NAV Premiums of Certain Precious Metal Trusts and Funds - Good Morning Fiat Nam!

Good morning, Fiat Nam!

Thanks to Dave and Denali Guide for suggesting that greeting.

In case you were wondering what happened overnight, Kuroda and the Central Bank of Japan decided to significantly increase their Quantitative Easing.

As you may recall, the Fed and the Japanese Central Bank did a tag team of money printing in the 'recovery' in the 2000's as the US pumped up a housing bubble.

The Japanese said that in addition to buying more official debt, almost as much as the government can issue which is an overt money printing machine, the government has also indicated that they will use their substantial pension funds to buy more equities and REITs, including those of other countries.

I think Japan may eventually provide a good test of the theory that a sovereign that prints its own money can never default.   Japan's problems involve significant demographics, but a great portion is some of the worst crony capitalism and opaque government by insiders in the OECD nations.  It is this kereitsu corporatism that put the FU in Fukushima.

One thing that works in the people's favor is a favorable attitude towards the group backed by peer pressure, rather than a dog eat dog economy based on serial fraud, and commensurately a decent public safety net.  Or at least there has been.

Stock futures soared in the US and the Nikkei futures were limit up.  

Overnight the Russia central bank had to raise its interest rates to 9.5% to defend the ruble which was under pressure on the forex markets.  

And in what appears to be a somewhat counterintuitive move despite Dollar strength on Yen weakness, gold and silver were slammed down hard in thinly traded markets.

The pressure from the US and its client states is now shifting heavily to Europe and especially to Germany, to permit a similar move to quantitative easing in Europe.

China remains remarkably quiet for now. Eurasia is large enough I think to break away from the threat of financial repression. One wonders how far they can be pushed before they make that choice. Or perhaps it is already being made.

Interesting times.

 

October 30, 1938 - Mercury Theater Presents The War of the Worlds

"No one can terrorize a whole nation, unless we are all his accomplices."

Edward R. Murrow, talk to his staff at CBS before See It Now, 7 March 1954 on Senator Joseph McCarthy

And 'The Night America Trembled' 1957

Gold Daily and Silver Weekly Charts - Currency Wars

 

"The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create.

What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world."

Martin Wolf, Financial Times, 12 Oct 2010

I think this time it is Putin and the rest of the world who have said, 'nuts' to the demand for surrender.   And more dramatically, China and a few others are playing 'Go' and skipping the trash talk, while stacking their pieces where they will on the table. 

I spent part of the day musing on the philosophical dimensions of money and debt.  Perhaps that will bear fruit in a posting some day. 

But this whole notion of the 'limit to the dollars the Federal Reserve can create' is intimately tied to the disagreement among nations I among others have chosen to call 'the currency wars.'   The more theoretical that discussion becomes, the existential, the more Thomistic of a character it takes on with essence and accidents and all those things we sat through at university. 

At some point in time, an Alexander will come forth and slice through that Gordian knot; and in that most real of acts make all Platonic tolerance vain, and vain all Doric discipline, with my apologies to Yeats and the sangre de Cristo.

This is no academic exercise however.   The wise and unwise use, and the limits, of power are the lines on the pages of history's copybook.  Those who do not understand them are lost in the leaves, no matter how hard they may plough on against the turn of events.

So today could be viewed as an extensive bit of PR, and the management of perceptions.  And they did a job of it.  Shorter term the Fed has an impressive array of tools at its disposal.  Mostly they are good at destruction and illusion and not very good at justice and sustainability.  But they are very afraid of losing control, because when you rule something by fiat, control and perception of power is paramount.

Today was a rough day for the precious metals, with the financial powers-that-be trying to prove that the end of QE III need have no negative effects on their financial engineering of The Recovery™.

The greater the leverage or beta with regard to precious metals today the worse the decline.  That seems obvious, but some disregard that when structuring their portfolios.

For example, gold bullion is performing better than silver, which is more variable, or lively, to the up and downside.  And the miners and other leveraged means of owning precious metals have been taken out and beaten today.

PHYS has lost about .75%  and PSLV about 2.8% since yesterday.   But if one holds the miners, it could be much more. 

I am not in silver in the short term here and now,  but I did make one injudicious mining purchase yesterday, alas.

Let's see what happens.

SP 500 and NDX Futures Daily Charts - Let It Be Written, and Let It Be So

"A society becomes totalitarian when its structure becomes flagrantly artificial: that is, when its ruling class has lost its function but succeeds in clinging to power by force or fraud. Such a society, no matter how long it persists, can never afford to become either tolerant or intellectually stable..."

George Orwell

This is the underlying message in the  young adult three book series The Hunger Games.

Stocks were able to rally higher today, back almost to levels of a few weeks ago,  on the better than expected estimate of GDP for the 3Q.     That GDP number was dependent on a few one offs like government spending, largely of the military kind, and on a more favorable trade balance.

Excelsior.

The exercise today was very much about proving that the Fed did the right thing in ending QE III, and that there need be no large decline in equities.  There is no coincidence in any of this.

There is a natural tendency to be optimistic and to wish for good things to happen.  The difficulty is when those steering the ship keep making poor decisions and following policies that are not productive.  And this unfortunately is the case today.

What will it take to change my mind?  A real media wage that is growing commensurate with GDP, so that domestic consumption can also grow and fuel the real economy without artificial stimulant and welfare spending on corporations and the military-industrial complex.

Fair enough?  Until then in my personal judgement the economy is neither self-sustaining nor stable. Yes I understand about lags.  And six years is one hell of a lag for those not receiving the beneficence of a trickle down corporatist welfare state.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds

I did not have the opportunity yet to update the metals holdings or cash levels in the below.

Gold Daily and Silver Weekly Charts - FOMC and the Usual Shenanigans

The Fed announced the end of QE III today as had been expected by almost everyone. And after a pause on the news, the dollar soared, precious metals and oil dumped, and stocks slumped, although stocks came back to nearly unchanged by the end of day.

See the commentary on stocks below for more about what the Fed said today.

Nothing has changed. Not one thing. And that is about nine-tenths of the problem that is causing this six year non-recovery for Main Street.  

We still have a rotten financial system acting like an unproductive tax and a drag on the real global economy, sowing malinvestment and distortions in whatever it touches and then some. 

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Downward Spiral of Dumbness

"The Committee anticipates, based on its current assessment, that it likely will be appropriate to maintain the 0 to 1/4 percent target range for the federal funds rate for a considerable time following the end of its asset purchase program this month, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.

However, if incoming information indicates faster progress toward the Committee's employment and inflation objectives than the Committee now expects, then increases in the target range for the federal funds rate are likely to occur sooner than currently anticipated.

Conversely, if progress proves slower than expected, then increases in the target range are likely to occur later than currently anticipated."

FOMC Statement, Oct 29, 2014

I think Bob Pisani literally squeaked when he read 'sooner' in the underlined portion of that FOMC statement, asserting that this was a 'hawkish' statement indeed.  He did not bother to reference the next sentences that begins, 'conversely.'

And I think the wiseguys knew that the Fed was basically saying nothing new, but throwing a farewell bone to the hawk Plosser on the committee, who won't be around after the first of the year, and the complexion of the FOMC turns decidedly more dovish in nature.

The US dollar spiked, but forex has a notorious carney game intraday, but that moved key commodities like gold and oil in the 'right direction' which is down. 

And the hosts and guests on bubblevision continued to burble on about 'rate increases' and 'amazing corporate profits' for the rest of the afternoon.

I am sure we will have loads of fun speculating about what the Fed will do next for quite some time.

Let's see how the rest of the world takes the news that the Fed has its hand on the tiller of the world's economy, to take it where they will.

I think the Fed will move when something forces their hand, and not one minute before.  And I will be glad but surprised if it is a booming economy fueled by organic growth and domestic consumption  next year.

Have a pleasant evening.