17 April 2015

Gold Daily and Silver Weekly Charts - The New York - London Gold Pool

Gold and silver ended the week pretty much revolving around the same trading ranges.

I might say that gold is coiling for a move, but I really don't quite feel it in the charts or the action on the tape.

The pricing on the Comex is being run like a bucket shop, so using finely tuned technical indicators is probably fruitless.

At some point this gold pool will break down. When that will be I cannot say.

Next week will be light for US macro news, so we will probably see more influence from China and their wrestling with their financial asset bubble, and Greece.

Have a pleasant weekend.


SP 500 and NDX Futures Daily Charts - China Bubble and the Canard That Is 'Say's Law'

Stocks gave up about half of the drifting higher advance of the prior nine days.

China took actions to dampen the very obvious equity bubble in their markets. Their dilemma is the same as most areas: they wish to stimulate growth, without creating dangerous asset bubbles.

Almost everyone is failing at this, because the plutocrats and oligarchs keep stimulating through the top down financial sectors, which are still fairly corrupt and predatory, and then cannot understand why growth isn't feed through to the masses in order to create more aggregate demand.

You might have heard of something called Say's Law from classical economics. It states that increased production is the source of growth in demand. According to Say's Law, when an individual produces a product or service, he or she gets paid for that work, and is then able to use that pay to demand other goods and services.

A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.

As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more men can produce, the more they will purchase.

This is the typical kind of theoretically compact, model bound, hair-splitting nonsense that economists like to put forward, and is related to memes like the wealthy few are the job creators. This a more elegant way of saying 'build it and they will come to buy.' And they will buy because you have paid them equitable wages, and they will want what you happen to build.

It makes no allowance for fraud, theft, financial oppression, slavery, and all the panoply of human vagaries that do not fit into perfectly rational models that propellers heads can dream up.

I don't suppose Monsieur Say every considered labor arbitrage, predatory management, and global arbitrage in his fantasy, or the propensity of producers to pay as little as they dare by some fairly untoward means and methods.  I don't want to bet much on the rational benevolence of those who are motivated primarily by greed.

Given the stagnation of real wages for the past thirty years, I would suggest that anyone who still puts this forward should be shamed out of the room. See the utopian assumption in there? Whoever builds things will pay a living wage and increase those wages as productivity increases.

It had its latest incarnation as 'supply side economics.' Which is a load of rubbish especially in a global economy.

Economics is so often such a carney game.

Here is Jesse's Law.
Unregulated greed will rise to exceed and overwhelm all rational expectations of theoretical market behavior over time, always and everywhere, because men are no angels.   And since money is power, the greater the concentration of money in a society, the less free it will become, and the less reliable all decision based market-based models of it will be.  Rational expectations, and therefore market forces, will fail when undermined by the unbridled greed for money and power.  Passion and obsession will trump reason, unless reason arms itself against the excesses of human nature.   History proves this.

Have a pleasant evening.


16 April 2015

Elizabeth Warren: The Unfinished Business of Financial Reform

If Elizabeth Warren were running for President, serious financial reform would be a key part of the national debate and her agenda.  The same can be said of Bernie Sanders.

Hillary may talk the talk but I am afraid that she, like the Republicans, are bought and paid for by the moneyed interests.   They are creatures of the system, caught in a credibility trap of deep capture by financial corruption.
Matt Taibbi:  Hillary's Fake Populism
We could be surprised. There is always that possibility.  We were certainly surprised by hope and change, in the wrong way. 

But I am not very optimistic.   The next President will most likely be from the same lineage of the last five as shown below.   They will most likely preside over the general trend in Western governments that, by distraction and deception, will continue to burn down the poor, the weak, the young, the aged, and eventually the middle class, to make room for the temple of Mammon.   And the love of many will grow cold.

The text of Senator Warren's speech may be downloaded in PDF form here.

Gold Daily and Silver Weekly Charts - Stanley Sees a Rebound Coming, Tax Revenue Is Obsolete

"It [Nixon closing the gold window on a Sunday evening in 1971] was one of the most dramatic economic events ever, a very big deal and I was at the epicentre of it on the floor of the New York Stock Exchange… He [Nixon] was spinning political speak, but what he was saying was that the U.S. has defaulted on its debts. And it got me thinking about what money is. What are dollars if they are not tied to gold?

I saw how the government lied or certainly spun things in a certain way. I had all these philosophical questions, like ‘Whom do you believe? What is actually truthfully going on?’ All of this pulled me into the global macro markets. The currency markets would be important to me for the rest of my life."

Ray Dalio

"Gold has worked down from Alexander's time... When something holds good for two thousand years I do not believe it can be so because of prejudice or mistaken theory."

Bernard Baruch

"The commerce and industry of the country, however, it must be acknowledged, though they may be somewhat augmented, cannot be altogether so secure, when they are thus, as it were, suspended upon the Daedalian wings of paper money, as when they travel about upon the solid ground of gold and silver.

Over and above the accidents to which they are exposed from the unskilfulness of the conductors of this paper money, they are liable to several others, from which no prudence or skill of those conductors can guard them."

Adam Smith, Wealth of Nations, p. 262

Above are the thoughts from three giants in the world of finance, spanning a long period of time. 
I tend to deeply discount the mistaken observations of the stock touts and sell side carnies of the day.  But when the economic 'names,'  the very serious pundits such as Willem Buiter, Ben Bernanke, and Paul Krugman start squawking loudly about how they do not 'understand' gold, and how it seems ridiculous to them, I get a clearer perspective by standing on the thoughts of these giants quoted above.  
There was intraday commentary about the lack of serious reform in the financial system here.

Stanley Fischer noted today that Q1 was bad, but sees the economy rebounding according to the CNBC headlines, and that the Fed cannot wait forever to raise rates. 
As you may recall I think we will get a symbolic raise from the Fed sometime this year, maybe even a second.  And then they will take that back when it finally occurs to everyone that The Recovery™ is more of a public relations event than an economic reality for the general public.

Bonds and the precious metals were immediately slugged.  

Stanley's speech was a trigger for a major market move. Whether he knew about this in advance, or his text had been given out in advance, or the news algos are that much in control now of the markets, it is hard to say.  The financial news certainly spun it the way they wanted.  But there it is.
We ought not to be surprised.  After all the precious metals are priced in a bucket shop in the States, so that is no great surprise.  But Treasuries?  Now that is some scary flash crash scenario concern.
I do think that his saying that 'rates cannot stay this low forever' is a tautology.  Obviously they cannot stay there, and that is how his remarks were eventually couched by the end of the day.
Speaking of bucket shops, we had some deliveries taken on the gold contracts as noted below with nothing happening in silver, except the usual shoving of bullion around the plate in the silver warehouses.
The amount of 'delivery' action on the Comex is a rounding error on the Asian exchanges.   That is a phenomenon worth noting.
I would like to reiterate what I said last night, that it is highly unlikely that a hedge fund initiative to change the charter of the Central Gold Trust to allow for bullion redeemability is unlikely for the Central Fund, CEF.   CEF's shares that trade are non-voting and the voting shares are closely held by management.  I do not know why the Gold Trust was arranged differently, but there it is.
I was interested to see an essay published in American Affairs by the NY Fed Head Beardsley Ruml in 1946 that contended that Taxes For Revenue Are Obsolete.   The author asserts that with a fiat money system a country needs only print the money it requires to support their spending needs, although they must keep the value of the currency in mind.   Taxes are only used for shaping and engineering social and economic goals.
Now doesn't that sound like what some are calling Modern Monetary Theory?  As I have said, I find it amusing that this notion is presented as some new discovery, but even moreso, it is something that the obtuse bedfellows of a group of social spending Liberals and Libertarian 'less government' austerians both agree.   Although the libertarians that I have discussed this with think that the notion that the printing can be limitless because sovereign states cannot default is ludicrous. 
Apparently the beauty of not having to bother with taxation to raise money to support spending is in the eye of the beholder.  And believe me when I say that the beholders have some very different objectives in mind.
I wonder how the von Miserians feel about trillion dollar platinum coins?  
The point of this being that before one concocts and begins promoting arrangement that give men enormous discretionary power, you might want to think very, very hard about who will be wielding that power, and the ends to which they may put it.
Have a pleasant evening.



SP 500 and NDX Futures Daily Charts - Looting Will Continue Until Exhaustion or Collapse

I imagine you did not hear too much today about the much larger than expected number of new unemployment claims.

Today the Street was celebrating the IPOs of Party City, Etsy, and the highly ironically named 'Virtu.'

Etsy reminds one of the internet boom stocks, sans gerbil cannons.  That it opened for trade at nearly twice the IPO price of $16.  It is a 'story' stock with no profit but a 'platform with users,' and it could be purchased with the most deeply devalued currency around, the overpriced stock of some other internet wonder.
Virtu is an HFT trading firm that experiences a losing day about every five years or so. Anyone who can look at that record and still say they believe in 'a level playing field' and 'free and honest markets' is either willfully ignorant of markets, or a moral black hole.

Have a pleasant evening.


Simon Johnson: Restoring the Rule of Law in Financial Markets

“Crime, once exposed, has no refuge but in audacity.”


With campaign finance reform, the need to reform the financial markets is one of the greatest social policy issues of our time.

Simon Johnson is one of the few 'name' economists who recognizes this and is willing to talk about it.

There is a bitter campaign being waged in the think tanks and the media against reform. The campaign is similar to that which was waged for almost a decade to overturn Glass-Steagall.

Getting rid of bad government by eliminating all government is just giving the real perpetrators what they wish. What we need are the kind of rules and regulation that Simon Johnson and Elizabeth Warren talk about here.

It is the kind of reform that Franklin Roosevelt worked to put into place that lasted for almost 70 years, until the forces of Wall Street were able to guile the people into handing over their pursestrings to them once again.

What is discouraging is the deep involvement of both sides of the aisle in the Congress in enabling this sad corruption of the markets and the financial system--  for money.   And in particular how the moral and intellectual processes of the state have become corrupted by the power of the moneyed interests.

To put a fine point on it, once the professional classes become cowed or corrupt, reform of the process through systemic means is exceptionally difficult.   What we have is deep capture and the credibility trap reinforcing the worst of the abuses through a series of punishments and rewards.

And what may be particularly galling is when insiders who are at the locus of the corruption, like our recent crop of presidential candidates on both sides, talk about how they will change things, while the money is still flowing through their hands, and the spin is flowing out of their mouths.

And alas, even some of the reformers seem more interested in getting some of their own power and money than in promoting real reform.  We have a problem, not at the periphery of our actions, but at the moral root of our thinking.
I have always enjoyed listening to economist Robert Johnson's brief excerpt below, because it highlights the very crux of the problem.  Unless some of the well to do and the professional classes shake off the lure of big money and the credibility trap, and start acting responsibly, this is going to end very badly.  
And make no mistake, there are some of the self-deluded and their servants who see that turmoil that may come as just another opportunity for their looting and a rise to greater power as they energize the mob for their own ends.  But they forget the great lesson of history, that once the madness is unleashed, it tends to serve none but itself.
Why should anyone stop lying and cheating, when they are so profitable under the rule of the modern gods of the market, power and money?   Why stop at all?  And then comes the inescapable agent of the downfall of excess, Nemesis, with all that it implies.
I have no illusions.   Given the state of our condition, ninety nine percent of those who read this will go on and do absolutely nothing differently for themselves or their people.   But it is in the moral one percent that there is some hope for peaceful, evolutionary change.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustainable recovery.

No More Cheating: Restoring the Rule of Law in Financial Markets
By Simon Johnson

The political debate about finance in the US is often cast as markets versus regulation, as if “more regulation” means the efficiency of private sector decisions will necessarily be impeded or distorted. But this is the wrong way to think about the real policy choices that – like it or not – are now being made. The question is actually what kind of markets do you want: fair and well-functioning, with widely shared benefits; or deceptive, dangerous, and favoring just a relatively few powerful people?

In a speech on Wednesday, Senator Elizabeth Warren (D., MA) laid out a vision for better financial markets. This is not a left-wing or pro-big government agenda. Senator Warren’s proposals are, first and foremost, pro-market. She wants – and we should all want – financial firms and markets that work for customers, that encourage innovation, and that do not build up massive risks which can threaten the financial system and bring down the economy.

Senator Warren puts forward two main sets of proposals. The first is to more strongly discourage the deception of customers. This is hard to argue against. Some parts of the financial sector are well-run, providing essential services at reasonable prices and with sound ethics throughout. Other parts of finance have drifted, frankly, into deceiving people – on fees, on risks, on terms and conditions – as a primary source of profits. We don’t allow this kind of cheating in the non-financial sector and we shouldn’t allow it in finance either.

The unfortunate and indisputable truth is that our rule-making and law-enforcement agencies completely fell asleep prior to 2008 with regard to protecting borrowers and even depositors against predation. Even worse, since the financial crisis, the Securities and Exchange Commission, the Justice Department, and the Federal Reserve Board of Governors proved hard or near impossible to awake from this slumber.

We need simple, clear rules that ensure transparency and full disclosure in all financial transactions – and we need to enforce those rules. This is what was done with regard to securities markets after the debacle of the early 1930s...

Read the entire piece here.

"The problem of the last three decades is not the 'vicissitudes of the marketplace,' but rather deliberate actions by the government to redistribute income from the rest of us to the one percent. This pattern of government action shows up in all areas of government policy."

Dean Baker

"Most of them became wealthy by being well connected and crooked. And they are creating a society in which they can commit hugely damaging economic crimes with impunity, and in which only children of the wealthy have the opportunity to become successful. That’s what I have a problem with. And I think most people agree with me."

Charles Ferguson, Predator Nation

15 April 2015

Gold Daily and Silver Weekly Charts - Round Numbers and Extraction Capitalism

Gold and silver managed to rally back today.

But they are still revolving around their round numbers, and moving in a trading range.

Silver is oscillating between 15 and 18, and gold between 1180 and 1220.
There was not much delivery action report at the Bucket Shop, and there was the usual moving around of bullion in the silver warehouses, with gold warehouse activity at a minimum.
This market is going to break.  I don't know when.  But all price manipulation schemes eventually do.
I am concerned that a number of things are going to break.  But that is the price of turning the keys to your society over to a gang of sociopaths.
I gave the Central Gold Trust issue more thought, and I still think that this looks like a venturesome arrangement for this fund to get a big short term gain.    The high threshold for redemption is more like GLD that anything Sprott might have, and the entire premise seemed poorly thought and lacked any longer term focus.  It was a short term focused shot at 'unlocking value.'  Once.
If I were a long term investor I would vote no.   But if I were a speculator who likes to trade in and out for a flip I would probably want to take it.

In answer to a query, a similar situation does not seem feasible with the Central Fund because the shares that trade are non-voting.  The voting shares are closely held by management of the Fund.
Have a pleasant evening.


Chris Hedges is not pulling many punches in this one.   I think he is a little on the dramatic side for my own centrism.  But things are certainly not going all that well,  injustice is widely tolerated, and the system is in dire need of reform.  Is a valid perspective depending on what assumptions and standards one applies.
If his views were taken up by a large minority of activists, it would probably shock most adults who are not early baby boomers, but would seem like the 1960's to those who were around back then. Activist sentiment became galvanized around a social cause in civil rights, and against aggressive wars such as Vietnam.
I won't say they were good times.  There was quite a bit of violence and blood, more than most people probably remember. Assassinations were popular methods of quieting dissent at home and abroad. 
But the politicians were less smug and complacent, and the music was markedly better.

So many things to think about. Whom will we elect for President this time, Bush or Clinton?