25 July 2016

Gold Daily and Silver Weekly Charts - Option Expiry and FOMC

There will be a precious metals option expiration on the Comex tomorrow, and the FOMC will be making their rate decision known at 2 PM on Wednesday.

We will also be getting some additional Q2 GDP economic data on Friday.

There are some broader comments about current events in the SP 500 and NDX commentary below.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Peak Hubris

"I don't understand people...who talk about us as being in decline, and who act as though we are not yet the greatest country that has ever been on the face of the Earth for all of history!"

Hillary Rodham Clinton, 25 July 2016

How can we possibly have any problems, except for malcontents, naysayers, and whiners?  We are the greatest!

The Democratic establishment's lack of understanding of what a large portion of the public has been saying and thinking during this entire election cycle and beyond is both remarkable and yet understandable, given the insular bubble of easy money, crony capitalism, and endless favoritism in which their candidate and their pampered protégés exist.

This utter disconnect from the public is why liberal establishment figureheads can write columns in the New York Times suggesting that all must be well everywhere, because things are great in the affluent bubble-land of the Upper West Side of Manhattan, or in Silicon Valley.  And then go on to imply that anyone who may disagree, who may be protesting and working for meaningful reform, is ignorant or dishonest.

This is no incidental thing; it is systemic.  It was revealed to be the emails and the attitude of the DNC establishment towards the entire Bernie Sanders campaign, which was a remarkable manifestation of popular will to reform.

We have been hearing this sort of nonsense for some time now from the establishment cronies of both parties.  Like all elites who have become insular and out of touch throughout history, the fortunate few have stopped listening to anything outside of their own circles, and have little attention or tolerance for dissent from their group thought.

And I suspect that the DNC power players, led by their poster child HRC, would like to take the support of the progressive and reform factions for granted, counting on fear of Trump to beat them into line.

Does anyone doubt that the very comfortable Wall Street wing of the Democrats will eventually toss the progressives and reformers under the bus, and try to garner more endorsements from disaffected establishment Republicans and their big money sponsors?   After all, this has been Obama's modus operandi for the past eight years.

One gets the distinct impression that political party powers are not particularly interested in real reform, or equal justice, or relief to the many disadvantaged from an increasingly corrupt and broken system.

Rather, they want to climb on board the upper decks and get a piece of the action from the existing dirty, rotten system for themselves.  They may talk the talk of justice and compassion, but in their hearts their guiding principle is 'greed is good.'

Let's see if that overreach gets an unexpected reaction, sooner rather than later. But as some point there will be one.

And make no mistake about it, Trump may be more of a wild card, an unknown entity in the political arena, but he has a long history that suggests that he will be no better, no different, and perhaps worse in the short term.

This is a year of poor choices, and that is a direct outcome of a broken, inwardly focused political system dominated by captive institutions and by Big Money.

And rather than an appeal to reform, and progress, and real growth, what we are instead served up is bread and circuses, and a heavy handed attempt to rule by fear rather than by the reform, which people so desperately crave, with their informed consent.

Stocks caught a lift today after an edgy bout of light selling in the early trading, as all eyes are on the economic news, but especially that instrument of institutional privilege, the FOMC which will be making its announcement on Wednesday.

Have a pleasant evening.

24 July 2016

Plutocracy, Then and Now - The Lesser of Two Evils

The world being what it is, we sometimes have to choose between two less than desirable options. The problem with choosing the lesser of two evils that are distasteful enough is that one has to numb their conscience to do it. This is what is known as a 'Faustian bargain.' We may lie to others and especially ourselves about it, but there it is.

But the individual will find that if they choose to make this kind of rotten deal with their own conscience enough times, and put their inner voice aside to make an expedient, practical choice rather than a moral one, and pile lie upon lie to ease the pain of their betrayal, eventually their conscience will fail them when it matters the most.  Or they may simply find themselves too compromised to do anything but overtly choose what is objectively wrong or suffer serious personal consequences.  They have intertwined their fingers with the power of darkness so deeply that now they are his.

And this is how the banal, time serving functionaries familiarize themselves into eventually doing otherwise unthinkable, and sometimes monstrous things.

The road to hell is paved, not with one climactic choice, but a long series of increasingly bad choices and lies, that eventually grow into a complete betrayal of duty, and our honour, and our sacred oaths of service.

We Americans are not usually thought to be a submissive people, but of course we are. Why else would we allow our country to be destroyed?  Why else would we be rewarding its destroyers?  Why else would we all— by proxies we have given to greedy corporations and corrupt politicians— be participating in its destruction?

Most of us are still too sane to piss in our own cistern, but we allow others to do so and we reward them for it. We reward them so well, in fact, that those who piss in our cistern are wealthier than the rest of us. How do we submit?  By not being radical enough.  Or by not being thorough enough, which is the same thing.

Wendell Berry

Under pretence of governing they have divided their nations into two classes, wolves and sheep. I do not exaggerate. This is a true picture of Europe. Cherish therefore the spirit of our people, and keep alive their attention. Do not be too severe upon their errors, but reclaim them by enlightening them.

If once they become inattentive to the public affairs, you and I, and Congress, and Assemblies, judges and governors shall all become wolves. It seems to be the law of our general nature, in spite of individual exceptions; and experience declares that man is the only animal which devours his own kind, for I can apply no milder term to the governments of Europe, and to the general prey of the rich on the poor.

Thomas Jefferson, 16 January 1787

Special privileges and the use of the taxing power for private gain, these are the twin pillars upon which plutocracy rests. To take away these supports and to elevate the beneficiaries of special legislation to the path of honest effort is the purpose of our party.

And who can suffer injury by just taxation, impartial laws and the application of the Jeffersonian doctrine of equal rights to all and special privileges to none? Only those whose accumulations are stained with dishonesty and whose immoral methods have given them a distorted view of business, society and government.

Accumulating by conscious frauds more money than they can use upon themselves, wisely distribute or safely leave to their children, these denounce as public enemies all who question their methods or throw a light upon their crimes.

Plutocracy is abhorrent to a republic; it is more despotic than monarchy, more heartless than aristocracy, more selfish than bureaucracy. It preys upon the nation in time of peace and conspires against it in the hour of its calamity. Conscienceless, compassionless and devoid of wisdom, it enervates its votaries while it impoverishes its victims.

It is already sapping the strength of the nation, vulgarizing social life and making a mockery of morals. The time is ripe for the overthrow of this giant wrong. In the name of the counting-rooms which it has defiled; in the name of business honor which it has polluted; in the name of the homes which it has despoiled; and in the name of religion, upon which it has placed the stigma of hypocrisy, let us make our appeal to the awakened conscience of the nation.

William Jennings Bryan, 30 August 1906

The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.

Franklin D. Roosevelt, Inaugural Address, March 4, 1933

Still another danger is represented by those who, paying lip service to democracy and the common welfare, in their insatiable greed for money and the power which money gives, do not hesitate surreptitiously to evade the laws designed to safeguard the public from monopolistic extortion. American fascists of this stamp were clandestinely aligned with their German counterparts before the war, and are even now preparing to resume where they left off, after 'the present unpleasantness' ceases.

They claim to be super-patriots, but they would destroy every liberty guaranteed by the Constitution. They demand free enterprise, but are the spokesmen for monopoly and vested interest. Their final objective toward which all their deceit is directed is to capture political power so that, using the power of the state and the power of the market simultaneously, they may keep the common man in eternal subjection.

Henry Wallace, 9 April 1944

It was of the utmost importance to me that people in western Europe should see the Soviet regime for what it really was. Since 1930 I had seen little evidence that the USSR was progressing towards anything that one could truly call Socialism. On the contrary, I was struck by clear signs of its transformation into a hierarchical society, in which the rulers have no more reason to give up their power than any other ruling class.

George Orwell, Animal Farm preface, 1945

Now we remember that it was Bill Clinton's administration that deregulated derivatives, deregulated telecom, and put our country's only strong banking laws in the grave. He's the one who rammed the North America Free Trade Agreement (NAFTA) through congress. Mass incarceration and the repeal of welfare, two of Clinton's other major achievements, are the pillars of the disciplinary state that has made life so miserable for Americans in the lower reaches of society. He would have put a huge dent in Social Security too, had the Monica Lewinsky sex scandal not stopped him. If we take inequality as our measure, the Clinton administration looks not heroic but odious.

Mounting a campaign against plutocracy makes as much sense to the typical Washington liberal as would circulating a petition against gravity. What our modernized liberal leaders offer is not confrontation but a kind of therapy for those flattened by the free-market hurricane: they counsel us to accept the inevitability of the situation.

Thomas Frank, Rendezvous With Oblivion, 1 September 2006

Our plutocracy, whether the hedge fund managers in Greenwich, Connecticut, or the Internet moguls in Palo Alto, now lives like the British did in colonial India: ruling the place but not of it.

Mike Lofgren, The Deep State: The Fall of the Constitution and the Rise of a Shadow Government, 5 January 2016

We are not left to conjecture how the moneyed power, thus organized and with such a weapon in its hands, would be likely to use it. The distress and alarm which pervaded and agitated the whole country when the Bank of the United States waged war upon the people in order to compel them to submit to its demands can not yet be forgotten.

The ruthless and unsparing temper with which whole cities and communities were oppressed, individuals impoverished and ruined, and a scene of cheerful prosperity suddenly changed into one of gloom and despondency ought to be indelibly impressed on the memory of the people of the United States. If such was its power in a time of peace, what would it not have been in a season of war, with an enemy at your doors?

No nation but the freemen of the United States could have come out victorious from such a contest; yet, if you had not conquered, the Government would have passed from the hands of the many to the hands of the few, and this organized money power from its secret conclave would have dictated the choice of your highest officers and compelled you to make peace or war, as best suited their own wishes. The forms of your Government might for a time have remained, but its living spirit would have departed from it.

Andrew Jackson, Farewell Address, 4 March 1837

A multibillion-dollar bailout and Wall Street’s swift, subsequent reinstatement of gargantuan bonuses have inspired a narrative of parasitic bankers and other elites rigging the game for their own benefit. And this, in turn, has led to wider—and not unreasonable—fears that we are living in not merely a plutonomy, but a plutocracy, in which the rich display outsize political influence, narrowly self-interested motives, and a casual indifference to anyone outside their own rarefied economic bubble.

Chrystia Freeland, The Rise of the New Global Elite, January 2011

That first [gilded] age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent. Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

Major commercial and investment banks—and the hedge funds that ran alongside them—were the big beneficiaries of the twin housing and equity-market bubbles of this decade, their profits fed by an ever-increasing volume of transactions founded on a relatively small base of actual physical assets.

Our future could be one in which continued tumult feeds the looting of the financial system, and we talk more and more about exactly how our oligarchs became bandits and how the economy just can’t seem to get into gear.

Recovery will fail unless we break the financial oligarchy that is blocking essential reform. And if we are to prevent a true depression, we’re running out of time."

Simon Johnson, The Quiet Coup, May 2009

The American economy increasingly serves only a narrow part of society, and America's national politics has failed to put the country back on track through honest, open, and transparent problem solving. Too many of America's elites-among the super-rich, the CEOs, and many of my colleagues in academia-have abandoned a commitment to social responsibility. They chase wealth and power, the rest of society be damned.

Jeffrey Sachs, The Price of Civilization, January 2012

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, Vicissitudes of the Marketplace Would Be a Big Improvement, 29 September 2014

Over the last thirty years, the United States has been taken over by an amoral financial oligarchy, and the American dream of opportunity, education, and upward mobility is now largely confined to the top few percent of the population. Federal policy is increasingly dictated by the wealthy, by the financial sector, and by powerful (though sometimes badly mismanaged) industries such as telecommunications, health care, automobiles, and energy. These policies are implemented and praised by these groups’ willing servants, namely the increasingly bought-and-paid-for leadership of America’s political parties, academia, and lobbying industry.

If allowed to continue, this process will turn the United States into a declining, unfair society with an impoverished, angry, uneducated population under the control of a small, ultrawealthy elite. Such a society would be not only immoral but also eventually unstable, dangerously ripe for religious and political extremism.

Charles Ferguson, Predator Nation, June 2012

This elite-generated social control maintains the status quo because the status quo benefits and validates those who created and sit atop it. People rise to prominence when they parrot the orthodoxy rather than critically analyze it. Intellectual regurgitation is prized over independent thought. Voices of the dispossessed, different, and un(formally)educated are neglected regardless of their morality, import, and validity.

Real change in politics or society cannot occur under the orthodoxy because if it did, it would threaten the legitimacy of the professional class and all of the systems that helped them achieve their status.

Kristine Mattis, The Cult of the Professional Class, 4 April 2016

Plutocracy is not an American word but it's become an American phenomenon. Back in the fall of 2005, the Wall Street giant Citigroup even coined a variation on it, plutonomy, an economic system where the privileged few make sure the rich get richer with government on their side.

By the next spring, Citigroup decided the time had come to publicly 'bang the drum on plutonomy.' 
Over the past 30 years the plutocrats, or plutonomists— choose your poison— have used their vastly increased wealth to capture the flag and assure the government does their bidding.

This marriage of money and politics has produced an America of gross inequality at the top and low social mobility at the bottom, with little but anxiety and dread in between, as middle class Americans feel the ground falling out from under their feet.

Like those populists of that earlier era, millions of Americans have awakened to a sobering reality: they live in a plutocracy, where they are disposable. Then, the remedy was a popular insurgency that ignited the spark of democracy. Now we have come to another parting of the ways, and once again the fate and character of our country are up for grabs.

Democracy only works when we claim it as our own.

Bill Moyers, last episode of Bill Moyers Journal, 30 April 2010

Hubris calls for nemesis, and in one form or another it's going to get it, not as a punishment from outside but as the completion of a pattern already started.

Mary Midgley, The Myths We Live By, 2003

22 July 2016

Gold Daily and Silver Weekly Charts - Grinding Slowly

"But seeking to justify himself, the scholar of the word and the law asked Jesus, 'And who is my neighbor?'"

Luke 10:29

The modern gospel of personal prosperity and selective privilege, exceptionalism by whatever criteria a group may choose to exclude and oppress the other, although it has appeared throughout history many times and in many forms,  may be one of the worst and most insidious sins against the Spirit.

"But I just want to be left alone!" Truly, if you choose to live as this, you will be excluded and left alone, for all time.

August may be a big month for the metals, and we could see a taste of things to come next week with a Comex PM option expiry and an FOMC decision.

The Fed is either going to raise rates next week, or after the November elections.  They really would like to raise at least an additional 25 basis points, but may not have adequate cover from the economic results to do so.   And few expect them to raise more than one more time this year, so it would be a bit of a giveaway if they did now.

As you know, the Fed's interest rate 'policy' at this point has more to do with their own policy implementation mechanics, and much less than with the real economy, which quite frankly they have been neglecting for a the past couple of decades.   They are mesmerized and captured by 'the system.'

Obama's remarks today in his joint news conference with the Mexico President Enrique Peña Nieto were a magnificent example of the credibility gap in action. President Obama waxed poetic about how great things are, and what a boon to the economy that NAFTA has been, and that the TTP will be.

The irony is that the Democrats may enable the presidency of Donald Trump by nominating one of the weakest candidates possible to run against his anti-establishment sentiment. For Hillary, whatever else she might be, is the poster child for crony capitalism.

Several have been coaxing me to give an impression of where I think gold might go over the next four weeks or so. This is a mug's game really, because even if one gets it directionally correct, the magnitude and the timing of such short term moves is almost impossible to forecast more than a few days out. And then there are the absolutely unpredictable exogenous events that can move markets dramatically.

But in general, I think gold will end the year higher than where it is today, barring unforeseen events, and possibly much higher. It really depends on if and when it can break out of its current ranging trend.

To say how it gets there is quite a task, but down, up, down, up, down, and up, up, and away are not a bad for an educated guess. The timing on this is really beyond mortal knowledge, but many will make up for it by predicting a break out every week, and count it as a score when they are finally right.

I think we will see a lot of chop and 'shenanigans' as the bullion banks and their monetary masters struggle to manage the leveraged paper against a shrinking pool of physical bullion. When the tipping point comes in this is hard to predict with any accuracy, but when it comes you will know it.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Dog Days

Stocks traded in a sleepy updrift today with light volume and lower volatility, pretty much as I had expected.  I am glad I did not spend too much time watching the wiggles back and forth.

We will be getting a little more economic news action next week, along with the continuing dribble of earnings reports.

The weather here is simply baking, and is likely to be exceptionally warm this weekend.  It almost makes you wish for September.

Have a pleasant weekend.