01 September 2014

Franklin Roosevelt: On Labor, Wages, and Confidence

"A man must always live by his work, and his wages must at least be sufficient to maintain him."

Adam Smith

"The issue isn't just jobs. Even slaves had jobs. The issue is wages."

Jim Hightower

Some analysts are confusing higher wages with monetary stimulus. Nothing could be further from the truth, at least in the real world of today.

Monetary stimulus is what the Federal Reserve does, that is, increasing the money supply by expanding the monetary base. It is a non-organic growth of money.

I think it is a well-noted and oft-remarked upon feature that the monetary stimulus that the Fed is providing is being given directly and almost exclusive to the Banks, in order to shore up their damaged balance sheets and provide them an artificial stream of profits.

 And of that stimulus, the bulk of it seems to be finding its way into financial speculation and a new bubble in paper assets, and the acquisition of more companies to build even greater monopolies.

Wage increases, that are not merely a secondary effect of a general monetary inflation, are indeed not useful, except that the workers at least keep pace with the rate of price inflation.  But I don't think that this is what anyone is recommending who talks about higher wages.  The Fed is not an actor on that stage.

The currently imbalanced and distorted financial system is taking the lion's share of all new growth, and continues to do so as it has been doing for the past twenty years.  This cannot last.

When consumers purchase things, they must either use cash or credit. And to obtain the cash they can work more hours, or have more family members working. To obtain more credit, they can mortgage their house, and increase their debts. 

We have seen the explosion of a consumer credit bubble in housing debt, facilitated and engineered by historic levels of financial fraud by the very Banks who are now taking their subsidies of monetary stimulus from the Fed.  It happened almost six years ago, but the economy remains in 'the new noe-feudal normal.'

At some point the long abused consumer says 'enough' and cuts back their purchasing to the barest of essentials.  And the economy grows stagnant at home, which gives the moneyed interests a strong incentive to seek captive markets overseas.  And so a new round of neo-colonialism is born.  Which in turn creates its own sets of problems, lies, and economic distortions.

The data indicates that we are now, at long last, finally at that point.

 And the one percent has never been richer, or had more influence with the political class.

How much is enough for them?   When will they be content?  With them it is with wealth as it is with power.

'Wir haben keine Hemmungen, und einen großen Magen.'

I think that the solution is rather obvious. We have been here before.

"After many requests on my part the Congress passed a Fair Labor Standards Act, what we call the Wages and Hours Bill.   That Act --applying to products in interstate commerce -- ends child labor, sets a floor below wages, and a ceiling over hours of labor.

Except perhaps for the Social Security Act, it is the most far-reaching, the most far-sighted program for the benefit of workers ever adopted here or in any other country. Without question it starts us toward a better standard of living and increases purchasing power to buy the products of farm and factory.

Do not let any calamity-howling executive with an income of $1,000.00 a day, who has been turning his employees over to the Government relief rolls in order to preserve his company's undistributed reserves, tell you -- using his stockholders' money to pay the postage for his personal opinions -- tell you that a wage of $11.00 a week is going to have a disastrous effect on all American industry.

Fortunately for business as a whole, and therefore for the Nation, that type of executive is a rarity with whom most business executives most heartily disagree...

Some of my opponents and some of my associates have considered that I have a mistakenly sentimental judgment as to the tenacity of purpose and the general level of intelligence of the American people.

I am still convinced that the American people, since 1932, continue to insist on two requisites of private enterprise, and the relationship of Government to it. The first is a complete honesty, a complete honesty at the top in looking after the use of other people's money, and in apportioning and paying individual and corporate taxes (according to) in accordance with ability to pay. And the second is sincere respect for the need of all people who are at the bottom, all people at the bottom who need to get work -- and through work to get a (really) fair share of the good things of life, and a chance to save and a chance to rise.

After the election of 1936 I was told, and the Congress was told, by an increasing number of politically -- and worldly-- wise people that I should coast along, enjoy an easy Presidency for four years, and not take the Democratic platform too seriously. They told me that people were getting weary of reform through political effort and would no longer oppose that small minority which, in spite of its own disastrous leadership in 1929, is always eager to resume its control over the Government of the United States.

Never in our lifetime has such a concerted campaign of defeatism been thrown at the heads of the President and the Senators and Congressmen as in the case of this Seventy-Fifth Congress. Never before have we had so many Copperheads among us -- and you will remember that it was the Copperheads who, in the days of the Civil War, the War between the States, tried their best to make President Lincoln and his Congress give up the fight in the middle of the fight, to let the Nation remain split in two and return to peace -- yes, peace at any price.

This Congress has ended on the side of the people. My faith in the American people -- and their faith in themselves -- have been justified. I congratulate the Congress and the leadership thereof and I congratulate the American people on their own staying power...

You will remember that from March 4, 1933 down to date, not a single week has passed without a cry from the opposition, a small opposition, a cry 'to do something, to say something, to restore confidence.' There is a very articulate group of people in this country, with plenty of ability to procure publicity for their views, who have consistently refused to cooperate with the mass of the people, whether things were going well or going badly, on the ground that they required more concessions to their point of view before they would admit having what they called "confidence."

These people demanded 'restoration of confidence' when the banks were closed -- and demanded it again when the banks were reopened.

They demanded 'restoration of confidence' when hungry people were thronging (the) our streets -- and demanded it again now when the hungry people were fed and put to work.

They demanded 'restoration of confidence' when droughts hit the country -- and demanded it again now when our fields are laden with bounteous yields and excessive crops.

They demanded 'restoration of confidence' last year when the automobile industry was running three shifts day and night, turning out more cars than the country could buy -- and they are demanding it again this year when the industry is trying to get rid of an automobile surplus and has shut down its factories as a result.

But, my friends, it is my belief that many of these people who have been crying aloud for 'confidence' are beginning today to realize that that hand has been overplayed..."

Franklin D. Roosevelt, Fireside Chat June 24, 1937

Although they rarely mention it in the history books, it is ironic that around this time the moneyed interests and neo-cons of Roosevelt's day were fomenting a domestic revolution, and investing heavily in European fascists whom they hoped would be obedient gangsters for crony capitalism.

29 August 2014

Gold Daily and Silver Weekly Charts - Cap 'n Coil

Nothing really happened of note in the Comex warehouses for gold.

Silver is seeing the usual movements, in and out, with CNT providing quite a bit of the action.

We are now trading the metals for September, which is an active month for silver and not gold.

US markets will be closed on Monday for Labor Day.

There was commentary overnight about the Coppock indicator which is signaling an intermediate bottom in the price of gold and most likely for silver as well. You can read it here.

In my opinion any chart or technical signals are subject to some form of confirmation. The metals need to break out of their doldrums.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Hubris R' Us

The SP 500 futures managed to close at exactly 2000.00.  Cute.

There was a remarkable amount of complacency in the US trade today as the summer help took the markets into a three day weekend with plenty simmering on the geopolitical stove.

As you know, today was the end of the month. Next week the pros come back from vacation and we may see a different tone to the daily trade.

Have a pleasant weekend.

Coppock Indicator: An Intermediate Term Bottom For Gold Is In

The data wrangler, Nick Laird from Sharelynx, sent these long term technical charts of gold in US dollars with a note saying, "I like the look of it Jess. It's a deep cyclical indicator and you can see from its past performance how it works for gold."
I have to admit that this is one indicator I am not given to using, probably since I rarely was a long term investor in the past, and this is a cyclical tool although certain chart functions will allow you to utilize it on shorter term charts, and probably incorrectly based on Coppock's intent.
It is an indicator that generates only buy signals by attempting to identify market bottoms after serious declines.  The indicator must turn negative into a trough.  That implies that it had previously been positive. And then it must begin an upturn and sustain it.
So if I am reading these charts correctly, the last buy signal we have had was in 2001 with a big bottom buy signal forming in 1998-99.  See what I mean about longer term?  For a trader, that is glacial.
For my own charting method, I think we are in a potential bottoming formation, but we need badly to break the cycle of lower highs and lows, in order to confirm any of the potential bullish patterns I am seeing.  There is a closer look at the relevant area on my own gold chart at the very end.
Confirmation after a breakout is the most meaningful thing that the metals can do at this point.  Everything else is just talk and speculation.  
I include a six sigma trend chart from Nick to give you an idea of targets for any intermediate move.

Just in case you were wondering, I have included a Coppock chart for silver as well.  And if you look at it closely you will see a little fakeout bottom with an upturn that failed in 2012.  Confirmation of a breakout is your friend.
Giving the amount of 'tinkering' being done with the metals on the Comex, I have a gut feel that says if and when we go higher, it will be with a breakout, with a vengeance.  This has been as much price thuggery as it is price discovery.
Until then it is cap and coil, with some downside risk hedged up by a bullion put from China et al. 

28 August 2014

Gold Daily and Silver Weekly Charts - A Tale of Two Metals Markets - Shout and Feel It

Nothing of particular interest was shown in the Comex reports from yesterday. Tomorrow we bid adieu to the August contract.

Time to move our eyes to the September month which is active for silver but not gold.

The precious metals are unfortunately very politicized in this currency war. That is both a risk, and an opportunity.

There was intraday commentary on the metals here.

There are obviously two metals markets, one of paper, and one of real metal delivered and taken. One is most expressed in the overnight market with trading in Asia and Europe, and another that starts after the New York opening bell.

I picture that transition in the video below.

Have a pleasant evening.

Here is a visual representation of the NY open in the precious metals markets after the overnight trade.

The house is rockin', until the goons come a-knockin'. lol

By the way, I came across a nice Reinhardt-Grappelli original tune on the radio today for the first time. I thought I would share it with you.

SP 500 and NDX Daily Charts - Hymn To Freedom

The complacency in this market is almost as chilling as the complacency that seems to permeate the privileged classes, from the economists to the politicos.

Narcissists without very good peripheral vision.   It makes one--  uneasy.

Have a pleasant evening.

NAV Premiums of Certain Precious Metal Trusts and Funds - Currency Wars Enflammé

"Among the calamities of war may be justly numbered the diminution of the love of truth, by the falsehoods which interest dictates and credulity encourages."

Samuel Johnson

There is a very little bit of a 'flight to safety' today as the war of words in the Ukraine heats up.  Propaganda is flying hot and heavy from both sides of that border. 

Equities are downright complacent, and the precious metals are capped with fair regularity.  All is good, nothing to see here.  Move along.

This entire episode seems to be a manifestation of the keen disappointment that Uncle Sam felt when Russia started refusing to play ball with the Anglo-Americans in any number of areas, from dissidents to global economics.  In some ways this can be seen as the last gasp of the extended British Empire, with America and France on board along with the usual suspects.

The Yanks keep waving the NATO flag, but the Russians call that coalition FUKUS:  France, UK, US.   Of note is the absence of Germany in that analysis.  Germany is a pivot point.

There is certainly a difference of opinions and interests.  China is quiet, but I think we know where they are likely to be positioned.  If you understand the moves on both sides within the context of the currency war things make quite a bit more sense than otherwise.

This is not to say that Russia and China are the 'good guys' in this, not one bit.  I tend to see this as competing power blocs, or crime families if you will.  I don't see much altruism or activity on the moral high ground by anyone.  We live in a particularly self-centered and cynical time.

What we are seeing in so many areas at once is an extension of philosophy and objective expressed in The Project for the American Century, and a fairly cynical one at that. The neo-cons will work with extreme jihadists in the Mideast and crypto-fascists in Eastern Europe. 

Big Money and the will to power have no loyalties except to themselves and will gladly fight to the last drop of your blood.  I don't see many good actors in this scenario on either side.

I am reminded of this wonderful section and quote from Nomi Prins' new book, All the President's Bankers about the lead up to WW I.
“The war should be a tremendous opportunity for America.”

Jack Morgan, of JP Morgan in a personal letter to President Woodrow Wilson, September 4, 1914
I have written before about the striking parallels between Obama and Wilson.

A real flight to safety would crush the precious metal shorts if it spills over from paper to the bullion markets.  And so I would look for the Banks to do all that they can to avoid it, diffuse it, deflect that possibility.

Premiums are a bit low on the Central Funds.   Sprott Silver is a bit wide on the premium, especially with the likelihood of a secondary offering increasing.