02 September 2014

Gold Daily and Silver Weekly Charts - Cap, Cap, Pounce

Welcome to September. Ouch.

The spotlight is now on silver, and less so on gold.

Both metals took a hit that was fairly obvious starting late last night. I was surprised it did not go deeper.

It is tough to make a real short term bullish case until we break this pattern of lower highs and lower lows.

Big amount of silver get shoved around the plate at the Comex, so we will have to shift gears a bit and adjust to reports with much bigger numbers of ounces involved.

Today was the first day. Let's see how the rest of the month goes.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Bubble On Through M&A's and IPO's

Stocks had a bit of a roller coaster ride today, with techs trying to take the lead on the upside.

The markets are sloughing off quite a bit of exogenous risk. But that ought not to surprise us, because that is almost the very definition of a bubble in assets. The fundamentals and realities are ignored, as pieces of paper become increasingly traded on their own without regard to risks.

September is going to be marked by the biggest IPO ever. The much awaited Alibaba will be rolling out between now and about September 20. The wiseguys are also going to taking a lot of M&A activity out of the trunks and planting them in the killing fields of a toppy market. Why not? Whether you are paying with cash or stock, your currency is debased.

So barring any untoward events I would expect the markets to muddle through to the latter part of September, and then get set up for some sort of correction into October.  It will probably not be severe, again unless it is driven by some geopolitical events, because of the midyear elections coming up.  Unless of course the financiers decide to engage in some mild form of coup d'état.

I put out an excerpt from a new Harvard Business Review article earlier today that is worth reading here.

Although greed is always a factor in any human activity in our fallen world, there are times when it reaches a peak of activity and predominates, becomes a focus along with power. And then the world is turned upside down as it were. We are in such a time, I firmly believe.

Have a pleasant evening.

The Anti-Humanism of the New American Century

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power as well.

Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they make a desert, they call it peace."

Tacitus, Agricola

The fully financialized recovery is not sustainable. In fact, it closely resembles a Ponzi scheme.

The Fed creates enormous amounts of money, which it carefully feeds into the financial system through its Banks and their associated Funds. This is a 'trickle down approach' to monetary stimulus.

The monies created are directed primarily towards the same types of activities that have been dominant in the financial system for the previous ten years at least: financial speculation, building of monopolies, acquisition of assets for repressive exploitation through rents, and the transfer of wealth to the top one percent through largely non-productive activities.

The result can be seen in the continuing plunge of the velocity of money, which is a measure of how much actual GDP related activity is being generated by the additions of monetary growth. Most of the growth we are seeing is only on paper and in accounting gimmicks, and not in real advances and improvements in the standards of living and infrastructure.

 In fact, one can make a good case that all those things that are dependent on longer term planning are suffering greatly, and even being 'hollowed out' for the sake of short term greed.

This short term mentality that has been engineered into our social, economic, and legal structures is going to bring about a cycle of booms and busts. We have seen two busts thus far, and are working on a third. And the third time might be the charm.

The forces of the anti-human are growing stronger and more strident. They are hungrier for power, and having laid waste to some areas, move on to others in a cycle of perpetual war and acquisition until exhaustion or collapse. The only imperative these new Lords of the World have is 'more.' 

It is only in this context that some of the recent decisions that are being made and actions undertaken can be fully understood.

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

"Five years after the official end of the Great Recession, corporate profits are high, and the stock market is booming. Yet most Americans are not sharing in the recovery. While the top 0.1% of income recipients—which include most of the highest-ranking corporate executives—reap almost all the income gains, good jobs keep disappearing, and new employment opportunities tend to be insecure and underpaid. Corporate profitability is not translating into widespread economic prosperity.

The allocation of corporate profits to stock buybacks deserves much of the blame. Consider the 449 companies in the S&P 500 index that were publicly listed from 2003 through 2012. During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees."

William Lazonick, Profits Without Prosperity, Harvard Business Review Sept. 2014

Wall Street On Parade

Joseph Stiglitz: The Costs of Inequality

“There are two visions of America a half century from now. One is of a society more divided between the haves and the have-nots, a country in which the rich live in gated communities, send their children to expensive schools, and have access to first-rate medical care. Meanwhile, the rest live in a world marked by insecurity, at best mediocre education, and in effect rationed health care―they hope and pray they don't get seriously sick.

At the bottom are millions of young people alienated and without hope. I have seen that picture in many developing countries; economists have given it a name, a dual economy, two societies living side by side, but hardly knowing each other, hardly imagining what life is like for the other.

Whether we will fall to the depths of some countries, where the gates grow higher and the societies split farther and farther apart, I do not know. It is, however, the nightmare towards which we are slowly marching.”

Joseph E. Stiglitz, The Price of Inequality

NAV Premiums of Certain Precious Metal Trusts and Funds

Gold and silver took a fairly stiff hit this morning as the US dollar rallied on Yen and Euro weakness.

I have been looking for a big down move to flush out the trade and help to set a shorter term bottom. This may be it, or we may have some more to go.

Chartwise we are at the bottom of a trading range, if in fact this is what it is.

As you may have heard, the central banks are trading the US futures markets. Perhaps we need a new form of Glass-Steagall that prevents ALL the TBTF banks from engaging in speculation and all the corruption that comes with it, and distorting market prices with their immensely subsidized money.  What better way to transfer money from the many to the few.

When will enough be enough for this pack of crony capitalists?  Alas, their motto might best be expressed as:
'Wir haben keine Hemmungen, und einen großen Magen.'

Our inhibitions are few, and our appetites are enormous.
Since the precious metals seem to be running counter to stock these days, the rounding top that may be forming in US equities is of particular interest.

Lots of possibilities, but for now the weakness in metals is the dominant force, and stocks have been on a tear since bouncing off their own bottom of doom and gloom just a few weeks ago.

It is hard to be too cynical about these markets, and too skeptical of official statements.

Let's see what happens.

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.