30 August 2015

Bernie Sanders Interview: 'The Business Model of Wall Street Is Fraud'

Most people are sick and tired of the system as it is now.  And they are once again attempting to reject the status quo, having been badly disappointed by Obama and the Congress.  And this gives rise to popular movements and even third parties.

The biggest problem with popular movements is that they either tend to be co-opted by the most powerful in the status quo and used badly, misdirected and deceived, as in the case of the Tea Party, or diffused by too many factions and  lack of prioritization resulting in a lack of effective cohesion, as in the case of the Occupy Movement.

And so we have the ascendancy of the Wall Street wing of the Democratic Party, and the Koch Brothers wing of the Republicans.

And the corrupting power of Big Money underlies all of it, in part thanks to the Supreme Court ruling in Citizens United that defined corporations as having the rights but not the obligations of people, and money as free speech, while doing nothing to remediate the actual use of free speech by real people except in special zones and restricted venues, subject to some of the most oppressive abuse of the secrecy laws..

Contrast this with the anti-War movement of the 1960's which was driven by a single issue:  end the war in Vietnam.  The message was simple and clear, and it took hold, fritghtening the political establishment and hounding first Johnson to withdraw, and then Nixon to be so weakened and desperately foolish  that he caused his own downfall.

And so we have the more focused, non-establishment campaigns of Bernie Sanders and Donald Trump shaking up the accepted norms in political campaigning wisdom.

I would like to think that finally, after all these misspent years, the 'same old same old,' no matter how artfully the spin machines may brand them, cannot win again.

The probability for change is higher now than in the past.  But how it eventually turns out is another question.  The electoral process is still very young, and many things may happen between now and next November.  And the power of money and of powerful connections between the shadow government and the moneyed interests is still there, still lurking in the shadows and pulling strings.

Interesting times.

Gold Coming Off the LBMA Spiked Last Week

There was a interesting spike in physical gold activity last week on the LBMA.

It could be some seasonal phenomenon connected with the end of August and the approach of the prime season for gold.

But it also seems consistent with the 'tension on the tape' that I have been seeing.  And a number of little indicators and some interesting things, like the generally 'well informed' Goldman taking delivery of gold at the Comex for their house account.

One outcome of this increase in physical gold flows *might* be the realization of the cup and handle bottom formation on the gold chart, and a quick run to target around the 1250 to 1270 area.   And depending on what else goes with it, that might just be for openers.

Or it might once again be ignored and come to nothing.

But it does seem that the gold flows from the West to the markets in China and India are intensifying at these prices based on a number of diverse data points.

One cause of this could be a divergence between the paper price of gold with leverage and the actual physical markets because the price of gold as set in London and New York is below the clearing price in dollars as part of a momentum trend in the forex markets.

If a commodity price is set below the natural clearing price, one would expect to see the demand for the real underlying asset increasing.

Those who flatly dismiss the possibility there can be such a divergence between the market price and the natural clearing price have not been paying attention to what has been going on in any number of rigged markets over the past few years.

The excessive speculation fueled by a surfeit of paper money in a few hands and slack regulation that permits the unsustainable reckless pyramiding of positions is a good contender for the theme of the last two decades.

For what it is worth, I am seeing what appear to be increasing signs of 'fragility' in the precious metals market.   And in a nutshell, I am thinking that we are seeing a bear market bottom.  Trends, especially in forex related markets, often tend to overshoot and overstay their time.

But like the proverbial search for the lost keys, we will find the end of this era of financial madness in the last crisis, and perhaps that will be the one that breaks the Banks.

The chart below was provided by Nick Laird at goldchartsrus.com.

29 August 2015

Leveraged Financial Speculation to GDP in the US at a Familiar Peak, Once Again

"I believe myriad global “carry trades” – speculative leveraging of securities – are the unappreciated prevailing source of finance behind interlinked global securities market Bubbles. They amount to this cycle’s government-directed finance unleashed to jump-start a global reflationary cycle.

I’m convinced that perhaps Trillions worth of speculative leverage have accumulated throughout global currency and securities markets at least partially based on the perception that policymakers condone this leverage as integral (as mortgage finance was previously) in the fight against mounting global deflationary forces."

Doug Noland, Carry Trades and Trend-Following Strategies

The basic diagnosis is correct.   But the nature of the disease, and the appropriate remedies, may not be so easily apprehended, except through simple common sense.  And that is a rare commodity these days.

Like a dog returns to its vomit, the Fed's speculative bubble policy enables the one percent to once again feast on the carcass of the real economy.

'And no one could have ever seen it coming.'

Once is an accident.

Twice is no coincidence.

Remind yourself what has changed since then.  Banks have gotten bigger.   Schemes and fraud continue.

What will the third time be like?  And the fourth?

Do you think that Jamie bet Lloyd a dollar that they couldn't do it again?

Should we ask them to please behave, levy some token fines, watch the politicans yell and posture in some toothless public hearings, let all of them keep their jobs and their bonuses?   And then bail them out, wind up the old Victrola,  and have another go at the same old thing again?

Maybe we can vote for one of their hired servants, or skip the middlemen and vote for one of the arrogant hustlers themselves, and hope they get tired of taking us for a ride before we all go broke.

This policy we have now is the trickle down stimulus that the wealthy financiers have been sucking on with every opportunity that they have made for themselves since the days of Andrew Jackson. Whenever the ability to create and distribute money has been handed over by a craven Congress to private corporations and banking cartels without sufficient oversight and regulation, excessive speculation, financial recklessness, and moral hazard have acted like a plague of misery and stagnation on the real economy.

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the Bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank.

You tell me that if I take the deposits from the Bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin!

You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out."

From the original minutes of the Philadelphia bankers sent to meet with President Jackson February 1834, from Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels

I believe all of the above is entirely possible.  Because we still have an unashamed cadre of quack economists and their ideologically blind followers blaming the victims,  prescribing harsh punishments for the weak, laying all the blame on 'government' and not corrupt officials on the payrolls of Big Money, and giving the gods of the market and their masters of the universe a big kiss on the head, and expecting them to just do the right thing the next time out of the natural goodness of their unrestrained natures the next time.  What could go wrong with that?

Genuine reform.   It's too much work, and too much trouble.

Related:  Comprehensive Tally of Banker Fraud

h/t Jesse Felder for the chart

Gold Seasonality And Average Intraday Price Movement

It will be interesting to see how gold moves in the latter half of this year.

As for the intraday movement, the impact of the London - New York on the gold trade is hard to miss.

It might not be too glib to say that the Anglo-Americans are sellling, and the rest of the world is buying overnight.

I certainly hope that this sort of long term price manipulation does not catch up to them on the supply side.

28 August 2015

Recent Trends in the Premium For Silver Coins Versus Spot Silver

"One important aspect of the physical market that is often overlooked is the premium it commands over spot price. Right before the Global Financial Crisis in 2008, the spot Silver price fell as low as USD 9 per oz., whereas the price of a 1 oz. Silver Eagle was around USD 17 on the wholesale market and even higher on the retail market! That’s a price premium of 188%!

That means that if you had held 100 oz. of paper Silver, you might have had to liquidate that for USD 900 (assuming the market was not halted for trading then), whereas if you had held 100 pieces of 1 oz. Silver Eagle coins, you would have gotten at least USD 1700 for them if not more."

BullionStar, The Difference in Paper and Physical Gold and Silver in times of Crisis

For the charts below the price data is the 'Ask'  live price from a major online supplier.

As always, if it is data related to the gold and silver markets and it is publicly available, Nick Laird at goldchartsrus.com is probably keeping track of it.

Shanghai Exchange Has 73 Tonnes of Gold Withdrawn In 4th Largest Week In History

There were a little over 73 tonnes of physical gold withdrawn from the Shanghai Gold Exchange in the latest week ending August 21st.

This is the 4th largest withdrawal of bullion in its history.

It is hard to tell what exactly is going on in such a dodgy, highly leveraged market, with its determined attempts to keep the price knocked lower so often during the late London to NY trading hours.

But I am sensing a change in the market, and more things running under the surface than meets the eye.

Goldman is no major player in the gold bullion market, but it did strike me as odd that they are suddenly stopping large amounts of bullion for their own house account this month. It is not that they are a player in gold, because they are not.  But that they are wired into many sources of information, are good at spotting trends, and are more like a hedge fund, comfortable running on the edge of the markets.

And the gold chart, for what it is worth in these times of market interventions, seems to be trying to form a rounded bottom in the form of  a cup and handle, with a successful retest of the handle this week.  This calls out a price around the bottom of the old trend channel at 1270.

It could also be nothing.  I will pursue the details of such a chart formation if we see the right kinds of follow through next week.

And I will certainly be watching silver very carefully for any signs of life.  It may be pivotal next month.

Let's see what next week brings.  Gold is just one market among many, and it is certainly not the largest one in play.

And while I have your attention, I thought I would include a long term chart of the relation of deliverable gold at current prices to open interest.  It might mean nothing.  But it doesn't seem to be anything familiar before 2013

The charts below courtesy of data wrangler Nick Laird at goldchartsrus.com.