Monday, August 22, 2011

Another Sucker's Rally Today

Now that the retail investors have been all but driven from the markets and all we have left are the algo driven HFT computers we can expect yet another irrational (if not short lived) rally in the markets today. In part the delusional will interpret the fall of Kaddafi as the harbinger of some new stability for North Africa. The TV pundits have already started with the lollipops and roses meme for the aftermath in Tripoli. I wonder if In-Trade has a bet on how long it will take for it to fall apart into chaos if not outright tribal warfare.

But never mind that, everyone is anticipating the DJIA to be up today following the European markets and a lowering in the gold price on the London markets. The flurry of emails filling my in box on all the supposed “hot buys” has become one of my favorite forms of entertainment. They all can be summed up in one sentence: “This is the bottom you have to buy now or get left behind by a resurging market!” I guess they would have us ignore that each new “rally” has a half life even shorter than the previous one and is followed by an even larger decline. They’re trolling for suckers but I’m not one of them. As far as I’m concerned the fine print disclosure statement, or as they see it “get out of jail free card” is no pass for the criminal nature of this activity of preying upon the scared and uninformed.

If one willingly jumps into a tank full of sharks knowing full well that you might get eaten it’s one thing, but when the sharks are chumming the waters to entice the unwilling and uninformed to jump right into their greedy jaws it’s quite another.

But then it is just this kind of criminal fraud that got us into this mess and not a single one of these rapacious monsters of Wall Street has seen a single day in jail never mind in court, why then should we expect them to change their behavior. The SEC and the CFTC are staffed with former and future employees of the very institution they are allegedly regulating so don’t expect any justice any time soon. And when the pressure does begin to mount you can bet that the worst of them will already have left and be residing in Liechtenstein or someplace else with no extradition treaty and safely out of reach.

Sunday, August 21, 2011

And The Next Chapter Unfolds.

Now that it appears the war in Libya is about to wind down there might be a few questions that need asking. Don’t be looking for any answers never mind the questions in you Main Stream Media source.

As background it might be helpful to review a previous posting from May;

At present there are at least two other events on the horizon that attention may turn too now that the logistic capabilities of supporting the so-called rebels in Libya can be freed up.

The first and seemingly most immediate would be Syria, with both the President and Secretary of State Clinton issuing demands for President Assad’s resignation. Given the growing tension between Israel and Egypt over the recent attacks in Israel and the unpredictable nature of how the rest of the Arab world would react to a “kinetic action” against Syria in the heart of the region any such action might be more might be biting of more than the Administration is willing to chew. If such an action were to be undertaken it could be almost guaranteed that Syria would launch an attack against Israel in order to try and bring other Arab states and perhaps Iran into the conflict on it’s side. At which point all bets would be off and the conflagration would spin out of control faster than a drunken Lindsey Lohan in a jewelry store.

With an Administration palpably desperate to find a distraction from the consequences of its disastrous economic policies and with the financial elites equally desperate to keep the ponzi fraud of the markets alive, one Hugo Chavez comes to mind. The parallels between Chavez’s statements about desiring to create a gold backed monetary system for Latin America independent of the collapsing US dollar and Kaddafi’s wanting to create a “Gold Dinar” for settlement of oil contracts is unmistakable and undeniable. Hence the reason you won’t see anything about it in the MSM.

Understanding that the US already has a sizeable military and intelligence logistics presence right next door in Columbia and there already exist tensions along the border over allegations of Columbian and possibly US troops crossing that border in pursuit of Columbian FARC insurgents the table may be already set for the next act in this Orwellian nightmare. Add in huge oil reserves and that the US imports large amounts of it, exclusively to California, and the temptation for the Machiavellians may be too much to pass up.

All this is speculation of course but when and if you here the propaganda machine that Polish err Venezuelan troops have cross the border and that American troops have been killed defending the Reich, err Columbia then maybe you will understand just what fools we are being played for.

The only question then will be whether the American people will be in the streets protesting against being deprived of house, home, jobs and food or reacting to Kabuki Theater in the jungles of Columbia. The powers that be won’t really care which, as either one will allow for further ratcheting up of government control, depriving us of even more liberties in the name of security.

Before the FED, JP Morgan, the B of E, the BIS begin congratulating themselves about shutting down Kaddafi and perhaps securing his 143.8 tons of gold to cover their short positions on the COMEX they might want to first find out how much of that gold is still in Tripoli and how much has already been moved to Caracas.

The Scramble Part Two...

From what I see the process has already begun with the announcement on Friday that Venezuela’s debt paper was being downgraded. Chavez may be right about wanting to escape the "dictatorship of the US dollar" but the man is his own worst enemy when in comes to understanding capital. I guess that's what comes from hanging around with Castro.

The banksters are going to want to get this matter into the courts as quickly as possible, ram it through and wait for gold to go up for all the other intendment reasons so they have to dole out as little as possible of it in whatever "special case" bonds or notes -payable in 10 years of course- to cover any settlements. Throw in the banksters usual "administration fees" and Venezuela is effectively stripped of it's gold.

The only overhanging question I see is if they have the time to put the scenario in place, courts can be frustratingly slow to act and other events accelerating the collapse could outpace their plans. Which then raises the question of war. Given the considerable US military presence right next door in Columbia, no telling what they can cook up. Kill off a couple dozen US soldiers, blame it on Chavez and there you go, the ready-made primary excuse for more uncontrolled printing, war. I here Ben may be backing up the truck loads of lithium grease to lubricate the presses going into hyper drive as we speak!

I can almost hear the propaganda machine at work, “The Polish, err Venezuelan troops crossed the border and attacked our valiant troops defending the Reich, err Columbia. Blah, blah ,blah.

As usual there are bad players on all sides and as usual it’s the troops and innocent civilians who will end up getting it in the neck as the result of the Machiavellian power plays of others.

It’s going to be question of which gets people more riled up first, and who they blame for it; the ongoing financial chaos depriving them of house, home, jobs and food or some cooked up theater of the absurd in the Columbian jungles.

Friday, August 19, 2011

Same Play Different Cast.

In case any of our Republican friends harbored any delusions that Gov. Perry of Texas was going to be any different than any of the other bought and paid for politician, I suggest you check this out.

I don't know who this particular character is but I do know that BofA is in deep trouble and is on the verge of becoming the new Lehman Brothers.  The message is quite clear - you protect our sorry backsides and we'll fill your pockets - same play different cast.  In the meantime gold bounced off $1880.00 on the London market this morning as the European equity markets continue to spiral downward.

Only question for BofA is will they still be around by the time the primaries get here never mind the general election?

Wednesday, August 17, 2011

The Scramble For Physical Gold May Be About To Begin. Got Physical?

It looks like it might be “game on” in the physical bullion markets, the long anticipated parabolic move upward coming your way courtesy of one Hugo Chavez, the erstwhile dictator of Venezuela. He started Wednesday by announcing that his government will be nationalizing all the gold and silver mining industries. This story alone may well have led to JP Morgan holding off on their usual Thursday raid on precious metals on the COMEX.

Chavez quickly followed up on the move by announcing that he was going to seek repatriation of all of he country’s gold assets, beginning with some 99 tons held by the Bank of England. Venezuela also has requested return of gold deposits held at the BIS in Switzerland and the Federal Reserve Bank of New York. He has also indicated that he going to move Venezuela’s cash reserves out of western banks and into banks in China, Russia and Brazil. The problem for the B of E is that most of it gold holdings have either been leased out or are otherwise encumbered by cash swaps particularly to the aforementioned JP Morgan’s GLD ETF. I can only imagine the panic at the “Morgue” this evening. Blythe Masters and her flying monkeys who control the COMEX have a big problem. Namely the eligible vaults at the COMEX only have some 10.5 tons inventory!

Somehow I don’t think Chaves is going to accept either shares in the GLD or a rubber check from Blythe’s commodity desk.  Neither do I think el Presidente has a snowball’s chance in hell of actually getting his hands on that gold. He is clearly concerned that his wave of nationalizations has spawned a raft of civil actions seeking compensation for the properties seized by his government and that it could lead to the freezing of his overseas accounts. The race will be on to see if sanctions can be put in place and accounts frozen before the logistics of currency transfers and moving physical bullion can be executed.

No matter how this plays out the shorts on the COMEX may be doomed. If Chavez presses his claim neither the B of E nor the Morgue have the physical to deliver. The B of E will be forced to reclaim their swaps putting the short squeeze on the Morgue placing Blythe in the position in having to buy gold on the open market and the price goes ballistic, and both the London Bullion Exchange and the COMEX are faced with default, just the rumor of which will push the price even higher.

If the courts beat Chavez to the punch and freeze Venezuela’s assets before the transfers can take place they risk a third world political backlash, making the justifiable claim of the western banks waging economic warfare to prevent the collapse of their un-backed short positions. This could then in turn unleash another storm of sovereign states demanding the return of their own bullion deposits. Absent any similar legitimate claims for compensation as are held against Venezuela, the end result for B of E, JP Morgan, HSBC and the rest of the shorts on the COMEX will be the same.

My bet is that Blythe Masters and Ruprecht have the plane warmed up on the runway. Only now they might not be as welcomed in Venezuela as they had hoped.

Thursday, August 11, 2011

Will The Parasites Begin to Feed on Themselves?

I am, as always quite bemused by the "tax the rich" crowd. It’s kind of like watching a burned out hippie sitting cross legged on the sidewalk, hands on his knees palms up, rocking back and forth and chanting "tax the rich, tax the rich” over and over like it were some Tibetan mantra. They have no concept of the actual numbers we are dealing with. All they know is that their would-be political idols are saying it and its emotionally satisfying to be sticking it to someone else.

Fact is, if the government could take 100% of the income of that top 5% of earners they so loath, it still would not be enough to balance the bloated federal budget. And then what? Come the next tax year that 5% is nowhere to be found to be taxed. They have packed their bags, closed their factories and shops and are gone. Be it to Switzerland or New Zealand or Gault’s Gulch, where ever, it won't matter. Yes maybe they will have to pay high taxes those places as well, but they won't be faced with an insane government capable of neither rational thought or honest decision. Then what will the "tax the rich" crowd do? That top 5% and their 50% of the tax revenue will be gone forever and government spending won't have dropped a dime. So instead of "borrowing" (printing from thin air) 40% of the budget, government will be printing up 80% or 90% of the budget. Ask your "tax the rich" friends just how well they think that will work out. 

Unless you have one of these in your basement you might be in trouble.

What these people don't understand is that the issue is not how much tax the top 5% pays or does not pay, but HOW that top 1/10 of 1%, the super rich, the banking and financial elite, accumulate wealth. As long as they are allowed to continue to accumulate through manipulation of markets rather than generating wealth through production, they will remain being nothing more than a engorged and massive leach attached to the jugular vein of the economy, sapping it’s life blood to pay their outrageous salaries and yearend bonuses. What matters is how Congress has succumbed to the pressure from the Treasury and the banks to grant “most favored nation” status to nations like China and Russia and others not because they have any intention of trading fairly, but because the banks and trading houses take a cut out of each and every currency exchange. Tthis particular bit of detritus is sold to us under the premise that it doesn’t matter that our trading “partners” are putting their self-interest first, the United States must be seen as being “fair” in our dealings with other nation regardless of any detriment to our economy, security and well being as a sovereign state. Excuse me while I roll up my pant legs. It has nothing to do with trade or with fairness; it has everything to do with how much the elites can suck out of each and every transaction. 

And just like with any other parasitic infection as the host grows weaker and less able to sustain the parasites, they begin to feed on each other as well. In the last crisis we had the sacrificing of Bear Sterns and Lehman Brothers, this time it looks like the formerly “all powerful” Bank of America is about to be splayed across the already bloody stone alter. While their banking brothers hold its limbs in anticipation of tearing them off, the High Priest of JP Morgan is set to plunge in the ragged obsidian dagger, cut out its still beating heart. Holding it up before the gasping crowd B of A will be condemned as having been not quite quick enough to hide their fraud in the mortgage mess. The High Priest and his minions will then devour what is left of the corpse, kick a few millions or a billion or two to the government in penance for B of A’s “crimes.” With their own culpability at least for the moment deflected upon B of A, they will then be left, not so surprisingly, even “Too Bigger and Too Fatter To Fail.”

Brian Moynihan and Bank of America meet their demise.

Unless and until we break the power of the banks to create the nation's currency as an instrument of debt owed to them, unless and until we stop their interdiction into every conceivable transaction, unless and until the politicians are broken of their addiction to financing their campaigns with these gangsters pocket change, things will not improve, they will only get worse, no matter who gets "elected."  Things are on the decending trend line, get used to it.

Wednesday, August 10, 2011

Ugly Reality Sets Back In

Simplistic analogies absent causative details are not an answer to anything, just as endless partisan finger pointing are part of the problem not a solution.

The fact remains when the Dems took over Congress in 2006 and the White House in 2008 they thought they had carte blanch to undertake and endless stream of spending in pursuit of their utopian socialist dependency dreams. With their secure super majorities in both houses, they added nearly $5,000,000,000,000 to an already insurmountable debt, made an already dismal unemployment number worse and in essence kicked the crutches out from under an already hobbling economy with a new and endless sea of stealth taxes on business via the cancerous growth of regulations. Many of which exist for no other purposes than to exercise government control and justify the existence of a new raft of Federal bureaucrats.

With all these facts laid squarely at their feet, both the public and the markets reacted. Firstly global markets contracted under a tide of inflation and uncertainty. Secondly the voters (the very same ones who were praised as paragons of wisdom and virtue for putting the Dems in power) resoundingly threw them out of the House and greatly diminished their numbers in the Senate. So now these same voters are subject ridicule and derision as ignorant and partisan because they got slapped in the face by the consequence of their folly of electing these arrogant fools and elected a different bunch of arrogant fools.

The Dems have seen what they thought was going to be decades of dominance (can you hear me Mr. Carville?) snatched away in but an instant, and they are desperately thrashing about to find a scape goat to blame, anyone to blame but themselves for their own folly.

Now the new bunch of arrogant fools have co-operated with the old bunch of arrogant fools and added another $2,400,000,000,000 to the aforementioned insurmountable debt and again the markets react with further contraction and flight to hard assets and we get the same game played again. Both bunches seek to blame anyone but themselves for the consequences of their folly.

So now after the schizophrenic reaction on the DJIA to the FEDs announcement that zero interest rates will continue, money moved out of bonds, where low interest plus inflation means a net loss, and into dividend paying stocks. But then it only took until this morning for the ugly reality to set back in and the markets are again sinking like a stone. Gold is again reaching new highs and has even surpassed platinum in price. The Italian stock market has been shut down in a vain attempt to stem the exit of cash. The Dow again invokes rule 48, for the second day in a row. The Swiss Franc continues to soar against both the Dollar and the Euro.

But fret not the arrogant fools of both parties will continue to delude themselves (and try to convince you of their delusions) that there is a “political solution” to a systemic problem of economic and monetary misalignment. Sadly the partisan hacks on both sides of the aisle will buy into it and make of themselves just as big a bunch of fools as those in Washington.

Monday, August 8, 2011

And Now Back To Our Previously Scheduled Program…. Part Three

Last Thursday was ugly.  Today was even uglier, and predictable. Tuesday may well be chaotic.  The Japanese markets are already down 5%, South Korea’s are down 9-1/2%.  Chinese inflation numbers have come out at 6-1/2%, much hotter than the expected rate of 4-1/2%.  Euro zone futures are already down nearly 2/3 of Monday’s total loss.  US markets may not have time to wait for the FED’s Open Market Committee before reacting.  Helicopter Ben may be forced to release some absurd statement by 7:00 AM in order to try and stem the tide of panic. QE3 to infinity and beyond!  Will it work? I have my doubts, but putting the printing presses into hyper drive is the only card he has left in his hand. Got physical?

And Now Back To Our Previously Scheduled Program.... Part 2

What can I say except that the wheels are coming off.  Gold broke through the $1700.00 mark on the Asian markets this morning.  Both the DAX and STOXX markets in Germany openrd down nearly 20%.  Rumors are swirling that the SocGen bank in France and UniCredit in Italy are on the verge of collapse.  As much as some have decried the S&P down grade of US Treasuries it's psycological impact will be small compared to what will happen when the down grade allmost all Municiple Bonds this morning.  Gee I wonder why it was announced that "Rule 48" will be imposed this morning before the market even opened.

Good Luck!  When tipping points are reached its like Wylie Coyote has finally looked down and realized he has indeed steped off the edge of the cliff.

Gold Reaches $1700.00 (Why I buy gold and silver redux).

With Gold breaching the $1700.00 mark on the opening of the Asian markets on Monday I thought it might be worth re-posting my position on precious metals.  The continued and accelerating deterioration of conditions in the Euro zone combined with the down grade of Treasuries (soon to be followed by a down grade of municiple bonds will only push PMs higer still).  When (not if) gold breaks Sinclair's $1764.00 mark look for the move to go parabolic, and game over for stocks and bonds.

Gold and silver values (not prices) are only a reflection of the rapidly evolving new reality.

There will always be those who will deny that the entire western financial system is F.U.B.A.R. You know the term, denying it, finger pointing or making excuses for how we got here won’t change the facts. There is no intention from any of the politicians or bankers of doing anything to fix the problems at their root cause, OTC derivatives. The European Union has outlawed naked CDSs (credit default swaps) which is at least an indication that they are trying to do something. Whether it will prove too little, too late or not, time will tell. The chances of anything like that happening in the US are absolutely ZERO.

To say it is very late in the game is a gross understatement.

The times of any kind of normal conditions, however you might want to define them, are gone and they’re not coming back any time soon. One needs only look at the FACT that before the crisis of 2008 the Federal Reserve was buying between 10% and 15% of US Treasuries, now they are virtually the only buyer and by this action alone they are consigning the Dollar to its doom.

Only by adjusting our attitudes and actions to this new reality is there any hope for getting to the other side with any semblance of intact wealth and security. This applies at both the individual and societal level

The system has already failed, act accordingly. There are no political champions waiting in the wings with the will or ability to fix it. Even if there were, there exist no means that could be applied that would not in the short term cause an even more severe economic dislocation than we are already faced with. Even if there were some practical solutions left (and there aren’t), neither the banks nor the politicians would allow them to be applied because it would diminish their power.

We have embarked on a third war in the Middle East and it will be impossible to disengage as the chaos spreads. Kind of reminds one of the Uncle Remus story of the Tar-Baby. It is utter madness and no good can come from it. The revolutions and wars in the Middle East are not pro Western and not pro democracy, they are anything but.

Look back at what the price of commodities were 2 years ago and what they are today. By the time we reach the next election they will look like bargains by comparison.

If you are holding physical bullion and food stocks hold on to it as it will be the only insurance you will have and you’re going to need it. Show some pity for those who would deride you for holding insurance, they will be the first victims of their own hubris, but be careful, for as the rug is pulled out from under them they will blame you for their situations and many of them can and will resort to violence.

Thursday, August 4, 2011

And Now Back to Our Previously Scheduled Program.

Well now that the debt ceiling debate is over and the Treasury burned through about 60% of the $400 Billion in new boworrowing authority in a single day, it seemed the markets decided to get bact to "the previously scheduled program." While the various partisan pundits busied themselves blaming their respective opposition for todays meltdown on the DJIA,they tend to ignore the fact as bad as it was on Wall Street the situation in the Euro Zone was far, far worse. Not only were all the various borses off nearly as much as the Dow, the soverign bond market virtually shut down. The sell off in Italian bank stocks was so diasterious trading in the largest banks was suspended. No matter how high they push up the yeild on PIIGS bonds there are no buyers to be found. So it looks like ECB will be forced to step in and buy, i.e. print more and more Euros.

With the US markets already skitish after and extended sell off the panic on the trading floors must have been palpable. With about 45 mins. to go until closing those investors that had been hanging on all day hoping for even a small reversal threw in the towel and the market fell another 150 points.

I can't imagine there are many stock brokers or hedge fund managers that are getting much sleep tonight. Far as I'm concerned, serves them right. All that pumping up prices on low trade volumes just came back and bit them on the backsides. It's not like there haven't been those of us warning this would happen.

Monday, August 1, 2011

The Debt Deal and the Addiction of Deficit Spending.

If you listen carefully over all the propagandistic noise coming out of the mouths of the politicians and news pundits you will hear that sharp metallic clanking sound of the debt/deficit can once again being kicked down the road. QE3 is here with a vengeance to the tune $2.8 Trillion!

The debt addicts of Wall Street and at both ends of the Washington Mall now have their fiat fix and will count on their party and news media enablers to try and convince the masses that all will be well, at least until after the next election. As soon as the commodity markets opened in Asia gold prices fell sharply and the Yen and Swiss Franc both fell off against the US Dollar. We can expect the DJIA to recover a good portion of last week’s losses on opening on Monday morning.

The problem with addicts and addiction is that each new fix produces diminishing returns until the point where the addict is cut from his support system of enablers and either cleans up his act or continues to ingest the poison until it kills them.

Clearly at this point that small but growing part of the body politic that seeks to cut off the addicts from the drug of debt have been overcome by the larger body of enablers. They have been told to “get their ass in line” and succumbed to the pressures of the larger mass.

Just how long the markets will buy into the delusion of politics as usual and some newfound dollar stability will remain to be seen. At some point the realization will set in that this new $2.8 Trillion in debt has no more chance of being repaid than the previous $14.3 Trillion and the markets will reverse once again. What the trigger of that realization will be no one knows. The potentials are seemingly endless. An evitable default in Europe, renewed wars in the Middle East or another unforeseen natural disaster are all within the realm of possibility. Whatever the trigger is, when it happens the shackles of political hubris and fiat addiction will come off the beast of hyperinflation and our economic reality will change almost overnight.

So then I would suggest that we all, especially our politicians, familiarize ourselves with the stories of recovered addicts. They will all tell you that the period of withdrawal is the most horrific and difficult thing they have ever done. But they will also tell you that they came out the other side stronger and better people and with a sense of self-reliance they never knew they had.