Bill Cara’s Blog for Mar 23, 2012

CTA Trading Desk Morning Report

[8:15am ET] Good morning, Geoff here.

The DAX started the trading in the black by almost 1% and then weakness entered the market and it dropped to net negative. What are traders worried about? A European default over the weekend?

With complacency running rampant, any new negative news from Europe, China or the Middle East could lead to a major drop in the lofty S&P 500.

Conversely, sentiment in gold is negative and the recent decline has led to many traders exiting the space. I would feel more comfortable with a bigger shake of the tree to get the final longs out, but any news positive for gold could lead to a big rally in gold.

The long bond trade continues to work but it is Friday so we shall see if we hold that trade over the weekend.

I have always done best by buying weakness and selling strength with stops in place and suggest you do the same.

Have a great trading day!


Here are the 7:00am ET snapshots of the latest equity market trading results for Europe, and futures prices plus 5-minute charts of the futures for S&P 500, 30-year US Treasury Bond, US Dollar index, Gold and Crude Oil.

Symbol Name Last Trade Change Related Info
^ATX ATX 2,177.65 6:44AM EDT Up 4.56 (0.21%) Components, Chart, More
^BFX BEL-20 2,324.36 6:59AM EDT Up 1.09 (0.05%) Components, Chart, More
^FCHI CAC 40 3,457.22 6:59AM EDT Down 15.24 (0.44%) Chart, More
^GDAXI DAX 6,965.27 6:44AM EDT Down 15.99 (0.23%) Components, Chart, More
^AEX AEX General 324.45 6:44AM EDT Down 2.47 (0.76%) Chart, More
^OSEAX OSE All Share 482.67 6:44AM EDT Up 3.32 (0.69%) Components, Chart, More
^OMXSPI Stockholm General 337.30 6:44AM EDT Down 0.71 (0.21%) Components, Chart, More
^SSMI Swiss Market 6,229.49 6:44AM EDT Down 20.07 (0.32%) Components, Chart, More
^FTSE FTSE 100 5,836.45 6:44AM EDT Down 9.20 (0.16%) Components, Chart, More
FPXAA.PR PX Index 986.00 6:59AM EDT Down 4.20 (0.42%) Chart, More
MICEXINDEXCF.ME MICEX Index 1,524.12 7:44AM EDT Down 6.08 (0.40%) Chart, More
GD.AT Athex Composite Share Price Index 769.59 6:44AM EDT Up 4.52 (0.59%) Chart, More

http://finviz.com/futures.ashx

http://finviz.com/fut_chart.ashx?p=m5&t=ES

http://finviz.com/fut_chart.ashx?p=m5&t=ZB

http://finviz.com/fut_chart.ashx?p=m5&t=DX

http://finviz.com/fut_chart.ashx?p=m5&t=GC

http://finviz.com/fut_chart.ashx?p=m5&t=SI

http://finviz.com/fut_chart.ashx?p=m5&t=CL

The team will check in during the day, reporting in the Discourse when there is a new entry.

Enjoy your day.


Cara on Trends & Cycles


Vad’s Catch of the Day


Kaimu’s Sound Money


CTA Trading Desk Mid-Day Report


CTA Trading Desk Post-Close Report


Jeff Borsato’s Hidden Truth

The Golden Problem? A Consideration by Dr. Fekete

This article by Dr. Antal Fekete is long, detailed and informative.

I know that Dr. Fekete is read by Bill and many in the community and while I find it difficult to grasp some of the more esoteric aspects of his arguments in favour of gold, I believe he offers real value to the debate about gold going forward. No mere academic, do not let the “Dr.” part fool you, Dr. Fekete makes some founded and well supported points about the realities of both the gold market and our traditional understanding of what drives prices.

I’ve included a slightly shortened version for your review below,

Enjoy,

Jeff Borsato
jeffborsato@caratrading.com

The Problem of Gold, By Dr. A. Fekete
March 20, 2012

The article “The Gold Problem” of Ludwig von Mises, published 47 years ago in 1965, just six years before he died (the gold standard died with him in the same year) has some breath-taking thoughts, for example, “the gold standard alone can make the determination of money’s purchasing power independent of the ambitions and machinations of governments, of dictators, of political parties, and of pressure groups”, or: “the gold standard did not fail: governments deliberately sabotaged it, and still go on sabotaging it.” But for all our admiration we would be amiss if we did not point out certain errors in his article. These are all errors of omission, and correcting them would hopefully make the Mises article even more helpful to the discriminating reader.

Mises fails to answer his own question why gold is the best choice to serve as money. Indeed, why not another commodity, or a basket of commodities? The reason is that the marginal utility of gold is unique in that it declines at a rate slower than that of any other substance on Earth. Various assets have various marginal utilities which determine their value. All of them decline, albeit at various rates. In other words, economic actors accumulate assets increasingly reluctantly, up to their satiation point that will be reached sooner or later. For gold, this point is removed farther, so far indeed that for all practical purposes it is beyond reach.

Therefore if you substituted another commodity, or basket of commodities for gold, then you would end up with a unit of value the marginal utility of which was inferior. It would decline at a rate faster than that of gold. It would be akin to substituting a yardstick made of rubber for one made of metal.

1. The Futility of Inflationary Policies

Mises ignores the fact that newly created money can be spent not only on goods and services, but also on financial assets. This is the proverbial fly in the ointment of the inflationary argument. It is also a subtle one, so much so that the government as the would-be perpetrator of inflation often falls victim to it. It may think that it is promoting inflation while, in fact, it acts as quartermaster for deflation.

By restricting the circulation of gold money or by other means, the government can make financial speculation more attractive. In doing so it wants to reduce the amount of money available for buying goods and services. This strategy of the government and its pseudo-economists consists precisely in channeling enough of the newly created money into speculative ventures so that the untoward consequences of price and wage rises will not occur, or they will occur later, so that the causality relation is obscured.

The paramount example is bond speculation. Of course, under the gold standard there is no bond speculation because the variation in the bond price (or, equivalently, in the rate of interest) is minuscule making the opportunity to earn speculative profits negligible. Unless… unless… the central bank makes profits risk free as a bait to speculators by inappropriate monetary and fiscal measures. This is exactly what happened in the early 1920’s when the policy of open market operations, so called, of the Fed were first introduced quite illegally, we might add (the policy was legalized retroactively in 1935).

* This article is in response to Dr. Joseph Salerno’s remarks made in the interview with Anthony Wile of the Daily Bell, July 3, 2011

In an unhampered market risk-free profits that may occur from time to time are ephemeral and therefore inconsequential. Hawk-eyed speculators immediately take advantage of them with the result that any further opportunity to make risk-free profits is eliminated on the spot. This is no longer true if the opportunity to make risk-free profit is not an infrequent aberration but the consequence of deliberate and well-advertised official policy as it is in the case of the policy of open market operations. When the central bank relies on open market purchases of government bonds in order to augment the monetary base on a regular, ongoing basis, then speculators can anticipate and pre-empt it.

This policy, whole-heartedly supported by Keynesian/Friedmanite economics, is the most ill-conceived monetary policy ever concocted for the purpose of increasing the stock of money. The Federal Reserve Act of 1913, for excellent reasons, disallowed such a policy and imposed stiff and progressive penalties for non-compliance on the Federal Reserve banks if their balance sheet showed that government bonds had been used to cover Federal Reserve note or deposit liabilities. At first the Fed used open market operations illegally. It could get away with it because of the connivance of the Treasury in ‘forgetting’ to collect the penalty. The conspiracy created a fait accompli and, in the end, Congress was forced to legalize the corrosive practice retroactively in 1935 when it amended the Federal Reserve Act.

Interest rates have been falling for over thirty years. The Fed is no longer in control. It is lunacy to believe that it can stop the avalanche that it started so easily in the early 1980’s. Today the speculators are the only buyers after China and other exporters to the US bailed out of the US T-bond market. Speculators will keep buying the bonds as long as they can reap risk free profits. It is true that ‘quantitative easing’ cuts into that business, as the Fed is buying bonds directly from the Treasury, bypassing the open market (another illegal practice). Watch for the day when the speculators will start dumping bonds and selling them short. When they transfer their buying from the bond market to the commodity market, the game is up.

Open market operations is a charade that can go on only so long as speculators are allowed to reap risk-free profits at the expense of the producers and the savers. When the latter have been squeezed dry, it’s “après nous le deluge”. That is the true scenario of Great Depression II.

2. The Futility of the Policy of Suppressing Interest Rates

Mises (and, before him, Ricardo who was an advocate of the elimination of gold coins from circulation) was wrong when he stated that there is no difference between the gold coin and a promise to pay gold coin as long as the security and maturity of the promise cannot be doubted. The promise can perform all the monetary functions that the gold coin does. Well, it cannot, because there is one very important exception. When the marginal bondholder in protest to low interest rates sells his bond (a future good), he insists on getting gold (a present good). He will not take a promise to pay gold, because it is still a future good, and an inferior one to boot as it pays no interest. Taking it would mean jumping from the frying pan into the fire.

This shows that gold hoarding, far from being a deus ex machina, and far from being a curse of the gold standard, is an important market signal. It indicates that the rate of interest is being pushed below the rate of marginal time preference. It had better be heeded before it is too late. Gold hoarding cannot be understood except in the context of its counterpart, gold dishoarding. When the signal is heeded, banks tighten up their loose credit policies and the government reins in expenditures, gold will be dishoarded and the marginal bondholder will replace gold in his portfolio by repurchasing the bond at a profit.

This was the reason for eliminating gold coin circulation first in Europe in 1914, and then in the United States and Canada in the 1930’s. Governments wanted to make sure that they were in full control of the rate of interest, free from any interference from the marginal bondholder. This policy had to fail. It was shipwrecked on the reef of gold hoarding.

All economists, including Mises himself, missed the importance of the nexus of gold hoarding and dishoarding as the manifestation of arbitrage by the marginal bondholder between the bond market and the gold market, explaining the all-important contact between gold and interest.

3. The Futility of the Policy of Boosting Wages

Mises had too great a faith in the Quantity Theory of Money, and was probably disturbed by the fact that real bills, however temporarily, could serve either as money substitutes, or as bank reserves on which sound money could be built. His negative attitude with regard to Adam Smith’s RBD is regrettable. Real Bills are the next best thing to gold into which they mature in 91 days or less. The demand for real bills is virtually unlimited. Not only banks with surplus gold in their tills scramble for them as the best earning asset commercial banks can have, but also those individuals and institutions who have large payments coming up (say, the purchase of a house, or a factory, or the retirement of a bond issue) and they have to assemble cash by the closing or maturity date. They could not put these accumulating funds into stocks, bonds, or mortgages because they were not sufficiently liquid. An increased offering would immediately depress their price. Instead, these people went into the bill market and bought real bills the liquidity of which was second only to gold.

But real bills had another great significance having to do with the labor market. The only author who recognized this fact was the German economist Heinrich Rittershausen (1898-1984), see his book Arbeitslosigkeit und Kapitalbildung, Jena, 1930. A large part of outstanding real bills in circulation represented the wage fund of society. Out of this fund wages for labor producing merchandise that will not be available for sale for up to 91 days could be paid now. Thus real bills represented a real extension of demand for labor. Employers would simply go ahead and hire all the hands needed to produce merchandise in high consumer demand, without worrying who will advance the funds to pay wages before the merchandise could be sold. The wage fund would always be there. The RBD explains why there was no ‘structural unemployment’ in the 19th century, in contrast with the 20th when the wage fund was destroyed never to be rebuilt. 19th century entrepreneurs did not have to assume the burden of financing the payment of wages. The bill market took care of that. Say’s Law was operative: there were employment opportunities as long as prospective employees wanted to eat, get clad, shod, and keep themselves warm in winter.

The point was driven home most forcefully when the wage fund was inadvertently destroyed by the victorious Entente Powers. They decided not to allow the rehabilitation of the bill market after the cessation of hostilities in 1918. This single decision sealed the fate of tens of millions of workers who were to be laid off in the 1930’s for lack of financing the wage bill. It was also the reason for creating the corrosive ‘welfare’ state that paid workers for not working and farmers for not farming. It also caused the demise of the gold standard by removing a vital organ, its clearing house: the bill market. Here are the details.

The victorious Entente Powers were afraid of German competition in the postwar period. They wanted to monitor, if not control, Germany’s exports and imports. As this would not be possible under the system of multilateral trade, that is, trade financed by real bills circulation, they opted for a system of bilateral trade. Never mind that this meant a setback for their own producers and consumers as well. Never mind that much more gold was needed to run a system of bilateral trade than that required by a system of multilateral trade extra gold they did not have. Never mind that this would make the 1925 return of Britain to the gold standard deflationary. The neurotic fear of German competition took precedence over all other concerns. In fact, these concerns were never examined and the decision was made in high secrecy.

This was the end of real-bill financed world trade, the great success story of the 19th century. The bill market was destroyed. We still suffer the consequences. In effect, world trade was reduced to barter. Worse still, along with the destruction of the bill market society’s wage fund was also destroyed. There was no one to advance wages payable to laborers whose products could not be sold for cash up to 91 days. Vast sections of the world’s productive plants were condemned to idleness for the disappearance of the wage fund. As I mentioned, the only economist in the world who saw what was coming was Rittershausen. Economists still owe him recognition for his great insight. The world is still condemning the gold standard as the major cause of the Great Depression of the 1930’s and the horrible unemployment in its wake, when the real cause was the destruction of the wage fund, a misguided unilateral decision of the victors in World War I made in secrecy.

Once again the world is facing the same dangers as it did four score of years ago. Yet one can see only complacent governments in a self-congratulating mood over their ‘success’ in ‘fending off’ the Great Financial Crisis. But the writing is on the wall: if governments fail to rehabilitate the gold standard and its clearing house, the bill market, together with the wage fund, then a much more devastating leap-tide may soon engulf the world.

4. The Futility of the Policy of Gold Valorization

The world has been witnessing the pathetic attempts of governments and central banks “to keep the gold price in check” since the 1971 fraudulent default of the US government on its international gold obligations. To be sure, a default is always followed by a depreciation of the dishonored paper, so the futility of the policy of gold valorization has always been a foregone conclusion. But what we have is far more than this self-defeating effort to keep gold out forever from the monetary system. What we have is a veritable brain-washing of the whole world about the role of gold in the economy, and blaming gold for results that only keeping gold in the system could have prevented.

It is alleged that gold has disqualified itself from playing the role as the monetary anchor and source of credit in the economy. ‘Gold is far too volatile for that’. This is puerile because it ignores the fact that the so-called volatility of gold is just the mirror image of the volatility of the irredeemable dollar in which the price of gold is quoted.

It is also ignored that the debt crisis is a direct consequence of exiling gold from the international monetary system. Gold is the only ultimate extinguisher of debt. It cannot be replaced by the dollar or any other irredeemable currency. Under the dollar system debt simply cannot be extinguished. Total debt can only grow, never shrink. All the bad debt and “toxic sludge” stays in the system and is merely kicked upstairs into the balance sheet of the US Treasury. There it remains, representing a great threat to the world. Like radioactive material, when its quantity exceeds the threshold, a chain-reaction starts triggering an nuclear explosion. The world needs gold as a safe way to eliminate bad debt.

Through a system of bribes, blackmail and intimidation research on questions relating to gold has been discouraged to the point that it is practically non-existent. The world continues to live in a fool’s paradise. It believes the size of government debt does not matter because it can always be rolled over. Nor would it cause inflation or deflation because competent and honorable gentlemen at the helm can safely navigate our monetary ship through the strait of Scylla and Charybdis. They have a sharp tool, the printing press, and with its judicious application they can fine-tune the quantity of money in circulation as well as the rate of interest for the benefit of all. But the virtual elimination of research on gold will strike back. These ‘competent’ and ‘honorable’ gentlemen at the helm are complete ignoramuses when it comes to gold. They have no notion of the erosion of the gold basis and the irresistible march of the gold futures markets into the death valley of permanent gold backwardation. When disaster strikes, gold will not be available at any price. What this means is that the world is insidiously slipping into barter. But you cannot feed the world’s present population on the basis of a barter economy. Poverty, pestilence, famine threatens society, not to mention the breakdown of law and order. All this, and more, because government leaders have allowed the suppression not only of monetary gold itself, but also the research on monetary gold.

Ben Bernanke, the Chairman of the Federal Reserve Board introduced a new phrase into the vocabulary of economics on July 11, 2011, in his testimony at a Congressional hearing. The new phrase is: tail risk. He defined it as the “really, really bad outcomes” in the economy, as if they were completely outside of human control on the pattern of floods, earthquakes, volcanic eruptions and tsunamis.

But ‘tail risk’ in reality is the wholly unnecessary risk taken with human lives by a parasitic, contemptuous, conceited, and yes, ignorant ruling class symbolized by Bernanke, that has hijacked the Constitution, in particular, turning the Constitution’s monetary provisions upside down which define money in terms of gold and silver. They are only interested in their own self-aggrandizement, in perpetuating their power, and in preserving their superstitious faith in irredeemable currency a monetary system that has failed miserably every time foolish leaders in history experimented with it.

Mises was a great warrior fighting these usurpers and monetary hijackers with the sharpest weapon there is: human reason. We must follow his lead even if it sometimes means that we have to add new ideas that go beyond Mises’s opus.

The day of reckoning for monetary insanity is on hand. The Constitution is there for the protection of all. If we fail to preserve and uphold it, and meekly succumb to the monetary hijackers’ and usurpers’ tactics, then we shall have only ourselves to blame for the consequences.


  1. 10:00 AM ET New Home... [#106715]
    By: davefairtex (5216 comments) Go to top ↑
    • 10:00 AM ET New Home Sales
  2. 1 in Buy alert 7 in Distribution Zone 11 in Sell... [#106716]
    By: davefairtex (5216 comments) Go to top ↑
    • 1 in Buy alert
    • 7 in Distribution Zone
    • 11 in Sell alert

    Accumulation Zone: Monthly 3, Weekly 2, Daily 17
    Distribution Zone: Monthly 16, Weekly 20, Daily 13

  3. Gold seems to want to hold 1640 and the dollar wants to... [#106717]
    By: dberryclan (687 comments) Go to top ↑

    Gold seems to want to hold 1640 and the dollar wants to hold 79. It really seems to be all about the dollar despite all the good and bad economic news around the globe. Will Q2 be a turning point?

  4. ... [#106720]
    By: Bull Hunter (3552 comments) Go to top ↑
  5. ... [#106721]
    By: Grym (5469 comments) Go to top ↑
    • you don't really think they will let those tax cuts expire... [#106723]
      By: teamonfuego (2544 comments) Go to top ↑

      you don’t really think they will let those tax cuts expire do you?

    • Grym, Re: Those tax cuts or increases or 1.5 Trillion... [#106726]
      By: dberryclan (687 comments) Go to top ↑

      Grym,
      Re: Those tax cuts or increases or 1.5 Trillion dollar budget cut in 2013.

      The White House and the Congress when backed into a wall, either knock the wall down or create an executive order in order to do what they wish. They are not “Kings”, but over the years they are acting the part more and more. History demonstrates, they will do what they want and it will be “politically expedient!”

  6. http://bloom.bg/GPOaNs New tax which takes effect in April... [#106722]
    By: Mark H (1363 comments) Go to top ↑

    http://bloom.bg/GPOaNs

    New tax which takes effect in April will be $3.78 per metric ton of mining output. Para state accounts for one third of Vale’s iron-ore output.

  7. NATIONWIDE CONSUMER CONFIDENCE UK for Feb Actual: 44... [#106724]
    By: Les (7233 comments) Go to top ↑

    NATIONWIDE CONSUMER CONFIDENCE UK for Feb
    Actual: 44 Cons.: 49 Previous: 47

    BBA MORTGAGE APPROVALS UK for Feb
    Actual: 33.1K Cons.: 39.1K Previous: 38.0K Revised from 38.1K

    CONSUMER PRICE INDEX (YOY) Canada for Feb
    Actual: 2.6% Cons.: 2.7% Previous: 2.5%

    BANK OF CANADA CONSUMER PRICE INDEX CORE (MOM) for Feb
    Actual: 0.4% Cons.: 0.3% Previous: 0.2%

    BANK OF CANADA CONSUMER PRICE INDEX CORE (YOY) for Feb
    Actual: 2.3% Cons.: 2.2% Previous: 2.1%

    CONSUMER PRICE INDEX (MOM) Canada for Feb
    Actual: 0.4% Cons.: 0.4% Previous: 0.4%

    http://www.fx360.com/calendar/

  8. ... [#106725]
    By: Les (7233 comments) Go to top ↑
  9. I sold my calls yesterday morning for a nice trade (it's... [#106727]
    By: ea32da32 (2362 comments) Go to top ↑

    I sold my calls yesterday morning for a nice trade (it’s not a great option candidate because of the spreads) but reloaded yesterday afternoon – eventually there will be a short squeeze on this I’m hoping.
    Earl

  10. IBM - estimates, target increased at UBS. Shares of IBM now... [#106728]
    By: Bull Hunter (3552 comments) Go to top ↑

    IBM – estimates, target increased at UBS. Shares of IBM now seen reaching $203, according to UBS. Estimates also increased as ACN results suggest strong demand trends in IT services. Neutral rating.

    NKE – Citi removes the athletic apparel giant from its list of Top Picks Live.

    NKE – estimates, target raised at Credit Suisse. Shares of NKE now seen reaching $117, according to Credit Suisse. Estimates also increased, given higher futures orders. Neutral rating.

    SBUX – numbers raised at Jefferies. Shares of SBUX now seen reaching $62, Jefferies said. Estimates also raised on lower coffee costs. Buy rating.

    UTX – target raised at Jefferies to $96, Jefferies said. Restructuring benefit and debt paydown notable. Buy rating.

  11. I'm hoping $3.76 will be the support that holds - started... [#106729]
    By: ea32da32 (2362 comments) Go to top ↑

    I’m hoping $3.76 will be the support that holds – started 1/2 at $3.88, will add next week if buy volume picks up.

    NKE – priced to perfection IMHO.

    • I Started 1/2 at $3.88 today aswell , what a... [#106732]
      By: johnuk (866 comments) Go to top ↑

      I Started 1/2 at $3.88 today aswell , what a coincidence..

      • Hi John, I've been waiting for this opportunity, it... [#106735]
        By: ea32da32 (2362 comments) Go to top ↑

        Hi John, I’ve been waiting for this opportunity, it retraced the jan move a bit to much but hopefully this will begin a new move higher;-)

        Earl

    • ... chuckling here, because I added as well. If the low... [#106738]
      By: tradylady (205 comments) Go to top ↑

      … chuckling here, because I added as well. If the low holds, weekly looks good… I can see inverted H&S’s everywhere. :)

      • Hi tradylady - GG as well, I bought earlier this week. I'm... [#106739]
        By: ea32da32 (2362 comments) Go to top ↑

        Hi tradylady – GG as well, I bought earlier this week. I’m trying to set things up so I don’t have to pay so much attention to this the next couple weeks – getting ready for a little shutdown at the plant. have 5 winners now and considering selling covered calls – now is not a good time to be a libra;-)

  12. Wow. Lookin'... [#106730]
    By: Dr. Strangelove (2004 comments) Go to top ↑

    Wow. Lookin’ good.

    http://finance.yahoo.com/news/silver-wheaton-repor

    Got mine.

  13. it's put in a nice base, needs volume/>price and we'll... [#106731]
    By: ea32da32 (2362 comments) Go to top ↑

    it’s put in a nice base, needs volume/>price and we’ll be good.

  14. after BHI was slammed most of the O&G group moved down... [#106733]
    By: ea32da32 (2362 comments) Go to top ↑

    after BHI was slammed most of the O&G group moved down but their catching some support now.

  15. crazy... [#106734]
    By: ea32da32 (2362 comments) Go to top ↑

    crazy trade.

  16. that crazy spec stock - they are banging the ask for days... [#106737]
    By: ea32da32 (2362 comments) Go to top ↑

    that crazy spec stock – they are banging the ask for days now – I sold 75% and letting the rest ride – would not be buying here but that was a good one. thanks
    Earl

  17. The spread between Spain's 10-yr note und Der Vaterland's... [#106736]
    By: Dr. Strangelove (2004 comments) Go to top ↑

    The spread between Spain’s 10-yr note und Der Vaterland’s zehn-jahre bund has been rising alle veek since Greece’s bond is now kaput and presently stands at 3.55%. Above 3.5% to 4% and you know it’s trouble (insolvent). When it crosses 4.25%, it’s at the door. Portugal is already toast based on the spread but, as we all know, Spain’s economy is much larger and Italy spread is not far behind.

    Confidence is just about lost in the Mediterannian debt vehicles owing to the technical games surrounding the second round of Greek default.

    This is bullish for a continued U.S. equity rally as a hidey hole … for now.

    • "Confidence is just about lost in the Mediterannian debt... [#106743]
      By: Vadym Graifer (4341 comments) Go to top ↑

      “Confidence is just about lost in the Mediterannian debt vehicles owing to the technical games surrounding the second round of Greek default.

      This is bullish for a continued U.S. equity rally as a hidey hole … for now.”

      Not exactly. When this storm comes (and I say “when,” not “if”), it will be positive for USD and negative for equities.

      • Vad - "Not exactly. When this storm comes (and I say... [#106745]
        By: Dr. Strangelove (2004 comments) Go to top ↑

        Vad -

        “Not exactly. When this storm comes (and I say ‘when,’ not ‘if’), it will be positive for USD and negative for equities.”

        Don’t believe the big money will ride USD debt instruments as a safe haven longer than Fu Man Chu (the champion bull) knowing it’ll be next. I agree with you for the short term consequence of money flows out of europe in the event of an ugly anomaly. If it is to be a slow motion failure, on the other hand, flows will choose equities over fixed debt as appears to be happening at present in U.S. markets with the 10-yr on the rise and equities riding the hype.

        One thing for sure, there are a lot of cross currents at play!

      • Vad, "When this storm comes (and I say "when," not "if"... [#106751]
        By: tradylady (205 comments) Go to top ↑

        Vad,

        “When this storm comes (and I say “when,” not “if”), it will be positive for USD and negative for equities.”

        All equities?

        • Hmmm... as they say, "there is always bull market... [#106752]
          By: Vadym Graifer (4341 comments) Go to top ↑

          Hmmm… as they say, “there is always bull market somewhere” :) Let’s say for major indices and most stocks, with some sectors and names better positioned to withstand the storm and some taking the full brunt, but I doubt it will be worth the effort to figure out which ones get through it unscathed. Turbulent times make for traders’ market, not investors’.

          • "there is always a bull market somewhere"-- some names... [#106755]
            By: Ilya (572 comments) Go to top ↑

            “there is always a bull market somewhere”– some names positioned to withstand the storm etc…

            When the good ladys of the ‘morals salvation club’ in La Grange, Texas finally, with the relunctant nods from their husbands, forced the sheriff to raid the ‘chicken ranch’ aka ‘the gentlemens dalliance parlor’, he even arrested the piano player!

            No good stock goes unpunished in a bear raid.

  18. Here is my post yest. FD: i have May 22.50 calls which are... [#106740]
    By: NYUGrad (4750 comments) Go to top ↑

    Here is my post yest. FD: i have May 22.50 calls which are up already pretty considerably.

    Chart: http://bit.ly/GIVSKG
    Post yest: http://bit.ly/GWJiYL

  19. "move over middle east - private America is taking over... [#106744]
    By: ea32da32 (2362 comments) Go to top ↑

    “move over middle east – private America is taking over O&G”, NOT a response to Obama, he had nothing to do with this, claims “America took over as worlds largest exporter of value added to hydrocarbons” – “NG/OIL 40/1 price ratio looking good for transportation on converting trucks”, to me this is a risk on analysis – over the long term… I know there are many other problems to consider…
    Earl

  20. bounced off the 20dma - group is up a bit. edit picked up... [#106741]
    By: ea32da32 (2362 comments) Go to top ↑

    bounced off the 20dma – group is up a bit.

    edit picked up the 06/50 calls for $1

  21. Thanks JeffB. Antal Fekete and his wife were our guests at... [#106748]
    By: Bill Cara (4105 comments) Go to top ↑

    Thanks JeffB. Antal Fekete and his wife were our guests at the Cara Bahamas 2011 Conference. Kaimu kindly covered the travel costs from Europe. Antal delivered an interesting paper. I agree and promote his view that if goldminers who are in a well funded and positive cashflow position were to hold bullion in inventory, there would be upward pressure on the price.

  22. (Despite concerns,U.S. to give Egypt $1.5B... [#106749]
    By: ea32da32 (2362 comments) Go to top ↑

    (Despite concerns,U.S. to give Egypt $1.5B http://www.cbsnews.com/8301-202_162-57403031/despite-concerns-u.s-to-give-egypt-$1.5b/ via @CBSNews)

    breaking news, WH to purpose $1.5B bathWATER exchange for Oil;-)

  23. CFTC Commitment of Traders report sees 10-year Treasury... [#106753]
    By: Vadym Graifer (4341 comments) Go to top ↑

    CFTC Commitment of Traders report sees 10-year Treasury shorts spike to fresh multi-month highs; AUD longs at multi-month lows

    US Dollar Index: Specs Net: 35,694 v 34,044 prior, COT index 82.0 v 79.4 prior, Open Interest 57,914 v 59,216 prior (2-week low) – 7-week high in net longs

    Euro: Specs Net: -82,954 v -99,336 prior, COT index 32.6 v 26.6 prior, Open Interest 183,786 v 179,986 prior (2-week high) – 4-month low in net shorts

    British Pound: Specs Net: -15,852 v -41,848 prior, COT index 47.1 v 27.0 prior, Open Interest 67,754 v 85,696 prior (8-week low) – 6-month low in net shorts

    Swiss Franc: Specs Net: -11,191 v -14,798 prior, COT index 18.2 v 10.6 prior, Open Interest 34,685 v 33,500 prior (2-week high) – 6-week low in net shorts

    Japanese Yen: Specs Net: -25,821 v -42,380 prior, COT index 31.8 v 18.5 prior, Open Interest 95,667 v 86,878 prior (3-week high) – 2-week low in net shorts

    Australian Dollar: >Specs Net: 45,191 v 66,756 prior, COT index 46.7 v 71.8 prior, Open Interest 148,859 v 130,182 prior (multi-year high) – 3-month low in net longs

    Canadian Dollar: >Specs Net: 42,315 v 26,721 prior, COT index 66.9 v 52.2 prior, Open Interest 83,221 v 92,375 prior (3-week low) – 10-months high in net longs

    New Zealand Dollar: Specs Net: 4,210 v 13,223 prior, COT index 26.0 v 59.3 prior, Open Interest 25,162 v 25,223 prior (9-week low) – 11-week low in net longs

    Mexican Peso: Specs Net: 24,329 v 78,892 prior, COT index 35.6 v 67.6 prior, Open Interest 150,632 v 94,006 prior (11-month high) – 7-week low in net longs

    S&P 500: Specs Net: +5,584 v -1,911 prior, COT index 63.5 v 57.4 prior, Open Interest 16,878 v 27,087 prior (multi-month low) – positioning turns net long after 11 weeks of net short

    10-yr T-note: >Specs Net: -180,172 v -77,289 prior, COT index 25.4 v 53.1 prior, Open Interest 590,402 v 512,825 prior (7-month high low) – 18-month high in net shorts

    Vix: Specs Net: -14,543 v -16,411 prior, COT index 29.6 v 22.9 prior, Open Interest 216,143 v 187,783 prior (multi-month high) – 2-week low in net shorts

    Gold: Specs Net: 131,463 v 150,906 prior, COT index 1.6 v 8.7 prior, Open Interest 218,555 v 230,048 prior (8-week low) – 11-week low in net longs

    Silver: Specs Net: 21,169 v 21,816 prior, COT index 32.1 v 33.5 prior, Open Interest 35,809 v 35,102 prior (2-week high) – 7-week low in net longs

    Copper: Specs Net: 12,275 v 9,072 prior, COT index 63.1 v 57.2 prior, Open Interest 85,395 v 77,776 prior (13-month high) – 7-month high in net longs

    Crude Oil: Specs Net: 234,592 v 243,174 prior, COT index 85.9 v 88.8 prior, Open Interest 555,244 v 574,730 prior (3-week low) – 4-week low in net longs

    Natural Gas: Specs Net: -133,300 v -137,969 prior, COT index 93.8 v 90.3 prior, Open Interest 661,866 v 653,781 prior (multi-month high) – 2-week low in net shorts

    Wheat: Specs Net: -38,388 v -41,165 prior, COT index 23.0 v 20.3 prior, Open Interest 223,460 v 228,477 prior (2-week low) – 2-week low in net shorts

    Corn: Specs Net: 311,712 v 287,427 prior, COT index 61.8 v 56.8 prior, Open Interest 470,796 v 476,597 prior (2-week low) – 6-month high in net longs

    **Relative COT index based on 3-yr lag.

  24. Followed by Jocks comments on the quality of management... [#106754]
    By: Pierre (96 comments) Go to top ↑

    Followed by Jocks comments on the quality of management (ex-Western coal) I found this dated document http://goo.gl/P5SmA published by Jennings Capital
    The insider are buying but it appears to me the warrants issued at lower prices are keeping the stock prices lower. I am surprised that they have left the US based investors in a lurch.

    Disclaimer: I hold ECX with ACB at a much higher price than the current stock price.

    • Pierre - thanks for finding and posting that analysts'... [#106758]
      By: jock (1011 comments) Go to top ↑

      Pierre – thanks for finding and posting that analysts’ report on ECX. Warrants mentioned therein expired before end 2011, so I doubt there is warrant overhang. Plus, ECX has acquired a 2nd mine since this report. What’s not to like except disregard for us US investors?

      • ALOHA!! So the issue is if you hold ECX through a US... [#106776]
        By: kaimu (3289 comments) Go to top ↑

        ALOHA!!

        So the issue is if you hold ECX through a US broker you can neither sell nor buy shares? Is that right? I no longer have ECX in my IB account so I do not know if IB is in the same boat or just other US brokers have issues. Does not make sense.

        I’ll talk to the top and try to find a solution to the problem … Give me a few days!

        Last year I sold ECX via IB with no problems. I did experience a problem converting some old LYM/LYMCF shares to ECX. Perhaps that is part of the issue. Not sure at this point! I resolved it by contacting Bryce Porter(LYM CEO then) and he went through Computershare. It took a couple weeks but the conversion was done.

        The company is not anti-American! It seems any such company would welcome more liquidity not less. We’ll see …

  25. ... [#106756]
    By: Les (7233 comments) Go to top ↑

    http://www.bloomberg.com/news/2012-03-23/mf-global

    Whether it actually happens? We shall see.

  26. Let's bash those pesky machines again. I'm with Vad on this... [#106757]
    By: Les (7233 comments) Go to top ↑

    Let’s bash those pesky machines again. I’m with Vad on this one, sick of hearing how it’s the machines fault:

    http://uk.reuters.com/article/2012/03/21/idUKL6E8E

    Jesse’s published a recent speech by the CFTC’s head honcho to congress. Gensler said:

    The derivatives markets that the CFTC oversees are where hedgers across the country meet financial firms, and others generally called speculators. Over time, the makeup of these markets has shifted dramatically. Financial firms and speculators now make up the vast majority of these markets. For instance, producers, merchants, processors and other end-users make up approximately 15 percent of the crude oil futures market.

    Swap dealers, managed money accounts and other financial actors make up the remaining 85 percent. In Chicago Board of Trade wheat contracts, end-users make up nine percent of the long and 29 percent of the short positions, meaning that over 70 percent of this market consists of financial interests

    http://www.futuresmag.com/2012/03/21/cftc-gensler-

    So, straight from the horse’s mouth – speculators make up the vast majority of US futures markets. Although I could probably be convinced that Jamie Dimon is an alien HFT robot disguised as a human being, most speculators remain mostly human, regardless of whether they trade themselves or use black boxes.

    Yes, futures markets no longer serve their rightful place as a hedging instrument for American business. But no one talks about the destructive monetary policies that eventually lead to speculation as the primary economic activity of the civilization in question, until its inevitable collapse.

    Would be nice to be treated as an intelligent human being again by the news media,

  27. ... [#106759]
    By: Grym (5469 comments) Go to top ↑
  28. ... [#106767]
    By: davefairtex (5216 comments) Go to top ↑
    • No surprises there, and in wider understanding of the place... [#106768]
      By: Les (7233 comments) Go to top ↑

      No surprises there, and in wider understanding of the place of gold and perhaps silver in any new monetary system developed I understand that they are not magic bullets. They will not fix our requirements on their own.

      However, spinning the article you’ve quoted on its head, we can say that the money masters attempt to continue to apply their given currencies as a constant, despite their reckless policies that continue to stretch the value of these currencies like a rubber band. Those bands appear to be in greater danger of overstretching and breaking as this folly continues.

      Time – precious metals have a time and place in economic and monetary systems. They appear to be as confidence in money as a constant deteriorates.

      There is every likelihood that land and food produce may well take precious metals place later in the century as an overpopulated planet struggles to feed itself. A century for the farmer perhaps.

    • ALOHA!! I always love the historical context of things... [#106777]
      By: kaimu (3289 comments) Go to top ↑

      ALOHA!!

      I always love the historical context of things. All it shows is that the value of money is so “politically driven”! Only our elected Gods have the power to send the youth off to War and these days they do not even need to declare a War! Obviously, yes War is very destructive and inflationary.

      Yes also, money has never been constant and even during the gold standard various countries went off the gold standard in order to prosecute wars. Market prices fluctuate is a given based on supply and demand and the greater fool principle! I am not sure why Armstrong brought up US CALL MONEY RATES from 1876 as proof of what? That markets are volatile and suckers get caught on the wrong side of margin calls? In a broader monetary base the NYSE is just another component. Banks make loans to brokerages and they also loan to commercial clients. Banks also loan to other banks and governments. What was the volatility of those rates in 1876?

      You can condense the whole article down to POWER CORRUPTS! And it pretty much corrupts everything in its path, especially money monopolies. More competition would be helpful in that respect so that monetary power and policy is not so centralized. I agree with all his monetary assessments at the end of his article!

      Obviously we live in a world of DEBT GONE WILD! This would seem to be a major red flag that we need to change our monetary course which cannot be done unless we make some major political changes first. What are the chances of that? Rome and Romans had a much longer time period to adjust. I also believe we have some major technological advances that the Romans did not have to contend with from a global neurological standpoint. That’s a Rebecca Costa thing!!!

      • Kaimu - thanks for that reminder!!! Rebecca Costa... I... [#106780]
        By: ea32da32 (2362 comments) Go to top ↑

        Kaimu – thanks for that reminder!!! Rebecca Costa… I ordered her Watchman book;-) Tavis Smiley asked why we got into this mess and much of it is ‘power does corrupt’ which I’ve always believed is biological and I tend to look at much from that basis, but she says things simply got too complicated. I see she is hanging a lot of hope on neuro-science and pushing brain fitness – I’m a fan of TED so I can see where this is going;-) visionary…

        thanks again,
        Earl

  29. Nanex is catching the quote stuffing that appears to... [#106769]
    By: Les (7233 comments) Go to top ↑

    Nanex is catching the quote stuffing that appears to trigger selling in the silver futures market, among others. Gaining some clarification from Vad the other day, if HFT wants to make money on the spread, that’s one thing.

    But quote stuffing….

    http://www.investopedia.com/terms/q/quote-stuffing

    … if that’s the game played to get the ball rolling on a sell off or a spike down, that has no place. I wonder if these spike ups we’re witnessing with no news intraday is helped along by the same process?

    http://www.financialsense.com/contributors/cris-sh

    Either way, all the more reason to keep the physical bullion away from the hustlers in the Wall St. casino.

    • Quote stuffing is one potentially negative aspect of HFT... [#106771]
      By: Vadym Graifer (4341 comments) Go to top ↑

      Quote stuffing is one potentially negative aspect of HFT that needs to be dealt with, and easy to deal with.

      For those who are really interested to understand the mechanics, let’s have a look into it. The idea behind quote stuffing (practice of entering and immediately canceling enormous number of away-from-market quotes) is to overwhelm less equipped counterpart. To make it simple: if you have a computer capable of processing 50 quotes per second while I have one capable of merely 20, you stuff the market with 30 quotes per second (more than I can process but less than you can). As a result, my computer is chocking on data, not being able to react in time on developing events, while yours still has excessive capacity. You’ve got an edge. With me so far?

      What is the potential danger here? One clearly seen is that the exchange mechanism is getting needlessly strained; there is a potential for all this data to exceed the capacity of the very venue through which it flows. Another is a rich soil for possible collusion between an exchange and some of participants to grant them unfair advantage.

      How do you deal with it? That’s where things start that make me think that some (or most) of those generating the noise are either incompetent or motivated by something other than desire for a healthy marketpace (or both). Some of the suggestions aim to kill HFT altogether which is akin to eradicating blackberry because of its torns instead of cultivating tornless variety. Others, like transaction tax, amount to suggestion to cover the crop field with concrete in order to fight weeds. Meanwhile, if you institute the reasonable time restriction on quote cancelling (say 1 second from the moment the quote is entered), the matter is over. There are better and more elegant ways to deal with it, but even that, extremely simple and very easy to implement, solves the problem instantly. One can only wonder why the flames under the issue continue to be fanned.

      As for HFT pushing prices down, like in that silver example, I am yet to see sensible explanation of how it can be done. What’s described in the article can’t work. No wonder though – most of “explanations” of the harm allegedly caused by HFT, including its role in flash crash, make zero sense and look convincing only to those who don’t understand market mechanics.

      • Thank you Vad - very good clear... [#106775]
        By: ea32da32 (2362 comments) Go to top ↑

        Thank you Vad – very good clear reason;-)
        Earl

      • so, quote stuffing in and itself is insufficient to get the... [#106789]
        By: Les (7233 comments) Go to top ↑

        so, quote stuffing in and itself is insufficient to get the ball rolling on a sell off like the example remarked and that silver chart is just a run-of-the-mill dbi on large volume then? So much for the smoking gun…

  30. ... is up earlier than usual. I'm sure my views are quite... [#106770]
    By: Bill Cara (4105 comments) Go to top ↑

    … is up earlier than usual.

    I’m sure my views are quite different than many of yours.

    • ... [#106790]
      By: Les (7233 comments) Go to top ↑
      • Les, As supporting evidence of a possible turn in mining... [#106791]
        By: davefairtex (5216 comments) Go to top ↑

        Les,

        As supporting evidence of a possible turn in mining shares, what do you make of GDX:$GOLD? Daily shows possible double bottom, weekly isn’t so cheery – its definitely a case of “buying low” (which does seem like a good idea), but low can always go lower, as we know. Over the past 52 weeks, ratio of GDX:$GOLD went from 0.42 to 0.30 – a 29% drop.

        Can always do a paired trade – long GDX short GLD.

        GDXJ:GDX might be rolling over on the downside. And on the weekly chart, $GOLD is right at its 50 week moving avg. That could be interpreted as “struggling to hold the 50″ or “ready to bounce strongly off its 50.” We might be at an important inflection point there.

        • I've given up trying to nail a bottom from this various... [#106792]
          By: Les (7233 comments) Go to top ↑

          I’ve given up trying to nail a bottom from this various ratio charts Dave, but the attached monthly chart brings some big picture perspective that Geoff and Bill are alluding to. A gold/miner ratio not seen since the crash of 2008. So what is it? Equity markets down or miners catch up?

          In that light the bet on miners turning and playing catch up with equities is looking more interesting. I’m watching whether this deteriorating economic news (illustrated by PMI readings below 50 last week) leads to a sell off in everything, as Bill alluded to as a possibility in the WIR. I wouldn’t step in front of the market in the face of a vicious liquidation.

          But, odds on additional QE look good in such a case, especially as El Presidente will want to shine for the electorate going into an election.

          As we’ve both remarked on, shorter time frame rebuilding of metal charts here will lead to constructive rebuilding of longer time frame charts. Something that must be monitored.

          • I think we agree. I don't think QE is going to happen... [#106794]
            By: davefairtex (5216 comments) Go to top ↑

            I think we agree.

            I don’t think QE is going to happen unless we have a massive hit of some sort first. And the massive hit will likely take all equity prices down hard before we get that QE bounce. Your vicious liquidation. Who wants to buy into that?

            If we don’t have some nasty hit, we might just get a rebound in miners in a sector rotation move as the market continues up and ever up.

          • Brandt's chart read of a potential inverted H&S on... [#106795]
            By: Les (7233 comments) Go to top ↑

            Brandt’s chart read of a potential inverted H&S on $gold offers other possibilities:

            http://peterlbrandt.com/gold-ready-to-attack-new-h

            something easy enough to watch this week for confirmation or invalidation.

  31. Here's some interesting fallout from France over the... [#106772]
    By: davefairtex (5216 comments) Go to top ↑

    Here’s some interesting fallout from France over the shootings by Mohammed Merah.

    http://www.aljazeera.com/news/europe/2012/03/20123

    “Henceforth, any person who habitually consults internet sites which praise terrorism and which call for hatred and violence will be punished under criminal law,” he said in a televised address.

    Any person who travels abroad for “indoctrination into ideologies which lead to terrorism” will be prosecuted, Sarkozy said.

    • ALOHA!! Any person who travels abroad for "indoctrination... [#106778]
      By: kaimu (3289 comments) Go to top ↑

      ALOHA!!

      Any person who travels abroad for “indoctrination into ideologies which lead to terrorism” will be prosecuted, Sarkozy said.

      Ah-h-h … Napoleon, Jr speaks!! Terrorism is in the eye of the beholder! Any Iraqi or Afghan being bunker-bustered by the US Air Force considers America a terrorist state. Timothy McVeigh was considered a “homegrown” terrorist and he was trained by the US military. Is the US military a terrorist organization then? Should we prosecute his drill Sargent and base commander?

      In my view the more we allow politicians to seize our Rights and our Freedoms the more this breeds discontent among the masses who already feel duped and enslaved as it is. You can see the results of such enslavement in the Arab Spring and OWS and the Tea Party. People have limits! And when they reach those limits they resort to HUMAN ACTION as they see it. It matters little what politicians threaten in the end. Every ruler has their day of reckoning!

  32. Tungsten Filled 1 kilo Gold Bar Discovered in... [#106773]
    By: tradylady (205 comments) Go to top ↑

    Tungsten Filled 1 kilo Gold Bar Discovered in UK

    “Australian Bullion Dealer ABC Bullion has contacted SD to advise that one of its suppliers has provided them photographic evidence of a tungsten filled 1 kilo gold bar discovered this week. The bar passed a hand-held xrf scan which showed 99.98% pure AU. The tungsten was only discovered when the bar was physically cut in half.

    After numerous reports of 400oz tungsten filled bars being discovered in Hong Kong, this is the first documented and verified report with photographic evidence that has been made public…”.

    http://silverdoctors.blogspot.com/2012/03/tungsten

    • Shake up of the physical market coming? As one reader... [#106788]
      By: Les (7233 comments) Go to top ↑

      Shake up of the physical market coming? As one reader commented:

      “They did it in rome at the end of that empire, rinse wash repeat”

  33. (Transportation Secretary Ray LaHood has publicly blessed... [#106779]
    By: ea32da32 (2362 comments) Go to top ↑

    (Transportation Secretary Ray LaHood has publicly blessed the train – it means jobs, he says – and it’s cleared several regulatory hurdles in Washington.)sic http://hosted.ap.org/dynamic/stories/U/US_TRAIN_FR

    I suppose if Reid can rob Peter to give paul a vote (I mean the money) it may be a boon for LVS and others – on second thought I doubt it will make any difference.

    Earl

  34. Marc has a radio interview (March 23rd) on Bloomberg. I... [#106784]
    By: Ilya (572 comments) Go to top ↑

    Marc has a radio interview (March 23rd) on Bloomberg. I never learned the magic so I can’t link.

    Simply search ‘Marc Faber’ and the magic will appear out of thin air!

    His comments on industrial materials (read metals), land values, Chinese political problems and his ‘take’ on social equity are all well known but nonetheless thought provoking anew.

    Well worth the cost of admission which nowadays remains ZERO.

    Enjoy.