Archive - Feb 2011

I had been planning an article based on the Green Day song – Static Age - about the propaganda, lies and misinformation that are endlessly directed at the American people by the government, the mainstream corporate media, and the wealthy elite that control the levers of our society. Then Barack Obama presented his 2012 Budget proposal, including his 10 year projection for our country. I know you’ve heard the term Peak Oil, but the term that came to my mind when I saw Obama’s budget was Peak Bullshit. I thought that would be a great article name, but some sites wouldn’t like the foul language. I was in a quandary until the Elvis Costello song Pump It Up came on the radio while I was driving to work. Down in the pleasure center of Washington DC, the propaganda, slander and most blatant lies are spoken without a hint of guilt or even the faintest whiff of shame. The politicians in Washington DC on both sides of the aisle believe the American people are stupid, gullible, apathetic and easily manipulated. They may be right, but there are a few people out there who can cut through their bullshit and find the truth.

After the USD has confirmed it is no longer a flight to safety currency, and stocks can only go up (91 days until we pass the all time highs at the current rate of no volume HFT-inspired, Primary Dealer facilitated and Fed funded levitation), suddenly we see a dramatic pick up in bond buying, for no reason, aside from the fact that full blown war may join the revolutions in the Middle East. And since nobody will ever sell one share of stock (if they did there will be an immediate congressional hearing to establish whether selling should be, in fact, made illegal) the only way to protect capital is to jump into the 10 Year. That this ongoing divergence makes no sense is irrelevant: such is life under Chairsatan Vissarionovich Jr.

RANsquawk US Afternoon Briefing - Stocks, Bonds, FX etc. – 18/02/11

Meanwhile, not letting any parabolic blow off in silver crisis go to waste, the Criminal Reserve and the Criminal Dealers engaged in another gang rape of whatever is left of the US middle class. Today's POMO, which closed with $6.688 billion of 3 year bonds getting monetized (at a whopping 5.6x Submitted/Accepted ratio), basically consisted of just two cusips: the 912828PQ7 and the 912828QH6. Of these two, QH6 represented $5.285 billion or 80% of the entire POMO. Why is this interesting? Because this CUSIP was auctioned off ten days ago, with an actual issuance date of February 15. That's Tuesday. The Fed just monetized bonds that were eligible for trading for a whopping 3 days! The daylight robbery, and the PD fringe benefits, continue as nobody apparently has the guts or half the brain to understand just how criminal this set up is. Luckily, everyone will magically, and very retroactively "know" just how ominous this now daily occurrence was after the next and last crash.

And dare I say -even in the great bull run of 2010/ 2011- this is a headwind for higher equity prices.

We apologize for this most recent silver update, but it is rather exhilarating to watch the main Tri-Party repo clearer, and Fed's pet bank squirm. Silver is now above $32.70 as the unleashed squeeze is claiming victims left and right, and the metal is up 7% from yesterday's low. Jamie: it may be time to shelve those dividend plans for a year or two but at least you got your bonus you sly dog, you. As a reminder, margin calls in silver, and they will be, ahem, sizable, commence at 3pm Eastern.

Crude go whoosh. And just in case it is unclear where this is going, the WSJ reports that according to "diplomats" Iran is redoubling efforts to enrich Uranium by installing faster centrifuges, as it is supposedly seeking to overcome setback to nuclear program believed caused by the Stuxnet virus. Unclear how much information was fabricated in the creation of this latest war provocation (see Iraq WMD).

Presented without nominal (and certainly not real) commentary.

We thank Sean Corrigan of Diapason Securities for bringing our attention to the MIT Billion Price real time inflation Index (first reported here) who points out that based on the ongoing surge in prices, which have increased by 1.25% in the last 45 days (December 31, 2010: 101.085, February 14, 2011: 102.353), a simple annualization indicates a 10.6% increase in prices in 2011! With all undue respect to the Chairsatan (and other "disinflationists") it is time to bring Volcker out of the freezer once again. Look for the 30 Year to pass 5% in a few weeks. Oh yes, M2 surged to all new time highs again.

Can the ECB outspend the Bond Markets? Is Portugal truly Insolvent? Will they default? What happens to rate sensitive assets that are already at depression levels, such as real estate, when rates spike world wide? Why am I asking questions that everybody already knows the answer to???? Well, just in case, here go those answers anyway.

The situation in Bahrain is now critical, with live fire raining (literally: the army is shooting from helicopters on citizens and journalists) on protesters, resulting in dozens killed, even as Libya (9th largest crude reserves in the world) is rumored to be in a comparable situation. The countdown on Saudi Arabia is now on. Watch the latest development at Al Jazeera which is now broadcasting live from Manama.

If we are going to get hit on the head with a meteor (or solar flares) there is not much we can do about it, so why worry?

And silver surges on margin hike news, taking out $32, and fresh 31 year highs. Something is very wrong. Our only question: how long before the American taxpayer has to repeat the AIG experience, and bail out JP Morgan over its billions in silver shorts. For our non tinfoil heat wearing friends in the various operating subsidiaries of the FT, we have one comment: "We have sold everything we can produce in silver and have demand for at least twice that volume,” said David Madge, head of bullion sales at the Royal Canadian Mint, which produces the silver Maple Leaf coin. Silver coin sales at the US Mint and the Austrian Mint also hit record levels in January"

Now that JPM is out of the picture, the last recourse of gold and silver price suppression is exchange margin hikes. Or was. The CME has announced, that as of close today, it will hike various gold and silver (and other metal) contract initial and maintenance margins by 50%.... And nobody cared. This means the CBs are well on their way to losing the imposed gold standard wars. Look for the USD to take a big step lower shortly as nominal values of everything do the inverse.This will naturally be promptly followed by a "sudden and dramatic deterioration in European conditions" as the EUR can not be far behind in the FX race to the bottom.

It's a day ending in Y. Meaning it is time for the ECB to go ahead and sweep another billion or so Portuguese bonds under the rug. Because you can't have the 10 Year yield at all time highs (as in yesterday) and for that relentless stream of lies emanating from every ECB bureaucrat's orifice to be taken seriously, can you. We give the ECB another month before they realize what the SNB figured out long ago: it's best to give up when it comes to direct market manipulation. We are confident Portuguese bonds will hit another all time high yield by the middle of next week. And at some point European taxpayers may just ask what all their money is being spent on.