Archive - Apr 24, 2013

With its biggest 8-day rally in 20 months, Gold - having jumped another 1% this evening - has just breached $1445 and retraced half of the record plunge from April 12th. It would appear that the record physical demand that we are seeing in every corner of the globe is indeed leaking back into the actual price of gold.

A currency for clowns...

We have no personal experience in the business of false flag terrorism, but we imagine that engineering a successfully staged terror attack to be blamed on innocent or semi-innocent parties with the goal of psychologically manipulating a population requires that one also be an accomplished storyteller.  It demands an avid imagination and an organized sense of foresight.  And, most of all, it requires a consistency of narrative.  Without consistency, the audience’s ability to suspend its disbelief is damaged, and they become disconnected from the fantasy being portrayed. The establishment and the useful idiots they manipulate want to make the “threat” the center of attention, but ultimately, the threat is irrelevant.  There will always be the danger of terrorism and death. True crisis lay in what we refuse to see, and the greatest crisis today is not the bombing of a marathon, but the destruction of our freedoms in the name of “security”.  The bottom line?  Our civil liberties are not up for compromise.  Period.  Shootings, bombs, nukes, nothing!  There is no rationalization that will ever make tyranny a moral enterprise. We are not frightened, and we are not ignorant.  No attack, no matter how heinous, will ever convince us to hand over our freedom.

Things sure are getting weird in the fifth subbasement of 1 Chase Manhattan Plaza...

If you’ve been watching any commercial television lately, you are well aware that the financial services industry is very busy running expensive ads imploring us to worry about our retirement futures. Open a new account today, they say. They are not wrong that we should be doing something: America is facing a retirement crisis. One in three Americans has no retirement savings at all. One in two reports that they can’t save enough. On top of that, we are living longer, and health care costs, as we all know, are increasing. But, as Martin Smith found when investigating the retirement planning and mutual funds industries in Frontline documentary 'The Retirement Gamble', those advertisements are imploring us to start saving for one simple reason. Retirement is big business - and very profitable.

Those who think back to November 2011 will recall that it wasn't Jon Corzine's wrong way bet on Italian bonds that ultimately led to the bankruptcy of MF Global, well it did in part, but the real Chapter 11 cause was the sudden liquidity shortage due to the way the trades were structured as a Repo To Maturity, where the bank had hoped to collect the carry from the bond coupons, thereby offsetting the nominal repo cost of funding. The kind of deal which is the very definition of collecting pennies in front of a steamroller, as while the funding cost may be tiny and the capital allocated negligible (due to the nearly infinite implied leverage involved when using repo), when the underlying instrument crashes, and the originating counterparty has to fund a massive variation margin shortfall, that is when the shadow transformation cascade triggers an immediate liquidity crisis, which can result in liquidation cascade in a few brief hours. It happened with MF Global, it happened with Lehman too. And, we now learn, it also happened with Italy's most troubled and oldest bank, Monte Paschi (BMPS), whose endless bailouts, political intrigue, depoit runs, and cooked books have all been covered extensively here previously.

The is the key area to watch. If Gold continues to correct, then we could go to $1200. But Gold should hold up here as ong as the long-term trendline remains intact.

The political class set in motion the eventual obliteration of our economic system with the creation of the Federal Reserve in 1913. Placing the fate of the American people in the hands of a powerful cabal of unaccountable greedy wealthy elitist bankers was destined to lead to poverty for the many, riches for the connected crony capitalists, debasement of the currency, endless war, and ultimately the decline and fall of an empire. The 100 year downward spiral began gradually but has picked up steam in the last sixteen years, as the exponential growth model, built upon ever increasing levels of debt and an ever increasing supply of cheap oil, has proven to be unsustainable and unstable. Those in power are frantically using every tool at their disposal to convince Boobus Americanus they have everything under control and the system is operating normally. Nothing could be further from the truth.

First it was a tripling of gold sales at the UK Royal mint, and now with just 23 days in the month of April gone, it is the US Mint's turn to reports that more gold has been sold month to date than any month since December 2009 when a record 231,500 ounces were sold. In one day, the mint sold yet another 13,000 ounces of gold, bringing the total to 196,500, or more than triple the 62,000 ounces sold in the previous month.

It is becoming increasingly evident that Japan is attempting to use monetary policy to paper over the cracks of imploding foreign policy decisions. The 'storm in a teacup' that has brought China and Japan into fierce rhetorical battles over the Senkaku (or Diaoyu) Islands is having far more deep-seated impacts on the people of the two nations - and implicitly their buying habits. Unfortunately for the embattled Japanese - they are the ones in need far more than vice versa. As Bloomberg reports, discrimination against Japanese is increasingly common in China, as the head of China's Honda plant notes, he’s "never worked in a more hostile place." The dispute over the islands is raising resentment with bars and restaurants showings signs at the door saying, 'Japanese are barred from entering.' "Wherever I go, like department stores or in taxis, people ask me whether I am Japanese," and the reaction can be frosty. Simply put, no matter how cheap the Japanese make their cars by explicitly devaluing their currency, the largest auto market in the world (that of the Chinese) will not be buying; summed up rather bleakly, "I don’t really care about [car] brands,... but there are cars I won’t buy -- the Japanese ones. The reason is simple: Diaoyu."

What is happening to you America?  Once upon a time, the United States was a place where free enterprise thrived and the greatest cities that the world had ever seen sprouted up from coast to coast.  Good jobs were plentiful and a manufacturing boom helped fuel the rise of the largest and most vibrant middle class in the history of the planet.  Cities such as Detroit, Chicago, Milwaukee, Cleveland, Philadelphia and Baltimore were all teeming with economic activity and the rest of the globe looked on our economic miracle with a mixture of wonder and envy.  But now look at us.  Our once proud cities are being transformed into poverty-stricken hellholes. We are in the midst of a long-term economic collapse that is eating away at us like cancer, and things are going to get a lot worse than this.  So if you still live in a prosperous area of the country, don't laugh at what is happening to others.  What is happening to them will be coming to your area soon enough.

After touching multi-year highs amid the exuberance of liquidity sloshing around the world, Oil became too glaring a concern and two weeks of suppression took the only Central-Bank-'Governor' to much more comfortable levels. But, the last week has seen the biggest 5-day jump in WTI in 8 months and today the biggest jump in 5 months. It seems the 'Brent Vigilantes' are back. Equities traded in a very narrow range after yesterday's #HashCrash and eMini volumes were among the lowest of the year. An early afternoon ramp, aided by EURUSD, failed at overnight highs and collapsed back to VWAP as the machines were in charge once again. Treasuries rallied from early morning high yields ending the day lower in yield (TSY yields down 1-2bps on the week against a 30 point rally in the S&P!!) Durable goods dismal data just reinforced Europe's donut and stirred the bad-is-good mantra as Trannies outperformed, but interestingly once again the Dow was unable to break above pre-Boston levels. FX markets were relatively calm for once as gold, silver, and copper all gained. VIX ended up for the day by 0.25vols at 13.75%.

Forget the papered over cracks of manufactured EPS 'beats', or the talking-head anecdotes of one or two companies chosen to represent the 'earnings season' visibility. This chart from S&P shows the simple reality that operating earnings per share has been growing at an ever-decreasing pace since QE began. Of course, just as they were saying in June 2011, the next few quarters will see this growth re-accelerate...

How much changes in six months. Last September, everyone, including the hotdog vendor, the shoeshine boy and the kitchen sink, was screaming that AAPL $1000 is just around the corner, and cartoon analysts named for state capitals were coming up with idiotic price targets (hint: $1111) that only intellectually-stunted dyslexics could love. Six months later, the former growth company (and now levered-divdend value play) can barely break above $300. So, just to set the record straight, here, courtesy of marketsqueeze.com, is a small sample of the penguins who could barely outscream each other on the way to a "certain" $1 trillion market cap. Ooops.

It appears, once again, that the government's inept approach to spending 'other people's money' has blown up in their face. As HotAir.com reports, newly obtained documents show the Obama administration was warned as early as 2010 that electric car maker Fisker Automotive Inc. was not meeting milestones set up for a half-billion dollar government loan, nearly a year before U.S. officials froze the loan. Just as with Solyndra, Congress seemed convinced to spend billions of taxpayer money 'investing' in green-tech startups - only to lose everything. Simply put, in our humble opinion, the pattern is explained by the 'monopoly money' perspective we suspect these funds are viewed as in light of Bernanke's inexorable funding of the government's largesse. None other than the great Joe Biden reveled in the news in 2009 that Fisker would re-open a closed GM plant creating jobs, jobs, jobs; it never completed the task and never created one job. When the money isn't yours, 'investing' public funds is oh so easy and it appears, with zero consequence for the decision makers - again. But this story is not over yet, as Fisker heads to Congress looking for the right "financial and stretgic resources" once again.