Archive - Apr 2011 - Story

David Sokol's attorney Barry Wm. Levine fires right back, and it is now popcorn time. "Mr. Buffett drafted the March 30th press release announcing Mr. Sokol’s resignation in cooperation with Mr. Charlie Munger and Mr. Ronald Olson both of whom are Berkshire Board Members. They know the law and they know the Berkshire policies. In that context, Mr. Buffett correctly declared Mr. Sokol’s conduct lawful and indeed was effusive of his praise of him. There is no new information or new fact which has become available to them since that press release was issued on March 30th...It is alarming that Mr. Buffett would be advised to so completely flip-flop and resort to transparent scapegoatism."

My name is Grant Williams and I’m a precious metals bug.

There. I’ve said it.

It feels good to get that off my chest.

Of course, those amongst you who have been riding alongside me these past few years probably already had a sneaking suspicion that was the case and, I imagine, several more of you are now tutting, rolling your eyes and muttering “I KNEW it. Where’s that ‘Unsubscribe’ button?” (bottom of the last page – no offence taken). Well today, we’re going to talk about precious metals again I’m afraid, but in a broader sense if that helps at all. For readers who are over the whole precious metals thing, there’s a nice cartoon on the last page and you’ll find several stories about alternate subjects scattered throughout pages 7 to 15). For those of you still reading at this point, join me inside the recesses of my mind. Please keep your hands and arms inside the carriage at all times.

Commodity speculators may or may not be the vile criminals the president and his new working group are making them out to be, but they sure have made their view clear on where they think the USD and the EUR (the JPY not so much) are going. Below is the latest update from the CFTC Commitment of traders report on the three key currencies. While there has been some modest short covering in both the USD and JPY, both continue to trade like the carry funding currencies they are. And with bullish spec positions in the EUR at a multi year highs, the only question is whether the yen or the dollar will be the carry currency of choice in the next beatdown. Of course, how the EUR is expected to retain its lofty perch with all of the PIIGS soon to go under is beyond us, but hopefully it makes sense to Trichet, who is stuck between an inflationary rock and a insolvent peripheral hard place.

Each day the general population gets at least one dose of teleprompter humor. So for a bit of variety, courtesy of William Banzai, we bring you some teleporter tragicomedy (which also explains so very much...)

Crony capitalism bailout induced dementia may be a bitch but it sure does put things on the fast track. Specifically, from "Neither Dave nor I feel his Lubrizol purchases were in any way unlawful" to "the Sokol situation is inexplicable and inexcusable" in thirty days. Ignore the fact that Buffett both "explained" and "excused" it when he first announced it hoping that would be the end of course. After all who would dare disturb the kindly old Octogenarian of Omaha atop his perch, after he himself made billions off the backs of taxpayers, the same people his sidekick Munger who did precisely the same illegal frontrunning when he bought a boatload of BYD (oddly nobody brought that one up yet: we are confident it is being saved for the Too Bit To Fail launch party at the Museum of Mirrors) told should only buy gold if they believe the country they live in is going to kill them. We wonder if Munger has seen the price of gold lately, and if that to him is any indication of the genocidal inclinations of said host country. As for the demented one, who ended his letter with: "I have held back nothing in this statement. Therefore, if questioned about this matter in the future, I will simply refer the questioner back to this release" we wonder: now that the validity of that statement has been thoroughly refuted by none other than grandpa Warren, whether he would like to revise it, and if so, can he absolutely, definitely guarantee us that his heir apparent (not to mention Munger) was the only one who would frontrun Berkshire on corporate acquisitions in the past? We promise to believe him this time.

From Reuters:

For months Bill Gross has been very vocally antagonizing the US Treasury by telling anyone who cared to listen that US debt is nothing short of the world's biggest ponzi and that Ben Bernanke is satan. For the longest time Tim Geithner took this effrontery peacefully, always willing to offer the other cheek. Until last night. In what is quite possibly a direct warning shot fired straight at Pimco's primary revenue driver, the Treasury has made it clear Bill may want to focus on unicorns and rainbows in his next monthly letter.

Brief and comprehensive summary of the week's key bullish and bearish events

The same two geniuses who made "Aaaand, it's gone" a household phrase, bring you the HUMANCENTiPAD. Was Apple just hacked from cool to iTool?

"Permanent increases in the monetary base foreshadow eventual increases in inflation that can increase, rather than reduce, unemployment."So, the Chairman was....lying?

About a year ago, we wrote an article titled "How HFT Quote Stuffing Caused The Market Crash Of May 6, And Threatens To Destroy The Entire Market At Any Moment" in which we advanced the proposal, first suggested by Nanex, that while High Frequency Trading was the primary reason for the May 6 flash crash, it was a specific aspect of HFT that permitted the Dow to drop 1,000 points in the span of minutes, namely "quote stuffing", or the process of blasting millions of bids and offers without and interest in executing a transaction, merely as a fishing expedition to isolate any "whale" orders and to front run them, making a few guaranteed cents in the process even as this materially distorts true market depth, liquidity and overall stability. And while we were not surprised that the toothless, incompetent and corrupt US securities regulator did take a passing interest in the issue, the topic of "quote stuffing" has finally attracted the interest of US prosecutors. From Bloomberg: "U.S. prosecutors have joined
regulators’ investigation into whether some high-speed traders
are manipulating markets by posting and immediately canceling
waves of rapid-fire orders, two officials said...Justice Department investigators are “working closely” with the Securities and Exchange Commission to review practices “that are potentially manipulative, like quote-stuffing,” Marc Berger, chief of the Securities and Commodities Task Force at the U.S. Attorney’s Office for the Southern District of New York, said today at an event in New York." But, the traditional red herring justification for this criminal behavior goes, they provide so much liquidity which would forever be gone if it weren't for the high freaks.

Well, how will Obama balance his budget? Without cutting any spending, he could simply double taxes for everyone – but that wouldn’t work; he’d have to tax the poor and the rich. Since the top 5% of wealthy Americans are already paying over 58% of total US taxes collected, raising their tax burden will likely force them to move to Canada (the land of lower taxes and really good money managers). Meanwhile, raising taxes for the poor isn’t really a good way to get reelected in 2012. So, what does Obama do? Using his Nobel Peace Prize as inspiration, he crafts a plan that will cut spending by $4 trillion over the next 12 years. Then, using his teleprompter for guidance, he orates this plan to congress and the American public in the smoothest of silk possible. It was a great plan, until his very own Vice President, Joe Biden, falls asleep during the speech and on national TV at that. But in hindsight, this was actually smart as it deflected attention away from the details, and as we all know – the devil is in the details.

One clue: Exhibit A

The only things that are doing well are the stock and bond markets. But the markets and the economy are totally different things – except, over a very long period of time, there's no necessary correlation between the economy doing well and the market doing well. My view is that the market is as high as it is right now – with the Dow over 12,000 – solely and entirely because the Federal Reserve has created trillions of dollars, as other central banks around the world have created trillions of their currency units. Those currency units have to go somewhere, and a lot of them have gone into the stock market. As a general rule, I don't believe in conspiracy theories, and I don't believe anything's big enough to manipulate the market successfully over a long period. At the same time, the government recognizes that most people conflate the Dow with the economy, so it is directing money toward the market to keep it up. Of course, the government wants to keep it up for other reasons – not just because it thinks the economy rests on the psychology of the people, which is complete nonsense. Psychology is just about the most ephemeral thing on which you could possibly base an economy. It can blow away like a pile of feathers in a hurricane

Dear Congressman:

It’s here:  Your moment at the plate.   You’ve whiffed more than a few … and, yes, we’re counting.  But you’ve been gifted another at-bat, and the President’s tired.  Seventh inning stuff is coming out of his teleprompter, and this full-count fastball will be straight, level, and slow.  You won’t see another one like this for five years.

An embattled first term president is faced with an outcome that he must, at all costs, prevent, and he’s done very little ground work ahead of it.  He is about to become the first President in American history to preside over a default on the national debt, unless you vote to let him raise the limit on the financial burden we leave our children.  He would ultimately be crazy to deny any reasonable option, absolutely anything, rather than live with the outcome of his refusal.  Politically speaking, he’s whispered a prayer to the Greek God of Imprudence and Fiscal Insanity, raised a one-finger salute to the nation’s savers through the sunroof of a stolen golden Beemer, and revved it toward the draw-bridge that you were elected to control.

Now it's just getting plain silly. Following two margin hikes by the CME, one for 9% and one for 10% this week, now MF Global, run by former Goldman CEO Jon Corzine has joined the fray, and has hiked its silver margin to $25,397. As a reminder, the latest CME margin is $14,513, or about 6% of the contract value of $241,750 assuming a silver price of $48.35. So MF Global's is 175% of the CME! It is obvious that everyone is now hell bent on destroying the parabolic move higher in gold and silver, which is happening for a very good reason: deranged money printing. Although, as yesterday, we very much doubt MF Global, or anyone else for that matter will hike ES margins any time soon. After all, doing anything to stop the Weimar rally^TM in its tracks is treason of the highest degree under Bernanke's dictatorship and is punishable appropriately. In the meantime, can the exchange just make margin trading in commodities illegal and move to all cash? At least that way all the weak momo hands can be relegated to chasing Netflix and other bubbles, making their eventual pop all the more memorable.