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The market has screamed loud and clear what the tangible results of the QE3 program are even without ever being implemented.

The Financial Times published an interesting article on Wednesday by a Tokyo-based analyst with Arcus Research, Peter Tasker, entitled of 'Cash out of gold and send kids to college'. The article is interesting as it is an articulate synopsis of those who are either negative on and or bearish on gold. It clearly shows the continuing failure to understand the importance of gold as a diversification and as financial insurance. Tasker incorrectly states that gold is "just another financial asset, as vulnerable to the shifts of investor sentiment as an emerging market." He conveniently ignores over 2,000 years of history showing how gold is a store of value. He also ignores recent academic research showing gold to be a hedging instrument and a safe haven asset. Another fact unacknowledged is how gold has clearly been a store of value since the current financial and economic crisis began in 2007. Since then gold has protected people from depreciating financial assets (such as equities and noncore bonds) and from depreciating fiat currencies such as the dollar, the pound and more recently the euro. 

Back in 2009 when the world wasn't filled with HFT 'experts', we deconstructed the topic of High Frequency Trading on a daily basis, and predicted not only the flash crash, not only debacles such as the Knight trading fiasco, not only the death of capital markets as a fund raising vehicle for companies who wish to go public (i.e. the FaceBook IPO fiasco), but much more (all of which has yet to pass before the stock market, as it was once known, is no more). The reason why little if anything can and will be done to fix the persistent threat to capital markets that is HFT is two fold: i) none of the current regulators understand anything about modern market topology, and ii) HFT is so embedded in markets that unrooting it would result in a complete reboot of "fair" stock valuation: imagine what would happen to stock prices if Knight and its "buy everything" algos were no longer present. Mass hysteria as the realization that vacauum tubes are now TBTF. That said it is always amusing to observe as more and more people get in on the scam that is the "equity market", now completely dominated by robots which do nothing but accelerate and perpetuate momentum moves - after all it is all they can do in lieu of being able to read financials, or anticipate events. Remember: it is always the market that makes the news, never the other way around. So it was entertaining and informative to read the latest recap of all events HFT-related as narrated by Wired's Jerry Adler, whose write up "Raging Bulls: How Wall Street Got Addicted to Light-Speed Trading" does an admirable job of showing how not only nothing has changed since those days in 2009 full of warning, but how in fact things are moving ever faster to what will one day be a trading singularity, limited strictly by the speed of light (and maybe even surpassing that). Of all the things in the article, the one we found most curious is that since 2009, the round trip from the biggest quant trading hub in Chicago to the exchange hubs in NY and NJ, has been cut by over 50%, or from over 13 milliseconds to just about 9 milliseconds, courtesy of Microwaves.

The silver market was affected by “devious efforts” to move the price of the precious metal, according to Bart Chilton, a member of the U.S. Commodity Futures Trading Commission, as reported by Bloomberg. “I continue to believe, consistent with my previous statements and information from the public, that there have been devious efforts related to moving the price of silver,” Chilton said by e-mail today in response to questions from Bloomberg. “There have also been silver and gold market anomalies outside of the silver investigate window that have raised, and continue to raise, market concerns.” The enforcement division of the Washington-based agency, the main U.S. overseer of derivatives markets, began pursuing allegations of manipulation in the silver market in September 2008.  Investigators have analyzed more than 100,000 documents and interviewed dozens of witnesses, the CFTC said in a November 2011 statement. Chilton said last month the investigation may be completed as early as September.

Market players are watching for any details on the ECB’s bond purchasing plans, after bank chief Mario Draghi said last week that the ECB would target short-term debt, fuelling optimism in the bond markets. A Reuter’s poll of economists on Friday highlighted that they expect the Fed to start QE3 in September, but a top Fed official said that a stimulus package so close to a presidential election would not be prudent. Since the ECB conditioned it would buy more government debt from Spain & Italy if they agreed to strict austerity packages, this has decreased pressure on either country to act quickly. The Financial Times interviewed Ken Wattret, a BNP Paribas economist who said: “If people think this will all be sorted in a matter of days, or weeks, then they will be disappointed. We could be in limbo for months.”

Instead of having to fire 1900 people, Deutsche Bank will now have to only let go 1899. The reason: the second most prominent casualty of the Lieborgate scandal is now none other than Bob Diamond's daughter Nell, who made quite a splash in the aftermath of the Barclays Libor manipulation revelations when the social circuit butterfly tweeted that "George Osborne and Ed Miliband can go ahead and #hmd.” As it turns out after graduation from Princeton University in June 2011, and following a stint in UNICEF, the philanthropist, whose twitter profile is riddled with photos of shoes and runway poses, joined Deutsche Bank in November 2011, whether due to her natural curiosity into the minutae of Investment Banking, or for other reasons. Of course, considering her Princeton thesis was on "The Cultural Myth of Female Hair in the Victorian Imagination" (strinkingly comparable to "The Power Of Women's Hair In The Victorian Imagination" but we digress), it likely was the latter. As it turns out, 9 months after joining the firm full time (she had a part-time stint in the summer of 2010, following comparable stints at the Abernathy Macgregor Group, Nantucket Ice Cream Company, Abercrombie and Fitch), the young woman who sold "Rates" products (Libor and other IR derivatives? Surely that would be ironic at a bank which is now front and center into the Lieborgate investigation) at Deutsche Bank has decided to call it quits, in the process saving the job of at least one low level banker who now will not have to be let go because of the lack of an English thesis focusing on Female hair during Victorian times

And the update comes as expected: RUSSIAN INTERIOR MINISTRY DENIES ISSUING ANY STATEMENT ON ASSAD'S HEALTH VIA TWITTER: REUTERS

Moments ago, the apparently fake twitter account of the Russian minister of the interior Vladimir Kolokoltsev (which was created days ago) sent out the three completely unconfirmed and uncorroborated tweets stating that Syria's president Assad "has been killed or injured" which the market, in all its ultra-high speed trading wisdom, took and ran with, not waiting for any actual confirmed news to be released (because obviously Russian official channels have never heard of news wires such as Interfax).End result: WTI soaring by over $1 to just shy of $92, on what very well may be completely fake news, dragging the entire market higher with it.

• Monti Warns of Euro Breakup as Tussle Over Spain Aid Hardens (Businessweek)
• Italy doesn't need German cash, Monti tells Germans (Reuters) - at least we know who needs whose cash...
• Spain has time to Wait for Clarity on EU Aid -Econ Min (Reuters) - which came first: the Spanish bailout request or the denial to need a Bailout request? Ask the Spanish 2 year...
• Bundesbank Weidmann’s opposition to a proposed new wave of ECB bond purchases has support of Merkel’s CDU - Volker Kauder
• China media tell U.S. to "shut up" over South China Sea tensions (Reuters)
• Top Chinese Leaders Gather in Annual Summer Conclave (WSJ)
• Greece Agrees With Troika on Need to Strengthen Policy (Bloomberg)
• Coeure Says ECB Should Look at Getting Loans Into Real Economy (Bloomberg)
• Italy Central Banker Sees Potential Rate Cut as Euro Economy Slows (WSJ)
• A Dose of Dr. Draghi's 'Whatever It Takes' (WSJ)
• Greek bank head sent savings abroad (FT)

Investors now look to the European Central Bank’s rate decision at 1145 GMT.  If “Super” Mario Draghi doesn’t come out with a loaded arsenal (bold intervention), then the markets will be disappointed.  Mario Draghi will be confronting his colleague and nemesis in the ECB Jens Weidmann. Weidmann is the Head of THE Bundesbank, a former Merkel economics advisor, and an ECB governing council member who has just 1 vote out of the 23 today at the ECB MEETING in Frankfurt. However Weidmann sees his role differently.  "I certainly would not say that we are just one of 17 central banks [in the Eurozone]," he said in an interview published on Wednesday. "We are the largest and most important central bank and we have a greater say than many other central banks in the Eurosystem. This means we have a different role." The disagreement here lies with the fact that the Germans are against the ECB becoming like a US Federal Reserve in Europe. Weidmann feels it would be wrong to give the ESM a banking license allowing it to tap large quantities of funds from the ECB. Can “Super” Mario make the jump happen? Time will tell.

When it comes to building wealth, muddying the difference between perception and reality is the key manipulation tool that banksters use to goad people into wrong choices.

We already know that the National Security Agency will soon capture all communications — phone calls, search histories, web history, e-mails, passwords, etc — in their Utah data centre. In Britain, a dangerous precedent is being set. "A teenager arrested over a malicious tweet sent to Team GB diver Tom Daley has been issued with a warning. Dorset Police said the 17-year-old boy was held at a guest house in the Weymouth area on suspicion of malicious communications and later bailed. After coming fourth in the men’s synchronised 10m platform diving event on Monday, Daley, 18, from Plymouth received a message on Twitter. It told him he had let down his father Rob, who died in 2011 from cancer." Arrested and cautioned for expressing an opinion. Not for threatening violence. Not even for racial or sexual abuse — as happened in March when a student was convicted of incitement to racial hatred after he tweeted a series of racial slurs. Just for expressing an opinion that the authorities found to be distasteful.  I admit, it was a distasteful comment. But the idea that the government should arrest the person who made it is far, far, far more distasteful still. Meanwhile, the number of bankers arrested for rigging LIBOR remains at zero.

Spain is facing a regional, banking, and sovereign crisis all at once. The funds to prop it up simply do NOT exist. To argue otherwise is to ignore math and Germany.

Facebooked.....

A Fed decision to launch QE3 would increase the yellow metal’s appeal as an inflation hedge and bolster prices.  US house prices increased for their 4th month in a row suggesting that the US housing market recovery may be underway which dampened further hopes of any immediate easing in the US Fed’s monetary policy. The markets are playing a waiting game and investors are cautious.  Thursday’s ECB policy meeting will determine if President Mario Draghi will have the backing he needs to embark on significant policy changes to rescue the region’s financial woes.  Yesterday, German Finance Minister Schauble said in an email response to a newspaper, “The rules of the European Stability Mechanism don’t foresee a banking license to allow refinancing at the European Central Bank”.  Schauble’s comments fell like a penny in a wishing well that rippled to curb the market’s enthusiasm. Since Draghi’s initial comments to “do anything it takes” gold has increased by nearly $50/oz.

Some positive indicators have prompted at least one article at Forbes to predict $8.00 natural gas by "the approaching winter."