It is difficult to express just how warped US markets have become, though, from the movements of the past two trading days, a case can be made that the markets are being guided by forces that are distinctively not based on free market ideology nor statistics that can be trusted within any degree of accuracy.
Taking a look first on the massive downdraft in commodities - mostly silver and crude oil - from Thursday's trading, one should look no further than the CME (Chicago Mercantile Exchange), the overarching body that controls trade in futures, options and various other derivatives.
The CME raised margin requirements - the cost to buy a futures contract - on silver four times in the past two weeks. That resulted in many speculators - generally honest traders working with leverage via margin - to reduce their exposure, thereby taking the price of silver from close to $50/ounce on Friday, April 29, to under $35/ounce by Thursday, May 5.
This really doesn't require much thought. If it costs more to buy something - in this case a silver futures contract - you either buy less of it or don't buy at all, waiting until the price is more reasonable. In the case of silver futures contract, a highly inelastic entity (You can't buy a fraction on one; you must buy a full contract.), one is either in or out. When margin requirements (cost) rise rapidly, many legitimate buyers head for the hills. This is exactly what happened all week, culminating in the final thrust downward on Thursday, May 5, as there were also fewer short contract holders which would have provided some support, having to cover as prices fell. Alas, the shorts were also out of the market due to exorbitant margin costs.
This makes a great deal of sense from a banker's perspective. Money flowing into either physical silver or gold is money out of circulation, and, more dangerously, into a competing currency. Precious metals compete with all fiat (paper) currencies, insofar as they are considered stores of wealth and mediums of exchange. Thus, when one buys Silver Eagles, silver bars, etc., bankers get worried because the buyer exchanged paper dollars (or Euros or Yen or Reals) for physical metal. And if the price of physical metal and the amount in circulation gets too high, the need for paper dollars is diminished.
Silver, being the "coin of gentlemen," as opposed to gold, "the coin of the realm (or, kings), is a very dangerous commodity to the banker line of thought. If more and more ordinary people - the "little guys" upon whom the banker depends - conduct transactions in silver - the utility of paper money declines, velocity decreases and all of a sudden there's a liquidity crisis.
This is exactly what the global (mostly in the USA) banking cartel feared as silver approached all-time highs, thus the need for margin hikes to kill the competing currency before it became a real threat.
The same is true for gold, to a lesser degree, as central banks hold gold as a final backstop to their paper currencies, though it is leased out, levered 100-1, and therefore, being a useful conduit for the bankers, not as volatile as silver.
As for oil, what caused Thursday's sell-off is a little less clear, but again, the CME, which owns the NYMEX, where West Texas Intermediate oil futures (the most popular and widely held) are traded, extended trading range limits from $10 to $20, exacerbating an already decisive decline.
In simple terms, the CME allowed oil to fall though the floor simply by changing the rules in the middle of the day. There's less concern in the price of oil declining, because lower oil prices are generally good for everybody outside of oil companies and Middle East sovereigns, so less attention was paid to the CMEs quick decision, but it still underscores the levels at which rules will be either broken or amended to accommodate the needs of the powers behind the money (read: the too big to fail banks, the Fed and Treasury Department).
Now to Friday's fiasco in the Bureau of labor Standards (BLS) non-farm payroll data for April (the establishment survey). While the consensus opinion had been trending toward lowered expectations, the BLS surprised everybody with the announcement of 244,000 new jobs created during the month, 268,000 in the private sector, offset by a loss of 24,000 public sector jobs - mostly municipal and state employees being furloughed.
What's intriguing about the non-farm payroll data is how the numbers are created, and the use of the word "created" is no accident, because the BLS employs such such extreme and convoluted data manipulation that pure statistics become rather murky. It's easy to say that our monthly "jobs data" is more a political process than an actual statistical survey with a margin of error in the low single digits. It's guided by a smallish sample and then amplified by what's known as the "birth/death model," a number created to reflect the number of businesses opening (birth) and closing down (death).
Does the BLS actually sample bankruptcy and new corporation filings in selected communities and states? No. Does the BLS ever adjust the number for seasonality. No. For accuracy, yes, but not in the month-to-month survey numbers.
So, from where did the 244,000 net new jobs in April come? 175,000 came from the birth/death model. And while some are contending that roughly 62,000 came from the widely-published McDonald's hiring, the Wall Street Journal begs to differ, stating that McDonald's hire date was April 19, a week after the BLS survey period.
Taking just the raw data, subtracting out the birth/death figures, the US economy consisting of existing businesses created 69,000 net new jobs - not so hot. If we can believe that a couple hundred thousand newly-minted entrepreneurs joined the business fray and 30 to 40,000 businesses went belly up in the same time frame, we could believe this figure. However, like the missing photo of a dead Osama bin Laden, there's no proof of these "births" and "deaths," only trust in the BLS, which, by the way, stretched credulity again by proclaiming the official unemployment rate to have risen, up to nine per cent (9%).
That rise correlated to the other side of the BLS coin, the household survey, which showed the number of employed persons to have fallen by 190,000 from the March reporting period to April.
Is it a gain of 244,000 jobs or a loss of 190,000? Who knows? The point is that many decisions are made based upon the BLS data, which, as shown, is more guesswork and massaging of data than trustworthy data, but one wonders if these decisions are based on reality, a perception of reality, or if the reality is being superimposed upon the American public to suit the current narrative of "recovery."
Whatever the case, it seems a shoddy way to run a country's economy, with dodgy data and questionable maneuvers by those running the exchanges.
It doesn't snow much in the USA in May, but that surely doesn't preclude a massive snow job by Wall Street and the federal government and their extensions.
Friday, May 6, 2011
Thursday, May 5, 2011
Armageddon Arrives in Commodities; Stocks Next
As has been the ongoing motif of this blog for many months, the grand Bernanke experiment is now experiencing some of the nasty side effects. Today's action in commodities, particularly silver and crude oil, came as a stark reminder that leveraged positions can go very, very badly in very, very short spans of time.
It was just last Friday that silver stood at the precipice of $50/ounce, approaching the all-time high. As of this writing it is now trading on the spot market at $34.76, a drop of 30% over just four days. WTI crude oil futures were at $116 on Monday, and today it closed on the NYMEX at $99.80. All those sheiks and oil robber-barons drooling over $4/gall gas across the USA can now wipe their chins with their sell tickets.
Stocks were also not immune from the liquidity trap. The Dow was down as many as 200 points around midday, but recovered a bit into the close. Still, leveraged bets (margin) on selected stocks have finally begun to display inherent risk and the carnage has only begun.
What set off today's massive selling spree were a number of unrelated events which combined to turn the trading day into an economic tornado, tearing through asset classes like a Midwestern twister. First, a series of margin tightenings on silver speculation that has been ongoing from Sunday night began the unwinding process. Silver had been hammered for three straight days without buyers on the downside. Then, with the 8:30 am release of some truly horrible weekly unemployment claims, the spring was coiled tighter.
Initial claims for the most recent week (last week in April) came in at 474,000, the highest since August of 2010, off expectations for a number around 400,000. So much for Hope and Change, Bernanke's Zero Interest Rate Policy (ZIRP) and QE2. The smart money has made its way out of Dodge and the rest of the pilgrims are scrambling to leave town with whatever they can salvage.
While commodities were being ravaged one after another, stocks were salvaged from the brunt of the storm, though they eventually faced capitulation and will likely be under pressure from the opening bell on Friday, after the April non-farm payroll report goes public at 8:30 am EDT. Following the unemployment number, expectations have been ratcheted lower. The expected number of new jobs created during the month was supposed to be around 200,000, though that's been trimmed to 185,000 and even lower by some analysts. Anything under 185,000 will produce a bloodbath. Even anything over that will likely induce more selling, on a faster pace than today's, because this is a liquidity trap, and economic numbers - good, bad or indifferent - may not matter at all.
The winners on the day were the US dollar, which majestically made its move all the way from a low of 72.81 (about the point at which Mssrs. Bernanke and Geithner were having accidents in their pantaloons) to a close at 74.08, a move of roughly 1.5%, which, in the world of currencies, is enormous. This created a vicious, self-reinforcing virtuous loop, with the dollar's rise causing commodity margin calls, and a risk-off scramble in stocks.
The other winner was bonds, which explains much. Bonds are the lifeblood of the Ponzi scheme between the Treasury, Primary Dealers and the Federal Reserve which gave us the illusion of prosperity against the backdrop of an eroding dollar. Bumping right up to the debt ceiling, the Fed intervened in a very big way today - behind the scenes, of course - to dampen risk appetite and make fixed income investments the choice for the foreseeable future. They had to, being backed into an untenable position.
It was truly a momentous day, one which we've been preparing you for with our reminders all week that the narrative was changing with the (fictitious) slaying of Osama bin Laden. And now, change has come to us all.
Dow 12,584.17, -139.41 (1.10%)
NASDAQ 2,814.72, -13.51 (0.48%)
S&P 500 1,335.10, -12.22 (0.91%)
NYSE Composite 8,397.40, -109.21 (1.28%)
Advancing issued were submerged by decliners overall, 4183-2412. The NASDAQ recorded 48 new highs and 52 new lows, the second straight day of high-low reversal. On the NYSE, there were 100 new highs and 36 new lows, mostly due to the elevated levels reached recently. It's hard to imagine the daily lows not overtaking the highs within the next week. Volume was magnificently higher as sellers sold with both hands.
NASDAQ Volume 2,241,177,750
NYSE Volume 5,510,796,500
Crude oil took an earth-shattering drop of over 8%, losing $9.44, to finish at $99.80. The selling is certainly far from over as the tempering of emotions in the Middle East after the slaying of OBL will surely push prices back to some level of sanity and take out the majority of the risk premium and speculative fever.
Gold, which had been holding up relatively well with respect to other precious metals, finally took a beating, losing $43.40 (nearly 3%), to its current trading level of $1473.10. Silver took the worst of it again, falling another $4.73, to $34.66, but there is a silver lining for the faithful in precious metals. Most of the true believers - who only hold physical metal and use the futures and ETFs only as a hedge - have a cost basis below $20/ounce.
Technically, they've lost nothing, and could still sell right here for a hefty profit. But they won't, and are actually looking at this momentous correction as a buying opportunity, hoping to snatch up more metal at what they perceive as bargain-basement prices. The general strategy is to buy once everything has more or less settled out. Nobody is really worried about catching the absolute volume, and a few days of upwards trending will not entice the hardiest of the breed. They will wait until a bottom is confirmed. Like love, they'll know it when they see it. The same strategy holds more or less true for gold bugs worldwide.
The holders of gold and silver will eventually rule the world as we approach - at breakneck speed - the eventual destruction of the global fiat money regime and the likely collapse of more than a few governments. What has happened in Greece, Iceland, Ireland and Portugal will eventually visit the shores of Japan, the USA, Great Britain, France and even China.
We are still reeling from the catastrophe of the housing bubble and collapse and the general liquidity and solvency crisis of 2008. The measures taken by the Federal Reserve and other central banks has been to throw more money at the credit monster they created, but it has resulted in extreme imbalances everywhere. The thinking at the top of government is focused already on the elections of 2012. The betting is that the US government and the financial community will have a time making it there unscathed.
If this looks anything like 2008 to those wizened enough to learn from history, those people would be on the right track, except, this time, it's likely to be worse and without any magic bullets, because the Fed is all out of them.
It was just last Friday that silver stood at the precipice of $50/ounce, approaching the all-time high. As of this writing it is now trading on the spot market at $34.76, a drop of 30% over just four days. WTI crude oil futures were at $116 on Monday, and today it closed on the NYMEX at $99.80. All those sheiks and oil robber-barons drooling over $4/gall gas across the USA can now wipe their chins with their sell tickets.
Stocks were also not immune from the liquidity trap. The Dow was down as many as 200 points around midday, but recovered a bit into the close. Still, leveraged bets (margin) on selected stocks have finally begun to display inherent risk and the carnage has only begun.
What set off today's massive selling spree were a number of unrelated events which combined to turn the trading day into an economic tornado, tearing through asset classes like a Midwestern twister. First, a series of margin tightenings on silver speculation that has been ongoing from Sunday night began the unwinding process. Silver had been hammered for three straight days without buyers on the downside. Then, with the 8:30 am release of some truly horrible weekly unemployment claims, the spring was coiled tighter.
Initial claims for the most recent week (last week in April) came in at 474,000, the highest since August of 2010, off expectations for a number around 400,000. So much for Hope and Change, Bernanke's Zero Interest Rate Policy (ZIRP) and QE2. The smart money has made its way out of Dodge and the rest of the pilgrims are scrambling to leave town with whatever they can salvage.
While commodities were being ravaged one after another, stocks were salvaged from the brunt of the storm, though they eventually faced capitulation and will likely be under pressure from the opening bell on Friday, after the April non-farm payroll report goes public at 8:30 am EDT. Following the unemployment number, expectations have been ratcheted lower. The expected number of new jobs created during the month was supposed to be around 200,000, though that's been trimmed to 185,000 and even lower by some analysts. Anything under 185,000 will produce a bloodbath. Even anything over that will likely induce more selling, on a faster pace than today's, because this is a liquidity trap, and economic numbers - good, bad or indifferent - may not matter at all.
The winners on the day were the US dollar, which majestically made its move all the way from a low of 72.81 (about the point at which Mssrs. Bernanke and Geithner were having accidents in their pantaloons) to a close at 74.08, a move of roughly 1.5%, which, in the world of currencies, is enormous. This created a vicious, self-reinforcing virtuous loop, with the dollar's rise causing commodity margin calls, and a risk-off scramble in stocks.
The other winner was bonds, which explains much. Bonds are the lifeblood of the Ponzi scheme between the Treasury, Primary Dealers and the Federal Reserve which gave us the illusion of prosperity against the backdrop of an eroding dollar. Bumping right up to the debt ceiling, the Fed intervened in a very big way today - behind the scenes, of course - to dampen risk appetite and make fixed income investments the choice for the foreseeable future. They had to, being backed into an untenable position.
It was truly a momentous day, one which we've been preparing you for with our reminders all week that the narrative was changing with the (fictitious) slaying of Osama bin Laden. And now, change has come to us all.
Dow 12,584.17, -139.41 (1.10%)
NASDAQ 2,814.72, -13.51 (0.48%)
S&P 500 1,335.10, -12.22 (0.91%)
NYSE Composite 8,397.40, -109.21 (1.28%)
Advancing issued were submerged by decliners overall, 4183-2412. The NASDAQ recorded 48 new highs and 52 new lows, the second straight day of high-low reversal. On the NYSE, there were 100 new highs and 36 new lows, mostly due to the elevated levels reached recently. It's hard to imagine the daily lows not overtaking the highs within the next week. Volume was magnificently higher as sellers sold with both hands.
NASDAQ Volume 2,241,177,750
NYSE Volume 5,510,796,500
Crude oil took an earth-shattering drop of over 8%, losing $9.44, to finish at $99.80. The selling is certainly far from over as the tempering of emotions in the Middle East after the slaying of OBL will surely push prices back to some level of sanity and take out the majority of the risk premium and speculative fever.
Gold, which had been holding up relatively well with respect to other precious metals, finally took a beating, losing $43.40 (nearly 3%), to its current trading level of $1473.10. Silver took the worst of it again, falling another $4.73, to $34.66, but there is a silver lining for the faithful in precious metals. Most of the true believers - who only hold physical metal and use the futures and ETFs only as a hedge - have a cost basis below $20/ounce.
Technically, they've lost nothing, and could still sell right here for a hefty profit. But they won't, and are actually looking at this momentous correction as a buying opportunity, hoping to snatch up more metal at what they perceive as bargain-basement prices. The general strategy is to buy once everything has more or less settled out. Nobody is really worried about catching the absolute volume, and a few days of upwards trending will not entice the hardiest of the breed. They will wait until a bottom is confirmed. Like love, they'll know it when they see it. The same strategy holds more or less true for gold bugs worldwide.
The holders of gold and silver will eventually rule the world as we approach - at breakneck speed - the eventual destruction of the global fiat money regime and the likely collapse of more than a few governments. What has happened in Greece, Iceland, Ireland and Portugal will eventually visit the shores of Japan, the USA, Great Britain, France and even China.
We are still reeling from the catastrophe of the housing bubble and collapse and the general liquidity and solvency crisis of 2008. The measures taken by the Federal Reserve and other central banks has been to throw more money at the credit monster they created, but it has resulted in extreme imbalances everywhere. The thinking at the top of government is focused already on the elections of 2012. The betting is that the US government and the financial community will have a time making it there unscathed.
If this looks anything like 2008 to those wizened enough to learn from history, those people would be on the right track, except, this time, it's likely to be worse and without any magic bullets, because the Fed is all out of them.
Wednesday, May 4, 2011
American Sheeple Love to Be Fleeced and Played
The lies, half-truths and material obfuscation by the government has reached new heights with the latest flip-flop on the "Osama bin Laden is dead" story.
Now the president won't release a picture of a dead bin Laden because it might inflame the Jihadists of the world. Rubbish! Pure, unadulterated nonsense from the man who is supposed to be the leader of the greatest nation on the planet, but is now exposed as nothing more than a simple liar.
Lies, lies and more lies are all the American people can expect from the most corrupt government the world has ever seen. The details of this entire, "we got him" affair have changed so often as to strain credulity until it doubles over in laughter or vomiting, or both.
First, the story originally released by AP on Sunday night, May 1, was that bin Laden was killed a week prior and that the White House had been waiting for DNA tests to confirm that the victim was indeed the world's bogeyman. Anyone watching the news scroll on FoxNews or CNN saw it, undeniably. That story vanished as soon as the president stepped up to the podium that Sunday night.
Then there were reports of a firefight, now, no firefight. Osama was armed, then he wasn't; he used his wife as a human shield, then he didn't and it wasn't even his wife, then it was his wife and she was shot because she rushed one of the Seals. There were two helicopters, no, three, no, there were four. Then Osama bin Laden is taken out of the compound to Afghanistan and rushed to an aircraft carrier for a proper burial at sea. Sure, that's completely understandable, especially if you believe Osama bin Laden was a seaman or a pirate.
Of course, there's the implausibility factor of a huge compound with 18-foot high walls, topped by barbed wire in a town populated by retired Pakistani military people, which never raised any suspicion for five or six years. That's certainly believable.
The entire episode is one huge farce and sadly, the iPad buying American sheeple public-at-large will gooble up every last sound bite of it, all the while chanting, USA, USA, USA! because the American sheeple actually love being conned, swindled, cheated, fleeced and sheared by their government. After all, this is the culmination of the 9/11 attacks, the major farce that has to this day never been adequately explained.
But, so what? Osama the Terrible is dead, right, and whether he's been dead for five, six or seven years is really immaterial because the powers that be are changing the narrative. They had to, because the most recent narrative of borrow and spend and gas at $4.00 a gallon and rising food prices and war on three fronts wasn't really going all that well, was it?
So, now, we have crashing commodity prices, falling stocks and oil down seven bucks in three days. Get ready for the new AUSTERITY coming to America. The sheeple will be fleeced from an entirely different direction and instead of calling it a recession or a depression, it will be known as a period of "slow growth" or "stagnation." Anything but calling a spade a spade, a recession a recession, a depression a depression.
The American sheeple will receive less in government service and be taxed more for it all in a "shared sacrifice" decade of austerity that is evolving even as we sit back and watch the latest American Idol or Star Dancing. America has been permanently dumbed-down and defeated, and the government loves it because an ignorant public is a well-behaved public. Give them their bread and circuses, today known as food stamps and football, and they'll just blindly follow along.
That's just the way it is, sheeple, one and all. You love being played.
Dow 12,723.58, -83.93 (0.66%)
NASDAQ 2,828.23, -13.39 (0.47%)
S&P 500 1,347.32, -9.30 (0.69%)
NYSE Composite 8,506.61, -78.07 (0.91%)
For a change, everything (except bonds) went down. Declining issues overwhelmed advancers - for the third day in a row - by a score of 4700-1904. On the NASDAQ, the flip required to shake the markets from rally mode to selling spree occurred today with 52 new highs, but 53 new lows. On the NYSE, stubbornness prevailed with 89 new highs and 28 new lows, but it's getting closer. Volume, unsurprisingly, was up again today, on a down day, an ominous warning that more selling is on the way.
NASDAQ Volume 2,250,185,000
NYSE Volume 5,078,037,500
Commodities continued to be whipped into submission. WTI crude oil futures fell another $1.81, to $109.24, the lowest price in two weeks. Gold tumbled another $20.60, to $1516.50 and silver took another massive beating, down $2.27, to $39.39. And, this just in after the close, margin requirements on silver are being raised again by the CME. Apparently sending the price of silver down $11 in three days isn't enough to square all of HSBC's and JP Morgan's short positions.
The often-discredited ADP Payroll report for April was released prior to the open today, showing private payrolls increasing by 179,000, short of consensus. But the real news was that the ISM Services index fell from 57.3 in March to 52.8 in April, a pretty big loss and well below consensus estimates of 57.5.
Tomorrow comes another week of initial unemployment and continuing claims, which precedes the BLS non-farm payroll report on Friday.
Prepare for disaster because we've been living one for the past three years.
Now the president won't release a picture of a dead bin Laden because it might inflame the Jihadists of the world. Rubbish! Pure, unadulterated nonsense from the man who is supposed to be the leader of the greatest nation on the planet, but is now exposed as nothing more than a simple liar.
Lies, lies and more lies are all the American people can expect from the most corrupt government the world has ever seen. The details of this entire, "we got him" affair have changed so often as to strain credulity until it doubles over in laughter or vomiting, or both.
First, the story originally released by AP on Sunday night, May 1, was that bin Laden was killed a week prior and that the White House had been waiting for DNA tests to confirm that the victim was indeed the world's bogeyman. Anyone watching the news scroll on FoxNews or CNN saw it, undeniably. That story vanished as soon as the president stepped up to the podium that Sunday night.
Then there were reports of a firefight, now, no firefight. Osama was armed, then he wasn't; he used his wife as a human shield, then he didn't and it wasn't even his wife, then it was his wife and she was shot because she rushed one of the Seals. There were two helicopters, no, three, no, there were four. Then Osama bin Laden is taken out of the compound to Afghanistan and rushed to an aircraft carrier for a proper burial at sea. Sure, that's completely understandable, especially if you believe Osama bin Laden was a seaman or a pirate.
Of course, there's the implausibility factor of a huge compound with 18-foot high walls, topped by barbed wire in a town populated by retired Pakistani military people, which never raised any suspicion for five or six years. That's certainly believable.
The entire episode is one huge farce and sadly, the iPad buying American sheeple public-at-large will gooble up every last sound bite of it, all the while chanting, USA, USA, USA! because the American sheeple actually love being conned, swindled, cheated, fleeced and sheared by their government. After all, this is the culmination of the 9/11 attacks, the major farce that has to this day never been adequately explained.
But, so what? Osama the Terrible is dead, right, and whether he's been dead for five, six or seven years is really immaterial because the powers that be are changing the narrative. They had to, because the most recent narrative of borrow and spend and gas at $4.00 a gallon and rising food prices and war on three fronts wasn't really going all that well, was it?
So, now, we have crashing commodity prices, falling stocks and oil down seven bucks in three days. Get ready for the new AUSTERITY coming to America. The sheeple will be fleeced from an entirely different direction and instead of calling it a recession or a depression, it will be known as a period of "slow growth" or "stagnation." Anything but calling a spade a spade, a recession a recession, a depression a depression.
The American sheeple will receive less in government service and be taxed more for it all in a "shared sacrifice" decade of austerity that is evolving even as we sit back and watch the latest American Idol or Star Dancing. America has been permanently dumbed-down and defeated, and the government loves it because an ignorant public is a well-behaved public. Give them their bread and circuses, today known as food stamps and football, and they'll just blindly follow along.
That's just the way it is, sheeple, one and all. You love being played.
Dow 12,723.58, -83.93 (0.66%)
NASDAQ 2,828.23, -13.39 (0.47%)
S&P 500 1,347.32, -9.30 (0.69%)
NYSE Composite 8,506.61, -78.07 (0.91%)
For a change, everything (except bonds) went down. Declining issues overwhelmed advancers - for the third day in a row - by a score of 4700-1904. On the NASDAQ, the flip required to shake the markets from rally mode to selling spree occurred today with 52 new highs, but 53 new lows. On the NYSE, stubbornness prevailed with 89 new highs and 28 new lows, but it's getting closer. Volume, unsurprisingly, was up again today, on a down day, an ominous warning that more selling is on the way.
NASDAQ Volume 2,250,185,000
NYSE Volume 5,078,037,500
Commodities continued to be whipped into submission. WTI crude oil futures fell another $1.81, to $109.24, the lowest price in two weeks. Gold tumbled another $20.60, to $1516.50 and silver took another massive beating, down $2.27, to $39.39. And, this just in after the close, margin requirements on silver are being raised again by the CME. Apparently sending the price of silver down $11 in three days isn't enough to square all of HSBC's and JP Morgan's short positions.
The often-discredited ADP Payroll report for April was released prior to the open today, showing private payrolls increasing by 179,000, short of consensus. But the real news was that the ISM Services index fell from 57.3 in March to 52.8 in April, a pretty big loss and well below consensus estimates of 57.5.
Tomorrow comes another week of initial unemployment and continuing claims, which precedes the BLS non-farm payroll report on Friday.
Prepare for disaster because we've been living one for the past three years.
Tuesday, May 3, 2011
Ponzi Schemes, Bubbles and Manipulation Rampant in US Markets
What follows bizarre?
On the absurdity scale, probably irrational, or maybe unbelievable.
That's exactly where US markets are now and for the foreseeable future - or until about the middle of June. Nothing makes sense on the surface, but there are correlations. Below the surface are machinations of big money players, central banks, the Too Big To Fail banks here in the US and Europe and whatever whacky game they're playing in the two biggest Eastern economies - China and Japan.
Consider that the dollar index spent the overnight gaining, fell sharply during the morning in the US, spent the next two hours rising, and ended the day with two hours of flatness, resulting in a final prinat at 4:00 pm EDT of 73.095, a paltry gain of 0.051, hardly a blip on anyone's radar.
Now, the Dow did follow along at the end, though it made all of its gains, back to a small print higher for the day, in the final hour of trading, bouncing back from a 50-point loss.
Meanwhile, silver had its worst one-day decline since the Hunt Brothers got wiped out in 1980. Sure, silver was overvalued on a very short-term basis, but the meaning of the massive, manipulated crash was to get the price back down to where JP Morgan and the rest of the shorts wouldn't be losing theirs. The attacks since Sunday night on the paper silver market, in conjunction with margin hikes by the COMEX, have had the desired effect. Silver is down, the US dollar will live for another day, week, a few months, maybe even until the presidential election in 2012.
Oil finally had its comeuppance, for a day, but if anything is a bubble, it is not silver, which has been suppressed for decades, or gold, which has broken out of the stranglehold of the big banks, but oil and stocks. Crude oil has doubled in the past year along with stocks over the past two years. Some stocks are up as much as 300, 400, 500% or more from the March, 2009 bottom to today. Normal markets do not double in one or two years. One only need to look at the massive amount of stimulus thrown at the markets via the Federal Reserve to see where the bubbles lie.
Where will everything go from here. A guess is a good as anyone can make right now, but if Ben Bernanke is serious about ending QE2 on schedule in June, one can probably side with deflation over the short term, a long-overdue market correction, and crashing interest rates.
Of course, the Fed can't allow interest rates to rise, since that would bankrupt the US government, so their only option is to reign things in, allow the stock market to correct and hope it doesn't crash as money will flow into medium term bonds. The speculative plays in commodities will cease to exist and the dollar will bounce.
That's a best guess scenario, until the next financial crisis, caused by either the Fed, the banks or the government, occurs. And one will occur, because one always does. Heck, it's been almost three years since the last one, so we're probably overdue.
In the long, long run, it's a depression, plain and simple. The Fed cannot continue printing money at a breakneck pace, nor can the government borrow at ridiculous speed, especially when the two biggest buyers of our debt (after the Federal Reserve, via the PDs and POMO), Japan and China, have their own issues and are not all that sound, economically-speaking.
In a world so tangled and cross-reliant, there are no safe havens, only places that will do better than others. Sure, the good, old USA will likely outperform Greece and Ireland, but Germany appears to be the only sane economy in the world, followed maybe by Brazil or India.
Dow 12,807.51, +0.15 (0.00%)
NASDAQ 2,841.62, -20.22 (0.71%)
S&P 500 1,356.62, -4.60 (0.34%)
NYSE Composite 8,584.68, -64.93 (0.75%)
Declining issues took the measure of advancers for the second straight day, 4471-2090, and if this kind of lopsided A/D line continues another day, we'll have no problem calling it a trend. On the NASDAQ, there were 60 new highs and 39 new lows, closing in on equilibrium. At the NYSE, 141 new highs and 22 new lows were recorded. And, surprise, surprise, volume was actually solid today; not a very positive sign for markets.
NASDAQ Volume 2,225,012,000
NYSE Volume 4,968,288,500
The commodity trade seems to e blowing up all over the place. WTI crude futures fell $2.47, to $111.05, when traders were shocked to find that there was actually a glut of oil sloshing around waiting to be turned into useful products, like gas, plastics, etc. The world has been led to believe that there's no more oil out there, that the political disruptions in the Middle East will cause production declines, when nothing is further from the truth. The oil wells and fields will keep on producing through revolution or peacetime, money is money, everywhere in the world, after all. There is simply a greedy cartel of nations and companies that like the price in the stratosphere and people need to drive their cars, run their engines, so it goes.
Gold was squelched a bit again, down $8.50, to $1537.10 at the moment, but that was nothing compared to the raid on silver, which is currently down $2.27, to $41.66. Remember, silver was almost $50 per ounce last week. A line has been drawn in the sand by the central banks and, more importantly, the silver shorts at JP Morgan and HSBC, who have won this battle, though the war carries on apace. Silver is eventually going to $150 on the open market and there's nothing they can do about it, long term. All they have is their paper market in the SLV and PSLV EFTs and they will eventually break down, when all participants require physical metal and they won't have enough.
That's where we stand today, on the precipice of failure of fiat money, for what it's worth.
On the absurdity scale, probably irrational, or maybe unbelievable.
That's exactly where US markets are now and for the foreseeable future - or until about the middle of June. Nothing makes sense on the surface, but there are correlations. Below the surface are machinations of big money players, central banks, the Too Big To Fail banks here in the US and Europe and whatever whacky game they're playing in the two biggest Eastern economies - China and Japan.
Consider that the dollar index spent the overnight gaining, fell sharply during the morning in the US, spent the next two hours rising, and ended the day with two hours of flatness, resulting in a final prinat at 4:00 pm EDT of 73.095, a paltry gain of 0.051, hardly a blip on anyone's radar.
Now, the Dow did follow along at the end, though it made all of its gains, back to a small print higher for the day, in the final hour of trading, bouncing back from a 50-point loss.
Meanwhile, silver had its worst one-day decline since the Hunt Brothers got wiped out in 1980. Sure, silver was overvalued on a very short-term basis, but the meaning of the massive, manipulated crash was to get the price back down to where JP Morgan and the rest of the shorts wouldn't be losing theirs. The attacks since Sunday night on the paper silver market, in conjunction with margin hikes by the COMEX, have had the desired effect. Silver is down, the US dollar will live for another day, week, a few months, maybe even until the presidential election in 2012.
Oil finally had its comeuppance, for a day, but if anything is a bubble, it is not silver, which has been suppressed for decades, or gold, which has broken out of the stranglehold of the big banks, but oil and stocks. Crude oil has doubled in the past year along with stocks over the past two years. Some stocks are up as much as 300, 400, 500% or more from the March, 2009 bottom to today. Normal markets do not double in one or two years. One only need to look at the massive amount of stimulus thrown at the markets via the Federal Reserve to see where the bubbles lie.
Where will everything go from here. A guess is a good as anyone can make right now, but if Ben Bernanke is serious about ending QE2 on schedule in June, one can probably side with deflation over the short term, a long-overdue market correction, and crashing interest rates.
Of course, the Fed can't allow interest rates to rise, since that would bankrupt the US government, so their only option is to reign things in, allow the stock market to correct and hope it doesn't crash as money will flow into medium term bonds. The speculative plays in commodities will cease to exist and the dollar will bounce.
That's a best guess scenario, until the next financial crisis, caused by either the Fed, the banks or the government, occurs. And one will occur, because one always does. Heck, it's been almost three years since the last one, so we're probably overdue.
In the long, long run, it's a depression, plain and simple. The Fed cannot continue printing money at a breakneck pace, nor can the government borrow at ridiculous speed, especially when the two biggest buyers of our debt (after the Federal Reserve, via the PDs and POMO), Japan and China, have their own issues and are not all that sound, economically-speaking.
In a world so tangled and cross-reliant, there are no safe havens, only places that will do better than others. Sure, the good, old USA will likely outperform Greece and Ireland, but Germany appears to be the only sane economy in the world, followed maybe by Brazil or India.
Dow 12,807.51, +0.15 (0.00%)
NASDAQ 2,841.62, -20.22 (0.71%)
S&P 500 1,356.62, -4.60 (0.34%)
NYSE Composite 8,584.68, -64.93 (0.75%)
Declining issues took the measure of advancers for the second straight day, 4471-2090, and if this kind of lopsided A/D line continues another day, we'll have no problem calling it a trend. On the NASDAQ, there were 60 new highs and 39 new lows, closing in on equilibrium. At the NYSE, 141 new highs and 22 new lows were recorded. And, surprise, surprise, volume was actually solid today; not a very positive sign for markets.
NASDAQ Volume 2,225,012,000
NYSE Volume 4,968,288,500
The commodity trade seems to e blowing up all over the place. WTI crude futures fell $2.47, to $111.05, when traders were shocked to find that there was actually a glut of oil sloshing around waiting to be turned into useful products, like gas, plastics, etc. The world has been led to believe that there's no more oil out there, that the political disruptions in the Middle East will cause production declines, when nothing is further from the truth. The oil wells and fields will keep on producing through revolution or peacetime, money is money, everywhere in the world, after all. There is simply a greedy cartel of nations and companies that like the price in the stratosphere and people need to drive their cars, run their engines, so it goes.
Gold was squelched a bit again, down $8.50, to $1537.10 at the moment, but that was nothing compared to the raid on silver, which is currently down $2.27, to $41.66. Remember, silver was almost $50 per ounce last week. A line has been drawn in the sand by the central banks and, more importantly, the silver shorts at JP Morgan and HSBC, who have won this battle, though the war carries on apace. Silver is eventually going to $150 on the open market and there's nothing they can do about it, long term. All they have is their paper market in the SLV and PSLV EFTs and they will eventually break down, when all participants require physical metal and they won't have enough.
That's where we stand today, on the precipice of failure of fiat money, for what it's worth.
Monday, May 2, 2011
Death of Osama bin Laden Springs Bernanke Trap
Whether or not one accepts the story of the demise of Osama bin Laden as gospel or Golem, there is no doubting that the mainstream news media is treating it as the truth, and celebrating it with requisite aplomb.
It served as the leading commentary to an otherwise dull Monday, especially in the financial markets. At one time, the capture or death of the man who was widely recognized as the mastermind of the 9/11 attacks was thought to able to create a market rally of dizzying proportions, but today's response was muted, if not downright dismissive of the manhunt that took nearly ten years, untold thousands of lives and over a trillion dollars.
The euphoria felt at the White House on Sunday night was not reflected in the trading on Wall Street, though the death of the world's most infamous terrorist did manage to provide a suitable cover story for crashing silver, and, to some degree, calming the Midas effect in the gold pits.
Other than those obvious manipulations, the death of OBL did less to inspire confidence than it did to induce relief that the most evil person in the world had finally met his maker. The rest of the moves in the market could widely be attributed to nothing as earth-shattering as the ordinary movement of the US Dollar against other fiat currencies, particularly well=reflected by the dollar index (DXY).
Initially higher on the news, the DXY lost ground throughout the day, finally bottoming out at 72.72 in early afternoon before rallying back to 73.04 at the 4:00 pm NY close. The decline and subsequent rise in the dollar index was the primary mover of stocks throughout the session, in an inverse relationship that has been in effect since the first round of QE in 2009.
In essence - apply tin-foil hat here in appropriate degree - the timing of OBL's death came at the perfect time for the world's money men. The dollar had been in a vicious slide over the past three months, which fueled the commodity and stocks boom, but was also threatening to undermine the reserve status of the US dollar. The decision to "pull the trigger" - whether real or imagined - quieted dollar devaluation fears, for now, but also took down stocks, creating a Bernanke Trap, in which monetization of US debt and the associated demise of the dollar gives rise to inflation and commodity speculation but the inverse could foment a stock market correction or crash and more severe economic fallout.
Thus, with the death of Osama bin Laden, we have a new enemy, the evil genius chairman of the Federal Reserve, the man behind the curtain pulling the levers, Ben Bernanke, and he is hopelessly trapped into a scenario in which neither outcome is preferable or palatable. One might assume that the esteemed chairman will side momentarily with the monetarists who believe dollar hegemony is preferable to runaway inflation and rioting at gas stations, though making assumptions in the age of political markets is a dangerous game.
For today, the dollar and Bernanke have survived, barely, but tomorrow may be another story altogether. In the very least, we can be assured that the killing of Osama bin Laden represents a shared view at the very pinnacle of power that the the overarching narrative needed to be changed, and abruptly.
Mission Accomplished.
Dow 12,807.36, -3.18 (0.02%)
NASDAQ 2,861.84, -11.70 (0.41%)
S&P 500 1,361.22, -2.39 (0.18%)
NYSE Composite 8,641.56, -29.85 (0.34%)
Market internals belied the slight declines. Stocks which lost ground far outnumbered those gaining, 4135-2454. On the NASDAQ there were 177 new highs and 28 new lows. The NYSE had 337 stocks make new highs and just 13 reach new lows. Obviously, the new highs were made early in the session, before the dollar began to rise and kill the carry trade (now known as risk on). Volume could best be described as either laughable, embarrassing or just plain disinterested.
NASDAQ Volume 1,768,677,875
NYSE Volume 3,669,946,000
WTI crude futures actually fell 41 cents, to $113.52, though that hardly can be construed as relief for motorists already feeling the pinch from $4.00 gasoline. According to AAA, the average price for a gallon of unleaded regular gas is now $3.95, so, $5.00 by summer becomes a distinct possibility in at least 10 states. Already 14 states are experiencing average prices above $4.00, with Hawaii the highest, at $4.57. The lowest average price is in Wyoming, at $3.60, hardly a bargain.
Precious metals were hammered down by the movers and shakers at JP Morgan and the Fed, with gold getting hit with a $19.80 decline, down to $1545.90 as of this writing. Silver took the brunt of the action, with five margin hikes in the past two weeks putting the kibosh on larger speculation in the paper markets. Silver fell $4.39, to $43.55, a point which may actually trigger more paper selling and eventually result in ramped up physical buying.
There's little doubt that the masters of fiat money at the Federal Reserve will do anything to keep gold and silver from appreciating, though they've been an abject failure up to this point. The Fed simply cannot stomach competing currencies and gold and silver amply qualify. If it means the end of screenings at airports and reduction of global tensions, maybe it's a worthwhile tradeoff, but the other side of the Fed's coin is already painted red. Any squelching of precious metals by pumping up the US dollar is likely to have similar deleterious effects on the risk trade in stocks.
At the end of the trading day, Tim Giethner made his appearance and the purpose of all the frenetic activities of the past 18 hours suddenly became crystal clear. The Treasury outlined plans to extend the deadline for raising the debt ceiling to the first week of August, thus delaying or deferring a crisis in the congress.
America teetering on a debt default with the currency debased for the whole world to see must have appeared as the opportune moment to divert attention by killing public enemy #1.
Mission accomplished, indeed, but beware the ultimate costs.
It served as the leading commentary to an otherwise dull Monday, especially in the financial markets. At one time, the capture or death of the man who was widely recognized as the mastermind of the 9/11 attacks was thought to able to create a market rally of dizzying proportions, but today's response was muted, if not downright dismissive of the manhunt that took nearly ten years, untold thousands of lives and over a trillion dollars.
The euphoria felt at the White House on Sunday night was not reflected in the trading on Wall Street, though the death of the world's most infamous terrorist did manage to provide a suitable cover story for crashing silver, and, to some degree, calming the Midas effect in the gold pits.
Other than those obvious manipulations, the death of OBL did less to inspire confidence than it did to induce relief that the most evil person in the world had finally met his maker. The rest of the moves in the market could widely be attributed to nothing as earth-shattering as the ordinary movement of the US Dollar against other fiat currencies, particularly well=reflected by the dollar index (DXY).
Initially higher on the news, the DXY lost ground throughout the day, finally bottoming out at 72.72 in early afternoon before rallying back to 73.04 at the 4:00 pm NY close. The decline and subsequent rise in the dollar index was the primary mover of stocks throughout the session, in an inverse relationship that has been in effect since the first round of QE in 2009.
In essence - apply tin-foil hat here in appropriate degree - the timing of OBL's death came at the perfect time for the world's money men. The dollar had been in a vicious slide over the past three months, which fueled the commodity and stocks boom, but was also threatening to undermine the reserve status of the US dollar. The decision to "pull the trigger" - whether real or imagined - quieted dollar devaluation fears, for now, but also took down stocks, creating a Bernanke Trap, in which monetization of US debt and the associated demise of the dollar gives rise to inflation and commodity speculation but the inverse could foment a stock market correction or crash and more severe economic fallout.
Thus, with the death of Osama bin Laden, we have a new enemy, the evil genius chairman of the Federal Reserve, the man behind the curtain pulling the levers, Ben Bernanke, and he is hopelessly trapped into a scenario in which neither outcome is preferable or palatable. One might assume that the esteemed chairman will side momentarily with the monetarists who believe dollar hegemony is preferable to runaway inflation and rioting at gas stations, though making assumptions in the age of political markets is a dangerous game.
For today, the dollar and Bernanke have survived, barely, but tomorrow may be another story altogether. In the very least, we can be assured that the killing of Osama bin Laden represents a shared view at the very pinnacle of power that the the overarching narrative needed to be changed, and abruptly.
Mission Accomplished.
Dow 12,807.36, -3.18 (0.02%)
NASDAQ 2,861.84, -11.70 (0.41%)
S&P 500 1,361.22, -2.39 (0.18%)
NYSE Composite 8,641.56, -29.85 (0.34%)
Market internals belied the slight declines. Stocks which lost ground far outnumbered those gaining, 4135-2454. On the NASDAQ there were 177 new highs and 28 new lows. The NYSE had 337 stocks make new highs and just 13 reach new lows. Obviously, the new highs were made early in the session, before the dollar began to rise and kill the carry trade (now known as risk on). Volume could best be described as either laughable, embarrassing or just plain disinterested.
NASDAQ Volume 1,768,677,875
NYSE Volume 3,669,946,000
WTI crude futures actually fell 41 cents, to $113.52, though that hardly can be construed as relief for motorists already feeling the pinch from $4.00 gasoline. According to AAA, the average price for a gallon of unleaded regular gas is now $3.95, so, $5.00 by summer becomes a distinct possibility in at least 10 states. Already 14 states are experiencing average prices above $4.00, with Hawaii the highest, at $4.57. The lowest average price is in Wyoming, at $3.60, hardly a bargain.
Precious metals were hammered down by the movers and shakers at JP Morgan and the Fed, with gold getting hit with a $19.80 decline, down to $1545.90 as of this writing. Silver took the brunt of the action, with five margin hikes in the past two weeks putting the kibosh on larger speculation in the paper markets. Silver fell $4.39, to $43.55, a point which may actually trigger more paper selling and eventually result in ramped up physical buying.
There's little doubt that the masters of fiat money at the Federal Reserve will do anything to keep gold and silver from appreciating, though they've been an abject failure up to this point. The Fed simply cannot stomach competing currencies and gold and silver amply qualify. If it means the end of screenings at airports and reduction of global tensions, maybe it's a worthwhile tradeoff, but the other side of the Fed's coin is already painted red. Any squelching of precious metals by pumping up the US dollar is likely to have similar deleterious effects on the risk trade in stocks.
At the end of the trading day, Tim Giethner made his appearance and the purpose of all the frenetic activities of the past 18 hours suddenly became crystal clear. The Treasury outlined plans to extend the deadline for raising the debt ceiling to the first week of August, thus delaying or deferring a crisis in the congress.
America teetering on a debt default with the currency debased for the whole world to see must have appeared as the opportune moment to divert attention by killing public enemy #1.
Mission accomplished, indeed, but beware the ultimate costs.
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