India's Clumsy, Futile Attempts to Throttle Public Gold Purchases

1 kilogram = 35.2739619 ounces.

Why does this matter?

Because that's the amount of gold an Indian citizen is legally allowed to take into India after at least six months abroad.

In a fascinating story in the aftermath of the India government's harsh restrictions on the importation of gold, a plane from Dubai to the Indian airport at Calicut carried 80 passengers, each of them returning to their homeland with one kilogram of gold.

In dollar terms, the plane was carrying 2572.06 troy ounces of gold, valued at roughly $3,086,472 worth of gold if one uses $1200 per troy ounce as a baseline. The passengers were primarily laborers returning home from construction jobs in the Middle East. Full story, courtesy of the India Times here.

The actions by some of the more nefarious elements in Indian society point up the futility of governments' attempts to control money supplies, balances and trade in the face of independent people. All they ever end up doing is causing imbalances, which naturally favor those in control positions. Sadly, the bulk of the population doesn't see what's being done to their currencies and their freedoms until it is too late.

As it is in India, it is everywhere. Governments, once they have grown beyond their capacity to usefully serve the population, become nothing but a drag and anchor on society.

Thanks to oversize, bulky interference by government entities and their cohorts like central banks, besides the now near-daily ramping to new and newer all-time highs on the various US equity indices, there's not much worth reporting these days.

DOW 16,294.61, +73.47 (+0.45%)
NASDAQ 4,148.90 , +44.16 (+1.08%)
S&P 1,827.99, +9.67 (+0.53%)
10-Yr Note 98.45, +0.20 (+0.21%)
NASDAQ Volume 1.66 Bil
NYSE Volume 2.83 Bil
Combined NYSE & NASDAQ Advance - Decline: 4111-1647
Combined NYSE & NASDAQ New highs - New lows: 669-58
WTI crude oil: 98.91, -0.41
Gold: 1,197.00, -6.70
Silver: 19.41, -0.04
Corn: 434.25, +1.00

Big Week for Stocks Ends on High Volume, 4.1% GDP

If stocks needed a little more of a boost after the Fed's taper-lite effort earlier in the week, the BLS gave it to them early Friday morning, when it announced the final revision to third quarter GDP at a whopping 4.1%, which turned out to be a solid increase over the already rosy 2.8% first estimate and 3.6% second estimate.

Thus, all the indices turned in a solid performance for the week, among the best of the year. The Dow had its third-best week of the year, and it has been a year of outsize gains overall and generally superior performance for equities when compared to all other asset classes.

Maybe the general economy is not exactly where everyone would like it to be, but it appears to be close enough for Wall Street, as trading winds down to just six trading days remaining in 2013.

For the week, the Dow was a moon-shot, gaining 465.78 points for a 2.96% rise; the NASDAQ tacked on 103.77 (2.59%); the S&P added 42.99 points (2.42%).

Record highs at the close on Friday were recorded for the Dow, S&P, Dow Transports and the Russell 2000.

Due to quadruple witching in options and futures, NASDAQ and S&P rebalancing, and a Fed-infused dose of holiday cheer, volume hit its best level of the year.

Bonds were well-behaved, with the benchmark 10-year note finishing at a modest 2.91% yield.

Everything looked so good, even gold and silver caught some bids.

The old song says, "Santa Claus is Coming to Town," though it appears the jolly fat man made Wall Street an early destination.

DOW 16,221.14, +42.06 (+0.26%)
NASDAQ 4,104.74, +46.61 (+1.15%)
S&P 1,818.31, +8.71 (+0.48%)
10-Yr Note 98.65, +0.50 (+0.51%) Yield: 2.91%
NASDAQ Volume 2.93 Bil
NYSE Volume 4.90 Bil
Combined NYSE & NASDAQ Advance - Decline: 4247-1527
Combined NYSE & NASDAQ New highs - New lows: 505-63
WTI crude oil: 99.32, +0.28
Gold: 1,203.70, +10.10
Silver: 19.45, +0.267
Corn: 433.25, +2.75

Fed Hangover Batters Gold, Silver; Stocks Flat, A-D Negative

After yesterday's glorious proclamation by the all-wise and omnipotent Wizard of the Fed, Ben Bernanke, the euphoria that was yesterday's nearly-300 point rally on the Dow fizzled into nothingness with a downside bias on the advance-decline line, with a 3:2 ratio favoring losing issues.

Gold and silver were beaten mercilessly for not cow-towing to the company line that everything is getting "better," the US economy is in the midst of a brisk recovery and the stimulus just reduced by the Federal Reserve is really there just for window dressing.

The "reality" for money managers and investors is that the precious metals are just not competitively priced in comparison to the absolute bargains in stocks, which, by the way, are at all-time highs, spurred there by massive stock buybacks, easy credit and compulsive labor reductions.

Remember that the actual reduction in the amount of bond purchases by the Fed hasn't even begun; that will happen in January, should economic conditions remain somewhat the same, but there were some cracks in the Fed's armor-plated monetary policy directives even as the market opened on Thursday with a massive rally hangover that lasted the full duration of the session.

Initial unemployment claims came in at an unexpectedly-high 379,000, the highest number since March, and mind you, this is in the middle of the holiday season, where part-time retail jobs and temporary work should be plentiful. It's an ominous development.

Additionally, existing home sales fell for the third straight month, down 4.3 percent last month to an annual rate of 4.90 million units.

Anybody with even a cursory interest in real estate understood that the combination of higher prices (median home prices were higher by 9.4 percent over the same period last year) and higher interest rates create an affordability issue, pricing out marginal buyers and slowing the momentum in housing.

Tighter credit standards also had an effect on the lower volume of real estate sales, as did the number of cash buyers decreasing slightly.

Interest rates were effected negatively, with the 10-year note yield rising to 2.93%.

With news like this, how can the Fed not taper? It's skittles and unicorns as far as the eye can see, which, coincidentally is about to that bridge over yonder, which I just happen to own and would like to sell you for the low, low price of...

DOW 16,179.08, +11.11 (+0.07%)
NASDAQ 4,058.13, -11.93, (-0.29%)
S&P 1,809.60, -1.05 (-0.06%)
10-Yr Note 98.48, +0.23 (+0.23%) Yield: 2.93%
NASDAQ Volume 1.66 Bil
NYSE Volume 3.47 Bil
Combined NYSE & NASDAQ Advance - Decline: 2250-3438
Combined NYSE & NASDAQ New highs - New lows: 290-110
WTI crude oil: 98.77, +0.97
Gold: 1,193.60, -41.40
Silver: 19.19, -0.873
Corn: 430.50, +5.50

Fed Tapers Bond Purchases, Loosens Policy Guidance; Markets Love It

In a masterstroke of monetary legerdemain, outgoing Federal Reserve chairman Ben Bernanke delivered a final, resonant chord to his easy money policy of the past five years, announcing a reduction in the level of MBS and treasury bond purchases while simultaneously changing the guidance for rate policy going forward.

What the Fed has decided to do was to strike a delicate balance between the two policy initiatives currently employed. Bond purchases will henceforth be reduced from $85 billion to $75 Billion per month, shaving $5 billion from MBS and $5 billion from treasury purchases.

In its policy statement, however, the Fed took a different direction, emphasizing that the federal funds rate would remain at zero to 0.25% beyond the time at which unemployment falls below 6.5%. In other words, the Fed, as is their usual mode of operation, changed the game or moved the goal posts in terms of policy in order to accommodate a lower amount of bond purchases, in effect, maintaining equilibrium.

What the Fed is saying, somewhat tongue in cheek, is that their bond purchasing program (QE) has not quite brought about the desired results. The economy is not improving as rapidly as they anticipated, if at all, but, in order to not upset capital and equity markets with their bond purchase "tapering," they decided to loosen the language surrounding any future decision to raise interest rates.

It was quite the nifty move by the hands at the Fed, and both bond and stock markets behaved well along the lines anticipated by the manipulators of the world's money supply.

Stocks rose gratuitously, with the Dow and S&P closing at all-time highs; bonds remained distinctly calm. It was the perfect end to a reign of easy money that Bernanke has overseen, and gave the next man up, Janet Yellen, direction in which to pursue the Fed's policy directives.

The long and short of all the hype and hoopla over this final Fed meeting of the year and the last press conference by Mr. Bernanke is that the status quo was maintained and will be maintained for the foreseeable future. During his presser, the Chairman spoke of low inflation through 2016, with unemployment coming down gradually over a similar time period.

While the inflation expectations are well below what the Fed desires (2-2 1/2%), the 6.5% unemployment threshold has essentially been removed from all future Fed calculus.

When the world completes a couple more trips around the sun, at this time two years from now, it's expected that the Fed will no longer be purchasing bonds to the excessive degree it is today, and that unemployment will be much closer to "normalcy" at or near five percent.

In the real world, should everything proceed as the Fed anticipates, the economy, with interest rates still moored at zero, with 5% unemployment, the economy would be growing at a ripping rate so rapid that inflation would once again become a real problem.

Would it be so. The chances of everything working in straight lines toward a normalized economy is nothing more than a Fed fantasy. There will be disruptions and distortions and quite possibly another recession. Additionally, believing that pressures and changes from other parts of the planet would not be disruptive, is the purest height of folly.

The Fed hasn't really changed much at all. Reducing bond purchases by $10 billion per month is nothing more than a rounding error in the larger scheme of things. The punchbowl of free fiat has been left at the Wall Street party. Nothing has changed other than possibly, perception, and the person sitting in the Fed chair will be different.

The monetary can just got kicked down the road quite a stretch further. The new normal gets extended until something breaks.

DOW 16,167.97, +292.71 (+1.84%)
NASDAQ 4,070.06, +46.38 (+1.15%)
S&P 1,810.65, +29.65 (+1.66%)
10-Yr Note 98.78, -0.29 (-0.29%) Yield: 2.89%
NASDAQ Volume 1.83 Bil
NYSE Volume 3.74 Bil
Combined NYSE & NASDAQ Advance - Decline: 4252-1467
Combined NYSE & NASDAQ New highs - New lows: 311-112
WTI crude oil: 97.80, +0.58
Gold: 1,235.00, +4.90
Silver: 20.06, +0.219
Corn: 425.00, -1.75

Markets Flat in Advance of Fed Announcement

With little movement in the major indices - or individual stocks, for that matter - it is evident to anyone watching or participating in equity and bond markets that the financial world anxiously awaits the policy statement from the FOMC tomorrow at 2:00 pm ET, in which the Fed may or may not announce the tapering of its bond purchasing program.

Currently stuck at monthly figures of $45 billion in treasury purchases and another $40 billion in MBS (mortgage-backed securities), signs that the Fed may have enough reliable data to begin scaling the program back are still ambiguous. There have been hints, predictions and all manner of speculation on what the Fed will announce via their final policy meeting of the year, but one thing remains certain: the Fed must begin to curtail this program soon, not only because it has been ineffective, but that it could also do (and may have already) damage to the fragile economy.

On Wall Street, there's widespread belief that a cut-back in bond purchases by the Federal Reserve would cause a dip in the equity indices, being that there would be less of the free champagne money flowing to the TBTF banks, but a growing suspicion that the extent of these bond purchases, with money going to the connected and already-well-heeled, may be causing a rift of considerable proportions between the monied interests of the financiers and the rest of the planet.

Income disparity, already at an extraordinarily-high rate preceding the crisis of 2008-09, has been exacerbated by the easy money put into the hands of the rich, a trend which may be leading to suspicion, distrust and eventually, class enmity.

So, with less than 24 hours before what may be a significant announcement, traders have chosen to sit upon their collective hands, leaving volume at some of the lowest levels of the year.

Wednesday's FOMC announcement should provide some pre-holiday fireworks. If not, markets could just as easily rally from relief as sell off from disappointment. Whatever the Fed has planned for tomorrow should affect everything from stock prices to mortgage rates.

DOW 15,875.26, -9.31 (-0.06%)
NASDAQ 4,023.68, -5.84 (-0.14%)
S&P 1,781.00, -5.54 (-0.31%)
10-Yr Note 99.05, +0.77 (+0.79%) Yield: 2.86%
NASDAQ Volume 1.59 Bil
NYSE Volume 2.82 Bil
Combined NYSE & NASDAQ Advance - Decline: 2593-2889
Combined NYSE & NASDAQ New highs - New lows: 154-117
WTI crude oil: 97.22, -0.26
Gold: 1,230.10, -14.30
Silver: 19.84, -0.261
Corn: 426.75, +3.50