Friday, August 31, 2012

The Action In The Metals Today

If you read between the lines of Bernanke's headline comments, he essentially is saying that he's ready to print a lot of money if "necessary."  That's why the metals where ambushed hard yesterday, it's why the dollar dropped like a rock on no other news overnight, it's why they took the metals down as the headlines hit and it's why the metals spiked hard after the initial hit today.  We actually removed all hedges from our fund yesterday after the ambush because I suspected this would be the case.
This is highly orchestrated at this point and frighteningly Orwellian.  The metals are getting ready for a big move higher and all of the short-term trading geeks/computer funds using rsi's and macd's are going to get hammered on shorts or miss out on a very big run if they are flat.

Bernanke's speech was exactly what I thought it would be in terms of FOMC policy promotion:  basically a regurgitation of the last FOMC meeting statement.  You don't need to dissect his statements word for word the way that bald idiot on CNBC (Steve Liesman) likes to do.  If you look at what he says contextually, it's easy to see that he's ready to drop a massive printed money into the system once the election is over.  I don't think its coincidental that the Treasury debt ceiling will be hit about a month AFTER the election.  Remember:  the purposes of money printing are 1)  to keep the banks solvent/liquid and 2) to finance Treasury debt.  Per the latter, we know that during one trailing 12 month period after QE2 was announced, the Fed indirectly bought 90% of all new Treasury debt issued.  For all of 2011, the Fed bought something like 60% of all Treasury debt issued.

That's why I can't understand why newsletter "experts" like  The King Report and Phoenix Capital, the latter featured on Zerohedge, are so adamant about their view that there will not be any more QE.  If that's the case, how will the Government fund its operations?  It's really that simple.  It's not about the economy, stupid.

The bottom line is that today's move in the metals took a lot of people by surprise.  In addition, the open interest in silver has declined quite a bit this week in what is likely aggressive short-covering by JP Morgan.  In other words, something is going on behind "the curtain" which we are not seeing that has triggered short covering by "insiders" to the market.  Next week should be interesting, to say the least.

I hope everyone has fun holiday weekend.  The tennis U.S. Open will be in full swing this weekend - hopefully Andy Roddick lasts a few more rounds before he retires and college football kicks into full gear, as does the Friday night lights of high school football.


  1. Exclusive: Morgan Stanley Smith Barney rainmakers consider exit

    The advisers' complaints stem mostly from the rollout of a new technology platform dubbed "3D" on which they manage clients' money, store information and look up research reports and market data. The system's rollout has taken longer than expected and been beset by technical problems that have angered clients and advisers.

    Several of the advisers involved in the budding revolt have worked at Smith Barney for decades. They run groups named after them in New York, New Jersey and California and are members of Morgan Stanley's Private Wealth Management Group, which only works with clients who have at least $20 million in assets.

    Four advisers who signed the letter, and whose names Reuters has learned, together manage about $47 billion. Those advisers either declined to comment on the matter or did not return phone calls and emails seeking comment.


    1. A Holiday Treat - Grilled Jackass

  2. Good content as always. I agree, I'm befuddled when seemingly 'intact' commentators pontificate endlessly regarding QE - when/if/how soon - etc.

    Bottom line - the appetite for our Treasury debt has waned -- seriously -- where do these fools think the Government is getting this money?

    It's blatant what the Fed/Treasury/Dealers are doing that is 'overt', I can't begin to imagine what they've done and will do that is 'covert'.

    All in the name of saving 'Government/Banks'. If you're RIGHTS or your PERSONAL PROPERTY are seen as standing in the way of saving the 'Bankerment', make no mistake about it, you will loose both.

  3. Mike Lofgren on Dysfunction in Our Political Parties
    August 31, 2012

    Bill talks with Mike Lofgren, a long-time Republican who talks about the modern dysfunction of both Republican and Democratic parties. In Lofgren’s view, Republicans have become overly obsessed with obstructing President Obama, and the Democrats suffer from political complacency. Lofgren’s new book is The Party is Over: How Republicans Went Crazy, Democrats Became Useless, and the Middle Class Got Shafted.

  4. in simple language, the once assured expectancy of markets tanking on the slightest hint of "positive" economic news and a FED backdown on possible stimulus has now reached a new point of inflection. QE or no QE, it seems now that having backed itself inextricably into a corner, the FED is rapidly proceeding down the road to a position of increasing irrelevance, perhaps by design.

    apparently Au is sniffing this out and, as the paper futures and options contracts of the COMEX assume a similar position of increasing irrelevance in respect of physical holdings, more and more investors along with Central Banks, commercial and sovereign funds, and even the "man on the street" are funneling the last shreds of failing capital into the tangible and appreciating assets of physical gold and silver.

    now that the perceptions that have masked the impossible obligations of liabilities and the subsequent destruction of capital are being stripped away, QE to infinity, obviously inevitable and equally obviously with less and less net effect, will give way to the realization that the black hole of derivatives contracts will yield the trillions and trillions of fiat flooding down that endless chasm equally ineffectual and even more critically irrelevant.

    the Lehmaned,Corzined, MF'ed Global. Peregrined, beKnighted, Sentineled,JPM'd hypothecated, missing, and stolen triillions are just the tip of this proverbial iceberg which is rapidly sinking this Titanic of a financial system that is heading rapidly to the bottom. Got a life boat?

  5. btw, i think a lot of us share this sentiment

  6. In Italy, world’s oldest bank faces uncertain future

    SIENA, Italy — Tucked away in this Tuscan city, the oldest bank in the world has survived the Borgias, pestilence and too many wars to count. Now, a mundane foe has proved far more dangerous: Italian government debt.
    The 540-year-old Monte dei Paschi Bank, Italy’s third-largest, is on the ropes as it struggles to deal with holdings of Italian bonds, once considered a prudent place to tuck cash.
    The euro crisis upset that calculation. Across Europe, banks are confronting the same problem as seemingly safe bets that governments would repay their debts turned out to have been major gambles.
    At the heart of the crisis, the tangled relationship between governments and the financial sector amplifies the financial problems on both sides. And in Siena, bountiful profits that once poured from Monte dei Paschi’s treasure-filled Gothic palazzo have dried up. Last week, the bank announced that it had lost $2 billion in the first half of 2012.

    The Spanish and Italian governments, meanwhile, have found themselves at risk of needing bailouts as investors demand significantly higher rates of interest to lend to them. Higher rates have, in turn, added to the stress on Monte dei Paschi’s finances, because it can sell only its holdings of less-safe Italian bonds at a loss.

    “If you’re concerned about the Italian government, you’re going to be concerned about the Italian banks, too,” said Ben May, an analyst at Capital Economics, a London-based research firm. “If you were going to see a fairly big government default, you’d be wiping out a big chunk of Italian banking capital.”

  7. A Billionaire’s Bet on Inflation – Frank Giustra Long Form Interview – Video