Friday, December 20, 2013

Federal Reserve Market Invtervention In Extremis

For all of you who are still trying to figure out why the stock market has shot up like a bat out of hell despite the fact that the Fed has reduced (at least temporarily) the amount of monthly money printing, please take the time to read this article written by former Assistant Treasury Secretary and highly respected academic Paul Craig Roberts:  Manipulations Rule The Markets

It's no secret that the economy in the U.S. is starting to fall apart again, along with that of the rest of the world.  In order for the Fed and the Obama Government to keep feeding us the lies about the economy, it is important that the Fed - in conjunction with the U.S. Treasuries Exchange Stabilization Fund - keep the stock market moving higher and the price of gold capped at an extraordinarily low manipulated level (I'm currently working on an article that will demonstrate how the Fed manipulates the gold market using Comex paper gold futures).

Meanwhile,China keeps hoovering up all of the physical gold that is being stored in NYC and London vaults:  What's Happening To All The Gold?  That's a video interview on Bloomberg News with an analyst based in London who recently toured the primary gold vaults in London.   Guess what?  They are becoming quite empty...

Finally, I just published two separate articles which explain why the housing market - based on both new and existing home sales - is getting ready to plunge back into a nasty bear again.  You can read those here:  The Housing Market Bear Is Growling  and here:  November Existing Home Sales - Look Out Below.

Based on everything I observe and research, I have two holiday recommendations:  1)  if you no longer trust the Government and understand just what a Ponzi scheme our system is, start taking as much phony paper money as you can afford and quickly accumulate physical gold and silver that you keep outside of the banking and financial system - that last point is of critical importance;  2)  if you think you are going to list your home for sale in mid-January and get the same price your friendly local real estate broker quoted you back in July, forget about it - get your home listed and price it to sell if you really want to move or recapture any equity value it has right now. By this time next year I believe people will be shocked at how much the housing market has fallen apart.

One more point on housing.  While the FHA did not make a big public announcement about this, starting Jan 1 it has lowered the size of mortgage it is willing to guarantee in 650 counties.  In some cases the reduced mortgage size is substantial.  The FHA now funds over 20% of all new mortgages, including a wide swathe of subprime-quality borrowers.  Essentially you can kiss that part of market demand good-bye unless prices fall by a significant amount.

At any rate, have a great weekend and if you are taking most of next week off, Buon Natale.  If you are traveling,  auguri e buon viaggio!


  1. fyi all bank depositors in america are going
    turn into "unsecured creditors" of the bank starting jan. 1st
    2014.((((what this means is, your money is legally theirs if they should they "fail" starting jan. 1st 2014 as per the law "dodd frank
    act")))) it wont be a bail out next time but a bail in. proof? go to the page
    and scroll down to listen to
    oct. 24 the first half hour. the heavy part
    is at about 15min. into it for the next 3 mins.
    +++ also see this aptly titled "Money Is Not Safe In The Big Banks" ... the fed
    is insolvent. as of jan. 1st 2014 you keep your money in the bank for what good
    reason? watch the video at least

  2. I was kicking myself for getting out of the market just before Thanksgiving and watching this most recent surge. I have been converting assets into bullion for over two years including the proceeds from my home sale in July. The big question is in your opinion Dave, how close are we time wise? Can you Just ball park it? I won't hold you to it because I realize that people who prognosticate with a crystal ball end up eating a lot of glass. Have yourself a great holiday and thank you for all your great work.

    1. Man I don't know. William Kaye who's been pretty good with his directional calls thinks gold could start to explode in Q1 next year.

      I am confident, however, the housing market will shit the bed in early 2014. That's easier to read because the Fed can't directly influence the direction unless if decides to outright buy a zillion homes.

    2. Blackrock and other Wall st. hedgies are slumlords now, they bought thousands of homes that back a rental backed security . I imagine the Fed had something to do with this , so they have shot that wad.
      I can't wait for this ponzi to blow up, the end zone dancing by the Fed media cheerleaders is nauseating.

      Thanks for the post and valuable insight

    3. I hope gold explodes soon. I'm so dispirited, I'd be euphoric if I could achieve a state of despondency.

  3. "Whether it be the economic or political woes of the United States, Japan and the European Union, the Russian diplomatic victories over Syria, Armenia or the Ukraine, or Chinese ambitions in the East China Sea, tomorrow’s powers are quickly filling the geopolitical void left by yesterday’s powers.

    But 2014 will experience a dramatic acceleration of this profound trend thanks to the convergence of several factors: loss of control of the world by the United States, the end of desperate rescue methods (mainly quantitative easing), a new implosion of the real estate market... Not forgetting the groundswell which is the forced reform of the international monetary system. Using roulette is an example, until recently there has been the phase “place your bets” during which the players have been able to prepare and implement their strategies; we are now rather in the phase “no more bets” where the players will soon be able to see their profits-or losses."

    [ I agree with their predictions to a point but not to their conclusions (outcome). it's anybody game out there when the cards fall.]

    1. MJ ,
      From your finger tips to Gods ears !
      I am so fed up with how the elitists, through their many devious ways ,keep honest money , namely physical gold and silver down. Someone recently said that it will take their crony thieving money system to cave in on itself before any real and natural wealth is realized. " The Constitution only gives people the right to pursue happiness. You have to catch it yourself."
      Benjamin Franklin

  4. Fed balance sheet tops $4 trillion for first time

    The Federal Reserve's balance sheet expanded to a record $4 trillion in the week ended Dec. 18, the central bank said Thursday (

    The Fed balance sheet has been growing as the central bank has been buying $85 billion a month in Treasurys and mortgage related assets since last January. This is the third program of asset purchases, otherwise known as quantitative easing, that has expanded the Fed's balance sheet from $891 billion in 2007. Economists are concerned the central bank may have difficulty shrinking the balance sheet at the proper time without upsetting financial markets. The Fed announced Wednesday that it plans to trim the purchases to $75 billion in January and wants to take regular steps to decrease the pace of purchases, perhaps ending the program sometime late next year. The Fed now holds $1.5 trillion in mortgage-related assets and $2.2 trillion in Treasurys. The central bank also holds $326 billion in other assets.

  5. The Volcker Rule's Major Miss & Kim Kardashian's Bikini Bod

    The Big Six banks (JPMorgan Chase, Bank of America, Wells Fargo, Citigroup, Goldman Sachs and Morgan Stanley) that control the majority of domestic deposits (and nearly all of U.S. derivatives) dangle them as financial hostages before complicit regulators, legislators and presidents. Too big to fail is about power, not size. These banks that sit atop the U.S. financial hierarchy by virtue of their legacy leaders having attacked 1933 Glass-Steagall regulations since the 1950s—piece by piece—own insurance companies, asset management companies, and brokerage or trading houses. They not only have access to an increasingly higher proportion of deposits, but also of pension and other funds, and insurance policies. That’s why one of the main things that banks did to weaken the possibility of broad restriction on any of their overall trading activities was to ensure these side financial service businesses would bear no restriction on trading, proprietary or otherwise, as per their exemptions in the Volcker Rule.

    The Fed’s Language Game

    Another section of loopholes begins with covered fund activities on page 463. This is the stuff that allows banks to trade almost anything anywhere as long as it’s named in such a way as to avoid suspicion. Section 10 begins with prohibitions on banks buying or having certain relationships with a “Covered Fund.”

    Pages 500 to 637 provide lists of exemptions to the above such as foreign public funds, insurance company separate accounts, loan securitizations (which were central to the subprime crisis), derivatives on loan securitization (ditto), venture capital funds (another word for private equity funds) and credit funds (which can hold all sorts of AIG-type credit derivatives).

    In Section 11, we get another laundry list of permitted activities in conjunction with organizing covered funds, including “permitted risk-mitigating hedging activities” (and aren’t they all?) from pages 638 to 766. These also include foreign funds and insurance companies. To cap it off, we get some obligatory legal jargon about how to comply with whatever weakened rules remain from pages 767 to 882. C’est tout.

    Something Is Not Always Better Than Nothing

    For those people who think the Volcker Rule is a swipe at the banks and will reduce risk in the system, I urge you to reconsider. The Volcker Rule (and Paul Volcker, for whom it’s named) might have had good intentions, but the form it has taken, and was destined to take as I’ve written before, is a placation. It is not substantive reform, or even the right path.

    Only a resurrection of Glass-Steagall will truly reduce the risk mega-banks pose to our economic lives.

    it sounds like game on....and almost everything and anything gold related has been pasted...I don't know what's going to change but anyone I've ever mentioned gold to for protection can't get enough of pouring salt into the wounds and thinks things are fine (401's restored, real estates a sure thing). One messed up landscape.

  6. Dave

    You keep pretty well grounded in the here and now ..... but if you were to speculate, would you be partial to the internet scuttlebutt that the countries of the world are in secretive negotiations, a sort of Brenton Woods 2. And no, I am not referring to that Iraqi dinar nonsense. I am referring to China/Russia/BRICs initiating a Gold Trade Standard .. and the U.S. grudgingly realizing that they can't prevent it and thus have to be a part.

    If you were to get drunk on New Years Eve and wish to fire off a wild assed post of "get TF outta here" speculation, I certainly would be interested in hearing your outer most thoughts.
    Wouldn't even hold you to it or bring it up later.

    Just sayin

    1. My real thoughts: read "The Road"

      The U.S. won't grudgingly give into anything. Once rulers are bitten by the power bug, it takes death to give it up. That goes back through history to at least Caesar and probably a lot farther back.

      The U.S. has already engaged in low level global warfare. When China eventually "calls' the U.S. on the gold it supposedly still has as reported, that's when we could see things start to fly out of control.

      The U.S. Government is THE most dangerous terrorist in the world now and that terror extends from the extreme political corruption, financial market manipulation, NSA spying and it's meddling militarily in EVERY corner of the world

      This will not end well...

  7. Some FED updates DEC 20:[1][id]=WRESBAL&s[1][range]=10yrs
    DEC 12[1][id]=BASE&s[1][range]=10yrs

    Mises uses TMS; you can select a 10-yr look with the radio button:
    The True Money Supply (TMS) was formulated by Murray Rothbard and represents the amount of money in the economy that is available for immediate use in exchange.
    Macleod did a datapoint fit to this one 2 years ago already, & he showed it had gone hyperbolic (accelerating exponential above parabolic) with a vertical rise targeting early 2014.

    edit: checked his name spell, & up popped his newest article DEC 20 this topic!:

  8. The House Edge
    Off Limits, but Blessed by the Fed
    Published: December 21, 2013

    In 1999, Congress permitted Wall Street investment banks like Goldman Sachs and Morgan Stanley to keep their commodity operations. Since then, other banks have been allowed to expand into commodities, but in recent years no bank has gotten more leeway from the Fed than JPMorgan, experts in the field contend. In California and the Midwest, JPMorgan’s subsequent dealings in electricity echoed actions of Enron a decade earlier. The Federal Energy Regulatory Commission contended that JPMorgan engaged in price manipulation that generated $125 million in “unjust profits.” Last July, JPMorgan agreed to pay $410 million in penalties and restitution; it neither admitted nor denied wrongdoing.

    Maneuvering in markets for electricity, metals, oil and more added billions to the bottom line at banks like JPMorgan, Goldman Sachs and Morgan Stanley in recent years. But their involvement in commodities has now come under intense scrutiny. Industrial users of aluminum and other metals contend that questionable activities by major banks have increased their costs. Regulators like the Commodity Futures Trading Commission have been investigating the issue, and congressional hearings have also explored potential problems.

    kiss the ring

  9. Gold takes ‘legal’ route to Kerala
    KOCHI: Revenue intelligence agencies manning various airports are helplessly watching huge quantities of gold flowing into the state through the legal route with jewellers using NRIs returning home as 'couriers'. All 80 passengers on a flight from Dubai that landed in Kozhikode last week were found carrying 1kg of gold, the legally permitted limit, the gold on that flight alone totalled 80kg, worth Rs 24cr.

    Jewellers are reportedly contacting NRIs through travel agents to persuade them to carry 1 kg of gold paying 10% of its value as duty in foreign currency. The jewellers offer to remit the duty as well quid pro quo like flight tickets, customs officials revealed.

    Nearly 200 kg of gold was "imported'' after remitting the due duties through Kozhikode during last one week. Cochin International Airport witnessed the import of over 140 kg of gold in the first 20 days of December, said a customs official.

    Sounds like the appetite for gold is alive....wonder how many flights in total? maybe WGC demand off a little?....what about private charters?

  10. Dave,

    I wanted to conduct an experiment. So I posted an ad on Craigslist here in Seattle to see what the demand was for gold. I wanted to sell 1 ounce gold Philharmonic for basically spot. Mind you if you want to buy locally it will cost you $50 in premium to obtain this coin. Anyway, I had two offers in 2 days: 1. A guy wanted to trade his unsealed PlayStation 4 and 2. another guy wanted to trade his Cannondale bike.

    I don't know what this says about the general public, but I was quite amused.

    1. That's interesting. The marke for gold is more thin in Denver on Craigslist because of the dollar cost but there are cash buyers you can find who will pay more than spot and less than coin dealers charge.

      Try this: call around to the biggest coin dealers and find out where they are selling silver eagles. In Denver its $5 over spot. Then stick a roll on C/L for a dollar/oz less and see how many responses you get. In Denver that ad would draw at least 5 responses w/in 3-4 hours.