The Comex reminds me of the Mad Tea Party, with the LBMA not all that far behind it.
As for GLD and its like, when the tea pot gets tipped, let's see what comes out.
As a reminder, tomorrow is the March option expiration for precious metals at the Comex.
The SP 500 is running the stops to a new all time high. One has to wonder what the Fed and the ruling class are thinking.
Well, if you don't know where you are going, any road can take you there. ---Jesse's Cafe Americain
I came across this statistic during the week that really took my breath away:
In just the first five weeks of 2014, investors have already removed more money from EM mutual funds and ETFs than they pulled out during the entire year 2013.
The efficient-market guys will tell you that rational investors will allocate based on where the greatest expected returns are and that capital flows will follow value.
This is actually the exact opposite of how the markets really work in practice.
Over long stretches of time, we can say that money is eventually allocated efficiently--but the journey to get there is where trends and volatility come from.
In other words, the efficient market isn't a state of being--it's a verb, a process.
But in the short- to intermediate-term, flows don't follow value, they follow performance.
They chase it.
Each week witnesses money being thrown at whatever has worked best during the prior week.
As my friend Carl Richards likes to say, "Repeat until broke."
--Joshua M. Brown, "Flows Don't Follow Value, They Follow Performance"
Back in Wk 501 (September 2010), gold and silver began what looked at the time like the beginning of the metals’ bull market parabolic rise. However in Wk 679 (February 2014) we now know that didn’t happen. But remarkably, even after their traumatic corrections of the past few years, gold and silver have only dropped to gains similar to those seen by the Dow Jones and NASDAQ thirteen years into their bull markets. Table below gives the specifics. It’s a strange bear market that finds gold and silver almost as profitable as the Dow Jones and NASDAQ were from 1982 to 1995, thirteen years into their bull market.--Mark Lundeen
The last crisis was just the banks. This time we are looking at a potential popping of a full-blown global currency bubble, which was generated as the solution to the last crisis. And this new bubble is all supported on an inflated US monetary base of $3.8 trillion. That's bubbly gearing of nearly 40 times, or 163 times the monetary base on the eve of the Lehman crisis.--Alasdair Macleod
Gold is obviously coiling in a symmetrical triangle at key resistance, within a large inverse H&S formation, and an even larger 'W formation.'
I do not expect the Comex situation to resolve itself this month, with continuing low inventories of deliverable gold and antics with price and delivery being played until there is some shock from outside the pits, some failure to deliver that cannot be covered up or brushed aside.
It *could* break right at the Comex, but I suspect that the price setting mechanisms there are sufficiently divorced from the real market so that Comex will be collateral damage to some much larger event.
It takes patience in times like these, since things unfold slowly when you watch them every day. But when the time is come, it seems as though it happens all in a rush, and the inevitability of it all appears to have been written large on the wall.
That is how it was with the last financial crisis, and that is how it will be with the next one which is probably no more than two years away. While the policies and fundamentals remain the same, it will be foolish to expect other outcomes.--jesse's--cafe americain
Did you know that the U.S. state that produces the most vegetables is going through the worst drought it has ever experienced and that the size of the total U.S. cattle herd is now the smallest that it has been since 1951? Just the other day, a CBS News article boldly declared that “food prices soar as incomes stand still“, but the truth is that this is only just the beginning. If the drought that has been devastating farmers and ranchers out west continues, we are going to see prices for meat, fruits and vegetables soar into the stratosphere. Already, the federal government has declared portions of 11 states to be “disaster areas”, and California farmers are going to leave half a million acres sitting idle this year because of the extremely dry conditions. Sadly, experts are telling us that things are probably going to get worse before they get better (if they ever do). As you will read about below, one expert recently told National Geographic that throughout history it has been quite common for that region of North America to experience severe droughts that last for decades. In fact, one drought actually lasted for about 200 years. So there is the possibility that the drought that has begun in the state of California may not end during your entire lifetime.---more at Why Food Prices Are Going To Start Soaring--ETF Daily News
This soaking-up of Dollars by the only countries having sufficient growth to be able to use them explains, to a great extent, the lack of any Dollar devaluation or inflation in the US notwithstanding the Fed’s policy: the devaluation which should have gone hand-in-hand with such money creation has been absorbed by the rest of the planet’s economic dynamism. ..
to halt the decline of their currency, emerging countries’ central banks are selling their dollar reserves to buy back their own currency on the markets (7), resulting in a surplus of dollars and an increase in demand for the local currency, causing it to rise automatically (8). For example, in such a period Turkey, India, Brazil and Indonesia among others, have each offloaded in the order of tens of billions of Dollars per month (9).
This means that Dollar buyers, the emerging countries, have become sellers. In other words, the only countries able to absorb excess Dollars are now refusing them. Let’s recapitulate: the Fed and the Treasury continue to flood the world with $65 billion a month, but no one wants them… Where can they dump them now? In a few oil producing countries which still sell in Dollars, but especially in the US of course. And what can this country’s lifeless economy do with them? Not a lot… certainly less than the emerging countries did...
During the past week, gold and silver and the shares of their producers had been rallying strongly for about two months. This caused numerous moving-average crosses, relative strength measures, and other well-known technical signals to be triggered. In case you weren't sure whether this had occurred, there were many articles on the internet and on cable TV explaining why silver or GDXJ or something else was set for a strong short-term rally. There was also a significant surge in volume particularly during upward moves, indicating that some group of well-capitalized traders had decided to jump aboard the bullish bandwagon.
Let's suppose that you had observed all of this behavior, so you knew that momentum players who were completely absent from the precious metals market had recently been climbing back in. You also know that they'll immediately bail out as soon as they're behind by anywhere from 2% to several percent, depending upon their stop-loss methods. What will happen next? The financial markets are obviously going to punish those who are tardy to any concept, while rewarding those who are able to make the most difficult and patient decisions. The easiest way to knock out recent buyers is via a rapid selloff. If such a decline is followed by an equally rapid rebound, then those who sold when their stop losses were triggered will be whipsawed too quickly to get back in close to their selling price. Eventually, they'll be forced to buy at a much higher price--probably just in time for the next correction to occur.--SJ Kaplan
There are many different strategies which are used by both investors and traders. The reason is that different participants have very different goals in the financial markets. If you can identify which players are present at any given time, then you can figure out what they are going to do next, and therefore what the financial markets are going to do to ensure that most of them lose money. The basic principle is that since the financial markets will always reward the fewest participants, knowing how groups of traders are positioned enables you to figure out how the market will defeat them and therefore how you can act in anticipation of this event.
For example, many traders--especially active institutional participants--set tight stop losses when they are trading, so that they don't lose more than a few percent on any given trade. This approach doesn't help their long-term track record, but it enables them to satisfy their superiors or whoever is really in charge that they're properly doing their job. If these traders are momentum players, then they are likely to trade something after it has crossed above or below a particular level, after it has gained or lost a certain percentage from a recent extreme, after a certain moving average has been crossed to the upside or downside, or some other quantitatively measurable signal.
via Financial Post, here is a chronological summary of all recent banker deaths:
Sunday, Jan. 26: London police found William Broeksmit, a 58-year-old former senior executive at Deutsche Bank AG, dead in his home after an apparent suicide.
Monday, Jan. 27: Tata Motors managing director Karl Slym died after falling from a hotel room in Bangkok in what police said could be possible suicide. Slym, 51, had attended a board meeting of Tata Motors’ Thailand unit in the Thai capital and was staying with his wife in a room on the 22nd floor of the Shangri-La hotel. Hotel staff found his body on Sunday on the fourth floor, which juts out above lower floors.
Tuesday, Jan. 28: a 39-year-old JPMorgan employee died after falling from the roof of the European headquarters of JPMorgan in London. The man, Gabriel Magee, was a vice president in the investment bank’s technology department, a source told WSJ.
Wednesday, January 29: Russell Investments’ Chief Economist Mike Dueker was found dead in an apparent suicide. Police said it appears Dueker took his own life by jumping from a ramp near the Tacoma Narrows Bridge in Tacoma, Wash., AP reported. According to Bloomberg, Dueker, 50, had been missing since Jan. 29, and friends and law enforcement had been searching for him.
The week before, a U.K.-based communications director at Swiss Re AG died. The cause of death has not been made public.
Monday, February 3: 37-year-old JPMorgan Chase & Co executive director who died from unknown causes Feb. 3 appears to be the latest in a series of untimely deaths among finance workers and business leaders around the world in the past three weeks. Ryan Crane, a JPMorgan Chase & Co. employee who in a 14-year career at the New York-based bank rose to executive director of a unit that trades blocks of stocks for clients, died in his Stamford, Connecticut, home.
Tuesday, February 18: 33-year old JPMorgan forex trader is the latest in a string of suicides to take his life in Hong Kong.
"Fed chairperson Yellen gave a marathon six-hour audience to the House Committee on Financial Services last week. It was so devoid of substance and meaning that the TV network covering it switched the feed a few times to the exciting Olympic event of curling,..."
At least with curling we see an honest effort with measurable results...Yellen's delivery was more like hurling, and I do not mean the Irish sport.
Lo, the taper is still on under Wizard Yellen, for the simple reason that if she backed out of it now, before she officially chaired her first meeting of the Fed governors, her outfit would lose whatever shreds of credibility it still hangs onto. Even with the taper on, it is for now still pumping over half a trillion dollars a year into the banking system. There is some reason to think that it made the markets puke two weeks ago. But then a really bad employment number came out, and in the inverse climate of bad-news-being-good-news for bubble markets, that was construed as a sure sign that the Fed might have to un-taper sometime around late spring with Yellen’s chairpersonship fully established. I suspect they’ll do something else: they’ll continue to taper down purchases of treasuries and mortgage detritus via the direct TBTF bank channel and they’ll establish a new “back door” for shoveling money into the system. Nobody knows what this is yet, and it may be some time even after it starts that the mechanism is discovered. In the meantime, the seeming placidity of the renewed “risk on” mood should be a warning to market cheerleaders. Something’s got to give and I think it will be the US dollar index, which has been in Zombieland since November. The world has never been so ready for a change in direction. Expect no real guidance from your leaders.--H Kunstler
The last time we got this far ahead of the 50 day moving average in BGEIX was August 26 2013 when we were at 12.28 compared to 10.44 50 day MA. That is about 18% above the 50 day. Right now on this holiday for some, we are sitting at 18.5% above the 50 day moving average. So, as much as i hope this a real rebound and we can take out 12.28 and everything south of 20 in the next 6-12 months, I'd have to say we will suffer a setback soon. Of course if the US $ collapses this week :), maybe not, but things are getting a little frothy and even former gold stock boo-birds (Lt. Dan (to a degree), Permabear Doomster, etc.) are at least acknowledging some progress. It sure doesn't seem right and having them back to booing while the gold stocks resume an upswing and generally stays above the 50 day on any correction would be very constructive--we shall see.
Will real dividends stay permanently elevated? Will profit margins stay permanently elevated? Can we be assured that the worst is behind us? Can we expect future growth in real dividends to match the growth we've seen since the early 1990s? I wouldn't answer a resounding yes to any of those questions. Call me skeptical, to put it mildly. Instead, I would ask the following question.
Will we someday, using the power of hindsight, discover that our massive trade deficit was not the permanent free lunch that it was advertised to be?
Put another way, it really helped the corporate bottom line to transition from "Made in USA" to "Made in ____." Mission accomplished. Now what? Persistently high oil prices (financial meltdowns notwithstanding)? Persistently stagnant wage growth? Persistently high unemployment? Increased rate of US (and/or global) financial meltdowns? In and out of ZIRP from here on out (if ever out)? Even more giant sucking sounds?
Nice chart and more comments in the post Saturday, February 15, 2014
The Stock Market: What Could Possibly Go Wrong? at Illusions of Prosperity Blog
Yeah, that's the first thing I thought too. That's the 500 lb gorilla sitting on the back of an elephant in the room that the author failed to mention. You have to take great risk just to try to preserve the value of the money you have today. You're lucky if the value of the money you have in the future, including investment gains, is even close to the value of that money today. Your options are few, and typically a casino, with (even honest) insiders having a distinct advantage. And god forbid you invest in gold, because then you're fighting the Fed and its money printing machine it uses to squelch the price of gold, in an attempt to prop up its fiat money system. And I truly believe its only a matter of time before the government makes good on its attempts to turn everyone's 401K plan into a "guaranteed revenue stream" using T-Bills (i.e. Social Security 2 funded by blatant theft).
Another great comment==you have to have steel nerves--it should not have to be that way, but it is what it is and you have to take an insanely contrarian viewpoint and be willing to average into investments when there seems to be no hope just to eek out returns. Leave your money in the stock market for the last 5 years?? Great--now watch it disappear in the magic megaphone of volatility in our years of stagnation.
A couple of good comments from a blog post about why IRAs/401Ks etc.don't work for retirement:
You missed the biggest pitfall of all that makes these accounts useless.
If you put $10,000 in your retirement account in, let's say 1999, that $10,000 now has the buying power of about $4,500 1999 dollars.
So, You have lost over half of your money by putting it in your retirement account.
The entire "retirement" account has been nothing but a scam from the beginning. It's just another way to keep you separated from your money and therefore keep you controlled and working for the man.
Bernanke was very explicit in stating that raising rates too soon during the Great Depression was one of the gravest policy mistakes at the time. But fear in the market – a rise in volatility – has a similar impact, making for a less favorable credit environment. The reason this is so important is because a recovery based on asset price inflation can falter. It is because of this that we believe the Fed has all but promised to be late in raising rates, i.e. is all but promising inflation.
The Fed may well be the primary source of volatility. Much of it is because the Fed is transparently confused. The Fed is confused because it cannot look at market-based indicators to gauge the health of the economy (because its own policies have distorted prices). As a result, they must read the tealeaves of imperfect and backward looking economic data not something that they have a particularly good track record of doing. Let’s also not forget that with so much leverage in the economy, any small policy shifts may have an amplified impact on the markets....
Bonds may not provide long-term refuge given the fiscal challenges ahead. Gold has lived up to its role as a diversifier in the past, but given that our daily expenses are not priced in gold, it can be a volatile ride that investors must be able to stomach.---A Merk (Amen to that!)
Bill, I have 1 addition to your other reader's "QE Monopoly":
 Everybody gets a "get out of jail free" card
Fleck: Oh, of course. :)
" How big a chuck in how many different alternative vehicles is the question? "
Might be a good idea to hold a chunk of cash for averaging into treasuries later this year or early in 2015. If we get some weakness in the US dollar it will probably hurt treasuries and then all the boo birds will come out about the death of "trashuries" just like they did about gold recently. BTTRX is an Am Century zero coupon fund that matures in 2025. Of course they used to have a 2030 fund but closed that down--too bad.
We will want to see a lot more pessimism about bonds than now--an especially good sign would be for Bill Gross to announce that "trashuries" are dead and that he will never invest in them again. Eventually there will be such an announcement or something close.
Buying BTTRX may actually commence even before gold stocks finish their run and before commodities have fully boiled over. :)