Archive for the ‘GOLD’ Category

Market Regulation

A quote from Karl Polanyi’s book, “The Great Transformation”

The self-regulating market was a threat to them all, and for essentially similar reasons. And if factory legislation and social laws were required to protect industrial man from the implications of the commodity fiction in regard to labor power, if land laws and agrarian tariffs were called into being by the necessity of protecting natural resources and the culture of the countryside against the implications of the commodity fiction in respect to them, it was equally true that central banking and the management of the monetary system were needed to keep manufactures and other productive enterprises safe from the harm involved in the commodity fiction as applied to money. Paradoxically enough, not human beings and natural resources only but also the organization of capitalistic production itself had to be sheltered from the devastating effects of a self-regulating market.

The markets are in a state of flux right now with the commodity “currency” now coming into disrepute.

One must start to question how much longer this can continue before the ‘real’ commodities such as oil, food, water and gold are put back into a majority position?

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Not enough lipstick to make this pig look pretty anymore

Governments On Both Sides of the Atlantic Try to Put Lipstick on a Pig

pig needing lipstick

piggy waiting for lipstick

We noted yesterday that the big banks have criminally conspired since 2005 to rig $800 trillion dollar Libor-based market.

Barclay’s chairman says that the Bank of England gave explicit approval for the manipulation.

A former Barclay’s executive – who was close to the Libor-setting manipulation – told the Daily Mail that Barclay’s manipulated Libor to make the bank look healthier than it really was, and , and the cover-up led to a slow policy response which prolonged the financial crisis.

This appears to be very similar to what happened in America.   As I noted last year:

The Tarp Inspector General has said that [then-Secretary of the Treasury Hank] Paulson misrepresented the big banks’ health in the run-up to passage of TARP. This is no small matter, as the American public would have not been very excited about giving money to insolvent institutions.

(Paulson also threatened martial law if Tarp was not passed.)

As we reported last year:

[All of the big banks were] insolvent in the 1980s, but the government made a concerted decision to cover that up.

Financial writers such as Mish and Reggie Middleton pointed out in late 2007 and early 2008 that B of A was again insolvent.

Nouriel Roubini noted in January 2009 that the entire U.S. banking system is “bankrupt” and “effectively insolvent”:

“I’ve found that credit losses could peak at a level of $3.6 trillion for U.S. institutions, half of them by banks and broker dealers,” Roubini said at a conference in Dubai today. “If that’s true, it means the U.S. banking system is effectively insolvent because it starts with a capital of $1.4 trillion.”


“The problems of Citi, Bank of America and others suggest the system is bankrupt,” Roubini said. “In Europe, it’s the same thing.”

Indeed, the American government’s zero interest rate policy is very much like the British Libor manipulation scandal … it’s nothing but an attempt to breathe life back into the insolvent banks, at the expense of the taxpayer.  And see this.

And the “financial reform” laws passed in the wake of the crisis have, in some ways, actually weakened regulations of the financial markets, allowed the big banks to get a lot bigger, and have intentionally allowed fraudulent accounting (and see this).

Likewise, the “stress tests” in both Europe and America have been a total scam … a naked attempt to put lipstick on a pig to cover up the fact that the big banks are insolvent.

By choosing the big banks over the little guy – and failing to rein in the fraud which caused the crisis in the first place – the governments on both sides of that Atlantic are dooming both the financial system and the people to failure.

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Russian Market Closes … may stay shut for more than 24 hours.

Via Zero Hedge:

There are a series of serious challenges to the Russian Stock Market.

Given that since 2000 nearly all world stock markets have been trading in similar direction, the implications of a cascading market shut down are significant.

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Commodity insider track … get yours while you can!

Mike Maloney says it clearly,”High frequency shearing.”

Get out while you can!

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Max Keiser – Silver Liberation Army

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Stocks Plunge On Rare Equity-Gold Decoupling

Equities suffered their largest single-day drop in 4 months as for once Apple was unable to single-handedly hold up the index letting it drop closer to its credit-oriented risk. A monster day for NYSE and ES (S&P 500 e-mini futures) volume saw Financials and Discretionary sectors underperforming and the Energy sector joining Utilities in the red for the year. The S&P closed at its lows as it broke its 50DMA for the first time since DEC11 as AAPL dropped 1.25% for the day (and -2.5% from the highs) but most notably equities and Treasuries are back in sync from early March as 10Y closed under 2% for the first time in a month. Gold and Silver surged around the European close, on little news, as we suspect safe-haven buying and an unwind of the gold-hedged bank-stress-test rally – with another relatively unusual divergence between Gold and stocks on the day. VIX broke above 21% closing just below it back near one-month peaks as the term structure bear-flattened (but notbaly pushing ahead of its credit-equity implied fair value). JPY strengthened all day (and AUD weakened) as carry trades were unwound in FX markets leaving the USD marginally higher on the day (and EUR marginally lower despite the turmoil in European markets). Oil fell back below $101.50 but it was Copper that has suffered the most – down almost 4% since Last Thursday. Credit markets were weak with HY marginally underperforming IG (beta adjusted) but still implying further weakness in equities as HYG closed just shy of its 200DMA.

Treasury yields tumbled 5-7bps on the day with the long-end outperforming but equities stayed in sync as they pulled back to early March levels…

but it appears as though the gold-equities hedge is being unwound as they have converged rapidly YTD in the last day or two. This retraces all of the post Bank stress-test outperformance and almost undoing any post LTRO2 outperformance juice left in stocks.

YTD performance of main risk assets…

While Apple relishes still +55% YTD, broad sectors of the S&P 500 are rolling over rapidly. Energy joined Utilities today in the red for the year but financials have tailed the most in the last few days…

And the broad derisking of the S&P – which closed under its 50DMA for the first time in 4 months is perhaps starting to drag Apple lower also as it sufferes it largest drop since mid-December…

but Apple’s impact remains evident when compared to credit markets where the selling is picking up speed and volume also

But VIX is pushing on ahead regardless (with the largest 2-day spike in over 5 months), touching its 100DMA today at the top, and closing slightly above its credit- and equity-model implied value would suggest…

And while JPY repatriation (carry unwinds) was evident all day long, it seems between our notes on EUR-USD basis swap deterioration occurring again and the repatriation of EUR that the USD was relatively stable – only managiong small gains on the day – despite all the dysphoria in Europe…

Nowhere is Europe’s stress more evident (except perhaps in our LTRO Stigma trade) than in the Senior and Subordinated credit spreads of European banks. It seems a Senior-Sub decompression trade is in order given the spread and ratio of the two levels of the capital structure but on reflection – just what will be the recovery rate on these should an event occur – given the massive encumbrance of LTRO? It would seem Sub financials look rich still and while more expensive for carry – certainly face minimal recoveries.

All-in-all, pretty much what credit markets have been arguing for for a week or two now as the sad reality of a flow-less liquidity pump and slowing global economy come home to roost. The cracks in the veneer of AAPL are perhaps most worrying for all those hedgies who have levered themselves into it as we wait until Europe’s open to see if the pressure on Italian and Spanish banks resumes.

Finally, for the Alcoa watchers, the company did report a better than expected $0.10 EPS, compared to an expected loss. Yet what does $0.10 translate to? Why $94 million in actual Net Income. Something else is far more troubling: namely the company free cash flow (EBITDA-Interest Expense-CapEx), which is sliding on an LTM basis, as well as its net leverage (total debt-cash), which soared to the highest since December 2010 in Q1 2012 at $7866 million, or roughly 5.0x the company’s FCF. Alcoa better restart the cash generation soon or else.

AA Free Cash Flow:

AA Net Leverage:

Charts: Bloomberg

Bonus Chart (because its one of those days)…S&P 500 priced in Gold…maybe time to unwind some exuberance

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GOLD going to move, U$D under more pressure

Iranian oil will move to India and China using gold for settlements.

Iranian Oil for Indian & Chinese GOLD

Expect this to cause GOLD to have more upwards pressures and the demand for US dollars to decrease.

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POP goes the bubbles?

The discussions in Jackson Hole are continuing and while the results are not yet being published or sent out publicly there are disturbing elements arising from those sources who have spoken about the events taking place in Wyoming.

The issues in the Middle East continue to dominate the stability of the world now, Iran has re-emerged onto the discussion larger than ever before.

Libyan forces continue their actions, with NATO support … yet the NATO nations are tipping over financially and may not be able to keep their forces in the field, certainly not with any ground forces of appreciable size.  Something that taking a 2 million inhabitant city would require.

All of these items and events point to MORE VOLATILITY in the marketplace as the uncertainty or CHAOS grow.

Who will be popping the bubbles?  Could it be a malevolent spirit, known to delight in such CHAOS?

Are the horsemen far behind?

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$1764 for Gold is the Parabolic number

Great Interview from GoldMoney Foundation.

Gold Foundation Interview

If you are seeking bullion I have solutions for you.

Contact me directly at:

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GOLD GOING Ballistic?

   By Andrea Hotter 

LONDON (Dow Jones)–JP Morgan (JPM) has become the latest bank to up its forecast for spot gold prices, hiking its estimates by a whopping 39% and predicting the precious metal to reach at least $2,500 a troy ounce by the end of the year.

This is almost $800/oz higher than current levels, which represent an all-time high.

The U.S. bank had previously expected spot gold to be at $1,800/oz by year-end.

The move will come amid very high volatility, the bank’s Colin Fenton said, and is being driven by “rising probability of a reflaring of financial crisis.”

Earlier Monday, Goldman Sachs (GS) raised its forecast for gold, saying its economists now place a one-in-three chance of a U.S. recession that would most likely occur within the next six months. But its prices are significantly lower than JP Morgan’s, with Goldman predicting a spot prices of $1,645/oz in three months and $1,730/oz by six months.

Gold soared higher overnight and has become an investor favorite amid deteriorating economic conditions in the euro zone and the U.S.

Friday’s downgrade of the U.S. credit rating from AAA to AA-plus by ratings agency S&P triggered the most recent strength in gold, which leapt over $70 from Friday’s low to peak at $1,715.29/oz earlier Monday.

Morgan Stanley, ANZ, UBS, MF Global and Barclays Capital last week all upgraded their gold price forecasts, while producers like Barrick Gold (ABX), AngloGold Ashanti (AU) and Randgold Resources (GOLD) have been making bullish statement in support of further rises in recent days.

But JP Morgan said it isn’t just gold that will benefit from the financial malaise. Commodities geared toward Asia, investment, and inflation will outperform commodities anchored more to the growth prospects and local supply chains of the U.S.

“The bullish basket includes Brent crude oil, gasoil, gold, raw sugar, copper, corn, and wheat,” said JP Morgan’s Fenton. “The bearish basket includes WTI crude oil, RBOB gasoline, aluminum, zinc, and North American natural gas.”

He singled out sugar, noting that dollar weakness and rising inflation expectations open the upside for raw sugar prices to surge far higher than would otherwise be likely, perhaps doubling or more in a spike. But he cautioned that “sugar rallies tend to be brief, violent, and difficult to time.”

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