The Market…

Posted on June 30, 2010 by rockingjude

From David’s Desk

www.MilesFranklin.com

“Ownership of gold means you are your own central bank.”  Jim Sinclair

On Monday, Richard Russell warned that the market was in very dangerous territory and that the Dow was flirting with danger as it approached the break-down from a long-building head-and-shoulders formation.  Support was around 9800.  Today, the Dow was down 268.22 to 9870.30.  Here is Russell’s chart, once again.  You can visualize what he is referring to…

june30

What he wrote is so important; I will show it to you again.  He said:

Why do I think the stock market will be so rotten? Here’s why. Look at the chart of the Dow in the current issue of Barron’s. Or study the chart of the Dow below. If this isn’t the mother of all head-and-shoulder top-formations, I’ve never seen one. If this formation falls apart, I expect the break to signal the start of a brutal decline in stocks. The first area of support is Dow 10,000. The base of the entire formation comes in at Dow 9800. If the formation breaks down, I think all previous plans, scenarios and strategies will hit a stone wall. Wall Street and public sentiment will turn black-bearish. Consumers will head for the storm cellars and once in, they’ll shut the door above them and lock it.

Another day like today and the Dow will breach the neck-line support at 9800.  Why is that so important?  Because most of the action in the stock market is program trading by large funds.  Their computers are programmed to buy and sell at certain strategic points like moving averages, previous highs and lows and Fibonacci points.  Whether this information is actually significant is not important.  What is important is that the funds and their computers think it is and act accordingly.  A break-down from a long-term head and shoulders is a big sell signal to most of the computer algorithms.  It is like fulfilling your own prophecy.  They expect the market to continue to fall, so they sell which forces the market lower which re-enforces the validity of their programmed trading platforms.  Once this waterfall drop starts, it can go a LONG way.  This is what Russell is alerting you to.

GLD options expire on the close on Tuesday, June 29th.

http://finance.yahoo.com/q/op?s=GLD+Options That is motivation enough for the banking cartel (JPMorgan, HSBC) to knock the price down.  They almost always do.  Gold dropped to $1,226 but recovered by the end of the day and closed at $1,242.  A lot of those calls conveniently fell out of the money with Monday’s drop. To me, this is the real reason gold got attacked today.

You can almost feel the pressure building up beneath gold – and on top of the stock market.  It feels like something is about to break lose.  The markets are acting like they sense it.  The market discounts the FUTURE, not the past.  What is it trying to tell us?  Whatever it is, it isn’t good.

Richard Russell had just a few words to say today, but they are important

Today it finally happened. My PTI turned bearish by 1 point. Stock market acted in harmony. Both the Dow and Transports down triple digits with the Dow again under 10,000. Investor sentiment turning increasingly gloomy. This isn’t a case of rising unemployment or vanishing consumer buying. The market is looking ahead to hard times in the future.

Russell’s “PTI” is his bible, his Primary Trend Index.  It finally went negative, after many months of being positive.  The PTI never lets him down and is his most useful metric for signaling the trend or direction of the stock market.

Sincerely,
David Schectman
Miles Franklin

Gold and silver highlights from June 28th
june302

Today, most of the so called “investment experts” are waiting for gold to correct, while it continues to march higher.  That does not bother me; actually I find it mildly annoying, because those warnings allow gold to advance without attracting much of any public participation.  As a result, the gold bull market continues to climb higher with only a small number of Americans aboard.  Ultimately, I believe that too will change.

Think About It!  Andy Schectman

Below is a chart of gold, going back 3 years.  It’s truly amazing to me, but denials and ignorant comments about gold, and its role by the mainstream, has kept the public out of this market. The higher a bull market goes without attracting mass attention, ultimately the greater the potential for the bull market.  After all, gold has risen this far with virtually no public participation. What’s going to happen when the public finally becomes interested?  My guess is that product will be nearly impossible to find, and a whole lot more expensive when you find it.  So while you can, get longer gold!

june3010
 US Money Supply Plunges At 1930′s Pace And Housing Index Drives By Sol Palha (www.safehaven.com)

The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history. The M3 figures – which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance – began shrinking last summer. The pace has since quickened.

The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of institutional money market funds fell at a 37pc rate, the sharpest drop ever. “It’s frightening,” said Professor Tim Congdon from International Monetary Research. “The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly,” he said.

The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.

Well, we can’t say we did not warn everyone; for a long time now we have been stating that this recovery is all smoke and mirrors. Worse yet we proved that the Dow has not put in one single new high in the past 52 weeks in our article titled Dow’s new highs, all lies. When priced in other commodities such as Gold, the Dow is in a clear down trend.

We also stated that the housing recovery was all humbug and unemployment levels would remain at lofty levels for years to come. High unemployment coupled with a terrible housing market is cause for concern.  The housing market index dived 17 points indicating that the small uptick was mainly due to the $8000 tax credit which has now expired.

The housing market index dived to 17 in June from 22 in May, the NAHB reported.

All three components of the index fell in June, and home builders were more discouraged in all four regions of the country. “The recovery in home building will be slow due to the elevated level of unemployment, tight credit conditions, high rates of homeowner and rental vacancy rates and the high level of homes available for sale,” wrote Gary Bigg, an economist for Bank of America Merrill Lynch. The index was lower than the 21 that was expected by economists surveyed by MarketWatch, and was the lowest since it hit 15 in March. The five-point drop was the most since November 2008.

Then on Wednesday it was announced that new home sales fell twice as much as was expected.

The plunge by nearly a third in new home sales to an all-time low annual rate of 300,000 reported by the Commerce Department was a “shocker” even though a decline had been expected after the expiration of the first-time home-buyer’s tax credit on April 30, said Harm Bandholz, chief U.S. economist at Unicredit Markets.

“Sales fell almost twice as much as expected;” he said, and what makes it “even more concerning is by far the biggest public support for the housing market is still in place.” The government continues to insure or guarantee nearly every mortgage in the U.S. through the Federal Housing Administration, Fannie Mae and Freddie Mac.

“Housing could be in for a double-dip downturn,” said Sung Won Sohn, economics professor at California State University Channel Islands. The abysmal performance of home sales since the tax credit expired shows “how dependent the fledging housing recovery is on government help” and is forcing the Fed to be more cautious about withdrawing support, he said.

If one combines the above factors with a rapidly contracting M3 money supply, we have the perfect recipe for a disaster. Double dip recession is not what these chaps should be worrying about; the term they should possibly be thinking of is depression.

Conclusion

We are going to repeat what we have been saying for the past few years; avoid the housing market. A better option would be to use pull backs to open up positions in Gold and or Silver; if you already own a position then use strong pull backs to add to them.  Investing in precious metals and various other commodities makes more sense than throwing money into real estate; the only exception being good farmland.

Casey Research (www.caseyresearch.com)

Monster Money Printing

Dear Reader,

There was an interesting article on MineWeb today. It was about recent moves by China, now the world’s largest gold miner, to buy yet more gold – from the U.S.

Here’s an excerpt…

China is already the world’s largest gold miner, and many analysts now assume – following the country’s announcement last year that it had been building up its gold reserves for six years unknown to the West – that it is still expanding its gold holdings in a way that does not necessarily show the gold going into official reserves. And now it appears to be looking elsewhere to purchase supplies of the yellow metal without overtly impacting the market.What is significant, perhaps, is that this suggests that China’s commitment to gold is both ongoing – and likely to increase. The country, through its financial institutions and state television advertising, has been persuading its ever growing middle classes to purchase gold (and silver) as a good investment. There seems little doubt that the state is doing the same thing itself as a means of diversifying its huge reserves.

Full article here.

While the amounts involved in this particular transaction are relatively small, the underlying policy behind it speaks volumes about the Chinese game plan; trading their intangible Federal Reserve notes for gold, the world’s most tangible form of money. And doing it in such a way that it largely flies under the radar, keeping the price of gold from skyrocketing.While the Chinese off-market buying may not send gold surging anytime soon, it certainly solidifies the foundation under the gold at a price over $1,000, and maybe higher than that.

Monster Money Printing

The other required reading for today comes from Ambrose Evans-Pritchard of the Telegraph, titled “RBS tells clients to prepare for ‘monster’ money-printing by the Federal Reserve.”

Here’s an excerpt:

The ECRI leading indicator produced by the Economic Cycle Research Institute plummeted yet again last week to -6.9, pointing to contraction in the US by the end of the year. It is dropping faster that at any time in the post-War era.The latest data from the CPB Netherlands Bureau shows that world trade slid 1.7pc in May, with the biggest fall in Asia. The Baltic Dry Index measuring freight rates on bulk goods has dropped 40pc in a month. This is a volatile index that can be distorted by the supply of new ships, but those who watch it as an early warning signal for China and commodities are nervous.

Andrew Roberts, credit chief at RBS, is advising clients to read the Bernanke text very closely because the Fed is soon going to have to the pull the lever on “monster” quantitative easing (QE)”.

“We cannot stress enough how strongly we believe that a cliff-edge may be around the corner, for the global banking system (particularly in Europe) and for the global economy. Think the unthinkable,” he said in a note to investors.

Full article here.

While it’s interesting, and I guess encouraging, to see others lining up behind our oft stated view that we are nowhere near out of the tunnel yet – the prospect of a crushing train wreck in the economy isn’t the sort of thing that has us doing a jig around the virtual water cooler here at Casey Research.Especially in that the number of people I personally know who have fallen on hard times is on the steep ascent. These are, for the most part, folks who until recently would have been considered successes – strong-willed, hard-working people whose lives were decorated with all the material trappings that come from mountains climbed and challenges won. Today, investment portfolios blown up, mortgages underwater, jobs lost, and prospects fizzling for anything outside of fast food, a certain sense of desperation is becoming palpable.

One such family we know, the chief breadwinner comfortably retired for the past eight years, had their $1.6 million home in the local paper this past week – as a foreclosure. Meanwhile, the family has disappeared to parts unknown.

Sentiments aside, this is not the time to be either cavalier or complacent about your finances. And if you have a job, redoubling your efforts to add value to the enterprise is more important than ever. As I have suggested in the past, the single best way to do so is by studying the industry you are in one hour a day.

The fact that there is no apparent end to this crisis gives rise to the question, “How much longer might it actually last?”

The accurate answer is that no one can know… for the simple reason that the market is so heavily skewed by government interference. In other words, no one can say what hijinks they’ll get up to next or what the consequences of those hijinks will be.

That said, the signs that the end of the crisis is approaching will be unmistakable in that it will coincide with the government capitulating in such a way that makes it clear it will no longer squander the nation’s future in the failed attempt to spend, tax, and regulate the crisis away. Given that none of those standard “tools” of government make things better – quite the opposite – makes the capitulation assured.

But when? I have some thoughts on the timing, though it can only be considered rank speculation at this point. To get to the point, a quick but relevant detour is required.

This morning is UGLY…
  • Renewed concerns over European debt
  • European stock markets all sharply lower … 3 to 4%
  • Silly stuff … some concocted and new (only months old) Chinese leading economic indicator contracted modestly and cited for a selloff in the Chinese stock market
  • Focus on European austerity implementations, and so on
  • The DOW quickly went into the tank, dropping 200+ points and broke key psychological support at 10,000
Gold actually went up in the day on the early going, but was hit hard when the DOW and DOG went into a free fall after the opening … dropping to $1226. “There are no coincidences.” Where do you thing the price of gold would be today if The Gold Cartel had not terrorized the price yesterday?
The gold action by the end of the day was nothing short of spectacular, as buyers showed up despite the liquidation in the commodity and stock markets. And it performed superbly despite yesterday’s orchestrated takedown, bucking the horrendous technicals as a result of the bloodbath. Should gold go right back up, as I expect it will, then it will have done so twice in a row following Gold Cartel raids. This means once gold takes out $1260 again, the price is likely to explode as the cabal forces will have to retreat to higher ground … having lost two battles at current price levels.
Not only did gold do well today, but so did silver, coming back from an $18.38 low. Just holding its own was a big one for us silver bulls. Copper fell 16 cents and crude oil dropped $2.31 per barrel to $75.94. In years past Morgan would have buried silver with commodity plunges such as those.
The PPT was called into duty yet again and managed to rally the S&P above key support at 1040, which it had blown through with about 15 minutes left until the bell. The DOW was brought up 60 points.
Commodity position limits included in financial regulation bill
Submitted by cpowell
In an e-mail to a GATA supporter today, U.S. Commodity Futures Trading Commission member Bart Chilton wrote that the financial regulation legislation pending in Congress, described in the report below, would require the commissionto set position limits in all commodities of finite supply, including precious metals, which Chilton has advocated but which the commission still seems unprepared to do on its own.
Gensler on Brink of Position Limits Victory
By John Kemp
Commodities Now, London
Tuesday, June 29, 2010
U.S. Commodity Futures Trading Commission Chairman Gary Gensler appears to be on verge of achieving a big victory in his battle to impose stricter position limits on major energy futures contracts.
Back in January, Gensler unveiled proposals for tough new limits on futures
positions in U.S. crude, natural gas, gasoline, and heating oil. Unlike previous
limits set by exchanges, these would be set by the commission itself and would
aggregate all positions in economically equivalent futures and options for a
particular commodity. The proposals were designed to limit exemptions for firms seeking to hedge financial rather than physical exposures and largely restrict financial and physical hedgers from also running speculative positions.
Finally, the proposals contain strict new account aggregation procedures that
would cumulate positions based on a minimum 10 percent equity ownership and largely end the present safe harbor for independent account controllers.
Push-back against the proposals has been fierce. The U.S. Futures Industry
Association (FIA) and many major swap dealers have argued the CFTC lacks
statutory authority to impose limits unless it finds they are necessary to
“diminish, eliminate, or prevent” the burden imposed on interstate commerce by excessive speculation.
In the absence of a finding that excessive speculation has actually occurred,
which the CFTC has carefully not made, the FIA claims the CFTC has no authority to press ahead with limits. Its robust submission could be a prelude to challenge the Commission’s forthcoming decision in court.
Gensler cites the same regulation — Section 4(a) of the Commodity Exchange Act (7 USC Section 6(a). But he emphasizes the words “shall” and “prevent” to argue Congress has given the CFTC a clear mandatory, not discretionary, instruction to set limits. It can do so to meet the threat of excessive speculation rather than waiting for evidence it has in fact occurred.
The scope of the commission’s authority, whether it must or may set limits and
whether there is an evidential trigger it has to meet first, has been the
subject of a prolonged battle between the CFTC and industry lobbyists as part of the fiercely contested derivatives section (Title VII) of the Wall Street Reform and Consumer Protection Act (HR 4173).
The portion of the bill dealing with position limits has been repeatedly drafted
and redrafted to make subtle changes to the commission’s authority. The
original, House-passed version added extra language to Section 4(a) to clarify
that “the commission shall … establish limits.”
It also added extra text later on to Section 4(a) to state that the commission
“shall set limits … in its discretion.” It is given this power not just to diminish, eliminate, or prevent excessive speculation, or prevent corners, squeezes and market manipulation.
The commission is expressly authorized to set limits to ensure there is
sufficient liquidity for bona-fide hedgers and to “ensure that the
price-discovery function of the underlying market is not disrupted.”
This is a much broader mandate than the commission currently enjoys and
emphasizes that Congress is giving the CFTC a lot of flexibility in deciding how
to police the market most effectively.
In the Senate, the bill’s language was initially changed from “shall …
establish limits” to “may … establish limits,” which is more permissive and
closer to the industry’s preferred formulation.
“May” was strengthened again to “shall” in an amendment sponsored by Senate Agriculture Committee Chairman Blanche Lincoln (the derivatives industry’s bete noire). But the Senate version was silent on other objectives the commission might take into account when setting limits, leaving the CFTC with much narrower authority.
The House-Senate conference committee has finally settled on the House line. The commission “shall … establish limits” and it includes all the other purposes
enumerated in the House bill, considerably broadening the commission’s
authority.
It is a clear victory for the CFTC chairman. The bill clearly expresses the
intent of Congress that the commission will set (aggregated) limits — not that
it could do so only if it finds econometric research showing limits are
necessary. In construing a statute, the federal courts will pay great deference
not only to the text but also the legislative history of the statute. If it is
approved by both houses and signed into law by the president, enactment of HR 4173 should lay to rest any doubts about the CFTC’s statutory authority to press ahead with limits.
Gensler must still win backing from a majority of his fellow commissioners to
adopt the proposal sent out to consultation. From their comments in January, it
appears he has the firm support of only one other commissioner (Bart Chilton), while one is opposed (Jill Sommers) and two have expressed reservations (Michael Dunn and Scott O’Malia).
Even here Gensler may have made some progress. Both Dunn and O’Malia warned about the risk of pressing ahead with limits on exchange-based positions when the CFTC could not impose limits on equivalent positions in OTC markets.
The text adopted by the conference committee makes clear the CFTC shall set
aggregate limits applying not just to U.S. exchange positions but also positions
held in OTC derivatives or on foreign exchanges based on the same commodity.
It should go a long way to meet the reservations raised by Dunn and O’Malia in January. In a final victory, Gensler has also secured a very strict
interpretation for bona-fide hedging. Until now there has been some discussion of whether swap dealers are “bona-fide hedgers” when they take positions to offset commodity index positions and other total return swaps they offer to pension funds and other institutional investors wanting exposure to commodity prices.
The conference committee text resolves that question clearly. Swap dealers
hedging exposure to index products and other total return swaps are not
bona-fide hedgers; they are risk managers who may benefit from a separate but more limited exemption granted by the CFTC at its discretion.
The proposed statute is quite clear. Bona-fide hedges must use transactions as a substitute for transactions in the physical marketing channel and be
economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise.
Swap dealers may claim a bona-fide hedging exemption only if their counterparty is itself eligible for a bona fide hedging exemption or if the swap dealer is offsetting physical risks. Index hedges do not count.
These financial hedgers will have to apply for a limited risk management
exemption instead. Under current CFTC proposals that would be limited to twice the normal position limit in crude, gasoline, heating oil and natural gas.
Gensler may still have to reshape his position limit proposals to take account
of the concerns raised by his fellow commissioners and industry comments
submitted during the consultation exercise. But the final version of the
derivatives legislation immeasurably strengthens his hand and should give the
CFTC strong legal cover in case of any court challenge.
A Must-Read Blog Post From Eric King
Eric King dissected the recently released BIS (Bank For International Settlements), which is a secretive and powerful organization that functions as a “central bank” for all Central Banks. As has been discussed on this blog, the underlying structural problems which led to a de facto collapse of the U.S. banking system in September 2008 were never addressed – they were papered over in a move that functioned to transfer a massive amount of wealth from U.S. taxpayers to the “too big to fail big banks” and the people who run them.
Based on all the indicators I track, the global financial system is headed toward a financial collision which will make the 2008 event look tame by comparison. As King highlights from the BIS report:
Policy rates are already at zero and central bank balance sheets are bloated. Although private sector debt has started to decline, public debt has taken its place, with sovereign fiscal positions already on an unsustainable path in a number of countries. In short, macro-economic policy is in a vastly worse position than it was three years ago…
Quite frankly, I find that statement from the BIS to be an extraordinary admission of failure by the world’s Central Banks in their attempt to apply Keynesian economic principles to “fix” the global economic problems. It is a brutal assassination of Bernanke’s self-proclaimed expertise on having the ability to use his toolbag of economic voo-doo in order to avoid the next Depression (I didn’t think it was possible, but Bernanke is even more arrogant than Greenspan and will eventually be regarded as equally incompetent).
As Eric King asserts, and I completely agree this assessment:
The very fabric and the seams of the financial system are coming apart. Who knows what the timetable is for the implosion of the current monetary system? We are witnessing the greatest wealth transfer in history, and the horrors of the aftermath of this tragedy will not be forgotten for decades…You must own gold to be on the right side of the greatest wealth transfer in history.
Here is the link to King’s blog entry: Got gold? Here’s the link to the BIS report: BIS Annual Report.
You actually don’t need to read those two items in order to understand what is going on. The trading action in the gold/silver is market is sending a VERY LOUD signal. The one remaining “policy” tool which has yet to be applied in full force – and which isn’t really a policy tool, but rather one last mechanism to effect the final transfer of wealth from the public to the wealthy elite – is the outright cranking up of the fiat currency printing presses. Make no mistake, whether it’s implemented under some sort of cloak and dagger disguise or with outright “helicopter drops of money,” it’s coming soon and the ONLY way to have any hope of seeing the other side with your wealth somewhat intact is to own gold and silver in substantial quantities.
Jim Sinclair (www.jsmineset.com)

Markets Make A Definitive Statement

Dear CIGAs,

Equity markets are sharply lower, the Euro is sharply lower, commodities are under significant pressure. Gold opens lower and recovers $16 from the low to be up on the day.

1. The type on inflation being discounted by Gold requires business activity to be putrid.
2. This type of inflation is hyperinflation, which is a currency event, not an economic demand phenomenon.
3. Rather than a singular currency loss of confidence igniting hyperinflation, it will be all Western currencies moving against each other with intolerable to business volatility.
4. All Western governments will practice QE to infinity, as we return to credit market problems. The statement of the G20 and Prince Charles cutting down on caterers is all smoke and MOPE.
5. Gold is NOT a commodity.
6. Gold is a currency
7. Gold is the currency of choice.
8. Gold is going to becoming the reserve asset of choice by central banks
9. Ownership of gold means you are your own central bank.

Conclusion:

The arguments between inflation and deflation revealed itself today to be purely semantical.

Gold is headed in this move to $1650 with its normal drama.

Jim Sinclair’s Commentary

QE to infinity will be practiced by the entire Western world.

G-20 to world: Spend more, save more
 June 28, 2010, 4:08 p.m. EDT
By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) – The global economy is still sickly, the Group of 20 nations said over the weekend, but they couldn’t agree on the best medicine.

As expected, the leaders of the 20 economies meeting in Toronto promised they’d do more to stimulate the economy and create jobs, but at the same time they vowed to do less.

“Strengthening the recovery is key,” the G-20 stated, because “the recovery is uneven and fragile, unemployment in many countries remains at unacceptable levels, and the social impact of the crisis is still widely felt.”

“To sustain recovery,” the leaders promised, “we need to follow through on delivering existing stimulus plans, while working to create the conditions for robust private demand.”

But in the very next breath, they took it back. “Recent events highlight the importance of sustainable public finances and the need for our countries to put in place credible, properly phased and growth-friendly plans to deliver fiscal sustainability, differentiated for and tailored to national circumstances.”

Jim Sinclair’s Commentary

This smoke and mirrors recovery will be seen not as a U, W or V, but rather as a ski jump.

The little up was not a bottom, but a cliff over which world economies are now going down together.

Japan’s recovery may be slowing.
Japan’s industrial production slipped in May, as did household spending, and the unemployment rate unexpectedly increased. The data points suggest Japan’s economic recovery is slowing down, and may serve as a warning to politicians that it’s too soon to tighten fiscal policy in favor of deficit reduction.

Strengthening economy??? I don’t think so…

CIGA Ian

june303

Prepare for Cliff-Edge, ‘Monster’ Money Printing: RBS
 CIGA Eric

Monster quantitative easing, suggesting higher gold prices, and higher yields, essential major loss of confidence in fiat.

‘Monster’ Quantitative Easing Coming

Roberts is predicting the central banks are going to have to start pumping more money into the system.

“With fiscal policy off the agenda, we have always expected more quantitative monetary easing,” he wrote. “And this time will be different. We have always argued that buying of bonds is less efficient than guaranteeing yield levels, and that yields are the key, not raising money supply, given demand for credit is dead.”

Source:

cnbc.com

This morning is UGLY…
  • Renewed concerns over European debt
  • European stock markets all sharply lower … 3 to 4%
  • Silly stuff … some concocted and new (only months old) Chinese leading economic indicator contracted modestly and cited for a selloff in the Chinese stock market
  • Focus on European austerity implementations, and so on
  • The DOW quickly went into the tank, dropping 200+ points and broke key psychological support at 10,000
Gold actually went up in the day on the early going, but was hit hard when the DOW and DOG went into a free fall after the opening … dropping to $1226. “There are no coincidences.” Where do you thing the price of gold would be today if The Gold Cartel had not terrorized the price yesterday?
The gold action by the end of the day was nothing short of spectacular, as buyers showed up despite the liquidation in the commodity and stock markets. And it performed superbly despite yesterday’s orchestrated takedown, bucking the horrendous technicals as a result of the bloodbath. Should gold go right back up, as I expect it will, then it will have done so twice in a row following Gold Cartel raids. This means once gold takes out $1260 again, the price is likely to explode as the cabal forces will have to retreat to higher ground … having lost two battles at current price levels.
Not only did gold do well today, but so did silver, coming back from an $18.38 low. Just holding its own was a big one for us silver bulls. Copper fell 16 cents and crude oil dropped $2.31 per barrel to $75.94. In years past Morgan would have buried silver with commodity plunges such as those.
The PPT was called into duty yet again and managed to rally the S&P above key support at 1040, which it had blown through with about 15 minutes left until the bell. The DOW was brought up 60 points.
Commodity position limits included in financial regulation bill
Submitted by cpowell
In an e-mail to a GATA supporter today, U.S. Commodity Futures Trading Commission member Bart Chilton wrote that the financial regulation legislation pending in Congress, described in the report below, would require the commissionto set position limits in all commodities of finite supply, including precious metals, which Chilton has advocated but which the commission still seems unprepared to do on its own.
Gensler on Brink of Position Limits Victory
By John Kemp
Commodities Now, London
Tuesday, June 29, 2010

U.S. Commodity Futures Trading Commission Chairman Gary Gensler appears to be on verge of achieving a big victory in his battle to impose stricter position limits on major energy futures contracts.
Back in January, Gensler unveiled proposals for tough new limits on futures
positions in U.S. crude, natural gas, gasoline, and heating oil. Unlike previous
limits set by exchanges, these would be set by the commission itself and would
aggregate all positions in economically equivalent futures and options for a
particular commodity. The proposals were designed to limit exemptions for firms seeking to hedge financial rather than physical exposures and largely restrict financial and physical hedgers from also running speculative positions.
Finally, the proposals contain strict new account aggregation procedures that
would cumulate positions based on a minimum 10 percent equity ownership and largely end the present safe harbor for independent account controllers.
Push-back against the proposals has been fierce. The U.S. Futures Industry
Association (FIA) and many major swap dealers have argued the CFTC lacks
statutory authority to impose limits unless it finds they are necessary to
“diminish, eliminate, or prevent” the burden imposed on interstate commerce by excessive speculation.
In the absence of a finding that excessive speculation has actually occurred,
which the CFTC has carefully not made, the FIA claims the CFTC has no authority to press ahead with limits. Its robust submission could be a prelude to challenge the Commission’s forthcoming decision in court.
Gensler cites the same regulation — Section 4(a) of the Commodity Exchange Act (7 USC Section 6(a). But he emphasizes the words “shall” and “prevent” to argue Congress has given the CFTC a clear mandatory, not discretionary, instruction to set limits. It can do so to meet the threat of excessive speculation rather than waiting for evidence it has in fact occurred.
The scope of the commission’s authority, whether it must or may set limits and
whether there is an evidential trigger it has to meet first, has been the
subject of a prolonged battle between the CFTC and industry lobbyists as part of the fiercely contested derivatives section (Title VII) of the Wall Street Reform and Consumer Protection Act (HR 4173).
The portion of the bill dealing with position limits has been repeatedly drafted
and redrafted to make subtle changes to the commission’s authority. The
original, House-passed version added extra language to Section 4(a) to clarify
that “the commission shall … establish limits.”
It also added extra text later on to Section 4(a) to state that the commission
“shall set limits … in its discretion.” It is given this power not just to diminish, eliminate, or prevent excessive speculation, or prevent corners, squeezes and market manipulation.
The commission is expressly authorized to set limits to ensure there is
sufficient liquidity for bona-fide hedgers and to “ensure that the
price-discovery function of the underlying market is not disrupted.”
This is a much broader mandate than the commission currently enjoys and
emphasizes that Congress is giving the CFTC a lot of flexibility in deciding how
to police the market most effectively.
In the Senate, the bill’s language was initially changed from “shall …
establish limits” to “may … establish limits,” which is more permissive and
closer to the industry’s preferred formulation.
“May” was strengthened again to “shall” in an amendment sponsored by Senate Agriculture Committee Chairman Blanche Lincoln (the derivatives industry’s bete noire). But the Senate version was silent on other objectives the commission might take into account when setting limits, leaving the CFTC with much narrower authority.
The House-Senate conference committee has finally settled on the House line. The commission “shall … establish limits” and it includes all the other purposes
enumerated in the House bill, considerably broadening the commission’s
authority.
It is a clear victory for the CFTC chairman. The bill clearly expresses the
intent of Congress that the commission will set (aggregated) limits — not that
it could do so only if it finds econometric research showing limits are
necessary. In construing a statute, the federal courts will pay great deference
not only to the text but also the legislative history of the statute. If it is
approved by both houses and signed into law by the president, enactment of HR 4173 should lay to rest any doubts about the CFTC’s statutory authority to press ahead with limits.
Gensler must still win backing from a majority of his fellow commissioners to
adopt the proposal sent out to consultation. From their comments in January, it
appears he has the firm support of only one other commissioner (Bart Chilton), while one is opposed (Jill Sommers) and two have expressed reservations (Michael Dunn and Scott O’Malia).
Even here Gensler may have made some progress. Both Dunn and O’Malia warned about the risk of pressing ahead with limits on exchange-based positions when the CFTC could not impose limits on equivalent positions in OTC markets.
The text adopted by the conference committee makes clear the CFTC shall set
aggregate limits applying not just to U.S. exchange positions but also positions
held in OTC derivatives or on foreign exchanges based on the same commodity.
It should go a long way to meet the reservations raised by Dunn and O’Malia in January. In a final victory, Gensler has also secured a very strict
interpretation for bona-fide hedging. Until now there has been some discussion of whether swap dealers are “bona-fide hedgers” when they take positions to offset commodity index positions and other total return swaps they offer to pension funds and other institutional investors wanting exposure to commodity prices.
The conference committee text resolves that question clearly. Swap dealers
hedging exposure to index products and other total return swaps are not
bona-fide hedgers; they are risk managers who may benefit from a separate but more limited exemption granted by the CFTC at its discretion.
The proposed statute is quite clear. Bona-fide hedges must use transactions as a substitute for transactions in the physical marketing channel and be
economically appropriate to the reduction of risks in the conduct and management of a commercial enterprise.
Swap dealers may claim a bona-fide hedging exemption only if their counterparty is itself eligible for a bona fide hedging exemption or if the swap dealer is offsetting physical risks. Index hedges do not count.
These financial hedgers will have to apply for a limited risk management
exemption instead. Under current CFTC proposals that would be limited to twice the normal position limit in crude, gasoline, heating oil and natural gas.
Gensler may still have to reshape his position limit proposals to take account
of the concerns raised by his fellow commissioners and industry comments
submitted during the consultation exercise. But the final version of the
derivatives legislation immeasurably strengthens his hand and should give the
CFTC strong legal cover in case of any court challenge.
A Must-Read Blog Post From Eric King
Eric King dissected the recently released BIS (Bank For International Settlements), which is a secretive and powerful organization that functions as a “central bank” for all Central Banks. As has been discussed on this blog, the underlying structural problems which led to a de facto collapse of the U.S. banking system in September 2008 were never addressed – they were papered over in a move that functioned to transfer a massive amount of wealth from U.S. taxpayers to the “too big to fail big banks” and the people who run them.
Based on all the indicators I track, the global financial system is headed toward a financial collision which will make the 2008 event look tame by comparison. As King highlights from the BIS report:
Policy rates are already at zero and central bank balance sheets are bloated. Although private sector debt has started to decline, public debt has taken its place, with sovereign fiscal positions already on an unsustainable path in a number of countries. In short, macro-economic policy is in a vastly worse position than it was three years ago…
Quite frankly, I find that statement from the BIS to be an extraordinary admission of failure by the world’s Central Banks in their attempt to apply Keynesian economic principles to “fix” the global economic problems. It is a brutal assassination of Bernanke’s self-proclaimed expertise on having the ability to use his toolbag of economic voo-doo in order to avoid the next Depression (I didn’t think it was possible, but Bernanke is even more arrogant than Greenspan and will eventually be regarded as equally incompetent).
As Eric King asserts, and I completely agree this assessment:
The very fabric and the seams of the financial system are coming apart. Who knows what the timetable is for the implosion of the current monetary system? We are witnessing the greatest wealth transfer in history, and the horrors of the aftermath of this tragedy will not be forgotten for decades…You must own gold to be on the right side of the greatest wealth transfer in history.
Here is the link to King’s blog entry: Got gold? Here’s the link to the BIS report: BIS Annual Report.
You actually don’t need to read those two items in order to understand what is going on. The trading action in the gold/silver is market is sending a VERY LOUD signal. The one remaining “policy” tool which has yet to be applied in full force – and which isn’t really a policy tool, but rather one last mechanism to effect the final transfer of wealth from the public to the wealthy elite – is the outright cranking up of the fiat currency printing presses. Make no mistake, whether it’s implemented under some sort of cloak and dagger disguise or with outright “helicopter drops of money,” it’s coming soon and the ONLY way to have any hope of seeing the other side with your wealth somewhat intact is to own gold and silver in substantial quantities.


Related articles by Zemanta
Enhanced by Zemanta
Share

Leave a Reply

Name

Email

Website


© 2009-2012 Project World Awareness All Rights Reserved -- Copyright notice by Blog Copyright

Thank you for using IGIT Tweet Button, a plugin by PHP Freelancer