"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Tuesday, April 3, 2012

The FOMC Strikes Again

All one needs to know about how the Fed is attempting to knock down the price of commodities in general was demonstrated in today's FOMC minutes.

The idea that I believe it wants to keep uppermost in the mind of traders is that the US economy is recovering, very slowly, but recovering - enough to justify the idea that growth will be steady, that employment will be increasing  - slowly  - but that there are still headwinds.

However those headwinds, while they bear watching, are not sufficiently strong enough to derail the recovery - this will prevent any slipping back into recession. If they are - of course the ever vigilant Fed stands ready to act - if not now however.

This means that equities should move higher as long as the economy is growing and moving forward, even if it is moving forward at a snail's pace.

One of those headwinds, which they were very concerned to make known, was the idea that GLOBAL GROWTH is slow (hint, hint - CHINA). That means less need for commodities! Again - HINT- HINT.

This notion is designed to take away the idea of an IMMEDIATE QE3 which works to herd the cattle-brained hedge funds (insert theme from "RAWHIDE" here with Ben playing the part of the trail boss)  into selling commodities in general. Down goes copper, platinum, other base metals, other tangibles, etc. - only the markets which have the strongest set of fundamentals on the supply/demand equation are able to withstand the barrage of hedge fund, one way, selling pressure which then immediatey follows the minutes as surely as night follows day.

Thus, if the global economic growth is slow and there is not the same demand for commodities as there was previously, and if there is no need for an immediate round of QE3 - then where oh where can the hedge funds make money? Answer - where else but in equities.

We then see commodities mauled while stocks initially tank but then rapidly bounce off their worst levels of the session to end only modestly lower. Yep - no inflation here anywhere - see - just look at the commodity indices and you can see that our near zero interest rate policies are not creating the faintest whisp of inflation. Oh, ignore that gasoline price chart - it's definitely pesky but we can always have the political branch open up the spigots on the Strategic Petroleum Reserve in time for the General Election and deal with that if those prices are still too high at the gas pump come August or September and the Dear Comrade's poll numbers are not any better.

Yes, Virginia - modern price controls without price controls. What a marvelous innovation from our monetary masters.

Now if they can just get that pesky bond market to cooperate and turn around after today's plunge out of disappointment that the Fed will not be buying bonds forthwith. Ah, but that is another day's work for our saviors.


  1. Great and spot on commentary Dan. I don't think today's nonsense fooled anyone. Business as usual.
    I should have sold my positions prior to the FOMC minutes and rebought.

  2. Yep. I was Lucky last time. This time a 3.5 percent loss in a single day. Time to buy deeper to get it back. Getting very sick of this game. 2 years and been fairly lucky. This time just going to keep accumulating, as more shares will eventually equate to more wealth. A new USSA is in the making. Our commander is telling all of us what is right and wrong. Hell he even is threatening the highest court in the world with his Socialist rhetoric.

  3. Thanks again Dan. The Professor would have awarded you a gold star for your recital of today's lesson had you left out the sarcasm.

    Is it just wishful thinking on my part, or are these well-rehearsed dramas (Fed jaw-boning/bullion bank selling/Pavlovian algorithm response) losing their shock value? A couple of weeks ago they were able to effect $1,630, and before that $1,620, but today only $1,640.

    1. this things going back to 1530!

  4. Thank You, Mr. Ben,
    My dealer dropped the silver price and I bought.
    Thank You, Mr. Ben.

  5. Other than where manipulation is taking place - you have to think of it as price discovery.

    Just like with paper gold and silver - the true bottom is in place when the physical buyers step up. If traders want to get serious, they should be colluding together on a short squeeze via physical delivery. If they don't want the "hassle" of taking and paying for physical - then these paper games will always take place and they can be happy with 40% under performance of equities.

    In short, do what the Chinese do - start hoarding physical.

  6. Chinese return from holidays next week. Should be a feeding frenzy.


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