Federal Reserve Official Singing the Praises of Unlimited Money Creation

Late this afternoon, a story appeared on the Dow Jones newswire service relating a speech given by Federal Reserve governor Jeremy Stein. In his prepared remarks he defends QE3 and seems to be strongly arguing for an additional new round of QE4.

I must say that it certainly appears these monetary elites really do believe their own BS. If creating lasting prosperity was this easy, what in the world took mankind so longer to figure it out?

I think the most preposterous of his remarks was his claim that the ultra low interest rate environment being created by the Fed has allowed companies to refinance large portions of their current debt at "cheaper, longer-dated terms". This, he claims, helped strengthen the economy and "was a good thing from a financial stability perspective".

Yes, that is not a misquote.

Anyone who trades the markets for a living will tell you that the Fed's actions have created unprecedented volatility as its actions are intended to counteract the deflationary forces arising from the excessive levels of indebtedness that are swamping over the entirety of the global economy but particularly those economies of the fading West.

Instead of allowing the system to clear, as painful as that will be, the Fed continues to try to entice additional borrowing by forcing down long term interest rates to insanely low levels. This, they claim, is a good thing.

There is however a nice, dirty little secret that Mr. Stein, more than likely inadvertently, let out of the bag. Here is the takeaway quotation....

Research shows "Treasury buying is associated with increases in stock prices, which in turn can have wealth effects on consumption and investment".

There ya have conclusive proof that a major strategy of the Central Bank is to produce enough funny money to jam the stock market higher and by so doing, make consumers feel wealthier as they examine their 401K's and retirement portfolios as well as inducing businesses to expand based on a rising price for their stock.

To hell with the impact that this will have on the middle class and average American citizen over the long term. While they may "feel better" now that the Fed has been successful in creating paper asset inflation among stock shares, they are going to "lose that lovin' feelin" when this same deliberately designed inflation shows up in food and energy prices.

Yes indeed, America thanks you Mr. Stein, you and the rest of your shortsighted fools at the Federal Reserve.

http://news.yahoo.com/feds-stein-backs-qe3-says-policy-remains-effective-004501841--sector.html

Silver and the Risk Trade

I have posted the following composite chart without any easily discernible labels to illustrate why I analyze the silver market in the manner that I have been doing for some time now.

Both charts use last November 2011 as the starting point and carry on through the present trading session. See if you can pick out which one is the Continuous Commodity Index and which one is the Silver price.

Surprised? You should not be. As I have stated repeatedly, silver is moving in near perfect tandem with the RISK TRADE. When risk assets are in vogue, silver will move higher; when risk aversion is the play, silver will move lower along with the rest of the commodity complex.

There are occasional deviations from this pattern but as the chart clearly demonstrates, the connection between the two is undeniable.

The Fed is basically doing everything within its power to keep Wall Street happy and the hedge fund crowd pouring loads of hot money into risk assets (equities and commodities) to drive a stake through any sort of deflationary expectations. Heaven help us all if the VELOCITY OF MONEY ever begins to seriously uptick.

But what they are also attempting to do at the same time is to prevent the bond markets from signalling the least bit of inflationary pressures. So far they have been able to pull off this stunt. One wonders how long the game will continue without any measurable ramifications.

What you can definitely say that they have done however is to destroy the ability of seniors to live off their life's savings seeing that they have killed any hope of them getting a decent rate of interest for the next 3 years on savings accounts. Simultaneously, they are also setting up the commodity markets for another surge higher should the hedge fund crowd become completely convinced that the Fed has killed any deflation fears.

If we see silver break out into a strong uptrend move, watch the buying power of the middle class drop into the toilet as the cost of the essentials of life will be rising right along with it.

This article in the Wall Street Journal detailing Costco's end run around next year's tax increase on dividends is too interesting a read to ignore.

It continues to prove the disconnect between those big monied interests and the average small business owner who ends up bearing the brunt of their "go ahead and raise taxes" BS.

November 29, 2012, 7:39 p.m. ET

Costco's Dividend Tax Epiphany

Obama's fans in the 1% vote to beat Obama's tax increase

When President Obama needed a business executive to come to his campaign defense, Jim Sinegal was there. The Costco COST -0.68%co-founder, director and former CEO even made a prime-time speech at the Democratic Party convention in Charlotte. So what a surprise this week to see that Mr. Sinegal and the rest of the Costco board voted to give themselves a special dividend to avoid Mr. Obama's looming tax increase. Is this what the President means by "tax fairness"?

http://online.wsj.com/article/SB10001424127887324705104578149012514177372.html?mod=WSJ_Opinion_LEADTop

I commend the following article to my readers....

Newsmax

Welcome to Soviet America

Thursday, November 29, 2012 09:40 AM

By: Lev Navrozov
Welcome to Soviet America!

“Lev, this is Julie. Do you remember me?” The voice on the phone sounded familiar. She went on: “Almost 40 years ago, I believe the year was 1975, I went to see your play ‘Welcome to Soviet America!’ at Carnegie Hall. It was a one-actor play, in which you played all the roles, while my husband was helping you to set the stage and change the lighting, which was part of the script.”

http://www.newsmax.com/navrozov/Soviet-America-Putin-Obama/2012/11/29/id/465816

Trader Dan interviewed at King World News

Please be sure to check in over at King World News to read my upcoming written interview with Eric King this afternoon.

In that interview we are discussing the ramifications of today's report issued by Goldman Sachs discussing their expectation to come out of December's policy meeting of the FOMC.

"Whack-A-Mole" Job on Gold takes it Down

Reading the wire feed commentary from early in today's session was another exercise in the cluelessness and lemming-like parroting that proceeds forth from the US financial media these days.

It was that nasty, infamous "FAT FINGER" once again that was initially blamed for the smashing avalanche of sell orders that crushed the gold price lower early in today's session.

Never mind the fact that the market did not immediately pop right back, which would have indeed been the case were there an actual trading error involved. The other annoying fact is that "fingers", fat or skinny or otherwise, have very little if anything to do with today's trading volume. We are talking about gigantic hedge funds and other large commercial interests, most of whom use some sort of automated computer trading platform which places orders for them. The only thing a "finger" is needed for is to beckon the servant to bring another glass of Chabliss to the hedge fund office crowd.

I am reading today's hit as just another bear raid on the gold market like so many other that we have seen over and over again throughout the last decade+ of the bull market in this metal.

The bears were caught flat footed last Friday when gold shot up through $1740 and then $1750 on light volume on a day in which a large portion of the usual trading contingent were still recuperating from their Thanksgiving Day dinner and were nowhere to be found on the trading floor or near their computers, which were probably not even turned on.

The surge, which was suspect to begin with, managed to get the bulls all revved up and had headlines about gold breaking out starting to proliferate. That of course was an enormous, "NO NO" to the bullion banks so in came the extra artillery and ammunition and the upstart bulls were summarily taken to the woodshed with a message being sent that no matter how much, how long, how often and many gazillions in Treasury notes, bonds and bills, along with agency debt or MBS's that uncle Ben and this merry band of alchemists decide to stuff into the Fed's balance sheet, gold will not be permitted to soar unchallenged to new heights. After all, we cannot have any votes of NO CONFIDENCE in this paper conjurers and their insanely destructive monetary policy.

More to follow later....
Continuation:

Those of you who follow the markets closely will no doubt have noticed that the HUI closed on its high of the session and basically moved straight up from the opening bell.

It looks to me that what happened was two-fold - first - an avalanche, and I do mean 'avalanche' of sell orders hit the gold pit in the first minute of pit trading. Volume estimates were more than 13,000 in one minutes time. That is simply enormous. That smashed the price down below $1730 which was where the sell stops were located. That selling then took prices town the gully towards $1700 where the bears were hoping to break it. They could not however as the market spent the rest of the session holding above that critical support level. Bargain buyers moved in.

Secondly - it looked as if there was a pretty sizeable spread unwind in the hedge fund ratio trade where they buy the metals and beat the snot out of selective gold shares. The unwind involves selling the metal and then buying back the shares. As I mentioned in last evening's post - the HUI-gold ratio had fallen to a  potential monthly close going all the way back to January 2002. At some point anyone who is playing that extremely profitable spread trade has got to lift it if they hope to capture any of those paper profits and actually realize them. Seeing that we have three trading days (now only 2) left in the month, some of the hedge funds want to book those profits to look good on those monthly statements that are going out.

Gold should garner good support above the 100 day moving average near 1694, a level which has not been violated since mid-August this year. If for some reason it fails to hold above that 100 day moving average, more fund selling will occur. Bulls will try to keep it from even reaching that level however as there appears to be a decent support level that has formed near $1704-$1705.

On the topside, the 50 day moving average is at today's high near $1740. Gold will need to climb back above that level to attract the momentum based buying crowd.

Keep an eye on the HUI - if the slap happy mood continues in the broader equity market, which by the way rallied on news of near permanent Federal Reserve buying of Treasuries and other assorted candies and nuts, not to mention more propaganda about some sort of deal to avert falling off the fiscal cliff, then the mining shares will probably correct some of this drastic undervaluation against bullion.

As a trader I have to go with what the market price action is telling me but as a student of world history and economics, I have to also shake my head in bewilderment that anyone with a thinking brain can believe the current crop of losers in Washington DC are going to do anything to actually get the US's fiscal house in order.

"Revenue increases" aka (tax hikes) will generate enough revenue to run the government for about 10 days if I did my math correctly. Meanwhile, just like they promised back during the Reagan era and the Bush I era, Democrats will mumble about cutting expenses but those pathological liars will spend and spend and spend until they guarantee the nation's bankruptcy and financial ruin.

Both parties are not one bit interested in reducing spending and putting the nation on a path towards fiscal sanity. The only difference between them is that the Democrats will ruin the nation faster than the other group.

By the end of the next four years, we will be more than $21 TRILLION in DEBT. chew on that one for a while and weep for your children and grandchildren who will, or already are, enslaved to the debt that this current crop of shortsighted political fools have saddled them with.

Gold shares Continue to Underperform against the Metal

There remains very strong interest in the gold ETF's, interest which I might add is aiding the strength in the metal; however, this interest is a double-edged sword as the ETF's continue to siphon off money flows that would have, in times past, found their way into the mining shares. The result - continued underperformance by the mining shares in general against the price of gold bullion.

Notice from the chart that with a bit more than a month to go in the year, the HUI to gold ratio is sinking back down towards its recent lows and looks to finish the year on a very sour note.

Back in July of this year, the MONTHLY CLOSING price of this ratio was the lowest close for any month going all the way back to January 2002. Even the two spike lows that occurred during the worst of the credit crisis, which erupted in the summer of 2008, managed to see those two months recover well off their worst levels and close higher than this year's July close.

Something is going to have to occur within the industry as we enter into the new year or I believe even some of the long-term holders of the gold shares are going to begin to take a good, hard look at maintaining their holdings. Investors put their capital into a company because they are looking for return on that investment. If they can find better returns in an ETF, they are going to make the move there. That is just a simple fact of investor life.

A good response to those who continue to denigrate the secession movements...

Parting Company

By Walter E. Williams

11/28/2012

 

For decades, it has been obvious that there are irreconcilable differences between Americans who want to control the lives of others and those who wish to be left alone. Which is the more peaceful solution: Americans using the brute force of government to beat liberty-minded people into submission or simply parting company? In a marriage, where vows are ignored and broken, divorce is the most peaceful solution. Similarly, our constitutional and human rights have been increasingly violated by a government instituted to protect them. Americans who support constitutional abrogation have no intention of mending their ways.

Since Barack Obama's re-election, hundreds of thousands of petitions for secession have reached the White House. Some people have argued that secession is unconstitutional, but there's absolutely nothing in the Constitution that prohibits it. What stops secession is the prospect of brute force by a mighty federal government, as witnessed by the costly War of 1861. Let's look at the secession issue.
At the 1787 constitutional convention, a proposal was made to allow the federal government to suppress a seceding state. James Madison, the acknowledged father of our Constitution, rejected it, saying: "A Union of the States containing such an ingredient seemed to provide for its own destruction. The use of force against a State would look more like a declaration of war than an infliction of punishment and would probably be considered by the party attacked as a dissolution of all previous compacts by which it might be bound."
On March 2, 1861, after seven states had seceded and two days before Abraham Lincoln's inauguration, Sen. James R. Doolittle of Wisconsin proposed a constitutional amendment that said, "No State or any part thereof, heretofore admitted or hereafter admitted into the Union, shall have the power to withdraw from the jurisdiction of the United States."
Several months earlier, Reps. Daniel E. Sickles of New York, Thomas B. Florence of Pennsylvania and Otis S. Ferry of Connecticut proposed a constitutional amendment to prohibit secession. Here's my no-brainer question: Would there have been any point to offering these amendments if secession were already unconstitutional?
On the eve of the War of 1861, even unionist politicians saw secession as a right of states. Rep. Jacob M. Kunkel of Maryland said, "Any attempt to preserve the Union between the States of this Confederacy by force would be impractical, and destructive of republican liberty."
The Northern Democratic and Republican parties favored allowing the South to secede in peace. Just about every major Northern newspaper editorialized in favor of the South's right to secede. New York Tribune (Feb. 5, 1860): "If tyranny and despotism justified the Revolution of 1776, then we do not see why it would not justify the secession of Five Millions of Southrons from the Federal Union in 1861." Detroit Free Press (Feb. 19, 1861): "An attempt to subjugate the seceded States, even if successful, could produce nothing but evil -- evil unmitigated in character and appalling in content." The New York Times (March 21, 1861): "There is growing sentiment throughout the North in favor of letting the Gulf States go."
There's more evidence seen at the time our Constitution was ratified. The ratification documents of Virginia, New York and Rhode Island explicitly said that they held the right to resume powers delegated, should the federal government become abusive of those powers. The Constitution would have never been ratified if states thought that they could not maintain their sovereignty.
The War of 1861 settled the issue of secession through brute force that cost 600,000 American lives. Americans celebrate Abraham Lincoln's Gettysburg Address, but H.L. Mencken correctly evaluated the speech, "It is poetry, not logic; beauty, not sense." Lincoln said that the soldiers sacrificed their lives "to the cause of self-determination -- that government of the people, by the people, for the people should not perish from the earth." Mencken says: "It is difficult to imagine anything more untrue. The Union soldiers in the battle actually fought against self-determination; it was the Confederates who fought for the right of people to govern themselves."
Walter E. Williams is a professor of economics at George Mason University. To find out more about Walter E. Williams and read features by other Creators Syndicate writers and cartoonists, visit the Creators Syndicate Web page at www.creators.com.
COPYRIGHT 2012 CREATORS.COM
2

Walter E. Williams

Dr. Williams serves on the faculty of George Mason University as John M. Olin Distinguished Professor of Economics and is the author of 'Race and Economics: How Much Can Be Blamed on Discrimination?' and 'Up from the Projects: An Autobiography.'
 

Pravda Commentary -

That this commentary appears in the English version of the Russian newspaper Pravda, is absolutely astonishing to me.

I never thought I would live to see the day in which an editorial in a Russian paper would more accurately describe what is occuring in the US than most of the drivel that passes for analysis in the mainstream media here in the US.

http://english.pravda.ru/opinion/columnists/19-11-2012/122849-obama_soviet_mistake-0/

Obama's Soviet Mistake

19.11.2012

 

By Xavier Lerma

Putin in 2009 outlined his strategy for economic success. Alas, poor Obama did the opposite but nevertheless was re-elected. Bye, bye Miss American Pie. The Communists have won in America with Obama but failed miserably in Russia with Zyuganov who only received 17% of the vote. Vladimir Putin was re-elected as President keeping the NWO order out of Russia while America continues to repeat the Soviet mistake.

Trader Dan taking some time off from the KWN Metals Wrap this Weekend

I am taking some R&R this weekend so will not be doing my regular weekly radio interview with Eric King over at King World News but please tune in regardless and listen in to Bill Haynes and my substitute for this week as I think you will enjoy the broadcast.

Gold Sharply Higher in Yen terms and Euro Terms

Remember that recent call by the Japanese for more yen printing by the Bank of Japan?  Obviously this was not lost on the gold market. Can anyone say "Deliberate Currency Debauchment"?

If that is not enough, the Europeans, not wishing to be outdone by the Japanese in the sense of who can debase their currency the fastest, continue to drone out about coming to the aid of Greece. Their remedy - print more money.

I have a bit of counsel to the political and monetary authorities. Why not just cease and desist ALL TAXATION OF YOUR CITIZENS COMPLETELY. You obviously can conjure into existence, out of nothing, all the money that you need. Why bother taxing anyone? Just print what you need and end the illusion of possessing any sort of discipline or ethics altogether.

At least that way your middle class will have something of their's left over before you bastards destroy what is left of their purchasing power.

Gold Clears Chart Resistance in Light Volume Holiday Trade

Gold has breached overhead chart resistance centered near the $1740 level in extremely light holiday trade. One thing to keep in mind about this is that pit locals are notorious for using these ultra thin trading conditions to go hunting for upside or downside stops. Since there is not the depth of liquidity that is normally present in the market, resistance to their hunting party efforts is minimal.

What this means for chart watchers is that one has to take the price movements with a bit of healthy skepticism. If the move is for real, it will hold on the resumption of trade during the next trading period. In our example - gold will need to remain above its breakout level of $1740 during both Sunday evening trade in Asia and during Monday trade here in the US.

The same goes for silver.

For today, the money flow is to the upside. All it takes is one or two hedge funds to start playing games and the locals, reading the direction of the money flow, enter the fray. The victims in this perfectly legal game of theft, are those who have foolishly placed stop loss orders and forgotten to cancel them during the holiday trade.

Lesson for traders - unless you plan on trading during these thin trading condition periods, get out of your positions before the holiday and wait for the return of the full week worth's of trading to re-enter. You might miss a move while you are enjoying some vacation but at least you will have the satisfaction of not enriching the pit locals.

It is the same for the S&P 500 which is witnessing a huge short squeeze. Thin trading conditions are allowing the locals to play.

This is where many of these guys make their annual incomes....

Revenge of the Turkeys

I guess the residents of these liberal leaning states never heard of a bow using a flu-flu arrow....

http://boston.cbslocal.com/2012/11/21/turkey-complaints-on-the-rise-in-brookline/

BROOKLINE (CBS) – Neighbors are on the offensive in Brookline after what some residents are describing as aggressive turkeys.
“They were attacking the vehicle,” Karen Halvorson said outside her home in the Aspinwall Hill neighborhood.
After getting in her truck, a neighbor came and ran the birds off but it didn’t stop there.
“Then, the turkeys came and started attacking my front door,” she said.

Happy Thanksgiving to all My American Readers

A moment from our history past....

THE MAYFLOWER COMPACT

In the name of God, Amen. We whose names are under-written, the loyal subjects of our dread sovereign Lord, King James, by the grace of God, of Great Britain, France, and Ireland King, Defender of the Faith, etc.
Having undertaken, for the glory of God, and advancement of the Christian faith, and honor of our King and Country, a voyage to plant the first colony in the northern parts of Virginia, do by these presents solemnly and mutually, in the presence of God, and one of another, covenant and combine our selves together into a civil body politic, for our better ordering and preservation and furtherance of the ends aforesaid; and by virtue hereof to enact, constitute, and frame such just and equal laws, ordinances, acts, constitutions and offices, from time to time, as shall be thought most meet and convenient for the general good of the Colony, unto which we promise all due submission and obedience. In witness whereof we have hereunder subscribed our names at Cape Cod, the eleventh of November [New Style, November 21], in the year of the reign of our sovereign lord, King James, of England, France, and Ireland, the eighteenth, and of Scotland the fifty-fourth. Anno Dom. 1620.

Gold Chart

Gold has rebounded sharply this AM and run right back into a strong level of selling resistance noted on the price chart. If the bulls can push through this region, they stand a very good chance of taking the market to the $1780 level.

What more can you say that "RISK ON" is in vogue today. WAX ON; WAX OFF; RISK ON; RISK OFF.


Wanna know why Silver is so strong today? Look at the following chart of the CCI. Yep, Risk on.

Home Sales Data uptick has copper bulls giddy with delight.

Today is "BUY EVERYTHING IN SIGHT" Day.
Tomorrow, who knows?

Keep the Pressure on those Red State Governors to say "NO"

The following article in the Wall Street Journal gives a strong voice to those of us who believe that the States should simply say "NO", to this intrusion on their sovereign rights when it comes to implementing Obamacare.

There is still a very good chance of muking this thing up and preventing a federal takeover of 1/6 of the US economy. If you want to know how health care would fare under such an event, take a good, long hard look at the US Postal Service.

Capretta and Levin: Why ObamaCare Is Still No Sure Thing

The majority of state governors are Republicans, and they have the power to disarm the health-care law.

http://online.wsj.com/article/SB10001424127887324735104578122741540428344.html?mod=rss_opinion_main

Suggested Read of the Day

The following comments are from Thomas Jefferson's letter to a Mr. William B. Giles. I did not post the entirety of the letter which can be found at Constitution.org. I did however think it noteworthy that Jefferson seems almost prophetic in his analysis. Keep in mind that while this was written 187 years ago, it might as well have been written this past year.

Please note the part highlighted is from me. It is very evident from reading this what Jefferson's views were on this question of separation. It was a last resort but it was a resort.

I submitted this letter because it seems like even among some who read this site on a regular basis, there is a continued meek and unresisting submission to steady incursions of the federal power over our lives and over the rights of the individual sovereign states of this Union. Despite a steady torrent of abuses to property rights and civil liberties by such unaccountable federal agencies such as the EPA, BATF, TSA, HHS, we are assured by some readers of this site that all is well and there is no need for concern. Surely such who state these things have never found themselves on the wrong side of one of these runamok and unaccountable but to themselves, agencies.

It reminds me of the story (whether this is true or no, I am not sure but it does serve as a wonderful example) of the frog put into a pot of water under which the heat is ever so gradually raised until the foolish frog is boiled to death. The same frog instantaneously put into a pot of already boiling water would leap out immediately. While suffering damage, it would have at least survived. In the former example, the pitiful creature becomes inured to the serious harm it is incurring and no doubt consoles itself that all is well as it always has been and that there is no cause for alarm or concern whatsoever.

Momentary false comfort for permanent ruin.


TO WILLIAM B. GILES.
MONTICELLO, December 26, 1825.
DEAR SIR, -- I wrote you a letter yesterday, of which you will be free to make what use you please. This will contain matters not intended for the public eye. I see, as you do, and with the deepest affliction, the rapid strides with which the federal branch of our government is advancing towards the usurpation of all the rights reserved to the States, and the consolidation in itself of all powers, foreign and domestic; and that too, by constructions which, if legitimate, leave no limits to their power. Take together the decisions of the federal court, the doctrines of the President, and the misconstructions of the constitutional Compact acted on by the legislature of the federal branch, and it is but
{147}
too evident, that the three ruling branches of that department are in combination to strip their colleagues, the State authorities; of the powers reserved by them, and to exercise themselves all functions foreign and domestic. Under the power to regulate commerce, they assume indefinitely that also over agriculture and manufactures, and call' it regulation to take the earnings of one of these branches of industry, and that, too, the most depressed, and put them into the pockets of the other, the most flourishing of all. Under the authority to establish post roads, they claim that of cutting down mountains for the construction of roads, of digging canals, and aided by a little sophistry on the words "general welfare," a right to do, not only the acts to effect that, which are specifically enumerated and permitted, but whatsoever they shall think, or pretend will be for the general welfare. And what is our resource for the preservation of the Constitution? Reason and argument? You might as well reason and argue with the marble columns encircling them. The representatives chosen by ourselves? They are joined in the combination, some from incorrect views of government, some from corrupt ones, sufficient voting together to outnumber the sound parts; and with majorities only of one, two, or three, bold enough to go forward in defiance. Are we then to stand to our arms, with the hot-headed Georgian? No. That must be the last resource, not to be thought of
{148}
until much longer and greater sufferings. If every infraction of a compact of so many parties is to be resisted at once, as a dissolution of it, none can ever be formed which would last one year. We must have patience and longer endurance then with our brethren while under delusion; give them time for reflection and experience of consequences; keep ourselves in a situation to profit by the chapter of accidents; and separate from our companions only when the sole alternatives left, are the dissolution of our Union with them, or submission to a government without limitation of powers. Between these two evils, when we must make a choice, there can be no hesitation. But in the meanwhile, the States should be watchful to note every material usurpation on their rights; to denounce them as they occur in the most peremptory terms; to protest against them as wrongs to which our present submission shall be considered, not as acknowledgments or precedents of right, but as a temporary yielding to the lesser evil, until their accumulation shall overweigh that of separation.

A little Humor - from the Maxine Cartoons

Over five thousand years ago, Moses said to the children of Israel ,
"Pick up your shovels, mount your asses and camels, and I will lead
you to the Promised Land."

Nearly 75 years ago, (when Welfare was introduced) Roosevelt said,
"Lay down your shovels, sit on your asses, and light up a Camel, this
is the Promised Land."

Today, Congress has stolen your shovel, taxed your asses, raised the price of Camels and mortgaged the Promised Land!

I was so depressed last night thinking about Health Care Plans, the
economy, the wars, lost jobs, savings, Social Security, retirement
funds, etc .... I called a Suicide Hotline.

I had to press 1 for English.

I was connected to a call center in Pakistan . I told them I was suicidal.

They got excited and asked if I could drive a truck......

Folks, we're screwed!

Trader Dan on King World News Markets and Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals Wrap where we discuss the past week's market action.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/11/17_KWN_Weekly_Metals_Wrap.html

The Decline and Fall of America

Last week, the day after the election, I penned an article that I entitled, "America Votes for National Suicide". That article has received more views than anything I have ever written not only on this site, but on the other sites that I formerly wrote for. Apparently it has struck a chord, resonating with a large block of readers.

There was a small minority who attributed the article to nothing but a mere case of "sour grapes", the bemoaning of an election loss.  Disclaimer - I was not originally a fan of Governor Romney but compared to the current captain of the ship America the Titanic, he would have not pushed the speed level on the engine controls to warp speed as the current occupant of the White House is doing.

I said at the time that I make my living as a commodity trader which means by nature of that occupation I must be able to ascertain trends in ADVANCE of the wider public if I am to be successful. That sort of thing tends to color the world at which one looks. In other words, I cannot help but to see the society at large in terms of trends. My reason therefore for writing the article was that I see what I believe is an irreversible trend in this nation, a trend which will result in its death as a Constitutional Republic.

Those on the left will of course rejoice at such an occurence. Those of us who cherish the nation as it once was are left with but few options. I still maintain that the best option is a splitting of the nation. The bare minimum could be a loose confederacy of states whom, in a united fashion, standing upon 9th and 10th Amendment grounds, refuse to implement any legislation proceeding from Washington which oversteps the Constitutionally granted powers of the federal government. The term is "Nullification". This would of course apply to such out-of-control federal agencies such as the EPA, ATF, HHS, TSA, etc.

I will be writing more on this in the near future as time permits.

That being said, I recommend that you read the following article in its entirety.

http://townhall.com/columnists/marvinfolkertsma/2012/11/17/the_decline_and_fall_of_america/page/full/

It is entitled, "The Decline and Fall of America" ( History buffs will immediately be mindful of Gibbons classic, "The Decline and Fall of the Roman Empire" ). The writer quotes from a Mancur Olson, an economist who published a book titled, "The Rise and Decline of Nations", in which he details the mechanisms involved in the decline in any great world power. It is frighteningly insightful. Once you understand this, the TREND in this nation will be easily discernible.

Here, in a nutshell, is the most powerful line in the article to remember:

This means nothing less than it says: a group will kill its host, the American republic in this case, before relinquishing even a modicum of benefits for itself.


If you want to see a microcosm of this principle in action, just look at what the unions did to the makers of Hostess Twinkies. They made sure it could not pull itself off the ground and now 18,000 of them are without a job.

On a local level just look at Detroit, Michigan. On a state level, watch California destroy itself within a decade. As they go, so too will our beloved country.

I do not know which is more tragic, the fact that the nation is now well down the road to permanent decline or the fact that so many, particularly those responsible for it, still remain completely blind to its ruin.

HUI holds at the last level of Chart Support

The barrage of selling that whalloped the mining sector seemed to have finally abated here at week's end. No doubt some of this was tied to shorts covering some very profitable positions. Additionally the rebound in the S&P 500 took the sector higher with it. I would think that some value based buyers were also at work here.

Regardless, the index bounced at the very last level of chart support shown. Additionally, the spike low in today's session went right back to the former downtrending line noted that was breached back in early September, a breach that I might add took the index sharply higher.

Oftentimes one will see a market that has broken out to the upside, run back lower and retest the broken downtrend line, touch it, then bounce back off of it giving evidence that the sellers have met up with sufficient buying to stymie any further downward move. That can be the end of the selling. We will see if that is indeed the case next week.

To give the bulls some breathing room, I would like to see this index move back past the 457-460 level for a bare minimum.  A stronger confirmation would be a move back above 475.

Word came late in the session today that some supposed progress was within reach of some sort of compromise to deal with the upcoming fiscal cliff issue here in the US. I am not so confident that anything that emerges will have the least bit of impact on the problem but then again investors were perhaps looking for some reason to book profits on winning short positions in the equity markets ahead of the weekend.

Gold Supported by Rockets in Israel

Gold continues to hold above support (see the earlier post from yesterday) as rockets flying in Israel and explosions are not something that even the most stalwart gold bear wants to deal with, especially over a long weekend during which anything could happen.

If we come into trading in Asia on Sunday evening here, and we have a further escalation over in the mid-East, gold will continue to attract buying. If we see tensions fade, then gold will likely move lower.

The mining shares appear to have finally attracted some decent buying after being beaten to a bloody pulp for most of this week.

The divergence between the shares and the price of the metal continues however so perhaps we will see a closing of the gap with the shares moving higher and gold either holding stable or drifting somewhat lower.

It is difficult to say which right now but the gap will be closed.

Do You Want to Stop Obamacare in your State?

Those of you who are opposed to this abomination and wish to prevent the destruction of what is left of our Republic, please read the following article. If you are fortunate enough to live in a red state, there is still a chance to see the states stop this thing dead in its tracks.

Please, please, pick up the phone and call your Governor's office and urge them to say NO to setting up the state run exchange. If the states refuse to implement this thing, it will wither and die on the vine.

This is how the States are able to stand on the Tenth Amendment and refuse to comply with a power grab by Leviathan on the Potomac.

http://www.redstate.com/2012/11/16/will-gop-governors-save-us-from-obamacare/

We all understand that elections have consequences and that there are certain issues which are ceded with an electoral loss.  Obamacare is not one of them.
If Obamacare is allowed to survive, then our Constitution has no meaning and our Republic is finished.  It will engender a takeover of 1/6 of our economy, create permanent dependency, induce unsustainable inflationary pressure on the cost of healthcare and health insurance, and saddle the next generation with crippling debt.  Every intervention, program, and mandate prescribed under the 2010 healthcare law, if left intact, will limit freedom, increase insurance premiums, create more dependency, and lead to rationed care.

Quote of the Day

"Society in every state is a blessing, but government, even in its best state, is but a necessary evil; in its worst state an intolerable one." --Thomas Paine

Rancher/Farmers - Further Casualities in the War Being Waged by the Left

Take a good, hard look at the following article and note particularly way down in the 10th paragraph:


Many Democrats argue the tax promotes equality among classes,
Read more: http://www.foxnews.com/politics/2012/11/16/ranchers-farmers-brace-for-death-tax-impact/#ixzz2CP5PO11S

If you will recall that article I wrote last week after the election, I mentioned that the left in this country takes as its motto the rallying cry of the French Revolution, "Liberty, EQUALITY, Fraternity".

They will not rest until they have reduced every citizen in this nation to the same level of misery and ruin that their policies are already producing in the land. That is their idea of Equality - an EQUALITY of IMPOVERISHMENT AND MISERY.

The vision of the Founding Fathers, and that which made our nation the most powerful, richest and most free nation ever seen, was an EQUALITY OF OPPORTUNITY. Where else but in America could a person of common means, with dogged grit and determination, running on his or her dreams, combined with hard work and sacrifice, reach greatness and levels of success beyond even their own wildest imagination?

That will be coming to an end in this land if the left is not stopped in their religious quest to equalize all.

I count among some of my friends, both ranchers and farmers who toil long, long hours through all kinds of weather and through all kinds of challenges to work their land and produce our food. Do you think that those leeches on the left, sucking the blood out of their weakening hosts, could give a rat's ass about what they are doing to the average farmer or rancher as a result of their Ahab-like pursuit of an imaginary earthly paradise? Of course not!

Just one more reason for an amicable divorce. Leave them half the nation and let them suck all the blood out of that until there is none left. Then maybe, just maybe, the fools will learn something, but I doubt it.

Big Jump in Federal Reserve MBS Debt Purchases

After questioning last week where the Fed's QE3 had gone, it seems as if we got an answer this week. This afternoon's report on the Fed Balance Sheet shows a sharp increase in Mortgage-Backed Securities holdings on their Balance Sheet, $37 Billion to be exact.

Keep in mind that the Fed had announced monthly purchases of $40 billion in MBS debt each and every month so it looks like they just made a big chunk of that for November.

Based on what I am seeing in the US equity markets, that $40 billion is not going to do much good as the stock market continues reeling from the election results, the upcoming fiscal cliff and the woes in the Euro Zone.

Gold Lower but Holding Above Support

Considering what looks more like a non-stop avalanche of selling in the mining sector, the yellow metal is holding relatively well. It has bounced off the first level of support shown on the price chart that comes in very near to the $1700 level.

Failure to remain above this level will allow the market to move lower towards the $1680 region where it can be expected to find some buying support.

To get the least bit of excitement going, gold will have to clear $1740 and remain above that level before it rattles anyone other than the most short-term bears.

Today, a story out of the financial press indicated that demand for Gold had fallen somewhat over the 3rd quarter. The World Gold Council indicated a drop of 11% over the same period last year. That seemed to spook some buyers. Throw in the fact that crude oil was lower, in spite of the simmering tensions in Israel (crude stocks are building significantly due to the pathetic condition of the economy), and any fears of inflation took a back seat today.

It also did not help the cause of the metal with the S&P 500 continuing to reel under selling pressure. Today was not a good day for Apple and that set the tone for most of the market.

We'll see how the metal closes out the week tomorrow.

Ron Paul Comments on the Secession Movement

God bless this man!


Ron Paul: The Founders Believed in Secession
“Secession is what we did when we left England, it was a wonderful thing”


Paul Joseph Watson
Infowars.com
November 15, 2012
Congressman Ron Paul reacted to the secessionist movement sweeping America today by reminding people that the United States seceded from the British empire, while slamming those who suggested their fellow Americans should be deported merely for talking about the idea.

http://www.infowars.com/ron-paul-the-founders-believed-in-secession/

Ron Paul's Farewell Speech on the Floor of the House of Representatives

All lovers of liberty should take the time to listen to Dr. Paul's final speech on the floor of the US House of Representatives. I sincerely doubt I will ever see his likes again but one can always hope against hope. His commitment to liberty is indisputable. Perhaps his son will pick up the banner in 2016.

I cannot but feel a deep sense of loss at a principled man who served his country and his citizens and somehow managed to keep alive his principles in the midst of that moral cesspool on the Potomac.

You may not agree with all of this views but at least you knew exactly where he stood and WHY.

The speech is a bit long for we in this generation whose attention span barely exceeds that of a gnat but grab a cup of coffee or a cup of tea and tune in to hear someone who makes sense and really means it!

Pay close attention to Dr. Paul's comments on the home schooling movement and how it is the remedy for the future generation  of lovers of liberty. The government controlled public school system is responsible for the economic and political ignorance that now has the current generation firmly in its grasp.



http://www.washingtonpost.com/blogs/the-fix/wp/2012/11/14/ron-pauls-farewell-speech-video/

HUI Chart UPDATE

This is the evening chart update of the HUI after it was further shellacked during the afternoon hours of today's trading session when the S&P 500 broke down through its technical chart support level.

As you can see on the updated chart, the HUI has one level of chart support left before it retraces the entirety of its move higher from the late June/early July rally.

S&P 500 Drops through Support

The S&P 500 was attempting to hold near the low formed last week that came on the heels of the post-election collapse in the US stock markets.

It just so happens that the low was in the very near vicinity to the critical 50% Fibonacci Retracement Level of the entire rally of the late May/early June swing low.

It bounced away from that level yesterday but today, down it went.

The index is now poised to drop all the way to the next Fibonacci retracement level, the 61.8% level, or the 1340-1344 region.

Failing to hold there, it should retrace the entirety of the rally meaning that we could very well be looking at a drop through the 1300 level on down towards 1275 or lower.

The onus is now on the bulls to hold the next level of support at 1340 if they have any chance of regaining the near term advantage, which clearly lies with the bears.

HUI Under Intense Selling Pressure

EVer since Newmont and Barrick reported "less than stellar" earnings, (and that is being generous with my choice of words), the mining sector has not been able to shrug off the selling pressure coming from both disappointed bulls as well as opportunistic bears.

The technical posture of the market has deteriorated but if the index is able to stay above the former downsloping trend line which it took out in early September, the long term bulls will be okay.

It is not uncommon to see a market breach a trendline and then come back to retest it before moving higher. If we get such a test, it will prove whether or not the resolve of the bulls remains intact and whether they still see the mining sector as the strong value that they did a couple of months ago. I think it is an obvious statement that the Newmont and Barrick news shook their confidence in a big way.

There is a bit of chart support near 448. If that cannot stem the bleeding in the sector, the most likely target for the next support region arises near 440.

The problem that the sector has right now is that the disappointing earnings numbers, combined with strong weakness across the broader US equity markets, have given rise to that infernal ratio spread trade of the hedge funds, a trade which I might add has proven to be wildly successful for them even as it has produced massive frustration among the long-term oriented holders of these companies. It has also produced dramatic UNDERVALUATION of the shares in selective companies at times. This looks to be once again developing with the stubborn refusal of the Comex gold and silver markets to follow the shares lower.

This dichotomy between the shares and the metals cannot go on indefinitely however so something will eventually give. Either the metals will follow the shares lower or the shares are going to rebound.

given the fact that the S&P 500 is flirting dangerously with a critical support level, it is going to take a near Herculean effort on the part of the mining sector bulls to drive these share prices back higher. If we do get one of these "miraculous" rebounds in the S&P 500, especially in the last hour of trading, I would look for selling pressure on the mining shares to dissispate.

Secession Petitions Now Number over 610,000 Signatures

I will try to keep posting an occasional tally of the number of signatures on the ever-growing list of states from which secession petitions have been submitted.

Based on the rate of increase (Texas is closing in on the 100,000 mark), I suspect we will be up near one million before the week is out.

Grain Prices Continuing to See Selling Pressure

Continued weakness in the grain complex is helping to keep pressure on the Continuous Commodity Index or CCI. There looks to be a change of ownership occuring in this complex with hedge funds bailing out of a sizeable long position and commercial interests obtaining long side hedge coverage.

We have this selling occurring not only in the grains, but also in the metals and the energy sector and some of the softs. This is providing some headwinds to the precious metals complex even with the equity market bulls trying their best to jam prices higher and prevent a further technically related sell off from deepening.

US Dollar on the Receiving End of Safe Haven Flows

As much as it pains me to write the words, US Dollar and Safe Haven, in the same sentence, the rush into the Dollar is evident as the fallout from the US election, combined with fresh fears surrounding Greece and other parts of the EuroZone continues unabated at this point.

This is perhaps one of the main reasons that the big shorts over at the Comex have been able to thus far stymie the yellow metal near the $1740 level.

Note on the chart below that the US Dollar is working steadily higher after having managed a strong push through a heavy resistance level near the 80.50 region. It has now pushed to the 100 day moving average, a level at which we would expect it to encounter some profit taking by speculative longs in the market. However, the above mentioned combination seems to be preventing any serious long liquidation at the moment as traders are more interested in owning the Dollar, warts and all, than they are the Euro at the moment.

Note also that the 20 day moving average has now crossed firmly above the 50 day moving average which is also flattening out and now looks as if it too wants to turn higher. There is an additional bit of chart resistance coming in near the 81.75 level that might stem its advance should the bulls keep pushing it higher.

The point I wish to make here is that the broader US equity market is continuing to head lower as the election results have guaranteed a decidedly unfriendly business climate for the foreseeable future. I am writing this during the Asian session but the S&P 500 is trading lower and once again looks as if it wants to test that critical 50% Fibonacci retracement level of the rally beginning earlier this past summer. If the bulls cannot force a quick rebound as they did last Thursday, the index will more than likely drop to at least the 1343 level.

With some of the risk trades being removed, the US bond market is also moving higher shoving interest rates lower in the process. The long bond is back up in nosebleed territory as it is once again testing the all time highs. Clearly, the SLOWING GLOBAL GROWTH THEME is back into play, again, for the umpteenth time. It seems as if we are never to be rid of this damned incessant tug of war between the deflationists and the inflationists. Now that the US public has voted for 4 more years of the same crap, it is difficult to see any of this changing meaning we are going to have another 4 years of incessant volatility and more market madness as the Fed fights the forces of deflation.

Look at what has happened to the yield on the Ten Year Treasury Note once again. If you want to know which side is prevailing in this battle between the deflationists and the inflationists, just keep an eye on this chart as it will tell you all that you need to know.

One last chart, it is a gold to S&P 500 ratio chart. It is evident which of the two has been the better long term investment. A rising line means that gold is outperforming the broader US stock market. The S&P 500 has outperformed gold during some brief intervals through a good portion of 2009 and especially in the second half of last year but since the middle of this year, gold has been holding up much better than the stock market.

Gold Stymied Once Again at $1740

Gold continues to attract more sellers than buyers near the $1740 level once again reinforcing that zone as the next important chart resistance level that needs to be taken out if the market is to have a legitimate chance of making yet another run to $1800.

At the present time, it continues to retreat with dip buyers planning their next point of entry. Keep in mind that a lot of guys were leery about chasing this market higher after it first collapsed in price about 10 days ago and then came roaring back after the US election. That sort of extreme volatility is enough to chase away even the most battle-hardened of traders.

There should be a pretty good floor of support as the market descends lower towards the $1700 level.

Talk of an Amicable Divorce Picking up Supporters

Last week I penned a commentary noting what I believe to be an irreconciliable division growing within these DisUnited States of America. That division, in my opinion, cannot be bridged because it includes TWO MUTUALLY EXCLUSIVE political ideologies.

One consists of a vision of limited, Constitutional government, as bequeathed to us by our Founding Fathers, and which gave rise to the most free, most prosperous and most generous nation that this planet has ever seen or will likely ever see again.

This philosophy has at its core the ideas espoused by John Locke, namely, natural law and that which flows from it. I might add here that under this system, men are free to PURSUE HAPPINESS, not necessarily achieve it.

The other consists of a vision of an increasingly powerful and intrusive centralized government, patterned after the current European statist model, in which the idea of God-given, unalienable rights is a foreign and outdated concept. Under this model, the rights of the individual take a back seat to some current notion as to what is in the best interests of the majority of the people, which notion is of course to be decided by the current holders of political power.

The latter vision has as its roots the rallying cry of the 18th century French Revolution; "Liberty, Equality, Fraternity". Under this vision, government or the state exists to be the "GREAT LEVELER", removing inequities in wealth and producing EQUALITY amongst all the citizenry. Inherent in this theory is the concept that those who are wealthy have achieved their wealth and success at the expense of the wealth and happiness of others who are not wealthy. This is where the rise of class warfare and the pernicious theories of Marx have their origin.

While I understand how startling and how shocking it must be to some to hear talk of the dissolution of the Union, I am only stating the obvious - the two sides in this nation are in a state of near perpetual hostility towards each other because the ideas that they espouse are repugnant to the other side.

Instead of the melting pot, "E Pluribus Unum", (out of many, one), America is being Balkanized along lines of ethnicity, class, gender and a host of special interest groups. Public sector unions are now clearly pitted against those whose taxes pay for their salaries and benefits causing further resentment and further fueling the flames of resentment against their feeding at the public trough.

Time constraints prevent me from further detailing the growing divisions in this nation but suffice it for now to say that more and more there is talk of an amicable divorce between the various states in this union. This is not something to be taken lightly. Can anyone imagine this sort of thing a mere 20 years ago? Talk of separation is a last resort, an idea born out of complete frustration. Even at that, amazingly, there are now TWENTY separate petitions from the citizens of TWENTY SEPARATE states to the White House requesting a peaceful separation from the Union. Interestingly enough, by the White House's own rules, any petition reaching a required 25,000 signatures is required to be considered by a committee.

In the time that it has taken me to pen these comments, the petition from the state of Texas has already garnered another 400 signatures ( I am not that fast of a typist). The petition from Louisianna, which seems to have been the first of these petitions, is well on its way to reaching the necessary 25,000.

I think it can be safely said that these petitions will be given about 15 seconds of consideration by the current administration before being rejected but the mere fact that this sort of thing is becoming more acceptable to a growing number of citizens, is evidence that this nation is going down the same path that led to the breakup back in 1861.


https://petitions.whitehouse.gov/petition/peacefully-grant-state-texas-withdraw-united-states-america-and-create-its-own-new-government/BmdWCP8B

So Where's the QE3??? (Updated)

As you all know by now, the Federal Reserve boldly announced plans "to boldly go where no man has gone before" and purchase each and every month, the tidy sum of $40 BILLION in US Mortgage Backed Securities (MBS ) to "aid the recovery". This was supposed to begin in September of this year and continue on out as far as the eye can see, into infinity, as my friend Jim Sinclair has stated, or until economic conditions warrant a cessation of the program.

Here is the problem however. I have been closely monitoring the balance sheet of the Fed each and every week and I simply do not see it! Take a look at the following chart I have constructed of the overall balance sheet but detailing also the sum of mortgage backed securities contained therein.

Can you see how both lines have basically flatlined since the cessation of QE2 last year? Does anyone out there see a climbing MBS line on this chart especially to the tune of $40 billion higher each month? I sure don't!

Here's a closer look at just the Mortgage Backed Securities listed on their Balance Sheet. Does anyone looking at this see any sort of SUSTAINED move upward on this graph as of yet?

By now we should have seen at the very least a jump of $40 billion for the month of October. We did get some buying seeing a jump from 835,000 to 868,069 ( a rise of $33.1 billion - less than $40 billion) but then we fell right back again. Obviously the Fed is selling some of these assets as they have been doing for some time now but in my mind, this defeats the entire reason behind an addtional stimulus effort involving $40 billion in new purchases each and every month. It may be that if this is the trend (purchase new MBS's and add to the balance sheet while selling some existing MBS's and remove those from the balance sheet) that the actual QE3 effort is going to fall short of an increase of $40 billion each and every month.

Here are the big questions which I hope someone out there who is more versed in these things than I am can answer - Where's the QE3 going? What is the Fed buying or are they even buying anything? If they are not buying, why not? If they are buying, why is the size of their balance sheet not increasing by at least the tune of $40 billion each month? How many existing MBS's already on their balance sheet prior to the onset of QE3 are they planning on selling?