Saturday, December 1, 2012
Trader Dan interviewed on the King World News Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Markets and Metals Wrap. I have returned after taking a brief hiatus for Thanksgiving.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/1_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/12/1_KWN_Weekly_Metals_Wrap.html
Friday, November 30, 2012
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
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
Thursday, November 29, 2012
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.
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
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
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.
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
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.
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.
Wednesday, November 28, 2012
"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.
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.
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