"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


Saturday, October 8, 2011

Precious Metals continue Range Bound - Ditto for the HUI

Both silver and gold continue putting in wide-ranging price swings on a day to day basis providing plenty in the way of volatility but when the dust is settling at the end of the week, neither metal can escape its range bound trade.

What we are witnessing on the price charts is merely the pictorial form of uncertainty that currently is reigning over the minds of traders/investors. The long term bullish trends for both metals remains intact but short term fears over further risk aversion trades and hedge fund long liquidation in the commodity sector is preventing both the bull camp and the bear camp from gaining a tactical advantage.

Gold is unable to break through overhead selling resistance near the $1680 level but continues to attract good-sized buying, especially from Asia, on dips towards the $1600 level and below.

Silver runs into selling above $32.50 from nervous longs as well as opportunistic shorts. On the downside it is attracting interest from buyers when it moves into the region near $30 and below.

This range trade in the metals is keeping the mining shares in a similar pattern with the current markers at 540 in the HUI on the topside and 500 on the bottom. Trips below 500 on the HUI are generating good buying among the shares keeping this index above the 485 level.

The cross currents remain ample - on the European front many traders fear that the ECB and the European leaders are not going to act quickly enough or with enough vigor to prevent their version of the Lehman Brothers meltdown from occuring. Whenever the news seems to favor more decisive action on their part, traders/investors are cheered and plunge into equities and commodities on the long side. Whenver the opposite is true, out go stocks and commodities and everything else that does not look like a US Treasury.

Long term such action on the part of the ECB is inflationary and will end up debauching the Euro in the same fashion that QE has done and will do to the US Dollar if and when it will be employed again over here. Short term none of these hedge funds gives a hoot about any of the long term ramifications. They will try to squeeze every nickel out of such an event if they can and leave the political and monetary leaders to fix what they are eventually going to destroy by this imbecility. Call me a simpleton but I believe human actions should carry implications whether those actions affect only individuals or even countries. Rewarding stupidity, greed and folly is a prescription for more, not less, of the decisions that led to such crises in the first place.

In the fading West, we have reached a point in our history where political leaders want all the benefits of capitalism but none of its drawbacks. Those drawbacks include allowing poor decisions to be met with failure. When the lessons that result from poor choices are painfully learned, those same choices and actions are generally avoided in the future. Not any more - no we can have all the gain without any pain thanks to this magical fairy-tale land created by monetary officials who seem to believe it is their God-ordained destiny to save men from themselves.

Would that it were that easy! We could create heaven on earth and absolve men from any consequences for their poor judgment. Unfortunately there now exists a permanent class of individuals who cheer this sort of thing on not realizing how harmful it is in the long term. It enlarges the scope of government and allows it to intrude into the cleansing process that MUST occur in a capitalistic system if that system is to function efficiently. The STRONG survive; the WEAK perish. That may seem brutal on the surface and in some manner it is but leaving human emotion aside, it is this weeding out process that allows for efficiency and ultimately rewards good judgment and sound policy.

I survey where we are today with this constant enlargement of Central Bank activity and increased interference by political leaders and I often wonder whether a Steve Jobs could create a company like Apple, step down and then come back and lead it back to its place of prominence today. He did that through his sheer genius and ruthless insistence on creating products that consumers would want.

Imagine a world in which the political leadership finds an Apple losing market share, fading from its former glory and lacking creativity only to hear the company's leadership begging and pleading before the ruling powers about how it is too big to fail and needs government assistance to keep it viable "because of all the jobs it creates". Then imagine those same political leaders providing it taxpayer funding (from borrowed money) to give it a lifeline and rescue it. Instead of the company being forced to take a hard look at itself and get its creative juices flowing, as Apple did under the helmship of Steve Jobs, it takes the taxpayer money and survives but does not thrive by introducing a new line of products that consumers desire.

That is not capitalism; it is more closely akin to fascism or as some prefer, crony capitalism, which truth be told, is no capitalism whatsoever. Either a company stands on its own merits or it doesn't. How many family-owned businesses have we see fail in the last few years? There has been no rescue plan for them. If anything the federal government has made their life even more difficult by piling on more regulations and now attempting to saddle them with a huge boondoggle known as Obamacare? That is where we have now come in our journey here in the West - a system where government picks winners, allows fools to thrive in spite of themselves and works to undercut small business. I wonder what our Founding Fathers would think were they to see this now.

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the King World News Weekly Metals Wrap.