"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


Thursday, March 21, 2013

Cyprus Fears Rekindled?

Talk today was all about the resurgence of fears related to the situation in Cyprus. The US equity markets were heavy throughout the session as a result but from what I could tell, there was not that much demand for safe haven US Treasuries. Yes, those were higher but considering the extent to which the concerns surrounding Cyprus were in the headlines, I would have expected a much stronger tone to the US bond market.

Also, remember when the news first broke over Cyprus over last weekend and the markets opened for trading Sunday night here in the US. The Euro was absolutely mauled as a result. Today, while it was weaker, it refused to stay below the 1.29 level. From what I can see, there apparently is not that much worry over the Europe if the common currency will not stay down below 1.29 on the Cyprus news flaring up again.

The Yen on the other hand was acting as if the end of all things was upon us as it completely erased yesterday's sharp losses soaring over 150 pips at one point today. For the life of me I do not understand why anyone would call the Yen a "safe haven" currency but then again, I do not understand why anyone would call the US Dollar one either. Both nations are printing TRILLIONS of these respective currencies into existence and yet this is somehow a safe haven?

Like I and many others have said - there is nothing rational about markets, not any more.

Gold caught a firm bid today and managed to stay above $1610 for most of the session which is promising. It needs to prove it can clear resistance near $1620 if the bulls are going to be able to seriously squeeze that extremely large hedge fund short position. Frankly, I am not sure what it is going to take to push gold through this level if the Cyprus news and the reverberations related to that cannot do it. Whoever it is that is doing the selling up near the session highs is strong handed and will take some serious force to dislodge.

Gold in Euro terms is showing signs of life having broken out to the upside of its downtrending channel. It is no longer making a series of lower highs and lower lows but has stabilized and looks to have forged a bottom. With Yen gold strong, Sterling Gold looking decent and now Euro gold joining the chorus, the bears will have to dig in deeply to prevent the respective overhead chart resistance levels from giving way. We know that there is a deep pocketed seller present in New York - is that the only place?

Resistance in Euro Gold is near today's high at 1250 followed by 1270 and then 1280. After that, Gold has a shot at testing psychological round number resistance at 1300 euros.

U S Dollar priced gold is shown below on a two hour chart where the selling effort can be more clearly seen.


  1. Dan, whatever has the markets quiet and unconcerned, certainly is a big and intimidating creature. The stage where the markets size up this menace, remaining "motionless" or frozen, appears about to end in reanimation of this cartoon from my POV.
    And maybe Marketwatch is also done "crying wolf"?

    Paul B. Farrell
    March 21, 2013, 9:42 a.m. EDT
    Bond crash dead ahead: tick, tick ... boom!
    Commentary: ‘Investors have no idea what’s about to happen’

  2. Link here--

    Paul B. Farrell Archives | Email alerts

    March 21, 2013, 9:42 a.m. EDT
    Bond crash dead ahead: tick, tick ... boom!
    Commentary: ‘Investors have no idea what’s about to happen’

  3. Dan,
    Unbelievable, It appeared for a bit that we might just start some serious short squeezing, Green Shoot jumping on the old Kitco chart. Anyhow other positives:
    ^HUI cleared your 360.The mining stocks saw some life on above average Volume. Maybe, just maybe, I can get some air back in these tires. Been rolling down the road deflating for some time. GO MINERS, GO GOLD, GO CYPRIOTS, tell LaGarde to take a hike, get out the Heidlebergs, get the plates, and a one type devaluation of your accounts gives you options in the future. If you give up (no clear title determined) to the Russians, and/or the Eurolands, you lose self destiny!!!!

  4. Simple...fear hence non response same with savers in EU disbelief, deluded hope "all will be fixed...again" all for just a little while.

    Deer in the headlights and it aint Toyota Yaris (pun intended) which is coming down the road but something much much bigger...

  5. We can thank Bob Mugabe for giving us a taste of what may come.
    My sister who lived in Zimbabwe has seen it all before. Bank runs - banks with no cash - inflation running at thousands of percent - no fuel at pumps - no food in shops. Of course it was in Africa so who cared. Now its in the back yard - watch the worried little faces pressed up against the glass.

  6. Dan,
    This is what struck me most from your posting: "I am not sure what it is going to take to push gold through this level if the Cyprus news and the reverberations related to that cannot do it."

    Here we are on Friday, Cypress is in worse shape / collapsing (after its banks "passed" stress tests a few months ago) and Gold is -$10, the Euro +.40% against dollar. This after of a week where we also had the Fed reaffirming QE ad infinitum.

    To put it succinctly, all the scenarios for which one owns gold as insurance are coming to pass, yet gold is not responding. It is like being in the midst of a Cat 5 hurricane and having hurricane insurance premiums actually go down!

    1. I would say at present....their is a large foot on the throats of the market. Benny, Jamie, Lloyd, and others. Once the hedge funds recognize the fatal ways of their errors, then and only then will the upheaval of their ways turn around..

  7. Mugabe in Zimbabwe must be steaming right now.

    He printed trillions and it turned out to be a disaster.

    Bernanke is now printing trillions with Paul Krugman begging for more, and as a result,

    a) Gold has entered a new bear market while the Fed Balance sheet gets hockey sticked into Outer Space

    b) Inflation has become non-existent, some commodities like coffee at multi-year lows

    c) 10-yr. Interest rates at 50-year lows for 8 consecutive monthly closes below 2%

    d) Stock markets hitting all time record highs

    e) The wealthy are now becoming even wealthier, with Jamie Dimon boasting that "I'm richer than you"

    f) The "Too Big To Fail" banks are now even bigger and more powerful

    g) The "Derivatives Colossus" is growing exponentiall, with numbers so high you can't even count it any more

    h) The U.S. Consumer is now in the midst of one of the greatest spending binges of all time, paying up to $299 for new Retro Nike Air Jordans with that stock now hitting record highs.

    I mean really, economic historians must be looking at all this with their mouths agape, seeing history in the making.

    Poor Mugabe must be fuming mad, wondering where he went wrong and how Bernanke got it so right.

    I bet if Ben Bernanke retired and held a symposium in New York like Jim Sinclair did this week, he could charge $100,000 a head easily, with many bankers and economists from around the world anxious to hear how he pulled off the most incredible financial feat in world history.

    1. Mark -
      I get the point, but not the best comparison. USD reserve currency and all.

      I think of BA (even more than the new tech bubble as we expect that) as it is hitting new highs even the flagship 787 has been grounded for two months with no solution in sight.

      Or KBH virtually back up to its pre-crash price even though it has had losses for five straight years.

      It makes all prudent investors feel like schmucks. New normal, Eyeballs/Clicks/Fed

  8. I was asked to write a new mystery novel. "Assasins of Global Greed". It goes something like this. "As the poor mom and pops business continue to get blanked on loan applications, and the owners slowly go bankrupt as the cost of their inventory can no longer be priced in the market compared to the free money groups" slowly eroding their "HOPE". After becoming completely exhausted with limited earnings on their CD's and totally against stock risks, many began investigating the issue.
    After finally learning the truth, they became "Vigalantee Assains" on Wall Street and Central Bankers. The story will have many twists and turns as each new CEO of the large derivative "enslaved" Banks turns up dead. Eventually, the Central Bankers are taken out one at a time. No one could solve the "mercy killings" but eventually calm returned to America, and true Risk Reward reigned. The banks went belly up, Sovereign Bond funds tanked. A new order emerged where caps on individual debt were instituted and aligned with various resources including Gold, Oil, Natural Gas. America prospered.


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