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

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


Tuesday, September 17, 2013

Commodity Sector Stagnating

I mentioned in some recent posts that gold is having trouble sustaining any rallies due to the fact that as far as the bulk of traders/investors are concerned, inflation is a non-issue right now. You have falling grain prices as the market gears up for large harvests and now you have falling crude oil prices as well. Gasoline is backing off as the driving season/ vacation time is finished. The softs are struggling with coffee prices and sugar prices unable to get much going in the way of upside action and you even the livestock markets looking like they are liable to run out of upside. In short, commodities in general are seeing little in the way of strong buying. This is negating any influence from the sector as far as contributions to higher food or energy prices.

As you can see from the following chart, the commodity sector is heading lower once again. Note that the index here is trading below the 50 day moving average ( BEARISH) and is sitting right on top of the 100 day moving average. If it cannot find its footing there, it has more downside to come. That will not help gold but especially will it not help silver which needs an inflationary environment in which to thrive.

Throw on top of that an abysmal employment situation and a Velocity of Money reading that is moving lower, and the ingredients for wholesale inflation are not anyway in sight.

Gold, being a hedge against inflation, is therefore losing one of its fundamental pillars of support.

If we did not know this already, we were reminded of it today when the inflation number for August showed a mere 0.1% increase from the month of July, shy of the 0.2% that the Labor Department reported for the month of July compared to its previous month of June.

This sets up a rather interesting scenario was the markets focus on the upcoming FOMC statement for clues of "THE TAPERING". If inflation is not a threat based on the government's numbers, then will the Fed feel any particular urgency to go ahead and announce any tapering whatsoever? Given the weak employment readings of late, they may just stand pat and do nothing but repeat the same old mantra about monitoring economic data for clues to the economy's strength, etc.

IT seems as if the number floating around out there is a $10 billion reduction in the amount of bond/MBS buying from the current $85 billion. But that may prove to be too much. It is hard to say so we will have to see what the doves say and what the hawks say and go from there. If they announce what amounts to a "dovish" statement, gold may get a bit of a relief rally but until the rest of the commodity sector sees fresh inflows of speculative money, rallies in gold look like they are going to be sold at this point with equities remaining the go-to investment of choice for the big players.

J P Morgan back in the News again

Our old "friends" over at J P Morgan are back in the news again today and not in a good fashion. It seems that the CFTC is looking deeper into the so-called "Whale" issue which concerned events back in early 2012. Comments out of the CFTC noted that they could use the new Dodd-Frank powers granted to some of the regulatory agencies to charge the firm with "RECKLESS" manipulation. Interesting to say the least....

Morgan is thus far balking at any settlement of the issue which would require them to admit manipulation on their part.

I should also note that the CFTC is focusing on a large build up in Morgan's derivative positions...

I will try to keep you up to date on this development.

Gold and silver thus far are yawning at the news as the "Whale" issue was related to the credit default swaps market.

A Change of Pace

Now, for what is really important news.... this one is especially for my readers from down under!

Australian Wild Pig Drinks 18 Beers, Gets in Fight with Cow


Seriously--- after the horrific news from yesterday involving that Naval Yard shooting, I thought that it might be helpful to get a bit of news that is not so saddening. One cannot read the reports from that terrible crime scene without realizing that something is wrong with the culture in this nation. At times it seems as if we are rotting from within. Virtue, honor, decency are becoming the truest of scarce commodities. Once again however we learn about another shooter with mental illness issues - how do these people keep falling through the cracks and are thus enabled to carry out their twisted deeds?