Monday, August 16, 2010

Gold Market Is Not “Fixed”, It’s Rigged,
In 1919 the major London gold dealers decided to get together in the offices of N.M. Rothschild to “fix” the price of gold each day. While this was notionally to find the clearing price at which all buying interest and all selling interest balanced the possibility for market manipulation and self-dealing is inherently systemic in such a cozy arrangement. This quaint anti-competitive procedure continues to this day. In no other market in the world do the major players get together each day and decide on a price. Imagine if Intel, AMD and Samsung were to meet each day to “fix” the price of microchips, or if the major oil companies were to meet each day to “fix” the price of crude oil; wouldn’t there be a public outcry and a flurry of antitrust violation lawsuits? The “fix’ is not open to the public, there are no published transcripts of each fixing, and there is no way to know what the representatives of the bullion banks discuss between each other.

The current London Gold Fix is conducted by the representatives of five bullion banks, namely HSBC, Deutsche Bank, Scotia Mocatta, Societe Generale, and Barclays. The “fix” is no longer conducted in an actual meeting but by conference call. (more)

Technically Precious With Merv

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John Bolton: Russia's Loading of Nuke Fuel Into Iran Plant Means Aug. 21 Deadline for Israeli Attack

By: David A. Patten

News that Russia will load nuclear fuel rods into an Iranian reactor has touched off a countdown to a point of no return, a deadline by which Israel would have to launch an attack on Iran's Bushehr reactor before it becomes effectively "immune" to any assault, says former Bush administration U.N. Ambassador John R. Bolton.

Once the fuel rods are loaded, Bolton told Fox News on Friday afternoon, "it makes it essentially immune from attack by Israel. Because once the rods are in the reactor an attack on the reactor risks spreading radiation in the air, and perhaps into the water of the Persian Gulf."

Russian Prime Minister Vladimir Putin declared in March that Russia would start the Bushehr reactor this summer. But the announcement from a spokesman for Russia's state atomic agency to Reuters Friday sent international diplomats scrambling to head off a crisis.

The story immediately became front-page news in Israel, which has laid precise plans to carry out an attack on Iran's nuclear facilities while going along with President Obama's plans to use international sanctions and diplomatic persuasion to convince Iran's clerics not to go nuclear. (more)

Why the Market Will Keep Falling

Economic indicators have been on the decline for several weeks now. However, it took until this week for investors to flee from equities. To understand why the market took so long to respond to the souring data you have to understand that a Catalyst is usually required for stocks to begin moving in unison with reality. You also have to understand that a Catalyst is the fourth, but most important, of four keys key to successfully timing a move in the market (or individual stocks for that matter):

1. Understand the environment -- Observing what's happening in your neighborhood can help, but it isn't enough. You need a broad view of what's going on with business and economics, in the U.S. and worldwide. Several objective sources can be found on the Internet.

2. Understand when the government and/or Fed will intervene and if the intervention will help -- When the economy is in danger, the government and/or Fed will inevitably intervene to save the day. If you short the market and an intervention occurs the next day, you’re probably going to lose money. (more)


The article of July 22nd on "Smoking Guns of USTreasury Monetization" hit more desks, raised more dust, and brought more attention than expected to the heightened malfeasance in progress using USGovt debt securities. The actions continue without any hint of regulatory notice or legal prosecution. The problem is more diverse than just JPMorgan sale of bonds far beyond their existing supply. Sure, the venerable colossus sold more than $2 trillion in USTreasurys than were issued in the 1990 decade. Records no longer exist. The problem goes far beyond the giant bank, which gobbled numerous other banks in the course of its reign, to become an oligopoly cog within the USGovt today. See Chase Manhattan, Chemical Bank, Manufacturers Hanover, and Bank One. Any competent student of financial economics can see that such merger is part & parcel of the Fascist Business Model, with climax merged union with the state, and certain side effect benefits of subterranean license in numerous markets like silver. JPMorgan cannot be fixed by the process any more realistically than an angry man with a vengeful heart can carve out his own cardiac pump in order to enjoy a better day. Thus no solution exists. (more)

Options Play: Wheat Could Be Topping

After the big run up in Wheat prices the market looks to be settling down for either sideways action or a correction.


Fundamentally, in my opinion unless there is any fresh bullish news to move the WHEAT MARKET higher it seems as though this market could be topping out or poised for a correction to the downside.

Technically, I see the short term trend in WHEAT FUTURES breaking below the 9 day moving average indicating the the short term trend is no longer up. There has been 3 closes below the 9 day MA on diminishing volume indicating the bullish momentum is slowing. See daily chart below. (more)

Here Are 5 Reasons The Unemployment Rate Will Soon Start Heading Higher

This morning, in the "Negative News Flow" post, I noted that the unemployment rate will probably start ticking up again soon.

Here are a few reasons why I think the unemployment rate will increase (some overlap):

1) The main reason is the general slowing economy. There is a general relationship between GDP and the unemployment rate (see Okun's Law), and since I expect a 2nd half slowdown (from a sluggish 1st half), I also expect few payroll jobs to be added in the 2nd half - and that suggests the unemployment rate will rise.

2) With the end of the housing tax credit, I expect residential construction employment to decline further over the next few months. (more)

'Junk' Bonds Hit Record

Wall Street Journal,

U.S. companies issued risky "junk" bonds at a record clip this week, taking advantage of keen investor appetite for returns amid declining interest rates and tepid stock markets.

The borrowing binge comes as the Federal Reserve keeps interest rates near zero and yields on U.S. government debt are near record lows. Those low rates have spread across a variety of markets, making it cheaper for companies with low credit ratings to borrow from investors.

Corporate borrowers with less than investment-grade ratings sold $15.4 billion in junk bonds this week, a record total for a single week, according to data provider Dealogic. The month-to-date total, $21.1 billion, is especially high for August, typically a quiet month that has seen an average of just $6.5 billion in issuance over the past decade.

For the year, the volume of U.S. junk bonds has exceeded $155 billion, 80% higher than in the year-ago period and easily on pace to surpass the record $163.6 billion total for 2009. (more)

An Argentina-like Economic Crisis

The United States' economic decline precariously resembles Argentina's economic collapse, which started in 1998 and landed Argentina in a depression by the end of 2000. What began in Argentina as a recession mushroomed into a full-fledged depression due to bad economic and monetary policy. The Obama administration and its congressional Democrat lackeys are on the precipice of following Argentina's disastrous economic and monetary policy decisions.

Arguably, the United States economy has been in a two-year-long recession, and while some may posit that the country has started an economic recovery, others suspect the country will plummet into a deeper recession, or perhaps a depression. In the past two years, the United States government instituted economic and/or monetary policies detrimental to American's short- and long-term economic prosperity.

  • $700-billion TARP bill.
  • $787-billion economic stimulus bill the president deemed necessary to keep unemployment under 8%.
  • $410-billion Omnibus bill with 9,000 pork-barrel projects.
  • $1.3-trillion deficit in fiscal year 2009.
  • $1.4-trillion deficit estimated for fiscal year 2010.
  • $1 trillion or more for a health care bill that the majority of Americans didn't want.
  • Auto industry bailout with complete disregard to the bankruptcy laws, which turned the U.S. government into an equity owner and granted an ownership stake to the United Auto Workers union.
  • $500-billion bailout of Fannie Mae and Freddie Mac.
  • $145-billion bailout of Greece.
  • Billions spent by the Federal Reserve to purchase toxic assets.
  • $10.6-trillion dollar public debt the day Obama took the oath of office. In nineteen months, the public debt stands at $13.3-trillion (a 25% increase). (more)

FHA now backing apartments in Manhattan with a price tag of $820,000 to $3 million with a 3.5 percent down payment.

The Federal Housing Administration (FHA) was created in 1934 during the Great Depression to give low to moderate income Americans a chance at pursuing the American dream of homeownership. Even in the best of times, the FHA was only a small fraction of the mortgage market as it was never intended to be a big player. Today the FHA now backs 30 percent of all loans outstanding and is quickly burning through its reserves. You would think that the FHA would try going back to its core mission of helping those it initially set out to help. Instead, it is now being used as a backend tool to fund absurd mortgages that don’t fit into any other current government loan programs.

In Southern California, where the median home price is $300,000, 4 out of 10 loans made since May of 2009 have been backed by FHA loans. This is happening in a market that is 65 percent more expensive than the nationwide median home price. Think this is bad enough? Now the FHA will be funding loans for apartments out in Manhattan that have market rates of $820,000 to $3 million. That FHA sure knows how to stick to their mission statement: (more)

Silver Is Ready to Explode!

As this video will demonstrate (Made December 2007, posted February 2008), I have been extremely accurate when it comes to money and financial predictions. Among the things I warned my clients about:

1. The 2001 Stock Market Collapse
2. The rise of the Euro and decline of the dollar in 2001.
3. The housing boom
4. The housing bust
5. The current depression
6. Double-digit unemployment
7. Inflation
8. Start buying gold in 2001. (When it was less than $300 per ounce)
9. Start buying silver in 2001. (When it was less than $4.00 an ounce)
10. Continue buying gold and silver during the last decade.
(Those that listened earned 300% on their money)

I have a perfect record for my financial predictions. I don't tell you this to brag. I tell you this because I want you to understand why you need to listen to me right now. (more)

This Weeks US Economic Calendar

DateTime (ET)StatisticForActualBriefing ForecastMarket ExpectsPriorRevised From
Aug 168:30 AMNY Fed - Empire Manufacturing IndexAug-
Aug 169:00 AMNet Long-Term TIC FlowsMay-NANA$35.4B-
Aug 1610:00 AMNAHB Housing Market IndexAug-151414-
Aug 178:30 AMHousing StartsJul-550K555K549K-
Aug 178:30 AMBuilding PermitsJul-570K573K586K-
Aug 178:30 AMPPIJul-0.1%0.2%-0.5%-
Aug 178:30 AMCore PPIJul-0.1%0.1%0.1%-
Aug 179:15 AMIndustrial ProductionJul-0.8%0.6%0.1%-
Aug 179:15 AMCapacity UtilizationJul-74.8%74.5%74.1%-
Aug 1810:30 AMCrude Inventories08/14-NANA-2.99M-
Aug 198:30 AMInitial Claims08/14-470K475K484K-
Aug 198:30 AMContinuing Claims08/07-4500K4500K4452K-
Aug 1910:00 AMLeading IndicatorsJul-0.1%0.2%-0.2%-
Aug 1910:00 AMPhiladelphia FedAug-