Jim Rogers talks with a laryngitic Maria Bartiromo on CNBC. Highlights:
Ron Paul’s Treasury Sec?
Gold Daily and Silver Weekly Charts – La Douleur du Monde – Most Likely to Go Super Nova
By Jesse of Jesse’s Cafe Americain
“It appears that there is an undeliverable force heading towards an unmanageable object.”
At some point the shysters will lose control of the monetary papier-mâché which they have created. And the subsequent reaction could be epic, with the almost inevitable force of nature, like a tsunami rolling in.
Only a few people understand this. So it could be quite the surprise to many.
In the meantime the bankers and politicians are scrambling for the goodies pouring out of the financial piñata which they cracked open in the financial crisis.
The banks have plenty of gold to lease into the bullion banks, and then on into the markets and as collateral for leveraged paper obligations. But they are running out of silver, which causes me to believe that the silver cartel will break first, and will lead the way higher, as it has been doing. A handful of Too Big To Fail Banks seem to be short more silver than can possibly be delivered without incurring terrific losses, even by today’s distorted standards. From the looks of it, it appears that there is an undeliverable force heading towards an unmanageable object. Further complicating matters is the possibility of a magnitude 9.6 sovereign debt earthquake in the markets.
Unless there is some forced settlement, some draconian government intervention, silver appears to be a leading candidate for the manipulated market most likely to go super nova.
If the equity market does not fall apart over Greece et al., I would imagine that the trading desks will try to stand on the metals until a little closer to quarter end, then its elevator going up. But watch out for a Greek related problem. I am not sure how the markets might react to this if it really is another Lehman like event. So as you might expect I am running a paired trade, and net short into the close.
The dollar chart is a big problematic. I can make a scenario for a break either higher or lower from the chart. I think we will know the move when it comes, but predicting it in advance is a dicey thing, except for the broken clocks.
If the sovereign default situation goes badly there *could* be a liquidation selloff that would impact silver, and to some extent gold. This is why I am holding paired trades that are short stocks and long bullion. I further adjusted the risk downward today, and lengthened the shorts.
Re-published with author permission.
In a recent interview with Bloomberg, James Bullard, president of the St. Louis Fed, offered a blunt warning on America’s disastrous financial trajectory.
Lawmakers and investors shouldn’t take comfort in low U.S. borrowing costs because markets are often “complacent” about the risk from excessive deficit spending, said James Bullard, president of the Federal Reserve Bank of St. Louis.
“When it does blow up it will be too late,” Bullard said in an interview last month in New York. “When markets lose confidence in the U.S. and say that they don’t trust us any more, rates will skyrocket and the crisis will be upon you.”
He’s right, of course. Interest rates can’t stay low forever. If (when) the world does start to lose faith in America’s ability to reign in spending and cut debt, things could get crazy for a while. And quickly.
Mr. Bullard points to Greece as an example. Just a year and a half ago, the Greek 10-year yielded around 5.5%. Today that number is closer to 17%. 18 months later.
Trying to raise more debt at those levels would be ludicrous. Like trying to run a national budget on a high-interest credit card. Unsustainable, impossible. Nobody wants to buy your debt, you’ve sold quite enough already. But thanks.
While it is somewhat refreshing to hear such talk from a sitting Fed president, let’s be real. It’s meaningless, and in actuality Bullard is just one of the more hawkish doves. Hoenig’s on the way out, and he was the closest thing to a senior power-wielding “quasi-hawk” we had.
To say that most of Bullard’s colleagues do not share his concerns would be an understatement. And unfortunately, they’re the ones who call the shots.
Bill Dudley, ex-Goldman director and current head of the powerful NY Fed, who continually reassures us about the recovery’s “self-sustaining” nature, is among the uberly-dovish leaders.
By the way, isn’t it difficult to imagine how one could possibly, in any way, call the current economy self-sustaining? Self-destructive would work. But to say this recovery is organic in any way, as the central bank simultaneously injects historically-unprecedented amounts of liquidity into the market, is borderline moronic.
Interest rates are prices, and they are screwing with this fundamental aspect of the economy in a very dangerous way.
And they’re not just “juicin things up a lil” or “primin’ the pump a bit” at this point. They’re sloshing gasoline all over the place. More fuel to come, right after they let things cool down for a little while. My guess: QE3 starts late fall, early winter at latest.
Dudley is only co-captain of the dove brigade, of course. He shares that honor with the Bernank and Janet Yellen, both dedicated printers with a natural, clueless optimism about them. And a knack for ignoring things that affect small people, like price inflation.
There are no extremists at the Fed. No major opposing schools of thought, or vigorously debated theories. Only varying levels of conformity, best I can tell. Those at the Fed who experience (much frowned-upon) bouts of “hawkish urges” are hopelessly outnumbered, and outgunned politically.
Guest post by Jesse
The miners were rallying with stocks and the metals today, as one might expect.
In the short term the markets will move on the Greek debt situation, the FOMC monetary policy decision tomorrow, and to some more individual extent the Russell 2000 rebalancing on Friday.
Gold looks to be on the verge of breaking out. Let’s see if they can do it. A great deal will depend on macroeconomic and political events in the short term.
I have included a second gold chart which shows the chart formations should the breakout be confirmed after the July Comex options expiration, and the sturm und drang which follows for a few days afterward.
JP Morgan may wish to plug in a new ‘cost of doing business’ item in their budget for the commodities trading group. And Ben may need to keep a little ‘walking away’ money at hand for his cronies.
FT
JPMorgan settles SEC charges for $153m
By Kara Scannell in New York
June 21 2011 19:01JPMorgan Chase agreed to pay $153.6m to resolve US Securities and Exchange Commission civil fraud charges that it misled investors in a mortgage-related security it constructed for Magnetar, an Illinois hedge fund.
The SEC charged JP Morgan with failing to disclose to investors in the collateralised debt obligation, a security linked to mortgage-backed securities, the role played by Magnetar.
The hedge fund helped select mortgages included in the CDO, named Squared, and was betting against them. The SEC alleged that investors were told that an independent firm, GSC Capital, had selected the portfolio.
JPMorgan agreed to settle and reimburse investors in the CDO without admitting or denying wrong-doing. The settlement also requires JPMorgan to change how it reviews and approves offerings of certain mortgage securities.
Visit Jesse’s Cafe, where he blogs daily. Published with author permission.
