Tag Archives: market intervention

Friday’s Gold Smash Reeks Of Central Bank Corruption

It’s no secret that the banking cabal has been going to great lengths to prevent gold from breaking out above its 200 day moving average.   Why?  Because it is likely that if this were to occur, it would “flip” the hedge fund black box algorithms from selling rallies and shorting downside momentum to buying gold sell-offs and chasing upside momentum higher.  In other words, it would make the task of keeping a lid on the price of gold much more difficult.

The effort to keep gold from legitimate price-discovery is understandable – from the elitist banking cabal perspective, at least:   if the price of gold were allowed to trade freely, it would likely find a market-setting price at least 3-5 multiples above where it is right now.   If this occurred, it would completely undermine the Fed’s QE and ZIRP monetary policy.  It would also cripple the Fed’s ability to keep the stock market juiced wreck the carefully crafted illusion that everything is fine in the U.S. economic and financial system.

Today’s gold smack was one of the more blatant displays of the unfettered corruption that has engulfed the paper gold market:

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When I woke up this morning, gold had jumped $13 from its previous day’s close, as both China and the ECB indicated that they would be printing more money to prevent their respective banking systems from collapsing. Out of nowhere, about an hour before the London p.m. fix, the price of gold suddenly “fell” off a cliff.  Initially, 2,692 contracts (7.8 tonnes of paper gold) hit the Comex (Comex floor + the computerized trading system) at 8:58 a.m. EST. From 9:00-9:30, another 21,855 paper bombs were dropped (approximately 63 tonnes) hit the Comex; from 9:30 – 10 a.m. EST 25,914 contracts were launched (75 tonnes). To put this in perspective, the minute before 8:58 a.m. 302 contracts traded. In the 30 minutes following the attack, 8,583 contracts traded.

The p.m. London p.m. gold price fix, which “officially” is set at 10:00 a.m. EST, involved unusually large volume and an unusually large 9 iterations in order to set the price.  The price was “fixed” at $1,161.25, which was $18 below the $1,179.30 high price gold had hit shortly after the ECB announced more QE.

In total over 5 million ounces worth of paper gold traded during the smash. As of today, the Comex vault operators are reporting only 202.3k ounces of gold to be available for delivery.  With no relevant news or events reported, it can only be concluded that the price drop in gold was an attack on the price by entities intent on preventing gold from the process of legitimate price-discovery.  Perhaps worse is the fact that Governmental agencies put in place and funded by the Taxpayers to prevent market corruption are either indifferent to or complicit with the market intervention.

The Economy Is Starting To Crash – There Will Be No Rate Hike In September

“Dave I got your emails – it’s over” – Good friend in NYC who called this morning, has worked on Wall Street for over two decades

All of the meaningful, least manipulated economic indicators are now collapsing at the rate at which they collapsed in 2008/2009.  For instance this morning’s Empire State Fed manufacturing index:

UntitledThe index itself is back to where it was in 2009. The new orders index – the best indicator for current wholesale demand – plunged to a level last seen in 2010, when the Fed was in the early stages of pumping nearly $4 trillion in fresh printed money into the financial system.

The collapse in commodity prices has been widely acknowledged, but the most important commodity barometer of economic activity is oil.  The price of oil began to collapse in the middle of 2014, which is when I have suggested the U.S. economy started to hit a wall.  After a dead-cat bounce, the collapse has resumed:

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The big Wall Street banks have huge incentive to try and keep the price of oil propped up. Why? Because they are sitting $100’s of millions of unsold bank debt issued by rapidly collapsing U.S. oil shale companies. Sure, paltry fines levied by the SEC and CFTC for breaking the law and engaging in fraudulent activities is written off as the cost of doing business. But the prospect of losing $100’s of millions on senior “secured” bank debt is looked upon a “blood money.”

If the big Wall Street firms, with the help of Central Banks, can’t keep the price of oil propped up, it means there’s a big problem in the global economy, including and especially the United States – the world’s largest source of demand for oil.

Finally, perhaps the best overall indicator that the end to the insanity that has gripped the markets is over is the degree to which the Fed’s intervention in the markets has become so painfully obvious.  Everytime the S&P 500 is on the verge of falling off a cliff – like today, for instance – a big bid miraculously appears – a big bid that the hedge fund HFT-driven algos embrace and front-run, driving the stock market away from the edge of that cliff.  I know a lot of people who are still highly irritated by this.  But I would be more shocked if Yellen and Company didn’t intervene in the stock market on a daily basis.

Even worse is the intervention in the Treasury market.  Interest rates are on virtual “lock-down.”  In fact, I would argue that, on a de facto basis, the Treasury market for all intents and purposes has been “shut down.”  The Fed has become the largest holder by far and, via its network of Wall Street primary dealers and the Bank of Japan, has ensured that a meaningful supply from sellers will never hit the market.  To refresh everyone’s memory, recall that the Bank of Japan is buying JGBs from Japan pension funds using printed yen and replacing them with U.S. Treasuries.   Indirectly Japan has become the Fed’s warehouse for loose Treasuries – “loose” as in Treasuries being unloaded by Russia and China.

Do not mistake the money that has been “created” by the insane rise of a stock market that has been pushed to its highest valuation level in history.  This is not “wealth” – it’s shifting the deck chairs around on the Titanic.  The revenues of the S&P 500 companies have been declining for several quarters in a row now.  If we were to use the accounting standards that were enforced in 2000 – instead of the highly misleading accounting rules in place now –  the p/e ratio, forward p/e ratio and the dubious “Shiller p/e ratio” would show their highest levels ever.

Perhaps the biggest issue I’m grappling with now is what will happen when the Fed loses control?  Rather than watch helplessly as the stock market collapse, I am beginning to wonder if they’ll just shut the markets down…

NYSE circuit breaker

Lumber Hits A New Multi-Year Today

Don’t believe the hype about the housing market.  I have proof that most of the buying is coming from small investors/flippers and vacation home sales.  I will be writing about this soon.

Oh, let’s not forget that Cramer recommended going long three homebuilders right as the DJUSHB (Dow Jones Home Construction Index) was peaking at 600.   I have research reports on two of them that show he’s a complete moron.

How do we know that the housing market – especially new home sales – are collapsing.  Well, nothwithstanding the fact the big homebuilders like Lennar are trying to lease out new homes in communities in which sales are approaching zero (LINK), the price of lumber has hit a multi-year low today:

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I don’t care what kind of spin the bubble-promoters put on that lumber data, the only reason the price of lumber is falling is because demand is falling.  And demand is falling because homebuilders are not ordering lumber for new homes being built.  And new home are not being built because – I’ve detailed exhaustively in my homebuilder reports – new homebuilders are sitting on all-time record high inventories AND debt.

Lumber is now lower than it was when the Fed implemented “Operation Twist.”  To review: Operation Twist was disguised QE in which the Fed sold a big portion of its short Treasury debt (because the banks needed repo and derivatives collateral) and bought longer term Treasuries, specifically targeting the 10-yr maturity bucket.  Why 10-years?   Because 30-year fixed mortgages are priced off the 10-year Treasury.

Yes, Operation Twist was designed specifically to help re-inflate the housing bubble.   As I’ve shown in previous articles, the Fed did a better job inflating prices than volume.  In fact, I pity the real bona fide buy-it-and-live-in-it homebuyer  because they will soon discover that they overpaid for their American Dream home by at least 50%.

Now the price of lumber is below the price at which this economic signal triggered QE/Twist.  What, if anything, can the Fed to now?  Once enough small-time investors/flippers get stuck with homes they can’t rent out or flip, there will be an air-pocket of demand and both sales volume and the homebuilder stocks will experience an “air pocket” drop.

I have added to my homebuilder short positions today.  I caution that the sector is oversold right now and will likely bounce.  But I’ve left room to add if that happens.  My research reports show why and how to short the homebuilders.   Currently the homebuilders are more overvalued in relation to their underlying financial metrics than they were at the housing bubble peak in 2005/2006.   This is a grand-slam home run short-sell opportunity akin to shorting the sector in 2005 and shorting tech stocks in Jan 2000.