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Friday, March 30, 2012

Money Draining out of Stock Funds, while the market soars:

This amazing chart shows money bleeding out of stock funds (red) while the market soars (Black).  

Why is money draining out of stock funds?  Well, according to the Financial Industry Geniuses on TV, it's because small investors like you and me are just dumb and we get everything wrong.  But Golly, Gee Whiz, if we wouldn't touch the market with a ten foot pole, because, in our feeble opinion, it's a rigged casino guaranteed to rob us of all our hard earned cash, then who on earth is causing the market to soar?

Yes, my friends, who could it be?  

Why, it's Super Ben, the Trader-in-chief, faster than a front running super computer, able to fix global economies with a single trade!  Yes, Super Ben, single-handedly saving the US Economy by printing trillions, giving it away to the banks, who then pour it into risk assets, and then award themselves trillions more in bonuses.  

Super Ben, who, disguised as mild mannered Fed Chair, Ben Bernanke, fights the never ending battle to prop up the bankrupt Banks, prop up the risk markets and squelch the gold price, all in pursuit of Truth, Justice, and the American Way.

So don't worry your feeble little minds about all this terribly complicated stuff.  Super Ben, Trader-In-Chief, is at the helm, and he'll do all your thinking for you.

Thursday, March 29, 2012

Bernanke: Futures Trader In Chief

Bernanke: "QE2 Contributed To A Stronger Stock Market" As TrimTabs Predicts More QEasing Ahead


Judging by Bernanke's recent testimonies, wherein he repeatedly cites "stock market gains" as the chief indicator of the success of his money printing programs, the job of the Head of the Federal Reserve Banking Cabal is to support the stock market.  And yes, he's doing a fine job of that - seeing that he's the one buying the stocks through the Federal Reserve Member Banks.


Recently he's also been touring the country talking down gold, citing the "problems of a gold backed currency."  This speaking tour has coincided with several assaults on the gold price, wherein some un-named huge trading desk (J P MORGAN) has repeatedly dropped thousands of gold contracts in seconds on the Futures market.  No trader would ever do this if they were simply trying to manage or even liquidate a position.  The only reason to do this is to drive down the price of gold.  So far, Bernanke has had some moderate success at this too.


The Futures-Trader-In-Chief is managing his job fairly well to this point.  As Europe collapses and the US Banks remain insolvent, it will be interesting to see how possible it is to manage the world economy from Ben Bernanke's Futures Trading Platform.



Wednesday, March 28, 2012

All News is Good News

We're back in a news cycle where, as far as the markets are concerned, all news is good news. 

Terrible housing and durable good figures?  Great!  That means Bernanke will keep printing money and feeding it to the banks until the cows come home.   So the markets should definitely zoom higher.

Better than expected employment numbers?  Great!  That means the economy is turning a corner and should be much stronger than anyone expects (Except for everyone.)  Nobody really get how much stronger the economy is than everybody else thinks it is - except for everybody in the financial service industry - which includes everybody on Television. 

That's the game.  Why?  Because all those financial industry employees make money off of keeping you in the markets.  Once you lose interest, they're all out of a job.

The game works until the next crisis.  Then everybody grabs their heads and shrieks; "OMIGOD! Nobody could have seen this one coming!  Better run to your financial service industry professionals, because only they really understand this terrible complicated thing that's happened, and only they can guide you through this terrible time - even though they never saw this coming.  Because Nobody could have seen it coming.

And then Ben Bernanke and Whoever is President will print up new Trillions and give it to the Banks.  And everyone will shake their heads sadly and say: "This is terrible.  Normally we don't endorse this type of Socialist Giveaway - But in this CRISIS it is clearly NECESSARY.

It happend under Reagan during the S and L crisis.  Then under Bush during the Bank Collapse.  Reagan and Bush: History's two Greatest Socialists.  The men who oversaw the two greatest Socialist Money Transfers in the history of the world.  And who are now regarded as Icons of the Free Market.

Who will be the next Icon of the Free Market?  Whoever is president this year or next.

Tuesday, March 27, 2012

GEE - It's not so easy if we don't get to cheat!

Goldman Diaspora Falters as Flamand Hedge Fund Declines

Ex-Goldman Sachs (GS) Group Inc. traders led by Pierre-Henri Flamand and Morgan Sze raised more than $4.5 billion for their own hedge funds, helped by the experience of having worked at what once was Wall Street’s most profitable securities firm. 

So far, none of them has made money for clients. 

The two are among at least six traders who have left Goldman Sachs’s biggest proprietary-trading group in the past two years, which the New York-based bank shuttered in response to new U.S. regulations. All, including Daniele Benatoff and Ariel Roskis, trailed this year’s stock market rally after losing money in 2011, investors said.  

Goldman Sachs - a BANK as well as a trading outfit - has extensive ties to the FED, as well as massive FRONT RUNNING SUPER COMPUTER.  They're also used to "borrowing" unlimited funds from the Fed to drop on thin futures markets - like the precious metals - and pushing them around for free profits.

Hedge Funds don't have all these advantages.  GEE - IT'S NOT SO EASY WITHOUT EXTENSIVE INSIDE INFORMATION - AND TRADE- CHEATING TECHNOLOGIES - IS IT GUYS? Just ask your buddy John Corzine.  I guess now it's time to start stealing again.

Monday, March 26, 2012

As Bernanke Pumps: the Markets Soar: the dollar will collapse

Pimco’s Gross Says Fed May ‘Hint’ at QE3 at April Meeting


Hedge Funds Capitulating Buy Most Stocks Since 2010

Sunday, March 25, 2012



QUESTION: Why would a tracking ETN devised for traders to bet on rising volatility plunge 40 percent in 2 days while volatility rises sharply during the same time period?

Bogus Answer:  Something about the Net Asset Value getting out of line with the value of the underlying notes blah blah blah.

Real Answer:

UPDATE: Credit Suisse Resumes TVIX Issuance After Month-Long Halt 

Obviously, traders at the Big Banks were informed of this before it happened and used this inside information to massively short TVIX ahead of the announcement in order to steal millions of dollars from poor shlub day traders.

 Now, nobody does or should feel sorry for day traders.  They're gamblers.  Just as nobody really feels sorry for investors at MF Global from whom John Corzine and his buddies stole 1.2 Billion dollars.  They were gamblers too.

Here's the rub.  Everyone investing in anything: stocks, bonds, money funds - are also gamblers.  And soon, when everyone realizes that no money is safe anywhere in this rigged system,  all gambling - which is to say all economic activity - will stop.


How far away are we from this point?


Well, during this latest stock market "rally" over 70 percent of the volume was just Banks and their High Frequency Trading Programs running up prices - with money "borrowed" at Zero Percent from the Fed.


And over 90 percent of all new treasury issuance is being bought by the Fed.


 So maybe we're there.  And we just haven't realized it yet.


Saturday, March 24, 2012

but will he ever go to jail for stealing 1.2 billion dollars?

MF Global’s Corzine Ordered Funds Transferred, Memo Says

Jon S. Corzine, MF Global Holding Ltd. (MFGLQ)’s chief executive officer, gave “direct instructions” to transfer $200 million from a customer fund account to meet an overdraft in a brokerage account with JPMorgan Chase & Co. (JPM), according to a memo written by congressional investigators.
Edith O’Brien, a treasurer for the firm, said in an e-mail quoted in the memo that the transfer was “Per JC’s direct instructions,” according to a copy of the memo obtained by Bloomberg News yesterday. The e-mail, dated Oct. 28, was sent three days before the company collapsed, the memo says. The memo does not indicate whether that phrase was the full text of the e-mail or an excerpt.

The account could have contained both client and company funds, the memo notes. Whether the transferred funds were those of the company, its clients or both is not known.
“If client funds were transferred at his direction, it raises new questions,” Seth Berenzweig, managing partner at Berenzweig Leonard LLP, a law firm in McLean, Virginia, said in an interview with Bloomberg Television. “This is a new storm cloud that is now headed for Jon Corzine and it raises a lot of issues.”
O’Brien’s internal e-mail was sent as the New York-based broker found intraday credit lines limited by JPMorgan, the firm’s clearing bank as well as one of its custodian banks for segregated customer funds, according to the memo, which was prepared for a March 28 House Financial Services subcommittee hearing on the firm’s collapse. O’Brien is scheduled to testify at the hearing after being subpoenaed.

‘Funds Were Safe’

“Over the course of that week, MF Global (MFGLQ)’s financial position deteriorated, but the firm represented to its regulators and self-regulatory organizations that its customers’ segregated funds were safe,” said the memo, written by Financial Services Committee staff and sent to lawmakers.
Steven Goldberg, a spokesman for Corzine, said in a statement that Corzine “never gave any instruction to misuse customer funds and never intended anyone at MF Global to misuse customer funds.”
Vinay Mahajan, global treasurer of MF Global Holdings, wrote an e-mail on Oct. 28 that JPMorgan was “holding up vital business in the U.S. as a result” of the overdrawn account in London, which had to be “fully funded ASAP,” according to the memo.

$200 Million Transfer

“On the afternoon of Friday, October 28, MF Global transferred $200 million from a segregated customer account at JPMC to cover a $175 million overdraft in one of MF Global’s JPMC accounts in London,” the memo says. “Ms. O’Brien wrote in an e-mail that the transfer was ‘Per JC’s [Jon Corzine’s] direct instructions’.”
Barry Zubrow, JPMorgan’s chief risk officer, called Corzine to seek assurances that the funds belonged to MF Global and not customers. JPMorgan drafted a letter to be signed by O’Brien to ensure that MF Global was complying with rules requiring customers’ collateral to be segregated. The letter was not returned to JPMorgan, the memo said.
Corzine, 65, in testimony in front of the House panel in December, said he did not order any improper transfer of customer funds. Corzine also testified that he never intended a misuse of customer funds at MF Global, and that he doesn’t know where client funds went.

‘Never Intended’

“I never gave any instruction to misuse customer funds, I never intended anyone at MF Global to misuse customer funds and I don’t believe that anything I said could reasonably have been interpreted as an instruction to misuse customer funds,” Corzine told lawmakers in December.
In his statement, Goldberg said Corzine did not specify which funds should be used to replenish the JPMorgan account.
“He never directed Ms. O’Brien or anyone else regarding which account should be used to cure the overdrafts, and he never directed that customer funds should be used for that purpose,” Goldberg said. “Nor was he informed that customer funds had been used for that purpose.”
The bankruptcy trustee overseeing the liquidation of the company’s brokerage subsidiary has estimated a $1.6 billion shortfall between customer claims and assets available.
Lawmakers and investigators from the Commodity Futures Trading Commission, Securities and Exchange Commission and Department of Justice have been reviewing events leading up to MF Global’s bankruptcy filing. Executives including Corzine, a Democrat who served in the Senate from 2001 to 2006 and as governor of New Jersey from 2006 to 2010, gave testimony on the collapse at three congressional hearings last year. Corzine was co-chairman of Goldman Sachs Group Inc. (GS) before entering politics.

Congressional Report

Representative Randy Neugebauer, a Texas Republican and chairman of the Financial Services oversight and investigations subcommittee, is preparing a final report on his investigation into the firm’s failure.
“One of the goals of our investigation is not only to find out where the money went but to identify what went wrong in order to prevent this from happening again,” Neugebauer said in a statement.
O’Brien is scheduled to appear before lawmakers with Christine Serwinski and Laurie Ferber, two other MF Global executives named by Corzine as being involved in the transaction, according to the memo. Henri Steenkamp , the firm’s chief financial officer, is also scheduled to testify, as is a representative from JPMorgan who has not yet been identified.

European Bet

MF Global and its brokerage sought Chapter 11 bankruptcy after a $6.3 billion bet on the bonds of some of Europe’s most indebted nations prompted regulator concerns and a credit rating downgrade. Corzine quit MF Global Nov. 4.
During his testimony, Corzine identified O’Brien as someone with knowledge of a transfer of funds from customer accounts before the firm sought bankruptcy protection Oct. 31.
Reid H. Weingarten, O’Brien’s lawyer, did not respond to a phone call and e-mail seeking comment.
The memo’s account of the e-mail exchanges aligns with what Terrence Duffy, the executive chairman at CME Group Inc. (CME), told lawmakers during a December congressional hearing. Auditors at CME, which had authority to oversee MF Global, learned from an employee of the brokerage that Corzine knew about the loans involving a European affiliate, Duffy told committee members.
To contact the reporters on this story: Phil Mattingly in Washington at; Silla Brush in Washington at
To contact the editor responsible for this story: Maura Reynolds at

The Old Timer Knows something:

Move into Gold

Richard Russell snippet
Dow Theory Letters
Posted Jan 12, 2012

For a decade I have been urging my subscribers to move into gold -- either physical bullion or other wise. Now I am at it again PLEASE MOVE INTO GOLD. Those who think gold has lapsed into a bear market simply do not know what they are talking about. Gold has simply been correcting in an on-going bull market.
This is a time when almost every central bank in the world is grinding out paper currency, grinding it out by the car-load. This is a time when people are searching for safety. People are frightened and confused. Where is the land of safety?
There is only one safe asset on the planet: that safe asset is gold. Uninformed people believe gold is just a commodity. Wrong, gold is absolute money. Gold alone is the world's only completely safe currency. Gold has no counter-party against it, and no central bank has ever found a way to create gold.
The fact is that gold can only be produced by the sweat ingenuity and capitalization of men.
The key to the entire situation today is something you don't hear anyone talking about. I am referring to PAIN. I am referring to the fear and avoidance of pain. When a man loses his job it's painful. When A man does not know how he's going to feed his family it's painful. These are basics that every politician knows about.
The first job of every politician is to get reelected. If the pol's constituents are feeling pain they will not vote for the politician who represents them. Every politician knows this, and thus politicians always vote for spending plans that they hope will keep their constituents happy. During the years following World War II politicians have OK'd an endless parade of spending bills. As a result the US national debt has grown to over $13 trillion dollars -- an amount that would have been considered inconceivable just a few years ago. Almost every nation on earth has indulged in the same kind of fiscal madness.
To cover the insane spending, nations have had to create an almost endless amount of fiat currency. This avalanche of "money" has steadily reduced the buying power of almost every currency. The result is that it takes increasingly more paper currency to buy one ounce of real money – gold.
Richard Russell
website: Dow Theory Letters
email: Dow Theory Letters

Wednesday, March 21, 2012

Got Rationality?

All current  financial models are based on the proposition that man will make a mathematically rational choices when trading or investing.

This absurd notion goes against everything we know about the history of man.  Other than that, Daniel Kahneman devised a series of experiments that proved beyond any clinical doubt that man's rationality is skewed in some very predictable ways:

A) Man is very risk averse to the point of extreme mathematical irrationality when trading and investing.

B) Man is extremely attached to the comfort of the familiar when trading and investing.  He is willing to give up great mathematical utility to preserve things and situations that are familiar and comfortable.

C) Man has a very short term view when investing and trading that causes him to miss the obvious utility of an opportunity that will mature over a longer horizon.

When taken together it is easy to see how politicians and their constituent partisans can argue endlessly and fervently over meaningless minutiae while the country sinks into an oblivion of debt.

It is easy to see how short term data can be used to give the illusion of comfort that things are getting better.

It is easy to see how people cling to their stocks, bonds and US dollars, when all of these things have persistently lost inflation adjusted value over the last 20 years.

And it is easy to see how most traders/investors still fail to see the value of gold over time, in spite of the fact that it is the only investment vehicle extant that remains in a long term bull market.

And finally, it is easy to see how most everyone will be taken by surprise when the next external shock sends the financial system over the brink. 

Got rationality?  Got Gold?

Tuesday, March 20, 2012

What you see is all there is

Daniel Kahneman's book on thinking as it regards investing/trading rests on the fundamental proposition that What You See is All There Is - at least as far as you're concerned.  You don't know what you're not aware of.  You don't take it into account.  And certainly there's a whole lot each of us is not aware of.

What we do is take that which we are aware of, and spin causal fictions to give us what Kahneman calls Illusion of Understanding, and Illusions of Validity.

This seems pretty straight forward, right?

It is until you consider that all economic theory developed and used by the financial industry is predicated on Full Information, Rational Decision Making, and Selfish Behavior.

Full information either in markets or individuals is absurd, Rational Decision Making by humans is laughable, and Selfish Behavior represents banks, but not necessarily private citizens.

Full information and rational decision making are two self serving fictions perpetuated by the financial industry that prop up what Kahneman calls "illusions of expert understanding."  Selfish behavior is clearly a projection of the financial industry onto all their clients.

In other words all the models, all the forecasting, all the talking head explanations that you get from your reports, your advisers, your favorite TV commentators are absolutely 100 percent worthless.

Dr Kahneman also back tests the forecasting results of the 100 top CFO's in the country over a period of 20 years and finds the correlation coefficient of the economic forecasts to be ZERO.  In other words, the proverbial Chimpanzee throwing darts would have done better.

Another of Kahneman's propositions is that personal and societal narratives are very hard to change, as they are based on nothing but fictions.  Therefor evidence to the contrary will always be viewed with suspicion, opprobrium and will usually be summarily discarded.

You can apply all this to whatever you might wish.  I apply it to gold.

As far as gold is concerned, the stubborn myths  the still have hold of the popular fiction are:

a) It's a barbarous relic of a bygone age.

b) It's worthless because it's useless.

c) It's a pointless investment as it has no yield.

d) There's not enough of it to anchor a currency anyway.

All of these are simply fictions we tell ourselves to make us feel better that we have no gold.  That we rely on the US dollar as the anchor of our financial lives.  Hang on to them as long as you can.  Once they are lost, they will be lost forever.

Friday, March 16, 2012


Dear CFTC Staff,

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well. I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days. The last ten years has been market by inflexion point after inflexion point with the most notable coming in 2008 after the acquisition of Bear.

I wish to remain anonymous as of now as fear of termination mounts from what I am about to reveal. Robert Gottlieb is not my real name; however he is a trader that is involved in a lawsuit for manipulative trading while working with JPMorgan Chase. He was acquired during our Bear Stearns acquisition and is known to be the notorious person shorting in the silver future market from his trading space, along with Blythe Masters, his IB Global boss. However, with that said, we are manipulating the silver futures market and playing a smaller (but still massively manipulative) role in manipulating the gold futures market. We have a little over a 25% (give or take a percentage) position in the short market for silver futures and by your definition this denotes a larger position than for speculative purposes or for hedging and is beyond the line of manipulation.

On a side note, I do not work directly with accounts that would have been directly impacted by the MF Global fiasco but I have heard through other colleagues that we have involvement in the hiding of client assets from MF Global. This is another fraudulent effort on our part and constitutes theft. I urge you to forward that part of the investigation on to the respective authorities.

There is something else that you may find strange. During month-end December, we were all told by our managers that this was going to be a dismal year in terms of earnings and that we should not expect any bonuses or pay raises. Then come mid-late January it is made known that everyone received a pay raise and/or bonus, which is interesting b/c just a few weeks ago we were told that this was not likely and expected to be paid nothing in addition to base salary. January is right around the time we started increasing our short positions quite significantly again and this most recent crash in gold and silver during Bernanke's speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.

As regulators of the free people of this country, I ask you to uphold the most important job in the world right now. That job is judge and overseer of all that is justice in the most sensitive of commodity markets. There are many middle-income people that invest in the physical assets of silver, gold, as well as mining stocks that are being financially impacted in a negative way b/c of our unscrupulous shorts in the precious metals commodity sector. If you read the COT with intent you will find that commercials (even though we have no business being in the commercial sector, which should be reserved for companies that truly produce the metal) are net short by a long shot in not only silver, but gold.

It is rather surprising that what should be well known liabilities on our balance sheet have not erupted into wider scale scrutinization. I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. We are only helping reality come to light therefore allowing a real valuation of our banking industry which will give investors a chance to properly adjust without being totally wiped out. I will be contacting a lawyer shortly about this matter, as I believe no other whistleblower at JPMorgan has come forward yet. Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America's best kept secrets. Please do not allow this to turn into another Enron.

Kind Regards,
-The 1st Whistleblower of Many

Thursday, March 15, 2012

Another Riddle: (come on, give it a try)

Here's another riddle:

America has 400 Billionaires in a population of 307 million.

Venezuela has only 2 billionaires in a population of 23 billion.

What does this tell you about the respective economies and economic systems of these two countries?

Here's one possible answer:  "If Venezuela were on economic par with the US they'd have 45 billionaires, therefor it's clear the wages of socialism is economic deprivation:" This according to Dennis Gartman.

Here's another:  "US capitalism tends to concentrate wealth exclusively in the hands of the very few: therefor the wages of capitalism are economic deprivation."

Which answer is correct?


This is a classic example of fast thinking which substitutes a simple correlation between two random events and then designates a false causation.  You hear this every day over and over from every talking head on every subject.

Why?  Because it's easier than thinking things through.  And it's faster than thinking things through. And it supports the positions we want supported, which will not always be the case if we bother to think things through.

The trouble is - (well, one amongst many troubles) that the longer we engage in this fast and facile thinking the less able we are to think things through.  

The first step in thinking is learning the difference between correlation and causation.

If you don't know how to do that, try the book Freakonomics, which, despite the flashy title, is all about the "surprising" things we learn about our world when we learn to distinguish the difference between Correlation and Causation.

Tuesday, March 13, 2012

Technically correct

Here's a riddle:

How is it that a Fund Manager who lost 20 percent last year is able to convince himself that a fund manager who gained 200 percent is really incompetent?

Well, according to momentum trader Dennis Gartman, holding onto a fundamental conviction through a 50 percent slide only to end up with a 200 percent gain is the height of incompetence:

"In retrospect he was right in having lived through those sorts of downward
price movements, but as a trader/investor this was borderline suicide. To have lived through a movement of such consequence without taking some sort of defensive action is nonsense and we think it terrible, terrible trading technique."

Apparently Gartman is proud of the fact that while ending the year with a 20 percent loss he was able to exhibit all the trappings of smart money management.

How is this possible?

This is the classic example of what Dr Daniel Kahneman  labels: fast thinking.  It is thinking done in shorthand, relying on "what is normal," "the mental shotgun," "illusions of truth," "mental anchors," "heuristics," and "Sheer laziness." 

According to Dr. Kahnemann this fast thinking is typical of most of what passes for thought right now, for the simple reason that it is far easier, for more reassuring than the painful process of slow or deliberative thought that often exposes the myths and fictional narratives that we build up around our world and ourselves. 

In trading it is thinking that relies on technical models that dictate when and what to buy and sell.  After all, these models are the time tested results of normative delusion.   They reflect that which everyone agrees to be can't-miss-economic-truths that result in disasters "nobody could have predicted" like those of Long Term Capital Management, the S and L crisis, the banking collapse of 2008, and the second banking collapse that is right around the corner.

Relying on technique, catch phrases and meaningless correlations rather than analytic thought is a tragic symptom of the fast thinking that dominates American discourse: political, economic and social.

Fast thinking is why Ben Bernanke  creates mountains of new debt to solve a debt problem.  It is why Newt Gingrich assumes that cutting taxes in a deficit economy will produce the same results as cutting taxes in a surplus economy.  It is why armies of  liberals and conservatives think Obama's economic policy is different from that of  George Bush.  Think that Ronald Reagan's economic policy was more conservative than Jimmy Carter's.  It is why Larry Kudlow believes America can have a strong dollar by adopting a "Strong Dollar Policy."  It is also why most Christians believe that the New Testament is an historical document.  Why most Americans believe we have a Free Market. 

And fast thinking is why 95 percent of Americans believe that the US dollar is the world's most stable and reliable currency.  It is why they think that gold is just another commodity to be traded like wheat or coffee.  And why they will be shocked at the world's most predictable crisis (that nobody could have foreseen) which is unfolding right before their very eyes.

And fast thinking will be the tragic cause of why the vast majority of Americans will be convinced that keeping a well diversified portfolio dominated in US dollars was the wisest thing to do even though it left them stone cold broke.

Sunday, March 11, 2012

A slow thinking problem: Why so few still get gold

A bat and a ball cost $1.10.  The bat costs $1.00 more than the ball.  How much does the ball cost?


How much?

If you answered 10 cents you're wrong.

In Daniel Kahneman's brilliant book "Thinking, Fast and Slow" he points out that even 50 percent of Harvard, Princeton, Yale and MIT students who partook in this study got the wrong answer to this simple question.  The ratio moves to 80 percent in "less selective" colleges.

Why can't even our brightest citizens think well?

Dr Kahneman posits two distinct thinking processes that battle each other in the human brain.  Fast thinking is a process dominated by snap judgements and pre-judgements based on everything we think we know.  In other words, it is a thinking process dominated by non-deliberation.

Slow thinking takes effort.  It mean slowly going through the process that Plato called: Syllogism: Reasoning Together.  Plato noted that to do this successfully you have to ask what is this, what is it not, what does it seem to be, what does it seem not to be.  Whether or not you literally ask and answer each of these questions, you still have work though those issues. 

It takes a few seconds to actually think the above problem through.  Maybe you got it.  Maybe you're used to thinking things through.  If so, you're in the vast minority of US citizens, who are obsessed with instant gratification, instant information and instant analysis.

What does this have to do with gold?

Most US analysts examine all economic markets - especially gold - as a function of historical ratios.  They claim that because the gold-dow ratio or the gold-silver ratio or the gold-gold stock ratio is this and such etc etc, therefor the gold price should be doing this and such.  Or because moving averages and stochastics etc. in the past have shown this and such, this and such will ensue.

This is all a product of fast thinking.  It's easy, it's reassuring,  It involves historical ratios and outcomes.  And it's almost always wrong.  Because as we move forwards in time underlying conditions that informed the ratios in the past have changed.

This is why technical momentum traders all lose money over time.  And this is why 95 percent of US investors still don't get gold.

Saturday, March 10, 2012


Welcome to the Free Market.  You couldn't make this sh#t up:


Bloomberg: MF Global Holdings Executives to Get Bonuses (for stealing 1.2 billion dollars) If Court Approves

The MF Global Holdings Ltd. (MFGLQ) executives who oversaw the company before it failed last year should get bonuses this year if a bankruptcy court approves, said Frank Piantidosi, an adviser working with the trustee,Louis Freeh.   A senator objected to Freeh in a letter.
The compensation packages are still being prepared, and would apply to Chief Operating Officer Bradley Abelow, General Counsel Laurie Ferber and Chief Financial Officer Henri J. Steenkamp, Piantidosi of Freeh Group International Solutions LLC said in an e-mail.
  MF Global Holdings Executives to Get Bonuses If Court Appr
Jon S. Corzine, left, former chairman and chief executive officer of MF Global Holdings Ltd., Bradley Abelow, center, president and chief operating officer of MF Global, and Henri Steenkamp, right, the company's chief financial officer, at a Senate Agriculture Committee hearing in Washingtonon Dec. 13, 2011. Photographer: Andrew Harrer/Bloomberg
  MF Global

The value that Brad, Henri and Laurie bring by helping to liquidate and recover assets for the estate outweighs the cost to retain them,” Piantidosi said. It would cost more to replace them with outside consultants less familiar with MF Global’s operations, he said.


Thursday, March 8, 2012

How much European debt is on (or off) the books at US Banks?

03/06/2012 Spiegel online

The Hundred-Billion-Euro Bomb

Euro-Zone Central Bank System Massively Imbalanced

One economist called his counterpart Hans-Werner Sinn's analysis 'brilliant.' Zoom
Sinn: A brilliant economist with a terrible beard.  DPA

More than a year ago, German economist Hans-Werner Sinn discovered a gigantic risk on the balance sheets of Germany's central bank. Were the euro zone to collapse, Bundesbank losses could be half a trillion euros -- more than one-and-a-half times the size of the country's annual budget.
Hans-Werner Sinn, an economist in Munich, discovered a strange entry in the Bundesbank's statistics: In late 2010, records showed claims on other euro-zone central banks totaling over €300 billion ($400 billion). Curious, Sinn began to dig deeper. What he found exceeded his worst expectations.

"The Bundesbank told me those were irrelevant balances. But that didn't reassure me."

After weeks of detective work, Sinn assembled enough pieces to create a picture that would make any one shudder: Since the 2007 financial crisis, immense imbalances have formed within the otherwise harmless payment system that exists between the central banks of the 17 euro-zone member states. While Italy, Spain, Ireland, Portugal and Greece, all hit hard by the debt crisis, show deficits totaling over €600 billion, the claims owed the Bundesbank have climbed to €498 billion.

'Caught in a Trap'
As long as the monetary union continues to exist, this isn't a catastrophe. The money is virtual, created by central banks, and its existence doesn't mean that an equivalent amount is lacking elsewhere. But as soon as a country leaves the euro zone, or the currency union collapses entirely, things get critical.

"We're caught in a trap," Sinn says. "If the euro breaks apart, we're left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists." That figure, €500 billion, is more than one and a half times Germany's annual federal budget.

This, though, is the worst-case scenario, and would only apply if the euro zone falls apart entirely. A far more realistic possibility is that one country, such as Greece, would leave the monetary union. In this case, all of the other euro-zone central banks would have to bear the Greek central bank's debt together. Germany's Bundesbank, in accordance with its share of the European Central Bank (ECB), would assume about 28 percent. With Greek debt at €108 billion, Germany's share would be approximately €30 billion.

The Bundesbank's claims are set off by massive debts in crisis-stricken euro-zone countries.Zoom
The Bundesbank's claims are set off by massive debts in crisis-stricken euro-zone countries.

Gold technicals?

These are the monthly and weekly charts of gold.

Technically this is all anyone needs to know about gold.  Every time it goes from the top of the channel to the bottom of the channel technical momentum traders like Gartman, the fast money crowd on CNBC, the geniuses at Fox Business, Gene Epstein at Barrons etc etc declare that the gold bull is dead, and they urge everyone to sell all their gold.

Don't listen.  Don't trade gold.  Think why it's been going up.  Think to see what's changed.  If you can't think it through stay away altogether.  If you can, then you'll see we're a long long way from the day when anything will change.

Otherwise you'll be one of the dopes trying to make money off something like this:

Wednesday, March 7, 2012


There are still many many analysts, brokers, traders, investors who profess not to believe in market manipulation - and trade, analyze, invest as though manipulation does not or could not exist.  There are even many, like Dennis Gartman, who regularly ridicule the very idea that manipulation could exist.

Let me point out that the Federal Reserve Bank has a license to print money.  They can use that money in any way they like to accomplish any purpose.they like.  And nobody can legally audit or monitor their activities.  So clearly they have the ability to manipulate the markets simply by dropping unlimited cash to buy unlimited contracts on any futures exchange through any member bank or dealer.

Why on earth would anyone believe they don't do this thing that they can do?

Why would anyone believe they would refrain from an activity that clearly benefits them - in the short run.

Their stated goal is to support the stock market.  Bernanke sites the stock market level continually as a proof that his policies are working.  Why wouldn't he then support the stock market?

On the other hand, Gold is widely regarded as the most effective measure of the efficacy of Fed policy.  A high gold price is regarded as proof the Fed is failing.  Bernanke and everyone else understands this.  Why then would he not cap the gold price?

Apart from the mountains of anecdotal evidence of market manipulation - there's this simple common sense test: Why would someone with the power and motive to easily do something not do it?

And why not do it?

The answer is that manipulation is a very temporary fix for complex structural problems.  And manipulation of prices only encourages those contributing to the structural problems to continue their destructive practices.  In fact it rewards them for practices that ultimately destroy the economy.

Specifically: Manipulation rewards bank and Hedge Fund traders for continuing to use debt to leverage enormous bets through complex derivative instruments in order to make large trading gains.  This continually increases the amount of debt in a system that is already drowning in debt.  And this directs the energies of the banks towards trading gains rather than towards the efficient distribution of capital. 

And worst of all, ultimately, manipulation always fails.  It's only a matter of when.  And when it does, manipulated markets catapult in the exact opposite direction.

Tuesday, March 6, 2012

David Stockman on the Fed:

David Stockman (Ronald Reagan's budget director): "Here's the heart of the matter. The Fed is a patsy. It is a pathetic dependent of the big Wall Street banks, traders and hedge funds. Everything (it does) is designed to keep this rickety structure from unwinding. If you had a (former Fed Chairman) Paul Volcker running the Fed today 7/8— utterly fearless and independent and willing to scare the hell out of the market any day of the week — you wouldn't have half, you wouldn't have 95 percent, of the speculative positions today.

Q: You sound as if we're facing a financial crisis like the one that followed the collapse of Lehman Brothers in 2008.

A: Oh, far worse than Lehman. When the real margin call in the great beyond arrives, the carnage will be unimaginable.

Q: What will 10-year Treasurys yield in a year or five years?
A: I have no guess, but I do know where it is now (a yield of about 2 percent) is totally artificial. It's the result of massive purchases by not only the Fed but all of the other central banks of the world.
Q: What's wrong with that?
A: It doesn't come out of savings. It's made up money. It's printing press money. When the Fed buys $5 billion worth of bonds this morning, which it's doing periodically, it simply deposits $5 billion in the bank accounts of the eight dealers they buy the bonds from.

(comment: and they use that money to front run your stock trades.)

Q: Do you own any shares?
A: No.

Q: Are you in short-term Treasurys?
A: I'm just in short-term, yeah. Call it cash. I have some gold. I'm not going to take any risk.

Q: Municipal bonds?
A: No.

Q: No munis, no stocks. Wow. You're not making any money.
A: Capital preservation is what your first, second and third priority ought to be in a system that is so jerry-built, so fragile, so exposed to major breakdown that it's not worth what you think you might be able to earn over six months or two years or three years if they can keep the bailing wire and bubble gum holding the system together, OK? It's not worth it.

Comment: Personally, I think that gold is safer than cash.  But obviously you need both.

Monday, March 5, 2012

Short term thinking is not thinking at all

There's an old adage that the stock market is discounting out into the future, say nine months to a year.  Now, I don't know if this was ever true.  But right now 70 percent of the volume on the NYSE is from high frequency trading.

What's high frequency trading?  It's when you place a trade to buy 100 shares of Apple, and Goldman Sachs' supercomputer picks up you trade buys the 100 shares, sells it to Merril Lynch's supercomputer at a fraction higher as it picks up the trade a split second later and then Merril Lynch sells the 100 shares at a fraction higher to your broker - even if your broker works at Merril Lynch too.

The amount of time being discounted by the NYSE in this model is about a nano second.

And a nano second is about the attention span of the average American right now. 

The fact that Goldman Sachs is now also a commercial bank and they can get the money to front run your trade from the Federal Reserve Bank at zero percent interest is far too long a thought for most Americans to grasp.  Add to that the fact that the money the Fed uses to give to Goldman Sachs to front run your trade is, in fact, your money.  The Fed uses your money to give to Goldman Sachs so that they can front run your trade should make most Americans furious.

It would be far more obvious, but functionally no different than if the US Congress declared a Front Run Tax to be taken from your paycheck and given to Goldman Sachs to use to cheat you on every trade.  If there was a tax you'd probably vote against it, I'd bet.  But since the process takes about 5 minutes of solid thought to decipher, you just don't give a damn.  (That's the generic "you.")

In fact, most Americans are furious.  But they're furious because their cell phone just dropped a call or their DS isn't working properly, or their neighbor's phone has more apps than their phone, or because the damned Liberals or Conservatives or Muslims or Jews are screwing everything up. 

On top of that they're vaguely upset that things don't seem to be going well.  But they're kind of sure things might probably do better soon enough, hopefully.

Unfortunately it does require about 5 minutes of thought to figure things are really getting worse and why they are getting worse.  And another 5 minutes to figure out how gold will be the ultimate insurance policy against this persistent decline.

If you have 5 minutes it might be worth it to try.

Friday, March 2, 2012

But seriously... What happened to gold?

The gold flash crash on Wednesday certainly freaked out a lot of gold investors.  And it provoked an amusing round of jeering from everyone who's missed the entire gold rally so far.  Which is a lot of people.

J P Morgan (a bank that is a principal owner of the Fed) dropped three million paper ounces of paper gold onto the comex futures exchange all at once.  They ran stops and took the paper price down pretty hard - from 1800 to 1700.  They can do this any time with money they borrow for free from the Fed.  They did this in conjunction with a Fed press conference.

But think about this: Does J P Morgan own three million ounces of gold that they wanted to sell?  No.  Of course not.  What do they own?  They own the Fed.  Literally.  They are majority share holder of the Federal Reserve Bank.  They are part of the banking consortium that owns the Fed.

1800 to 1700.  That's a big move in one day.  Get used to it.  That's what the comex is for.  The Fed plays this game in the other direction with stocks.  Every time the market falls J P Morgan can buy 10,000 SP contracts, rally the futures, and the cash price follows like a panting dog.

It's fun and profitable - if you're J P Morgan.

If you're one of the many analysts and fund managers who refuse to believe in market manipulation because it ruins your religious belief in America's Great Free Market, it's not so fun.  You get to be right about the stock market going up - a tiny bit.  And you get to be right about Gold being a dangerous trading market.  And you get to steadily lose 20 percent a year for you fund and your clients. 

Make no mistake.  Nobody's making any money trading these markets - except the banks that own the Fed.  Hedge funds run by trading geniuses like George Soros also make money.  Because he takes a long term macro fundamental position and knows he's right and waits it out.  Everyone else using quant based technical trading programs and stupid momentum trading strategies are getting killed.  Year in and year out. 

So don't trade.  Gold is on sale right now.  Buy it cheap.  Buy bullion.   Put it away.  Because all the Central Banks in the world can't change the primary trend of markets - over time.

And remember this: in June the Pan Asian Gold Exchange goes live in China.  A real exchange for real gold.  Each contract backed by physical gold that will be delivered.  That's the beginning of the end for  J P Morgan and the Fed's short term control of the gold market. 

That's not far off.  And they know it too.  So hang on to your hats til then.