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CARTEL CAPITULATION WATCH
The US stock market had a bad day on light volume with the DOW closing at 10,122, down 72, and the DOG dropping 26 to 1836. Both closed on their lows.
The dollar only fell .06 to 89.74, while the euro went up .34 to 120.54.
The SEP bond contract made new highs for the move and is breaking out. Action such as this is hardly an endorsement the economy is surging.
September bonds
http://futures.tradingcharts.com/chart/TR/94
While Wall Street continues to spin, spin spin what it wants the public to believe, the nitty-gritty of the economic news is not strong at all. Today we hear spending is back up, yet income is not keeping pace. This does not bode well for the future. Eventually spending what you don’t have will catch up. Debt, debt, debt can’t win in the end.
08:30 Personal Income reported 0.1% vs. consensus 0.5%; spending 0.8% vs. consensus 0.7%
Prior income unrevised 0.2%; spending revised to (0.2%) from (0.7%).
* * * * *
WASHINGTON, Aug 30 (Reuters) - U.S. consumer spending rebounded sharply July, government data showed on Monday, erasing the disappointment of June and bolstering hopes that the U.S. economy has recovered from its recent soft spot.
Personal spending rose 0.8 percent, more than making up for a revised 0.2 percent fall in June, the Commerce Department said. The improvement in consumption was actually even larger since June's spending had been initially reported as a 0.7 percent decline.
But personal income advanced at a more modest pace than expected, posting a 0.1 percent rise compared with a 0.2 percent gain the previous month. July's advance was the weakest reading since November 2002. –END-
From The King Report last evening:
"Bloomberg reports Chinese demand for commodities has put shipping rates at a four-month high. This obviously suggests that Chinese government efforts to cool China’s economy, more precisely its commodity buying binge, have not slowed the economy as much as they desire."
GATA’s Mike Bolser:
Hi Bill:
The Federal reserve added $9.25B in temporary repurchase agreements today August 30th 2004, an action that caused the repo pool to dip a bit to $52.765 Billion and kept it very high. The DOW is weak, bonds completely subdued and gold jumped to $405.10 exactly at the PM Fix, a spike to a pre-set number if one ever existed.
Let's review the Fed's force application process: The Fed's primary dealers submit bids for and receive repos (Almost always far below their requests) from the Fed who issues temporary or permanent government securities, a repurchase agreement is one that reaches maturity on a future date from over night to as long as 28 days. This financial instrument is then presented as collateral to a banking institution and the cash funds are then used to "implement monetary policy" as the Fed declares.
Buying DOW futures to keep it elevated when it would otherwise fall is "monetary policy". The same is true for the bond futures market when the primary dealers buy "policy puts" to suppress the yield on government bonds.
Critics of the repo hypothesis point to the huge size of the DOW and bond markets and assert that they can't be steered by the $50 Billion daily pool (recently topping $70 Billion intra-day). These critics fail to appreciate that futures markets steer underlining markets and that the futures are far smaller in size than their "markets". An apt example is the COMEX gold market itself. It is smaller by an order of magnitude (10X) than the LBMA gold market and yet investors accept that its pricing mechanism is valid, thus the futures tail wags the market dog.
The fact remains that their are undeniable correlations between the issuance of permanent and temporary open market operations directly linked to major government "monetary policy" events, such as the putative "Iraq War Rally".
It was a Fed engineered event and clearly not an investor driven phenomenon.
Will the dollar fall?
It doesn't seem to be falling. Indeed, it is rising quite nicely since early in the year. This, after the Fed arbitrarily upped the MCDI by 1.4% on Dec 16th 2003 by adjusting the currency weights that comprise the MCDI (A group that is not identified anywhere in the Fed's domain, even after an exhaustive search by two experts).
Depending on how one measures it, the dollar charts look pretty good. Actually they look as good as gold looks bad and therein lies the clue that the dollar is as managed as gold. As the Fed runs the dollar up, do gold bugs really need the dollar to fall in order to profit? Not exactly.
The ³dollar² doesn¹t have to fall if you think about things. All that needs to happen is a run on physical metal by only a few principals or sovereigns as a consequence of failing market and fiscal confidence in the US economic system. We don't need the dollar to fall...only a squeeze on physical which can be unrelated to its price condition. John Brimelow reports elsewhere at the café on this very issue seeming to play out.
Economic weakness...story leaking out
Richard Russell¹s recent report about 500,000 job applications for 3,000 longshoreman jobs in Long Beach, California is a pretty good indicator of the level of employment deterioration that has occurred. Information like this can trigger the required confidence loss to trip important gold wires. It is difficult to offset that kind of bad economic news with feel-good election rhetoric from the president. The financial media's continued loss
of credibility in general is another way to measure the rising loss of trust among the larger financial entities whose potential move to physical the Fed dreads. This erosion in media credibility is the rising resistance that will eventually break the Fed's interventional plans.
The dead US economy evidenced by the above longshoreman turnout is a function of overcapacity and more Fed credit money from the Bernanke printing press only means more useless capacity (if one discounts the war machine whose fruits are indeed bitter these days). In any event, the Fed's new war capacity is hardly productive.
Look for pivotal deterioration to occur in the credibility department and lead to the abandonment of hope for the "light at the end of the economic tunnel" and a resultant shift away from Wall Street's conventional paper investment ³wisdom².
DIVG
The DIVG is rising ever-so-persistently and the Fed tries to disguise it each day up until the very last minute (10AM). It's still a bit early to predict the Fed's next DIVG phase goals but IF the dollar keeps rising as noted above, then gold will fall by a lesser amount to keep a rising DIVG.
The Fed is planning something new to replace their May 24th to late August hammer and I need some more time to determine their true intentions. Meanwhile, I hear from other detail-oriented computer analyst colleagues that their normal COMEX and Fed metrics are getting very jumbled so as to suggest a big event soon. Stay tuned.
Too extreme?
The Fed defaults the COMEX as their precious metals exit strategy. This view at first appears extreme. My answer to this reasonable critique is found in the Master of the Universe¹s Friday comments from Jackson Hole, Wyoming at the Fed's annual shrimp fest in the mountains. He darkly warns of defaulting Social Security (raising the retirement age is a default). Adding further insult to the idea of government and corporate integrity on Friday, leading US companies (AA, Friday's latest abandonment of their pensioners at $8 Billion) are defaulting their retirement funds so fast they are getting writer¹s cramps (by attempting bankruptcy as United is contemplating they throw their pensioners to the wolves). Tossing the paper gold speculators would be easy for a Fed that glibly speaks of stiffing your widowed grandmother, while others in their administration pump up her pharmaceutical bills, greasing their deep pocket Pharma buddies.
The increasing bankruptcy waves (a feature of deflation) is but one side of the Fed's monetary policy bitter harvest. The other is printing press inflation. Together they deliver stagflation to the already crushed financial media credibility. This is to be the economic future and gold is a reasonable life boat.
Energy woes in the ME continue
+++++++++++++++++
Rebels blew up a pipeline inside an oilfield in southern [8/28/04]
http://www.story.news.yahoo.com/news...p/iraq_oil
BAGHDAD, Iraq - Rebels blew up a pipeline inside an oilfield in southern Iraq (news - web sites) in the latest in a series of attacks on the country's oil infrastructure that has cut exports from the key southern oil fields in half, officials said Saturday.
Saboteurs hit a pipeline late Friday that runs within the West Qurna oilfields, 90 miles north of the southern city of Basra, sending plumes of fire and smoke leaping into the air, said a South Oil Co. official in West Qurna, who asked not to be named.
The attack will effect exports, though it was not immediately clear by how much, the official said. The fires were extinguished by Saturday afternoon.
Separately, a domestic oil pipeline in Nahrawan, a desert region 20 miles east of Baghdad, was ablaze Saturday, Associated Press Television News footage showed. END
+++++++++++++++++++++++
And finally this piece on oil depletion which is defined as an "extra demand" http://www.energybulletin.net/1752.html
"What it means is that before you meet a single barrel of demand growth you have to replace all the missing barrels," he continued. "Depletion is really an extra demand. Countries where oil production is still expanding are being put under increasing pressure to make up growing depletion rates. It's a huge drag on the system."
++++++++++++++++++++++++++++++++++
The era of cheap energy and price stability is over and you and your family are the only ones you can count on.
Mike
From Barron’s on government reporting – right up the MIDAS alley:
quote
YOU'D THINK THE REPUBLICANS, champions of free enterprise and mighty crusaders for tax cuts, could catch a break from the economic gods as they strut their stuff before the nation in prime time. But nothing doing. The dreary parade of dismal dispatches on the economy that surfaced on the very eve of the GOP extravaganza makes you wonder if those gods aren't in a mischievous mood after imbibing too much of their favorite nectar. Or maybe out of sheer perversity, they've decided to vote Democratic this year.
What rouses such unseemly suspicions are the revelations that second-quarter GDP was even less exuberant than originally reported, that sales of homes, both of the new and existing variety, declined in July, that new claims for unemployment insurance in the latest week took a bigger-than-expected jump, that, as per July's dip in the help-wanted index, jobs are harder to come by, that pacesetting outfits like Wal-Mart and Starbucks aren't tearing up the pea patch the way they usually do, that techs are struggling anew amid a glut of inventory, that last month's durable goods orders were disappointing on a number of counts -- it pains us too much to go on.
As if all this weren't enough, the Census Bureau chimed in with some truly depressing news just as the Republicans were about to come marching in. To wit: 1.3 million more unfortunates found themselves below the poverty line, raising the total of poor folk in this fair land to 35.9 million; the recovery hasn't done very much for median household income, either, which remained stuck at $43,318 last year, and 2003 also wound up on another melancholy note with 45 million people, or 15.6% of the population, bereft of health insurance, up from 43.6 million, or 15.2%, the year before.
The report, incidentally, was released a month ahead of time; apparently, Karl Rove didn't cotton to the idea of this sort of discouraging data coming out that much closer to Election Day. As to the rest of the sorry litany -- housing, jobs etc. -- we can only assume that most of the reliable number fudgers were on vacation and those that weren't were concentrating on the consumer-price index.
Unquote
-END-
You will find this of interest. Sounds like the empty Fort Knox story we heard months ago from one of the local truck drivers down that way:
bill, years passed, i talked to a friend who told me he had an interesting job at fed for the summer. he was re-stacking gold bars at fed reserve bank. made 13.50 per hour, and said he was surprised to find when he entered the vault how little work had to be done. in other words, there was a lot less gold than he was led to believe. the powers that be, wanted it brought forward and stacked up front for a photo op. at the time he and i did not think much about it, but now it makes infinite sense. they wanted it to look like more than it was!! incidentally, photographers were not allowed in the vault, but could only take pictures from a roped area. at the vault door. reminds me of the wizard behind the curtain in Alice in Wonderland!! thanks for the info on law suit. regards, paul
Housing bubble input:
Hi Bill,
From Business In Vancouver Magazine page 14 " West End Rental Market Wobbles "
In summary of the article: Downtown residential rental vacancies are at a high of 7 to 10% which is a 30 year high in vacancies. As if that is not enough, an estimated 47% of all the new condos being built are being built for spec investors who are hoping to rent them out at $C 2.00 a square foot (are people nuts?).
I was downtown this morning and stopped counting at 10 of the 25+ story condominiums being built in the downtown / false creek core. I can’t imagine what is going to happen when these thousands of new units hit the rental market.
It is truly amazing reading and analyzing the impact of excess liquidity and the bubbles it creates and then to go see it with your own eyes. The fact that people charge into this market (many to their economic doom) is astounding. One day the cranes will stop.
This is going to be absolutely brutal.
Best,
Dave.
Over the years we have had mainstreamers constantly query as to the motive of The Gold Cartel’s price manipulation scheme. Dave Lewis, in his fine commentary at The Little Bear Table, hits the nail on the head:
If Mr. Embry is correct about official/financial sector collusion suppressing the price of Gold, the monetary authorities have blinded themselves, perhaps, in part, by attempting to blind economic agents to their failures. Lord Acton's dictum, power corrupts and absolute power corrupts absolutely, comes to mind as I contemplate the current state of monetary affairs, as does the old adage about the fox guarding the chicken coop. Obfuscating the movements of Gold among countries, and, to the extent it is occurring, manipulating prices only serves to keep the people, and apparently the policy makers, in the dark as to the potential for economic disruption. –END-
An example of the superb effort so many GATA supporters have made over the years:
Hi Bill,
I sent out 30 plus notices to media, brokers, papers etc. about Embry's report.
If this new report is not enough to stir up S. Africa, I may have to go down there and kick some ass! They need to file a formal complaint against the U.S. with the State Dept. U.N. etc. etc..!!
Regards,
Brad
This anecdotal silver input fits right in with what we are hearing from London:
Bill-
I talked to a small coin dealer I know the other day and he said that silver bars now have large premiums and that for the first time since around 1980 dealers are calling him up to ask if he has any bars or 90% coins. If he wants to order 100oz bars he pays a 50 cent premium plus shipping. He also said gold coins are in demand.
I have polled this dealer for 12 years or so and this is the first time he has mentioned this tightness in the market. I thought you and the readers might be interested in this little tidbit.
As always, we all owe you for your courage and persistence. I love it when your critics say you are too hot tempered. If only you could be like those go-along to get-along types who dominate the PM industry! In light of what we are dealing with I say, stoke the coals!
Buzz
I am running out of different ways to describe my disgust at the goings on in the gold market world. Friday, the shares run-up because the insiders know what is coming. Yet, those same insiders bomb gold for The Gold Cartel. Today they sold all their shares and then lit into them late in the day, nullifying the excitement generated on the bullion side. One of the cabal’s mantras is to dampen public interest in gold and the shares by maneuvers such as this one. This is no Amateur Hour operation. It is extremely sophisticated and very consistent.
The XAU lost 1.52 to 92.85 and the HUI sank 3.19 to 202.13. Still not a word from the pitiful gold industry about Sprott Asset Management’s Special Report (Not Free, Not Fair: The Long-Term Manipulation of the Gold Price). They are pathetic! If the industry would run with this enlightening material, the constant price management nightmare would end. What a bunch of sad sacks!
Gold will eventually explode in spite of the leaders in the gold industry and their organizations, surely not because of them.
GATA BE IN IT TO WIN IT!
MIDAS
