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CARTEL CAPITULATION WATCH
The Bank of England raised its interest rate ¼% to 4.5%.
The DOW (10,410, up 42) and the DOG (2,000, up 9) keep on truckin’ along. So much for the fear of higher interest rates. That only applies to the gold market, which is the one market which historically reacted to higher inflation – back when the US had free markets. Even the bonds are yawning. The Sep bond rose 11/32 to 103 19/32 and ended up FLAT on the week. The stock market, with higher interest rate fears the talk of the town, made substantial gains.
US economic news out this morning:
8:29am U.S. 4-WEEK AVG INITIAL JOBLESS CLAIMS RISE TO 346,000
8:29am U.S. WEEKLY INITIAL JOBLESS CLAIMS UP 12,000 TO 352,000
8:30am U.S. CONTINUING JOBLESS CLAIMS FALL 106,000 TO 2.88 MLN
8:30am U.S. INSURED UNEMPLOYMENT RATE FALLS TO 2.3%
8:30am U.S. MAY IMPORT PRICE INDEX RISES 1.6%
8:30am U.S. MAY EXPORT PRICE INDEX
8:30am U.S. MAY EXPORT PRICE INDEX UP 0.3%
8:30am U.S. MAY IMPORTED PETROLEUM PRICE UP 10.3%
8:30am U.S. IMPORT PRICES UP 7% YEAR-OVER-YEAR
8:30am U.S. EXPORT PRICES UP 4.3% Y-O-Y, MOST IN 10 YEARS
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The jobless claims were 16,000 higher than expected and the import price number was double what the pundits predicted. Not good for the US stock market, dollar and gold bears on all counts. "So what?," say the Orwellians. "We will take the markets where we want to take them for the good of America."
The pundits were honing in on the import price number which skyrocketed to 1.6%, which is running 7% higher on a year over year basis. This probably tells us why the PPI number was cancelled. What the Orwellians are doing is an abomination. Yet, a worse outrage might be the silence of Wall Street and financial press about what is occurring. As each month passes, we see more evidence that a Mussolini-type economic fascism has crept into the way America is run from Washington to Wall Street. The gold price is rigged, the DOW is propped up and the US economic numbers are either hedonized or silenced. As a result, extraordinary imbalances continue to build in the US economic system, all of which must be reconciled one day. "If you want to dance, you have to pay the fiddler." This fiddler isn’t coming cheap. Americans will find this out down the road when our stock market tanks as the "chickens come home to roost." Most won’t know what hit ‘em. Only then will the press be outraged and look to assign blame and find the culprits. Of course, by then, it will be too late for the average Joe and Jane. The "horse will have left the barn."
The PPT working overtime:
NEW YORK (Dow Jones)--Program trading, the simultaneous purchase or sale of stocks in a single transaction, made up 54.9% of average daily shares traded in the first week of June, surpassing a record 54.1% in the previous week... -END-
GATA’s Mike Bolser:
Hi Bill:
Yesterday I jumped the gun a bit and posted the permanent operation of $1.035. It should have been posted today as today was it's delivery date (A thoughtful reader brought this to my attention and I am always grateful for this).
The pool fell a bit today but is still relatively high at $39.38Billion (after the correction). The Fed added $11.5 Billion in temps today somewhat offsetting a larger expiration. Thus the primary dealers will have a bit over $30 Billion until closing time today.
Miracle of miracles, the DOW is UP at this hour. Who'da thought? It is fun to watch the propagandists attribute the rise to...whatever. Market action (caused by intervention) creates commentary on the nearest semi-plausible cause that fools choose to believe.
Those pundits (including the biggest of Wall Street names) using backward looking "technical analysis" to try and predict the DOW are hopelessly burdened by their own dogma. It works fine in a free market but their work is useless in today's world of Fed intervention. Worse, many of them just can't make themselves admit it, for to do so would be to admit their paid services aren't worth the fees.
Mechanics of control
The repo pool is an elastic support mechanism that relies on the collective action of a group of Fed primary dealers who are compensated via permanent open market operations and the profit derived from holding temporary government securities. Some of these holdings go into the futures market to drive the DOW and may also aid in the currency market support. The daily tracks of this DOW support can be viewed in my "repos" chart at:
http://www.pbase.com/gmbolser/interventional_analysis
A careful examination of the repo chart shows a good correlation between the red 30-day ma of the pool and the green DOW moving average. The permanent open market operations shown in orange spheres are also correlated to up moves in the red repo trace trace which push up the DOW.
Note that there is a need in the mechanism of control for the interventionist to know the future as much as possible so as to compensate for known future weaknesses and to take advantage of known future opportunities.
For example, if a known negative event lies in the future, the Fed needs to have the ability counter it with a positive action with as much lead time as possible. In this way, surprise shocks are avoided. The Fed did this in the "Iraq War Rally" a can be plainly seen in the chart. The repurchase agreement issuance fulfills this need to control the future by having an expiration schedule that can be mapped into the future (maximum 28 days) to provide peaks in market liquidity on those days in the near future when they will be most needed. The astute trader can look for these large expiration days and take long DOW positions to ride in the Fed's wake. One must never forget however, that the Fed's wake is made only of paper.
For suppressing the strategic commodities there is a similar Fed need not only to see the future but also to have an organization to obtain the necessary physical stocks needed to sell. The Strategic Petroleum Reserve (SPR) is the functional equivalent of the Fed's repo expiration schedule. From it crude oil is sold to suppress the price of oil. Only a few people know the state of the SPR's unsold reserves but we can guess that it is pretty low these days. Indeed, fuel prices are high AND the US has an army in the oil-rich Middle East as further evidence of SPR weakness.
In the most strategic commodity of all, gold, the control mechanism is far less elastic than the DOW and much more direct involving far fewer people so as to insure project security. However, the Fed's need to have adequate stocks of central bank vault gold AND to see into the future is still just as acute for gold as it is for the DOW and oil, maybe more so.
How they manage that future determines whether they win or lose in this biggest and most crucial of all wars.
Mike
Update from The King Report:
The de-leveraging of The Street reappeared on Wednesday due to Easy Al’s harsh warning of rate hikes. Most everything fell while the dollar soared. The Fed did a $1.035B coupon pass (2s & 3s) in front of a Treasury Auction (Don’t you just love freely traded markets?), but the market ignored it.
This forced central banks to take 56.6% of the $15B of the Treasury Auction of 5s. Dealers ate 42.9%. Once again purported good auction results were kyboshed by the reality of just who had to buy the auction to keep things jiggy. This produced a spirited sell off in bonds.
Then the fun began. Suddenly the BLS announced that today’s release of PPI would be postponed and not released until Tuesday at the earliest. Bonds rallied in relief. An ugly PPI, and it should be due to soaring energy prices in May, could produce a very nasty 10-year Auction today. Gotta get them bonds sold, you know. Freely traded markets, my Greenspan.
A reporter from a great metropolitan newspaper told us that he called the BLS’s CPI division to see if they too had difficulty tabulating numbers that should be ready for release. We’re told they chuckled and said they were ready to go with the CPI.
The storm about the CES Birth/Death Rate continues as more brokerage firms try to downplay the ‘adjustment’. And of course some dopes are trying to label people as ‘conspiracy believers’ if they don’t swallow all of the BLS pap. What’s really funny is these people work at firms where conspiracies exist regularly in the pursuit of money. What really infuriates some Wall Street economists when the veracity of government numbers is questioned is the fear that they might have to actually do some work. Most of these guys & girls have been trained to just punch in government numbers into a model and then make projections. If one acknowledges that the data is inaccurate, then one must get valid data. And that would crimp long lunches and even longer recreation breaks. Of course there is a subset of economists and political operatives masquerading as economists that are upset because the braying about inaccurate government statistics might contradict ingrained biases…
With all the hoopla over the CES Birth/Death Rate, we decided to call our astute friend Lacy Hunt of Hoisington Management. We asked Lacy about the BLS’s methodology of using the B/D Rate in the payroll survey. Lacy said the BLS takes the B/D Rate number and adds it to the NSA payroll jobs counted. Then the BLS seasonally adjusts that total. And yet there are Wall Street economists that try to have us believe that the surge in that number is not significant. It’s as significant as any job number in the NSA count. It makes no difference where the jobs came from – and the math speaks for itself.
With that issue clarified Lacy brought to our attention the fact that the Household Survey shows pronounced weakness both quantitatively and qualitatively. The Household Survey is a random sample of about 60k people. The May Household Survey shows a 196k jobs gain, but 137k (70%) are self-employed jobs, which have lower benefits. Here’s some more of the bad news: unemployed increased 39k; Non-farm Wages & Salary Working Jobs fell 95k; Full-time jobs fell 200k, while part-time jobs increased ~423k. (The discrepancy in math is due to multiple job holdings.) Involuntary part-time jobs increased 134k to 4.6m and are 107k higher than last year.
The average duration of unemployment rose to 20 weeks in May from 19.7 in April. The median weeks unemployed increased to 10 in May form 9.6 in April. Is this the boom that so many herald?
Then Lacy turned his attention to consumer sentiment surveys, which we have also been noting. The latest ABC/Money poll fell to -19 from -11 on May 2. The ‘buying climate’ component fell to-32 from -22 on May 2. This is the lowest reading since 3/23/03. The crux of the argument: Random Sampling in the form of the Household Survey and various consumer polls show economic deterioration that is not consistent with the Establishment Survey gains of the past few months. Go ahead, you can send this to economists for comment. But try to ascertain if they were the economists who trumpeted the Household Survey when it was at odds with the then soft Establishment Survey.
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Why am I spending so much space to the details of the jobs report via the fine work of Bill King? Doing so because I believe it is a key to what is really going on out there in the US economy and will prove to be critical information to have in your back pocket in the months to come.
Bottom line from the way MIDAS sees it:
*The economy is much weaker than let on by the Fed, Wall Street and the Bush Administration.
*The US economic stat numbers have been pumped up for election purposes.
*The effects of the massive government stimulus, tax cuts and depression-like low interest rates are wearing off.
*The Fed has put itself between a rock and a hard place. They know the numbers have been fudged and have been cheerleading the markets themselves. Now, with Fed decision time coming, they realize the risk of interest rates going up at this time.
*We are in uncharted waters as far as the US financial system is concerned. The economic picture is worse than projected, inflation far higher than acknowledged.
Meanwhile, major US financial institutions are loaded up with tens of trillions of derivatives positions on their books. No one knows how a rise in interest rates during this fragile period might affect them. A rise in interest rates can only exacerbate that potential financial market problem and this one too:
Increase in foreclosures...
http://www.stevequayle.com/New…/040608.foreclosures.html
A Dream Foreclosed: Residents of the Region Are Losing Their Homes In Record Numbers
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The Bush Administration and Fed adjust economic numbers when it suits them and fail to when it does not. From Sarge:
If the gubbernmint uses seasonal adjustments in all their important reports, why don’t they use seasonal adjustments in this one?? And what the heck is "nonfinancial debt?" All the debt I have ever seen involved finance of some kind. LOL
Reuters
Household Wealth Reaches Record $45.153 Trillion
Thursday June 10, 12:15 pm ET
WASHINGTON (Reuters) - U.S. household wealth grew to a record-high $45.153 trillion in the first quarter of 2004, boosted by rising real estate and mutual fund values, the Federal Reserve said on Thursday.
In its quarterly "Flow of Funds" report, the Fed said household balance sheets rose $665.5 billion over an upwardly revised $44.488 trillion figure for the fourth quarter of 2003, despite a dip in the value of corporate equities. The net worth data is not adjusted for seasonal variations.
Total U.S. borrowing, excluding the financial sector, rose at a seasonally adjusted 8.6 percent annual rate in the first quarter, up from a revised 6.4 percent rise in 2003's final quarter.
The Fed said the pickup in domestic nonfinancial debt mainly reflected faster borrowing by the household sector as well as federal, state and local governments.
The total level of nonfinancial debt outstanding at the end of the first quarter was $22.781 trillion, it said.
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Just a precursor of what is to come:
Posted: Wed Feb 11, 2004 11:06 am
Fraudulent U.S. Bank Derivatives Behind Parmalat's Insolvency
by Michael Edward
…It is no coincidence that the 3 U.S. banks directly involved with the Parmalat scandal are those who hold the highest amount of derivatives:
1 - JPMORGAN CHASE BANK - $33 Trillion, 700 Billion
2 - BANK OF AMERICA - $13 Trillion, 800 Billion
3 - CITIGROUP - $11 Trillion…
http://worldvisionportal.org/WVPforum/viewtopic.php?t=176
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Silver demand item in from Tokyo:
Hi Bill,
FWIW, Shiseido has recently released a line of silver based deodorant products. I saw a few of them at the convenience store last night:
http://www.shiseido.co.jp/ag/workofag/index.htm
I don't know how much silver is in each bottle, but I would guess they will sell tens of millions of bottles each year.
Warm regards,
Thomas
On Richard Russell’s notion there is a significant short dollar position out there, which is the reason to be long the US dollar:
Debt is not a true short on the dollar, because the dollar has no real substance in a fiat currency. A debt can be considered a short on gold in a currency that is backed by gold, since you are promising to pay gold at some future date. This is why a central banker recently referred to gold as a 'yoke.'
Given a fiat currency, and given systemic debts that cannot be repaid, which way do you think any government would choose to go, and what do you think can possibly stop them. The only limitation on the number of dollars that can be 'printed' is hyperinflation, as in the case of the Weimar collapse in which they were faced with unpayable war reparations.
Being short on fiat is like being short on "I love you" and "the check is in the mail" or the corruption of central governments.
Jesse
Smoke continues to billow all over the place indicating there will be fireworks coming out of Washington in the weeks and months to come.
TENET LIED UNDER OATH TO 9/11 COMMISSION ABOUT 8/24/01 MEETING WITH PRESIDENT - AGENCY COMPOUNDS MISREPRESENTATION
* CIA Statement Omits Key Date From List of Bush-DCI Meetings in Weeks Before 9/11
* What Did Bush, Tenet, Rumsfeld and Gen. Myers Talk About in Crawford, TX Three Weeks Before the Attacks - One Day After the Flt. 77 Hijackers Were Watchlisted by the CIA?
From Mark G. Levy
Washington, DC, June 7, 2004 - Former CIA Director George Tenet committed perjury in his April 14 testimony before the 9/11 Commission when he claimed he had not met with President Bush in the month before the attacks on the World Trade Center and Pentagon. That misrepresentation in Tenet's testimony was noted within hours by Agence France-Presse. [Story reproduced below, & available at: HERE]
http://www.scoop.co.nz/mason/stories/WO0406/S00098.htm
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