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CARTEL CAPITULATION WATCH
The DOW pulled another one of its Hail Mary rallies again in the last 20 minutes, storming back 60 off its lows. It was getting pretty ugly going into the last half hour of trading. As is, the DOW fell 127 to 9990. The DOG was clipped for 22 points, falling to 1896.
One broad-looking top formation:
June S&P, which took out its March lows before recovering
http://futures.tradingcharts.com/chart/SP/64
This could lead to serious trouble:
WASHINGTON, May 10 (Reuters) - U.S. President George W. Bush plans this week to impose economic sanctions on Syria after accusing it of supporting terrorism and failing to stop guerrillas from entering Iraq, people involved in the deliberations said on Monday….
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GATA’s Mike Bolser:
Hi Bill:
The Federal reserve added $6 Billion in repos today May 10th 2004 in an action that caused the repo pool to rise to $37.67 Billion.
Both operative 30-Day moving averages, the DOW's and the pool's, have momentarily turned flat. I expect this condition to rectify itself by week's end but it bears close watching as ANY shift in the moving averages is significant. Today's DOW weakness combined with the increasing interest rate jitters isn't what the Fed wants to see.
While the repo pool is an assist tool (for the Fed) of proven effectiveness, it hasn't been tested through a crisis such as a sharp rise in long interest rates. With the 10-year at 108.5 and the 30-year yield tracking just above its long term ceiling at 5.4% the Fed is in a danger zone and as such they are vulnerable.
Conflicts
During any struggle, the conflicting parties seek intelligence in order to prevail. Neither side is ever fully aware of the battlefield status of the other until afterwards.
Additionally, it can be said of today's gold war that the attacking longs have time on their side while the defending gold sellers have the high ground but suffer dwindling resources. We can't know how much metal remains to be sold or when the central bank participants will finally realize the cause is lost or even where in the gold cartel's defense walls the first significant break will occur.
What the history of warfare has often proven is that the decisive break will occur when we least expect it.
Mike
The latest GATA news from Russia:
Dear Bill,
I am happy to inform you that GATA's efforts are attracting more and more public attention in Russia.
Take a look at a book on economics published in Moscow this spring (5000 copies).
http://paxamericana.narod.ru/index.html
If you translate this book's name into English you will get something like "The US Dollar Empire Decline".
This book was reviewed in popular business weekly magazine Expert (http://www.expert.ru).
GATA's position is presented in chapter 6.
I have translated this chapter into English using http://www.translate.ru site. The result is below.
The translation program does not know some words so they were transliterated (painted in pink) -- FRS is FED; antitrestovskogo is anti-trust; tsentrobanki -- central banks; pereotsenen -- overpriced; obrushajutsja -- crash; domohozjajstv -- households
You should read PLOT as conspiracy; scedule as graph
Best wishes,
Ivan Rogojkin, Moscow
Sarge reports on the inflation front:
Just went to Kroger to get milk for kids. Was walking down the ice cream freezers isle and saw new notices posted everywhere. In a nutshell Kroger is saying that these are the highest prices (in some cases EVER) paid for milk, butter, ice cream, cheese and other dairy products. They attribute it to a shortage in the supply of milk. They refer you to a website that "explains" everything.
http://www.idfa.org/news/stories/2004/04/milksupply.cfm (interesting short read)
So we are seeing "record high levels" in milk and products prices and this is because of a 1.8% reduction in milk production by farmers in Jan and Feb this year versus the same period last year?? Extrapolate this to the gold and silver markets. The disparity sticks out like an amputated (not just sore) thumb to me. Does it to you? –END-
Inflation is everywhere. From a Reuters release on remodeling costs:
Hourly earnings of U.S. construction workers averaged $19.19 in March, up 2 percent from a year ago, according to the U.S. Labor Department.
In the past year, prices have skyrocketed for the main types of panels used in home construction. The cost of a 4-by-8-foot plywood sheet has doubled to $15.36, while particle board of that size now goes for $15.65 -- nearly three times year-ago levels, said Michael Carliner, an economist at the National Association of Home Builders in Washington.
The cost of framing lumber has risen about 34 percent in the past year to $382 per thousand board feet, and softwood products made from spruce, pine and fir have climbed 58 percent to $378 a thousand board feet, according to the National Association of Home Builders.
Collectively, price spikes for wood and metals could add $5,000 to $7,000 to the cost of building an average-sized home, according to Carliner. -END
An interesting read in Barron’s:
J Alfred Greenspan
Barron’s
http://online.wsj.com/article_…aV3mputbXuGa66Cm5,00.html
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Something to ponder:
Bill,
I want to make a comment about the following statement made in Antal Fekete's posting "WHAT GOLD AND SILVER ANALYSTS OVERLOOK"
He refers to the growing naked short position in silver and says:
"One reason why I find the theory of inordinate and growing naked speculative short positions unattractive is because it assumes that the insiders are either stupid or suicidal or both. It is dangerous to underestimate one’s opponents"
I think it is very important to address this because I have heard similar comments from other sources and even from friends and colleagues who like Mr Fekete cite the requirement of people to be either stupid or suicidal to commit errors of judgement that could lead to catastrophic consequences. It is easy to fall into the trap of this argument. Clearly, one has to agree that the likes of JP Morgan, Morgan Stanley or Goldman Sachs are not staffed by stupid or suicidal people and then one has to agree therefore that their precious metals or derivative positions can not possibly pose a systemic risk to the world's financial system.
However, the flaw in the argument is the supposition that stupidity or suicidal tendencies are a prerequisite for monumental mistakes. There is very little historical evidence that catastrophic events have been triggered by the actions of stupid or suicidal people. Let's look at a few:
*The LTCM failure occurred when the market moved against a 1 trillion dollar derivative position that was backed by 4 billion dollars in assets. The LTCM founders were Nobel Prize Laureates! They were neither stupid nor suicidal. Infact the book that has been written about the collapse of LTCM was entitled "When genius failed"!!
* Enron collapsed when an untenable scheme of reporting loans as revenue became public. Enron was not run by stupid or suicidal people.
* The Metallgesellschaft oil derivatives fiasco which cost the company 1.5 Billion dollars was not because the company was run by stupid or suicidal people.
* Barrings Bank was brought down by a huge derivatives gamble on the future direction of the Nikkei. Nick Lesson, nor his supervisors, were neither stupid nor suicidal.
* The USSR collapsed when a hugely inefficient centrally planned economy failed. The USSR was not run by stupid or suicidal people.
* The Titanic was declared "Unsinkable" but ironically sank on its maiden voyage. The ship was not designed by stupid or suicidal people.
* John Law's Missippi scheme failed dramatically. There is no evidence that John Law was either stupid or suicidal.
It is a fact that the bullion banks continue to build their short positions in gold and silver to levels that it would be impossible to deliver against. It is fact that the gold derivatives at these same banks continue to grow while mining company hedges are being reduced. It is fact that some of the same banks have mind-boggling large interest rate derivative positions. What is NOT a fact is that these positions can not bankrupt the entities concerned because the people involved are not stupid or suicidal.
If conclusions are based on a set of incorrect assumptions catastrophies can and will happen. When problems first begin to appear the tendency is for everyone to make decisions which make the problem grow bigger because it is unacceptable for people in positions of power to allow anyone to question the original assumptions...until it is The gold and silver markets and the derivative markets have all the hallmarks of a problem being made a bigger problem in order to avoid admitting that original positions have been built on incorrect assumptions. In highly leveraged markets such action very quickly passes the point of no return. The only thing that then seems to be suicidal to the participants is to STOP adding to ludicrously untenable positions.
Cheers
Adrian
Out of Control:
War tab swamps Bush’s estimate
Spending projection: $150 billion by 2005
URL: http://www.sfgate.com/cgi-bin/…004/05/09/MNGOU6IK1J1.DTL
With troop commitments growing, the cost of the war in Iraq could top $150 billion through the next fiscal year — as much as three times what the White House had originally estimated. And, according to congressional researchers and outside budget experts, the war and continuing occupation could total $300 billion over the next decade, making this one of the costliest military campaigns in modern times.
As a measure of the Bush administration’s priorities in the war on terrorism, it has spent about $3 in Iraq for every $1 committed to homeland security, experts say.
That divide may be growing.
The Pentagon says its monthly costs for Operation Iraqi Freedom shot up from $2.7 billion in November to nearly $7 billion in January, the last month for which it has provided figures. Since then, the number of troops has jumped by 20,000 to 135,000, and the bloody insurgency has grown….
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The gold shares finally caught some bids. The XAU gained 1.91 to 79.94 and the HUI rebounded 4.44 to 173.24. The fibonacci 62% retracement close is holding so far. Every gold company in the HUI closed higher with Meridian rallying 4.72% to lead the way. Newmont finished up 92 cents to $36.33.
Have to start somewhere. Too early to tell if the gold share debacle of the last month has ended. Sure hope so. ‘Nuff of that….in it to lose it stuff. Let’s get back to:
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
Ed Steer kinda says it all in his reply to Ross's position. Steer is right, the mines have been selling out shareholders by selling real metal into a rigged paper price. None of them, even set aside their own metal as Goldcorp did, but continued to sell it off at below the cost of production.
As Ross states, they sold forward as well to the tune of 300 Moz. The miners are not a bullion investor's friends. Did you know that they are classed as commercials in COMEX? They sell futures too. This is why I don't take a position in them.
Ross says there are 500 Moz of visible stockpiles out there. But these figures are compiled from GFMS, the same bunch that understate the derivatives position in gold and overstate the central bank reserves in gold. Why wouldn't they do the
same in silver? If you check how these guys do their reserve calculations, they list consumption, and list production and when they subtract one from the other to come up with a deficit in silver, they then add a disinvestment number to the supply so that every year supply and demand balance! What they are doing is looking at the paper price (which is down or flat, year after year) and assume that this cannot happen without at least a balance in real supply.
So they make up the difference in supply by an assumption that there is no supply deficit because silver investors are dishoarding into the deficit. Year after year, according to GFMS, there is no deficit because there is no price increase. So they rig the numbers to rationalize the rigged paper price. Everybody lies in the pm market.
Take a look at the gold and silver market behavior over the past several months. They act the same. Sell offs occur at the same time as do spikes up. The degree or intensity differs, but the timing is the same. But these are two different metals with different supply and demand fundamentals. The only way two completely different monetary substances can act the same in the market is if they are being managed by officials who are also monetary rivals. In short, gold and silver act the same because they are both money and are both in competition with paper money at the cusp of a great change in perception. Ross ignores silver as money and treats his product as if it's a mere commodity. It isn't. Silver has been money for five times longer than gold. This is why the rigging is five times as intense with silver as it is with gold. Yes! Five times.
Did you know, that if silver becomes unavailable, industrial production ceases?????? Modern military action ceases?????? This is why the price has been held down too. If the manipulation ends, gold will be $3000 and silver will be $300. Mind you, a cup of coffee will cost $10 and you will be using your pension check pay your hydro bill, but that's the future.
Lest you think Ed Steer and I are being too hard on Ross, I must say that he and other silver mine CEOs are in a difficult position. Not one of them supports Ted Butler. Why, stupidity? If they withhold production, I think their respective national governments would land on them like a ton of bricks. You see, governments, be they Peru, or Canada make a fortune out of fiat money systems, more than they could out of a silver or gold based system. Think about it! Six billion human beings work for pieces of worthless paper instead of a real asset. To keep that scam intact, the powers that be would squash any mine official that tried to elevate silver to its real value. That is because it would expose the real value of paper money. We can't have that, can we? You see, if silver blows up, it will take gold with it.
What happens when the world does run out of silver stockpiles? Then, world monetary interests will face an interesting question. Do we shut down our fiat money system and free its slaves or do we shut down modern industrial society? This question is too big for me to wrap my tiny brain around so I shall just have to leave it hanging out there for the experts.
Regards, Rhody
One Silver Bull
Who's Not Scared
2004-05-06
We’ll let the Warren Buffett piece ride till tomorrow, since I want to get something else of particular interest out to you this evening. I’ve just received an insightful letter from a long-time pen-pal, Karl, who sees bullish parallels between silver’s current, corrective chart pattern and the pattern it traced out between 1974 and 1978 before going parabolic. He writes as follows:
"It's interesting that you talk about all the letters you’ve received concerning a market collapse and the effect it would have on mining stocks. I would submit to you, being the contrarian I am, that the very receipt of so many letters asking that question is evidence that the stock market is nowhere near a high. There are so many things going on in the markets, and it doesn't take a rocket scientist to see the heavy hand of market influence that is there at each critical point. Yet, there is almost a fanatical disbelief that the market is not being controlled or influenced or colluded on at key moments. Now, THAT I find hard to believe.
Fundamentals Unchanged
"As a bit of a gold bug, I would say that the nothing has changed fundamentally. Yet, there is an almost new mindset that somehow Everything has changed, that the metals and mining shares are in trouble, and that the dollar is set to continue higher. This it may well do, but if it premised solely on higher interest rates, than I would submit to you that the edging up in rates is what kicked off the parabolic rise in the metals in 1978.
"I found a parallel in the Silver chart from Prechter’s book, where he discussed a nine-wave triangle. In July of last year, I wrote about this triangle and about how it seemed that we were in an identical situation. Now, let me ask you a question: If this market (i.e., precious metals and mining shares) were on the verge of a huge move due to myriad of factors, not the least of which is the massive inflation underway while the economy is struggling, wouldn't a vicious washout to make everyone cautious be the very thing one would expect before the PMs begin a real ascent?
Collapse Served Its Purpose
"I think so, and it would have to be convincing. I’ve long expected that, when inflation began to kick into high gear, there would be an event that would make people think they were flat-out wrong and that the bull market was over. That appears to be what is happening now, with mining stocks and metals falling out of bed.
"Now, I could certainly be wrong. And maybe the fundamental picture did change in a two-week time-frame. But that would be hard for me to believe. We needed an event that would shake bulls’ beliefs to the core, and that’s exactly what we’ve gotten. If you go back to the link I posted about silver and its repetition of this triangle, everything is happening right on cue --
including the shakeout that happened after the rise out of the triangle. Granted, it didn't correct as much as now -- but then, the market has never been this heavily manipulated before. Regards, Karl."
aka Kapex
