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CARTEL CAPITULATION WATCH
Just when the US stock market looked like it was going to pull one of its patented late day Hail Mary rallies, it sold off fairly sharply. The DOW closed down 90 to 10,480, while the DOG slumped 9 to 2050. You got to wonder why anyone would want to be long this market with Iraq blowing up like it is.
An explanation why the Fed and Washington won’t tell the truth to the American public:
April 6 (Bloomberg) -- Public expectations about inflation are a more reliable indicator of future retail price trends than raw materials or commodities, St. Louis Federal Reserve President William Poole said.
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``My conclusion is that the unfolding inflation experience is most strongly anchored by how the public and financial market participants expect inflation to evolve,'' Poole said in a speech at the University of Arkansas in Little Rock. ``Well-designed and articulated policy under such conditions can produce great outcomes.''
Poole rejected several conventional inflation signals, such as commodity prices, monetary growth, and the producer price index as reliable near-term indicators of retail prices. The 66- year-old central banker is a voting member of the Fed's Open Market Committee, which sets the level of interest rates. –END-
GATA’s Mike Bolser:
Hi Bill:
The Fed added $5.75 Billion in temporary repurchase agreements today April 7th 2004, an action that moved the repo pool down a bit to $28.83 Billion.
We clearly see the Fed hesitating in a robust DOW support action at this juncture. The repo pool's 30-day moving average is tracking flat and I expect the DOW to follow suit for a few days at least. At this hour the DOW tracks around 10,480 and its 30-day ma has begun to round off to a level phase, just as the Fed has intended through it's repo tools.
After lengthy discussions with an avid follower, there are two other indicators that must be watched carefully in addition to the repo pool. They are the NASDAQ 200-day ma and the 10 year treasury yield. In the former, its 200 day ma was touched ever-so-briefly in March, only to sharply rebound and the 10year treasury yield which has run quickly up from 3.67% to 4.23% of late.
Its former recent high is 4.68% and, like the NASDAQ 200-day ma represents a warning sign that pressure on the Fed is getting very high. Today the 10 year is a bit better (for the Fed) doubtless as a result of its put buying. As they deteriorate, these indicators will signal a divergence from the DOW which will be maintained in an upward trajectory by the Fed at all costs. Such divergences, even with a rising DOW, will serve to draw even more investors to tangible instruments and away from paper.
Gold shot upwards this morning along with silver, a reminder that a sea of new precious metals investors still exists. The sustained high open interest positions must be very worrisome to the Fed. My website
http://www.pbase.com/gmbolser/interventional_analysis
reveals that the all-important DIVG 200-day ma continues in a linear up-slope and I interpret this very odd pattern as a Fed retreat to a higher defense level in progress.
Moreover, the two glaring patterns set since March 2003 (The obvious, three-phase, cyclical defense of DIVG=323 which failed in December leading to today's linear up phase) fit the conclusion that the Fed and its central mbank acolytes utilize the DIVG as an internal metric to value their remaining gold reserves and as a gauge of their status in today's gold war. The news continues to be very good on this metric.
Mike
Mike Bolser sure nailed it with this call yesterday, made BEFORE the news from Iraq hit the tape:
"Indeed, it is reasonable to predict within a month or two, the fall of an outpost or two similar to the fall of Ke San in Viet Nam. The archived pictures of burning C-130 re supply planes bull-dozed off the field still resonate. History is repeating itself."
Chuck checks in:
Bill:
Even though today was strongly influenced by the events in Iraq, the markets feel like something is ready to give here. The sharp rally in stocks followed by the late day reversal might be ominous here. It certainly was unusual.
Second, in the gold complex, in spite of the strength of gold, some of the golds continue to languish. Newmont, in particular, has acted sloppily, but I think that since it has had two bad gaps in the past week, and never closes well and yet is only off its recent high by two dollars, it is getting ready to join in. By contrast, GSS has acted entirely differently, with a nice move today.
I believe that events are ready to propel gold and the stocks upward very soon. The continued lack of interest in the small companies and the bad closes, which tend to discourage, to me, are actually positive signs. I am more concerned when there is rife speculation and abounding confidence. That day will come. Chuck
But, there is no inflation:
Bill,
Did you notice in yesterday's WSJ story about skyrocketing soybean prices the passing mention of the Farm Bureau Research Board's price index of groceries being up over 10% for the first quarter? Quite a different story than that CPI food number of .6 of 1 % for February. So basically Farm Bureau says food inflation is clipping at 40% annual and the government says about 6 or 7%. The Bush boys had better dispatch the goon squad down to those Farm Bureau folks and enlighten them to the wonders of hedonic deflators and seasonal adjustments. Crisco up 21% ? It's new and improved. Rice up 79%? It was a dry season in Asia. See how it works? Look for the next Farm Bureau report to be postponed until about, say, December. If gold merely tracked that grocery index it would be $500 bid this minute. I have never felt more strongly about the wheels coming off this economy. It is almost palpable. Too bad GATA was ignored these last several years.
Silver margins raised again.... what a hoot. I'm e-mailing them to request assurance to me I will get my May deliveries since they seem to be panicking. Maybe they hadn't thought of that response?
James McShirley
Mr. Gold Sale himself is biting the dust:
April 7 (Bloomberg) -- Bundesbank President Ernst Welteke agreed to take leave of absence after a 7,661-euro ($9,336) hotel stay paid by Dresdner Bank AG for him and his family sparked a probe by Frankfurt prosecutors and the German central bank.
Welteke, 61, will leave today, the Bundesbank said in a statement after a board meeting that lasted at least seven hours. The central bank's vice president, Juergen Stark, 55, will assume his duties temporarily, the Frankfurt-based central bank said. It didn't find sufficient reasons to fire him.
–END-
Oil and the PPI:
Hi Bill - I pulled this article off Bloomberg this morning (quoting the Bejing Morning Post). China is considering developing its own SPR (strategic petroleum reserve). It makes a lot of sense if you ask me. China currently consumes around 6 million barrels per day of oil - so a 180 day reserve would be north of a billion barrels. Anyone who thinks the oil based cost pressures that are squeezing the global economy are going to go away anytime soon - had better think again. Wonder how long the magicians in the Bureau of Labor Statistics can spin the PPI at the 1.2% annualized rate as they did in February? Stay tuned. Mark.
On the Comex margin increase:
Bill:
Quite incisive commentary on Tuesday. Red flag indeed! The Comex silver bullies might as well have reeled in their Jolly Roger and raised the white flag of surrender. The motives of these short-favoring crooks in raising silver contract margins ANOTHER 25% (after a 33% hike in February!) is transparent as air. This is like shipwrecked sailors clinging to flotsam and desperately pouring blood into the water to distract the sharks from their own vulnerability. I believe we are going to have an excellent opportunity to witness how intelligent AND hungry the "sharks" trading the silver (and gold) futures are.
To continue the analogy, it appears to me that the heretofore fully-conditioned Pavlov's dog-like traders may no longer be salivating on command of the exchange bureaucrats, but are ready and willing to savage their bumbling former handlers. I believe you are correct that we may be experiencing a paradigm change in the structure and behavior of the gold and silver markets, which may well initiate an event(s) of seismic proportion which will continue to generate devastating aftershocks throughout world markets. As you are apt to say: It's guts ball time. Lock and load for a silver showdown at the Crimex Corral!
GATA go!
Tom Kirsling
More on silver:
Hi Bill,
More evidence of VERY tight silver supplies?: I contacted a commodity broker today with the intention of opening a second futures account and asked how long it takes to receive delivery of silver nowadays. The broker said they do not process silver deliveries and said I should buy silver certificates. Some commodity broker, eh? Maybe I should have informed him that a paper certificate is not a commodity and that he should remember what business he is in - the commodity business.
Ron Lutka
Bill;
This headline is currently on the homepage of Quayle'e website. Speaks volumes if you ask me. Website:
http://www.stevequayle.com/index1.html
"As of April 6th, silver reached $8.26/oz. I just received word that the margin requirements for speculators have been raised starting tomorrow. This means that speculators must come up with more cash to cover their positions. The last three times this happened, silver sold down $.50-$.75 only to move back higher in the following days. The purpose of raising the margin requirements is to force liquidation of positions in the long camp – those who are expecting higher silver prices. The timing of this event is more than suspicious. Based on world turmoil and the number of investors taking delivery of their silver, this is indicative of much, much higher silver prices after the potential $.50-$.75 downward correction. Palladium is $316/oz headed toward the $400 mark."
Silver seems alot like a weeble these days - the powers that be seem to be able to make it wobble - but it never falls down. Kind of reminds me of fiat currency up till now.
best
Rob
The Morgan Silver Dollar:
Bill, The GATA response on our Morgan Silver Dollar offer was outstanding. If there are any CAFE members who are still interested in buying silver coins which offer great value and enormous upside potential, have them contact me ASAP. The Certified Coin Dealer Newsletter writes on 4/2/04, page 1: "Morgan Dollars remain extremely strong. Generics continue to march onward and upward with MS65, MS66 and MS67 being bid to higher levels." Supplies are getting tighter and prices should be going up again soon. Keep up the great work,
Brother Tim
Tim Murphy
Swiss America Trading Corp
800-289-2646 ext 1019
trmurphy@swissamerica.com
ECU Silver, my fourth largest holding, was shellacked the past two days. Before it was halted, it closed at 59 cents Cdn. Today panic selling set in and it fell to 30 ½ cents Cdn. I added to my position below 40 cents, which is where it closed.
Last September ECU was at 8 cents. Shortly before the trading halt, it traded as high as 68 cents. A 50% correction takes it back to 38 cents. Due to a poorly received press release, sellers couldn’t wait to get out and it over shot the 50% correction mark.
My take is ECU was overbought and due for a technical correction anyway. If you don’t have access to any charts, go to http://www.stockwatch.com and look ECU up. It went ballistic since last fall.
I’m no Jay Taylor or Bob Bishop when it comes to analyzing companies. I like ECU because I respect Michel Roy, the CEO, who he has turned the company around. When they upgrade their mill in Mexico, as they in the process of doing, ECU will be a very profitable little silver producer. Since I see silver shooting up to $40, it ought to be a nice winner.
Regarding the press release, I have not spoken to Michel about it. However, my guess is the authorities raked him over the coals and to get the stock up and running, he probably had to put the worst light on most everything.
The ECU share drop is annoying, but nothing like watching it drop to a penny like it did a few years ago. Now, that was brutal.
The gold shares continue to diddle. Still can’t understand it. Gold isn’t that far from making a closing high, yet the HUI is light years from its high. It finished at 232.29, up only 1.33. The XAU gained .39 to 102.81. Golden Star Resources, my largest holding, was by far the big HUI winner, closing at $6.94, up 32 cents or 4.83%.
The quality gold/silver shares are headed for the moon.
GATA BE IN IT TO WIN IT!
MIDAS
Appendix
Hi Bill,
This appeared in the Australian Financial Review today. Seems there are some people taking note that the 'fantasy economy' is nothing more than a house of cards.
Silver and gold looking strong in the Aussie session.
Cheers,
Malcolm
IMF warns investors against complacency
Apr 07 12:41
Jim Parker
World markets may be enjoying a sweet spot, the IMF has warned, but higher interest rates, a collapse in the US dollar and further terrorist attacks could turn everything sour very quickly.
In a cautiously optimistic global financial stability report released overnight, the International Monetary Fund noted that the vulnerability of markets had subsided further since its previous report in September last year.
But it warned that the currently favourable climate of low interest rates, increasing economic activity and rising corporate earnings might be generating a sense of complacency among many investors.
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"The main risk to the benign outlook for global financial markets is that such an outlook rests on a very fine balancing of opposing economic forces," the Washington-based fund said.
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"The continued abundance of liquidity and a lack of two-way interest rate risk could lead to a sense of complacency and intensify the search for yield, while neglecting risk factors."
Its warning is timely as markets in recent days have responded to strong US employment data by pricing back in the expectation that the Federal Reserve will raise interest rates this year.
The IMF also cited the risk to interest rates and asset markets from a disorderly correction in the US dollar as Asian central banks slow their market interventions to keep a lid on their own currencies.
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"At any sign of that risk materialising, foreign investors could demand a risk premium on dollar assets, including pushing bond yields higher and with more volatility than current market expectations,"the fund said.
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"This adverse development could reverse the strengthening of financial institutions' balance sheets and create headwinds to the economic recovery."
The Asian demand for US assets - mainly Treasury bonds - has helped the US fund its record current account deficit and has ensured that the greenback's depreciation to date has been relatively orderly.
Echoing concerns by some market commentators, the IMF also pointed to evidence of "herding behaviour" by some risk-hungry investors who have responded to easy money by moving into unfamiliar areas.
"This process could lead to an overvaluation of certain financial assets, particularly in small and illiquid markets such as many emerging markets. The longer this process persists, the greater the potential for disruptive corrections."
Aside from economic risks, the IMF also cited geopolitical factors and the possibility of further terrorist attacks - similar to the recent train bombings in Madrid - as a potential destabilising influence.
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"It is clear that if there were more incidents along the lines of Madrid, it would have an impact on the real economy," Gerd Haeusler, the IMF's director of international capital markets told reporters in London."
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"I would be somewhat concerned that an additional risk premium would be built into some asset classes that would be quite unwelcome."
April 7, 2004
Nader Calls for Bush to Be Impeached
By MAURA KELLY, Associated Press Writer
CHICAGO - Independent presidential candidate Ralph Nader (news - web sites) called Tuesday for President Bush (news - web sites) to be impeached for "deceiving the American people night after night after night" about U.S. involvement in Iraq.
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"When you plunge our country into war on a platform of fabrications and deceptions, and you bring back thousands of American soldiers who are sick, injured or dead, and that war is unconstitutionally authorized to begin with, Mr. Bush's behavior qualifies for the high crimes and misdemeanor impeachment clause of the Constitution,"
the 2000 Green Party presidential nominee said to applause from about 200 students at Columbia College Chicago.
Nader said President Clinton was impeached for "far less of an offense."
"Lying under oath is not a trivial offense, but it cannot compare with deceiving the American people night after night after night on national television, staging untruths and rejecting the advice of his advisers," he said.
Merrill Smith, a spokeswoman for Bush's re-election campaign, declined to comment.
Nader previously called for Bush's impeachment during an anti-war rally March 20 in the president's hometown of Crawford, Texas, to mark the first anniversary of the U.S.-led invasion of Iraq.
Nader, a longtime consumer advocate, was in Illinois to gather the 25,000 signatures he needs before June 21 to qualify for the state ballot. He failed Monday to qualify for Oregon's ballot, but said he would try again under another option there.
Many Democrats blame Nader for Democrat Al Gore (news - web sites)'s loss to Republican George W. Bush in 2000, and have urged him not to run this time. They cite the vote Nader captured in close contests in New Hampshire and Florida and argue that Gore would have won if either state had gone to the then-vice president.
But Nader says Gore is to blame for his misfortune, and he rejected the idea that he could draw support away from Massachusetts Sen. John Kerry (news - web sites), the presumptive Democratic presidential nominee.
In Portland, Ore., on Monday, former Democratic presidential contender Howard Dean (news - web sites) warned that "a vote for Ralph Nader is the same as a vote for George Bush."
An audience member in Chicago was booed for suggesting something similar.
Nader responded:
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"What we have to tell the two parties in unmistakable terms is that this country does not belong to two parties."
