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CARTEL CAPITULATION WATCH
The US stock market gave back all of Friday’s gains and then some. The DOW dropped 137 to 10,102 and the DOG flopped 45 to 1939. A few more days like this and we could have that perfect financial market storm sooner rather than later.
The good news:
March 15 (Bloomberg) -- U.S. industrial production rose a larger-than-forecast 0.7 percent in February as companies made more cars, electronics and business equipment, a report from the Federal Reserve showed.
The increase in production at the nation's factories, mines and utilities last month followed a 0.8 percent rise in January and was the fifth in the last six months, the Fed said in Washington. The proportion of industrial capacity in use rose to 76.6 percent, the highest since August 2001, from 76.1 percent. –END-
The bad news:
March 15 (Bloomberg) -- A gauge of manufacturing in New York state fell in March from a record, showing the slowest rate of expansion since September, as the outlook for new orders and hiring weakened, a survey found.
The factory index compiled by the Buffalo branch of the Federal Reserve Bank of New York sank to 25.3 this month from the high of 42.1 in February. A number greater than zero shows that a majority of manufacturers said business improved.
The bad news means this:
March 15 (Bloomberg) -- Higher interest rates are at least nine months away, according to a growing number of economists at Wall Street's largest bond-trading firms.
The Federal Reserve will wait until 2005 to raise its key interest rate from 1 percent, said economists at 10 of the 23 primary U.S. government securities dealers, which trade with the central bank, surveyed by Bloomberg News. In December, just six economists said the Fed would wait that long. –END-
GATA’s Mike Bolser:
Hi Bill:
The Fed added $3.5 Billion in repurchase agreements today march 15th 2004.This action caused the repo pool to edge up a bit to $35.25 Billion and also moved the pool's moving average to a level trajectory. The ma seems to be preparing for a move back up but this conclusion is not yet firm.
The DOW's own 30-day ma has made a tiny up tick since Friday and this seemingly innocuous move is important as it tells me that the Fed has steered the DOW's ma from a very short down stretch back to level, as predicted.
Back to 10,500 by the end of April
It doesn't seem like much of a prediction but by moving the DOW back to the 10,500 level at the end of April keeps it right on track for 11,750 by Labor Day.
It may not appear so but I'm trying to remain objective here and not fall in love with this working hypothesis. What continues to keep me energized is the dreadful sea of untoward financial fundamentals confronting the Fed as it grapples with reality. An inflationary reality for them that has no exit strategy except abject failure through currency debasement.
In such a scenario the Fed is highly motivated to present a brave face to the world through one of its still viable financial marionettes--the DOW. Their other stage puppet is the manipulation of long-term interest rates. However, even that Fed stalwart is being eroded by the imminent news release of $25 Billion in GSE derivatives losses which will doubtless focus more unwanted attention on JP Moragn's obscene $25 Trillion derivatives book (constructed as a pool of needed interventional liquidity).
Which of the Fed's many rigs will fail first?
There's no telling which commodity or interest rate market will collapse
first nor is it possible to predict the date. This is the reason that prudent investors should take reasonable steps as soon as possible in order to prepare for all eventualities.
Mike
My IA site has been updated:
http://www.pbase.com/gmbolser/interventional_analysis
But there is no inflation: From The King Report:
The Seattle Time’s Tony Pugh writes, "The government's top expert on Medicare costs was warned that he would be fired if he told key lawmakers about a series of Bush administration cost estimates that could have torpedoed congressional passage of the White House-backed Medicare prescription-drug plan." Bush’s initial $395B cost for his proposed drug benefit plan has been revised $100+B higher. The expert in question, "Richard Foster, the chief actuary for the Centers for Medicare and Medicaid Services, which produced the $551 billion estimate, told colleagues in June that he would be fired if he revealed the higher estimate to lawmakers." The article notes, "Foster didn't quit, but congressional staffers and lawmakers who worked on the bill said he no longer was permitted to answer important questions about the bill's cost." Case closed on government economic data integrity. http://seattletimes.nwsource.c…01877368_medicare120.html
From Adrian on the Saudi/gold situation:
I just did a rough calculation to see the viability of the Saudi gold hunting news. I took $36 per barrel and said that is about $9 more than the recent average annual price and OPEC target price of around $27. This gives Saudi a windfall revenue on 8 million barrels per day of 72 million dollars per day. At $400/oz they can buy 5.5 tons per day..that is 2008 tons on an annual basis. Well, what a coincidence!
So given the extra windfall revenue the number is certainly credible. Given the noise in OPEC about the devaluing of the dollar it makes sense….then there is the dynamite link and coincidence that Matahir Mohammed of Malaysia recently visited Saudi and advised them to sell oil in gold not dollars.
The numbers and the current facts fit…and now there are rumors of large purchases being planned.
It makes sense.
Adrian
From George Ure (http://www.urbansurvival.com). MIDAS has company over my outrage at the US Government and their shenanigans:
Friday
Friday's BIG Lies
The market's decline this week, which we'll get into more for subscribers over the weekend, is not the product of "overseas security concerns", so much as it is the whole world is waking up to what we pointed out yesterday: The world is entering a period of extreme fuel price uncertainty. How will the administration cope? The answer is simple: Lie.
Let me point out just a couple of obvious ones, so you can see it for yourself in absolute black and white. Today the Bureau of Labor Statistics is supposed to release the February Producer Price Index. But they won't - they can't. Why? because they haven't released the January PPI figures. And why is that? Take your pick of one of two options. Either the government is telling the truth on their web site at http://www.bls.gov/ppi/delaynotice.htm which says in part:
"As announced on February 17, the release of the Producer Price Index (PPI) for January 2004 has been delayed from the originally scheduled date of February 19, 2004. The length of that delay now means that the release of February data originally scheduled for Friday, March 12, must also be postponed.
The delays have been caused by unexpected difficulties in the conversion of PPI data from the Standard Industrial Classification system to the North American Industry Classification System. These difficulties have taken far longer to resolve than we originally expected.
We will continue to work diligently to resolve the remaining issues holding up the calculation of the PPI. When revised release dates for the January and for the February 2004 Producer Price Indexes have been determined, we plan to announce them at least one day ahead of time on this web page and through news advisories."
What does this imply? It means the government - with all of its resources - can't even figure out the producer price index, which has been a stalwart of economic forecasting for decades. OK, you want to believe the government? Then you have to believe they are dumber than a typical college business class, which working as a group could have resolved the whole thing in a matter of a week or two - and had money left over for a party.
Frankly, I can't buy it., I can't believe people in BLS are stupid. I think they're smart - damn smart. But they also know they would be axed if they spilled the beans about the producer prices which we demonstrated in January would be up 20% because of things like the 30-60% increases in steel prices and the fuel prices.
{Prediction: We won't see the Producer Price Index any time soon because it is a political nightmare. It won't happen until after the next "terror attack" because the BLS no doubt needs something to hide it behind.
The Second Lie
So the PPI is buried, now how does the administration get rid of inflation? Answer: Fuel Surcharges. Fuel surcharges aren't counted as "inflation" because they are deemed "extraordinary." I expect there has been a rash of phone calls from the neocons to their corporatist pals with a simple requestr: "You're a patriot, right? OK, we need you not to raise your rates. Use a "fuel surcharge" instead, so we don't have to report high inflation, OK? That way you will make the same amount of money at your corporation - and be doing a big favor for the President, who we all know needs a second term in order to defend our American Way of Life, right?" "Err...I guess so..." "The President thanks you..."
Now, let's say that I want to UPS a package to my son in Kirkland, Wa. I want to overnight him a box of CD's that weights one pound, and is 6" cube. what would I pay? I click through the UPS web site...and am rewarded with a quote:
Charges Per Package
32.91*
Hmmm....what's that asterisk?
* Rate includes a fuel surcharge.
Oh...well then, what's the surcharge rate? (click, click, search, click...)
http://www.ups.com/content/us/…/cost/fuel_surcharge.html
What we see is that UPS charges a fuel surcharge based on US Gulf Coast jet fuel prices. If the price is $0.90 a gallon, the surcharge would be 5.50%. And where do we get the fuel prices? The Department of Energy of course.
http://www.eia.doe.gov/pub/oil…t/current/pdf/table15.pdf
January and Feb look like this:… Chart not available
So if Jan is the basis for March, then the surcharge would be 6.5%, or if Feb is the basis, it would be 5.5%.
Now let's get back to my son's CD's, OK? Let's say that the fuel surcharge is based on January, and is 6.5%. This means on a 32.91 shipment, the fuel charge component is ($32.91*.065).$2.13. But wait! Didn't UPS rates go up in the past year? Suppose their rates went up 5% over the past year...add the "surcharge" and the effective rate of "inflation" for shipping is on the order of 11.5%.
I'm not picking on UPS - they are by far my favorite shipping company and extremely well run. But I want you to know that even an honest company like UPS is using "surcharges" - which may - or more likely won't - be picked up by govercrats working in election year mode. Not counting surcharges is like not counting tax rates. Why not? They're real - and are paid by real people, right?
Meantime, I'm sticking by my December forecast of a 13% US inflation rate this year - and if we see something less, it will only be because surcharges hide the real inflation and the produce price index might be extinct, for all we know.
-END-
From http://www.theage.com in Australia: For the "Nits" in the gold industry. Cartels are everywhere all over the world. The most obvious one of all, the gold one, stares you in the face every day. Wake up and grow up!
ACCC to cure economy of 'cartel cancer'
By Gabrielle Costa
March 16, 2004
Australia's consumer watchdog has promised to bust cartels operating in Australia, setting itself up to launch a series of prosecutions to ensure the economy operates under a regime of vigorous competition.
Speaking yesterday at a Melbourne luncheon hosted by the Institute of Chartered Accountants in Australia, Graeme Samuel, chairman of the Australian Competition and Consumer Commission, said that cartel behaviour had a far greater impact on consumers and the economy than the worst consumer scams.
He described cartels, including price-fixing arrangements and collusive tendering, as a "cancer on the economy" and a "silent extortion on consumers", and said they would be the ACCC's focus this year.
Mr Samuel said the ACCC had 32 investigations under way into cartel behaviour. Some centred on small groups of relatively small companies accused of price fixing, but others were international in scale.
Speaking after the luncheon, Mr Samuel said prosecutions would happen. "There are a number of them there. I don't know whether each and every one of them will prove up but . . . when you've got 32 that are there sitting on your books and some of them are coming in pretty loud and clear through the use of the leniency policy, what that says to me is that the leniency policy is working."
The ACCC has offered immunity from prosecution for companies that report cartel behaviour and assist in investigations. Only the first company to come forward from a cartel is provided with immunity - granted on the condition that that company did not initiate the cartel behaviour.
"It's (the leniency policy) starting to break down these cartels and there can be no greater satisfaction at the moment than to do just that," Mr Samuel said.
But he declined to give a timeframe for any prosecutions and refused to be drawn on which companies, or which sectors, were alleged to be involved.
The leniency policy is starting to break down these cartels.
GRAEME SAMUEL, ACCC
Mr Samuel said he would attend a conference in Korea in mid-April where international cartels would be discussed.
Australia would host a cartels workshop at the end of the year. Major international cartels were "clearly a lot more difficult to deal with because you've got to deal with international agencies," he said.
Mr Samuel also:
•Repeated his view that jail terms for cartel operators would provide a much greater deterrent than fines. The Federal Government is considering whether to introduce jail terms for hard-core cartel operators.
•Reiterated his opposition to a formalisation of the merger applications process, maintaining that the current informal arrangements were satisfactory.
•Said that any move by Parmalat to sell off its Australian holdings would be monitored because of the concentration of ownership in the dairy industry, in particular if National Foods or Australian Dairy Farmers bought stakes. "The number of processors in Australia are few and far between," he said.
-END-
Haggis from AussieLand:
G’day Bill,
Trouble in paradise!!!
The 13th of January 2004 was an important date. On that day, Gold was short sold, and since then the Gold price has formed a bullish wedge pattern, which eventually will break out above the US$ 400 – 410 resistance slope.
Also on the 13th January the stock markets started their topping formation, a "head and shoulders", which culminated in a break below the neckline on the 9th March.
On the 9th March the Silver price broke out above US$6.92. As you have correctly pointed out, there is no stockpile of silver, and as I understand it there is a massive short position.
On the 9th March Gold was yet again short sold, remaining in its wedge. There is a massive short position in Gold.
Once again, I highlight the point that the Chinese have mined gold for some 3,000 years, and currently produce the order of 3 million ounces per annum. They do not export it, so who has the Gold? China!
You have also highlighted that the Chinese have also "cornered" Silver production, having acquired 75% of all Silver production for the year 2005.
Och Aye
Haggis
Le Metropole Café has a history of trying to figure out moves ahead of time:
Dear Sir
,
In the 19-th century Le Metropole Cafe was known for accommodating chess championships.
Horia Stefan
Investors can’t get out of their gold shares fast enough. It is not hard to understand why. More and more of the pundits who follow the gold shares are advising clients (subscribers) to use extreme caution or to exit their positions. This includes Café contributors. Then you have hedge funds, which are being forced out to some degree due to the precipitously falling DOG. The XAU fell 2.33 to 96.30 and the HUI sank 6.44 to 215.60.
If the HUI loses another 6 points and closes below 210, it will break its rounding bottom formation.
As for me, I am all systems go. The Gold Cartel is in the process of losing control of the silver rig due to lack of physical market supply. While the cabal is all over gold at the moment, events in the days and weeks to come are likely to shake their iron-hand grip on gold significantly. Note that we are not undergoing a commodity price liquidation. The reverse is happening. We have close to having a melt-up. What could be more bullish for gold and silver?
Sure the shares could do anything short-term if there is a stock market debacle. But, I can’t see them staying down for more than a very brief perios. This is unlike 1987 when US interest rates were much higher. Are investors going to go into cash? If the Fed has to react to a stock market problem are they going to lower the US Fed Funds rate to ½%. Talk about panic setting in! If the dollar collapses is the Fed going to do, raise rates? Hardly! Seems to me they are in a box with few remedies to handle erupting financial market problems.
More than likely the HUI is going to come in 10 points higher one of these days and go straight up. Those out of position gold share wise will find re-entry to be very difficult.
As far as gold and silver are concerned, this was my call on Friday with gold down $5.20 and silver down 11 cents:
"My bet is gold takes out $406 and silver approaches $7.50."
That call still stands.
GATA BE IN IT TO WIN IT!
