CARTEL CAPITULATION WATCH
The PPT rescued the DOW this week and turned the trading crowd into buyers. Since last Friday it jumped 285 points to 10,110, up 69 today:
http://futures.tradingcharts.com/chart/DW/X
The DOG rose 18 to 1878.
The major reason given for last week’s US stock market weakness was soaring oil prices. Even with today’s oil turnaround ($47.86 per barrel, down 84 cents after making a $49.40 high), oil was up $1.68 for the week. So why the big move in the DOW besides the PPT support. Guess it is because so many traders expect oil to crap out. Oil is still extremely overbought and could do anything short-term, however, a 30% correction from its highs will only take it back to $40 per barrel, a price considered onerous to the US economy only months ago.
The tech news released after yesterday’s market close was not good:
18:21 Semi equipment book/bill ratio fell to 1.05 in July vs StreetAccount consensus 1.07 (4 firms)
The June book/bill ratio was 1.07. The three month moving average of bookings rose 0.1% in July to $1.61B; billings rose 2.3% to $1.54B.
* * * * *
SAN FRANCISCO, Aug 19 (Reuters) - North American semiconductor capital equipment makers reported that orders stabilized in July after nearly a year of gains, a U.S. trade group said on Thursday, suggesting the industry's recovery may be reaching a peak.
Orders for equipment used to produce microchips reached $1.61 billion in July, about flat with June, Semiconductor Equipment and Materials International said in a monthly update.
Orders were still more than double the same month last year, when the chip industry ordered $706.9 million in equipment.
Billings, or shipments, were $1.54 billion in July, up 2 percent from June and up 96 percent from a year earlier. The year-earlier comparison matches with a recent report by industry leader Applied Materials Inc. , which on Tuesday reported a 104 percent quarterly revenue increase.
The ratio of orders to shipments, known as the book-to-bill ratio, was 1.05 in July, meaning that for every $100 of products shipped, $105 in new orders were received.
"The bookings and billings values for North American-based equipment companies have stabilized at high levels," Stanley Myers, president of the trade group, said in a statement…
-END-
This potential bombshell continues to quietly percolate:
US subpoenas Fannie Mae in accounting probe
WASHINGTON, Aug 20 (Reuters) - Regulators investigating Fannie Mae's accounting practices have sent subpoenas to the No. 1 U.S. mortgage finance company in connection with the probe, a source familiar with the matter said on Friday.
Fannie Mae's financial regulator, the Office of Federal Housing Enterprise Oversight, began looking into the company's books after an accounting scandal at rival mortgage enterprise Freddie Mac led to a $5 billion earnings restatement and the ouster of top executives last year.
Regulators uncovered errors in the way Fannie Mae accounted for investments that had lost value and directed it in May to correct those errors. The company avoided an earnings restatement, but had to take a $278 million charge in the second quarter.
OFHEO Director Armando Falcon told Congress in July that Fannie Mae had been less than fully cooperative in meeting his office's requests for information and employee availability. Falcon said he had complained to the company in writing….
-END-
GATA’s Mike Bolser:
Hi Bill:
The Fed added $3 Billion in temporary repurchase agreements today August 20th 2004, an action that caused the repo pool to dip to $44.515 Billion.
The repo pool's 30-day ma has unmistakably changed from up to down and this is an important event that signifies a Fed tactical shift. Combined with the gold action today this isn't what the Fed normally does. They are acting as if they need less market and currency support or they have decided to abandon previous support efforts. Time will tell why this change has been made just ahead of a presidential election. Judging by the massive commodities pressure, the Fed clearly is in deep trouble so its a mystery why they are removing repo support just at this time.
Earlier in the day things seemed to be similar to previous mini-spikes in gold and silver most always followed by later disappointments. The metrics I look at predicted a gold ceiling of $410 or so, however, when I ran my synthetics at the Noon Fix, there is a DIVG channel break to 352.61 that may be significant due to mainly to MCDI pseudo-strength.
Yesterday I said:
" IF my interpretation is correct, the Fed has relaxed their hold to the top of their mini-cycle range and, in order to maintain its oscillation above and below $400 PM Fix , will add down pressure very soon, say, early next week. If this doesn't happen then the Fed may retreat to a higher DIVG defense level. It is a time of change for the Fed. Can they hold?"
I knew that either the Fed planned to foolishly hold the DIVG channel ma or they were planning a release to higher ground...it appears to be the latter.
Judging by today's action alone, the Fed can't hold the DIVG where they planned to hold it. They may be in DEEP TROUBLE right here at DIVG = 352.61 (more below).
The DOW is up 20 at this hour (12:30PM), bonds are quiet, with oil knocking on $49 per bbl. Indeed, oil looks like gold did in December 2002 when it ran up free of ESF gold sales because SECTREAS O'Neill had left (The president AND the Secretary of Treasury are required to operate the ESF).
The crucial difference with gold and oil today is that there may not be any remaining source of near-term sales (SPR) left to stop the oil price rise. If this is true, then the Fed is facing an oil abyss because China (a main oil buyer) has such a large dollar surplus it can afford to keep building its own SPR reserves while the US deficits explode.
Cayman Island Banks
Earlier this week, I mentioned that the big increase in Caribbean Island bank transfers might be back-channel repo actions but this appears only to be oil revenue flowing from US oil firms to sellers through off shore banks the increase amount ($17Billion) fairly matches the trade deficit increase so we can solve that little mystery.
Geopolitcs
I follow the simmering Georgian conflict because it reveals much about US/Russian relations in general, indicates whether Russian Central bank cooperation is under geopolitical stress and shows the extreme international risks taken by the Bush Administration in its wrong-headed policy of rival encirclement at a time when the US military is clearly overextended.
Friday, August 20, 2004
South Ossetia: Status Quo Is Unsustainable
Editorial
http://www.themoscowtimes.com/…2004/08/20/005-print.html
The long-frozen South Ossetian conflict has taken a violent turn this month in what both the conflicting sides and powerful regional stakeholders warn could lead to a full-scale war that would be devastating for the whole region.
Both sides are playing the blame game, accusing each other as well as a mysterious third force of instigating the violence. In addition, Georgia's populist president, Mikheil Saakashvili, has repeatedly pointed the finger at Moscow, accusing it of supporting the separatist regime.
The self-styled South Ossetian republic had no obvious interest in heating up the conflict frozen for more than 12 years. As time goes by, the international community has grown increasingly used to South Ossetia's de facto independence, if not to its claim to self-determination. Neither is Russia interested in changing the status quo, which gives it much leverage in dealing with Georgia. The fact that many South Ossetians have been granted Russian citizenship clearly reveals Russia's true intentions vis-a-vis its neighbor despite Moscow's status as a mediator and peacekeeper. END
+++++++++++++++++++++
I opined yesterday that the Fed might press gold down next week. This view was premature and didn't take into consideration some things I normally look at. Even though gold has run to $413 or thereabouts today, we should appreciate that the Fed precisely manages things day-to-day on long-term time scales. Therefore, when one of those long-term channels undergo a big change it is serious business. I have a forward-looking capacity and it is this metric that took a big upturn at the Noon synthetic Fix today. No one outside the Fed itself has this data.
There remains a chance that the Fed means to hammer gold in the near future and I can't rule this out, but combined with all the other bullish indicators, that outcome seems to be remote at this moment. My oscillation pattern is on the back burner. Monday's results will be very important in confirming this change so don't bet the milk money just yet.
Today's precious metals action suggests that the carefully crafted Fed plan for gold may be falling apart as badly as it is for crude oil (OR the Fed may have had in mind all along, only a temporary counterattack. I say this armed with certain knowledge regarding their previous Fed DIVG retreat which outwardly began in Feb 2004 with a 200 day ma change. The Fed had a VERY BAD day in the DIVG pits back on July 21, 2003 and it was on THAT day they decided to fall back. Gold AND the MCDI were up. Today is a day very similar to that previous gold cartel loss. It remains to be seen how much damage the Fed can absorb and keep clinging to the failed notion of a flat DIVG plan. It is also useful to note that Reg Howe in a conversation used the term "waypoint" to describe the recent Fed pressure on gold.
The Fed may think it's in control but Argentina's gold purchases and the café's reliable intelligence sources pointing to huge physical buyers entering the market all tell us that the Fed's game for physical gold is ending. The Fed must know that other central banks will join Argentina in buying gold.
I continue to search for an answer to the falling repo pool 30-day ma.
Mike
Something of intrigue to ponder suggests a Café member:
Bill,
This may be a little far fetched, but could Argentina be sending a subtle message to the IMF that they have no intention in "playing" their games, and that purchasing gold is just another way to communicate it?
DJ Tsy's Taylor: Argentina Should Remain Engaged With IMF
NEW YORK (Dow Jones)--U.S. Treasury Undersecretary John Taylor said it was important that Argentina stay actively engaged with the International Monetary Fund even as the country's third review with the Washington-based lender is delayed.
His remarks come as IMF chief Rodrigo Rato prepares to visit Buenos Aires ahead of the Asia Pacific Economic Cooperation meetings slated for early September. Argentina requested that the IMF effectively suspend its accord with the government until the turn of the year, so that the it can complete a $100 billion debt restructuring without IMF interference.
"While formal negotiations on the third review will be postponed until later this year, a continued engagement is important," Taylor said Thursday in remarks published on the State Department's web site. He also said it was important that Argentina get the restructuring process out of the way as it will promote sustained growth.
"I'm very pleased that Argentina is making progress on the macroeconomic side, the monetary policy on the fiscal side," Taylor said. "But as they have taken this opportunity to move to the third review of the IMF into the future, I'd very much hope it gives them the opportunity to negotiate with their creditors and come to a good solution."
Argentina defaulted on most of its public-sector debt in December 2001 amid political upheaval and a financial meltdown.
-END-
It’s nice having a lot more smiles these days:
Hi Bill,
"Oh for the time the cabal swine are buried."
I have really enjoyed some of the sarcasm in your daily summaries this week. However, before the cabal swine are buried, they should first be ground into sausage. I believe it was Bismarck who stated (paraphrased), "There are two things no civilized man should be witness to: the making of sausage and the making of laws."
Keep up the great work.
Best regards,
Trevor W. Heaver
Bear downs 36 beers, passes out at campground
Rainier, not Busch, the beverage of choice for thirsty black bear
The Associated Press
Aug. 19, 2004
BAKER LAKE, Wash. - When state Fish and Wildlife agents recently found a black bear passed out on the lawn of Baker Lake Resort, there were some clues scattered nearby — dozens of empty cans of Rainier Beer.
The bear apparently got into campers’ coolers and used his claws and teeth to puncture the cans. And not just any cans.
"He drank the Rainier and wouldn’t drink the Busch beer," said Lisa Broxson, bookkeeper at the campground and cabins resort east of Mount Baker.
Fish and Wildlife enforcement Sgt. Bill Heinck said the bear did try one can of Busch, but ignored the rest. The beast then consumed about 36 cans of Rainier.
A wildlife agent tried to chase the bear from the campground but the animal just climbed a tree to sleep it off for another four hours. Agents finally herded the bear away, but it returned the next morning.
Agents then used a large, humane trap to capture it for relocation, baiting the trap with the usual: doughnuts, honey and, in this case, two open cans of Rainier.
That did the trick.
"This is a new one on me," Heinck said. "I’ve known them to get into cans, but nothing like this. And it definitely had a preference."
-END-
Yes, the World Gold Council should be sent packing:
Further to your ongoing rant about the uselessness of the official gold community, check out the FT article below. Apparently the increase in physical demand that JB has been reporting for months is attributable to jewelry? An allusion is made to gold as a safe-haven investment in times of political turmoil but no mention of the buying actions of the Argentine CB or what this could portend should other CBs be following suit. Why would any gold company support these guys?
Also of note was the leap in the HUI yesterday for no apparent reason. Never mind technical analysis, my market activity is largely driven by activity in the gold indexes as leading indicators. They appear to be driven by inside information. When the HUI leaps and I can't reason why it always appears that those buying had an inside track on non-public information. Sure enough, bullion scores a big advance today on the back of reports showing that the US economic recovery is falling apart - wait until the increase in oil prices is reflected at the pump!!! I can only imagine what the August trade deficit will look like.
Brian Bacon
Demand for gold buoyant in second quarter
By Alex Skorecki
Published: August 19 2004
Demand for gold was buoyant in the second quarter of the year, driven by strong economic growth, the World Gold Council said on Thursday.
Consumer demand rose 11 per cent in weight terms and 25 per cent in dollar terms on a . year earlier according to figures from the precious metals consultancy GFMS.
However the World Gold Council also said that continuing uncertainty about the longer term economic and political outlook was adding a further boost to demand for gold, a traditional safe-haven asset.
Demand for gold jewellery was up 8 per cent at 664 tonnes in the quarter, in spite of a price rise of 13 per cent. Net retail investment rose by one-third to 79 tonnes, the highest second-quarter figure since 1999 when demand was driven by fears about the millennium bug.
James Burton, World Gold Council chief executive, said: Our promotional activities have clearly helped boost demand in markets such as Turkey, China and India.
Turkish demand was up 36 per cent and demand in greater China was up by one-third. One of the strongest countries was Vietnam where demand soared by more than 50 per cent.
However, the WGC said the main cause of the rise in greater China was the effect of the Sars virus, which had depressed demand in 2003, producing a jump in this year's comparison.
Jewellery sales in the US were 4 per cent higher, with strong buying reported in the run-up to Mother's Day. In Europe trends remained generally negative, although the decline was less strong.
In the UK, concerns about the impact of rising interest rates on disposable income damped optimism, the WGC said.
-END-
