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August 30, 2005

Farce Majeure
by John Mackenzie

Force Majeure simply means a 'greater force.'

Commercial contracts contain this clause in order to excuse a party/counterparty from liability. Essentially, this is to protect parties against an unforeseen and natural event beyond the control of either party and relieves it from performing stated obligations under the contract ONLY if failure to perform could not be avoided.

'Acts of God' as it were... happenstance beyond our control. This is a KEY tenant as yesterday's NYMEX debacle with respect to Light Sweet Crude Oil was anything but a failure to perform.

The NYMEX exercised greater force yesterday in order to protect Goldman Sachs and other Federal Reserve Shareholders from getting dunked mercilessly. They were merely protecting their short brethren in attempting to rig the price of Crude Oil in the Futures Markets.

Figure 001: Light Sweet Crude Oil October 2005 NYMEX

The widely held belief that the 'Markets' are self-correcting and best left to their own device becomes far more laughable daily. The circumstances that excused the settlement failure of performance remains ill defined at the NYMEX.

Once again, it became painfully obvious to NYMEX participants; the trading in Light Sweet Crude was far from self-correcting, instead tending towards excessive intervention. This undermines CONfidence as the concentrations of weakness are perpetually interfered with at precisely the moment things are about to get decidedly out of hand. A loss of control is not allowed and as these interventions increase in both scope and scale it evaporates counterparty liquidity. This leaves the interventionists on the one side of the trade, a leviathan, able to swing the Markets at will. In the Energy Markets the futures are used in order to stabilize the Price of Crude Oil and Natural Gas from the Short Side. The Equity and Bond Markets are a Mirror image from the Long Side of the trade.

Figure 002: Light Sweet Crude Oil November 2005 NYMEX

Figure 003: Light Sweet Crude Oil December 2005 NYMEX

The price drubbings in Figures 001 - 003 are as blatant as it gets, sheer desperation on the part of the Federal Reserve and its shareholders.

In order to have accomplished this feat of fraud, the Pit would have had to collar new long positions, while allowing shorts to compound, thereby averaging down the interventionist net short position, making them whole, or close enough for comfort.

There should be no mystery as to why the Saudi's voiced concerned over the Dollar denominated investment. There greatest asset is priced in Dollars. Petro-Dollars, denominated in Federal Reserves Notes may be declared legal tender inside the United States, but they are merely a trading vehicle which requires CONfidence to hold.

Yes, the alternatives for dumping are grim as the Dollar is the most over-owned poor mans promise on the planet, but as we move towards year end, CONfidence will erode to the point the Saudi's may well consider bringing home some if not all of that $360 Billion they so preciously want to swap for the coming series of alternatives beyond precious metals.

These will be 'Petro & Commodity' based currencies of producing nations, plain and simple.

The absence of alternatives to the Dollar is pure propaganda. When faced with a double bind of losing it all or losing 50%, you know as well as I precisely what will happen. There will be a run on the Dollar and with it, collapse.

Our Plutocratic minions at the COMEX are active this morning, recognizing the sound and fury over at the NYMEX worked wonders for stabilizing the price of Light Sweet Crude.

Expect wild volatility to pick up steam in the days and weeks to come as CONfidence in the United States is widely undermined through the process of intervention. We may reach a point where net long positions on exchanges are not allowed, in order to allow shorts to cover their price capping.

Consider it part of the shifting sands of the newly advanced 'War on Violent Extremism' in Financial Markets. As pessimism continues to mount in every corner of our cultural norms, diversion will play and increasingly important role.

These are exceptionally dangerous times, make no mistake.

No matter how elastic the ideology becomes, the rationale is utterly and totally flawed to the core. The slumbering American Public has begun to awaken to the ambiguity. The cause and effect matrix scorecard does not add up and no longer projects anything but hegemony.

As an aside...

It is remarkable to me the media failed to recant Pat Robertson's on-air call for 'The U.S. State Department ought to be blown up with a nuclear device' while pandering to his trial balloon for assassinating Hugo Chavez.

I have read and studied the Bible. God's will and greatest tenant was passed onto the Apostles during the last supper. It was simple, direct and made clear to the fishermen from the Sea of Gaelie, 'love one another as you love me' said Jesus.

In addition, Pat Robertson also advocated bombing the State Department during a June 2004 interview : 'Well, it looks like Congress had better do something, and maybe we need a very small nuke thrown off on Foggy Bottom to shake things up,...' The 700 Club mentor in Christianity said.

John Mackenzie

John Mackenzie manages private capital - Email: m2jrmfl@bellsouth.net

Copyright © 2004-2005 John Mackenzie

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