Well it's high noon at the USA Corral, and it's high time I got myself back on the rails.
Is it time to re-assess what potential developments lay ahead and whether George Lindsay's "Three Peaks and a Domed House" play out as the final arbiter of human emotions? In this observer's opinion, YES, it most certainly will. Tim W. Wood and I spent a good half hour discussing the "Mess" (aka: the Broad Markets) last evening and came to the conclusion that a deafening collapse was quite likely given the distortions, confusion and delay.
The only real question was where we have arrived on this very accurate emotionally charged pattern:
As a Nation we are borrowing north of 27% against our Gross Domestic Product. Can Debt or more importantly, the Credit Bubble continue to expand and fuel ever more rampant speculation in Credit sensitive vehicles? Will foreign buyers step up and continue to recycle our fallacious promises with even more cannibalization of their internal markets/savings while leveraged speculation continues its prolific financial malfeasance?
Will the Federal Reserve begin a reckless campaign of purchasing insolvent debt with Federal Reserve Notes, monetizing the debt and maintaining the Goliath of Government?
Is Hyper-Inflation possible and just how probable at this late stage of the Blow-Off in Credit and Monetary Aggregates?
Where are we in the Chart Model above, do we lie between points 20 and 21 or are we merely retracing from point 24 to point 25?
I'm the lonesome cowboy, riding across the range, with just a hand held radio to keep me sane.
Since December of 2003 there have been considerable points of interest which have converged, yet no real consensus. The Advisor Camps have pitched their respective tents on grounds with enough distance to warrant smoke signals as the means of communication. Yet both camps appear to be reading smoke plumes from outside the established lines of communication. Someone's blowing smoke, but whom?
What are Bonds, Currencies, Gold/Silver, Oil and Equities telling us?
Bonds appear to be forming a bottom in Yield terms and conversely a top in Price action, yet Credit spreads remain narrow. Of course they must if the Bond Market is to avoid a plague of stampeding elephants racing towards an oasis that is nothing more than a mirage. The epic dislocation awaits.
Is this another one of Alan Greenspan's notorious head-fakes in order to offload the mountain of promises that can never be paid to his bag holding buddies? Do they care? They DO create money from nothing and ARE responsible for the current speculative environment, but prefer to deal in aftermaths. Our monetary muffin men...
We've managed to sell quite a number of these contracts to foreign Central Banks and Safety Seekers while issuance was on the rise, well timed to a breather in the broad Equities Markets. The most recent breather had a tremendous amount of price destruction and internal damage without the major Indices going into a full-on meltdown. TRIN levels at astounding highs with very little price destruction in the indices levels... more rigging of markets.
Amazing feat of smoke and mirrors, kudos to you mad hatters. 990N remains an avid bidder of last resort. 3500 here at market, 5000 there... hey, it's only bits n bytes, why not meddle in the market, it does more good than harm right? Let's create an even more illiquid market to remove any willingness on the part of SHORT counterparties.
Riding through the FM stations, the tumbleweed, & the petrol station, Will all on board this Yankee station, prepare themselves for battle stations.
Crude oil has risen dramatically, more than enough to damage the economy in terms of input costs, yet the Financial Media has concocted every conceivable idiocy possible to spin this as "no clear or present danger" to equities just yet "Come on back in" they pronounce "The waters just fine."
The energy contrarians have their own particular bent that's curious at first glance as well: Freight is in decline in both Europe and Asia, therefore Oil is setting up to return from its near earth orbit.
Parabolic spikes always end the same way, eventually they decline. But is this spike over? I suspect it is just beginning for a number of reasons. Cheap and plentiful oil is a thing of the past; the shallow fields have been tapped and are beginning to yield diminishing returns. Cheaply available Crude Oil is a precious and scare resource.
There is plenty of oil around the globe, but it is no longer cheap or expedient in recovery. Rising demand has emerged from developing economies in the East. The byproduct of a world awash in Reserve Currency... the excess supply of FRN's is inflationary. A higher percentage of the recycled money for nothing is actually purchasing scare resources as opposed to United States Treasury Issuances.
I was somewhat dismayed to have learned the United States Treasury really doesn't belong to the United States. It belongs to a "Private Corporation" and had since 1921. Thank you Kenneth Parsons your recent essay was illuminating.
Oil is one of those precious resources whereby even Elitist Pranksters will stab one another in the back to assure Uncle Jed's/Pierre's/Gunther's cement pond remains full.
Of note, New York Harbor Unleaded appears to be trading in disbelief, that or someone's quietly begun tapping the Strategic Petroleum Reserve to keep a lid on pump prices. Given the dramatic increase in the Size of the SPR over the past four years and proximity to the elections, it would not surprise in the least the neoCONS were bleeding off whatever necessary to maintain the illusions of prosperity.
The Central Planners deny this has occurred. According to Fleece Street, crude oil was a short about $10 ago. Those poor suckers, financial funds trapped in yet another game of hide the cheese had their heads put in the short squeeze vise. If you fade Wall Street's reality, you often come up a winner. Why is that?
One of the more disturbing events... listening to the financial media blather on about how today's rally is based upon a forty two cent drop in the price of crude... no mention of the fact that crude has nearly doubled in four years. Back then the "New Economy" did not require crude oil, it was truly a new and improved; a new paradigm for some miraculous reason or another... You see, "miracles" do happen to those who choose too believe.
I can't see for the tear gas, & the dollar signs in my eyes. Well, what's a man got left to fight for when he's bought his freedom. By the look of this human jungle, it ain't just the poor who'll be bleeding!
Gold decided it was about time again, by plan or design, the Yella Dawg kicked up some dust and attracted a few more fleas. Argentina bought a bunch of the Barbarous Relic, which appears to be in direct conflict with the IMF and World Banks best wishes. Perhaps pegging to the Dollar (Actually the Federal Reserve Note, there's really no such thing as Dollars) and importing INFLATION were a bad idea after all. It certainly appears to have been given the ruinous state of Argentina's Economy, but better late than never. Heaven forbid the rest of globe's residents figure this Breton Woods deal out.
It's the wedding/dowry season in India once again, so demand for gold is on the rise or so goes the spin. I guess by that logic Indians are getting hitched a 30% faster clip than before. One must ask, what's the hurry and why is GOLD not only rising in rupee's but about every other form of confetti that passes itself off as "Money"?
Imagine that... Phase 2 for gold bulls is beginning.
Gold is an emotional subject, it pits the moral against and immoral/amoral constructs of usury.
Perhaps that's why the American re-Public no longer owns its GOLD, our stock in trade as well as the core of the financial economy is Spreads. "I'll have a number five... hold the pickle, and I'd like to swap my long fries for short rings..."
I still spend a fair amount of time reading the GOLD Advisor herd's ramblings. Not much has changed, GATA's still screaming "Go Gold!," self-proclaimed Uber advisor, Jim Sinclair is still discussing French Curves, $480 and Dollar relationships. Many have turned towards the light like sunflowers on the prairie declaring gold dead, in a multi-year bear market, going down for the count or some other semblance of DEAD ON ARRIVAL. Good, as that's been a losing wager for four years running and the same Chiefs are shouting at the same Indians, who tend to repeat the mantra, endlessly without looking through the glass.
It would appear the Dollar's relationship to GOLD is being tested as I type, yet again... dollar up, gold barely budging. Dislocations this past week were about as funky as Bootsy Collins and that is very funky.
It's difficult for me to accept all this "Conventional Wisdom" given the severity of distortions that abound. In this observers opinion, you can turn the page on those for now.
GOLD has been actively suppressed for decades.
It was the Clinton/Rubin Administrations policy to embark on a heightened "money for nothing" campaign via its "Strong Dollar Policy", a disaster and embarrassment to our trading partners everywhere. NAFTA's open door has proved to have been another globalization attempt by hemisphere gone awry, unless, of course, you measure immigration as a success.
I prefer to listen to the market and filter out the noise. It's most often wrong.
Most everyone round here thinks they're something special. That destiny will be kind -- While they're digging for gold, diving for pearls, and aiming for heaven from this man made world.
Part 2 to follow.
*Thanks to Matt Johnson of THE THE for all lyrics in bold.