Makes sense to me Spiny. I'm looking forward to the activities of the next few months at SFMI but I will reserve my enthusiasm lest I am being goaded by the Gods to take bait of the market meisters.

With all the pressure on the U.S Admin., all the hearings, announcements, opinions and all the spin one wonders what will come next for gold as almost every day we are witness to profound events that are shaping the markets. It is all just too much for the average, beleagured taxpayer to keep up with. Many of the events are hidden. What seems to be clear is that the anger of the average American is waxing tidal against Wall St., the Fed and the Admin. When will the tide come in? Obama's press conference with Volcker standing to his right behind him would suggest that the Pres. has finally begun to listen to the man he should have listened to in the first place. Or, was it all just a show for public consumption to once again attempt to make a silk purse out of a pig's ear?

Already there are those who suspect that these "initiatives" to sooth the savage beast are merely the after dinner mints disguised as the appetizers. Word is that none of these new rules willeven begin for at least 5 to 7 years. Others think that one of the biggest beneficiaries will be none other than Goldman Sachs. anyway, here are a few blurbs from yesterday's LeMetropole Cafe (for those who do not subscribe) worthy of consideration.

"Once again we see that the key to the gold price is not what the dollar does. Somebody wants gold and silver down, and down badly. I would like to think it is The Gold Cartel doing everything they can because they know they are going to have to cover a fair amount of their positions soon. This is surely wishful thinking, but the individual honchos behind the gold price suppression scheme are in deep trouble… Ben Bernanke, Tim Geithner, and Larry Summers … as are its trigger pullers: Goldman Sachs and JP Morgan Chase. The public outcry against the big banks and Wall Street is beginning to crescendo and likely to be more so in the months ahead. ...

It was excellent propaganda from Obama today about stopping banks from speculating and trading for their own account but perhaps he hasn’t read the OCC US Bank Derivative report which shows that 5 US banks hold notional amounts of derivatives ranging from 4 T$ (Wells Fargo) to 78 T$ (JPM). All banks together own 204 T$ of derivatives. Note that almost 100% of these derivatives are held for trading by the top 4 derivative holders (see table below). The percentage of derivatives held for trading by all banks averages 98.9%. I don’t know how he contemplates getting the banks to unwind them. These derivatives include 102 B$ in gold derivatives and 9.3B$ in Precious Metals (mainly silver) derivatives. This massive derivatives monster demands a new denomination “Too Big to Comprehend”! I would bet that Obama doesn’t even know about the problem let alone comprehend it. If he does then his speech was the biggest lie ever told…unless of course he meant that the banks can’t speculate or trade for their own account with anything reported on their balance sheet; off balance sheet is OK or in accounts that are held in offshore special purpose vehicles! ...

"It is a year too late."

Just like both Bushes, Obama commenced his presidency with massive stimulus instead of taking the pain and doing the requisite purging and restructuring (like Reagan). Just like his predecessor, Obama delayed the inevitable but saved some elites on the back of taxpayers.

A big problem for Obama, Congress and the country is that the nation’s ire at the bailouts and bankster arrogance could provoke a discovery process of the true conditions of major banks. We believe Ben’s vehement obstruction to Fed and bank transparency is to prevent the consequences of such disclosure.

Now that the American public has demonstrated their displeasure by voting for Republicans in New Jersey, Virginia and Massachusetts, Obama and many Democrats will be forced to some kind of action.

But ideology prevents them from the requisite cleansing and restructuring. Instead Obama and other pols will vilify Wall Street, which we have been forecasting for the past year or so.

Unfortunately for Obama and the Democrats, the crackdown on Wall Street will provoke another downturn in the economy, which is already softening and faces a reduction of Fed juice. This will translate into even more ire, which should be at a fever pitch by the midterm elections.Mort Zuckerman op-ed in the WSJ: The Great Recession Continues Americans haven't been fooled by the Dow's rise. What they see ahead are more taxes. Economists may see the recession as being over, but the man on the street does not. Roughly 60% of the public believes the recession still has a way to go, a NBC/Wall Street Journal poll reported last October…

He didn't really mean what he said!

http://www.ft.com/cms/s/0/44f593ee-06a
7-11df-b426-00144feabdc0.html http://huffpostfund.org/stories/2010/01/fdic-chief-got-ba
nk-america-loans-while-working-its-rescue http://www.ft.com/cms/s/0/8ccaa85a-06c8-11df-b058-00144feabdc0.html

To all; surely President Obama didn't mean what he said yesterday, he couldn't have! The banks can't run proprietary trading, hedge funds or private equity? WHO does he think will step up and fill the void left to manipulate the markets? What does he propose? The Fed and Treasury manipulate everything on the planet directly without any middlemen or shrouded intermediaries? Surely he misspoke! Give him a couple of weeks and Wall Street will explain the error of his ways to him and all of this will go away.

All joking aside, if the banks could not trade for their own accounts, how will they make ANY money? They don't lend like they used to and they still have loans blowing up on a daily basis so if they can't rape the public in the markets anymore then where do they feed from? Yes we are in the midst of a massive deleveraging already but passing legislation forcing the banks to de lever will surely start a stampede toward the door to front run the banks.

Another humorous area would be the precious metals, WHO is going to step up and sell unlimited amounts of "paper Gold"? If the banks are precluded from trading and must unwind their books then WHERE and to WHOM does Mr. Obama think these banks are going sell theit S+P long positions and buy back their paper Gold shorts from? Ain't gonna happen bubba! It can't because everything, and I do mean EVERYTHING on the planet will come to a complete halt. Maybe Mr. Obama doesn't know that the banks run ALL the markets 24/7. Maybe he hasn't figured out yet that without "bank intervention" ie FRAUD and MANIPULATION that the stock markets and Treasury markets will crash and the metals will explode upward. Surely he doesn't want this!

Maybe the president is really a smart cookie and knows that unless they crash everything from soup to nuts the Treasury will not be able borrow anymore because they need more than is possibly available. Is the only way to continue Treasury funding by crashing everything and chasing capital into the "safety" of Treasuries? Maybe he figures that left to it's own the Treasury will end up "unfunded" which will result in a crash of everything anyway so why not just crash first and buy some valuable time for Timmy Geithner and the boys. Heck, why not propose legislation that the banks can ONLY invest in government securities? Why not propose legislation that they can ONLY buy and never sell until maturity?

No, all of this is strictly for public consumption and nothing more. THEY know, WE know, THE WORLD knows. The entire system is rotten to the core and has been a scam for years (since at least 1971), either they try to continue the scam and let the banks RE LEVER or everything crashes! What they really need to do is a $100 Trillion TARP and go forward like nothing happened! Like Richard Russell has said for years, either "INFLATE or DIE!".

We are surely at the "Uh Oh" moment of all time. Tim Geithner and Ben Bernanke have been caught making Goldman Sachs et al whole at taxpayer expense, Mr. Bernanke has his (non) confirmation hearings next week, Sheila Bair has been caught taking over $1 Million in mortgage loans from BOA WHILE she was negotiating their "salvation" (no conflict of interest here), the CFTC has a scheduled "we're going to make the markets fair" meeting and next week the "birth certificate" question hits a courtroom floor. All of this after the stock market has been on a 10 month "ramp" without any correction whatsoever. I don't have anything humorous to say about this because the only thing that comes to mind is Uh Oh! Have a nice weekend and regards, Bill H.

U.S. Economy
U.S. Stock Market
The Massachusetts Thunder Clap
Will Faith In The Bernanke And Geithner Puts Now Falter?

Executive Summary

1. The Massachusetts Senatorial upset was not about healthcare. It was about voter discontent across a broad range of issues.

1. Politicians respond to the special interests that fund them after an election. They respond to the voters that elect them going into an election.

1. The Massachusetts thunderclap has shifted forward this transition to the present.

1. Obama has suddenly shifted from the anti Glass-Steagall Geithner policy regime to the pro Glass-Steagall Volcker policy regime. He is shifting from a focus on the wishes of vested interests to the wishes of an angry populace that will vote in the fall elections.

1. The Supreme Court has removed the constraints on the ability of vested special interests to finance electoral campaigns. Obama has openly attacked the Supreme Court on this count – another example of his shift to populace positions.

1. The public does not like endless fiscal deficits. In the wake of the Massachusetts thunderclap there will be no second fiscal stimulus.

1. The public does not like Wall Street bailouts. In the wake of this thunderclap there will be no more financial sector bailouts. The Geithner put is in question.

1. The public thinks Bernanke is a tool of Wall Street. In the wake of this thunderclap Bernanke may not be confirmed as Fed Chairman.

1. Though this may have no implications for Fed policy, it may create uncertainty about the assumed Bernanke put.

1. If I am right that the outsized move in the stock market last year was driven by echo bubble dynamics augmented by mega moral hazard, an erosion in investor confidence in the Geithner and Bernanke puts could lead to a significant stock market correction.

1. As I have argued, the U.S. economy is not on sound footing going into 2010. The public wants jobs, but no more bailouts and no more fiscal stimulus. Political developments, by constraining the latter, may make the economy weaker. Stock market weakness may make the economy weaker. A weaker economy will exacerbate public antipathy to Wall Street, further a more hostile regime for investment, and threaten yet further stock market declines. There is a danger of a negative feedback loop as policy and psychology reflect more and more a pre-election populism aimed at devastated body politic.

GOLD/SILVER

London calling…

FT Trading Room / Regulation - Proposed trading caps anger bankers

Good morning Bill and Chris,
If this FT article is correct then the CFTC are proposing to move much more firmly than is generally understood to limit the activities of the big banks in the US energy markets.

Here is a quote from the article:-

"Bankers are privately steaming. "We are confused as to why the CFTC would create a hedge exemption process that no bank would be able to use and continue to serve their customers," says a commodity executive at a swap dealer."

Do you think that the above plus the proposals to return to a Glass-Steagall type banking environment may just indicate that Obama has woken up to some of the real problems he faces? Do you think this makes it impossible for Lawrence Summers to carry on in this administration since he was one of the key architects of the system that created the modern monster banker/traders?

Surely all of this is very positive for gold and silver, provided of course that the changes happen.

Have a great weekend,

Bob

Dave from Denver…

Friday, January 22, 2010

A VIew From the Trenches: Is the Dollar Going to Roll Over Here?

This week's action has been a pure paper-driven cartel smack. The gold lease rates creeping higher are testament to the supply squeeze, especially the one in Asia (Shanghai premiums are an unheard of $10+ over spot, Viet Nam $30+). If the big physical buyers start to look for big supply below $1100 and it's not there, we could see a moon-launch in the next few weeks. China doesn't want paper, nor does India, Viet Nam, Russia, etc. Also, I'm not going to go out on a limb and call a dollar top here, but the momentum indicators are starting to roll over and there's some decent resistance at the 78.70 level/200 (simple)dma, which is where the dollar ripped in reverse yesterday. Our spineless leader's empty tirade against Wall Street yesterday may do nothing more than stimulate even more "diversification" away from the greenback.

Furthermore, we now know that the intent of our Government is to spend its way into AT LEAST a $2.2 trillion deficit this year, which is reflected by the year-end debt limit ceiling raise by $300 billion PLUS the additional $1.9 trillion debt ceiling raise being superficially debated in Congress. That's the minimum spending deficit this year, as States will need billions in loans and Unemployment Benefits will no doubt be extended. To be sure, Government payroll (of which Extended Unemployment Insurance beneficiaries are a part) may be the only source of Democratic votes in November. Anyone who looks at that picture and thinks the dollar can go higher from here is taking too many hits from the bong.

Current gold smack

There are sound reasons for this gloom. Consumers have learned a bitter lesson. They understand that increased consumption—private and public—will have to come from income and not borrowing, and income will have to come from employment.Today, mainstream Americans are going on a financial diet amid deteriorating family finances…http://online.wsj.com/article/SB1000142405274870383700457
5013592466508822.html?mod=WSJ_hpp_sections_opinion...