11 December 2017

Stock Markets and Precious Metals Charts - FOMC Decision Wednesday, Stock Option Expiration Friday

"They never open their mouths without subtracting from the sum of human knowledge."

Thomas Reed (R-Maine)

Bloomberg had economist Art Laffer, of the eponymous Laffer Curve, talking up the GOP 'Tax Reform' bill in all its 'trickle down' glory. I did not even know this retrograde nonsense peddler was still around, having been discredited in his economic theory of top down stimulus rebranded as 'supply side economics'. Now we know just how bad for the people this new tax legislation may be.

The last refuge of a scoundrel is Art Laffer.

Can a credibly accused and completely unrepentant sexual predator with a penchant for the underaged be elected to the US Senate? We may find out the answer to that tomorrow. Could be a new low for manners and morals, and a new high for political hypocrisy, which these days is really saying something.

I was listening to a citizen of that state in question providing an argument for the reasonableness of the age of consent to be 13, as it was in the good old days.  PR-wise the election may be a seminal event for Brand Alabama.

Most likely the Russians are to blame. And Wikileaks.  Certainly it is not due to any failing on our parts. We are exceptional.

It is funny to see the Democrats and their supply chain trying to claim the moral high ground with the Clintons and Wall Street hanging around their necks. 

There will be an FOMC rate decision on Wednesday. The entire market expects the Fed to raise 25 basis points. More or less than that will like shock traders who will suspect that the Fed is seeing something previously undisclosed.

And there will be a stock option expiration on Friday. So this looks like a good week to game the miners.

Speaking of gaming markets, the much awaited Bitcoin futures made their debut last night.  I still find it utterly incredible that they would bring out leveraged futures on such a thinly held, thinly traded and unregulated commodity.

And because of the increase in wickedness, the love of most will grow cold.

Have a pleasant evening.

10 December 2017

Leaked DNC Memo Demands 'Unity' of All 2018 Candidates - GOP Tax Bill Shows a Party Beyond Repentance

“Once a government is committed to the principle of silencing the voice of opposition, it has only one way to go, and that is down the path of increasingly repressive measures, until it becomes a source of terror to all its citizens and creates a country where everyone lives in fear."

Harry Truman, Special Message to the Congress on the Internal Security of the United States, August 8, 1950

"We must dissent from the poverty of vision and the absence of moral leadership.  We must dissent because America can do better, because America has no choice but to do better.”

Thurgood Marshall

The political and social establishment is ensnared,  strangling within a credibility trap.  It prevents them from truly confronting themselves and what they have done, and what they are still doing in the service of power and money.

It prevents them from addressing the problems, much less the needed reforms.  It prompts them to act ineffectively and oddly, to the point that they obviously become a part of the problem and an impediment to progress.

The GOP seems almost beyond repair.  The Democrats need to unravel the Clinton/Wall Street wing of the party which has its head buried deep in their party power structure like a big fat tick.

The Republicans need a 'twelve step' program for any kind of helpful change to have even the slightest chance.

The GOP tax bill is blatant corporate giveaway for the benefit of the one percent, and one of the more recent signs of their blindness caused by ideology in service to greed.  They are not even bothering to excuse it anymore, except for the most naive of their supporters.  They try to hide it by voting in secret on largely undiscussed bills with little debate.  And as usual cover their perfidy with hypocritical slogans about freedom.

An even bigger disappointment because they have become content with failure, the DNC is purging itself of all progressive policies, dissent from the Wall Street status quo, with the Clintonistas trying to retain a tight grip on power— the power to keep losing elections unfortunately. But as long as they are pulling down fat consulting fees and favors from wealthy donors they seem to be content.

They cannot talk about real economic policy proposals for the benefit of their base. This would expose their hypocrisy and anger their real masters. All they have is negative campaigning about the other party, the 'lesser evil' proposition, and never ending fear tactics about Russia.

They too are serving their big money donors first and foremost, but at least have the modesty to cover themselves with the fig leaf of identity politics in addition to jingoism.

Both parties have come to resemble competing crime families, more so than representative political organizations.

There is another financial crisis coming, which will be fueled by the third artificial asset bubble since the GOP and the Clintons deregulated Wall Street, the financial sector, and the media, permitting the growth of powerful monopolies.

And there will be hell to pay. The problem is that they plan to stick the public with the tab, once again. That is why they wish to retain their control of the levers of power. 

Don't believe it? Watch, and be amazed. They have no shame in the pursuit of power and money.

08 December 2017

Stocks and Precious Metals Charts - For Ours Is the Kingdom, the Power, and the Glory - Don't Lie To Yourself

“For us to achieve 3 percent GDP growth over the next 10 years from tax reform, we have to have welfare reform. We need people who are mentally and physically able to work to get into the workforce. In my district, a lot of employers can’t find employees... Sometimes we need to force people to go to work.”

Rod Blum (R-Iowa)

“If we pass tax reform, we have to have welfare reform.  When you have a vibrant economy, there’s no reason for Americans to suffer on welfare.”

Clay Higgins (R-La.)

"There is felt today very widely the inconsistency in this condition of political democracy and industrial absolutism. The people are beginning to doubt whether in the long run democracy and absolutism can coexist in the same community; beginning to doubt whether there is a justification for the great inequalities in the distribution of wealth, for the rapid creation of fortunes, more mysterious than the deeds of Aladdin’s lamp."

Louis D. Brandeis, The Opportunity in Law, Speech to Harvard Ethical Society, May 4, 1905

"Starting around 1980, American society began to undergo a series of deep shifts. Deregulation, weakened antitrust enforcement, and technological changes led to increasing concentration of industry and finance.  Money began to play a larger and more corrupting role in politics.  America fell behind other nations in education, in infrastructure, and in the performance of many of its major industries. Inequality increased.

As a result of these and other changes, America was turning into a rigged game— a society that denies opportunity to those who are not born into wealthy families, one that resembles a third-world dictatorship more than an advanced democracy."

Charles H. Ferguson, Predator Nation

“When the system is rigged, when ordinary citizens are powerless, and when whistle-blowers are pariahs at best, three things happen. First, the worst people rise to the top. They behave appallingly, and they wreak havoc. Second, people who could make productive contributions to society are incented to become destructive, because corruption is far more lucrative than honest work. And third, everyone else pays, both economically and emotionally; people become cynical, selfish, and fatalistic. Often they go along with the system, but they hate themselves for it. They play the game to survive and feed their families, but both they and society suffer.”

Charles H. Ferguson, Inside Job

It is a disgrace that the economy and markets are organized and regulated so badly that people have to suffer poverty and be sustained on welfare in the midst of general and unprecedented prosperity. Unlike these congressional fellows quoted above, however, who seem to believe that killing welfare programs is the solution, most human beings will tend to believe that the cure for this is in reform based on social and human values. That is, before they are subjected to a constant and heavy application of stereotypes and propaganda about what has caused our current record economic inequality, and those naturally inferior beings whose lot in life is to be poor and oppressed.

We saw how the last Gilded Age ended. The gilding was covering a pervasive internal rot and creeping corruption, like a whited sepulcher. And it ended in violence and blood.  And this time will be different.

Today was the Non-Farm Payrolls report, and to sum it up in a nutshell, there are plenty of part time and dead end jobs at non-living wages. And the cheerleaders of the status quo have declared the arrival of The Recovery™ , hallowed be its name.

I thought it was cute that the 228,000 jobs added this past month are a bit outweighed by almost the same number of new initial jobless claims each week.

The Labor Participation Rate continues to be rather tepid, if not dismal. Maybe we should force people to go to work, at whatever job and wage we choose, as the Congressman from Iowa has proposed.

Or perhaps we can build a society where those who choose to work can do so with dignity and a living wage.   As Franklin Roosevelt noted in 1933,
"In my Inaugural I laid down the simple proposition that nobody is going to starve in this country.  It seems to me to be equally plain that no business which depends for existence on paying less than living wages to its workers has any right to continue in this country. By 'business I mean the whole of commerce as well as the whole of industry; by workers I mean all workers, the white collar class as well as the men in overalls; and by living wages I mean more than a bare subsistence level-—  I mean the wages of decent living."
It occurred to me today that this crypto-mania took off about the time that a small group of people identified a structural shortage in the available physical gold supply in London.   Despite some stopgap loans and virtual bullion seizures, the shortage remains.  Well, let's see how that works out for them.

A friend sent a photo of the snowfall in her yard just west of Atlanta this morning.  We are expecting the same storm to roll up the coast through this evening, giving us our first snow of the season at about 3-5".    Ho ho ho.

Have a pleasant weekend.

Peak Monetary Goofiness: One Thousand People Own 40% of Bitcoin Market

"About 40 percent of bitcoin is held by perhaps 1,000 users; at current prices, each may want to sell about half of his or her holdings, says Aaron Brown, former managing director and head of financial markets research at AQR Capital Management. (Brown is a contributor to the Bloomberg Prophets online column.)   What’s more, the whales can coordinate their moves or preview them to a select few.  Many of the large owners have known one another for years and stuck by bitcoin through the early days when it was derided, and they can potentially band together to tank or prop up the market...

As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,” Ari Paul, co-founder of BlockTower Capital and a former portfolio manager of the University of Chicago endowment, wrote in an electronic message. “In cryptocurrency, such manipulation is extreme because of the youth of these markets and the speculative nature of the assets.”

Olga Kharif, Bloomberg: The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market

'As in any asset class, large individual holders and large institutional holders can and do collude to manipulate price,'

Amen brother.  That's why we need regulators and oversight that is not 'captured' by those same very large institutions and wealthy political donors who are in such a good position to manipulate those markets.

And they are going to be bringing out a futures market and ETFs based on these digital chili beans.  This reminds me so much of the tech/internet bubble.

Gold and silver, I suspect, are going to be remembered as one such market segment that fell victim to the canard of free and naturally efficient markets and the natural rationality and fairness of financial and economic actors.  It is pretty hard to miss, particularly in silver.

My son and I had some time to discuss a number of things the past few days. He is a much better mathematician than I was at his age, and that makes sense because what he is doing at his level for Electrical Engineering starts to become very heavily dependent on mathematics.  I was much more of a boy programmer and systems architect at his age.

He was 'mining' his own bitcoins some years ago using a rig he set up using a video card and a few things he threw together just as a learning exercise.  We discussed the blockchains and how mining worked at some length back then.

I was curious to know about these 'forks' and where that was shaking out. Each new technology and bubble has its own set of jargon and technicalities.  As you may know, a Bitcoin has a memory block of a certain size. As a transaction in bitcoin occurs, that transaction is broadcast to the ENTIRE community of bitcoins, and is updated on them. I did not realize that is how it is set up.

The 'forking' is the usual scalability story, a fix to address a structural memory shortage, as we saw in the internet when we started running out of IP addresses based on the original IP block architecture.

Now I understand why bitcoin transactions can take so very long to complete, and why they are not being used in day to day transactions. And they are not, despite the hype.  They are used primarily for speculation and hoarding.

What I did not understand was how highly concentrated bitcoin ownership is by its nature, and why the 'bitcoin' market is becoming increasingly fragmented with different groups with their own architecture creating their own non-interchangeable types of bitcoins and crypto-currencies.

The key to this is obviously going to be the middlemen, the exchanges.  And I do not believe that they are particularly well founded or regulated.

I was a little surprised when he explained to me why and how a small group of oligarchs with access to enormous computing power were essentially in control of the future of the market. The early adopters are essentially along for the ride.  The technocrats are essentially making it up as they go along, and they do not necessarily agree, or have to agree, with each other.

And then today the story broke which I quoted above and below. And then the whole thing kind of fell together for me.

I cannot believe that the regulators have allowed the CME to bring out futures for these things, which apparently they are going to do over the weekend. Futures on a very immature, unregulated commodity which is closely held by about 1,000 people, most of whom know each other.

Bitcoins are not self-sufficient, naturally constrained, or universal.  That they are 'digital gold' is at best a reach, and more likely one of those passing fancies that become popular then fade.   Bitcoin is just a unit, a value bucket, that requires someone else to stand behind it in its particular manifestation.  And that is the key.

Gold is gold, and has 'worked' since the days of Alexander.  Cryto-currencies are just a new form of a very old enthusiasm.   The Bitcoin market seems much more like the very early over-the-counter stock market under the buttonwood tree.  Or perhaps even tulipmania.

I am not saying that everyone involved with this is acting in bad faith.  Not at all.  And something like a cryptocurrency *could* become real money some day.   It needs someone with a lot of financial clout to stand behind it with sufficient full faith and credit at a stable value of exchange for some particular flavor of crypto-coin.

This is just my own, certainly fallible, judgement.  But based on everything I know this is nuts.  And it is going to end very badly.

"Roughly 40% of the cryptocurrency is owned by 1,000 people, claims Aaron Brown, head of financial markets research at AQR Capital Management. In such an unregulated market, Brown said large holders of bitcoin could potentially be working together to orchestrate price changes. Given bitcoin’s recent spike, now could be a great opportunity for these users to part with a portion of their bitcoins, locking in the near 1600% price increase since the start of the year.

Bitcoin appears to be making its way into mainstream investing. Last Friday the US regulator gave the CME group and CBOE Global Markets the green light to launch bitcoin futures. Just yesterday, London-based digital banking company Revolut launched Bitcoin, Litecoin and Ether trading for their users.

As the cryptocurrency becomes a more mainstream investment and demand for it rises, these bitcoin ‘whales’ will be able to part with their bitcoins for a hefty profit. This could leave new investors with an asset in the midst of a bubble.

Roger Ver, a well known early adopter of bitcoin said, regarding ‘whales’ working together, “I suspect that is likely true, and people should be able to do whatever they want with their own money.”

Read the entire story at Market Mogul here.