Thursday, November 17, 2011

November, Thursday 17, 2011

DOW – 134=11770
SPX –20=1216
NASDAQ –51 = 2587
10 YR YLD -.07 = 1.96%
OIL –3.96 = 98.62
GOLD –42.30 = 1720.90
SILV –1.99 = 31.81
PLAT –36.00 = 1588.00

I have been reading reports that masked youths clashed with riot police outside Greece's parliament and the U.S. embassy. Thousands of austerity-weary Greeks marched through Athens in an annual commemoration of a bloody student uprising in the 1970s. The protest commemorates the squashing of a pro-democracy student uprising in 1973 by the military dictatorship that ruled Greece from 1967-74; just to jog your memory, the United States backed the military. Police fired tear gas and stun grenades to disperse the rioters. Some 28,000 people took part in the march, according to police estimates. About 15,000 people took part in a similar protest in the northern city of Thessaloniki that turned violent when a couple of hundred protesters threw projectiles and Molotov cocktails at police, who responded with tear gas. The demonstrations were the first test of public sentiment for the new technocratic government of Lucas Papademos.

The yield on 10-year Italian bonds fell 17 basis points, or 0.17 percentage point, to 6.84 percent. The new technocratic Italian leader Mario Monti pledged urgent action to curb the nation’s deficit. And just as Italy seemd to be getting better, Spain seems to be getting worse. The 10-year Spanish yield climbed seven basis points to 6.48 percent, after reaching a euro-era record 6.97 percent. Spanish Prime Minister Jose Luis Rodriguez Zapatero called on the European Commission and European Central Bank to act “immediately” to stem the crisis. Spain has a parliamentary election on Sunday.

Will this crisis continue to spread? And will the United States get singed by the fallout? And the answer is yes and yes. European bond traders smell blood. If the European Central Bank (ECB) is buying debt as part of a bailout, the markets rally. If the ECB is not, the markets fall. And the problem is that nobody other than the ECB is buying European bonds.

Like citizens around the world, traders are tired of being lied to by politicians who lie to each other. And, most of all, they're tired of not being able to adequately assess risk to the point where they can do their jobs. So they're taking matters into their own hands.

This is the ECB’s worst nightmare - that bond traders finally get fed up enough that they overwhelm central bankers and force interest rates higher, much the way the so-called bond vigilantes did in the early 1990s. The ECB held a bond auction today, but results were lackluster – indicating the ECB is not really propping up the bond market; at least not to the satisfaction of the bond traders. Understand, I’m not blaming the problems in Europe on the bond speculators – the blood sucking bond traders are a consequence of the problems – not the cause. And the threat is that if the Euro bond market is not propped up sufficiently, then the economic damage will be greater than equities are discounting. Maybe that was why stocks tanked this afternoon.

When the stock market dropped this afternoon, there was plenty of speculation; one idea was that there would be an announcement that the Super Committee, the Gang of 12, had reached an impasse and would not be able to come up with a budget deal. But that shouldn’t be the reason for a sell-off – no surprises; don’t we all know that we have our own problems with debt here in the USSA. Today the national debt topped $15 trillion; by the end of the week it will top $15.1 trillion; by the end of December the national debt will surpass 100% of the Gross Domestic product; officially, the United States government runs out of money tomorrow - but have no fear, because we have a Super Committee (clip) to conquer all the contentions. What’s this, now we have music for the Super Committee? Oh, they’ve got their own theme.

Of course the 12 bipartisan legislators on the Super Committee have until Nov. 23rd to reach an agreement, otherwise they will have wasted their time and they will get stuck with default positions that almost everyone sees as onerous and draconian. So, with this deadline rapidly approaching, the 12 legislators were busy working on – well, let’s check the calendar of Arizona Senator Jon Kyl – this morning he went to breakfast at a nice Washington DC restaurant for a fundraising breakfast with donors, but there were a few protesters that greeted him. (clip)

Kyl snuck out the backdoor of the restaurant, rushing to get back to work on the budget deficit. Six days to submit a budget – this after a budget fight in the summer that saw the credit rating of the Untied States cut from Triple-A; six days – not even six days because the budget still has to be reviewed by the Congressional Budget Office; less than six days – and Kyl thinks the most important thing he can do is to meet with campaign donors for a fundraising breakfast.

This wasn’t a town hall meeting – this was a fundraiser; this was a gathering that only included people who were writing checks. I wonder if any of those potential donors had some suggestions on how to share the sacrifices of a $1.2 trillion dollar reduction in the budget? There is a truth that has stood the test of time: no one can serve two masters – and with 6 days to go, under a strict deadline, we find out who Kyl serves. He couldn’t postpone his fundraiser for even one week. When are we going to stop pretending that the campaign finance system is anything other than bribery?

Is it unfair for me to single out Kyl? Probably – he certainly isn’t unique, and both parties are involved in fundraising every day. And there is no way you stop it. The Occupy Wall Street protesters are evicted. Encampments are being shut down all over the country; hundreds of protesters have been jailed. In New York, Mayor Bloomberg has effectively closed down Zuccotti Park. I don’t know if the evictions from the parks will put an end to the movement – but in some ways, the protest has already been successful – it has opened up a discussion. That’s pretty big right there.

Today was supposed to be a day of Action for the protesters.  The protesters tried to march on Wall Street to disrupt the opening of the New York Stock Exchange – that proved to be as effective as a screen door on a submarine. So, they have regrouped, and they are just kind of swarming around lower Manhattan – and finding some new energy – and the police are responding with more and more arrests.

One interesting development: Supreme Court Justice Anthony Kennedy said: “If the First Amendment has any force it prohibits Congress from fining or jailing citizens, or associations of citizens, for simply engaging in political speech.”

At least that’s what Justice Kennedy wrote for the majority opinion in the Citizens Untied case.

Let’s cover some quick economic notes: the price of oil has broken out of the $90-$95 dollar range. Certainly, much of that move is because of supply and demand, but some of it also is due to increasing unrest in the Middle East. It’s looking like another domino is about to fall. Syria faces pressure from the Arab League, Jordan, the EU and the USA. Looking ahead, whether there's civil war in Syria or a peaceful ouster in the coming months, who and what will fill the vacuum? Good guys or bad guys? 

Even near record high prices, gold hasn't lost its luster ... especially in Europe. According to a World Gold Council report, investors in Europe purchased a record $6.2 billion in gold bars and coins in the third quarter. While that's not a record in terms of weight, Europe's demand for about 118 metric tonnes nevertheless amounts to nearly a third of all the investment-grade gold demand worldwide in the quarter. It also marks a 135% surge in demand from Europe from the same quarter last year. Worldwide, demand for gold bars and coins was up 29% compared to a year ago.

The Nevada attorney general Catherine Cortez Masto has just filed a 606 count indictment against two title officers in Clark County, for supervising the filing of tens of thousands of fraudulent documents in a robo-signing scheme. Remember when the Departmetn of Justice went after organized crime – going after the mafia. Well, as mob prosecutions have shown again and again, you start by going after the foot soldiers in the hope that they roll on people higher up on the food chain.

Protesters are marching through New York, Europe is on the verge of collapse, the United States government will officially run out of money tomorrow. Have no fear – Congress has declared  that pizza is a vegetable. It is part of a debate on healthy school lunches for kids. Why did Congress do this, well they got $5 million dollars from the junk food lobby.
“Got it, everyone? Your kids can continue stuffing their faces with as much frozen pizza as they want now. It’s essentially the same thing as eating celery. Let’s just hope jelly beans continue to their protected status as legumes; and let’s cross our fingers that we may finally see the day when Pop Tarts will finally be recognized as fruit.

Hockey is next……

It’s been about 2 ½ weeks since the news broke that MF Global  “removed” unencumbered segregated funds from customers’ accounts. Segregation simply means that customer deposits can’t be mixed with the firm’s own money or used to cover firm expenses. They must always be available for customers to trade with or withdraw at a moment’s notice. During that time MF Global customers have found themselves locked out of reduced equity in their accounts. Worst of all, even MF Global customers who held no open futures positions and only cash and unencumbered assets, have found those assets under the control of the bankruptcy trustee. This is one of the reasons why I tell you to have some portion of your portfolio in physical metals, gold and silver that you can hold in your hand. Coins or bars that you can hold in your hand

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