Waiting on The Fellen
As Keith would say...."I'm not waiting on my lady. I'm just waiting on a Fellen."
The world holds its collective breath. Not at the events in Ukraine. No, not even at the changing alliance in the Middle East. Nope. Today, the world awaits an update from the all-powerful Fellen. Friggin ridiculous.
Just as ridiculous as the notion, put forth now for over five years, that The Fed is going to monetize the debt in order to "stimulate economic growth". That this lie continues to be spewed and believed is a scathing indictment of a number of things:
- The level of economic education in the US and the world
- The level of apathy in the US and the world
- The level to which the financial media is complicit and in the back pocket of The Banks
If quantitative easing was about "growth" and "jobs", shouldn't it be clear to all by now that it is a complete, 100% dismal failure? Should not today's paltry 0.10% Q1 GDP growth be evidence that The Fed should immediately halt all debt monetization and reverse course? Of course! The fact that they won't (CAN'T) is just further evidence that I am correct in my analysis. I'll state it again for anyone with a short attention span:
The Fed cannot and will not EVER eliminate quantitative easing. QE is NOT about economic growth. It is about funding the debt and deficit of the United States and keeping interest rates at extraordinarily low and unnatural levels. Without The Fed, and now the ECB, providing $80-100B/month for US Treasury debt and TBTF Bank subsidies, three things would happen:
- The Zombie Banks would fail
- Liquidity-dependent paper markets around the world would fail
- Interest rates would rise dramatically from the current 2.62% on the 10-year and 3.46% on the 30-year
Frankly, The Fed/US Govt can handle and work around both #1 and #2. It's #3 that they cannot allow, at all costs.
Currently, servicing the already-accumulated debt requires a huge annual budget expense. For fiscal year 2013, the total was $415.6B. (https://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm) AND THAT IS AT AN AVERAGE MATURITY OF UNDER FOUR YEARS AND A COUPON OF LESS THAN 3%!! If short term rates were to rise or if maturities were extended, the interest component of the US's budget would begin to grow exponentially. THIS CANNOT BE ALLOWED as the entire Ponzi will quickly unravel and The U.S. Empire will go the way of The Romans, the Ottomans, the French and the Germans...just to name a few. Now, don't get me wrong, THIS WILL HAPPEN EVENTUALLY. IT IS A MATHEMATICAL CERTAINTY. However, The Fed/US Govt will do everything in their power to push back the eventuality. Thus you have:
- QE to infinity
- Unlimited manipulation of every paper market, from equities to bonds to currencies to metals
- SPIN, MOPE and outright falsehoods regarding economic data
- Endless drumbeat toward war to create a "safe haven" bid for sovereign bonds
I could go on and on with this extraordinarily important subject as this is the basis of this site...The End of The Great Keynesian Experiment. For now, though, it's best to keep moving. The week is only half done and we've got a long way to go until Friday.
First, gold. How many times have we seen this chart now? Black line = bad economic news reaction. Red line = cap and intentionally beat back price. Blue line = Hold price down until The London PM fix. Green line = Let it go
If you think I'm crazy, here are just a couple of other examples for you:
Whatever. Like it even matters. Just watch the chart below and the 200-day MA:
If you're wondering why silver is down so much today, it has everything to do with the May expiration. Why? Recall that we've followed the Comex silver OI down from 165,000+ three weeks ago, 160,000+ one week ago to under 147,000 on Monday. That's a lot of contracts closing, in particular the shorts who do not have silver to deliver. Those spec shorts are being out back on today in the July contract...and...down she goes. These shorts will continue to be added for the next few days or until price breaks out of the triangle below. Taking the other side of these spec shorts are The Commercials, which are gladly buying and fattening their positions. Note how silver once again today failed to drop and stay below $19.20. This is by design. ONLY IF price falls and then closes substantially BELOW $19 would I get nervous and doubt my conclusions/forecast. Instead, I expect price to continue to hold support here and then ultimately break the triangle to the UPside. This resolution will begin to squeeze all these late-coming. momo-chasing shorts and a new rally will be underway.
Two other updates for you. With the lousy GDP number, The Long Bond is rallying again today. With the worsening Ukraine situation, palladium is rallying today, too. Both have once again opened significant gaps versus gold. On the charts below, you can see the clear correlation that gold has had with these two other items...a clear correlation that ended in both at the beginning of April. Since then, The Bond has continued to rally and palladium is up nearly 4%. Gold? Not so much. And so it is when every single market now shows the fingerprints of central planning.
Speaking of "Central Planning Fingerprints", I must close today by revisiting crude oil. Just yesterday, I printed a chart of crude at $102 and shouted that support had held. WRONG! Why has it reversed and what happens next?
Recall that the last time crude hit $105 before crashing to $98, The Woody Administration intervened by announcing a five million barrel release from the US Strategic Petroleum Reserve. This was done with the blatant intent of smashing price and "hurting Putin in his pocketbook". A funny thing happened along the way, though. Price fell to $98 but could not drop further. Over a period of five days in mid-March, The Evildoers tried and tried and huffed and puffed but couldn't break $98. Price then recovered back to $105. And now here we are again with The Central Planners jamming price back down. My hunch is that they will fail again near $98. Let's just see if I'm right.
LOTS of other stuff going on today...so much so that I hardly know where to start. To save time, I'll just give you these:
- A top-secret, pre-meeting meeting was apparently held yesterday before the FOMC stuff began. Hmmm. I wonder what was so important? http://www.zerohedge.com/news/2014-04-30/why-did-fed-hold-emergency-meeting-yesterday
- The Criminal CME Group is considering placing daily trading limits on the precious metals in an attempt to "lure back investors". These bastards are so desperate to get trading volume and open interest back that they'll do anything. http://www.reuters.com/article/2014/04/29/cme-group-precious-idUSL2N0NL1JH20140429
- And I found this earlier. I know nothing about the author but the story sure sounds familiar. http://rt.com/op-edge/155860-brics-imf-fiscal-rescue/
OK. Expect a full podcast later today, post-Fedlines. Enjoy the show.