Wednesday, 20 November 2013

In The Know?

Baltic Dry Index. 1495 -05

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

One of the queries Quakers are asked to consider, is: "Do you maintain strict integrity in your business transactions and in your relations with individuals and organizations? Are you personally scrupulous and responsible in the use of money entrusted to you, and are you careful not to defraud the public revenue?"

Probably why there a no Quakers on Wall Street.

We open today with Bloomberg alert to the high stakes betting taking place in the markets now, thanks largely to the Fed’s recent tapering U-turn.  Main Street may be flat on its back, but on Wall Street the Great Vampire Squids sense that something big is about to happen within weeks, or at most a few months. Stay long physical precious metals. This being our new lawless age, one or more of the Ebenezer Squids has probably been tipped off. Probably only the NSA and Snowy in Russia knows for sure, but without a new disaster on their hands, at the NSA they’re all probably too busy watching porn.

With futures and options trading a zero sum game, one side loses and the other side games. Are we still on too big to fail?

Old Ebenezer Squid had one-way pockets. He would walk ten miles in the snow to chisel an orphan out of tuppence.

With apologies to P.G. Wodehouse and the Duke of Dunstable

VIX Trader Betting $13 Million on 88% Jump in Fear Gauge

By Nikolaj Gammeltoft - Nov 19, 2013 8:51 PM GMT
An investor bought $13 million in call options on the Chicago Board Options Exchange Volatility Index, betting the gauge will rally at least 88 percent in the next four months.

About 100,000 VIX March calls were purchased with a strike price of 23 for about $1.30 each, according to Trade Alert LLC. The contracts were among the five most-traded on U.S. options exchanges today, based on data compiled by Bloomberg

An investor bought $13 million in call options on the Chicago Board Options Exchange Volatility Index, betting the gauge will rally at least 88 percent in the next four months.

About 100,000 VIX March calls were purchased with a strike price of 23 for about $1.30 each, according to Trade Alert LLC. The contracts were among the five most-traded on U.S. options exchanges today, based on data compiled by Bloomberg.

“The S&P 500 (SPX) trade looks like a melt-up trade and the VIX trade is the melt-down trade,” Justin Golden, a partner at Lake Hill Capital Management LLC, said in an e-mail. The New York-based hedge fund trades options on equity indexes and commodities. “Either way, in order for either of these to pay off you need significant movement in some direction.”

The two trades -- one that makes money with higher volatility, the other profiting with equity gains -- show seemingly opposing wagers on the direction of the stock market as investors gauge the prospect of continued monetary stimulus after a four-year bull market.

Below, Reuters proffers one possible explanation. And why not? China’s already spooked by the Fedster’s response to the Great Recession, the came last month’s near default by Uncle Scam in Washington. When the next Lehman hits, it’s all over for the Great Nixonian Error of fiat currency. Is China really changing? We will very soon find out.

"Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money."

Daniel Webster

China central bank suggests faster tempo for freeing yuan

By Aileen Wang and Kevin Yao BEIJING Wed Nov 20, 2013 1:23am EST
(Reuters) - With a shift in tone and language, China's central bank governor has dangled the prospect of speeding up currency reform and giving markets more room to set the yuan's exchange rate as he underlines broader plans for sweeping economic change.

The central bank under Zhou Xiaochuan has consistently flagged its intention to liberalize financial markets and allow the yuan to trade more freely, even before the Communist Party's top brass unveiled late last week the boldest set of economic and social reforms in nearly three decades.

But since the 60-point reform plan was released, Zhou has suggested urgency in pushing for change, although he has not provided any specific timetable. He promised on Saturday to "pull out all stops to deepen financial sector reforms".

Dariusz Kowalczyk, an economist at Credit Agricole in Hong Kong, said the governor's comments could mean that the People's Bank of China (PBOC) will widen the trading band of the yuan in the near term.

Insight - As U.S. default threatened, banks took extraordinary steps

Reuters – 19 hours ago
By David Henry and Lauren Tara LaCapra
NEW YORK (Reuters) - As the United States threatened to default on its debt last month, major U.S. banks set up war rooms, spent many millions of dollars on contingency planning and, in some cases, even prepared to underwrite federal government benefits.

In a series of interviews with top bank executives, new details emerged about the extent of the contingency planning that was undertaken before and during the 16-day government shutdown and as a potential default loomed.

The planning for worst-case scenarios didn't come cheap. JPMorgan alone has spent more than $100 million on contingency planning for U.S. budget crises in recent years including this one, sources close to the bank say. It has reviewed and analyzed thousands of trading contracts, updated computer systems to handle fiscal emergencies, hired consultants, and built new models to figure out what might happen to securities prices.

It may not go to waste. The temporary budget agreement that President Barack Obama signed shortly after midnight on October 17 to end the shutdown and lift the default threat, authorizes government spending through January 15 and eases enforcement of the debt limit until February 7, creating the potential for another budget crisis early next year, even as some Republicans vow they will avoid it.

Wife of jailed Chinese Nobel Laureate appeals for his retrial

By Sui-Lee Wee BEIJING Tue Nov 19, 2013 7:42am EST
(Reuters) - The wife of jailed Nobel Peace Prize Laureate Liu Xiaobo has filed an extraordinary appeal for his retrial, his lawyer said on Tuesday, in a move that could renew the focus on China's human rights record.

The news comes two weeks ahead of a visit to China by U.S. Vice President Joe Biden, during which human rights will likely be raised amid a broader crackdown on dissent and freedom of speech and assembly.

Liu, a veteran dissident involved in the 1989 Tiananmen Square pro-democracy protests crushed by the Chinese army, was jailed in 2009 for 11 years, on subversion charges for organizing a petition urging the overthrow of one-party rule.

He was the organizer of "Charter 08", a manifesto for political reform.

His wife Liu Xia, who has been under effective house arrest since he won the Nobel Prize in 2010, met Liu in October in prison in northeastern Liaoning province and got his approval for the appeal, prominent human rights lawyer Mo Shaoping told Reuters.

"Whether Liu Xiaobo's viewpoints in his articles are correct or wrong, whether he drafted "Charter 08" and whether those views are wrong or right, this is a citizen's right to freedom of speech and expression," Mo said.

"This is the constitutional right granted to every citizen and does not constitute a crime, so we are requesting that the courts hear this case again and find Liu Xiaobo not guilty."

Liu Xiaobo's imprisonment has drawn the condemnation of Western governments and fellow Nobel Laureates, who have been lobbying for his release.

We end for the day with more on our new lawless age. As the eight hundredth anniversary of the signing of the Magna Carta approaches in June 2015, with friendly oversight like this who needs a written constitution.

"What do I care about the law ? Hain't I got the power."

Cornelius Vanderbilt, 1794-1877.

Secret U.S. court approved wider NSA spying even after finding excesses

By Joseph Menn SAN FRANCISCO Tue Nov 19, 2013 2:37pm EST
(Reuters) - A secret U.S. intelligence court let the National Security Agency collect an expanded amount of data about Americans' email even after finding that the agency systematically exceeded the limits of a smaller program, newly released documents show.

The judge on the Foreign Intelligence Surveillance Court recounted a litany of problems with the first, smaller program, including the NSA collecting more categories of information than had been approved by the court and sharing data more widely within the electronic eavesdropping agency than had been authorized.

At issue are emails among U.S. citizens that the NSA scooped up in its pursuit of foreign intelligence. Though historically focused overseas, the agency intensified its domestic operations after the September 11, 2001, attacks in hopes of finding people in the country working with terrorists or spies.

The programs let the NSA search for Americans who had electronic contact with people who were in turn linked to people hostile to the United States. At times, however, analysts queried the database with names that had not been found to be terrorists or foreign agents, the judge found.

The NSA was allowed to share criminal evidence with law enforcement agencies, but in other cases it was supposed to obscure email addresses to protect the identities of U.S. citizens because of the Fourth Amendment's protections against unreasonable searches.

Instead, Judge John Bates wrote about the first bulk collection program, "NSA analysts made it a general practice to disseminate to other agencies intelligence reports containing U.S. person information," such as their email addresses.

Bates' 117-page opinion was among nearly three dozen documents declassified and released on Monday by the Office of the Director of National Intelligence in the wake of suits filed by the American Civil Liberties Union and the Electronic Frontier Foundation.


The order is heavily redacted, with entire pages and even the date of the ruling censored. Still, the remaining harsh criticism echoes that of a previously disclosed opinion faulting the NSA's conduct in scooping up email addresses and routing information.

"When a President does it, that means that it is not illegal."

Richard M. Nixon.

At the Comex silver depositories Monday final figures were: Registered 44.25 Moz, Eligible 124.23 Moz, Total 168.48 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over.

In the land where “my word is no longer my bond,” yet another market rigging scandal seems to be in the works. If we didn’t know better, we could be forgiven in thinking London’s “gold fixers” were members of the Unite union, fully signed up members of corrupt Scottish Labour’s Falkirk franchise. For the record I was born in the pretty little town of Falkirk, Scotland, where everyone is below average, according to the corrupt Scottish Labour Party, with Venezuela as its aspirational role model.

It is never difficult to distinguish between a Scotsman with a grievance and a ray of sunshine.

P. G. Wodehouse

Gold Benchmarks Said to Be Reviewed in U.K. Rates Probe

By Suzi Ring - Nov 20, 2013 12:11 AM GMT
The U.K. Financial Conduct Authority is reviewing gold benchmarks as part of its wider probe of how global rates are set, a person with knowledge of the matter said.

The FCA review is preliminary and hasn’t risen to the level of a formal investigation, said the person, who asked not to be identified because the matter isn’t public. The person declined to say which gold benchmarks were under scrutiny.

One of the key benchmarks is the London gold fixing, a measure of the spot price for physical gold that is set twice daily by five banks. At private Commodity Futures Trading Commission meetings this year, the U.S. derivatives regulator discussed reviewing how gold benchmarks are set, according to a person with knowledge of the matter.

“We’ve seen a pattern of this sort of scrutiny across markets,” said Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey. “I don’t think this will have a big price impact in gold, but it could change the way markets are traded.”

Regulators around the world are examining alleged abuses of a number of financial benchmarks by companies that play a central role in setting them. Inquiries were triggered after it emerged the London interbank offered rate, or Libor, the benchmark interest rate for more than $360 trillion of securities worldwide, was being manipulated.

The scandal also sparked reviews of how to improve how rates are set, so as to prevent them from being rigged in the future, and which ones should have formal oversight.

Steve Adamske, a spokesman for the CFTC, and Lara Joseph, a spokeswoman for the FCA, declined to comment on the review.

In addition to Libor, regulators including the FCA are investigating rate-rigging in the $5.3 trillion-a-day foreign-exchange market, and ISDAfix, a benchmark for interest-rate swaps.

Separately, the FCA will publish an update on its approach to supervision of commodities markets, including gold, before the end of the year, Joseph said.

----The London gold fixing is conducted twice a day by Barclays Plc (BARC), Bank of Nova Scotia (BNS), Deutsche Bank AG (DBK), HSBC Holdings and Societe Generale SA. (GLE) The pricing, started in 1919, was conducted in a meeting held for 84 years at N.M. Rothschild & Sons Ltd.’s offices, and started taking place over the telephone in 2004.

Yes, gold doesn’t bear interest. Many, including Warren Buffett, belittle its investment value. But, paintings or antiques don’t bear interest either. When money supply is rising, anything scarce tends to rise in value. Gold is the best scarce commodity in the world.

Andy Xie.

The monthly Coppock Indicators finished October:
DJIA: +178 Up. NASDAQ: +238 Up. SP500: +217 Up. The Fed’s final bubble continues to grow, until QE Forever isn’t forever. Up will remain up, until one fine day out of the blue the Fed finally loses control, or the next Lehman hits.

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