Murphy On The Markets
Bill
Murphy
August 9 - Gold $400.30 up $1 – Silver
$6.71 down 3 cents
Gold Closes Above $400, $45 Oil!, Calm
Before The Storm!
The
wise are instructed by reason, average minds by experience, the stupid by
necessity and the brute by instinct...Marcus Tullius Cicero, statesman, orator
and writer (106-43 BCE)
GO
GATA!!!
A note from this weekend.... After the US
financial markets’ dramatic day on Friday (the result of a stunningly
disappointing US jobs report), I thought I would pay special attention to how
the pundits viewed the developments, like those on Fox TV’s Saturday morning
business market shows.
Several things stood out:
*Most were still bullish, yet admitted
confusion over the surprisingly lousy jobs number. That the economy has
deteriorated so quickly the past month or two has them befuddled. It seems to
have done so under the radar screen of Wall Street? Perhaps a number of them
ought to subscribe to this column or read the very insightful King Report. What
they might have picked up:
1.
The jobs reports
were overstated all along due to something esoteric called the Birth/Death
Hedonic Adjustment Indicator. Bill King has been all over this after each
report, citing they were not nearly as strong as trumpeted by Washington and
Wall Street. Without utilizing this indicator, the job numbers would have been
weakish for some time. Perhaps the Labor people felt they just couldn’t get
away with their fudging any longer. There are also a number of Café members who
now believe the "powers" behind the scenes won’t mind if Bush is
dumped as he has become a liability to their grandiose plans. Meanwhile, they
have another Skull & Bones Yale man in Kerry to step in and take his place.
2.
While the jobs
numbers have been overstated, inflation has been understated. Even without
taking into account the juggling of the real numbers, the fact that the core
CPI, the most focused on inflation number, is calculated without implementing
energy costs is ludicrous. As oft-mentioned here, next to health costs what
item could be more important to the average American? Consequently, US
corporations and the average Joe and Jane are being squeezed and it is
beginning to really show. This should not surprise either as 80% or more of the
US economic reports the past two months have been sup-par and more anemic than
anticipated.
3.
The manipulation
of US financial markets is beginning to catch up to the price managers. A false
sense of economic well-being has been force-fed on the public. PRICE ACTION
MAKES MARKET COMMENTARY. Many of the US financial markets have been nothing but
technical illusions from a chart/TA standpoint. This has resulted in an unusual
amount of complacency among investors, which could lead to dangerous herd
investor movements in the months ahead.
4.
What really
surprised me was how few of the pundits were bearish and NONE suggested
investors should "batten down the hatches" and prepare for some very
difficult economic times. Amazingly NONE focused on the tax cuts running
their course, the effects of the incredibly low interest rates for an
extended period of time having run their course, as well as the initial
stimulus of spending on the Iraq War having also run its course.
5.
For years one of
my rants has been the artificial suppression of the price of gold was going to
come back and haunt the riggers and eventually prove to be calamitous for the
average American. The basic reason is very simple. Rightfully so or not, gold
is used as a barometer as far as the health of the US economy is concerned.
When the price of gold is soaring EVERYONE talks about inflation, crisis, or
safe-haven investing. Each of is a negative for Wall Street, which is why the
disingenuous, corrupt ones in The Gold Cartel have made such an effort to keep
the price down. Had they let it take its natural free market price course, gold
would be MUCH, MUCH higher than it is today; and, the average American would
have been given a fair signal to be more defensive with their investments.
***
It’s Monday morning. As if to prove my
point made over the weekend about gold being a key indicator for both Wall
Street economists and the public, Bear Stearns chief economist, John Ryding,
was on CNBC early on saying gold was his key inflation indicator. Thank you
very much! It could not be more obvious why The Gold Cartel is suppressing the
gold price. It’s called motive.
One need only flip the page to another
Wall Street apologist, CNBC’s Larry Kudlow, to give you some idea to what
length The Gold Cartel has gone to suppress the price of gold. The following
three year old piece says it all:
LARRY KUDLOW ON THE OIL/GOLD Ratio (June
2001)
Snippet:
Today's barrel price for oil is $17, which looks to be just about right in
terms of two economic models of oil-price behavior. First, the inflation-adjusted
real price of oil has averaged $21.50 a barrel over the past decade. Real
prices moved temporarily to $45 during the Persian Gulf War, and briefly fell
to $10 a barrel in late 1998 during the global financial crisis that threatened
world deflation and recession. The most recent spike was slightly above $30 a
barrel this year, so a $17 barrel of oil averages nicely within this pattern.
Second, the monetary model of oil prices that uses the ratio between gold and
oil suggests that today's $17 per barrel spot price (or current price) for West
Texas crude is also just about right. Gold is a useful benchmark because its
monetary purchasing power is relatively constant over long periods of time.
Hence, over time, an ounce of gold should buy roughly the same number of
barrels of oil. In the past decade an ounce of gold bought seventeen barrels of
oil, on average. Today, with gold at $275 per ounce, a $17 barrel of oil
implies 16.2 barrels per gold ounce. This is actually below the average of
seventeen oil barrels per ounce of gold registered over the past ten years.
Therefore, a $16 per barrel oil price would be consistent with the decade-long
trend.
http://www.nationalreview.com/kudlow/kudlowprint112101.html
-END-
17 barrels of oil times
today’s price of $45 comes to a total of $765, or what gold should be per ounce
according to his ratio formula.
Kudlow and the rest of the mainstreamers
on Wall Street have selective memories. Yes, gold should be at $765 per ounce
today. Why aren’t the Kudlows of the world suggesting something seems to be
very wrong with the price of gold from a historic perspective? This is what The
World Gold Council and the entire gold industry ought to be jumping all over as
even more anecdotal evidence of a nefarious gold price suppression scheme.
Once again we see how PRICE ACTION MAKES
MARKET COMMENTARY – commentary the price managers want the public to read – and
that is gold continues to lose its historic value in terms of oil, inflation
and safe-haven investing. Not only is this an outrage, it is disingenuous to
the extreme, and is only postponing the inevitable truth/result. The gold price
is going to go bonkers when the crooks lose control of their scam.
A big thanks to Lois Ringel for bringing
this old Kudlowism to my attention.
The big news of the day was crude oil (it
closed at $44.89 per barrel with a $44.98 high and up 94 cents), as it
approached $45 per barrel. The news:
11:56 Iraqi oil official says southern
oil output to remain shut until fighting threat is lifted, reports Reuters
*
* * * *
AP) - A radical Shiite cleric vowed to
fight to the death as his loyalists battled U.S. troops for a fifth straight
day Monday, and bombings in Sunni regions outside Baghdad -- including a failed
attempt to assassinate a deputy governor -- killed at least 10 Iraqis. The
fighting with Muqtada al-Sadr's Mahdi Army militia began to have economic
fallout. Iraq's southern oil company stopped pumping oil to the southern city
of Basra where militiamen were controlling main streets because of threats to
infrastructure, an official with the company said.
* * *
* *
12:48 Reuters reports YUKOY's main unit
Yugansk seized again by bailiffs
Recall this is the unit that received a favorable court ruling on Friday 8/6
* * *
* *
Incredibly, thanks to the price managers,
and after a lower opening, gold yawned and only drifted higher as the day wore
on. Volume was very light.
The gold open interest only rose 2038
contracts on Friday to 219,618. This tells us there was a fair amount of
short-covering and not much new buying as the price ran up so quickly. Once at
the $400 level, the price-cappers did their thing. This is VERY good news as
there is room for 100,000 specs to come in on the long side to bury the bums.
Perhaps it will take the specs a little more time to get their nerve up. Most
have to be sick and tired of the cabal picking their pockets.
Silver was wobbly above $6.70 on Friday
and stayed that way. Early on a 200 lot order took the price down to $6.55.
There were no bids, however, selling dried up and silver recouped most of these
early losses. The silver open interest rose 141 contracts to 98,325.
A nice silver plus for the day: the Comex
warehouse stocks fell a sizeable 2,117,277 ounces to 111,548,374, a new LOW for
the move. Just what MIDAS has been looking for and advertised at the end of
June.
The way I see it, this is the calm before
the storm. Certainly, this is a time to have your ducks in the water as far as
gold and silver are concerned. It is our ducks' kind of weather.
The
John Brimelow Report
Scepticism
a friend?
Monday,
August 9, 2004
Indian ex-duty premiums: AM $4.26, PM
$3.91, with world gold at $398.50 and $398.40. Slightly below legal import
point. The rupee weakened in afternoon. Premium compression, of course, is to
be expected when world gold rises abruptly. The Shanghai Gold Exchange moved to
actual discounts on world gold. Standard London continues to show premiums on
their kilo bar Dubai prices.
Despite the some times gold-friendly
weakening of the yen since Friday’s Tokyo close, TOCOM showed no enthusiasm: on
volume of only 13,393 Comex equivalent (up 35% on Friday, however) the active
contract was up 5 yen but world gold was down 75c on the NY close at the end of
trading. Open interest fell the equivalent of 995 Comex lots to only 95,090
Comex equivalent, and preliminary indications are that this may understate the
degree of liquidation by the public. (NY on Friday traded 65,334 contracts; open
interest increased 2,038 lots to 219,620.)
On Friday, gold following the employment
data essentially tracked the dollar, a number of commentators noting the
failure to make progress in other currencies. The small open interest increase
given the $7.30 jump in gold suggests that fresh buying was largely satisfied
out of short liquidation. One remains bemused as to why commercially-motivated
shorts would go short in the teeth of the premium data around last week – maybe
they were not aware of it. The highly professional Rhona O’Connell in her
weekly column on Thebulliondesk does not mention the huge and dramatic July
Turkish gold import number available last Thursday, which appears to suggest
huge Middle Eastern demand.
In general, neither the enemies nor the weary
friends of gold were particularly impressed by Friday’s superficially dramatic
gold action. Australia’s Privateer notes dourly:
"The most important feature on the
weekly chart is the fact that the 40 week moving average (MA) is firmly above
the 20 week moving average… The August 6 up move has pushed Gold back above its
20 week MA but not yet back to its more important longer-term 40 week MA…a
level above $US 410 is necessary before Gold can mount any challenge to its
February/April 2004 highs in the high $Us 420s (spot future closing price
basis)."
"The point and figure chart has
keeled over from its distribution zone in the mid $US 400s and has slid all the
way back down to just below the uptrend line. With the $US 4.00 gain on Friday,
the chart has turned up again and now rests just below the line."
"The biggest change in the point and
figure chart is the simple fact that with the rise on August 6, Gold is once
again well above its uptrend line…On this chart, a move above $US 410 in the
absence of any more distribution would be a sign of drastic increase in upside
strength. We'll wait and see."
This diffidence on the part of gold’s
friends is perhaps the strongest short term Bullish argument.
JB
CARTEL CAPITULATION WATCH
Two minor "Hail Mary" late DOW rallies
failed. Each time the DOW was lifted to 40 higher on the day, it gave up the
ghost, closing at 9815, down 1 and on the lows of the session. The DOG was
unable to gain any traction at all, losing 2 to 1775.
The dollar rose .03 to 88.49, while the euro
dropped .04 to 122.65 ahead of tomorrow’s FOMC meeting.
Wall Street is waiting to hear what the
Fed has to say tomorrow. Why? Greenspan and his recent comment to Congress
about the economy being in a "temporary soft spot" and high oil
prices being "transitory" was about as far off as you could get in a
short period of time.
What Wall Street wants is spin –
Goldilocks pabulum. If they get it, Greenspan will look even worse down the
road than he does now. Lose, lose for the Fed no matter what they do or say.
The shocker will be if they tell it as it really is!
Long the stock market?
Get ready for a Nagasaki
to shake you up any day or week now!
Economic news items of interest:
Cement shortages spread and start to
impact pricing says the WSJ
Faster growth regions are the hardest hit but some economists say it could
impact the entire economy if the shortage doesn't ease soon. Normally imports
make up the difference in demand but strong demand from China as well as rail
backlogs in the U.S. have exacerbated the problem. Other construction
commodities, such as lumber and steel, are increasing in price and facing
shortages. Industry execs say the shortage will ease with the coming cooler
weather.
* * *
* *
DIS' Miramax to lay off about 35% of workforce this week reports the NY Post
The paper says the layoffs are worse than expected.
* * *
* *
10:00 June Wholesale inventories
reported 1.1% vs. consensus 0.6%
Prior reading revised to 1.4% from 1.2%.
* * * * *
The inventories increase was unexpected
and not inconsequential. Goods are not moving off the shelves as hoped for.
Buffett increases bet against dollar to
$19 bln
NEW YORK, Aug 9 (Reuters) - Warren Buffett increased Berkshire Hathaway Inc.'s
bet against the U.S. dollar to $19 billion at the end of the first half of
2004, his holding company disclosed in a regulatory filing.
The value of the Omaha, Nebraska-based company's contracts in foreign currency
had increased by $8 billion by June 30, the company said its quarterly filing
with the U.S. Securities and Exchange Commission.
Buffett previously disclosed making investments in five foreign currencies in a
belief the dollar will decline in the long run as a result of the United
States' ballooning trade deficit. He has never specified which currencies he was
investing in, only saying they were major…. –END-
Warren Buffet has become the second
richest person in the world for very good reasons. Betting against him is a
sure way to the poor house.
GATA’s Mike Bolser:
Bill:
The Fed added $4.75 Billion in repos to day August 9th 2004, an action that
upped the repo pool a bit to $44.269 Billion and kept it quite high. The DOW is
struggling at 9850 at this hour. The Fed continues to march along its
pre-determined linear path upwards, seemingly uninterested in the DOW's
troubles. It's almost as if the Fed is content, knowing a future event will
turn things around for the DOW and perhaps for the election chances of the
President.
They HAVE been all over the bond rig, making sure the 30-year yield stays
almost exactly on 5%.
Oil continues to track above $44/bbl at this hour and there's no relief from
Venezuela. Indeed, if the administration thought they were going to install a
puppet regime in Caracas by stirring things up, it seems to have backfired
according to this story:
Why Hugo Chávez is heading for a
stunning victory
Richard Gott in Caracas
Saturday August 7, 2004 The Guardian
http://www.guardian.co.uk/venezuela/story/0,12716,1278276,00.html
To the dismay of
opposition groups in Venezuela, and to the surprise of
international observers gathering in Caracas, President Hugo Chávez is about to
secure a stunning victory on August 15, in a referendum designed to lead to his
overthrow. END
And the reason why this will happen can be found here:
http://www.vheadline.com/printer_news.asp?id=22339
In a phrase: US internal
meddling. Congressman Ron Paul objects to this kind
of government intervention
++++++++++++++++++++++
As I mentioned in Friday the Fed is leveling off their 200-day ma at DIVG=343
and as a result of the heavy selling needed to accomplish that the Fed is in a
weakened state. No one can say what they will do from here but a move back down
is highly unlikely so IF one were waiting to get on board with physical NOW is
the time.
Mike
Chuck checked in on Saturday:
Just wanted to pass on an observation
regarding Newmont yesterday. When has it been on the most up list with the
stock market down sharply. This contrasts starkly with the previous days as
Newmont weakened with the market. My guess is that it should be proctored for
its relative strength. A sharp move up above the $43 level and a weak market
would be immensely positive. The Rydex PM Fund is a point only seen at major
lows. The XAU and HUI look like 2002 revisited after the crash. If so, we
should start to see very positive action in the golds.
Jay (Taylor), if that is the gist of what
Jim Rogers wrote, it reeks with smugness and pride. As we know, "Pride
goes before a fall, and a haughty spirit before destruction."
Take a look at the world markets after
last week. It is pretty frightening. It looks like a panic coming up. Keep
looking at NEM and the other major listed stocks for real divergence. If we
don't bounce after the opening on Monday, we might be into it. Chuck
http://www.decisionpoint.com/prime/dailycharts/03osex.html
and then again this early afternoon:
So far the market has behaved as hoped. I
assumed that the market would try to rally all day especially with the Fed
meeting. It has a very heavy feel to you considering the drop of the past few
days. Also, I liked to see the major article in Barrons on a bank positively
comparing it to Citigroup.
And for gold, given the bounce in the
dollar and the Pavlovian drop in the shares, it is also performing well, now
over $400 even with some upward pressure in the buck. I would assume that the
dark forces will try to close it under the round number and say "so
there." But the next move might follow the Fed's rate decision. They are
between the proverbial rock and a harder place at this point. I am assuming
that any decision will have negative consequences upon the market, but I have
said this before.
One day soon, the calm and confidence will
give way to a scary volatility. I believe we are in transition here. Chuck
A potentially devastating development for
US financial markets:
WASHINGTON Aug 8 : Voracious purchases of
US Treasury bills by Asian central banks are coming under scrutiny ahead of
presidential elections amid concerns over national security and a ballooning
current account deficit.
Led by Japan and China, Asian economies have been gobbling up US dollar based
assets, particularly US Treasuries running into hundreds of billions of
dollars, over the last two years.
By investing in US securities, the Asian economies stash away proceeds from
selling their own currencies in an attempt to prevent them from rising against
the dollar and so making their exports cheaper and more appealing to American
consumers.
Some say that while the massive Asian holdings may keep US interest rates low
and help bankroll America's debts, they are propping up the US record 541.8
billion dollar current account deficit -- the balance of goods and services
between US and the rest of the world.
Others fear that such immense US wealth in foreign hands could boomerang if,
for example, the assets are unloaded abruptly in a deliberate attempt to
destroy the American economy.
Lawrence Summers, Harvard University President and US Treasury Secretary under
ex-President Bill Clinton, likened the Asian purchases to hoarding of gold by
European states centuries ago.
"Much has been made of US dependence on foreign energy, but the country's
dependence on foreign cash is even more distressing," Summers said in the
latest issue of the US magazine, Foreign Policy.
"In a real sense, the countries that hold US currency and securities in
their banks also hold US prosperity in their hands," he said. "That
prospect should make Americans uncomfortable."
Foreigners already hold almost 40 percent of marketable US Treasury debt. The
Asian central banks have increased their holdings of US assets to about one
trillion dollars, according to market estimates….
- AFP
Meanwhile Summers, one of the major
proponents of the gold price suppression scheme and the US strong dollar
policy, is going to have to crawl into a hole one day when it is exposed how he
was instrumental in cultivating what is ahead. He and Robert Rubin will go down
as some of the baddest financial market characters in the history of our once
great nation.
With Iraq completely falling apart, it was
hard to pass this one up too:
In his memoirs, "A World
Transformed," written five years ago, George Bush Sr. wrote the following
to explain why he didn't go after Saddam Hussein at the end of the Gulf War.
"Trying to eliminate Saddam...would have incurred incalculable human and
political costs. Apprehending him was probably impossible.... We would have
been forced to occupy Baghdad and, in effect, rule Iraq.... There was no viable
"exit strategy" we could see, violating another of our principles.
Furthermore, we had been consciously trying to set a pattern for handling
aggression in the post-Cold War world. Going in and occupying Iraq, thus
unilaterally exceeding the United Nations' mandate, would have destroyed the
precedent of international response to aggression that we hoped to establish.
Had we gone the invasion route, the United States could conceivably still be an
occupying power in a bitterly hostile land."
If only his son could read!!!!!
***
Latest Iraq scorecard:
*400 Iraqi dead yesterday. How many friends
and family members will this affect?
*More US soldiers dead in June and July this year than last year with this
August running ahead of this past July.
*An arrest warrant out for Ahmed Chalabi, the man who sat next to Mrs. Bush at
The State of The Union address in January and who the neo-cons in the Bush
Administration relied on to give them intelligence on Iraq before the war.
*Oil exports were shut down.
Some thoughts from a Swiss Café member on
Sunday:
Bill
The surge of the oil price over 40 us$ recently appears to be one of the key
factors in a chain of reactions leading to a weakening US economy, and the
significant drop in the DJIA and the $ on Friday, with the corresponding surge
in the POG to 399 $/oz.
The Fed may be able to manipulate many things, but oil may not be one of them,
(currently at any rate).
In this respect another key event is looming in this critical month of August,
the Venezuelan vote on August 15th.Latest indications are Chavez may win.
Chavez's popularity has gained recently as he has pumped increasing oil
revenue(from the rising oil price) into social programs into the economy.
Chavez Likely to Win August Recall-Venezuela Poll
http://abcnews.go.com/wire/World/reuters20040727_493.html
The Fed's decision next
week on whether to raise interest rates or not looks increasingly to be a
lose-lose situation for them. If they raise rates, the already weekend DOW may
decline in an orderly fashion, or even crash. If they dont raise, the $ may
crash and they could lose control of the POG.
Similarly the Chavez vote could lead to higher oil prices no matter the
outcome, once the uncertainty of the vote is removed.
If Chavez wins, the threat of a potential
oil embargo against the US will hang over the markets, if Chavez perceives the
US moving against him. If he loses, there is a heightened risk of unrest and
oil production disruptions.
Facit: "Cave Ides Augustus" Beware the ides of August, and talking of
soothsayers, it would be interesting to hear Mahendras latest thoughts on the
oil price situation? August 15th I will be on Chavez / oil watch.
All JMHO and definitely not investment advice.
Best
Alan
Bill
This article gives more specific background to my commentary on Venezuela of
06.08.04, in particular this extract:
"The United States is the biggest
single buyer of Venezuela's oil, but Chavez accuses President Bush (news
- web
sites) of trying to topple him and has threatened to cut off oil
shipments if the United States intervenes in its affairs.
Washington rejects these accusations.
SAYS OPPOSITION INCAPABLE
Dismissing his opponents as incapable of
ruling, Chavez warned the U.S. government that defeat for him in the referendum
could trigger unrest and instability in Venezuela, which could send already
high oil prices shooting up to $100 a barrel." –END-
http://story.news.yahoo.com/news?tmpl=story&cid=586&e=3&u=/nm/20040809/wl_nm/venezuela_
referendum_dc
Best
Alan
Here is a link to Wm. J. Murray’s (not to
be confused with Wm. J. Murphy’s) web site on silver:
http://www.minersmanual.com/silverarticle.php?SA_ID=190
***
One precious metals company after another
is reporting disappointing earnings. Relative to companies in other financial
market sectors, these disappointments rank our sector near the bottom as far as
under achieving for the last quarter is concerned. Costs keep going up, while
the prices of gold and silver are capped. The CEOs of these companies should be
screaming bloody murder about what The Gold Cartel is doing to their firms. What
a bunch of powder puffs as a group! Shareholders ought to be irate about their
bewildering silence. The outrage from my perspective continues on all counts.
Here’s another example of disappointment in this inept and dysfunctional
industry:
NEW YORK, Aug 9 (Reuters) - Coeur d'Alene
Mines Corp. (NYSE:CDE - News), which has made a
$1.8 billion unsolicited bid for Canadian miner Wheaton River Minerals Ltd. (Toronto:WRM.TO - News), on Monday
reported a wider quarterly loss and said it will restate its results for last
year and the first quarter.
The Coeur d'Alene, Idaho-based silver
miner posted a second-quarter net loss of $5.4 million, or 3 cents per share.
That compares with a net loss of $4.1 million, or 3 cents per share, in the
same quarter last year when the company had fewer shares outstanding.
-END-
The psychology regarding the gold and
stock market shares is extraordinary, interventionalism or no. After the news
the market received on Friday and the resulting dramatic moves in the markets,
one would have expected some follow-through in the early going today. Wrong!
The US stock market was bid right up before the opening and the gold shares
were hit fairly hard right off the bat.
Investors refuse to dump their general
market shares, holding on until they can recoup losses and yet, gold share
investors can’t wait to sell. It is almost surreal. It is as if the investment
world is in complete denial of the realities of what is really going on out
there from an economic, financial market viewpoint.
The gold shares regained most of their
early losses on light volume. The HUI finished at 183.27, down .35, while the
XAU lost .36 to 86.32.
Gold has become pressure cooker-like, yet
off the radar investment screen for most. This is extremely bullish. It could
blow at any time!
GATA BE IN IT TO WIN IT!
MIDAS
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