Empty gold vaults

We were having dinner with friends last night and talking about the gold markets when I mentioned two, and he mentioned two, and logic suggested four.  He told me about the reported Bank of England’s gold leasing:

Based on recent figures from the Bank of England, it appears as though
the Bank of England has directed the leasing of about 1,300 tonnes of
central bank gold from their vaults in a four month period from March
through June. 

Or at least that is the surmise, given the inventory level at the end of
February and the stated inventory on the Bank of England website at the
end of June.  Macleod thinks that this was done in support of the gold
price smackdown.

One has to wonder how that bullion will eventually be returned to its
rightful owners, given that it apparently has been taken from the vault
and delivered to the refineries en route to the East, or may even be
sitting in some vault somewhere with a high stack of paper claims set
against it.

Leased to whom?  Well, it would appear to be fairly obvious in light of this announcement last week:

The Economic Coordination Committee of the Cabinet, headed by Finance Minister Ishaq Dar, took the decision to ban the import of the yellow metal for one month with immediate effect.

During a meeting with Dar in Karachi last week, the Exchange Companies Association of Pakistan (ECAP) had claimed that smuggling of gold to India was causing rupee devaluation, as the importers were mopping up dollars from the market to meet the needs of the Indian buyers. After the Indian government’s decision to discourage gold import by imposing 8% duties, the buyers had shifted to Pakistan where the commodity was allowed to be imported duty free since 2001.

Our conclusion is that because the Indian and Pakistani government attempts to limit the physical gold demand has failed, the Bank of England, and possibly the Federal Reserve as well, are sending their gold East in order to prevent the price from rising and blowing up banks like J.P. Morgan that are holding massive short positions against the price of gold.

The Ponzi pyramid is quaking and this is the sort of thing that could easily cause it to collapse.

Gambling is going on in here?

Fox contributor Tobin Smith apparently failed to realize that he was supposed to make his profit on the pump from price movements, not directly:

Most investors can’t tell the difference between “sponsored investment research” and independent analysis, and that’s exactly what the “sponsors” — typically small companies paying for a marketing campaign that will inflate their stock activity and value — are counting on.

The difference gets even tougher to figure out when the sponsor hires someone who is known for giving independent commentary colored only by their own feelings and research. Think of it like a big honking commercial, with a celebrity endorser.

Last week, that bought-and-paid for stock endorsement was a 20-page mailer about Petrosonic Energy, supported by an e-mail campaign, featuring Tobin Smith, a money manager who has been a fixture on the television news shows for 15 years, and who is a regular on the Fox networks, describing himself on Twitter as a “guest anchor.” According to Fox, he is “a contributing market analyst for FOX News Channel and a regular panelist on ‘Bulls & Bears.’” (Fox, like MarketWatch, is owned by News Corp.)

While investors might have ordinarily treated the “special edition” of the new Next Big Thing Investor newsletter — Smith’s latest, just-started investment newsletter — like junk mail or spam, Smith’s name and his smiling, personable countenance had some investors doing a double-take, at least judging from the e-mails I received on the subject.

The people who contacted me considered buying the stock entirely based on Smith’s say-so, and the credibility he exudes in his Fox appearances. They didn’t appear to read the disclaimers of the campaign; had they bothered, they would have quickly found it was paid advertising for which Smith’s company pocketed $50,000.

The thing is, there is absolutely no difference between what Smith did and what Kudlow, Cramer, Bartiromo, and all the other financial news analysts do.  They’re all paid to try to sucker people into the stock market and they all benefit from seeing prices rise as the suckers create churn. I’ve never seen a study on this, and it has been a LONG time since I bothered watching what purports to pass for the financial stuff, but I would assume that there are probably 10 “buy” recommendations for every “sell” recommendation.

It’s not analysis, it’s cheerleading, and it has nothing whatsoever to do with economic realities or what the purported purpose of a stock market is.  The whole thing is a Fed-inflated casino, which is why “investors” are all breathlessly waiting today to see if Helicopter Ben is going to keep the party going another quarter.

Picture of a rally

I realize that many market analysts think Elliott Wave theory is akin to technical witchdoctery. But regardless of what you think of the theory, it is very hard to look at this image from Barry Ritzholtz without Waves 1 and 2 leaping out at you. As I’ve shown on the chart, the subdivisions are perfectly clear. Furthermore, the implications for the market happen to correlate almost perfectly with my current debt calculations for the economy.