Gary Tanashian's  Instablog

Speaking of the TED spread, from NFTRH9 dated November 22, 2008:

TED Spread & LIBOR Still With the Program [TED & LIBOR 1 Mo. charts omitted]

Again, these are not the kind of charts I want to be posting on NFTRH. What I want to be doing is looking at markets, stocks, bonds and currencies in a relatively stable environment. But since the NFTRH launch, I have not gotten what I want. These macro indicators, along with the above money supply data are a necessary evil for the time being because they help us navigate a historically difficult period. They help us avoid becoming just another sheep to the slaughter.

These charts rising impulsively are the last things economists want to see. As it turned out, the pullback in credit and risk nearly ground the system to a halt. With the massive globally coordinated efforts on the part of policymakers to savage their currencies, we indeed have more indication that the panic is easing. But of course the cost will one day be extracted in the form of a more intense inflation problem. But for right now, all anyone cares about is refuge from the deflation impulse now in progress.

Stock promoters do not want you to look at this chart... the government does not want you to look at this chart... As risk rises, the t-bill generally rises (its yield declines) and well, there ain't no 'less than zero' involved and if there was, it would seek it out. You know, frightened money might actually pay for perceived safety.



Each time the Fed has met (and pretended to have a decision to make) during the supposed recovery, I have posted an updating chart of the t-bill yield ($IRX) with its implications stating that there is no decision to make. There is no real recovery either.

Unfortunately, all too many just go with the flow. They are the dumb money and that money is dumb for a reason.

I would like to know who, in this grand rally and economic recovery environment, is so scared they have just got to get themselves more t-bills? The lower panel is the TED spread, between t-bills and eurodollars which NFTRH used as a bullish indicator back in Q4, 08. Now, it is turning up and that squares with the message of the nominal t-bill.

In 1999, the price of gold bottomed after having ridden the post-Volcker era down along with treasury yields. This was due to the sound policies the former Fed chief rammed home and the confidence that ensued.

Enter the Maestro, Greenspan, who inherited the benefits of this sound policy and used it for years as a lever to bail out the system whenever needed. Many people thought Greenspan was a great and powerful Fed chief, but in actuality he was simply playing off the confidence that had been restored in the monetary and financial systems.

I think this macro chart has profound implications and clearly shows that sometime in the 1999-2001 period, we went off the charts as increasing debt burden became not only acceptable, but necessary to support the lifestyles we had grown accustomed to. Denninger's letter in the previous post illustrates China's role in the macro Ponzi scheme in the harshest of terms.

There is talk of a gold bubble and in my opinion, the most unsavory of the gold bug 'community' are out in full force, hoping for nothing less. But gold is not in a bubble. That is because gold represents an anchor to sensible systems and simpler times. It is going nowhere. The other stuff, the remnants of a rotting system is what is going somewhere and that somewhere is down. In short, confidence is being lost. It is no coincidence that gold is the only asset in new high (blue sky) territory.



Back to the chart, look at what happened as Greenspan finally ran out of Volcker's ammo and the market realized that this was simply a shell game promoted mainly by the macro vendor financing relationship between the US and China. There have been various means of keeping treasuries aloft, not least of which is the need for China and other creditors to keep buying them or at the least, not talk them down. Gold's honest monetary value has simply picked up on the rigged game beneath the surface and sought the value that treasury yields have thus far refused to seek.

At the very least, this is a picture of honesty beneath the surface and sadly it is a picture that most people will either never see or come to see when the media are shoving it down their throats and they panic into gold at god knows what higher price than it is currently at.

I'll kill it here, but when I see and ponder pictures like this, I hear thousands of word.

You know, I sit here and twittle my charts and bitch about this and that, but there are some real heavy weights out there who really know how to get to the point, whether written or spoken. Like Karl Denninger for example, flipping the bird to China in this open letter.

"Let me give you a piece of advice: Sell your Treasuries and dollars while you can.

Oh, you'd love to do that, wouldn't you? But you can't, and you know it. See, you've entered into a pact with the devil - a devil of your own creation. Should you sell a material amount of your holdings you would collapse the Treasury market and receive only pennies on the dollar. Further, you would instantaneously cut off your trade flow into the United States - the rise in interest rates this would provoke over here would force our citizens to spend only what they earn, as the cost of credit would rocket higher - much higher. It would also force an immediate default on whatever was left of your alleged "Treasuries" as our government would be forced to repudiate your holdings to remain solvent. When it comes down to "you or us", let me assure you, it will be us. This in turn would cause all your poison toy, drywall, toothpaste and melamine-laced baby food factories to close. Without that meager $2/day salary you would have 750 million hungry and angry Chinese who just might figure out what a pitchfork's best and highest use is. We, on the other hand, would chuckle mightily as we returned to actual hard work - for our benefit, not yours."

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They are tired, yes. Pissed off too.

The government has this rigged and set on autopilot. Goldman Sachs runs everything out of the penthouse office. Money printing as far out as the eye can see. We don't have free markets and this is the run up to the new, fascist world order with Rockefeller and the Rothschilds in control. We have lost our freedom. We are going to devalue our way out of seemingly unpayable debts and obligations. Oh, the humanity. These are the thoughts of bear capitulation.



Or just maybe the dollar is going to turn and burn as greed turns to fear one day and it is again shown just how powerless these bureaucrats and buffoons really are. I know this is crazy talk, but neither the gold-silver ratio nor the VIX are at new lows as the markets make new highs. In fact, the VIX did a little hammer action yesterday and the GSR bounced off the SMA 50. But I am 'just a top caller who's not with the bullish program' say the newly brave bulls.

I don't like hype and I don't like mania (in either direction). Okay, I am a freak by today's standards. Let's hear it for the freaks, for one day they shall inherit the world.

...which is another way of saying I took profits on NGD and bought HMY, as the HMY-NGD ratio suits this bottom feeder just fine. See, you can find nice bottom feed opportunities even in a speculative blow off!



Seriously, after owning Metallica Resources (MRB) for years from 1.00, I am now officially tired of the bullshit going on at the former MRB's (now NGD's) Cerro San Pedro mine, with the local activists again stirring up a hornet's nest. The company is operating and will probably be unaffected, but it has been a good ride up from under a buck late last year. Maybe I will revisit at a later date, but for now I'll take this chart, which means I'll take long time South African major gold mining basket case HMY over NGD.