As the markets were heading into the close on Friday afternoon, I noticed that silver and gold were rallying and the newswire failed to provide any headline for the a substantial price rise. (There was no Syria news or any other type of geo-political event.) The weekend news also failed to support the rally at least until a few hours ago when the Washington Post ran a headline announcing that Larry Summers had withdrawn his name for consideration for Chairman of the Fed. Many pundits have been maintaining that Summers would be quick to end the entire QE program and thus would have a negative impact on all asset prices. Nonsense in the first degree, but as a trader, the first rule is to respect prices. The removal of Summers has led to the U.S. dollar selling in early Asian trading as the anticipation is now the Fed will be under a Chairman more in step with the Bernanke method of central bank theory.
The important outcome is that President Obama decided it was not worth wasting political capital and energy to support Larry Summers. In my HUMBLE OPINION it is a huge loss for Wall Street as President Obama has discovered that the left-wing of the Democrats in line with the Republican Tea Party was a powerful force and was representative of Main Street instead of Wall Street. The Wall Street success in blocking Elizabeth Warren as the head of consumer financial affairs has been a blowback to HUBRIS. We don’t know who will be the White House nominee but if it is Yellen, this will be a huge defeat for the Wall Street money machine. The other big loser is the political mouth of CNBC, John Harwood, and his claim to insider privileged knowledge. Speaking of insider knowledge, who was buying the precious metals on Friday? It could have been any of 535 members of an illustrious legislative body.
***In the Bavarian State elections held today, Chancellor Merkel’s sister party, the Christian Social Union (CSU) polled a very strong 49%, which was expected. A possible problem though is that Merkel’s main coalition partner, the FDP, failed to achieve the necessary 5 percent, which may prove ominous for the present Merkel government going into next week’s national election. The CDU leadership may feel strong enough that they will push dome present CDU voters to vote for the FDP in order to prevent a coalition of the CDU/SPU. The anti-euro party, AfD, did not field a candidate in Bavaria as our man in Berlin, GREEN AB, wrote in a post to Notes From Underground last week. We will be very attentive to the German news this week for the election outcome will have a bearing on the overall European financial situation.