Short-term Clarification

I've received a few questions regarding the previous post, so I thought I should revise and extend my remarks. This mainly has to do with my short-term expectations.

Let's lead off with the charts so that you can see what I'm seeing:

Though I continue to hear of robust, consistent demand for physical, it is clear that, at present, the paper manipulators are driving price. Yesterday, I laid out the historical case for driving price back to the levels seen before the announcement of QE∞ and we are almost there. In gold, this would amount to a drop toward $1720 and, in silver, a drop to at least $32.50. However, if gold does drop another $20 from here, silver will likely see something sub-32, something like $31.50.

The technical picture adds fuel to this idea. The same HFTs, algos and commercials that are driving the paper price lower would love to hasten the decline by piercing the 50-day moving averages and they'll likely have a go at it. As of this moment, I show the 50-day MA in gold to be near $1718 and the 50-day in silver to be $32.42.

So, in summary, though I laid out yesterday the case for why I'm extraordinarily bullish, there is still room for a little extra weakness before the bottom is in. The purpose of this post is to ensure that no one is caught by surprise IF it happens.

Lastly, a few emailers were wondering why I bought a Mar13 $40 silver call yesterday. Three reasons:

  1. To make fiat that I can convert to metal.
  2. To demonstrate for everyone the courage of my convictions, essentially putting my money where my keyboard is.
  3. Most importantly...I could be wrong about this entire post and the notion of one, further dip. If I'm right about where price is headed by late February, whether I bought yesterday, today or next week is of little consequence. Additionally, I had about $5M in cash so I spent half yesterday and I'll be looking to spend the other half if/when the final dip develops. My next purchase will likely be a gold call, either a Dec12 or a Feb13.

That's all for now. More later if warranted.

TF

3:55 pm EDT UPDATE:

Just a couple of things I've noticed this afternoon.

First, check out these 1-minute charts. The drops were not steep but, anytime you see selling on the Globex, it usually foreshadows Bad Guy intent. Last Friday into Sunday and Monday, for example. Again, this isn't much and we've already recovered some but you have to watch these things.

Now, take a good, long look at these daily charts of silver and gold. Note the rather obvious correlation to each other.

Also note the rather obvious correlation to the chart below....until the Sep 13 QE∞ announcement. Since then, the euro has zigged while the metals have zagged...again until today when the euro sold off and took the metals with it. (Not shown on the euro chart as it is only updated thru yesterday.)

So, what the heck is going on here? With the near 100% correlation from mid-July to mid-September, I would have thought that the trend would continue but it didn't. Should the euro be about 1.28 (1.307 as I type) OR should the metals be about $1780 and $35? One would expect this situation to fix itself but how? And when?

TF

273 Comments

Roark's picture

First

I would like to dedicate this accomplishment to all the Little People.... :)
Blythe. Jamie. And of course, the flying monkeys. :)

El Gordo's picture

Wow

Another example of me being some dumb but not plumb dumb.

Ircsum's picture

A rich Turd?

Turd sayeth "Additionally, I had about $5M in cash so...".......sure that wasn't $5K, sir? wink

¤'s picture

No. 4 ~ QE Markets: Welcome to Bizarro World, Where Down Is Up

Oct. 17, 2012, 11:58 a.m. EDT

QE’s real cost: dysfunctional markets

Commentary: Welcome to Bizarro World

By Michael Casey

NEW YORK (MarketWatch) — Central bankers appear to have relocated financial markets to Bizarro World, that comic-book planet where the laws of life and physics are the polar opposite of those on earth.

We saw it in the next-day reaction to Standard & Poor’s Rating Services’ unexpected two-notch downgrade of Spain’s debt rating after the close of trading last Wednesday.

In a normal world, investors would have run for the hills. But the following Thursday, they bid the country’s bonds higher, even though the S&P move fueled speculation Moody’s Investors Service would also announce a downgrade — which in its case would have seen Spain’s massive $2 trillion debt load saddled with a “junk” qualification. Much as Jerry Seinfeld explained to Elaine in a popular episode of his eponymous sitcom, it is just like Bizarro World, where “up is down, and down is up.”

There was a method to investors’ madness. Traders reasoned if Spanish Prime Minister Mariano Rajoy was worried about downgrades, he would stop procrastinating and ask for a politically unpopular bailout from the European Union. This in turn would trigger an influx of promised bond-buying by the European Central Bank.

A week later, Moody’s has decided to give the country a reprieve. The market’s initial reaction in Asian trading Wednesday was more orthodox: Spanish bonds rallied to their strongest level in six months, while the euro bounced to a one-month high. But look what happened in London hours: the rally stalled as a few analysts warned those more comfortably low yields could prompt Rajoy to recoil from seeking a bailout to avoid the tough policy conditions that would come with it. After all, he suggested in a Wall Street Journal interview last month Spain would only ask for help if its borrowing costs were too high to sustain.

All red-blooded believers in free markets should be disturbed by this circular logic....

http://www.marketwatch.com/story/qes-real-cost-dysfunctional-markets-201...

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Questions over China's Int'l Investment Position: Forex

http://www.tfmetalsreport.com/comment/225945#comment-225945

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Shibor vs. Libor: Better Protected against Fixing:PBOC

http://www.tfmetalsreport.com/comment/225947#comment-225947

Bollocks's picture

Goddamn fifth!

ya!

OrangeAlert's picture

$5M

Turd went over this before.  $5M = $5,000....$5MM = $5,000,000.  This should be all the discussion necessary on that topic for this thread.

Turd Ferguson's picture

Thank you, orange

MODERATOR

Yes, it seems like we go through this every time.

Roman numerals, as used today, are based on seven symbols:

Symbol Value
I 1
V 5
X 10
L 50
C 100
D 500
M 1,000
 
Response to: $5M
Bollocks's picture

@50Jim

You asked:

"Is there anyway we could color code or something like that for us as individuals.

blue              you are a stacker

red               you are a  buyer or seller on the comex

yellow        you are just a troll"

Good idea, but I'm a cross-dressing existentialist midget with severe acne and a penchant for really fat hookers.

What colour would that be? surprise

Roark's picture

@Bollocks

Pink with little purple polka dots. It looked good on the OompaLoompas. :)

Dr G's picture

First.

First.

Dr G's picture

@Turd, and Rome eventually

@Turd, and Rome eventually fell... :)

Rui's picture

Silver OI above 140K

It might have to come down to 130-135K for this correction to be over.

Chi-Town Deadhead's picture

Options

Turd,

I must have missed it but did the options service not take off or is that something that is still being worked on? I know this was mentioned a few months ago but I haven't seen anything after we sent you a personal note that we were interested.

Thanks for the updates. 

Always remember we will get by:

Jager06's picture

Stress!

I have been working on buying the ranch we have had our eye on. Lots of back and forth bickering....errr, negotiating between the bank who is controlling the shortsale of the property. Who knew the bank would treat the stack of physical as a cash equivalent and not want it as a down payment?

Yeah, no kidding. The bank will count the stack as cash equivalent and not require a down payment based on their presence as reserves toward our business operating expenses and debt management. This in turn frees up our debt to income ratio without actually paying anything off, producing more income or selling the stack. The presence of the metals balances out our lending equations and frees us of the need for a down payment on the property.

Im not sure if anyone else has had this experience, but I thought I would share.

Turd Ferguson's picture

On hold for now

MODERATOR

Upon further review, Andy and I both felt that we were currently too busy to give it the necessary time.

Maybe in Q1 2013.

Will keep you posted.

Response to: Options
Dyna mo hum's picture

Jager

Who said bankers were smart? The bank is holding a potential bad note on the ranch you want. You seem to be in the drivers seat so keep it that way. Most of the small bankers I have dealt with in the past could have written the book on being stupid.

¤'s picture

Empires and their half-life

Rome probably lasted wayyyy longer then anyone back then could even imagine or wanted it to.

I see the same thing in todays world with the U.S. in many different ways. The influence will be there for a very long time even if it's not as strong as it once was (or will still become even stronger). They control all the markets and major banking organizations (and the data) that matter. Not to mention a historic and OVERWHELMING military advantage that they seem to relish in their use of it.

The world we live in is essentially one big algo from D.C. for the most part. The buttons or policies they push in a certain direction dictate the flow of life to some extent if you think about it. We see it day in and day out in many ways and in many places globally.

Will the continued weakening of the USD necessarily mean that we'll suddenly collapse?

Eventually we will. 'Eventually' could still be a very long way off.

In the meantime, just hold on for the ride, live life and stack when you can do so and don't let the day to day market or your expectations drag you down.

None of this means I'm OK with it or that I don't care and wish it weren't different to some degree. However, I realize there is no way to erase the parts I think are wrong or make no logical or righteous sense at this time. There can be no avoidance of what is actually occurring vs. what we think should be occurring.

Life goes on and acceptance of some things makes life easier.

Smile and be happy with what you do have in life and do not get caught up in the day to day (minute by minute) market gyrations within the vast empire of U.S. influence. It might be on the wane but it's far from dead or even close to rolling over relative to any other countries current positioning or strength in all area's mentioned above. 

Give this some thought....

Rome at it's height...

roman_empire_map.png

The U.S. today...and still expanding

CR-map2-US-military-and-CIA-intervention

Dimeboy's picture

Only in Turdland. The rest of the world

uses Metric Prefixes

To help the SI units apply to a wide range of phenomena, the 19th General Conference on Weights and Measures in 1991 extended the list of metric prefixes so that it reaches from yotta- at 1024 (one septillion) to yocto- at 10-24 (one septillionth). Here are the metric prefixes, with their numerical equivalents stated in the American system for naming large numbers:

yotta- (Y-)

1024

1 septillion

zetta- (Z-)

1021

1 sextillion

exa- (E-)

1018

1 quintillion

peta- (P-)

1015

1 quadrillion

tera- (T-)

1012

1 trillion

giga- (G-)

109

1 billion

mega- (M-)

106

1 million

kilo- (k-)

103

1 thousand

hecto- (h-)

102

1 hundred

deka- (da-)**

10

1 ten

deci- (d-)

10-1

1 tenth

centi- (c-)

10-2

1 hundredth

milli- (m-)

10-3

1 thousandth

micro- (µ-)

10-6

1 millionth

nano- (n-)

10-9

1 billionth

pico- (p-)

10-12

1 trillionth

femto- (f-)

10-15

1 quadrillionth

atto- (a-)

10-18

1 quintillionth

zepto- (z-)

10-21

1 sextillionth

yocto- (y-)

10-24

1 septillionth

When in Rome, (I mean Turdville) do as the Romans (?) do....but

How do we count our actual Turd trillions using Roman Numerals?  MMMM? Surely when the calls come in the money, or Hyperinflation hits, we'll need new letters, maybe T.  I won the lottery! -$50TTs ! Woo hoo.

Dr G's picture

@dimeboy, it isn't just

@dimeboy, it isn't just Turdland. The financial world uses M and MM.

Jager06's picture

@ Dyna

This is not a small bank. They have stage coaches everywhere, in a manner of speaking.

Who the actual underwriter is remains to be seen though.

Bottom line is the little bit I had left after the canoe flipped was sufficient (and all they are aware of) for me to meet the banks reserve requirements.....which still just makes me wonder how long until I need to just trade them the shiny for the note outright.

Turd, I am waiting for the HEH move to try that.

Anyone have a link to what a specific size piece of productive property would have been worth in ounces historically? Acres per ounce? Or ounces per acre?

I also plan on double checking the fine print to make sure there is no deflation, hyperinflation, or war clause for revaluing the debt due to disturbances in the Farce.

Edit- For what its worth, the lender and the note holder on the short sale are the same bank. I wonder if the left hand knows what the right hand is doing?

zirpeon's picture

Say it ain't so...

David Selig, a tax accountant with experience representing folks embattled by the I.aRe.uS. sharing his impressions on desperation, dollar collapse, barter and the possibility of a "worse than the 1930's" confiscation:

  http://financialsurvivalnetwork.com/2012/10/29223/

Colonel Angus's picture

Basel accords

Did anyone ever answer the issue on the Basel accords? I wrote a pretty in depth paper about Basel 2 and its problems as relates to risk measures. I could probably explain the (messed up) rules about capital, etc if anyone is interested. It's just been a crazy couple of days, and I don't know if this has already been handled, been forgotten, or if it is still relevant. 

I don't know a great deal about Basel 3 yet. Sorry. (Uh, nobody really knows much about Basel 3, those damn bankers.)

vonburpenstein's picture

I Use 'K'.....

As in, "I've got 5K to invest"......where'd I come up with this ?

SRSrocco's picture

REPLY @ DR G....

 DR G wrote:

King World News is the biggest crapfest "media" source that we've seen in a while. Everybody interviewed there is either a blatant liar or delusional. This is evidenced by the way the "information" is presented. No other side to the story presented. No downside risk ever acknowledged. Nobody expects the KWN people to be perfect--except for the fact that they have set themselves up to be perfect.

Just pump, pump, pump. A complete joke.

Turd, on the other hand, acknowledges downside risk. He acknowledges when mistakes are made. That is how it should be done.

--------------------------

Dr G...  I totally disagree with your opinion of 'EVERYBODY" interviewed on KWN as being a blatant liar or delusional.  Of course, you are free to believe what you want and express it here on Turd's Blog, but I think you have made a SERIOUS OVERSTATEMENT concerning all the folks interviewed on KWN.

I too believe there is a great deal of BULLISH ANALYSIS coming from KWN, but what is wrong with that.  I don't think you really understand just how tight the wholesale silver and gold market are presently. 

Bix Weir just wrote this about the supposed NEW SILVER RIGGER.

According to the OCC, Citibank has increased their exposure to silver derivatives MASSIVELY over the first two quarters of 2012. Here’s the facts on table 9 (PREC METALS is mainly Silver):

  • 1/1/2012 $44 million
  • 3/31/2012 $5.7 Billion
  • 6/30/2012 $9.5 Billion

http://www.occ.gov/topics/capital-markets/financial-markets/trading/derivatives/derivatives-quarterly-report.html

At $35/oz the $9.5B represents 270M ounces of silver derivatives added in the first 2 quarters of 2012.

Now, I am not a big fan of Bix Weir due to some of his lousy analysis when comes to future gold and oil supply, but these figures that he has stated in his article are based on actual figures coming from the OCC. 

Furthermore, Doc at SilverDoctors had a recent large silver order at $10 million.  He couldn't access enough silver from his typical dealers so they called up Scotia Bank in Canada to see if they would work with them on this big order.  SilverDoctors big order client was from Canada.

The folks at Scotia Bank told SilverDoctors that they normally don't deal with customers unless they buy a minimum amount per year. However, the folks at Scotia Bank basically told them that if they sold them that amount of silver, it would move the price of silver up at least a $1 dollar.  At the time, this would have been about 330,000 oz.

The Reps at Scotia Bank ended the conversation by asking SilverDoctors, "Why on earth does your client want to buy that much silver anyhow??  Why don't you advise them to buy something else with their $10 million."

This is why I believe the LONDON TRADER's new posting about the huge shortage of silver in the wholesale market.  Furthermore, when I spoke to Harvey Organ earlier this year, he told me not to be concerned at all on the RETAIL INVESTMENT DEMAND, that had fallen off in the lower gold and silver eagle sales.  He stated that the wholesale market was extremely tight.

Dr. G...  I believe TECHNICAL ANALYSIS is dead.  Folks like Clive Maund help advertise the Bullion Banks Painted Charts so investors get hypnotized by the short term movements and fail to comprehend just how SEVERE THE WHOLESALE GOLD & SILVER MARKET have become.

Silver should be trading above $100 already.  Technical Analysis is being used today to keep people from UNDERSTANDING THIS FACT.

Jager06's picture

@ Vonburpenstein

K=Kilo=1000

5K= A short walk to the next objective.

100K= Long Range Land Navigation.

Double Bogey's picture

Quote

              If history repeats itself, and the unexpected always happens, how incapable must Man be of learning from experience.

― George Bernard Shaw

BB's picture

@ Dyna:

ivars's picture

@Colonel Angus-Basel II capital accounting

Please explain. No one has come with any proven idea/rules/risks models  how e.g. gold was accounted in BANK Tier 1 capital ratio as risk weighted asset  according to Basel II. It would be worth to know where the Banks are coming from, their viewpoint.

The8thHabit's picture

Idea

BLS should start using "M" instead of "K" for NFP reports. Imagine a headline: $85M jobs created in the month of October! Liesman would have orgasm on live TV!

beardeus's picture

@ SRSrocco

I read KWN everyday and honestly believe the "London Trader" and someone else, I can't remember his name right now, to be the most accurate.

Was this conversation about the $10 million dollar order from the Doc a public conversation?

If so I'd appreciate a link if you're free to provide one.

Thanks.

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