Guest Post: "Smelly Smoke Signals" by NN-L

Our pal, Ned, has cranked out a very interesting piece regarding the recent suspension, by the LBMA, of the publication of silver forward rates (SIFO). In an effort to give this article as wide of distribution as possible, it is reprinted below.

The most interesting and compelling part of all this is the timing. The LBMA decided to suspend SIFO reporting at the close of business on Friday, November 2. At that exact same moment, some newly-created measures of backwardation such as Sandeep Jaitly's "Basis/Co-Basis" were literally screaming of extreme backwardation and physical tightness. (More details here: http://www.feketeresearch.com/index2.php) The question is: Is there a direct connection here or is this all just a strange coincidence?...and I think you know how I feel about coincidences in the metals markets.

So, what do we know? Well...

  • Massive, recent physical purchases by Sprott, the Royal Canadian Mint et al.
  • Huge drawdowns of silver from SLV and ZKB.
  • Startling day-to-day turnover at bullion bank vaults
  • Highest total silver open interest on the Comex since October 2010.
  • I'll even add this: Tremendous recent price strength in face of blatant capping and manipulation.

What does it all mean? Maybe nothing. Maybe price will continue to languish while we patiently wait for the price to catch up with the fundamentals. Maybe, though, this is the beginning. Maybe we are finally about to see the incredible short squeeze and signal failure which we've all been expecting and was narrowly averted in May of 2011. Maybe we are about to witness something explosive and historic.

Maybe. We'll see. Just BTFD.

TF

(Will edit and load as a scribd in a few minutes.)

128 Comments

Mr. Fix's picture

Got it!...........(FIRST!!!)

Eat that Blythe!kiss

Thank you Turd for all you do.yes

You said:

"Maybe we are about to witness something explosive and historic."surprise

Yep! wink

Being here is like having a front row seat to the main event. devil

fats's picture

laughing all the way

HEH HEH HEH

Mudsharkbytes's picture

Me

Third.

achmachat's picture

thank you again!

smoke signals... and fire beacons!

what better place to see those than from here... the watchtower!

murphy's picture

JS Kim

Check out the second video from 11/29/12. Following his rant against the banksters he is almost giddy with what happened with miners by days end yesterday.

Looking good Billy Ray

Feeling good Lewis

http://www.smartknowledgeu.com/media.php

vonburpenstein's picture

Hey, I'm in the "UP A BUCK" Club...

Hat tip me if you bought yesterday and can now say, "I'm in the Up a Buck Club"...!

Oh, and top 10 too!

VB

ps. I know it's gay

القراع عصفور's picture

Tear The Roof Off The Sucker

ratioarbitrage's picture

Turd ... and Ned... thank you

I have been itching for nearly a month to see that explanation, which is almost exactly as I imagined it to be. No doubt there is a lot more to be known other than that silver is in short supply and backwardation is rampant - the names and faces of gibbering executives, the whisky knocked back after late meetings and the profane orders barked to traders would all be so gratifying to behold but no doubt these will not emerge, not now and perhaps not ever. Such details are in any case of no practical use to us, who by this incredible and oft-underestimated stroke of good fortune still have the opportunity with knowledge of the essential situation and with relative ease to purchase both precious metals at such ridiculously low prices and hold them out of harm's way.

ardentargent's picture

Feed the Turd

FEED THE TURD!

Please, folks.  This site is invaluable.

Turd and the rest of you gave me the confidence to buy USLV yesterday morning at $35.10. 

With it at $38.77 as I write, you can imagine I'm smiling at at 10.5% gain in 24 hours.

FEED THE TURD!

Cleburne61's picture

Why You Should've BTFD: 101

The class is online, it's quick, and it's free!  Best of all, you don't have to even register!

Just log on to your computer.  Done that?  Great!

Then bring up www.24hgold.com or www.netdania.com or whatever reliable site you can find, to bring up their charts(why anyone still checks Kitco's less than worthless charts I'll never know.  And btw, if I see one more ludicrous post saying, "OMG, silver just dropped $12 in one tick!  Is dis fo realz!  Holy shiz!"....or, "OMFG, the lease rate is negative 26%, a complete collapse, RAID?!"  then I'll ask the admins to kindly publish your ISP address, so we can all come visit your house as a TF community and stage an intervention.  Really, life is too short to waste on Kitco.  Stop doing it. Remember, the first step to solving a problem, is admitting you have one.  Don't let them lure you back with more Dani Cambone footage....just....walk....away.)

Next, bring up yesterday's charts for silver and gold.  Specifically look at 8 am ticks through 9:30 am.  Done that?  Super!  You're almost done!

Now, look at today's charts for silver and gold.  Looking at them?  Special!

Now finally, ask yourself, "are today's charts higher or lower than yesterday's"?  Then answer aloud.

Lesson completed!  Give yourself a pat on the back and repeat after me, "I "state your name" will no longer whine and gripe when someone gives me an unexpected sale!  I will no longer tell myself to wait 'just a little longer' to grow enough spine to buy the most undervalued asset on planet earth for even less money than it was moments ago.  Rather, I will do so....right! now!"

Remember your Alma Mater: "All Hail the Great and Powerful Turd", and walk toward your future with confidence and pride.

S Roche's picture

SIFO Cessation

The rest of the "key extract from the LBMA announcement", with the bit omitted by Ned highlighted:

 "The reason for the withdrawal of the dataset was that unlike GOFO these rates were indicative rates only and therefore not dealable rates between forward Market Makers. In addition, since January 2011, the LBMA forward Market Makers have jointly contributed essentially the same data (but covering an extended range of maturities – from spot to 3 years) to the LBMA’s daily forward curve for silver. This forward curve can be obtained from a variety of data vendors (Thomson Reuters, Bloomberg and others)."

http://www.lbma.org.uk/pages/index.cfm?page_id=46&title=current_statistics

and here are the data vendors listed: http://www.lme.com/market-data/data_vendors.asp. Not difficult to contact them directly.

Sorry, sounds like a beat-up but I will be happy to be proven wrong.

(No hat-tips please, by request.)

ratioarbitrage's picture

@ S Roche - available as paid data

I think the difference is significant. Clearly they are not trying to conceal the structure of the market from the entire world. Nevertheless it would be useful to know to what extent the limitation of the data almost entirely to those "within the system" makes a difference. No-one in the silver blogosphere has reported that backwardation spike until today. The number of people who have access to those screens *and who are likely to make a big fuss about it that might go viral* is clearly limited.

Even if "Daily Telegraph" or "Der Spiegel" picked it up, I am not sure if the general public would get excited. Futures are too arcane and require the TV to be off to understand them.

Cleburne61's picture

@ S Roche

No worries friend, none were forthcoming....

Turd Ferguson's picture

My favorite email from yesterday

MODERATOR

Lately, every day that there's a downtick in silver, I get irate emails from people. I find this curious, as if there's an effort to persuade me to go away. Oh well, sorry. Ain't going nowhere!

From a guy named "Ron":

1:16 PM (21 hours ago)

Like I said last time your forecasting is less reliable than tossing a coin,
You are dangerous to silver investors.

Bobbejaan's picture

TV Program ..... Preppers UK - Surviving Armageddon

Quote:
We’re ready... for the end of the world
Meet the Brits who have everything they need to survive when – not if – the planet faces meltdown

....

“I’m doing all this to protect my family.

If things kicked off, I would do anything possible to avoid a confrontation. But would I use lethal force to defend my family? Every day of the week – and twice on Sundays.”


http://www.thesun.co.uk/sol/homepage/tvmagazine/tvmagazinefeatures/4658816/Preppers-UK-Surviving-Armageddon-meet-the-Brits-who-are-ready-for-the-end-of-the-world.html

&

http://natgeotv.com/uk/preppers-uk-surviving-armageddon/about

I thought this program might be of interest to both us UK Nutters ... AND our Non-UK brethren who might like to see "How the other (limey) half lives" .... It's a slightly less cheesy one-off-special version of the USA "Doomsday Preppers" series.

I only caught the tail end of it last night, but it's being repeated on the National Geographic channel as follows (presumed to be UK/GMT timings) :-
Thursday 29 November at 11:00PM - National Geographic Channel
Friday 30 November at 8:00PM - National Geographic Channel
Saturday 1 December at 12:00AM - National Geographic Channel

ALTERNATIVELY, for those who may be unable to watch or see it via NatGeo .... Here is another time-shifting source/link for the program devil :-
http://www.rlsbb.com/national-geographic-preppers-uk-surviving-armageddon-720p-hdtv-x264-knifesharp/

Indenture's picture

Buying Oil

Someone mentioned last post about exchanging gold for personal items like a barter system. I was wondering how oil would be purchased. Not gasoline but actual petrolem before refining.

ratioarbitrage's picture

Apologies to the Insignificant Dot

I apologise to the single 4 hourly dot which was created by yesterday's smackdown. By the magic of the markets it has been transformed into the left-hand leg of the most beautiful, elegant and slender, almost vertical ellipse. In the markets, nothing is meaningless. Mea culpa.

S Roche's picture

re Ron

I follow a few metals traders on Twitter...one of them had a short and sweet non-trading Tweet, just "Thanks for your input, Ron". Looks like Ron had a bad day all-round, and it was everyone else's fault.

@Cle I gave you a h/t for that one. 

Tabberto's picture

SRoche

I fear you miss the point somewhat - sure the information is available albeit in a different format now, but they had to stop publishing that information when they did because even their 'indicative' mid-price would have shown a bright red number on Nov 5th.  An 'end of day number' sounds like the worst elements of LIBOR all over again anyway, compounded by the fact that the new end of day curve when backdated to the timeframe discussed shows nothing at all...conveniently.  The fact that you can now get hold of an 'end of day' version of the original doesn't mean something very interesting didn't happen - imo that is shutting the door after purposefully letting the horse out!

Edit: Ultimately this would appear to be an issue of whether one believes in coincidences/the tooth fairy!

enflow's picture

StackaSarus Say...

StackaSarus Say...

.........When It Comes To The Location of Your Stack...

.........................................................Close Mouth Catch No Fly...

cashbash's picture

Ned's chart

Can anyone explain what the chart is showing? I'm not familiar with basis or co-basis.

Bobbejaan's picture

Another TV Program ....

.... Which may be of interest :-

Quote:
What's the Earth Worth?
Episodes = 1 x 120' for History Channel
Executive Producer = Ross Harper & Ed Crick
Producer Director = Dominic Gallagher / Louise Say

From timber to cattle and from water to oil to gold, we'll take the ultimate inventory of all the natural resources that the Earth has to offer to uncover the absolute value of the planet. With informative CGI sequences, this Special will calculate the quantity of each resource - how much we've used through human history and how much is left - and put a price tag on all commodities in their raw state, before man has added value through design or manufacture. In the process we'll get a macro view of history by examining how prices and demand for certain resources have changed over time as new technologies make new materials valuable while rendering others useless.

.

BTW ........ Silver features prominently in the Precious Metals sector (NOT!!) laugh  broken heart

Tabberto's picture

This all reminds

me of when the CFTC suddenly allowed 'swap' dealers to get round their usual position limit reporting requirements - while during their own investigation - just when they most needed it!

ratioarbitrage's picture

@ Cashbash - what the chart shows

It is like two feet, toes downward, between two feet, toes upward, poking out from the blankets at the foot of the bed. It is indirect, but still conclusive.

They have run out of silver. They stopped posting the SIFO numbers to the general public because those numbers give an indirect indication of how much silver is truly available and how confident people are of getting it. Furthermore there is an internet community of thousands watching them closely and filling the blogosphere with comment. Too much exposure for those numbers and awareness of the situation might reach unacceptable levels.

tobydaniel's picture

@Turd

Its because you are dangerous! To the cartel that is:)

Bobbejaan's picture

And to complete the Hat Trick ....

S Roche's picture

re Ned's Chart

From Sandeep Jaitly's site: 

The idea of a spread has been transferred to the concept of carry, in particular with regards to gold. There is no such a thing as the carry for gold: the carry itself is composed of a spread the lower bound of which is referred to as the ‘co-basis’ and the upper bound the ‘basis’. Simplistically, the co-basis and basis are analogies in the space of carry to the bid and offer in the space of prices.

We clear now?

Edit: That was tongue-in-cheek, btw. I am guessing this is a lot simpler than this explanation would suggest.

S Roche's picture

@Tabb

Maybe, we'll see.

Pining 4 the Fjords's picture

Inside the halls of power

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