The Audacity of MOPE

With the metals down again today, I thought it was time to spread some information, not misinformation or disinformation.

The common MOPE regarding the rising U.S. stock market and potential Fed "tapering" is that finally, after four years of fits and starts, the U.S. economy is recovering and growing based on the improving economic statistics and burgeoning housing recovery. So is that really the case?

Yesterday, we discussed the fallacies of the latest BLSBS data and, as any regular reader of ZeroHedge knows, over the past 90 days almost every key metric of economic activity has "disappointed". Just today we had:

And, again, that's just today. The meme is that everything is finally getting better. Really? Really?? Hmmm. Let's go back to that housing starts thingy. As discussed yesterday, there's a certain LAW called The Law of Supply and Demand. For those who failed Econ 101, think of it in terms of a chart with a vertical axis and a horizontal axis. In it's most basic form, it looks like this:

What this is showing you is that price exists at the intersection of supply and demand. If you increase the supply or decrease the demand of an item, the price equilibrium is reset lower and price falls. Conversely, decreasing supply or increasing demand has the impact of raising prices. (See, it's not complicated. Maybe if you had spent more time studying and less time at the bar, you might have had a higher GPA!)

So, what does this mean for our supposedly robust housing recovery? While admitting that this is not the be-all-end-all, these four charts should be enough to give you pause and prompt you to consider whether the mainstream media is giving you the facts or just a heaping pile of MOPE.

If you're going to build a house, an apartment complex or an office building, you need to acquire a number of things. Most of the process is summarized quite neatly by Thornton Mellon in the clip below:

For the purposes of this discussion, however, let's keep it simple. For our house, we'll need lots of lumber for construction, copper for wiring and plumbing, aluminum for all the HVAC stuff and steel for the support columns and crossbeams. Again, price is a function of supply and demand so one might expect that a "robust" housing sector would be causing increased demand for these raw materials. One might expect that but one would be wrong.

Let's see, how's that lumber market doing?

And I think we all know that ole DrC hasn't been doing too well, either...

Uh-oh. Zero for two. Maybe aluminum and steel are faring better? Nope.

Ahh, but what do I know. I'm just a dope with a MacBook (that's for Turdle wink). But it sure looks to me that there isn't much of a housing recovery going on. And if there isn't a housing recovery, then the U.S. economy isn't getting any better. And if the U.S. economy isn't getting any better, then tax revenues won't be increasing. And if tax revenues won't be increasing, then the federal deficit won't be falling. And if the deficit isn't falling, then the Fed will have to keep propping up the bond market. And if the Fed has to continue propping up the bond market, the idea of them "tapering" is simple nonsense. And if tapering is nonsense, explain to me why the metals are once again falling this week.

Well, the past three days, it's all started in London. I think I recall that Ranting Andy has a term for this action but I can't remember what it is. What I do know is that when the selling starts at 2:00 am New York time and carries on until about 7:00 am New York time, the selling is originating in London. And who's in London? Just the bullion banks, that's all, doing their dirty deeds to slant the market in the thin, pre-Comex trading, trying to set the tone for the spec momo HFT money to come charging in at the 8:20 EDT Comex open. It's not complicated and it's all right here for everyone to see:

For today, at least, their efforts have been thwarted by all the crappy economic news and we've got a bit of a bounce on our hands. (That hat is still looking tasty, though.) Maybe, just maybe, we're getting a double bottom painted onto the charts? We'll see. Time will tell.

One last thing to discuss today. You know, back in the day, over two years ago when silver was soaring, there was a lot of talk about Comex defaults and commercial signal failures. I have to admit being sucked in a bit by this back then. Obviously, it didn't happen and I've since been very wary of this kind of talk. Again, if we've learned anything these past three years or so its that the primary power held by TPTB is the power to postpone the inevitable. That said, the Comex gold inventory numbers are really beginning to capture my attention on a daily basis.

We discussed this a bit yesterday but it's worth going over again today. After JPM reclassified another 160,000 ounces of gold from Registered (able to be used to for contract delivery) to Eligible (not ready for delivery), the TOTAL Comex registered inventory fell again yesterday and it now stands at just 1,676,000 troy ounces or about 52 metric tonnes.

Recall that every Comex gold contract is for 100 ounces. This means that the Comex registered vaults only have enough gold on hand to physically settle just 16,760 contracts. Big deal, you say. So what, you mutter. And you may be right. Most likely, The Shell Game & Charade will continue through the clever reclassification of more than enough rehypothecated gold from Eligible to Registered. OK, maybe. But chew on this for a minute.

The first "delivery" month for gold this year was February. That month, the total number of contracts standing for delivery totaled more than 13,000. This was somewhat odd in that that was nearly more than August, October and December of 2012 combined. That got my attention. Then, when April delivery rolled around, just 6,600 initially stood for delivery. Crisis passed, right? February was just a one-off. An outlier. Uhhh, nope. Over the course of the month, money continued to flow into the April contract for immediate delivery. These buyers were ponying up 100% margin and "jumping the queue" to some extent in that they were seemingly unwilling to wait for June. In the end, when it was all said and done, the Comex ended up delivering to 11,632 contracts in April.

And now here we come toward June. First Notice Day for the June contract is two weeks from tomorrow, the 31st. Again, on that day, the June13 stops trading and all contract holders must put up 100% margin in order to indicate their intent to take delivery. As of yesterday, the total open interest in the June contract was still 200,477. No doubt the vast majority of these are paper traders who, as we approach the end of this month, will sell or cover and roll into August. However, some will hold, intent upon taking delivery. (Maybe if you're Shanghai and you're currently completely cleaned out of gold in your vaults, you might take delivery of a few contracts? Hey, a guy can hope, can't he?) Of course, the question is, how many?

Again, as of this moment, The Comex only has enough Registered gold to settle 16,760 contracts. For some perspective, when we were 11 days out from FND for the April contract, the OI for April was 196,135. When we were 11 days out for the Feb13, the OI was 200,441. So, having the current June OI stand at 200,477 tells us very little. However, we must watch this very closely in the days ahead. Let's keep an eye on Comex vault changes and compare that to the daily drawdown of June open interest.

OK, that's all for today. Once again I plead with you to keep the faith and stand defiant. The laws of supply and demand are currently impacting paper metal which, in turn, impact the price of physical metal, too. This cannot and will not last forever. Hang in there.

TF

 

275 Comments

Roger Godberd's picture

Nice one Cyril

Mope alright.

I bin moping and mooching about trying to get a few more shekels to raise that stack.

Good stuff Turd, think Armstrong has a point as well. With all the crazies in power depressing interest rates & screwing pensioners/savers etc., people are dumping all investments in search of yield and some sort of home for their wealth, that means the US stockmarket and the USD. Dollar up strongly means metals down. This will continue until we have some sort of scare about the USD, or another Black Swan (such as a Comex default please!). With all currencies and your bank accounts under attack it is King Dollar time again, all those printed Greenbacks being absorbed abroad & therefore limited inflation in the good ole US of A. However all cycles turn, eventually.

I think we have more pain to come in the pgms, shame I am out of reddies to stack, just when I need them. What will break the DAM?

In the meantime attending this event tonight to memorise the bomber boys...

http://www.perfectpint.co.uk/beer-festival/1105/Dambusters-Inn-Beer-Festival-Weekend

Dambusters raid: Retrace the daring journey

http://www.bbc.co.uk/news/uk-22544567

achmachat's picture

So much going on...

... in such little time!

and of course, Turd, we shall stand defiant!

for the Trekkies out there: the Defiant!

SRSrocco's picture

MORE SHORTAGES OF GOLD IN ASIA

Gold Bar Premiums Hit Record in Asia on Supply Constraints

SINGAPORE, May 16 (Reuters) – Premiums for gold bars rallied to all-time highs in Hong Kong and Singapore on Thursday after bullion’s steepest drop since its April sell-off fuelled another round of buying, constricting supply.

Gold bars in Hong Kong fetched premiums of up to $5 an ounce over spot London prices, driven by tight supply and strong demand from China, the world’s second-largest consumer after India. Premiums stood at $3 an ounce last week.

http://srsroccoreport.com/gold-bar-premiums-hit-record-in-asia-on-supply-constraints/gold-bar-premiums-hit-record-in-asia-on-supply-constraints/

Furthermore, I have to agree with wholeheartedly with TURDS newest post.  The only thing holding up the economy is BS and QE.

Turd Ferguson's picture

Swineflogger asked me to post this for him

MODERATOR

49Pan's picture

Fourth

Again, thanks Turd for your insights

And yes everything else especially your humor

SilverSurfers's picture

faster

action hero, slides in for a single, top ten turder, two day hitting string. yeah baby!!!

so, it appears that 22.06 was hit again, in london last night. That is two days in a row it appears that the bull had died, tomorrow is determinative, as 3 in a row, and youre out, but huge double bottom in the works, for a stick save redo, though tomorrow is confirmation for reentry back into bull mode, and, then officially putting the nordic banner on the wall, retiring no 22 jersey, and taking the gold cup by the arctic goalie.

So, huge double bottom may be in, with one day left to keep the bull officially alive, tomorrow is key from this perceptive, could be a killer up move, and the bounce off 22 silver seems like a very good sign. just saying. just hoping. 

Turd Ferguson's picture

You're welcome

MODERATOR

And thank you.

Response to: Fourth
Howard Roark's picture

Top ten?

Ten guys fighting?
No a lot more to come, for sure.
Salut,
HR

lottiedah's picture

Jim Rogers, Gold Sell off

turkeybucket's picture

Commodity prices

So couldn't one also interpret the other commodities being down as proof there is no inflation to worry about? I know they are printing money like crazy, but they seem to have a good handle on preventing it from sloshing around anywhere but the stock market. It almost seems like they have total control of every market and that gold and silver may not see there day until the physical disappears (and who really knows when that will occur, could be 10 more years for all I know).  ugh!

Fulgurite's picture

Miners?

I was just thinking: could this whole drive down of the gold price also have anything to do by trying to push junior miners into bankruptcy?  Miners (HUI/XAU) appear to be hit even harder by the recent drops.

Is someone (perhaps a big miner?) trying to corner the supply side of gold/precious metals and has decided to play along with 'the Powers that Be'?

Howard Roark's picture

@that´s interesting

No doubt!

But accordingly to MOPE, nothing to see here. 

"Keep Calm and Slave on" as some good silver coins project said.

HR

MrMorden's picture

The New Paradigm

The old Golden Rule was:  "He who has the gold, makes the rules."

The coming Golden Rule will be:  "He who holds the gold, makes the rules."

Standby for paradigm shift.

silverwood's picture

Rodney's economics class

What was the movie that this video clip comes from? I am thinking I am up for watching a good comedy to match the laughter that I get from what is suppose to be markets.

Strongsidejedi's picture

@Fulgerite - that would be China?

China has "investments" into Canadian and Australian gold mines.

Strongsidejedi's picture

about Iranian gold for oil

is that supposed to be "breaking news" for zerohedge?

The US has been in Afghanistan and Iraq for like 11 years now???

duh...

foscotanner's picture

@ Turd - JWillie view

@ Turd

I believe that Jim Willie wrote some time back that the games in the paper markets would continue until all easy to steal gold was gone.

He said that the ETF's and Crimex would be last.

You are doing a great job at keeping score on how they are doing at draining these vehicles.

There remains an awful lot of gold within them though........

Given the blatant nature of the manipulation and lies, you have to wonder if they will simply stop recording details of gold drained from the ETF and simply keep draining it with no records until they no longer can......

Based on current rate of depletion, that means the paper games could continue into 2014........

opalboy's picture

Back to School

Sam Kinnison is perfect in it.

SilverSurfers's picture

Heavy

so if the manipulator is backed by printer press under an alleged criminal conspiracy and can slam the price anytime, how possibly can J Rogers predict anything, unless a mind reader in the divine 4th order.  Just gots no clue. Just Saying.

William S Kaye of Pacific Alliance Group just smoked them at KWNs

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/5/14_William_Kaye.html

FYI Barns sent short polite email.

Turd is great for COT and TA analysis, and commentary related. Nice Work!!!

Mickey's picture

so much is a fraud now

including how our govt is going to reduce debt over the next 5 months. When the economy is contracting.

Ands how's the cut back in QE going to affect this all?

Beastly Stack's picture

From Last Night

Does the Buck stop here? Those were some pretty lousy #'s these past 2 sessions.

http://tradermartinstake.blogspot.com/2013/05/todays-tidbit.html

Turd the MOPE will never end! If I watch the TV, it only makes me sick!

Urban Roman's picture

Audacity, MOPE

I love it! 

Turd, you need to update the Coughlan/Maguire figures in the sidebar ad. They're actually doing better than shown right now..

lottiedah's picture

Gold Sell Off, Peter Schiff

chappyhp's picture

@Turd, technical analysis in an untechnical world

Turd,

I wholeheartily agree about the MOPE and lack of said housing recovery.  However, I take issue with the prices of lumber, aluminum as economic indicators.  Every market is clearly manipulated so why should declining lumber prices mean anything. 

By the same logic, the declining price of gold/silver indicates everything is rosy and physical demand is low while higher oil prices indicate high demand which is also not true.

Love the site and insights here and agree with conclusions  but think the TA here is irrational in the new normal.

alan2102's picture

halfheartedhamster

from the last thread:

Halfheartedhamster: "There is a large contingent here that are simply off their fucking rockers. .... There is something about precious metals that attracts these disturbed people."

True, that. How else could it be? This sector is the despised and marginalized sector. We here in the West -- especially in the U.S. -- are in the belly of the beast. This is DOLLAR country, PAPER country. Dollars and paper are the only game in town. If you advocate otherwise, you are in the deviant minority. By the lights of the mainstream, you HAVE to be off your rocker to be in this.  

It is not like this everywhere.  In traditional cultures, like in India, physical gold has a revered place going way way back, and choosing to hold your wealth in such form is pretty much normal.  Banks and paper currencies are held in deep suspicion if not outright distrust.  The Islamic world (one billion strong now) has its gold dinars and silver dirhams, going back 1300 years, and they plan to restore the PMs to a central monetary role when it becomes possible to do so. The Chinese have a LONG metal-based money tradition (silver) lasting up to the 1930s; they were forced out of it, under duress, and they are no doubt still angry about that. (And they have LONG memories, you might note.)  And surely you are aware of China's recent retail gold buying-spree, amounting to many hundreds of tons, going into Chinese households -- encouraged by the PRC (government)!  Russia and China both have  metal  backing of currency in the works; in due course, in due course.  

But HERE, paper rules, and anyone who questions it is indeed a little "off their rocker", slightly "disturbed".  And it is not surprising that the off-rockerness overflows into other areas, such as weird conspiriology, etc.

s1lverbullet's picture

Random Comment: Fiat Currencies

Random thought of the day...: It is increasingly amazing to me how little the general public understands about fiat currencies and the nature thereof.  Being a private contractor, I have had the opportunity to work with people from all walks of life.  I have had conversations with many different people about economics, bonds, stocks, commodities, currencies, you name it, and it still just absolutely baffles me how increasingly ignorant the general population is about sound money.  Only one person I have come across actually gets it when it comes to fiat currencies.  Is the majority of the citizenry really that tuned out and uninformed?  We are really in for some hurt over the next several decades if that is the case. 

hsofiak's picture

@Miners?

My thought is that the price of miners is being driven down in order to loosen the shares from the hands of "retail" holders and mutual fund managers. 

What fund manager looking for a bonus would hold the shares of miners which have be in a long term funk?  How would clients look upon the manager?

Check out Blackrock's holdings of  Kinross and New Gold.  A while back their holdings were + 10%.  My conclusions is that the "Blackrocks" are picking up the shares cheap.

As others have alluded, and I think goes with the game plan, is that the paper price will continually fall until it reaches zero.  That is if there are players stupid enough to take the other side of the trade.  Alternatively, members of the EE will have both sides of the trade as the paper price gets driven as low as possible.

Physical goes east.  Gold in the ground stays in the west in the hands of the EE.

Turd Ferguson's picture

Welcome to the site but

MODERATOR

There is nothing in the charts posted that is Technical Analysis. All I showed was the price trends, displayed graphically.

TA would mean that I drew lines and curves all over the charts to imply some sort of price expectation. 

hsofiak's picture

@Random Comment: Fiat Currencies

Bang on.  Blank stares all around.  Ever notice that the number of pages in economic texts devoted to money are very few?  There is a reason.

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