On The Lookout, Part II

439
Wed, Jun 27, 2012 - 10:31am

When you eat, breathe and sleep your work, sometimes inspiration strikes you at the most odd of hours. Last night, I'm tossing and turning, trying to relax when the following pattern came to mind.

First, let's review a few things to insure that we are all on the same page. In Comex silver futures, there are five "delivery" months. These are the contracts that are the most actively traded because they are the contracts with the most volume and open interest (liquidity). These five contracts are considered "delivery" contracts because they are the ones through which holders most often take actual physical delivery of metal. Yes, the other months do see some delivery action but it is the months of March, May, July, September and December where the bulk of the physical settlement takes place.

If one desires to take delivery through The Comex, one must first buy a futures contract. Let's say you wanted your 5000 ounces of silver in March so you purchase a March12 contract. When you buy the contract, you only have to put up part of the money, this is your initial margin requirement. However, once the contract expires, The Comex will ask you to put up all of the money needed to purchase the silver. The date where "100% margin" is required is known as First Notice Day. It's a sort of put-up-or-shut-up type of thing. By late February, trading in the March contract will have ceased so The Comex wants you out of the contract. Only those with intent to take delivery are allowed to continue to hold it and all of them must have 100% of the cost of delivery in their respective brokerage accounts by First Notice Day.

It is on First Notice Day that we get some idea of how many contracts are standing for delivery. Recently, this number has been coming in anywhere between 2,000 and 4,000 contracts, or roughly 10,000,000 to 20,000,000 ounces of silver. OK, are you with me so far??

Here's the rather alarming trend that hit me late last night:

For the December11 contract, first notice day was November 30, 2011. Closing price that day of the March12 contract was 32.87. BY 12/29/11, the MARCH12 TRADED AS LOW AS 26.50. DOWN 19.38%.

For the March12 contract, first notice day was February 29, 2012. Closing price that day of the May12 contract was 34.70. (It was even higher at 37.26 on 2/28.) BY 3/22/12, THE MAY12 TRADED AS LOW AS 31.18. DOWN 16.32%.

For the May12 contract, first notice day was April 30, 2012. Closing price that day of the July12 contract was 31.01. BY 5/16/12, THE JULY12 TRADED AS LOW AS 26.73. DOWN 13.8%.

Graphically, it looks like this:

Uh-oh. Maybe now would be an excellent time to go back and read this post from last Saturday:

https://www.tfmetalsreport.com/blog/3940/lookout

As you know, yesterday was option expiration and the final trading day for the July12 contract. The action now shifts to the September12 contract. First Notice Day for the July12 contract is this Friday, the 29th. If things get a little dicey next week and into mid-July, don't say you weren't warned. That said, I firmly believe everything I put into the Saturday post referenced above. IF a washout through $26 materializes, please do not panic. Recognize it for what it is: The Closing Acts of The Silver Cartel. Once they are net flat or even net long, things are going to get very exciting around here.

Be patient. Think clearly. Be rational. Prepare accordingly.

TF

p.s. My intention is to update TurdTalksMetals with a new podcast, every day by 4:00 EDT. Today, there will likely be a bit of a delay, however. Thanks for your patience and thanks to all who are supporting the new venture.

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  439 Comments

I Run Bartertown
Jun 28, 2012 - 12:12pm

Number47

I've tried to explain this before, but maybe another approach can be to ask you why the proud and 'out' Socialists (most call themselves liberals) here support him so strongly? Maybe you should explain to them that he's a fascist and see how far you get?

Mussolini would not tolerate the state of affairs here, on many levels...

GeraldBostock The Green Manalishi
Jun 28, 2012 - 12:14pm

Stop

To Green Manalishi:

Thanks for posting Stop. I just saw Al Kooper in Boston in May. It was billed as a Tribute to Mike Bloomfield. They played lots from Super Session including Stop and for the first time in history a live performance of His Holy Modal Majesty. Great concert. (Sorry to be off-topic)

waxybilldupp Adman
Jun 28, 2012 - 12:15pm

@Adman re: Wealth Preservation

Adman, I sympathize with your view of your stack when you look at it from a short time horizon. But ask yourself, "Why did I buy PMs back in 2007?" If it was because, as some have suggested, owning PMs is important insurance against all the potential economic, political and/or social risks, then your notion to sell now is null and void. All of those risks have increased, perhaps, exponentially. If your motivation was the expectation of a quick FRN return, then, like so many others in so many ways, you made a bad bet. It's just that simple. Cut your losses and try something else with your remaining FRNs.

I have been buying PMs for at least 10 years. More early on then lately, but I still stack when I get the urge. Why? Because 10 years ago, I thought the risks mentioned above were already self-evident and PMs were compellingly beaten down to a level that seemed to be an opportunity of a lifetime. The other thing I have done is to buy using funds that I don't expect to need for a long time. PMs are my answer to a "self-directed IRA". I own it, I decide what's done with it, and best of all, I CONTROL IT. I don't trust any of these political, self-serving rat-bastards to have a wit of concern for my well being. Events of the last couple years prove that beyond a shadow of a doubt.

PMs are not for the faint of heart if you are compelled to watch and fret about every dollar it drops. The manipulation taking place certainly has those like Blythe feeling pretty smug. Manipulation of prices works until it doesn't. It's like winding a spring tighter and tighter. When the market wins, and it always does, the price launch should be breathtaking. I hope you are still with us to enjoy it.

wax off

unthought known Adman
Jun 28, 2012 - 12:17pm

Adman- believe me, I share your frustration..HOWEVER

there are only 2 possibilities... the world is awash in debt so do you think the powers that be will sit by while each country/govt goes bankrupt? or will they print? ultimately they will print.. no doubt about that..either way the endgame is the same..gold..the world goes bankrupt and fiat is worthless.. or they print, print and print..also, in the bull market of the 70's gold went up a bunch, than went down 50% before going up 400%...if this is similar that would take gold back to 900/1000 before resuming its run... may happen...wouldnt be surprised

Bohemian Be Prepared
Jun 28, 2012 - 12:17pm

@Be Prepared

"When you get pulled over in the future.... "May I see your license, registration and healthcare card?"

You're not ready yet, even though you're the Be Prepared guy ;-) You see, you have to become the U.S. illegal alien, or the Lizard from the Moon. Then it doesn't really matter if you have the license, registration or the healthcare card. And don't forget that you can call the Administration hot line and tell them, that you have become a victim of the ugly Arizona-style profiling.

waxybilldupp Number 47
Jun 28, 2012 - 12:19pm

@Number47 re:Real Socialism

>> "People with mortgages they can no longer afford will now be able to rent their own homes back from the government under the new mortgage to rent legislation." <<

A view of life in the United States in about 3-5 years. IMO. I think that will be one of the last shoes to drop to save our zombie banks. Thanks for paving the way, Now we can see how it works.

wax off

treefrog Be Prepared
Jun 28, 2012 - 12:20pm

@be prepared

corporations are not "people." they are "persons" as described in the 14th amendment, "nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws."

corporations are assemblages of people, as protected under the first amendment. so long as they are peaceable, they have the same rights under law as any other persons.

again, once the govvy begins to dictate to us what kinds of assemblages (i.e. corporations, labor unions, groups of labor unions, political parties, churches, groups of churches, and yes, pacs and super pacs) we may or may not have, the RIGHT to peaceably assemble ceases to be a right and becomes no more than a privilege conditional on the whim of our masters.

(just who is it who decides what the "true voice of the people" is, or is not?)

Number 47
Jun 28, 2012 - 12:27pm

@IRB

From Wiki.

Italian Fascism promotes a corporatist economic system whereby employer and employee syndicates are linked together in corporative associations to collectively represent the nation's economic producers and work alongside the state to set national economic policy.[5] Italian Fascism promoted such economics as a "Third Alternative" to capitalism and Marxism that Italian Fascism regarded as "obsolete doctrines".[6] Italian Fascists claim that their economic system resolves and ends class conflict by creating class collaboration.[7] It supports criminalization of strikes by employees and lockouts by employers as illegal acts it deems these acts as prejudicial to the national community as a whole.[8]

I'm sorry but you have a type of fascist in the white house, not a socialist. no self respecting socialist would hand societie's money to profit making companies.

I'd be interested to discuss this with you if you have the time, (in a few hours) as I am genuinely confused. I will keep it genial, I'm here to try and understand.

The Green Manalishi
Jun 28, 2012 - 12:33pm

Formula 1 Race in London

When I read stuff like this.....

I wonder if we are all stark raving bonkers. These people like Bernie Ecclestone are planning and carrying on as if nothing is wrong with the world. Don't get me wrong, I believe we are - as the good Turd says "At the end of the great Keynesian Experiment", but when you see rich guys planning stuff like this, you have to wonder.

Pit stop at the Palace: Billionaire F1 boss Bernie Ecclestone plans £35bn 200mph street race in London


Read more: https://www.dailymail.co.uk/news/article-2165869/Formula-One-Bernie-Ecclestone-pledges-35m-London-grand-prix-starting-Buckingham-Palace.html#ixzz1z6dbbECU

bullwhip29
Jun 28, 2012 - 12:36pm

@ Adman

RE: Wealth preservation?

Well, think of it this way. If you had taken your entire life savings and put it in the S&P 500, Tbills, real estate or under the mattress, where would you be today (relatively speaking)? If the SHTF for real, the value of most paper assets will vanish in a puff of smoke. Whatever you think you have in the bank, your brokerage accts and so forth won't be accessible. It might even be "corzined". The same goes for any so called equity that you may have in your home. Your gold and silver will continue to look and feel the same as it always did (assuming no one takes it from you). At this point, everything in life will be reduced to the bare bones basics: food, shelter, energy, knowledge and a means to acquire these items/services if you don't possess them.

IMHO, gold only drops to $450 if we have a complete systemic collapse.

single6 I Run Bartertown
Jun 28, 2012 - 12:52pm

I Run Bartertown

I dont want wachingtondc to touch this area........reciprocity sounds so wonderful and logical......again let the states deal with it. Stop letting the feds redefine the rules all in the name of "common sense reform" the fed govt gets in....is it ever a clean law or decision? no. The main focus needs to be power back to the states.

single6
Jun 28, 2012 - 12:53pm

give it time

someday....we will all become federal employees..... bankers are teachers are doctors are

senseiam
Jun 28, 2012 - 3:25pm

@ Adman

Gold is up %5.5 YTD, show me a bank that would give me that for my FIAT cash just sitting there?

To everyone else, what's this April business? April of last year wasn't gold under 1500? Around August gold was close to $1900, if you bought at those high levels well that's your mistake. Why would you buy at near all time highs? Most everyone here has been stating over and over, dollar cost average, buy during dips/dives, not during all time highs. If you had followed this you wouldn't be so upset right now.

Speaking for myself, all of the gold I have bought has been under $1650. I just bought some more on this recent dip when it was around 1583, yes I didn't time it perfectly, maybe I should have waited till today or maybe next week but in the end I am happy that I got in under 1600. I don't know about everyone else but I feel pretty confident that gold will be above $1600 by this time next year.

Mudsharkbytes
Jun 28, 2012 - 3:34pm

I agree with Adman in this respect…

…as somebody who has pretty much staked the farm on PM's and has no more fiat to spare, it does get old reading posts about how great it is to see prices decline so I can 'back up the truck' and 'btfd' etc…

Some of us are of an age where our mortality is starting to stare back at us and believe you me, at that point it's not a time to celebrate when our precious stack get's devalued in terms of everyday currency over and over and over again with no seeming end in sight.

I'm not about to 'throw in the towel' no matter what happens as I'm of the belief that you only truly lose money when you sell low, but on the other hand, I'd be very happy putting a portion of my stack to good use to finance some things I need to take care of, and this bullshit dithering around watching a chart meander southward for over a year is not cause to celebrate 'gifts' of lower prices so I can 'make my stack bigger'.

I'm more than ready for the payoff. Screw this manipulation. I'd like to subject the manipulators to some downward testicular pressure for a while & see how they like it.

Short Stack Dr G
Jun 28, 2012 - 9:03pm

Me too.

I find it depressing too but I take strength in the hope that the people will no doubt rise up as one on election day and kick these socialists out.

bronsuchecki TF
Jun 29, 2012 - 1:12am

@TF Perth Mint 1kg silver bars

Thanks TF. I finally located a chain of emails from "N" with our staff and there appears to have been some confusion as with whom the client placed the order - we never received the funds - but it is all resolved now. FYI, Perth Mint Hong Kong is a representative office and has never sold bars but we are current working on opening up our online bullion website to sell to select Asia countries.

maravich44 Katie Rose
Jun 29, 2012 - 2:28am

@Katie Rose..Thank You...

...always good to hear your thoughts and perspectives, I pray for you and us all, be well sister...

tpbeta
Jun 29, 2012 - 7:37am

Nice spike...

..I'm not underwater any more. I blame Turd.

John Galt tpbeta
Jun 29, 2012 - 9:31am

@ tpbeta re: Underwater

give it a few minutes...Blythe hasn't reported for duty yet.

Contribute

Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

Key Economic Events Week of 4/15

4/16 9:15 ET Cap Util and Ind Prod
4/17 8:30 ET Trade Deficit (Feb)
4/17 10:00 ET Wholesale Inventories
4/18 8:30 ET Retail Sales (March)
4/18 8:30 ET Philly Fed
4/18 10:00 ET Business Inventories (Feb)
4/19 8:30 ET Housing Starts and Building Permits

Key Economic Events Week of 4/1

4/1 8:30 ET Retail Sales (Feb)
4/1 9:45 ET Markit & ISM Manu PMIs
4/1 10:00 ET Construction Spending (Feb)
4/1 10:00 ET Business Inventories (Jan)
4/2 8:30 ET Durable Goods (Feb)
4/3 9:45 ET Markit & ISM Services PMIs
4/5 8:30 ET BLSBS

Key Economic Events Week of 3/25

3/26 8:30 ET Housing Starts (Feb)
3/27 8:30 ET Trade Deficit (Jan)
3/28 8:30 ET Q4 GDP final guess
3/28 10:00 ET Pending Home Sales (Feb)
3/29 8:30 ET Personal Income (Feb)
3/29 8:30 ET Consumer Spending and Core Infl. (Jan)
3/29 9:45 ET Chicago PMI
3/29 10:00 ET New Home Sales (Feb)

randomness