At the corner of Copperfield and Blaine

Mon, Oct 8, 2012 - 11:31am

What a joke all of this is. It's all just an illusion. A manufactured theater of disbelief where the magicians convince you ignore your senses, distrust your eyes and rein in your sensibility. The current performance includes such mind-blowing feats as:

  • The U.S. stock market is fast approaching a return to all-time high levels. Not because of corporate profits or any other, fundamental driver. Nope. In a market where over 80% of all trading volume is simple High Frequency Trading and "regular" investors have fled for the "safety" of cash, the stock market has become nothing but The Greater Fool Theory, writ large. One computer buys an issue in the hope that some other computer will buy it next, at a slightly higher price. What was once the greatest, most fair market in the world has been reduced to this: No price discovery, no efficient allocation of capital. Just bullshit computer gaming.
  • For decades, the U.S treasury market rose and rallied because of a circular pattern of capital. The U.S. consumed nearly everything the world could produce and sent dollars careening around the globe in purchasing those items. Those dollars then returned to the U.S. when the producing nations purchased treasuries and were then used to finance the next subsequent, higher level of debt. It was all well and good until the music stopped. As it became clear that this couldn't go on forever, the "creditor" nations stopped buying treasuries. Faced with the prospect of rising rates and increased interest costs, official U.S. policy has become one of self-monetization. In 2013, The Fed will issue over 1,000,000,000,000 in dollar credits to the Primary Dealer banks. Those banks, in turn, will purchase treasuries at auction, thereby funding about 80% of the projected 2013 federal budget deficit.
  • How about the appearance of currency stability through relative valuation and pegging? Is the dollar getting stronger or is the euro getting weaker? Conversely, if Fed policies lead to dollar weakness, shine the media spotlight on the euro in order to help the USDX find a bid. If your currency rises against your wishes, print a bunch of it like the BOJ or maybe peg it to some other fiat like the SNB.

The key to the game is to win the day and maintain the illusion a little longer. Future consequences be damned. All that matters is today and this week.

And this leads us to gold and silver. The prices of these metals have been manipulated and controlled for decades. Why, you ask? Again, it's all part of the illusion. What would the metals be telling you if gold was priced at $6,000/ounce, up from $3000 two years ago? And what would this signal about inflation and the relative quality of "establishment" money? If gold was shown to be more valuable that U.S. treasuries, would the 10-year bond still be yielding under 2%? If general inflation was accurately being reported at 10%, who in their right mind would lock up funds in a 30-year treasury at 3%?

So, here we are on this beautiful, early autumn Monday. Back on Friday, we were told that The Gold Cartel has shamelessly been allowed to create 2,500,000 ounce of gold from thin air in the time since the announcement of QE∞. Even more grotesque is the acknowledgment that, over the same time period, The Silver Cartel has created 70,000,000 ounces of paper silver. Our regulators, those arbiters of free and fair markets, simply avert their eyes to this crime in progress.

After reviewing Friday's CoT and the latest Bank Participation Report, Ted Butler has concluded that JPMorgan alone now holds short 34,000 contracts of Comex silver. If forced to deliver, this is the equivalent of 170,000,000 ounces or about 20% of the world's production for 2012. Additionally, after excluding the amount of open interest that comes from spreads, JPM now controls (on the short side) over 33% of the entire Comex silver market. If you add in the positions of their three largest partners in crime, the size of their position rises to over 50%! Think about this for a minute...Four banks control, on the short side, over 50% of all open contracts for a globally-important, industrial and monetary metal.

Again, the hopelessly-inept and likely-corrupt CFTC dawdles and does nothing. Can you imagine the outcry if four hedge funds managed to accumulate a 50%+ position in S&P futures? Or how would it play out if four countries had control over 50% or the crude oil market? But the CFTC turns a blind eye and does nothing.

But allow me to wrap this up on an optimistic note. Though all of the conditions exist for a sustained and coordinated price collapse, it hasn't yet happened. Why? I see two reasons:

  1. The two, separate 30%+ price drops in silver last year both occurred when QE was ending or had ended. At this particular moment in time, The Fed has thrown the banks a curveball by the initiation of QE∞. This is about priorities and, trust me, levitating the bond market is an almost infinitely larger and more pressing concern for The Fed than assisting JPM in their ongoing manipulation of the puny, little silver market.
  2. Because of the open-ended and infinite quality to this latest QE program, demand to exchange fiat for metal in London is unwavering. Every selloff in paper has been met with increased demand for physical. As long as this continues, sustained beatdowns in price are extremely difficult to accomplish.

So remain patient and buy the dip. Keep stacking and continue preparing. Though any quality magician can temporarily suspend your belief in reality, in the end it's all just an illusion. The laws of physics eventually trump the magicians skills just as the laws of economics will, one day soon, blunt the accumulated efforts of The Fed, the banks and their willing accomplices in government and the media.


About the Author

turd [at] tfmetalsreport [dot] com ()


Mr. Fix
Oct 8, 2012 - 11:32am


Britney Spears-Oops I Did It Again

Oct 8, 2012 - 11:35am
Nick Elway
Oct 8, 2012 - 11:36am

Gold to be Tier 1?

I believe from 2008, the BIS document does have the note (footnote 32 on page 26)

At national discretion, gold bullion held in own vaults or on an allocated basis to the extent backed by bullion liabilities can be treated as cash and therefore risk-weighted at 0%.

From August 30 2012 US Federal Register Notice of Proposed Rulemaking page 52901:

11. Other Assets
In this NPR, the agencies propose to apply the following risk weights for
exposures not otherwise assigned to a specific risk weight category, which are
generally consistent with the risk weights in the general risk-based capital
(1) A zero percent risk weight to cash owned and held in all of a banking
organization’s offices or in transit; gold bullion held in the banking
organization’s own vaults, or held in another depository institution’s vaults
on an allocated basis
to the extent gold bullion assets are offset by gold bullion
liabilities; and to exposures that arise from the settlement of cash transactions
(such as equities, fixed income, spot foreign exchange and spot commodities)
with a central counterparty where there is no assumption of ongoing
counterparty credit risk by the central counterparty after settlement of the
trade and associated default fund contributions;

It appears the hype about January 1, 2013 Gold becoming Tier 1 has a basis in fact in the US.

Oct 8, 2012 - 11:37am


Monty Python - Naked Organist
Oct 8, 2012 - 11:38am

Thanks Mr. T!

I was just getting ready to post the link... EVERYONE needs to read it....

Oct 8, 2012 - 11:38am


Surprisingly............Metals haven't been attacked as yet..hmmm what are they waiting for??

Oct 8, 2012 - 11:41am

Thanks Turd

Appreciate all the work, keep stacking friends.

Oct 8, 2012 - 11:44am

Cybercriminals plot massive banking Trojan attack

Cybercriminals plot massive banking Trojan attack

Gang plans to use sophisticated malware to initiate illegal wire transfers, RSA says

Oct 8, 2012 - 11:44am


Damn you, Mr. Fix! (you too, Bollocks!)

Oh well, I increased the PA medal count by 1 bronze at least.

Succinct and to the point again, Mr. T.

So let me see if I understand modern market theory and practice- who is the primary buyer in the following?:

US Treasuries- Fed (directly and proxy is the banks)

Stocks- Fed (proxy is the banks)

Real Estate- Fed (directly and proxy is the banks

Precious Metals- Fed (proxy is the banks)

Commodities- Fed (proxy is the banks)

Now remind me of how efficient markets are supposed to work?

Oct 8, 2012 - 11:46am

For Barnhardt fans

She was on with Dave Janda yesterday. Here's a link:

Oct 8, 2012 - 11:51am


Maybe w/in 45 minutes.... $33.50 poke.....

Oct 8, 2012 - 11:56am


Yup......bastards must be itchy.....can't sit idle twiddling their thumbs.....just waitin to BTFD

Oct 8, 2012 - 11:59am

Second? Not...

I think Mr. Fix wrote an app to detect and post... maybe I'll write one too.

Edit - ok- so I started down the path of writing something so that I could be first when ever I wanted to be - and then I had a better thought: maybe my energies would be better spent elsewhere - I've been first once or twice, and unless I have something thoughtful to say, maybe I should just give up on being first again. So here's my pledge - since I have a First! under my belt - I vow to no longer post in an attempt to garner another First! or Second! or Thurd! If I see no comments and I don't have anything productive to add - I'm just going to read Turd's comment.

I'm looking for a FUBM today - and if I get the motivation, I'm going to stack my stack so I can stand on it - and try to work that into an avatar - since I probably should have one being here so long.

Oct 8, 2012 - 11:59am

I bailed out on Thursday...but will be back when silver becomes

..but will be back when silver becomes oversold. Just going to do some paper shorting for the time being :)

I realize Clive Maund is not everyones favourite (its Turd!) but my intuition made me listen to him this time.

Anybody got some constructive criticism of his reasoning cause I am beginning to suspect he was right though he didn't give a clear downside target. My first guess is 32.50 before bouncing hard.

Oct 8, 2012 - 12:00pm

Obama's "HOPE" poster !

Socialist Realism poster art .... Norman Rockwell on CRACK ! Monedas 1929 Comedy Jihad Nostalgia World Tour

Oct 8, 2012 - 12:03pm

Very nice 5-minute chart

Check this out. Six attempts to jam gold down through 1770. Six failures.

foscotanner TF
Oct 8, 2012 - 12:11pm

Metals end game

I am starting to see the action in metals as follows:

1) Too many people in vehicles such as SLV & GLD for price to be allowed to rise.

2) Big shorts trapped and cannot escape

3) Only way to resolve above two is for the cartel to completely destroy the current means of metal trading. ie - sell more short term metal than deliverable to create the defaults at which point they can settle SLV / GLD and their shorts in paper. Since a default event will it be for pennies on the dollar?

4) Point 3 is what the cartel are trying to do with their blatant obvious selling at a point without any care or consideration of whether they can deliver.

5) Once point 3 is complete, where will we be. The bullion banks out of short. Most investors out of metals and feeling as if they never want to touch them again. This feels like the time when the moon shot could come along.


Oct 8, 2012 - 12:13pm

SLW SLV divergence

If I remember correctly, on the last run to 50, SLW used to be max 4$ above SLV during bull runs. During times of correction, SLW (miners) would crash first and go below SLV or be at par during sideways action. But this time, it looks different, Silver is beaten down yet SLW is over 6.5$ more than SLV. Miners are signaling an important divergence from the paper price which cannot sustain at these levels for long.

Oct 8, 2012 - 12:16pm

US security

This phone company from China wants to do business in the US. I'm wondering if the security threat is the loss of absolute control over communications and media. Do the ubermiesters need to have the off switch?

Oct 8, 2012 - 12:17pm

Hey Turd

Heard from Winston recently?

Bongo Jim
Oct 8, 2012 - 12:17pm


Looks like about 8 or 9.

Oct 8, 2012 - 12:22pm

As a matter of fact, I spoke

As a matter of fact, I spoke with him late last week.

He confirmed that all London fixes are being well attended, regardless of price.

Oct 8, 2012 - 12:23pm

Not So Fast There...

To be optimistic, is to be sometimes disappointed.

Are we not seeing something here? Have we closed our eyes to some small signs?

13% decline in oil prices in last 3 weeks

12.6% decline in price of soybeans

8% decline in cocoa price

44% decline in price of coffee over the past 14 months

25% decline in sugar prices

34% decline in price of orange juice

The kicker? 17% decline in economically sensitive copper

Real-time income tax withholding data/daily deposits to the US Treasury from all salaried US employees, since the beginning of June have shown an improvement in the employment numbers. Albeit a small improvement, but an improvement none the less.

Mind you - when comparing job creation alongside debt creation, you come with a cost of one million dollars worth of debt per job created! And gold's value is calculated as a function of ever-inflating government-issued currencies.

On top of all these mixed signals we get a new record high in food stamp usage.

To be optimistic is good. But remember - too much of good thing can be bad for you!

Oct 8, 2012 - 12:24pm

South Park October 3 Episode

A very funny version of 'theburningplatform' story.

Oct 8, 2012 - 12:24pm

Thanks Turd,

for a concise and accurate snap shot of the illusion we all deal with daily. If gold becomes a tier one asset will these shyster c..ksuckers claim all those paper chits as collateral?

P.S. That is a damned sad portrait from Jim Quinn. What a freaking mess.

Eman Laer
Oct 8, 2012 - 12:28pm
Oct 8, 2012 - 12:33pm

Does he have any idea

Who is actually selling physical? Any large owner of physical silver for example can't have made if any profit in the last year? Does he have any idea when the `stocks' of silver at LBMA or the COMEX will run out? I believe at best COMEX has about 5Moz left.

thurd aye
Oct 8, 2012 - 12:36pm

"Now the tale is told By the

"Now the tale is told

By the old man back home

He reads the letter

How they are paid in gold

Just to babble in the back room

All night and waste their time" ............

This place can get to you at times.

This has been burning all day,Then I remembered, request DPH.He can solve it,maybe GL.

transfer/new thread.

Oct 8, 2012 - 12:36pm

Excellent post Turd.

Excellent post Turd. Puts things nicely into perspective.

4 banks controlling 50% of the positions in the Silver market and the CFTC requires over two years to determine whether there is any malfeasance. There is no need to hear what the CFTC investigation concludes - they are part of the problem, not the solution.

Oct 8, 2012 - 12:41pm

@watchingdogma - no HFTs

"I think Mr. Fix wrote an app to detect and post... maybe I'll write one too."

In which case I will start the 'Keep computer algos out of Turdville' and 'No HFTs (High-Frequency Turdwatching)' society.

Before all our posts are auto-generated by our PCs (no suggestions that some already are...).

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