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 ()


Oct 9, 2012 - 10:18am
Beastly Stack
Oct 9, 2012 - 10:16am

If there was?

A happy TUesday,is there a certain time they have to cover shorts?

Beastly Stack
Oct 9, 2012 - 10:13am

Talk Propaganda!

You think CNBC is trying to help the CARTEL-all morning coverage on GREECE!Trying their best to break the EURO!


Be Prepared
Oct 9, 2012 - 10:12am

The Human Condition

I have also enjoyed the discussion that GL, Puck and others have been having because it relates to understanding how different world views play out from varying perspectives. I am, though, a pragmatist and, as I enjoy dabbling in philosophy, I realize that we, as a species, are predators and have been so for quite some time. The winners of our genetic pools were the most viscous and successful hunters and gatherers. We are all here because our ancestors were able to overcome great adversities and continue their propagation above all others. I am not trying to state that we are merely genetic drones destined to follow a prescribed path because we are sentient, for the most part, beings and can add new learned behaviors.

It is important to note, though, that most of the world's population is still in the daily struggle for survival and that struggle creates a mindset about how they view themselves and others within the world. Additionally, the tower of babel is still very much alive and well. The cultural and religious gaps, along with historical oppression, are monumental rivers whose course is difficult beyond measure to alter. For all that we think we have advanced, we have just barely climbed out of the muck of our primordial ooze. For example, the tribes in Iraq have been fighting each other along familial lines for thousands of years and a few dictators and foreign occupational forces aren't going to change that history. We, as a collective species, are still driven by the base urges of our reptilian brain. Have some people evolved beyond that? Yes. The question becomes moot when we see how quickly the veil of advanced society crumbles even under the slightest weight of disruption.

As SRSrocco (Steve) has pointed out, the struggle for resources will once again emerge as the core basis for national pursuits because cheap energy has become a thing of the past. We are heading into the wind of a Turning and we may very well have to take several steps back to devolve back into more regional areas to maintain a sustainable trading model. I can hope that the best ideas will rise to the top at the critical moments to be implemented to smooth and /or avert a catastrophic failure, but, as Prof. Bartlett used to say in my Physics lectures, humans always fail to understand the exponential function until it is too late.

Oct 9, 2012 - 10:11am

Paul Krugman gets (Austrian) schooled. Pure GOLD:)

After Krugman delivers his remarks, Spanish professor Pedro Schwartz (of the Austrian school) surgically demolishes Krugman’s arguments while Krugman, sitting behind him, can’t hide his discomfort and displeasure. Then when Krugman does speak again to respond, it’s with veiled outrage at having his arguments revealed as foolishness.

Professor Schwartz remains calm and respectful throughout, letting facts and numbers speak for themselves. Krugman, however, can’t hide his petulance or thin skin...Krugman refused to shake the victor’s hand.

The whole thing is worth watching when you have an hour. If you want just a quick box of popcorn entertainment, fast forward to about 39 minutes.

Paul Krugman
Oct 9, 2012 - 10:09am

On the wild side!!!

Lets take a look at the wild side. China comes into the shorts in bullion futures, selling into strength near 1800 and 35. Do they really care? They are also buying gold, in obvious move to back their currency as the reserve currency. What they are doing, also going short, is diluting JPM's ability to short. Metal should be flying, but now foreign sovereign funds are getting in on the game. So, any time china wants the gold standard, they can PUSH THE PLUNGER on JPM, china cover their shorts, JPM get flushed out to the upside and pop goes the weasel, China kicking ass on the wild side.

Mötley Crüe - Wild Side (Official Music Video)
Oct 9, 2012 - 10:05am
Oct 9, 2012 - 9:59am

The big banks who are naked shorting the metals are not the

problem. Its a given,, nothing new there kids.

The investigation should be on the so called regulators, the SEC, the CFTC.. thats where the real corruption lies going back to the corrupt law makers who enable all this crap.. go after them.. Kleptocracy is your governments

and since the bankers own the law makers,,,, you are tough out of luck..

Oct 9, 2012 - 9:55am

Electric Universe

Good call from Puck. The electric universe theory is amazing in its simplicity, I was blown away by it when I first heard about it. No need for dark matter and exotic particles like astrophysicists are determined to conjure up. It is strange the way the scientific community is ignorning it despite hugely convincing evidence that it is real.

Green Lantern
Oct 9, 2012 - 9:55am


EXCELLENT! Reptilian Brain indeed. We first have to get past the psychology of human beings before we can progress.

What should we do to get world peace?? I don't know. I can never figure out what to prepare for dinner.

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