That It Is, Edward

Wed, May 15, 2013 - 11:26am

That it is, indeed. The April BLSBS was just like the Jelly of The Month Club. It's the gift that keeps giving the whole year or, in this case, the whole month.

As we begin, this entire clip is actually a pretty good metaphor for how we all feel. Like Clark looking at the contents of the Christmas bonus envelope, I, too, stood in stunned silence as "Hampton Pearson at The Labor Department" laid on the gravy nice and thick two weeks ago. In the days since, again like Clark, I've been sent into several tirades, railing against The Suits and demanding Tylenol.

So what do I mean by this? Recall that the April BLSBS was this wonderful and glowing report that detailed how the U.S. economy has suddenly become robust and bountiful. Of course, none of this is accurate. The BLSBS is a complete joke, easily manipulated and based upon faulty statistical assumptions and wild guesses. Regardless, it's taken as gospel by the Hot Money Momos and, in these days of endless free money, sets the tone for the weeks ahead.

I could go back and rewrite a bunch of stuff about how this particular report was bogus but I have neither the time nor the inclination. Besides, DenverDave did a fantastic job of doing just that the day the report was released. So, to save energy, here's a C&P of his remarks. (I hope he doesn't mind). His full site can be found here and you really should save it to your favorites list and check it every other day or so.

FRIDAY, MAY 3, 2013
The Government's Non-Farm Payroll Report Has Taken The Term "Farce" To A Whole New Level
I'm not even sure where to start to with today's April employment report. It was so out of line with all the other economic indicators and with what we know about big banks, big retailers and big manufacturing companies and their numerous announcements of big job-count reductions this year.

Let me give just one example. The Government and Wall Street has been telling us that there a big recovery going on the housing market. And yet, if you go to Table B1 in this report from the BLS - LINK - you see that the construction sector was said to have lost 6,000 jobs in April. That makes no sense. The Birth/Death model (see below) shows construction adding 29,000 jobs. This is completely inconsistent with the story line that housing is improving. Bernanke said so himself on Wednesday.

And on the heels of this rather "robust" employment report, the Commerce Dept releases the factory orders report for March which shows a big decline of 4%, vs an expected decline of -2.8%. Not only that, but prior report of +3% for February was revised to lower to +1.9%. And then the ISM - Institute of Supply Management (formerly the Nat'l Assoc. of Purchasing Managers) releases its "services" report, which shows a decline from March to April and the index level was lower than expected. Someone is lying. I don't think the factories and private businesses reporting data that affects their bottom line are the ones.

I could go on all day boring you with the line by line analysis of today's jobs report. But you can peruse through the report linked above if you like. Trust me, there's better things to do with your time. What I will mention, however, is that according the Government - from their nefarious "Birth/Death" model - new business formations by small businesses theoretically added 193,000 thousand jobs to the number that the Government then "seasonally adjusts." I don't really know of anyone who believes that the Birth/Death model has an credibility whatsoever.

The thinking is that people who leave their job for whatever cause - i.e. get "headcount reduced" for cost cutting purposes - decide to all of a sudden take all of the money they haven't saved and start a new business. The theory is that these "businesses" add jobs or subtract, depending on what the BLS's "voo doo black box" decides was the likely number of businesses started vs. closed. Sound credible?

Anyway, when I went through my initial glance at the non-farm payroll report, I noticed a big bulge in the number of "business and professional" jobs that the BLS said were added in April. In fact, it was 73,000 of the 165,000, or nearly 50%. Then I noticed that according to the birth/death model, new businesses in this sector created 63,000 new jobs. Know anyone who started a business consulting business last month? Certainly IBM - probably the largest "professional services" employer in the country was hiring consulting employees, because they just significantly cut hours for that segment of their workforce: LINK

In addition, the Government, despite what we know about the fact that most of the big box retailers are closing something like 10% - 20% of their stores this year, added another 29,300 jobs. No way. Sorry. That number is a complete fabrication. Here's a link this "Alice In Wonderland" fairy tale called "the birth/death model:" LINK

The sad part is that there's 89 million people "not in the labor force," most of whom would probably like to have a job if they could get one. I wonder how what's going through their mind - at the least ones not getting disability, student loans, food stamps, etc - as they see a completely fictitious jobs number and then the stock market rocketing up 155 points (the Dow) on the heels of that fictitious jobs report.

I have a feeling it's going to get very ugly in this country in the second half of this year. That's why there's a record number of people buying up a record amount of gold and silver coins minted by the U.S. mint. In fact, now there's shortages of gold and silver eagles. The mint has not reported any silver eagle sales so far for May, but it's because they don't have the silver required to produce them. I also have a feeling it's why Ben Bernanke is going to leave the Federal Reserve in January. He doesn't want to be left holding the empty bag he inherited from Greenspan and then proceeded to blow up himself with even more helium. Have a good weekend.

Based off of all this faulty, nonsensical data, what has happened since? I'll let the charts show you. First, here are gold and silver:

The "economically sensitive" copper and crude initially rallied because things are improving so quickly. If things really are "improving", why have they since rolled over and retraced all of the gains?

And, of course, all of this "growth" means that someday very soon, QE∞ will be ending. So, buy The Pig and dump your treasuries. This trade was further helped along by the complete MOPE/SPIN nonsense provided late Friday by TheBernankButtBoy regarding "tapering".

Put it all together and whaddayaget? Well, if you're going to get the global investment community to buy the dollar by talking down QE, you're going to get bonds to sell off. And if bonds sell off, where are all of those newly-bought dollars going to go? Not commodities, certainly not after all the effort to paint them as complete losers. The only game left in town is: EQUITIES!

Of course, this plays right into The Bernank's lust for "The Wealth Effect". And that's all well and good until the day comes when it simply isn't. For if it were truly possible to actually create real wealth and prosperity by the process of inordinate money printing, don't you think the world would have figured this out centuries ago instead of just recently? You can lie, you can deceive and you can steal but, sooner or later, certain laws catch up to you. I'm not talking about legal BS like Dodd-Frank or some other such nonsense. Just like the Laws of Physics, there are Laws of Economics. There is no "Theory of Gravity", there is a "Law of Gravity". Similarly, there is no "Theory of Supply and Demand". That said, the Bernank and his minions may manage to keep the plates spinning for a little while longer. Picking the exact date and time of his eventual failure is a fool's errand akin to predicting the next earthquake. But just as one day soon The Big One will hit, one day soon The Bernank's House of Cards will come crashing down, as well.

As this pertains to gold and silver, prices will continue lower until they won't. This moment is as unpredictable as anything else, regardless of what Bo Polny, Bo Schembechler or Bo Derek might have to say. If the Hot Money Momos are willing to sell paper metal, The Cartels will buy as much from them as they can. All of this in preparation for the day when The Great Paper Charade can no longer be maintained.

Regarding the ending of The Charade, that day IS coming. Again, though, when? Once again, this is impossible to say but we will continue to read the tea leaves which lay between the lines in the hope of finding some clues.

  • London continues to deliver at a rapid pace
  • Shanghai appears to be out of metal altogether
  • The GLD has shed 300 tonnes YTD
  • Comex vaults have lost over 100 tonnes YTD
  • China imported 220 mts in March alone
  • Demand from India is soaring

I could go on and on but I won't. Just keep in mind that this demand for physical metal is on a 1:1 basis while paper creation is on the level of 100:1. Therefore, every troy ounce that is removed "from the system" removes the ability to create one paper Comex contract. You do this long enough and remove enough metal and the entire Charade simply collapses. That day is certainly coming however, in the words of Johnny Keynes himself: The market can remain irrational a lot longer than you can remain solvent. Please, unless you're trading along with Andy, NO LEVERAGE. PHYSICAL ONLY.

To that end, we'll be watching the June13 Comex contract very closely in the days ahead. ZH has been following the depletion of metal from the JPM vaults and though they sometimes paint a confusing picture of eligible and registered, the fact remains that JPM is under some serious pressure. ( Then add this to that: As of yesterday, the total OI in June13 gold was still 209,286 contracts. The total registered (able to be delivered) stockpile of all Comex vaults currently stands at 57.10 metric tonnes or 1,835,000 troy ounces. That's enough metal to physically settle just 18,350 contracts. Both Feb13 and April13 saw about 13,000-14,000 contracts for physical settlement so it won't take much of an increase for The Comex to have some serious problems on their hands.

What does this mean? Well, at some point The Cartels have to get on the bid. Why?

  1. To hedge the allocation demand they are receiving daily in London.
  2. To maintain the illusion of The Charade, attempting to regain confidence in the viability of the paper "markets".
  3. Perhaps if price is raised, some of the physical demand will wane a bit as buyers wait to see if prices will come back down?

These three items above are why gold is not going to $1100 or $800. Not going to happen. The system will break and collapse well before price could fall that far. Period.

So hang in there. If you have to, go find the Tylenol and take a few days off to relax. Your physical metal is just as shiny and lustrous as it was yesterday and the day before. It will be even more valuable in the weeks and months ahead. Keep the faith and know that you are doing the right thing in preparing for the eventuality of what is to come.


About the Author

turd [at] tfmetalsreport [dot] com ()


May 15, 2013 - 11:37am


havent read anythin


Hypnotized Housewife
May 15, 2013 - 11:41am

Newbie in the top 10?? Oh I

Newbie in the top 10?? Oh I hope so.

May 15, 2013 - 11:41am

Hat eating time?

Possibly eating a hat this week? Won't be able to do it on one setting so you will be going back for "seconds" Griswald.

May 15, 2013 - 11:44am


HA, that was fun, and an honor;-)

Fun and games asside, I don’t know if this is me capitulating or what but I had a thought this morning on my way to work. A few weeks back I received an email with several instances of regulator interest in rising rate scenarios at several banks, something that has been on the back burner for a while now. Since then, I have heard more grumblings, then with all this taper talk I got to thinking... What if the Fed is out of Treasuries to buy because of the sequester? They have the option of buying up MBS but that market is getting pretty crowded too. What if the Fed planning on raising rates to increase interest expense so that more bonds are issued? That would indicate more downward pressure as rising rates are bearish for the metals. That is until inflation starts to heat up because of all this debt monetization. Right now there is a velocity of money problem for the Keynesians, they want to get things moving and raising rates would do just that. This sounds a lot like the late 70’s, which would again indicate further weakness for a time before SHTF. I wonder what 1.1 Trillion in MBS and 1 Trillion of Treasury (and counting) liquidity sloshing around in the system will look like? How will they pull all that liquidity back out of the system to cool things off if they get too hot? Is the system going to break? Doubt it will happen any time soon, but it isn’t out of the question. The only thing I can think of to do is to buy when I have the money and take physical delivery and wait for everything to shake out.

Where has the liquidity gone? (hint: not into the metals)

Dark Matter
May 15, 2013 - 11:44am

QE exit

What do you think after reading the following article?

Aren't we already seeing some kind of "exit"? Exit from Gold and Silver as safe havens? Due to the perception that America is better of now compared to 2009?

E.g. housing prices ARE going up. Energy prices are down. There are no signs of inflation, being somewhat unexpected after all the QE money printing.

May 15, 2013 - 11:50am
May 15, 2013 - 11:51am

So I made top ten

Thanks Turd for all you do....

May 15, 2013 - 11:51am


for a guy who's wrong 100% of the time, this wasn't too shabby:

Please be sure to review this post

Submitted by Turd Ferguson on May 14, 2013 - 12:40pm.

And these charts. I'm getting increasingly wary that they are about to drop the hammer and jam things down toward $1400 and $23.

May 15, 2013 - 11:52am

jelly breaks confidence

presume that jelly of the month club; the whole idea was to break confidence, which i think they are most of the way there - but still have more tricks coming. you break confidence by; 'no predictability' (TA is not congruent to facts), the rest happens on it's own with loss of confidence. it's that point in the dismal science (econ) that heard consensus takes over. think of it like driving an oceanliner; a great amount of effort is needed to change it's direction, but once that course is changed it is very hard to alter it's course back in small subtle ways, you need a macro event for that. what you are seeing right now is the mantra of fallout from earlier actions. i don't exactly care about price point based in any currency. those of you that know me, know that i trade on ratios. 'when' both metals fall to a certain point - which they are very close to doing, i don't do anything, for a number of reasons. we have seen beat-downs before like a broken record on holidays. it does not exactly mean next weekend will be a sure bet. but everything that i do watch, is sending pretty clear signals that this is not over. confidence was broken for a reason, i can assure you of that. but the timeline may be way longer than most have the stomach for. how low? i have no idea. it's a flux and flow subjective call that is ever changing. that is why tech analysis isn't congruent to the facts right now. if it was, tf would have nailed this dead on a month ago. just remember though, there is usually a reason for everything. they don't call them black swans because they are usual. just enjoy the jelly for now.

May 15, 2013 - 12:00pm

Real numbers from the field-

Economic activity is picking up for manufacturing in So. California area. Mainly in aerospace. May/June's GDP should see a bump up to the 1.5-2% annualized growth rate. January through April was lousy about -1 to 0% growth.

Producer pricing is rising fast and PPI is waaaay understated. Our factory's utility bill (power, water & gas) is up over 15% year-over-year and other input costs are up by 5-10% on average...

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