The Audacity of MOPE

273
Thu, May 16, 2013 - 11:49am

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 ). 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

About the Author

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turd [at] tfmetalsreport [dot] com ()

  273 Comments

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SilverSurfers
May 17, 2013 - 10:54pm

High

fives will be all around!! Just got to make it skin tight and jelly tight, and give no wiggle room, and shot them down!!

https://www.youtube.com/watch?v=K_M0k9ez_uI

maravich44SilverSurfers
May 17, 2013 - 10:29pm

SS...

.quitenever surewhat yousay andthen itappears. https://www.youtube.com/watch?v=78w0pyhkqtk

SilverSurfers
May 17, 2013 - 10:28pm

AM

must use commonly available data sets, like prestacked orders, stop orders stack ups, volume from various sources, including private and public data sets, and over the years of watching, developed some kind of algorithim to render his prediction, as you were told early only there were no oscilloscopes, meaning so special hardward, and no briefs meaning no lawyers to make the case to wet pants bar or a cesspool district court, and hence, no go, as yet, but data sets and algorithims are child's play to me, and from the algorithim can translate into in house and client moneys of the target, and so, next up is hindsight capitalist or surgar cane, would suggest a likely interplay between those fungible money sources, and the algorithim is the tip off to how the target manipulates the bullion space, and there you go, you and present the model of the nefarious business inside leviathan without even have to look, and, the set up is complete for moving for injunctive relief. Now you can predict price wiggles, next is who done it, and from COT information, guessing, one can finger the bad guy, who done it. It seems like it pretty straight forward for the set up. Sure it would be detailed, but that is a silly specialty, done for 20 years with real rocket scientists in the patent context, and buy and sell orders are simple to understand. Piece of cake. Just have to prepare up front for the big bang cosmic salvo, and leviathan is fried cookies.

AstroTurd
May 17, 2013 - 10:15pm

Just Buy More Silver

For those of you who have jobs and income, and not not jobless for a year or more, are not experiencing severe age discrimination, or are not contemplating suicide, buy more silver! Do it for the rest of us!

SilverSurfers
May 17, 2013 - 9:55pm

Zulu

attack upon the totalitarians in control, with the left right pinchers going for the throat, the right wing press is going after the cesspool on IRS targeting and Benghazi cover up, while the army goes after northern treachery of Wall Street, and man, its looking real good my friends, there is hope, dont throw in towel, our revolutionary freedom rights will survive, we can save the nation, its not to late, stand firm, and we can destroy the fascists from northern wall street to that epicenter cesspool, stand firm my friends.

Zulu - Final Attack
The Bonnie Blue Flag - Gods and Generals

How is that for audacious mope?

SilverSurfers
May 17, 2013 - 8:15pm

Mind Screw III

aklusa to avoid spilling the beans on opposition per the set up, may simply run for hills, and plead denial, so, mind the screw the circus master up front, in the opening general yak and in initial salvo, with the purpose, by hoodies foiled using specious denial and justice served by getting to the truth, as comedians and clowns under the dignified and respectful big top should not disrespect and dishonor the dog and pony show and the circus master with a facetious specious dodge, which will make the akulas come clean, or will warrant sanctions, including issuance of injunctive relief and fees if otherwise, so in moving papers and opening yak, comment briefly about the possible dodge, and scare the dickens out of the akulas and embarrassed them more under live fire. LMAO!!

Where's Flipper?

Come to think of it, Audacious Mope of a circus master, is kind of like a huge monster woodie mind screw of a black robed reaper, so, whats the difference, which is, while also shooting ducks in a row, for killing two bird hoodies with one cost effective stone salvo.

SilverSurfers
May 17, 2013 - 7:32pm

Amigos

all three of then, roll call update switching tres hombres to three amigos, as window 2000 spell check can handle the spanish, with red squiggles, so the update to full on english for the precision torpedoes.

Video unavailable
Video unavailable
The Three Amigos Sing My Little Buttercup
SilverSurfers
May 17, 2013 - 6:32pm

Perry

mason, eat your freaking heart out, first it was cruise, now mason, next up is patton, then fdr for the grand slam, an in the park homer, rocking in the jailhouse, as any grandiose alpha werewolf in light speed would. Play it again sam.

Werewolves Of London
Video unavailable
Perry Mason Opening Theme/Intro #2

Particulars

Submitted by SilverSurfers on May 9, 2013 - 1:01pm. https://www.youtube.com/watch?v=hMKblZEnD3c Rocking in the Turdistan Jail https://www.youtube.com/watch?v=gj0Rz-uP4Mk

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

SilverSurfers
May 17, 2013 - 1:18pm

Extra

terrestrial extraterritorial contact is being launched, SETI would be impressed, sproot would probably not get it, on a slow boat, rule is to busy making money, that ho, so best shot, of the tres hombres in courageous canada land is embry, contact initiated, as a straight shooter of older nearly same age years and with a comprehensive global view may just get it all, if anyone can. Well wishes welcomed, surfer out from Jupiter on Thrusters in light speed. Crank it up!!

Ground Control to Major Tom
Video unavailable
NonoverlappingMagicCereal
May 17, 2013 - 12:37pm

@tmosley

Also, for milk, one should remember that milk is the most heavily subsidized food product on the market, and the quality is also likely much lower than it was thirty years ago (now with delicious pus). Saying low price milk means low inflation is like saying free health care means infinite deflation.

Fine, no milk then, I only picked it because it's one of those prices that easy to find data for. Eggs were ~$14/dozen, gas was ~$15/gallon, a stamp was almost $2. It works for anything. Seriously, try it yourself.

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