The Audacity of MOPE

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 wink). 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.




ballyale's picture

What happened to the Cyprus gold?

Not a peep about it for weeks now other than the last, "Cyprus plans to sell some of its gold for the bailout".

Perhaps there really is no Cyprus gold and it's been sold so many times over, it's gone forever.

Now, msm wouldn't want that to leak out to the financial public would they? Just let the story quietly die in the echo chambers of silence.

ctob's picture


Fortunately I need no faith  in the metals or confirmation of belief via fixed market "price".  I have negative faith in the currencies (as they are currently defined) I will be forced to use in the short term.   What the metals will truly do, I have no idea.  What the currencies will do I am quite quite sure of.

I am not investing.  

Go read the wikipedia page on "dollar" its comes from a German coin called a joachimthaler->thaler->dalder or daler(dutch).  The dollar from its very beginning was referring to a particular size, shape and weight of silver coin.  The reason its used in so many countries is the Dutch made a version of this coin and made it widespread and popular.  The "spanish dollar" itself was really a peso and Anglos just called it a dollar because it had similar shape and weight.  That wiki article even states that the US dollar no longer as any true definition for what it is in any statute now that the coinage definitions are revoked.  The US dollar has seen many many redefinitions for many types of reasons, changing price of silver in the 1870s, changing weight of silver for half dollars versus dollars.

What a US dollar is will be redefined once again in the near term.  Will the dollar go back to its origins and become a real silver coin once again?  I dunno,  I rather doubt it.  Will silver or gold become truly monetary and minted as legal tender again?  I dunno maybe, maybe not.

But one things for sure getting out of the current definition of dollar into something that can be made into the next definition of the dollar is almost certainly the smart thing to do.  When to do it is of course the billion dollar question.  And considering history and the behavior of central banks; gold is almost certainly going to be something that does that in a favorable way.  Silver is strange in this regards and a bit of a gamble.  I am highly suspicious of the official history of silver since 1960 and even as far back as the 1870s.  Something strange happened with silver over the last 150 years when compared to the last 5000.  Supposedly when Germany stopped minting the thalers that were the start of dollars the "price" of silver changed and this is when many countries went to mono-metallic focused standards, ie. gold.  

The current definition of the dollar is complete crap.  That is all the faith I need.  But then again I am not trying to be an "investor".

Further I would caution people to ask themselves this question, "How can a majority of people constantly increase their wealth via investment?".  There are winners and losers in investment.  Apparently according to "financial managers" a large majority of people are constantly picking winners (in a net manner) if everyone is winning who is losing?  Very few apparently and this works by .... magic?  No it works by constant and perpetual unlimited growth.  Which is against the laws of thermodynamic?  Oh yeah maybe it is magic.

This whole you should always be getting some percent return if you are conservative is BS.  Its been funded by leverage and debt and other BS.  The math doesn't work.  Don't fall for it.  Doesn't mean you can't make money in the market or there are not good deals out there but think about it.  EVERYONE's IRA is supposed to go up in perpetuity?  What a pant load.  This lie is going to collapse in the next 10 years because debt is going to collapse.  Perhaps you can make short term gains  in the market or whatever. Perhaps you could get more metals this way or some other real thing.  But this whole grass is greener meme going on is pretty silly unless you were purely doing metals as a trade.  But I don't have much sympathy for people coming here, being told markets are manipulated and then getting their panties in a wad when a trade in a crooked market doesn't go their way.  Either play it safe and accumulate or play the rigged game built on lies and accumulate in a rush (risky but might pay off).  But figure out what you are trying to do because whatever you have in dollars now is not gonna be the same as whatever "dollars" turn out to be.  

And if you think that is "out there" then just read an US history book that actually talks about money.  Isn't it strange how most of the history books don't actually talk much about something that was so important that it was written into the constitution and important people in the founding of the country like hamilton were imminently involved in such things right from the beginning?  Or that entire major agencies like our very first domestic intelligence agency (the secret service) was created as part of the Treasury, and up until recently still part of it, which was founded because due to yet another redefinition of the dollar fully 1/3 of our currency was counterfeit.  And only a decade later the dollar was again redefined due to changes in silver value and then yet again redefined because the redefinition caused a massive gold shortage.

An entire generation of people have been sold a financial fantasy land based on debt for the last 30 years.  Keep chasing yield if you want.  But sometime soon it won't just be there everyone can get positive yield.  So then what? Are you gonna save or invest when 50% of the people make 9% and the other 50% lose 9%? Obviously that is a simplification but a much more realistic prospect than 90% making 9% all the time.  People have been told for 30 years that if they aren't getting this they are losing out.  Its a classic con-job.  For a span of time it was true due to debt, but the mechanics of it are a con-job.

meluaufeet's picture

Cononish1314 - summer gold revaluation??

You'd think they might have let the Bank of England in on the secret. Special relationship and all that.

With a mere 310 tons of the yellow stuff (16% of Forex) this island might not come off so well.

At least they got the Rothchilds. Your point well taken.

JY896's picture

'Big Short' commencement speech...

...featured on ZH at the moment -- re-run from last year.

Meat of the matter comes from 14:00 onward, but all of it is good. A very apt speech to reaffirm one's fundamentals -- despite the fac that a core part of hjis message is to 'check your premises'. A chilling reflection on the state of the police state and the tools at its disposal -- and a stark warning from a dude who saw the previous tsunami coming. Very much worth a watch, if only to validate a belief that there is SOME intelligence and integrity in the world out there.

A link to his 2010 NYTimes Op-Ed that landed him in the position he describes in the speech is here.

More videos from the guy here.

Byzantium's picture

GLD drainage

Unless somebody can correct me, I believe it is conforming to one of these scenarios, but I don't know which. Are there any other scenarios?

  1. They are winding down the imaginary GLD holdings to the true holdings, through the ostensible guise of withdrawals.
  2. It was always leased gold, and the real owners want it back.
  3. The bullion banks or other big players, are taking it for themselves, at cheap prices orchestrated by themselves on the comex.
  4. It is needed to put out fires elewhere, and heralds the process of systemic collapse. 
crambo's picture


Years ago, I was given the game of Risk. While pulling the CQ duty in the Army, we would play for hours. I never once won. Others playing could see a pattern and develop a methodology and always beat my ass! I finally quit playing. The game still sits on a shelf as a reminder that I can't always figure it out and probably won't.

As others have noted, gold and silver are insurance policies. I buy when I can. Otherwise, I can't see the patterns and develop a strategy. So the best I got is buy and hold (even though every time I've bought 10 ounces or so recently, the bottom seems to drop out. Hat tip to everyone else who feels that way!wink)

Focus on life, buy when you can and be prepared to help your neighbors and your community. After all, what else you gonna do, stand there waiting for your grave to pull up so you can jump in?


Zoltan's picture

ND Silver Open

In blocks of 500 again to pile up a now standard 9K NDU on the first minute tick.  This is huge volume compared to the rest of a "normal" day (for example the ticks in the last few hours of today's trading was between 500 and 1K NDU).  This kind of unlimited, not for profit selling is what keeps the silver price in check.

2K NDU in the second minute tick and now that all the demand has been swallowed up we are under 500 NDU for the next few minutes.  This kind of manipulative selling (on a predictable daily basis) exposes the CFTC for the joke that it is.


QE to infinity's picture


Bullion by post WAS really out of nearly all silver coins a month or so ago. It currently has all silver coins in stock except Pandas, Maple leafs and American Eagles. ASE premiums are still quite high, everywhere I could find. Normally ASEs were considerably cheaper than silver Britannias, now Britannias are cheaper. 

Other than that, a lot of what you say makes sense, I don't think you are a troll, some people here seem to like calling anybody they don't agree with a troll, more is the pity as some of them are quite intelligent and interesting people otherwise.

Hunt brother's picture

Soros buys GDX and GDXJ..

The article is linked early in this thread.

Soros took this aggressive long gold position in Q1, before the April smash.

Also consider, he sold GLD and bought miners. Traded his paper gold for gold in the ground. 

Seeing that Soros was also blind to the April smash gives me some comfort.

Magpie's picture

@ Katie Rose. Califonia has no water,

so all those farming regulations are worthless, anyway.  LA county inhabitants will get their water to drink and fill their pools, but orchards will die and farmers will not plant what they cannot water.  What else can they do when they will only get 20% of the water they need?

Pining 4 the Fjords's picture

Seeking Alpha article- the moral hazard of a world currency

I am not at all convinced that the author has divined what Bernanke's real strategy is here (though to be fair I am not sure he really has a strategy other than "Try to fix the Depression of the 1930's, then make it up as I go") but I will say this:  Any non-national currency regime (whether SDRs or something else) comes complete with the exact same moral hazard- The nations that benefit most are the most profligate and unproductive, thus rewarding and incentivising profligacy and lack of productivity.  

The Euro is an outstanding test case.  Which countries benefit the most from that system? Which countries are least happy with it and are making the most noise about leaving it?  Exactly.

In addition, how is that whole "A shared currency will foster cooperation and bring people and nations closer  together" idea working out?  Anger, and in some cases outright hatred of other countries and the Euro in general, is indisputably rising.  The unproductive beneficiaries resent "austerity" being foisted on them by foreigners and the productive resent the lazy deadbeats who keep insisting on gorging at the trough of "free stuff".  So by all means, let's expand those dynamics to the entire planet.  That's a peach of an idea. 

Or we could, you know, live within our means and create sustainable value by rewarding productivity and hard work, thus building a future that is actually prosperous.  Either way, really. 

redwood's picture


Was wondering if/when you might return.  Good to see you back, even though I only read your posts for a short time before you left. I miss your wicked wit. :)

JY896's picture

@P4TF - I think most here agree that it's a TERRIBLE idea...

...but when did that last stop TPTB? I am terrified at the thought the guy might actually be right... Or worse yet, that he is one of the 'trial balloons'.

Even worse than the concept itself, it's the circumstances necessary for its imposition that scare me.

I just have (increasing) trouble believing that 'they' don't have a longer-term plan. Perhaps my own normalcy bias considers THAT option too scary to contemplate... :-]

PS: That whole bit about The Grand Chairman  of the FEDERAL RESERVE SYSTEM missing the premier monetary policy symposium hosted by the FedResBank of KC due to 'scheduling conflict' has stuck in my craw since the announcement was made.

Is the conference going to be nuked from orbit? Will he be too busy with his duties as head of the World Bank? BIS? IMF?

Something wicked this way comes, to be sure... Check out the brochure.

"Over the years, the symposium has provided a unique forum for the exchange of ideas on important policy issues of interest to central banks around the world. The continuing success of this event is due to the contributions of all who have participated over its long history, including the presenters, discussants, panelists and audience members."

Yeah, the presenters, discussants, panelists and audience members have sure been successful over the years, haven't they... The pamphlet does not say anything about the other 99.999999% of society, though...

Pining 4 the Fjords's picture

JY- yup!

There is only one thing to commend such a system- truly epic opportunities for graft.  Sadly, this is probably all it will take.  SDRs for everyone!

Pining 4 the Fjords's picture


Oh noes!  Fat Finger!

Byzantium's picture

@ Pining

all excellent points as always.

However, the root of the issue is to identify the purpose of the Euro. It is no secret that it is more a political construct than an economic one.

Cynics would say that it is more about control, than about economic prosperity, stability and freedom. From that control, comes subversion of, and economic plunder of, the sovereign state.

Based on what we have observed, if the objective of the Euro was that of centralised control, then arguably it is doing exactly the job assigned to it. 

Bugzy's picture

My bad

Sorry davyboy, did you mis service. You are NOT on my ignore list.

The Vet's picture

Byzantium - GLD drainage

" I believe it is conforming to one of these scenarios, but I don't know which. Are there any other scenarios?

  1. They are winding down the imaginary GLD holdings to the true holdings, through the ostensible guise of withdrawals.
  2. It was always leased gold, and the real owners want it back.
  3. The bullion banks or other big players, are taking it for themselves, at cheap prices orchestrated by themselves on the comex.
  4. It is needed to put out fires elsewhere, and heralds the process of systemic collapse. "

I don't think your scenario number 1 fits, but the next 2, 3, and 4 are almost all certainly true.

When GLD was adding tonnes a day, nobody could see any evidence of where it was coming from, as it didn't seem to impact the physical demand at all.  I believe that the APs had a standing arrangement with one or more CBs to lease whatever the GLD demand required and that leased gold was transferred to the GLD custodian as required in parcels by the APs.  While the gold was leased from the CBs, once it hit GLDs control they had the bars allocated to their name.  The responsibility for the lease remained with the BBs (APs) who leased it from the CBs.

Now the CBs want that leased gold returned from the BBs  (who are also the APs) who leased it and then sold it to GLD for GLD shares which they had already sold short to GLD shareholders. 

Of course the BBs want to get the gold back from GLD at the lowest price possible, therefore they and the CBs have a huge interest in depressing the paper gold price.  GLD trades according to that paper price, but the shares are redeemed for actual physical.

Zoltan's picture

At Least They Are Consistent(ly Wrong)

Silver Lease Rates
May 16 2013 Change
1M 0.1927% +0.0000
2M -0.2855% -0.5150
3M -0.2459% -0.5145
6M 0.4140% -0.0012
1Y 0.6838%


Notice how it has "changed" back to positive but without any "change" in the change column?

The spike is also gone from the chart.  If it is just crappy data why wouldn't the changes show up?

Just documenting it.


the_circle's picture

Owned to the extreme

Lol... that was very funny smiley, halfassedhamster was well and truly owned. There's no flies on you Turd! Now where was I....

Robespierre's picture

@ Davey Boy....

You are entitled to your opinion. As for me, I stand fast because this money printing to support our economy will  not end well that's for sure. Not tomorrow or the next day but in the not to distant future gold will be 3500.00 and silver if the 10 to 1 ratio stands will be 350.00 the oz. 

The members on this site can be a little tough on you when have a difference of opinion, believe me I know, but they do mean well. They are over protective of Mr. Turd because the guy knocks himself out trying to help investors in the metals community. Kind of thankless job when you come to think of it. So, if you would, try not to be so insulting with your comments. If you don't like the work the people are trying to do here don't come back. 

El Gordo's picture

Ignore list

I checked to see who all was on my Ignore List so I could brag about it a little, but when I checked there is no one there.  Any volunteers that want to go on my Ignore List?  I feel left out without having anyone on it.

margaritatime's picture

Redwood, Dc1, DPH, et al

apparently this only half listening to all the parrots out there thing has become a know, "Thing," because look at how i really don't  care, and i still make killer drinks (not with bacon). the thing of it is, you have got to walk in the rain, smell the roses, and smile. if i was so uptight about my positions i would be no better than a few of those poor egotistical bastards in the trading pit (oops, didn't you guys know they lurk this forum?). i hope a few of them see this post and understand that while placing trades for your boss is admirable - their time would have been much better spent on a better education, we are about to see why. fact is though, this party won't be getting underway for a little longer. i just thought i would show early and read about how many times a day the world is ending here in turdville.

who brought the chips? who wants a drink?!  pfft

ancientmoney's picture

@pining4 . . . re: world currency . . .

My reading of the article indicates that each country or region (EU) would continue to use their own currencies internally.  The balance of trade between nations would be settled via Drawing Rights or whatever they decide to call it, as opposed to the dollar, as is done now, mostly.  Each country's gold would back the SDR--not sure if physical gold would ever move; likely not, unless some country got too deep in debt, and other countries called their bluff, and took the phyzz.

The Watchman's picture

Great Chart From Nick Laird-

Cumulative production less cumulative demand = cumulative deficit
Silver demand and production chart

Beastly Stack's picture

Another BS Day

At least enjoy the photos, have a good night everybody!

maravich44's picture

i'll give it a go..



FMOTL's picture

Brit pussies

Occasional visitor here just checkin in. wow we got some right whingers showing up here now cos they lost some fiat. Somebody give that Daveybaby a kleenex and a kuddle, I just knew he had to be a Brit , snivelin and whinin like that, I find the majority of my fellow countrymen a huge disappointment and embarrasment. And here,s a tip to any other Brits who have still got some balls left and hav,nt given up the good fight, Ok , so you know we have VAT (value added theft) on silver here , well that shit, I aint paying those war  mongering criminals  the Rot childs and their owned politicos a dammed red cent, all you gotta do my friends is check out your local cash for gold (and silver) outlets , build a rapport with the owner and regularly take the supply off their hands at the scrap price and man you get some cool interesting stuff, this country has history and there is still plenty of good sterling silver floating around flatware (cutlery), cig cases, vestas cases, sports medallions, commemoritive issues (big in the 70,s), pre 1920 sterling coins (all our money was sterling silver up to 1919 hence pound sterling) , lots of great vintage and modern jewelery which you can ebay or market at a good profit at least double these lovely cheap prices the banksters are giving us (thanks Blythe et al , I love ya for that). Taking scrap off the market is as good as buying new because you are preventing it getting back into the system via refineries and by not paying the theft tax you are getting more metal for yourself and by marketing it at a profit you are spreading the silver love back to the people who may not have a clue about economics or anything like that but just want some beautiful jewellery at cheap prices so it keeps it circulating and everyone wins, you sell what you can and stack the rest. Beautiful !!

GuerrillaCapitalist's picture

@s1lverbullet Re: Random Comment: Fiat Currencies

We in the US live amongst total idiots. I gave up talking about economic policy, politics and the state of the nation a good while ago when I realized the world I had returned to was busy hiding from reality using any diversion at hand.  Now I'm only interested in taking care of my family and say fuck off to the rest of the fools.

¤'s picture

killer drinks etc.

Margarita gets it....seeing the sun through the showers or smelling the roses instead of dwelling on or worrying about the thorns/barbs goes a long way everyday. That's where I'm at.

Glad to see you back and in the mix/mosh pit. I'm taking it as a tiny sign that your  anticipating something different/unexpected on the intermediate horizon.

A drink sounds nice right about now. 


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