The Audacity of MOPE

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.


About the Author

turd [at] tfmetalsreport [dot] com ()


May 16, 2013 - 8:44pm

A miner that yields


Resource 161 million Oz

Production 1 million Oz Cost $1000 Oz

What is interesting is It's peak was $43.80 on the 4th Jan 2011

Gold on the 4th Jan 2011 was $1385 This share now trading at $14.80 and Gold trading at $1385

Production costs for the period marginally down.

You can understand why all small miners are on the floor and will remain while investors want yield not growth.

However this is a premier producer , one could speculate , looking at the current share price and the price in 2011 when the price of gold was at the same as today, 69% of the price existed purely on the expectations associated with the gold price.

So if that large % of price was expectation in a physically producing stock with a massive resource , how much of the Gold price was built on Expectation, that's why Gold is correcting.

Here is the kicker this stock topped out 7 months before Gold and I'll bet you a carton of Moet to a carton of bear this thing bottoms before the physical.

Just a thought

Fred Hayek
May 16, 2013 - 8:44pm

Regarding the phony deficit projection earlier in this thread

Over at, Karl Denninger had a good laugh at that comical deficit projection of 600 something billion dollars for this fiscal year. It's so risible because Denninger did the simple addition and subtraction to show that it's already about $762 billion so far and right on track for another $1.2 trillion for the fiscal year.

It's kind of tough to run a deficit of $600 billion for the year when you're already in the red $762 billion after about 7 or 8 months of the fiscal year. So, yeah, you've got a better chance of being hit by a chunk of anti-matter than our government and politicians becoming responsible, trimming the deficit and alleviating the need for QE.

A person might innocently repeat that comical CBO projection or he might be knowingly spreading a lie. Maybe Stock-canines had no idea how silly that number was. Either way that number's pathetically far from the truth. Funny they never seem to miss by that much in a way that paints a negative picture. I wonder what that means.

May 16, 2013 - 8:46pm

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.

Video unavailable

Fred Hayek
May 16, 2013 - 8:56pm

Oh, and for all the nitwits who think we're all cultists

My previous post has information from and a link to Karl Denninger's site, Karl has a lot of valuable information there, particularly common sense takedowns of the manufacturers' reports and the BLS data. But he's decidedly *not* a precious metals guy.

So . . . do I go over there and make snickering comments when the metals go up and act like some of the accused trolls do here? No. I just read and learn what I can. Zerohedge was the same way for a long time before recently. Now they don't spew that crap about risk-on! risk-off! They actually comment on the absurd manipulation. Did I try to antagonize the Tylers before they admitted it? No.

I suspect that most everyone here also frequents sites with which they have some partial or even fundamental disagreement. You can learn things which are useful, even in very limited aspects of those sites. Showing up here only when you can irritate the majority of the posters and consistently acting like a provocateur is not trying to learn anything or be social. It's either paid work or symptomatic of a regrettable mindset.

Nico Romanov
May 16, 2013 - 9:11pm

Reversal Day

Today's low of 1368. for the June contract should be the low for this correction.

ForWhomTheTollBuilds Nico Romanov
May 16, 2013 - 9:37pm


"Today's low of 1368. for the June contract should be the low for this correction." Pourquoi?

May 16, 2013 - 9:44pm
Turdle GG
May 16, 2013 - 9:44pm

@ Nico Romanov (aka Bo Polny?)

We all hope you're right, of course.

May 16, 2013 - 9:45pm


Well said Fred...a hat tip to you.

maravich44 Green Lantern
May 16, 2013 - 9:51pm
The Watchman
May 16, 2013 - 9:51pm

Turd,I Was Reading That...EXCELLENT ARTICLE

"How about a few facts:

At the time of the large sale on April 12, the gold price was breaking through $1,520.

4 million ounces at $1,520 is roughly $6 billion in notional value.

40,000 contracts would have required about (40,000 X $5,940) = $237.6 million in initial performance bond requirements, if the traders were Spec members. (CME Group subsequently raised Spec initial margin to $7,040 for the close on April 16.) If the big seller was a commercial hedge member, then it would have required (40,000 X $5,400) = $216 million in initial bond requirement. (CME Group subsequently raised Hedger initial margin to $6,400 for the close on April 16.)"

Ccanuck TF
May 16, 2013 - 10:02pm

Turd's Link Re: Position Limits

Excellent read, written, so the unedumacted can understand...

I found this article asked some very good questions about position limits...Great stuff as usual Turd!

This Site is AWWWWWSOME!

A Well Informed


May 16, 2013 - 10:12pm

Harvey's Up!

Harvey: The Comex registered or dealer gold plummeted to 1.668 million oz or 51.88 tonnes. The GLD reported a huge loss in gold inventory of 5.71 tonnes which followed yesterday's loss of 4.52 tonnes of gold. The SLV inventory of silver also lowered by 1.545 million oz. • Bill Holter (Miles Franklin): The world is sitting on more bubbles, bigger bubbles than ever before. If you added together ALL of the bubbles in the history of mankind (South Sea, Tulip, 1929, etc), they would be a percentage, a VERY small percentage of the bubble(s) we have blown and are living with today. • World Gold Council: global demand for gold in Q1 2013 was on the increase before the COMEX raid on April 15th. This is a clear indication that the fundamentals supporting a strong price for gold in the long term remain. • Marcus Grubb: global demand for gold in Q1 2013 was on the increase before the COMEX raid on April 15th. This is a clear indication that the fundamentals supporting a strong price for gold in the long term remain. GoldCore: The current gold price continues to appeal to investors and demand for all types of gold remains robust. There is no doubt that the next World Gold Council Gold Demand Trends report will surpass all the key benchmarks. Premiums for gold bars rallied to all-time highs in Hong Kong and Singapore on Thursday after bullion's steepest drop since its April sell-off fuelled another round of buying, constricting supply. The latest price fall, which lopped about $80 off the price of gold in just five sessions, has renewed physical buying interest, particularly in China. • DS: India would be buying, except they can't legally import any, and the supply deficit has not gone on long enough for smugglers to establish supply lines, even if the smugglers could find it to sell. • Andy Hoffman: if the Euro and Yen continue to plunge, it will DESTROY the U.S. manufacturing industry more; not to mention, those nation's that peg their currencies to the dollar...ANY attempt at "austerity" will only make things worse. The sad FACT is there NEVER was - and NEVER will be - a "recovery" until the catastrophic excesses of four decades of GLOBAL MONEY PRINTING are excised. • Keith Barron: "What you are seeing in the gold and silver markets right now is preposterous. We've seen the gold market smashed below $1,400 once again, and yet the premiums in Shanghai for physical gold will cost you $50 over the spot price. It will cost you even more if you want physical gold in Vietnam right now."

The Harvey Report!


May 16, 2013 - 10:14pm

Silly Ccanuck

You misspelled unedumacated. Fixed it for ya.


PS Nice to see some more stackers here from north of the border.

Ccanuck Zoltan
May 16, 2013 - 10:28pm


The error is a product of a fine grade 12 ed..edum..edumakashun?

Cheers Eh!

May 16, 2013 - 10:36pm

grandfather clause

Good article.....I've been under the impression that there are still no position limits for those large old entities who get to enjoy that distinction legally much to everyone else's chagrin.

The CFTC I believe ruled on the legality of it well over a year ago I think and upheld that right (gag!) for the cartel. Those are the rules (for them) even if it sucks for everyone else. House rules, play alongside them within those rules or get crushed but not surprised.

It's business as usual, year after year, decade after decade, going back many, many decades.

The rule of law is dead for TBTF's/cartels. In a just and fair US system (lol) the IRS head and all others should be charged and then jailed after a fair/impartial trial. If anyone of us in private business discriminated against a certain race or gtoup of people and extorted money through threats of punishment or jail we'd be in jail and fined.

Instead, the head of the IRS gets fired and gets to retire and the Predsident says it needs to be looked into. Huh? What about arrest?

The rule of law is dead and society will breakdown in some manner as yet unimagined (non-apocolyptic, sorry) because so many other similar and worse miscarriages are all around us. The breakdown of civility/integrity being one of the first. Already happening.

Grandfathered legal limitless positions in commodities are the least of the US's problems even if it sucks for us...and it does. Play the game as it exists, like it always has, and expect it to continue and worsen.

The Watchman
May 16, 2013 - 10:52pm
waxybilldupp Northern Border
May 16, 2013 - 11:07pm

Northern Border ... got gas?

I noticed the gas prices on my way home tonight. WTF? Went from $3.82 to $4.29 overnight. I expected to get on the 'puter and discover somebody turned a chunk of Syria to glass. Nope! (That's a good thing.) Just a little inflation that doesn't count because it's food 'n fuel which is too "volatile" to include in the calculation. Not that any of us Pilgrims have to buy food 'n fuel every frickin' day.

Meanwhile, back at the Comex, PMs have little value. Why would they? Just money. Who needs it?

Am I getting a bit jaded? Pretty much. Happily, my former stash, which now lies at the bottom of a nearby river, would be up about 200% if it was still easily to visit. Getting into PMs heavily about 10-12 years ago has some merit if I could find the stuff again. Note to self: Don't take stash on a picnic via canoe. Can't possibly end well.

Eyes open; no fear ... wax off

The Watchman
May 16, 2013 - 11:11pm
May 16, 2013 - 11:14pm

Nothing like a Dip in PM's.....

.....To bring the Trolls out in force. Yesterday was unbelievable. Can I recommend an IU Forum to which all the usual suspects can be diverted to and where they can all play with themselves?

Gold Dog
May 16, 2013 - 11:39pm

I have not read one word of the above...

... but, I am pretty sure it's an argument about the number of loading docks at the Denver mint.

I am just stopping by to remind my fellow Brothers that the shit starts Sunday night......

Keep your powder dry,...,or be left behind on "THE EVENT OF THE HALF-DECADE!!!!!"


Your friend,

This will be Cool Dog

EDIT- I hat tipped myself, sorry. This is the first time I have ever done something like this and I am cooked up for it.

It has, everything!,,,never mind.

May 16, 2013 - 11:46pm


She could fix the problem with her own money. Another "Champagne Socialist" milking the system in the true French Marxist mode.

May 16, 2013 - 11:46pm

Gas went up?

I'm only paying $5.55 a gallon here in British Columbia.

May 16, 2013 - 11:51pm

UK Gas

About $8 a Gallon. First!!!!!

cliff 567 Hagarth
May 16, 2013 - 11:56pm

Affidavit To Alabama Supreme Court

I found the link to this on BIN.

I'm sorry if the body thinks that the eligibility of the man serving as president does not affect the metals trade.

I read every word, I noticed numerous grammatical errors. I found that odd.

May 17, 2013 - 12:09am

Hiding Cash in Pretty Baubles

16 May 2013 Last updated at 06:40 ET

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Christie's art sale 'highest in auction history' Basquiat's Dustheads went for $48.8 (£32.1m) during Wednesday's auction

Related Stories

A contemporary art sale at Christie's in New York has made $495m (£325m), the highest total in auction history.

The sale included works by Jackson Pollock, Roy Lichtenstein and Jean-Michel Basquiat.

The sale established 16 new world auction records, with nine works selling for more than $10m (£6.6m) and 23 for more than $5m (£3.2m).

Christie's said the records reflected "a new era in the art market".

The sale featured works from institutions and private collections, including that of the late singer Andy Williams.

Paintings from the Williams estate included Edward Ruscha's Mint, Willem de Kooning's Untitled XVII and Basquiat's Furious man.

The top lot of Wednesday's sale was Pollock's drip painting Number 19, 1948, which fetched $58.4m (£38.3m) - nearly twice its pre-sale estimate.

Pollock's drip painting Number 19, 1948 fetched $58.4m (£38m)

Lichtenstein's Woman with Flowered Hat sold for $56.1m (£36.8m), while another Basquiat work, Dustheads, went for $48.8 (£32.1m).

All three works set the highest prices ever fetched for the artists at auction.

Christie's described the $495,021,500 total - which included commissions - as "staggering". Only four of the 70 lots on offer went unsold.

Brett Gorvy, head of post-war and contemporary art, described the amount as "the highest total in auction history".

"The remarkable bidding and record prices set reflect a new era in the art market," he said.

Steven Murphy, CEO of Christie's International, said new collectors were helping drive the boom.

"Twenty-five percent of our buyers last year were new to Christie's," he told Reuters. "And four or five of the key lots tonight went to people who have never bought here before."

Mark Rothko's Untitled (Black on Maroon) from 1958 was the fourth most expensive sale, raising $27m (£17.7m).


Flawless diamond sells for record $26.7m at auction

A flawless diamond has set a world auction record, selling for $26.7m (£17.5m).

The rare Botswana-mined 101-carat diamond was sold at a Christie's auction in Geneva.

It was bought by the Harry Winston firm and beat the previous record set by the 76-carat Archduke Joseph diamond, which sold for £21m (£13.8m) in November 2012.


High end Numismsatics are charging forwards as well, I believe that there is an ETF invested in them its pushing the prices higher, as well the Bundesbank has a currency collection of 388,000 items only the 4th largest collection in Germany.

May 17, 2013 - 12:10am

US gas prices

Rising Gas Prices: A State-By-State Look

Prices still are lower than at this time last year, though

May 16, 2013, 8:09 am EDT | By Alyssa Oursler, InvestorPlace Assistant Editor

Temperatures are rising, and so are gas prices.

The good news — if you want to be optimistic — is that the cost of a gallon of regular unleaded gasoline is more than a dime cheaper than it was a year ago. But compared to a month ago, consumers are shelling out at least 6 cents more at the pump — a total of $3.59 per gallon. In fact, the last few days have added up to the largest weekly increase since February.

Why? Well, Fox Business News reports that:

“Higher crude oil prices are driving up the price of retail gasoline, especially in the Midcontinent and West Coast regions where tight supplies and refinery maintenance are putting additional upward pressure on gas prices.”

This is evident by the glaring red one the left-hand side of the map. While California is used to having gas prices above $4 thanks to tight regulations, Washington and Oregon don’t usually fall into the highest price slot.

One thing that hasn’t changed, though, is that southern states still remain the cheapest. In fact, Tennessee and South Carolina were the cheapest two locales a month ago as well, and their prices have actually moved downward during the past four weeks.

Below is a state-by-state roster of average gas prices from AAA’s Daily Fuel Gauge Report, listed from most to least expensive:

State Price State Price State Price
Hawaii $4.343 Colorado $3.669 Maryland $3.465
Alaska $4.074 Kansas $3.662 Delaware $3.463
California $4.058 West Virginia $3.619 Montana $3.452
Illinois $3.976 South Dakota $3.617 New Hampshire $3.450
Oregon $3.951 Oklahoma $3.612 Arizona $3.442
Washington $3.950 Nevada $3.594 Georgia $3.426
Minnesota $3.853 Rhode Island $3.585 North Carolina $3.424
North Dakota $3.828 Idaho $3.584 Wyoming $3.412
Wisconsin $3.791 Vermont $3.570 Texas $3.402
D.C. $3.762 Missouri $3.546 New Jersey $3.385
Michigan $3.760 Maine $3.538 Arkansas $3.379
Indiana $3.758 Kentucky $3.534 Virginia $3.365
Connecticut $3.756 Utah $3.529 Louisiana $3.317
New York $3.729 New Mexico $3.519 Alabama $3.285
Nebraska $3.715 Massachusetts $3.516 Mississippi $3.284
Ohio $3.704 Pennsylvania $3.478 Tennessee $3.254
Iowa $3.700 Florida $3.468 South Carolina $3.242
May 17, 2013 - 12:15am

UK roads

Good thing Gas is So high in the UK otherwise the traffic would look like this.

Rui Pining 4 the Fjords
May 17, 2013 - 1:47am

@Pining - D@mn straight, you nail it

Quote: "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. "

That's what we need to tell all these Euro bulls out there, "Wake the hell up and smell reality." Economy growth has to be organic and left alone. Any time you let a clueless central planning agency force-feed economy with some kinda stimulus you'd create an intended bubble that would not exist were it not this undeserved stimulus money. This is why every time I heard someone talking about the need of "2% inflation" I wanna puke.

May 17, 2013 - 1:52am

Was Einstein an Economist?

Friedman, Krugman, Einstein:

Which guy knew what he was talking about?


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Key Economic Events Week of 3/25

3/26 8:30 ET Housing Starts (Feb)
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3/28 8:30 ET Q4 GDP final guess
3/28 10:00 ET Pending Home Sales (Feb)
3/29 8:30 ET Personal Income (Feb)
3/29 8:30 ET Consumer Spending and Core Infl. (Jan)
3/29 9:45 ET Chicago PMI
3/29 10:00 ET New Home Sales (Feb)

Key Economic Events Week of 3/18

3/19 10:00 ET Factory Orders (Jan)
3/20 2:00 ET FOMC Fedlines
3/20 2:30 ET CGP presser
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Key Economic Events Week of 3/11

3/11 8:30 ET Retail Sales (Jan)
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