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

Founder
turd [at] tfmetalsreport [dot] com ()

  273 Comments

ag1969
May 16, 2013 - 2:23pm

Stock

I have just been to KWN. Gold will be at 943,000 dollars/oz in one year. It is scary, wondering if you are right all the time about holding real money vs. Ponzi Coupons. Hope your wife cheers up Stock! My wife is a prepper and a stacker, I guess I am lucky in that regard.

Stock_Canines
May 16, 2013 - 2:30pm

ag1969

She is patient and of stacker mentality, but she worries a lot. A little high strung, but a lovely woman. Having a 2 and 5 year old only adds to her stress. All the best. I look forward to 943,000.

Cry Me A River
May 16, 2013 - 2:30pm

Potential Silver Standing For Delivery Has Increased To 39.5%

Even though some of those standing has declined by 8 contracts yesterday, those standing as a percentage of Comex silver registered inventories has increased. This is due to the drop in the registered category by over 1.1 million oz. in the last two days.

May 16, 2013 - 2:36pm

The Bernank - crazy like a fox...?

I wanted to highlight an article posted overnight in the last thread by Bohemian -- I agree that it's VERY interesting, but cannot yet figure out whether its thesis holds water:

The Bernanke Agenda - It Isn't What You Think It Is

Inconceivable! High Quality

"As early as 2008-09 there was a renewed interest in a plan to usher in a new global monetary system. It is my opinion that Bernanke saw the merit in such a plan and may have been resolved to the idea of orchestrating events in such a way that the ultimate outcome would be a relatively painless transition to a new global monetary system.My thesis here is that everything that has taken place since then has been orchestrated to accomplish that end [...]

Consider that Bernanke has announced he won't be in attendance at Jackson Hole this year due to a scheduling conflict. One wonders what that conflict might be that would pre-empt the single biggest event of the year for a central bank head. It certainly can't be an emergency as he announced that he wouldn't attend several months before the event.

What possible reason would he have for announcing he would not attend? Maybe he plans to be pre-occupied selling Congress on the need to adopt the new system or maybe he simply plans to take the lead in introducing and selling the system to the world and the timing for this event has already been set and conflicts with Jackson Hole. I do think the stage is set and now is the time to begin the final chapter in the process of orchestrating an epic and positive shift that I see as resolving many issues that have held us captive in a secular bear market that is well into its second decade."

The downside parts of the thesis?

1) "I think there are a lot of signs emerging - and at a rather rapid rate - that suggests the Fed and Congress are about to pull the rug out from under the markets."

2) "The truth is we need a new monetary system that will correct the inherent flaws of the present system. At Bretton Woods Keynes told us the system as configured would fail.It did fail so Keynes was right. Keynes believed that a global central bank and a global non-sovereign currency was the preferred solution. Keynes proposed the bancor and his proposal became Britain's official position on the matter at Bretton Woods."

I have no idea who the author, Joseph Stuber is, it seems he is another 'dope with a MacBook' (and I mean that in the most neutral, non-offensive way possible). But that is some intriguing hypothesis, and not necessarily contradictory to what has been circulating in this collective, group-mind of TFMR lately.

Supporting points:

- increasing proxy warfare and territorial brinksmanship

- BRI(II)CS activity / increasing coalescence in terms of currency swaps, trade union

- Asian security bloc solidified/expanded

- PM shenanigans going 'full retard'

WTFDIK. But some things I DO know:

- people who presume to know what's best for me and society, and execute policies proclaimed (by THEM) to be on our behalf an for our benefit without informed consent, buy-in or legal mandate are NOT allies or friends, and

- "It is said that if you know your enemies and know yourself, you will not be imperiled in a hundred battles; if you do not know your enemies but do know yourself, you will win one and lose one; if you do not know your enemies nor yourself, you will be imperiled in every single battle." -- Sun Tzu

- corollary: do not underestimate the enemy, its capacity to deceive or the resources at its disposal.

For a full gallery of (slightly disturbing) images like the one below, peruse williambanzai7's gallery of bearded phenomena.

PS: Short edit to point out that 'contrary' thinkers rarely if ever present data, supporting material or reasoned rationale, let alone possible AND plausible alternatives to the 'kooky', 'extreme', 'tinfoil-hat-wearing', 'batshit crazy' PM bugs, 'groupthinkers', 'doomsayers' and assorted 'freaks' on this site. They are content to stir s#!t up, attack character or style, replay endless loops of fallacy, and act all butt-hurt when their style, demeanor and lack of coherent content is attacked.

THAT is why they are considered trolls, and thus unwelcome -- NOT because of any specific argument that is bearish or contrary.

If a 'newbie' wanders onto the site and is put off by economic, social and monetary viewpoints that span the spectrum -- well, sorry, but it would appear they were not ready to open their eyes and study reality.

Prize Fighter
May 16, 2013 - 2:39pm

Larry, that's spot on.  I

Larry, that's spot on. I said a couple of years ago on ZH, "If a country goes bankrupt in a forest and nobody admits it, is it?" It takes two sides to be bankrupt right? Who can collect?

Facts or prima facie evidence of default does not matter as long as perception is truth. Back to the soundless forest of Acorns and nuts.

Howard Roark
May 16, 2013 - 2:44pm

@MOPE and change

I didn´t read your comment but it sure looks like it. Mentioning Galt and all.

Salut,

HR

Larry
May 16, 2013 - 2:47pm

MOPE and CHANGE

Could not resist using another BO inspired title. Turd, your headline and lead today is truth well told.

The thing that is confounding about being on the beat up side of MOPE is that we see nobody in the mainstream that is contradicting it. Maybe a zinger here or there, but nothing consistent or particularly noteworthy. The Ponzi's That Be write the script. The mainstream muppets read it. The puppets in Washington are aligned, obedient and well paid to get along and play along. The regulators don't regulate anything except their own wonkish distractions and excuses around workload and too-small budgets.

We all know these things, but the entitled and the busy, uniformed alike are not aware of any of it. The former are lost in free stuff and the latter feels something is not right but can't identify why they are becoming more broke every day other than "the price of gas, food, electricity, medical and everything else is going up".

But the real problem is not the fact that free enterprise believers and freedom advocates (as well as pm investors) have been losing ground. It's that we don't have the microphone. TPTB bought it and owns it. They control it and will only allow it's use for "news" items that fall within their range of acceptable for the cause with a little pseudo verbal jousting by the politicos thrown in just to keep it seeming real. In my opinion, the whole IRS v Tea Party thing is a red herring. Same with the slap-on-wrist bank "scandals" that dole out comparative paltry fines with no guilt attached.

We are living in times of one-way messaging from Big Brother, no honest journalism (outside of the internet, certainly not in mainstream), sleeping masses, criminal banking cartel and hardly anyone outside of the minority that sees this... nobody can grab the microphone to expose the Matrix. Even if they did, they'd better be able to be convincing and credible in a 5-minute sound bite, otherwise the complexity and learning curve required to connect the dots will go over the collective heads of the distracted and asleep ones. This is a real dilemma.

For change to happen in our economy, we need a change in our culture. We need to simplify and return to the truth in God's Word, then until His Kingdom is established on earth as in heaven, we should reapply the Constitution, which is imperfect but far better than anything else in this system of things in governments and nations today. Both of these movements will be fought tooth and nail by the ones I've already mentioned. It will also be fought by lobbyists, lawyers, CPA's, brokerage firms and insurance companies who require complexity to do their thing. As Turd says, "that's a lot".

But for starters, we just need some articulate and credible someone to take hold of the mass-media microphone and speak the truth, not in a harsh way as they do in Washington or shout loudest as they do on the talk/opinion shows, but in a loving, caring, firmly confident, peaceful, powerful, intelligent manner. Does that person even exist in politics or business today? Or have they gone the way of John Galt?

edit: had to return and add a most major element to the next-to-last paragraph that I left out in my haste.

Larry
May 16, 2013 - 2:50pm

Howard Roark

Just now finished yours (after tweaking mine) and noticed how similar our message or subject was almost at the same time. Enjoyed yours. Where is Galt anyway? And will he return?

ForWhomTheTollBuildsStock_Canines
May 16, 2013 - 2:50pm

@Stock_Canines

Thanks for sharing your process. Im going through a similar crisis though I only have "significant small" amounts tied up in PMs and am still ahead in Bernanke-Fun-Bucks. That said, watching PMs vs S&P is worse than any money loss could ever be.

Lately I have been trying to put together a good explanation for why PMs are falling. I probably dont have time to really hash it out here but here are a few disjointed points which I will argue as if I believe them even if I'm unsure:

- The new bail-in regime will heavily supplement QE and (almost) replace it. They will still need to print to fund the deficit but the real money needed by big financial institutions will now come from whoever needs to be reclassified as the institution's "investors". TPTB know that sufficient funds exist to balance the books of the big players in this way or they wouldn't go to the trouble of changing the rules on a worldwide basis and risking bank runs.

- The current rate of money printing while ferocious, is not quite enough to offset the money being destroyed by defaults or not being created because of a lack of new lending and general economic activity. Thus real interest rates are not necessarily as negative as we think they are.

-We assume that "they" will never let deflation take hold, and I agree that they would never allow a 2008 style collapse to go unchecked. But thats only because it would hurt the banks that own the fed. Would they *really* stop deflation at all costs if they rewrote the laws to make depositors into "investors" and then moved those investors below everything else in a bankruptcy (like they did with derivatives). What if they could "fail" while ending up owning all the real assets in the end? Bankruptcy only sounds horrible to you and I as individuals but to a firm, it is a simple reorganization, and even "a firm" doesn't have interests, only the small number of individuals controlling it do. The above is not at all thought out, but I am attempting a little lateral thinking. According to the Creature From Jekyl island, the Bank of the United States once engineered a depression just to unseat Andrew Jackson who was their political enemy.

The sickest irony of all is that if all of the above is true, what are you going to do? hold money in a bank or brokerage account? The bail in regime makes clear what will happen when the S&P gets volatile and someone's derivative book explodes. Hold paper currency? Printing is still printing... Stocks at all time highs? CDS that won't payout when the default is ruled not to be a default by the people who issued the CDS? Bitcoins when they can cut off your ability to convert back into the currency of the realm?

I don't know, all of the above makes me glad to own some phys. I get the feeling some people here went in BIG. Bigger than Santa, or Kyle Bass or anyone else told them to go. They have the money loss to worry about too. For me its just "mental anguish". Luckily I am very busy these days or I would have to dwell on it even more.

CcanuckNonoverlappingMagicCereal
May 16, 2013 - 2:54pm

Lapper

Name a few of them "journalists"....do you mean msm whores? the ones now trying to sell that "recovery" ???

Do you know Million Dollar Bonus, from Zerohedge?? I find you almost as entertaining, you still need some work though.

Try going 3/4 sarcastic 'retard' and 1/4 'I'm not a troll, just trying to ask questions retard' ....

Your game is gett'n old....give us something new...It will help get you off some of the ignore lists!!!

Thats how you get paid..right? By how many responses you get??? ...lol

Just Try'n to Help

Ccanuck

P.S Hey Gold Dog you got a raffle or something brewing?

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