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The Audacity of MOPE

275
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 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.

TF

About the Author

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

  275 Comments

Zol Tan · May 17, 2013 - 10:52am

Sorry for this but Zoltan is like a dog with a bone.

Silver Lease Rates
May 16 2013 Change
1M -0.2818% -0.4745
2M -0.2855% -0.5150
3M -0.2459% -0.5145
6M -0.1401% -0.5553
1Y 0.1399% -0.5444

Okay this is what it is currently showing. Here are snapshots of the last three days of silver rates (saved pics so they won't change).

See anything wrong with this picture?

Z

NonoverlappingMagicCereal · May 17, 2013 - 10:53am

https://pbs.twimg.com/media/BKd6iiZCYAAM7fC.jpg:large

And if you applied that same shadow stats inflation data to a gallon of milk, it should be over $30. Perhaps we should throw all our cash into dairy futures?

The jury is still out on shadowstats inflation metric for the last 5-10 years, but if you go back any further than that it's complete bullshit. No wonder they hide the actual numbers behind a pay wall.

Hammer · May 17, 2013 - 10:57am

Turdville. Free thinking in a world of high noon politics. When Bush the little one said "You are either with us or against us," I knew something had gone weird. I mean that was a statement that went around the entire world. Think about that for a second regardless of political preference. that was a huge call.

I remember immediately after 9-11, a South African (Africaaner) said to me around a barbecue on the beach that the 9-11 event would be seen by history as the equivalent of the 95 Lutherian theses posted on the door - not massively important at the time but a major turning point in history when viewed from many years after the event. Interesting angle.

Leaf Nation · May 17, 2013 - 11:01am

Nick Barisheff President of Bullion Management Group sent me a signed copy of $10,000 Gold. I have some gold porn to read this weekend while sitting on the deck. Heck, I would even take $2500 gold.

To all Canadian Turdittes on this board, have a great May 24 long weekend

Silver66

Peter Forth · May 17, 2013 - 11:03am

It would take 5 years of saving money to replace what has disappeared from my accounts in the last 3 months. And it's still dropping....

Hammer · May 17, 2013 - 11:05am

Meanwhile Tarrantino is just a fake copy of the real real badass spaghetti westerns

Video unavailable
· May 17, 2013 - 11:09am

Foam hat for lunch??

Mr. Fix · May 17, 2013 - 11:11am

 As the “endgame” continues to play out, the price of gold and silver continue to get hammered.

 I suspect that this particular waterfall event will be rather large, I just took a look at the mining stocks,

 and they have also been hammered. Traditionally speaking, this has often precipitated a large selloff in the metals.

 Once again, I say with certainty, these markets will never recover in their present form.

 There will be no significant rise in the price, until after a collapse.

Keep stacking,

this will not end well.

Hammer · May 17, 2013 - 11:13am

Yeah OK, this is from Tombstone but this is badass when he hits he headshot :)

Video unavailable
Leaf Nation · May 17, 2013 - 11:18am

Just got this report from the Capital Group discussing the U.S renaissance in energy

https://thecapitalgroup.com/ca/pdf/en/public/TLV_Spring_2013.pdf

Silver66

Ancient · May 17, 2013 - 11:19am

Dow in October 2007 was 14,165

Dow today is 15,286, up a little less than 9% since then.

Gold was $790 in Oct 2007

Gold today is $1360, up 72% since then.

Silver was $14.30 in Oct 2007

Silver today is $22.25, up 57% since then.

Note: The Dow is at all-time highs, gold is at 68% of its previous high. Silver is at 40% of its previous high. 

Are you a mo-mo investor, or a value investor?

Some famous investor said "buy when there's blood in the streets." Gold and silver are quite bloody, so seems a good time to be buying, all the way to (paper) zero. 

It appears the PTB have completely fooled the general peeps. They will have nothing to protect themselves when it all goes poof. I guess that's why DHS has 1.6 billion rounds of ammo at bthe ready.

Gold Dog · May 17, 2013 - 11:20am

....Gold at $40+ higher than the April low.

Silver, not so good.

Dog

NonoverlappingMagicCereal · May 17, 2013 - 11:20am

Do not eat a foam hat, for the love of god.

Bohemian · May 17, 2013 - 11:28am

I hope you won't do it, or -- that anyone here, in his right mind, would expect you to do it. In English, you call it something like -- a figure of speech, right? (sp) If everybody would do what he says "in figure of speech", there will be no one left around. I mean, just think what would happen, if everyone would go and F it. ;-) or F me, F you, and F everybody else...

Edit: let me make a statement (for a change). If anyone says that you shall eat that hat, he can go and F himself. cool

monkry TF · May 17, 2013 - 11:29am

Not there yet, but eat a yellow sponge cake hat if you must, we'll get the same chuckles out of it.

Not that I think you'd ever eat foam.

Nor do I think your wife would allow it, unless your insurance levels make her drool.....

ctob · May 17, 2013 - 11:35am

Not today, but sometime soon. I have been expecting something around memorial day.

Chad · May 17, 2013 - 11:36am

Quotes from Societe Generale Cross Asset Research:

-Recent price action and underlying investor activity suggest that bullish undercurrents in silver are starting to take effect, and prices are likely to trade up to and around $35/oz over the coming months.

-Silver has already broken above the short-term trending line of resistance defined by falling highs. The gold:silver ratio is also close to breaking down through its recent supportive trend, and this should be an early signal for renewed strength in silver.

source: FXWire Pro - Research & Analysis

Sitting in truck waiting for an appointment, pulled up netdania mobile and this showed up in news.

Chad · May 17, 2013 - 11:42am

* Russian Central bank gold/forex reserves $520.4 bln in latest week vs $533.5 bln in pvs week 

source: FXWire Pro - Central Bank

16.May 05:57:00

Anyone want to calculate how many oz and see if they gained any phys with a lower price?

tmosley s dewald · May 17, 2013 - 11:52am

@opticsguy: That is a pretty convincing chart. I'd like to see data on areas where glyphosphate are and are not used and seeing if the autism rates there match up. The chart's correlation seems almost too perfect. People do goalseek these things sometimes. Especially this Dr. Mercola, a fellow who has been harshly criticized by many in the scientific community and has been featured on Quackwatch. But then, maybe that is a conspiracy organization.

Not that I wrote the first three sentances BEFORE reading the article and seeing who wrote it.

unthought known Chad · May 17, 2013 - 11:55am

a bit out of date one would think

Chad · May 17, 2013 - 12:01pm

"And if you applied that same shadow stats inflation data to a gallon of milk, it should be over $30. Perhaps we should throw all our cash into dairy futures?"

I would wager that at some point in the not to distant future,that all commodities will catch up. I milked cows in college, twice per day, and for what milk brings today, I would hate to be a dairy owner. Wonder what healthcare costs would be if indexed for inflation?, college degree, autos, home prices

My mother tells me she had to sell her horse in the sixties ($450), to pay for my birth, includes all care associated. My last child was born in 2002 and we did not sign up for maternity (we THOUGHT we were finished, but God had other plans), had to pay all expenses. Wow, $10,000 or more by the time all said and done. Not a bad investment from then til now in healthcare, 20x bagger +!!!

Chad · May 17, 2013 - 12:01pm

"And if you applied that same shadow stats inflation data to a gallon of milk, it should be over $30. Perhaps we should throw all our cash into dairy futures?"

I would wager that at some point in the not to distant future,that all commodities will catch up. I milked cows in college, twice per day, and for what milk brings today, I would hate to be a dairy owner. Wonder what healthcare costs would be if indexed for inflation?, college degree, autos, home prices

My mother tells me she had to sell her horse in the sixties ($450), to pay for my birth, includes all care associated. My last child was born in 2002 and we did not sign up for maternity (we THOUGHT we were finished, but God had other plans), had to pay all expenses. Wow, $10,000 or more by the time all said and done. Not a bad investment from then til now in healthcare, 20x bagger +!!!

Chad · May 17, 2013 - 12:05pm

Damn, didn't look at date, sorry. You would think they would purge. Really sucks that is one of two news stories on netdania.

NonoverlappingMagicCereal Chad · May 17, 2013 - 12:09pm

I would wager that at some point in the not to distant future,that all commodities will catch up. I milked cows in college, twice per day, and for what milk brings today, I would hate to be a dairy owner. Wonder what healthcare costs would be if indexed for inflation?, college degree, autos, home prices

I don't know about healthcare or college degrees (which, fair point to you, have increased considerably above inflation), but according to shadow stats in the 1970s a cheap car cost about $60,000 and the median home was around a cool $1,000,000 in 2013 dollars. Don't take my word for it, though, take the data from their inflation calculator (you'll have to compute the actual number from the ratio of the graphical CPI and SS depictions) and apply it to whatever historical price data you want.

So no, those prices won't catch up to shadow stats. Ever.

tmosley · May 17, 2013 - 12:32pm

Stratajema has been added to my ignore list.

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.

NonoverlappingMagicCereal · May 17, 2013 - 12:37pm

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.

Derrick Michael Reid · May 17, 2013 - 1:18pm

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
Ground Control to Major Tom
Derrick Michael Reid · May 17, 2013 - 6:32pm

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
Werewolves Of London
Werewolves Of London

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
Derrick Michael Reid · May 17, 2013 - 7:32pm

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
Video unavailable
Derrick Michael Reid · May 17, 2013 - 8:15pm

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.

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Key Economic Events week of 6/11:
6/12 Trump-Kim summit
6/12 8:30 ET CPI
6/13 8:30 ET PPI
6/13 2:00 ET June Fedlines
6/13 2:30 ET CGP presser
6/14 8:00 ET Count Draghi presser
6/14 8:30 ET Retail Sales
6/14 10:00 ET Busi.Inv.
6/15 9:15 ET Ind. Prod

Key Economic Events week of 6/4:
6/4 10:00 ET Factory Orders
6/5 9:45 ET PMI Svcs
6/5 10:00 ET ISM Svcs
6/6 8:30 ET Intl Trade and Productivity
6/8 10:00 ET Wholesale Trade

Key Economic Events week of 5/28:
5/30 8:30 ET Q2 GDP 2nd guess
5/31 8:30 ET Personal Income
5/31 9:45 ET Chicago PMI
5/31 10:00 ET Pending Home Sales
6/1 8:30 ET BLSBS
6/1 9:45 ET PMI Manu Index
6/1 10:00 ET ISM Manu Index
6/1 10:00 ET Const Spend

Key Economic Events week of 5/21:
5/22 10:00 ET Richmond Fed
5/23 9:45 ET PMI Composite
5/23 10:00 ET New Home Sales
5/23 2:00 ET May FOMC minutes
5/24 10:00 ET Existing Home Sales
5/25 8:30 ET Durable Goods
5/25 9:20 ET Chief Goon Powell speech

Key Economic Events week of 5/14:
5/15 8:30 ET Retail Sales and Empire State Fed
5/15 10:00 ET Business Inv.
5/16 8:30 ET Housing Starts
5/16 9:15 ET Industrial Production
5/17 8:30 ET Philly Fed

Key Economic Events week of 5/7:
5/9 8:30 ET PPI
5/9 10:00 ET Wholesale Trade
5/10 8:30 ET CPI
5/11 8:30 ET Import/Export Prices

Key Economic Events week of 4/30:
4/30 9:45 ET Chicago PMI
4/30 10:00 ET Pend Home Sales
5/1 9:45 ET PMI and ISM Mau Idx.
5/1 10:00 ET Const. Spending
5/2 2:00 ET FOMC fedlines
5/3 9:45 ET PMI/ISM Svcs.
5/3 10:00 ET Factory Orders
5/4 8:30 ET BLSBS

Key Economic Events week of 4/16:
4/16 8:30 ET Retail Sales, One Fed Goon speech
4/16 10:00 ET Business Invt.
4/17 9:15 ET Industrial Prod., Four Goon speeches
4/18 Two Goon speeches
4/19 8:30 ET Philly Fed, One Goon speech
4/20 Two Goon speeches

Key Economic Events week of 4/9:
4/10 8:30 ET PPI
4/10 10:00 ET Wholesale Trade
4/11 8:30 ET CPI
4/11 2:00 ET March FOMC minutes
4/12 8:30 ET Imp/Exp Prices
4/13 Fed Goon Speeches...Rosengren 7:30 ET, Bullard 9:00 ET, Kaplan 1:00 ET

Key Economic Events week of 4/2:
4/2 9:45 ET PMI Mfg Idx
4/2 10:00 ET ISM Mfg Idx and Construction Spending
4/4 9:45 ET PMI Svcs Idx
4/4 10:00 ET ISM Svcs Idx and Factory Orders
4/5 8:30 ET Intl Trade
4/6 8:30 ET BLSBS

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