Bad Economic News Right On Cue

Wed, Jun 5, 2013 - 12:54pm

Just last week, we openly speculated that the "economic news" was about to turn decidedly sour, given that the yield on the 10-year note had moved significantly through 2%. So far, spot on.

Let's just take a look at today's headlines:

I first posited that this would be the case a week ago. You can go back and re-read the full post if you'd like: I haven't gotten the pre-BLSBS selloff I had anticipated...but...the fact that the economic news has turned out as expected makes the post increasingly relevant. At the risk of being BulletPointMan, here's a c&p of the main thesis:

"Once again, this move in rates can be traced to the BLSBS report of Friday, May 3. Since then, the note has fallen four points and now rests near support at 130, which corresponds to a rate of about 2.15%. This level may hold but I suspect that it will not. More likely is a drop to what appears to be critical support near 127-128.
But here's the deal. There is no way, no how that The Fed is going to allow support to fail, thereby letting 10-year rates back up to 3%+. Not happening. Besides the detrimental impact higher rates would have on the U.S. budget deficit and debt, higher rates would also crush any nascent economic recovery.
Already we are seeing things slow down in the U.S. (Even that statement is nonsense because "slow down" implies that previously things had been really cooking.) Check this headline from ZH just this morning. And, as discussed last week, if the economy was booming and housing growth was robust, demand for inputs such as lumber would be soaring and soaring demand would lead to higher prices. Right? Right?? Apparently not.

So here's what's likely to happen in the weeks ahead:

  • The 10-year note may fall a bit farther but then it will bounce and begin to rebound
  • Signs that the U.S. economy is weakening will get more mainstream press coverage
  • This will likely begin with a May NFP next Friday that comes in "weaker than expected"
  • A continuation or even increase of QE will shove stocks even higher
  • Gold and silver will finally stabilize and begin trending higher, the start of a summer rally"

OK, then. So what have we seen in the week since this was posted?

  • The 10-year note sold off, reaching a low on Friday of about 128 1/2. It has since bounced back to near 130.
  • The economic weakening is definitely getting more MSM coverage. (See above.)
  • Still waiting on the BLSBS but today's ADP sure raises questions.

Yes, the BLSBS data on Friday could still leave everyone at CNBS grinning ear-to-ear. We'll just have to wait and see. However, it should be clear to everyone that the U.S. economy is not booming or growing. If anything, it simply continues to bounce along the bottom, the illusion of current and future prosperity created by the daily purchase of S&P futures by The Fed's Primary Dealers. There will be no end to QE. Not now. Not later this summer. Not in 2014. Not ever. The only escape from under this mountain of endlessly leveraged debt is currency devaluation. Physical gold and silver will continue to be your only refuge. Buy some today. (And if you do so, please do it through one of our affiliates!)

I had expected hoped that price would recover today after yesterday's CoT-related selloff. So far, so good. Check this action in gold first. Note that price continues to be centered around the recovery trendline that began back on the overnight of the 18th. It also continues to battle a declining 20-day MA that is now near $1405 but stays resilient. This is a very good sign and, if it continues, foreshadows a jump through $1420 and a move back toward the late April recovery highs just below $1490.

And I've found something interesting on the silver chart. Maybe it's nothing. Worth no more than the paper it's printed upon. However, it is not and cannot be coincidence that all of these points on a chart are connected by this declining arc. And look at how the arc was right there to shove price lower on Sunday, the 18th. The Forces of Darkness tried to make it happen. They clipped price for over 10% in a matter of minutes. But a funny thing happened on the way to the beatdown. No additional sellers emerged. Instead of an accelerating drop into the $teens, price reversed and began to recover. We've been in a sideways, $1 range ever since. This has all the earmarkings of a bottom and a trend change. Will it? Can it? The BLSBS on Friday will likely hold the key.

Finally, today, we need to double back to a story that broke just as I was publishing yesterday's post. Our pal, DenverDave, sent me an email notifying me of a very peculiar change in the daily Comex data. It's a new disclaimer which The Comex apparently hopes will shield them from legal consequence should member vaults one day be shown to hold slightly less metal than is reported. The exact verbiage, which suddenly appeared on Monday is this:

"The information in this report is taken from sources believed to be reliable; however, the Commodity Exchange, Inc. disclaims all liability whatsoever with regard to its accuracy or completeness. This report is produced for information purposes only."

With all ChurchLady sincerity: Well, isn't that special? So now The Comex (which is a futures market...and futures, being paper obligations, are entirely dependent upon trust and confidence) is telling us that the information provided to them by their members is not necessarily "accurate or complete"? What???

A very succinct analysis of this can be found at Jesse's place: :

"One can only wonder why the Exchange felt the need to add this statement now, after all these years. Especially when Comex eligible gold inventory levels are approaching record lows, and there is widespread mistrust of certain parties and their opaque market positions on this list.
And there are rumours of forced cash settlements in lieu of bullion delivery floating around. The Hong Kong Metals Exchange just folded, and forced cash settlements. And banks are cancelling physical delivery arrangements.
How can someone who is trading metals and storing them at the warehouse not be concerned about a declaration of force majeure without liability recourse? What is the purpose of a commodities exchange when there are no representations made that they even possess what one is trading?"

Look, the shils, disinfo agents and apologists for The Cartels can SPIN and deceive all they want. But use your eyes and your brain. There is now a mountain of individual dots just waiting for you to connect them. You can either blissfully sit and amidst the pile of shit that has been shoveled upon you for decades or you can prepare for the new paradigm. The choice is yours.

Have a great day.


About the Author

turd [at] tfmetalsreport [dot] com ()


Jun 5, 2013 - 12:55pm


I Could have!!!

Jun 5, 2013 - 12:56pm

No 1st


Jun 5, 2013 - 12:56pm



Island Guy
Jun 5, 2013 - 12:57pm

First First?

Can it be?

I know it's juvenile to claim first, but let's be serious. This is a site tradition. Any any community, even an on-line one, is held together by the glue that is its traditions.

So, in the spirit of the traditions of this community - FIRST!

The Watchman
Jun 5, 2013 - 12:58pm


Shanghai Futures Exchange cuts trading margins for some contracts

Wed Jun 5, 2013 3:37am EDT

SHANGHAI, June 5 (Reuters) - The Shanghai Futures Exchange (ShFE), China's biggest metals bourse, will lower margins and trade limits for its precious metals and rebar contracts, a move aimed at boosting volumes ahead of plans to launch night trading for gold and silver. The SHFE is expected to add after-hours trading for its gold and silver contracts this month or next as part of its efforts to become a more global marketplace. The margin requirement, or the minimum amount of cash that investors must keep on deposit, for the precious metals contracts will be lowered to 4 percent from 7 percent from June 25th. Following is a table reflecting the latest changes: MARGINS (PCT) NEW OLD Rebar 5 7 Gold 4 7 Silver 4 7 (Reporting by Fayen Wong; Editing by Tom Hogue)
argent rampant
Jun 5, 2013 - 1:03pm

But at least housing is recovering... (Hah!)

Picked this up from a web site I never visited before called "Some assembly required"

When you read that the housing market is recovering, keep in mind that the 'recovery' is greatly the result of speculators fat on QE gobbling up thousands of houses in the hopes of making a profit by renting them out and then making a killing by selling them once they've bought enough to drive the prices up. Ordinary folks are not allowed to bid on the tens of thousands of houses being sold off by the government. The GSE's will sell off 20,000 houses in June alone. In some of the most depressed markets these bulk sales are enough to drive up prices and give the appearance of a revival. Blackstone , for example, owns 26,000, Colony Capital has 10,000 and so on. The investors are required to rent the properties for a period of time, to prevent immediate flipping and flooding of the market. It's the GSE's way of washing their hands and their consciences at the same time. So now it is not only banks and servicers who are keeping homes off the market to keep from depressing prices, these speculative investors are contributing to the illusion of tight inventories by either renting them out or – nearly as often – letting them sit empty, in hopes of driving up prices. This strategy is not looking like it will be a winner. The consumer is not back, the nightmare is not over. And the most recent economic data suggests more problems ahead, not sunshine. We’ve been here before.

Jun 5, 2013 - 1:03pm

Fifth ain't Thurd, but it's

Fifth ain't Thurd, but it's better than out of the top ten!!

So the DOW had its first down Tuesday in 21 weeks yesterday. Begins to look more like TPTB are slowly losing their grasp. I don't relish (in any way) the mess these folks are making because it will affect me HUGELY...on the other hand, I do look forward to watching them lose the ability to control things. Is it too much to ask that they be hoisted on their own petards?!? (Always wanted to use the word "petards" in a post!!!)

Jun 5, 2013 - 1:12pm

Look, they've changed their quote again:

"The information in this report has been totally pulled out of our asses; so of course, the Commodity Exchange, Inc. and our associated buttocks disclaim all liability whatsoever with regard to its accuracy or completeness. This report is produced for misleading small investors only and should not be used by employees of TBTF institutions."

Wallace Hartley
Jun 5, 2013 - 1:17pm

More Capital Controls Coming...

The main benefit of MMFs is their liquidity. The proposed reforms would severely limit this main benefit, effectively killing the MMF industry. What the article doesn't mention is that the $2.9 trillion currently in MM cannot be leveraged like deposits, equities, or bonds so where is the soon-to-be withdrawn $2.9T go (since the main benefit is no longer a benefit)? I'm sure the SEC and FED hope it goes into the equity market, but any re-hypothecatable (?) market will do.

SEC proposes radical money markets reform

Almost five years after a rush of withdrawals from money market funds helped to freeze bank and corporate funding markets during the crisis, and three years after initial partial reforms, the proposals are the culmination of a long push by regulators to reduce risks posed by the $2.9tn money fund industry.

“It has been a journey to get to this point. Commission staff have spent literally years studying different reform alternatives and performing extensive economic analysis in arriving at these recommendations,” said Ms White.

The SEC has proposed two key reforms as either alternatives, a move welcomed by the industry, or as a combination that would mark a more significant change to the structure of funds.

The regulator proposes that so-called “prime funds”, the largest part of the industry able to invest in a range of short term debt issued by banks, companies and governments, be forced to let the share price of each fund “float”.

At present funds maintain a stable price of $1 per share and it was the risk that a fund might “break the buck” and pay back less than $1, which precipitated the rush of withdrawals by institutional investors in 2008.

Funds that invest at least 80 per cent of their assets in cash or government debt would be exempt from the change, as would funds designated purely for retail customers, which would be required to restrict withdrawals by any one customer to $1m per day.

It has been a journey to get to this point. Commission staff have spent literally years studying different reform alternatives

- Mary Jo White, chairman, Securities and Exchange Commission

The alternative is that prime funds keep the stable $1 share price, but would be required to impose liquidity fees on withdrawals and impose restrictions on withdrawals in times of stress, once certain thresholds covering the type of assets held are crossed.

The SEC said it was considering whether to combine both measures “into a single reform package”, and requested feedback as part of a 90 day public comment period.

The Investment Company Institute, a trade group, commended the research undertaken by the SEC and the inclusion of liquidty fees and withdrawal restrictions. “We also welcome the inclusion of fees and gates as a standalone option in the proposal,”, the ICI said.

The largest money fund sponsors, Fidelity and JP Morgan, declined to comment pending a detailed consideration of the proposals. The Treasury praised the SEC “for continuing the work to address remaining vulnerabilities to our financial system presented by money market funds”.

The SEC also proposed more regular and detailed disclosure by funds, faster publication of fund holdings and extending reporting requirements to private “liquidity fund advisers” managing more than $1bn to “better monitor” any movement of funds to more opaque vehicles in response to the reforms.

Jun 5, 2013 - 1:22pm

Latvia will become the 18th

Latvia will become the 18th country to use the euro after being approved for membership by the European Commission. .... confirmed that the Baltic state had met the criteria for joining the single currency.

Looks like it's all good then. No problems here folks! ... Just keep on moving on ....

Oh wait! what criteria? .....Not criteria like the stress test criteria the TBTF banks have been passing since 2008 ....

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 10/21

10/22 10:00 ET Existing home sales
10/24 8:30 ET Durable Goods
10/24 9:45 ET Markit flash PMIs
10/24 10:00 ET New home sales
10/25 10:00 ET Consumer Sentiment

Key Economic Events Week of 10/14

10/15 8:30 ET Empire State Fed MI
10/16 8:30 ET Retail Sales
10/16 10:00 ET Business Inventories
10/17 8:30 ET Housing Starts and Bldg Perms
10/17 8:30 ET Philly Fed MI
10/17 9:15 ET Cap Ute and Ind Prod
10/18 10:00 ET LEIII
10/18 Speeches from Goons Kaplan, George and Chlamydia

Key Economic Events Week of 10/7

10/8 8:30 ET Producer Price Index
10/9 10:00 ET Job Openings
10/9 10:00 ET Wholesale Inventories
10/9 2:00 ET September FOMC minutes
10/10 8:30 ET Consumer Price Index
10/11 10:00 ET Consumer Sentiment

Key Economic Events Week of 9/30

9/30 9:45 ET Chicago PMI
10/1 9:45 ET Markit Manu PMI
10/1 10:00 ET ISM Manu PMI
10/1 10:00 ET Construction Spending
10/2 China Golden Week Begins
10/2 8:15 ET ADP jobs report
10/3 9:45 ET Markit Service PMI
10/3 10:00 ET ISM Service PMI
10/3 10:00 ET Factory Orders
10/4 8:30 ET BLSBS
10/4 8:30 ET US Trade Deficit

Key Economic Events Week of 9/23

9/23 9:45 ET Markit flash PMIs
9/24 10:00 ET Consumer Confidence
9/26 8:30 ET Q2 GDP third guess
9/27 8:30 ET Durable Goods
9/27 8:30 ET Pers Inc and Cons Spend
9/27 8:30 ET Core Inflation

Key Economic Events Week of 9/16

9/17 9:15 ET Cap Ute & Ind Prod
9/18 8:30 ET Housing Starts & Bldg Perm.
9/18 2:00 ET Fedlines
9/18 2:30 ET CGP presser
9/19 8:30 ET Philly Fed
9/19 10:00 ET Existing Home Sales

Key Economic Events Week of 9/9

9/10 10:00 ET Job openings
9/11 8:30 ET PPI
9/11 10:00 ET Wholesale Inv.
9/12 8:30 ET CPI
9/13 8:30 ET Retail Sales
9/13 10:00 ET Consumer Sentiment
9/13 10:00 ET Business Inv.

Key Economic Events Week of 9/3

9/3 9:45 ET Markit Manu PMI
9/3 10:00 ET ISM Manu PMI
9/3 10:00 ET Construction Spending
9/4 8:30 ET Foreign Trade Deficit
9/5 9:45 ET Markit Svc PMI
9/5 10:00 ET ISM Svc PMI
9/5 10:00 ET Factory Orders
9/6 8:30 ET BLSBS

Key Economic Events Week of 8/26

8/26 8:30 ET Durable Goods
8/27 9:00 ET Case-Shiller Home Price Idx
8/27 10:00 ET Consumer Confidence
8/29 8:30 ET Q2 GDP 2nd guess
8/29 8:30 ET Advance Trade in Goods
8/30 8:30 ET Pers. Inc. and Cons. Spend.
8/30 8:30 ET Core Inflation
8/30 9:45 ET Chicago PMI

Key Economic Events Week of 8/19

8/21 10:00 ET Existing home sales
8/21 2:00 ET July FOMC minutes
8/22 9:45 ET Markit Manu and Svc PMIs
8/22 Jackson Holedown begins
8/23 10:00 ET Chief Goon Powell speaks

Recent Comments

Forum Discussion

by NW VIEW, 21 min 37 sec ago
by sierra skier, 8 hours 39 min ago
by NW VIEW, 8 hours 42 min ago
by Trail Trekker, 10 hours 2 min ago