A Baker's Dozen of "Deflationary Bias" Charts

Fri, Oct 3, 2014 - 2:42am

We've asked a few times now, "what happened on September 1st"? It's time to revisit that question again today.

If you missed the previous two posts, you can find them here:



The basic premise is this:

Beginning in late August, the collective "market" finally began to anticipate to complete removal of overt Fed QE. (By the way, this was confirmed with the October POMO schedule, which shows QE3(∞) "ending" on October 28.) To understand how the "market" looks at this, think back to The Great Financial Crisis of 2008.

Back then, deflation was the big scare/risk. Asset prices were crashing globally and a global economy built upon debt and fractional reserve banking simply cannot survive in a hyper-deflation environment. Thus, QE1, QE2 and QE3(∞). Over the course of those money-printing programs, The Fed created nearly $3T in fresh cash, ostensibly to "help the economy".

Well that spigot will again be temporarily turned off in 26 days and the collective "market" finally began to anticipate just that back in late August. Without the constant dump of fresh greenback into the global banking system, we are right back to where we were in 2008. Namely, deflation.

If I'm right about this, what should we be seeing across the global financial markets? Mainly three, simple trends:

  • The U.S. dollar should be rallying as a prospective future of less dollar supply makes the supply of today's dollars more valuable.
  • The U.S. bond market should rally as a forecast for deflation makes even 30-year bonds at 3% look pretty attractive.
  • Every dollar-based "commodity", from the metals to crude to stocks should be falling as demand wains, liquidity reigns and the economy strains under deflationary pressure.
  • And what do we see? Let's start with the dollar. If we go back to mid-late August, what do we find?

    The US dollar as measured by the POSX:

    The euro and yen:

    OK, those charts seem to verify bullet point #1.

    How about the U.S. bond market? Are bond prices rallying, too? Well not at first and, while they were falling, they were the "missing link" in this equation. Ahhh, but look what happened two weeks ago! Bond prices suddenly reversed and prices began to rally...sharply. In fact, yields on the 10-year note and the 30-year Long Bond are now back to within a few basis points of the 2014 lows seen on August 28.

    So, whaddayaknow? The change in trend and rally from mid-September seems to be verifying bullet point #2!

    I guess that means we should now consider bullet point #3. Is nearly everything else falling? See for yourself:

    U.S. stocks as measured by the S&P 500 and Russell 2000:

    The most important "commodity" in the world at present, crude oil:

    And all five metals:

    Hmmm. Well those charts certainly seem to confirm bullet point #3.

    So, here's the point:

    IF I'M RIGHT ABOUT THIS, things are going to get even worse before they get better. Why? Because hardly anyone else is talking about it! By the time the world outside of Turdville finally figures out what's going on, the stock market will be crashing, crude will be near $80 and the metals will be even lower, particularly silver.

    The point is this:

    As things begin to unravel in October and November, The Fed will be forced to act. Remember, their primary stated mission is prompt employment and inflation. Deflation is their number one enemy and they will do anything (and this includes QE4) to avoid it! After or slightly before this deflationary bias finally runs its course, all of the "dollar-based commodities" listed above will bounce, turn and rally back higher. Until then, however, we must expect continued pressure, even on gold. And if $1180 gold gets taken out, there will even be spike downward as sell-stops get run below the current range, similar to the events of April 2013, though not quite as dramatic.

    In the end, this means you must be mentally prepared for what lies ahead. The next few weeks are going to be increasingly volatile and panic-filled, not just in the metals but across the board. Recognize it for what it is and realize that your stack of physical will be just as shiny and valuable with each passing day, regardless of the changing paper price. As I've been stating for weeks, at The End of The Great Keynesian Experiment, the paper price shenanigans/machinations of September 2014 will be long forgotten. You should continue to use this time wisely and prepare accordingly.


    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Oct 3, 2014 - 10:46pm

    Dynamo and JY

    I come here for the varied opinions and posts, yours included. I ask what would make you people happy (besides me not posting) and who you could support for president. A lot of complaining about the political system but not much interest in solving anything.

    Dyna mo hum Libero
    Oct 3, 2014 - 11:11pm


    "You people"? Wtf do you mean by you people? Don't mess WITH Jy either in his post this afternoon he made you look like the fool you are. You came to this forum with a chip on your liberal shoulder and dragging that political slut Elizabeth Warren LIKE SOMEONE HERE GIVES A FUCK WHAT YOU THINK. You will do well to leave us alone NOW.

    Oct 3, 2014 - 11:13pm

    Your viewpoint, opinion and thoughts....

    ...would be very welcome. If you put your mind to it, I bet you could be quite the critical thinker. Just tough for all that to shine through from behind what feels like incessant negativity, whining, put-downs, insults and closed-mindedness. You might be amazed at the reaction of those you disagree with, if you disagree with a modicum of civility. People might actually consider your criticism, were it offered constructively. And who knows, you might feel differently as well.

    Oct 3, 2014 - 11:29pm

    Wow!- 35 months later - sentiment > education > resolve.

    Almost 3 years ago I started waking up to the point where I decided to start investing in silver. At the time most of the hype was about silver to the moon and on many sites now it is not much different. Don't get me wrong - I never fully bought into the $100-$200-$1000 silver story - but it did feel good knowing that I was buying into something that was undervalued and that would one day reach its' true value.

    Checking online where I make most of my purchases I noticed that it has been almost 3 years since my first big purchase - at $37 CDN - and like anyone else who bought around then the fiat value of what was purchased has gone down. However, I've also educated myself a lot over the years (thanks in large part to TF Metals) and although I may be disappointed to a degree that my partial diversification into Ag has not brought me vast wealth in the short term I also realize that this is not about a quick profit. I a few posts here I've mentioned that I actually hope now that my humble stack is something that will hopefully make it into the hands of my children - if things don't blow apart in the next few years then I am quite certain they will need the stack more than I do.

    Perception over time is a funny thing - my 1st purchase at over $37CDN!!! Wow - it seems so long ago and I can't even bring myself now to think that it may hit that level again. I check the prices daily and in my head a few months back anything under $22CDN would have caused me to go into BTFD mode - but I've been waiting. I want to buy and DCA down (which I have been doing with smaller purchaces) but I keep holding off on another big purchase. I was going to pull the trigger on at $21 CDN and still held off. Now I'm looking at $19.01CDN and going "Meh, it'll be lower next week or next month".

    I'm not mad, sad or disappointed - no regrets. My maples, rounds, bars and scrap silver is still intact - it may be more valuable one day - but I can't predict the future. Silver should be higher - but it is still a commodity as well, subject to deflationary powers - and should there be a market correction - say 30 or %40% - whether it be by years end or next September - it is quite likely that we will all be looking at $14 silver.

    So I don't know if there is a point to this ramble. I don't like how and why things are playing out the way they are, but I can't do much to change it - much larger and stronger forces are in play . . . I'll keep an eye on the overall sentiment, hope for a turnaround, dollar cost average down (I post ads online and buy other peoples silver - about once a month - last purchase was at about $17.00 - I thought it was fair both ways - especially given what's happened price wise recently).

    Interesting thought - what would I do if prices go back to $37? Seems almost inconceivable at this point - I hope we all get a pleasant surprise in the not too distant future.

    Libero Dyna mo hum
    Oct 4, 2014 - 12:20am

    Hey Dyno

    Duhhrrr "you people" like you, who would "you" support for president? You can't even answer the question. But I never thought you may be not a citizen of US, and that is why you cannot answer a simple question.

    You state, "You came to this forum with a chip on your liberal shoulder". What the crap is that? Did I miss the admission test? What a pompous ass you are with your little one line snubs and cartoon insults. I don't think you've ever written more than a paragraph. -ho hum.

    Oct 4, 2014 - 10:28am

    Dyna & JY896 ...

    Sorry I couldn't do more. 1 hat-tip per post just doesn't seem like enough.

    wax off

    Oct 4, 2014 - 12:16pm

    Slightly OT

    What ever happened to Grant Williams? I really liked his reasoning behind the math.

    FWIW, libero changing the world through one (yours or my) vote doesn't make a difference (research/Google Diebold voting machines). I stopped with R Regan then I began to open my eyes, unfortunately, I had to see the full blown event in 08 to understand and put the pieces together. Thought about changing my name to Timothy.

    BTW, the value of Au in the country I reside with tangible assets, hasn't changed in the last 6 months but in USD terms.....one can only count the losses. That doesn't mean I will experience a loss in the future. So, where am I?

    Oct 4, 2014 - 2:16pm

    GSR - above 70:1

    Can't find the exact thread and comment but from a few days back I think it was Silver66 that referenced an insider as saying that the GSR may briefly hit 90:1.

    With the GSR sitting at over 70:1 in both US and CDN dollars I thought what would that actually look like in $ terms and given the present sentiment and way things seem to be going it doesn't seem too unreasonable.

    $14 seems to be the number thrown around recently - so that's silver at $14 and gold at $1260 an ounce. Given that gold has been somewhat more stable of late I can actually see this as realistic.


    silver66 dragonfly5
    Oct 4, 2014 - 3:41pm

    GSR- 70:1

    Guilty as charged, the individual is a manager of a precious metals fund. He thinks this is the last shake out. Weak hands are gone, and now it is the weak hands that thought they were strong.

    I did not post this as I thought it was evident, but he felt $14 was in the cards briefly. He is a trader so he spoke about easing in at $17 over next few weeks or so. I understand that comment. He felt upside to downside risk was skewed in the investors favour at these prices.

    If you are stacking not to sell, then if you buy your next oz at $15.75 or $17.91 does it really matter in 10 years?.

    He felt there would be a good trade in the GSR, load up on silver and then switch to gold

    My own view is each 70 oz of silver I buy now I am getting and ounce of Gold and a free 20 ounces of silver and if it hits 90 I am getting a free 40 ounces of silver


    Oct 4, 2014 - 9:40pm

    @dragonfly5 & silver66 Re: gold/silver ratio

    Nice leading indicator for "risk on" and "risk off"

    Oct 4, 2014 - 10:56pm

    from another bug site

    "...trader dan says: “Note that the last time reported holdings were at this level, it was the second week of December 2008.”

    which was the 2nd best time in living memory to buy gold stocks…"

    Oct 4, 2014 - 11:03pm


    Thanks for posting the chart.

    Looks like GSR was around 40:1 when I made my 1st substantial Ag purchase. 20/20 hindsight gold would have been better between then and now . . .

    What happened in the summer (approx) of 2011? That dip down to the low 30's looks like an anomaly that got "fixed".

    Oct 5, 2014 - 12:42am


    I believe that was the the time that the COMEX took the steam out of the silver bull (just around $50/oz) by increasing futures margin limits 3 times in a week. I wasn't paying attention back then, so I can't be sure about the details. Someone please correct me if I'm wrong about that.

    Oct 5, 2014 - 9:36am

    Sinclair - Gold In The News This Week

    The Church lady would say..."isn't that convenient"...regarding the the Yamana and Armstrong comments.

    My Dear Extended Family,

    Gold has had a historic amount of negative print and airtime this week. The Yamana and Armstrong comments seem timed perfectly to kick the legs out from under gold. The price of the US Dollar seems to have forgotten it was at .7900 only 11 weeks ago.

    The dollar has risen because the Euro collapsed 1000 points from 1.3600 to below 1.2600. This collapse of the Euro is due to the serious sanction's impact on Europe which have not significantly damaged any US financial interests. On the contrary, anti Russian sanctions have tipped Europe into recession. Draghi has been trying to talk the Euro lower for trade reasons, but his power is only words as QE there is more than likely against their constitution. This will be decided soon.

    To declare a permanent death sentence on gold because of the dollar's mirror image up move to the sanction-injured euro is premature in rally week #12.

    Gold is trading down into old lows which by definition are major support levels while both long and short term cyclical indicators have gone positive. Therefore probability says the decline is nearing an end both in time and price.

    I am fully committed financially to gold as I was above $1900. I anticipate success.

    This will drive the gold hating internet trolls wild, but all their efforts fit nicely into the spam blocker. I do not open emails from new names during these trying times as I know the organized and strategize hate that pours out of them.

    The takedown on gold is a highly organized spoofing play. It will fail to hold gold down permanently, and gold will again trade to new highs.


    Oct 5, 2014 - 11:07am

    Sinclair & Co.

    Keep buying into these stories and you will find yourself broke before you see $2000.

    Markedtofuture MountainMan
    Oct 5, 2014 - 12:32pm

    Sinclair & Co

    The Fed is tripping all over themselves to get massive deflation or stagflation and the Fed wants to can corporate earning...

    Which one do they want?

    Surging dollar may be triple whammy for U.S. earnings


    While the dollar’s strength is a sign of better economic prospects in the United States compared with the euro zone and other parts of the world, it makes U.S. goods and services more costly overseas.

    Data this week showed German factory activity shrank for the first time in 15 months, while European Central Bank President Mario Draghi disappointed stock investors when he failed to provide a specific stimulus program for the euro zone's flagging recovery. In China, data showed the country's manufacturing sector is barely growing.

    Grigoli said third-quarter profit estimates for U.S. companies with the most overseas sales have fallen more than estimates for the entire S&P 500 and also compared with companies with almost no overseas sales.

    Mizuho data shows a 1.5 percentage point decline in estimates from July 31 to Sept. 29 for companies that derive 60 percent or more of their sales from overseas compared with a 1.0 point decline in estimates for the S&P 500 and a 0.4 point decline for companies with almost no overseas sales exposure.

    Ford Motor Co.'s disappointing forecast this week may be a hint of what's to come. The No. 2 U.S. automaker cut its forecasts for pretax profit this year, citing steeper losses in Russia and South America.

    "Not to extrapolate too broadly from one company, but I think the negative sentiment . . .has been pretty dramatic," said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. Ford shares lost 10.7 percent last week.

    The potential hit to earnings follows a nearly flat quarter for the market performance of the S&P 500. The index gained just 0.6 percent, although it remains near its record high.

    Equity valuations are also tipped to the high side. From a forward 12-month perspective, the price-to-earnings ratio on the S&P 500 is 15, just above its historic average of 14.9, according to Thomson Reuters data.


    Let's not forget how we got here by Algopalooza...The MOAMOPE by James C. McShirley

    Submitted by lemetropole on 08/25/2014 14:34 -0400

    The advent of computer generated trading algorithms heralded a quantum leap forward in the quest for 24/7 control of markets. No longer were humans beings required to do such unseemly things as man trading desks or worry a whit if free markets were, if even infrequently, attempting to function. Algo precision has made even the blackest of black swan events seem to turn lily white in their utter non-eventfulness. No more significant Dow or bond crashes, and best of all, no gold rallies exceeding (exactly) 1.00%, or the occasional 2.00%. Algo sentinels now stand in a permanent state of vigilance, keeping MOPE alive. (MOPE is what Jim Sinclair refers to as "management of perspective economics".) Market manipulations and control of gold trading are what I have documented now for over 15 years. Many of these manipulations are well-worn, tried and true. Nearly all have intensified over the past 3 years. It seems as if one could throw a dart on a trading dartboard and hit an anomalous trading pattern nearly every time. Even with that said, I was stunned to stumble on to the biggest trading anomaly of all: the MOAMOPE - the mother of all management of perspective economics.

    MOAMOPE is quite simply the stunningly high percentage of lower opens on the 6:00 PM silver access trade open. Perhaps some have noticed the oddity in the form of a Kitco 3 day chart.

    Look familiar? It should, it’s happened 621 times in the past 3 years.

    Virtually every evening for the last 3 years at precisely 6:00 PM EST something very odd has happened: Comex silver offers swamped the bids to the tune of a 3-10 cent decline. For this to happen for three consecutive weeks would be strange. If it were to happen for three straight months it would be bizarre. MOAMOPE can only describe when it occurs for three straight years. It's a veritable Algopalooza! Silver has had a near-iron clamp imposed on it commencing with the access trade reopen. How severe is this iron clamp? From September 1, 2011 to the present, 621 out of the 744 6:00 PM access trade opens have been lower. All manipulation denialists take note: that's an astounding 83.5%.

    Legitimate hedging? Yeah, right. Ya think maybe deep pockets with algo sophistry?

    The pattern is consistent, pervasive, and relentless. For 36 straight months not ONE month has had a greater number of higher opens than lower. Amazingly 35 out of 36 were between 80-95% lower, and the lone outlier "only" had 67% lower openings. The pattern was irrespective of rising or falling silver prices. From January 1st to February 28th of 2012, for example, silver rose $9.28, going from $27.86 to $37.12. That's a whopping 33% gain! During that time, however, 34 out of 42, or 81% of the 6:00 PM access trade opens were lower. It was a bull market in silver in the context of a raging bear market in access trade opens. The MOAMOPE was in all its glory!

    Selling the 5:30 PM access trade close MOC and then covering 2-4 minutes after the 6:00 PM reopen has been a license to print fiat money for those willing to shadow cartel behavior. Even a 1-lot trade over 3 years could have netted someone $70-100k on a measly 3 cent scalp. The unusually high percentage of lower access opens is actually far worse than it looks, since the few higher opens for the most part faded as the evening wore on.

    The trend of lower silver access opens has actually accelerated in 2014, with 134 lower openings vs. only 14 higher openings, a 90.5% probability. More recently 80 out of the past 84 have been lower, with the past 24 in a row having been lower. This despite silver being virtually unchanged from January 1st to the present.

    Only 14 higher openings in all of 2014 - with silver virtually unchanged from Jan. 1!

    There have also only been 4 significant gaps higher on the 6:00 access trade open since the beginning of 2013 - all of which quickly faded. Why the lockdown on silver? Why such extreme treatment for a seemingly minor commodity market? Why has silver been constantly bludgeoned to death with the CME’s margin hammer? Why the silence on such blatant manipulation? The only logical answer is that to NOT do it would be tantamount to disaster for “the force”, or the “resolute sellers”, or whatever the hell the polite crowd is calling it lately. Call me impolite, but I'll just call it the MOAMOPE.

    Time researching the MOAMOPE: 20+ hours.
    Compensation: Zilch.
    Satisfaction proving once more that manipulation denialists are disingenuous phonies: Priceless.

    A denialist reporting on gold and silver trading.

    James C. McShirley
    August 23rd, 2014

    Oct 6, 2014 - 12:14am

    To the Turd.

    Turd old buddy. Glad to see you are still kicking....been awhile man. I'm back because the time is near. Been waiting awhile for these exact events to unfold. End of QE, rise of the dollar, the crashing of PMs. Man, I have lots of dry powder and I have been anxiously awaiting for this 'deflationary' even to take place. You and many others called this 'years' back. Been watch the non-federal reserve like a 'hawk'...so to say.

    Can't believe it is coming together exactly as everyone predicted back then...I've been out enjoying my life and not being 'holed up' all the time on here, getting things in order, finding ways to get new dry powder, watching the signs. Now, the time is nigh to start loading up the wagon again. Plus, anyone that can't see what is going on with the BRICs and their rush to get away from the dollar must be blind to what is even further out for us.

    The great thing.....I learned alot in the early days from Zhers, harvey and here. Most importantly was to understand the game that is being played, know the next moves, anticipate the moves....then get out and enjoy myself while I can. The only question I have is 'Where is the bottom this time'? I'm not a 'technical guy' but feel the $1050 range is my point to start getting back into yellow. Silver is more tricky....like you said, it may get hammered more. May pull the trigger around $14...who knows. Its a bargain either way.

    Keep up the work bro, lots of little turdites appreciate the work.


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