On The Lookout, Part II

439
Wed, Jun 27, 2012 - 10:31am

When you eat, breathe and sleep your work, sometimes inspiration strikes you at the most odd of hours. Last night, I'm tossing and turning, trying to relax when the following pattern came to mind.

First, let's review a few things to insure that we are all on the same page. In Comex silver futures, there are five "delivery" months. These are the contracts that are the most actively traded because they are the contracts with the most volume and open interest (liquidity). These five contracts are considered "delivery" contracts because they are the ones through which holders most often take actual physical delivery of metal. Yes, the other months do see some delivery action but it is the months of March, May, July, September and December where the bulk of the physical settlement takes place.

If one desires to take delivery through The Comex, one must first buy a futures contract. Let's say you wanted your 5000 ounces of silver in March so you purchase a March12 contract. When you buy the contract, you only have to put up part of the money, this is your initial margin requirement. However, once the contract expires, The Comex will ask you to put up all of the money needed to purchase the silver. The date where "100% margin" is required is known as First Notice Day. It's a sort of put-up-or-shut-up type of thing. By late February, trading in the March contract will have ceased so The Comex wants you out of the contract. Only those with intent to take delivery are allowed to continue to hold it and all of them must have 100% of the cost of delivery in their respective brokerage accounts by First Notice Day.

It is on First Notice Day that we get some idea of how many contracts are standing for delivery. Recently, this number has been coming in anywhere between 2,000 and 4,000 contracts, or roughly 10,000,000 to 20,000,000 ounces of silver. OK, are you with me so far??

Here's the rather alarming trend that hit me late last night:

For the December11 contract, first notice day was November 30, 2011. Closing price that day of the March12 contract was 32.87. BY 12/29/11, the MARCH12 TRADED AS LOW AS 26.50. DOWN 19.38%.

For the March12 contract, first notice day was February 29, 2012. Closing price that day of the May12 contract was 34.70. (It was even higher at 37.26 on 2/28.) BY 3/22/12, THE MAY12 TRADED AS LOW AS 31.18. DOWN 16.32%.

For the May12 contract, first notice day was April 30, 2012. Closing price that day of the July12 contract was 31.01. BY 5/16/12, THE JULY12 TRADED AS LOW AS 26.73. DOWN 13.8%.

Graphically, it looks like this:

Uh-oh. Maybe now would be an excellent time to go back and read this post from last Saturday:

https://www.tfmetalsreport.com/blog/3940/lookout

As you know, yesterday was option expiration and the final trading day for the July12 contract. The action now shifts to the September12 contract. First Notice Day for the July12 contract is this Friday, the 29th. If things get a little dicey next week and into mid-July, don't say you weren't warned. That said, I firmly believe everything I put into the Saturday post referenced above. IF a washout through $26 materializes, please do not panic. Recognize it for what it is: The Closing Acts of The Silver Cartel. Once they are net flat or even net long, things are going to get very exciting around here.

Be patient. Think clearly. Be rational. Prepare accordingly.

TF

p.s. My intention is to update TurdTalksMetals with a new podcast, every day by 4:00 EDT. Today, there will likely be a bit of a delay, however. Thanks for your patience and thanks to all who are supporting the new venture.

About the Author

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  439 Comments

Kuchek
Jun 28, 2012 - 11:32am

Obamacare?......... Iran Swift?

Anyone hear anything on the sanctions?

Adman sevin
Jun 28, 2012 - 11:32am

Wealth preservation?

An asset that continually plummets in value is NOT "preserving wealth" by any stretch of the imagination. Sorry. Say hypothetically that gold dropped to $450 an oz and silver $6 per oz, would you still say that; "Price in useless fiat doesn't matter. All that matters is how many oz's are in your stack......."?

I have watched the value of my beloved "stack" drop by literally tens of thousands of thousands of dollars over the last year. Don't tell me I'm just being negative and all I should worry about is the number of oz's I own. I'm not a millionaire by any stretch of the imagination. The loss to me is significant.

Watching money that took me almost 20 years to accumulate simply vanish as gold and silver crash lower and lower and lower gets me down. Sorry. Call me a troll or call me negative. I know there are no guarantees in life and I only have myself to blame but don't expect me to be happy about it. I'm so sick of this fake bullshit "Oh my God, I'm so happy the price of silver is crashing so I can buy even more!"

tobydaniel
Jun 28, 2012 - 11:36am

Obamacare

You know, this is just a symptom of what happens when you slowly allow for a corrupt fascist government to run wild. Because of the fact that Obamacare just passed, I think its only fair that we drop our second amendment right as well. One of the main reasons our founding fathers put that into the constitution was so that We The People would be able to take back our government and kill the traitors of America. I think because of the mere fact that we have not even attempted to gain back our country, its too late. There is no need for a second amendment any longer because Americans no longer have balls to use what it was designed for. Whats the point of it? We used to be worthy of it though. Makes me think how amazing our founding fathers were. I would have enjoyed being there and watching them fight for this country. I guess this is similar to cancer. How do you get rid of cancer? Well in reality, you kill the cancer by taking care of the root cause of it. We have a bunch of malignant cancer cells in washington. Just sayin.

zman
Jun 28, 2012 - 11:36am

Adman, would you like some

Adman, would you like some cheese with that whine?

The bulls have been wrong for a LONG time, a whole 9 months, just sell and move on already. I highly suggest not blaming others for your paper losses, and take some self responsibility. I think the local bank my be your best bet.

single6
Jun 28, 2012 - 11:38am

on a side note to gun owners

Stop asking for a national conceal and carry law. Why? because you then give up your states rights and let any decision that will effect national conceal and carry to 9 people in washingtondc. Even gun owners are a part of this problem of washingtondc getting to big........stop and think about what you are asking.....

ClinkinKY
Jun 28, 2012 - 11:38am

So, essentially he's saying that the SCOTUS has no reason...

...for being anymore.

----------------------------------------------------------------

CJ Roberts Opinion, pg 6:

“It is not our job to protect the people from the consequences of their political choices.”

-------------------------------------------------------------------------------------------

You're right Steph, our country died today.

Daedalus Mugged
Jun 28, 2012 - 11:39am

@stephanie (and others) My country died today

Our country did not die today.

It died quite a while ago. A lot of people realized it is dead today, but it did not die today.

The rotting corpse is really stinking up the room.

ClinkinKY
Jun 28, 2012 - 11:42am

B.O. Denies That It Is A Tax

Ha ha. "Falling into a pile of sh*t and coming out...smelling like a bouquet of roses". Smartest president ever /s

So what happens to the thousands of "Obamacare" waivers issued by this administration? Are these people/organizations in danger of "tax evasion"?

George and Obama debate health care taxes
rl999
Jun 28, 2012 - 11:42am

Obamacare Gold Tax

"President Barack Obama’s healthcare reform legislation reportedly contains an added provision that would tax gold coin and bullion transactions. The tax comes in an obscure section of the tax code that deals with purchases by self-employed people and small businesses, ABC News reports.

Starting Jan. 1, 2012, small businesses and self-employed people will have to issue 1099 forms, which are used to track and report the miscellaneous income associated with services rendered by independent contractors or self-employed individuals, for every vendor with whom they do more than $600 business in a calendar year.

The new regulation is designed to gain more tax dollars to finance some of the healthcare bill’s other provisions. According to ABC News, dealers in gold coins and bullion are among those most rankled by the change. Unlike businesses with a comparatively small number of vendors, coin dealers frequently buy from members of the general public as well as from other dealers.

Pat Heller, who owns Liberty Coin Service in Lansing, Mich., deals with around 1,000 customers every week and estimates that he will be filling out between 10,000 and 20,000 tax forms per year after the new law takes effect. "I'll have to hire two full-time people just to track all this stuff, which cuts into my profitability," Heller told ABC.

California congressman Daniel Lungren has introduced legislation to repeal the section of the healthcare bill that would trigger the new tax-reporting requirement because compliance would unduly burden small businesses..."

https://www.moneynews.com/StreetTalk/New-Tax-Gold-Hidden-Obamacare-healt...

TREACHEROUS CRETINS
Jun 28, 2012 - 11:45am
rl999
Jun 28, 2012 - 11:47am

Warning: Air date 21 July

Warning: Air date 21 July 2010. I don't know if this is back in effect since the bill passed.

Warning: gold porn ahead

Secret Gold Tax In ObamaCare
Dagney Taggart Daedalus Mugged
Jun 28, 2012 - 11:47am

@Daedalus

Yes. This country died in 1871. We don't want to upset the sheep too badly though.

I so f***ing hate parasitic looters.

agrock
Jun 28, 2012 - 11:48am

on the gold tax

so is this only for sellers? what about if you are planning on still buying....

I'm holding strong that PM's are to be kept of TEOTWAWKI.

ClinkinKY
Jun 28, 2012 - 11:48am

"Winning gracefully"

Former White House adviser and Executive Director of the Democrat Party Patrick Gaspard tweeted this following the SCOTUS Obamacare decision this morning:

Democrats remain classy as ever.

More… Gaspard also tweeted this but then deleted it:
“TAKE THAT MOTHERF**CKERS!”

MollyRatchet
Jun 28, 2012 - 11:49am

@ Adman

"Say hypothetically that gold dropped to $450 an oz and silver $6 per oz"

I have been reading comments regarding these prices (coincidence maybe) from individuals like American Patriot, tdda32, HarveyTex and others on Marketwatch. I find it very ironic that these numbers keep coming out of the mouths of individuals who claim, in their opinion, that the PM market bull market has died.

I am not calling you a troll ... just find the numbers too coincidental ... I believe you catch my drift.

Have a nice day.

MR

sevin
Jun 28, 2012 - 11:49am

adman

If your "stack" has dropped in terms of fiat tens of thousands of dollars unless you have thousands and thousands of ounces it seems as if you bought too high and bought into the hype of silver going to the moon. They always buy near the top and sell when there is blood in the streets. It's just a paper loss until you sell. An ounce of silver or gold will always be an ounce of silver or gold, but one dollar in the future will not buy the same goods as a dollar today.

Dr G
Jun 28, 2012 - 11:49am

So glad to be here with all

So glad to be here with all of you. Great posts today (and mostly always). Such brilliant minds here. Thanks for your contributions everybody.

Haole Guy
Jun 28, 2012 - 11:50am

Silver holding on

Silver holding on @ $26.45

SilverFocker
Jun 28, 2012 - 11:50am

I woke up again today

This is a continuing thing and I thought to myself , why am I paying for life insurance when I keep waking up everyday....maybe I should just cancel it.

This is no different than crying about your PM stash not getting a boost yet........Why did you buy it in the first place?

I bought as insurance ICSH's, just because the world hasn't fell apart does not mean it wont at some future point, same goes for my life insurance by continuing to wake up every morning.

Those that are getting frustrated for the PM price action seem's to have bought in for the wrong reason's. I hope I never ever need my stash, and I would never sell unless it was absolutely necessary, no more than I would want for the wife to cash in the life insurance policy......both outcomes are bleak at best, at least with my PM's I would get some enjoyment out of.

Short Stack Stephanie C
Jun 28, 2012 - 11:51am

Re: Tax? What Tax?

What, did you even read my Post? Let me say it again. No where in the Obama-Care Bill does the word tax exist. It states only that health care insurance can be mandated and failure to purchase said insurance results in a Fine. Not a Tax.

The Law, as it is written and signed by Obama must, by definition be unconstitutional as is. And the Supreme Court said as much.

Thus, it must be back to the drawing board for Congress. They must re-write the Bill, as a Tax. Vote on it and have a sitting President sign it.

Even if the govt. can keep the Law as is but use the Supreme Courts Ruling, Congress must still decide, how much the tax will be and who will be taxed (most likely the rich).

However, the States can opt-out. Meaning the people in such States will not be held to the "tax."

I foresee this Law, to use a past phrase as, "withering on the vine."

Magpie
Jun 28, 2012 - 11:52am

Thieves and liars

We're already in the crapper economically. What the hell is this economy going to look like once all the new taxes kick in and each of us have less to spend? Add in the 10% real inflation John Williams says we have, and all of us are going to be suffering a downgrade in discretionary spending, and for many, there won't be ANY discretionary spending. We can only work so many hours in a day, and pinch our pennies so hard. Hubby and I aren't rich, just a wee bit comfortable, and we try to live frugally and prepare for the future. It sure feels like that has all been taken away.

Today I hate being an American.

koan
Jun 28, 2012 - 11:58am

If you can keep your head...

when all about you are losing theirs......then you clearly have not grasped the gravity of the situation!?!

Here's the real one: (adman, memorise and go sit in a corner, gently rocking, while mumbling over and over...)

"If you can keep your head when all about you Are losing theirs and blaming it on you; If you can trust yourself when all men doubt you, But make allowance for their doubting too; . . . If you can meet with Triumph and Disaster And treat those two impostors just the same . . . Yours is the Earth and everything that's in it."
-- (Joseph) Rudyard Kipling
¤
Jun 28, 2012 - 11:59am
Dr G
Jun 28, 2012 - 12:00pm

@ShortStack, you are being

@ShortStack, you are being too near-sighted. I'm peeved about the ruling but my bigger concern is that the Supreme Court finds nothing unconstitutional in this. That says something about where we are headed.

It's that which I find depressing.

Number 47
Jun 28, 2012 - 12:01pm

OK, can someone please explain?

Genuine question here guys, being in europe I don't follow too much on your healthcare bill but as far as I understand it the government is forcing citizens to buy 'insurance' for healthcare provision. This insurance is provided by private companies.

Can someone explain the tirade of socialist accusations paraded towards Obama? I don't like the guy. I'm defending nothing he has done and I would fight to overturn this if it was being done in my country, however, this is not socialism surely?

This is fascism of the kind Mussolini meted on his people. Corporate gains through social governance.

If it was socialist then the state would be providing the medical care, NOT private companies.

Or am I wrong?

Number 47
Jun 28, 2012 - 12:03pm

Zombie update.

Been reading the zombie stuff, found it quite funny. Until I heard this on the radio today.

https://www.herald.ie/news/woman-has-part-of-nose-bitten-off-in-horror-a...

murphy rl999
Jun 28, 2012 - 12:05pm

rl999

I believe the article is from 2010 and that part of the bill was struck ( thank goodness)

John Galt
Jun 28, 2012 - 12:05pm

@ Adman re: All in

I can understand your agony over going all in in April of last year.

FWIW my son went all in around that time too, and as a father it has been sickening to watch PM prices fall and his saving decline in value - especially AFTER he listened to advice from his old man.

However, right from the day he bought his first coin I told him this: Maybe prices are going to continue to run higher in the near term, but think of this investment as LONG TERM protection for your savings. At the time I said there would likely be a "firefight" around $50, when silver prices got to their old highs from around 1980. I expected a pullback although honestly not as severe as it's been.

But I did tell him to always hold some cash and only buy PM with money that he wouldn't need to touch for a couple years at least. I stand by that advice.

Some additional things I've pointed out to him:

1. Retracements of 50% are normal in bull runs. Look at the charts for gold and silver in past decade to see evidence of this i.e. silver from $21 in early 2008 to $9 later that year. We are now in a roughly 50% retracement from when you bought.

2. The BIS (central bank of central banks) is reclassifying gold as a tier 1 asset. Why would they treat a "worthless" asset like this?

3. Central banks are now buying gold like crazy. Why are they preferring gold now over other currency as reserves?

4. Last night I read through the documents someone posted about creation of Federal Reserve Bank (posted earlier in this thread). At one point it says the Federal Reserve will only accept gold as payment for their "services", NOT federal reserve notes. In other words, even the Fed doesn't want to be paid in the own worthless paper.

5. During WW2 there was extreme hardship in many countries in Europe. The winter of 1944/45 was the worst, and was known as the Hungry Winter where members of my family lived. My grandfather had a farm in a rural place and people came from cities to barter for things like food. Some had nothing to barter with, so they offered cash (which was still in circulation but not widely used). He accepted cash because he refused to demand gold wedding rings from mothers who showed up with hungry children at his door. He trusted the government to honor the IOUs after the war. One morning he woke up, and the radio announced all old currency was worthless and being replaced by new currency.

My grandfather got screwed because he trusted paper debt over PM.

My advice: Don't get screwed, unless you want to.

I Run Bartertown
Jun 28, 2012 - 12:05pm

single6

Not really the same. It's the not the Feds telling anyone they MUST. It's the Constitution saying that there are rights that even the States cannot take away. That's pretty central to the Bill of Rights.

Edit: I reread that you said don't ask for a national CC law. That would pose the threat you speak of. But I'm not aware of anyone doing that. The debate I'm aware of is for reciprocity. If you have a valid State CCL, a neighboring State could not take prohibitive actions against you for entering.

Number 47
Jun 28, 2012 - 12:11pm

Real socialism.

This is a travesty bit of legislation just introduced here in Ireland.

People with mortgages they can no longer afford will now be able to rent their own homes back from the government under the new mortgage to rent legislation. Homes will be rented back to homeowners that have no realistic means to repay mortgages. The homes will be rented at prices similar to social housing to enable the recipients to remain within their communities. The government is working with the banks to facilitate debt forgiveness for outstanding mortgage arrears.

OK, taxpayer funded, subsidised rentals for those who overstretched themselves in the boom. Social housing costs are around 10% of a normal rental home. We didn't buy because of the boom, we don't live in social housing. Those houses should be on the market so prices can drop. No, let's all chip in to help out those poor 'homeowners'.

What a fucked up time to be alive.

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