In The Woods

312
Thu, Sep 8, 2011 - 9:25am

The overnight action is the PMs is certainly encouraging and it would seem as though the half-life of central bank gold intervention is now about as long as central bank currency intervention. We all know, however, that it is still too soon to let our guards down. The quick recovery in price may only serve to embolden our increasingly desperate adversary, so, much caution is still warranted.

That said, I do not want to minimize the importance of the overnight reaction in price. The SNB attack of early yesterday sent the metals markets reeling. The attacks were timed to have a spillover effect onto the Comex and December gold traded as low as $1794 by mid-morning. In the old days, this would have sent gold into a tailspin as weak-handed longs began to race each other for the exits. They knew they were no match for the central banks and The Cartel.

Note, though, how yesterday was different. Once the Comex was closed, things began to improve almost immediately. Baby steps at first but then a full-blown rally overnight in Asia. Our longs are no longer weak-handed. They are resolute. They are buyers of size and they seem to pounce on discounted prices. This must be very discouraging to The Cartel. They are trapped in an untenable short position and they are being forced to cover at increasingly higher prices. HAHAHA!

To that end, I feel I must state this again. Please be sure you are making note of which "analysts" and "traders" are calling a "bubble". One only needs a cursory understanding of the Commitment of Traders data to deduce that there is no such thing as the CoT data since early August has clearly shown that the primary driver of price to this level has been Cartel short-covering. A bubble presumes retail buying. Average, everyday investors rushing in to buy something. The greater fool theory in action. Think dot com. Think Las Vegas real estate. Cartel short-covering does not create a bubble. As stated ad nauseam, the weekly CoT report is a very important, fundamental statistic. Any serious metals analyst knows this. Accordingly, any serious metals analyst knows that gold is not a bubble. The boneheads calling gold a bubble are, therefore, not serious analysts and should be ignored. Do not forget them, though, as they will most assuredly resurface in the future to once again proclaim an end to the gold bull. Remember who they are so that you can ignore them in the future, too.

The next question we need to ask is: Why are the banks so desperate to cover? Ponder that one for a while. I've got my thoughts on the subject. I'd be curious to hear yours.

Here are your charts for this morning. I see they are already becoming outdated as the metals have continued to rally while I type.

Remember today that my warning of yesterday was not to sell, it was not to buy. I stand by that. With the active central bank intervention of earlier this week, it is still too dangerous to be boldly buying with confidence. For now, I am simply holding my positions. The only trades I made yesterday were to re-cover my October gold calls. You may recall, I have been long October calls but, from time to time, I've been selling some calls against them (creating a spread) whenever I felt that risk was high. I've been taking the "short" side off and "opening up" my calls when I feel that risk is minimal. My current trading portfolio is as follows:

Long Oct 1900 gold calls vs short Oct 2000 gold calls

Long Dec 1900 gold calls vs short Dec 2200 gold calls

Long Dec 50 silver calls vs short Dec 60 silver calls

About 25% cash. Patiently waiting.

Lastly, I would be remiss if I didn't print the chart below. Several Turdites have sent it to me looking for my opinion and I feel it deserves your full consideration.

About the quickest way to go broke trading futures is to go around declaring that "this time is different". However, in this case, I feel this time truly is different.

This chart covers the previous 32 years of Keynesian central banker-dominated thinking. We are at the end of the Great Keynesian Experiment. The current system will not be continuing much longer. A new paradigm will soon be emerging. Therefore, while price will still correct from time to time, historical correlations such as this one are of minimal significance.

I've got lasts of 1862 and 42.42. It will be a very interesting day so try to keep an eye on things. More later. TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  312 Comments

Dr G
Sep 8, 2011 - 2:01pm

Transcripts of Bernanke's

Transcripts of Bernanke's comments from minutes ago: https://www.zerohedge.com/news/bernanke-speaks-jackson-hole-redux-fed-ha...

"Fed has range of tools for more stimulus"...yes, like printing more money. Everybody knows the Fed has one tool and one tool only. They can call it other names, but a bullet is a bullet, and in this case they don't work. Whatever, they don't care, they'll load another one in the chamber come the FOMC meeting.

Better call HP and get more ink.

Shill
Sep 8, 2011 - 2:02pm

Yup Tesla I am seeing it. The

Yup Tesla I am seeing it. The bastards are throwing everything at us at the moment, but the momentum is there. They are trying like hell to cap us.

LETS DO THIS!

Dr G
Sep 8, 2011 - 2:04pm

Beware the Globex

Beware the Globex sell-off/manipulation prior to Manchild's speech.

Tom L
Sep 8, 2011 - 2:04pm

@murphy

I think reviewing TheVet's posts on the options thread would be a good start. As far as valuing a put to sell I would say that a premium that is seriously above the Black-Scholes price at higher than normal 'historic volatility' (defining 'higher than normal' as between 0.1 and 0.2 higher) would be a safe bet. But, that's really too fancy.

Simply put if you can read a chart even semi-competently, nothing fancier than identifying horizontal support and resistance, than any put that is paying you at break even prices significantly below a solid support line is a good buy with minimal risk of being 'assigned' the stock on expiration.

Oct $6 SVM puts are paying you $0.50-$0.55/contract right now. Do you think that SVM has a prayer in hell of being $5.50 on Oct 19th? If not, the premium is literally free money. The other day TheVet was selling them for $0.95. He could cover those now for a tidy $0.40 profit or hold them until expiration and keep the whole shebang.

Does this help?

Ta,

Goofy
Sep 8, 2011 - 2:05pm

onewileyz Santa got plenty,

onewileyz Santa got plenty, no problem:)

As a my friend the reindeer herder said after getting caught by his boss after the 5. day of fishing and drinking instead of checking in on the the herd :

"Where is the reindeer? Ooohh, the reindeer is in the mountains and the fish is in the water!"

Dr Durden
Sep 8, 2011 - 2:07pm

Benflation has spoketh. The

Benflation has spoketh.

The dollar is back, beyotches! We're all rich!

Tom L
Sep 8, 2011 - 2:09pm

@Murphy

One last thing. As I said before, if you like a stock and its volatility is low (which you can get from a 'full quote' on the stock) then buying some cheap calls to support your share investment is, IMO, a sound strategy. Selling puts on oversold good stocks like SVM is a rare opportunity for a nearly risk-free premium that a novice could make money at. But, in no way am I recommending that as a main strategy to go long if you aren't first seasoned in valuing the contracts in the first place.

Ta,

murphy
Sep 8, 2011 - 2:10pm

Yes, he said sheepishly, ta

Yes, he said sheepishly,

ta back atcha, thx

Jake
Sep 8, 2011 - 2:12pm
¤
Sep 8, 2011 - 2:14pm

good call...

....shill

Watching the Bernank and kind of struck that he seems a bit nervous or maybe just starting to feel the pressure. No smug demeanor today. I don't envy him but I'm not letting him off the hook either.

Wonder what kind of meds. he's on? Shill...any takes on the Bernanks meds?

Looks like a Kush day for him. No Haze in his words today.

Mikey murphy
Sep 8, 2011 - 2:16pm

@Murphy, You can sell the Oct

@Murphy,

You can sell the Oct 6 put bid .5 ask .65 and maybe get .55 Ten contracts would be $550 minus commissions. 44 days to expiration. SVM would have to go to 5.45 for buyer to profit. That's a long drop from 9.10.

Jake
Sep 8, 2011 - 2:17pm
The Vet
Sep 8, 2011 - 2:18pm

Tom L & et.al. SVM puts

The calculations for put values include volatility as a major effect. Higher volatility gives higher premiums, but volatility doesn't have direction. You get the higher premiums regardless of whether the current direction of the stock is up or down. SVM has been very volatile in both directions so all of the options are actually way overpriced. That's bad if you are bullish and want to buy calls, but it's great if you are bullish and intend to sell puts. The stock just has to settle down into a range for a couple of days and most of that volatility premium for the near months will vanish and your short put will be in profit.

I am still selling puts on SVM going a little further out in time. I could close all of last weeks positions right now for serious profits but there seems to be little risk at the moment of letting them expire in due course.

margaritatime
Sep 8, 2011 - 2:21pm

quick note

Three points:

1. The dollar remains the "currency of choice"... notice that has been replaced with the former parroting of "reserve currency". Hard for me to take him serious with that shaking unconfident voice.

2. peeps the Euro and markets are getting out of sync - be careful on the globex.

3. Just consolidation going on - not a shake down IMO.

2turdledoves
Sep 8, 2011 - 2:21pm
Tom L
Sep 8, 2011 - 2:22pm

@TheVet

Exactly. That's what I was trying to tell Murphy. Don't buy overpriced calls... sell overpriced puts. Or, look for a different stock to buy calls in that you like. Thanks for the succinct reply.

Ta,

Jake
Sep 8, 2011 - 2:26pm

You Got That Right!

Dr G said: Beware the Globex sell-off/manipulation prior to Manchild's speech. GOT PHYSICAL?

Shill
Sep 8, 2011 - 2:26pm

@ DPH

@ DPH

Mikey The Vet
Sep 8, 2011 - 2:27pm

@ The Vet, Thank you sir.

@ The Vet,

Thank you sir. Made about 1500 so far on that advice and looking to add more.

kingboo
Sep 8, 2011 - 2:29pm

Bernanke speech summed up

"My bosses would like me to tell you that the economy is on the edge of a cliff, you're all gonna die if you dont convince your politicians to do it OUR WAY.....by the way, the inflation isnt from our printing press....it's from high gas prices, oh and another thing...healthy economies dont come from hard work and innovation, they come from "sound fed policy".....did i mention that slow growth was caused by the tsunami in Japan, yeah, well.....it was, damn it! In closing, my bosses also wanted me to point out that their way of life is being threatened here! and that makes them very uncomfortable, quite frankly, this whole thing is making them nervous. So, please just do whatever i tell you.....your cooperative slavery is greatly appreciated. The Bernank.

ps: we gonna be prinitin like a MOFO soon.......peace!

Economical Disaster
Sep 8, 2011 - 2:30pm

Peter Schiff - “The Whole World is Desperate to Buy Gold”

When asked about how the great money printing experiment will end Schiff responded, “It’s going to be a disaster for everybody who put their faith in this system, in the fiat monetary system. There are people who are going to be wiped out, completely wiped out. People jumped off of rooftops in the crash (of 1929). Lives are going to be ruined because of this fiat monetary system. What if we end up moving towards a complete totalitarian, centrally planned economy? These are some dangerous times we are headed for.”

When asked about bullion bank short positions in silver that can’t be covered Schiff replied, “I can’t think of a reason why anybody would want to be short silver, but these banks were dumb enough to buy sub-prime mortgages, so I guess they are dumb enough to short silver.”

https://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/9/8_Pe...

BagOfGold Economical Disaster
Sep 8, 2011 - 2:31pm

Economical Disaster says...

"Because Switzerland's books are cooked. We all thought the country was the richest and most financed in the world, it's not. Sort of like CANADA, books are cooked, they lie and the entire charade is about to collapse. CANADA has zero GOLD, ( it can fit inside Harpers desk) now neither do the Swiss..Or the U.S."

I beg to differ!...Canada "DOES" have gold...It is in the ground!...Many of the best gold & silver miners are listed here in Canada!...All we have to do is wait until gold is $5,000 & silver is $200 an ounce...then we will go & dig it out...so you & everyone can buy some!!!...

Bag Of Gold

Jake
Sep 8, 2011 - 2:31pm
Las Vegas Dave
Sep 8, 2011 - 2:31pm

Back in business Yo

close above 1860 is strong support for cruising into 1900+ territory

Shill
Sep 8, 2011 - 2:35pm

I mean you have to love this

I mean you have to love this hold here...This is great stuff for sure. But the pressure is building and something should give by the 3:00 witching hour.

Economical Disaster
Sep 8, 2011 - 2:36pm

@BagOfGold

again..

CANADA has NO gold..

The miners have the GOLD.. its FOREIGN SOLD and OWNED..

CANADA GETS ZERO

Timber Tim
Sep 8, 2011 - 2:37pm

@scottj

A telling picture of Perry if ever there was one.I fear for Ron,his honesty and the sincerity of his beliefs, make him stand out from the fakes.He will be ruffling more than a few feathers.It doesn't matter what your political persuasion is, he would be good for America.

If his hands where safe enough to bring 4000 new lives into the world.Then maybe they are the type of safe and experienced hands that America needs.


Sep 8, 2011 - 2:38pm

Uhhhhh...

this is definitely worth reading.

https://www.zerohedge.com/news/euro-finished


Sep 8, 2011 - 2:42pm

Banks Desperation to Cover? Here is a Thought

Analysis of this question that Turd posited requires some assumptions. So, like Turd, I continue to ask myself why, why, why?

Let me start with the most basic, simple question, before getting to Turd's question. Here it is:

Who is really in power?

To address this question, one must make many assumptions, which if true, could build support for the conclusion in response to Turd's question, but which if untrue, would then cause any projected answer to fail miserably. So, I will list my key assumptions, so that if the assumptions prove false, my conclusions can be rethought.

Who is really in power?

To address this, it must be asked then, at what level? This, I believe, is the absolute key to understanding the entire paradigm. If I am correct, then my analysis is flawless. If I am wrong, then my analysis is completely worthless. So, in my mind, there are huge stakes on getting the assumption on this key point correct, or else my stacking and preparation methods are basically a waste of time.

The level of power I am referring to must naturally be the highest level possible. Everyone answers to someone. But who is at that highest level? Is it a private group, like the Rothschilds, Bilderbergs, et al.? Or is it some cabal of government leaders, elected officials, military, et al.?

This really begs the question, and holds the key: if a person were to know who was in charge, then would that not also mean that such person would be part of the ruling elite? I say this, because knowing who is in charge means that there is definitely someone to blame for things going wrong. As we all can see, things are definitely going wrong for large groups of people all over the world. Likewise, knowing who is in charge allows one to seek advantage by getting permission from whoever is in charge to undertake a course of action, settle disputes, etc.

So, my assumption on this point, is that it MUST be some elite group of private individuals that are truly in charge, and calling the shots. And I mean ALL of the shots. There are any number of corroborating facts to back up this assumption, which most of us on this blog have already read about and thus I need not list them here again. Look, it is simple: assets and the medium of exchange are power, since they control political power. We are beyond the dark ages where military might alone ruled the day. Now, power is wielded more subtly and with great finesse.

If my assumption is correct, that a small, private group of bankers/elites are in charge, then, my whole analysis of Turd's question flows naturally. These individuals, low in number, but extremely wealthy and powerful, are calling all of the shots, with some combination of sticks and carrots deployed to control behavior of those traditional leaders and decision makers, such as POTUS, Bernanke, etc.

Power is Shifting East:

Here is where it gets fun. I firmly believe that the traditional Western power is shifting to the East. The current private group that is in charge, realizes that power is shifting East, and is doing two things: delaying the inevitable power shift by all means possible, and simultaneously setting in place a power-sharing agreement with the East, which will allow the current western private group to maintain control of the West to the extent that the East allows once power truly shifts East. The signs are all on display, right before our eyes.

Show me ONE thing that refutes this conclusion and I will rethink my analysis.

So, to the question of WHY:

Why are banks desperate to cover?

For that matter, here are some other WHYs that might as well fall within the same analysis too: Why are not the big banks allowed to fail? Why are all western govts in a race to the bottom to devalue their currencies? Why is the dollar the reserve currency? Why don't the Chinese simply buy up everything in site with all of their reserve dollars/euros? Why is there manipulation in the price of gold/silver? Why are there American soldiers spread out all across the globe? Why do none of the european countries have a large military presence across the globe?

Here is why: the end game is being managed, to allow for a gradual power shift to the East, and for the current powerful western elite to share power when that time finally comes. So, the order has been given to preserve the system while this transition occurs.

See? The system CANNOT be allowed to collapse in short order. The system must be allowed to gradually reset. The Eastern elites know this. The Western elites, from the top on down, know this. Obama is a useful tool. He is charismatic, and loads of sheeple believe and like him. Opposition to Obama has been portrayed successfully as elitist, or racist, or without compassion, etc. So, the western powers have the distractions at hand to keep the focus off the real power transition that is being played behind the scenes. Bernanke is a tool, he is doing his part, as are Geithner, and the useful idiots in charge of the US Congress and House. See, those politicians are easy to control, just give them a taste of power, and they will do anything to keep it, including doing what they are told.

Banks CANNOT collapse, or chaos would ensue, ruining the well-orchestrated plans. That is why they are desperate to cover. They were told to cover. They were told that more money printing would ensue, and hence, they were then not afraid to deploy their tools, including covering their shorts, etc.

Someone posted about the massive short positions the banks are stuck in. I say big deal. If banks had to liquidate their shorts, then yes it would be a big deal. But, the manipulation that goes on each day makes the big banks so much money that there is just no reason to liquidate those early shorts. Besides, they are told not to liquidate them, so they don't. Will Comex fail? Certainly not yet, not until it is time for that, and right now, it is not part of the plan for that to happen just yet.

This is a lot to chew on, but I am confident that it sums up the answer to Turd's question nicely.

What else flows from this conclusion? Western fiat currencies are going to keep being debased, while physical gold and silver will maintain their stores of value. At some point, who knows when, but the date is getting closer each day, those physical ounces will be unbelievably more valuable than they are today, and at that point, it will be time to exchange them for something else of value. Paper fiat notes are NOT valuable, nor will they maintain any store of value over time. They are for short term trading, that's it. Hold them long term at your peril.

So, long post, but no apologies for posting this analysis.

Mikey
Sep 8, 2011 - 2:44pm

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