NAV Premiums of Certain Precious Metal Trusts and Funds

The metals are a bit quiet considering the circumstances of post-option expiration and FOMC day.

War of the Worlds: 30 October 1938

Remembering the 84th Anniversary of Black Tuesday, 29 October 1929

"The truly savage and frenetic part of New York, the terrible, cold, cruel part, is Wall Street.

Rivers of gold flow there from all over the earth, and death comes with it. There, as nowhere else, you feel a total absence of the spirit: herds of men who cannot count past three, herds more who cannot get past six, scorn for pure science and demoniacal respect for the present.

And the terrible thing is that the crowd that fills this street believes that the world will always be the same, that it is their duty to keep that huge machine running, day and night, forever...

I was lucky enough to see with my own eyes the recent stock-market crash, where they lost several billion dollars, a rabble of dead money that went sliding off into the sea. Never as then, amid suicides, hysteria, and groups of fainting people, have I felt the sensation of real death, death without hope, death that is nothing but rottenness, for the spectacle was terrifying but devoid of greatness.

And I, who come from a country where, as the great father Unamuno said, “at night the earth climbs to the sky,” I felt something like a divine urge to bombard that whole canyon of shadow, where ambulances collected suicides whose hands were full of rings."

Federico Garcia Lorca, A Poet In New York, October 1929

Gold Daily and Silver Weekly Charts - Day After Option Expiry and FOMC Tomorrow

Gold was hit for a pullback today, which was no surprise since it was the day after an option expiration and tomorrow is an FOMC day.

Silver was a bit more resilient but both metals are stalling here a bit below the important breakout levels that will validate an intermediate bottom.

There was no action in or out of the COMEX warehouses yesterday.

As shown in the article below, the Wall Street Journal said that Central Banks are cutting purchases and that gold is fading from the investment picture.  

You will forgive me if I doubt this.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - IBM to the Rescue On October 29

Weak economic news was a drag on stocks for most of the day.

During the trading day IBM announced a big addition to their stock buyback program.

IBM helped to push the Dow and the SP higher, and turned a poor day into another drift higher.

Tomorrow we will get the FOMC rate decision.

Nothing new is expected.

Today was the 84th anniversary of Black Tuesday, 29 October 1929.

Paper Gold Versus Physical Gold

Thanks for this from a tweet by KoosJansen and a stalwart Floridian reader.

What leverage?  Who said anything about leverage?

Lars Schall's Matterhorn Interview with John Butler On Gold

This is Part 2 of his interview. Part I can be seen here.

This is speculative of course, but I found it to be very interesting. Lars does a good job of drawing out the thoughts of his interviewee, and stepping out of the way and allowing them to expand on their thoughts.  

I had not been familiar with John Butler and while I may not agree with the likelihoods of some of the outcomes I respect his thinking very much.  He puts a bit more flesh on the theory of a hyperinflationary crisis.

I do not agree with his analysis of the euro breakdown.  I think it was inherently unsustainable for the reasons I have outlined in the past.  A currency that spans a broad area of varying economic needs must include a political union with 'transfer payments' to allow for the loss of monetary policy.

I do agree that the euro must evolve.

Gold Daily and Silver Weekly Charts - Quiet Comex Option Expiration

The metals were quietly today, as the early overnight rally in gold was leaned on most of the afternoon.

Let's see if they get hit tomorrow on the day after option expiration or on an FOMC day on Wednesday when nothing is expected to happen.

Prices in the metals are set at the margins. Prices in most markets are set at the margins.

I say this because some people have questioned why the relatively small amount of gold available for delivery on the Comex can matter to price.  They say that because it is such a small percentage of all the gold that has ever been mined, and in their model gold never gets used and is always there.

Well, its a two edged sword. How can dumping in a quiet market what is a relatively small percentage of all the gold that has ever been mined knock the price down? And conversely how can a spot shortage of gold on the same market cause the price to rise?  There might be a clue in there somewhere.

It is because all the gold that has ever been mined is never up for sale at one time and at the current price. Supply and demand work on what has been offered (supply) against the current desire for acquisition (demand). All the gold, silver, diamonds, water and anything else that might exist does not matter if you are trying to buy at a certain time and place at a certain price.  A higher price tends to make more supply available, all other things being equal.  Is that so hard to understand?

I think people get somewhat stuck on the idea that there is an offtake of silver for industrial use, but not so much for gold. That is awkward thinking based on a false assumption.

Silver is more actively brought to market through mining and recycling than gold.   Silver is often a byproduct of base metal mining.   And while silver has a heavier industrial component, gold has a heavier monetary component.

You may not believe that gold is monetary, but for about the past four or five thousand years enough people have thought so to have set a fairly reliable trend in that direction. 

Gold is a monetary metal, the premiere monetary metal. And it is obviously coming back into its own after a long bear market and a regime in which gold was out of favor by a group, the Anglo-American banking cartel, that was promoting other alternatives.  As I have shown several times that has changed.  

And I think for several reasons the structure of the gold market looks like an accident waiting to happen, with a significant price dislocation to the upside. And not so much for silver, although I like both, because no central banks are accumulating silver for monetary purposes as far as I am aware. So, it may not make sense to you in particular, but history does not seem to be leaning in your favor.

Speaking of the Comex, there was almost no movement in or out of the warehouses on Friday.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Drift Higher Ahead of Fed

Today was a very quiet day in the markets with light volumes and a slight upward bias as markets toddle along on earnings results and expectations of no changes from the Fed on Wednesday.

This is a 'dull market.' It looks a bit toppy but I think it might take something to shake the bulls out of their sleepwalking the indices higher.

 

Moyers and Morgenson: JP Morgan May Have Gotten Off Easy - Other's People Money

Matt Taibbi had some similar things to say about this same topic, Nobody Should Shed a Tear For JPM.

And of course, Jon Stewart had a classic takedown of the apologists and spokesmodels for the Wall Street Banks on CNBC and Fox, among others.

Predatory and crony capitalism, as opposed to constructive and transparent capitalism, is a recurrent problem as described in Other People's Moneyby Louis D. Brandeis written in 1913. 

Claims Per Deliverable Ounce Rises Above 55 at These Prices - JPM's Odd Warehouse Deliveries

There was nothing in or out of the Comex warehouses yesterday with regard to gold bullion.

TFMetals had some very interesting observations on recent actions in the Comex, in which JPM brought in two tranches of perfectly even metric tonnes to their warehouse.

Anyone who knows the nature of actual gold bars in use understands that they are never crafted even to the ounce, and certainly not to the tonne.

And one has to wonder where such a large amount of gold was found outside the Comex in 100 oz bars and/or from what refinery it has recently been certified Comex good.  Or were the customary requirements waived for some reason on introducing new bullion bars into the Comex complex for them?  Are they self-certifying now? 

They are on the quantities.  As you know, the CME has added a specific disclaimer to their warehouse report that say they perform no audit or inspection whatsoever on what the Banks might report in bullion, and assume no responsibility.

Be all this as it may, the number of claims per ounce of registered metal continues to climb with expanding open interest, and now stands at around 55, which is very high.    And about 40 percent of that deliverable gold sits in the JPM managed warehouse.

Given the potential for a dislocation to the exchange, and the widespread gimmickry that has been uncovered with the Banks and their commodity activity, I would like to think that the CME and CFTC might rouse themselves to have a look.

As I recall, someone who is a hero to the markets said, 'trust, but verify.' And the grounds for trust these days are stretched exceptionally thin.

Weighed and found wanting.

Stand and deliver.

Gold Daily and Silver Weekly Charts - FOMC and Option Expiration Next Week

As a reminder Monday, 28 October is the November options expiration on the Comex.

November is not a particularly significant month for the futures in precious metals, but relative to supply the open interest is rising, so we *might* see a gut check some day, perhaps Tuesday or Wednesday.

This would also cover the traditional whacking on the metals around an FOMC meeting announcement on Wednesday. I doubt very much we will see anything new out of the Bernanke Fed as he winds down his tenure. We may see some acknowledgement of the damage which the government shutdown has done to the real economy.

I have linked to two pieces on it in the sidebar news, the charge and the denial,  but have not commented on the allegations made by Mr. Jeffrey Christian at the Silver Summit this week that whistleblower Andrew Maguire is 'a fake.' Maguire has denied it in a statement at TFMetals, but has not yet made a more expansive and complete response.

Since none of my thinking depends on anything that Maguire has said, and I do not know him or the validity of what he says, it does not concern me overmuch.  I said as much the last time I spoke on this topic here.   But I have some friends who have confidence in him, and I would hate to see them disappointed and badly played. 

I am expecting something like an interview in KingWorldNews, and I would hope they don't beat the teasers on this to death for drama's sake.  A whistleblower must present their bona fides since it is a portion of their claim to credibility.  I look forward to clearing the air on this before it becomes even more nonsensical with ex-wives and he said, he said.   A frank and undeniable rebuttal is what is owed to their audience, and the mystery has become a bit much. 

And it is good to remember that the reason we must tolerate all this nonsense is because of the appalling lack of transparency in the positions and transactions in the gold and silver markets, and the uneven performance of the regulators who put forward five year investigations into verifiably odd actions in markets, and then shut them down without any report whatsoever. It hardly inspires confidence, and I think people around the world are viewing these antics with increasing disdain.

In the meanwhile, the markets go forward, and whatever has been hidden will be revealed. Eventually.

Have a pleasant weekend.

SP 500 and NDX Futures Daily Charts - Trick or Treat?

Stocks were drifting higher for much of the day as Amazon's beat on revenues cheered the markets.

The economic news not so much.

Next week is another FOMC decision on October 30. Do we think the Fed will have a trick or a treat for the market?

More of the same from their treat bowl is most likely with little new being done or said, as Bernanke winds down his tenure at the Fed.  They may acknowledge done to GDP by the government shutdown.

Have a pleasant weekend.

NAV Premiums of Certain Precious Metal Trusts and Funds

Still thin, but a bit less so.

On the Eve of Saint Crispin's Day

Tomorrow, October 25, is the feast of Saints Crispin and Crispinian.

It is not otherwise notable or observed in the liturgical calendar anymore, but is remembered because it marks the anniversary of the Battle of Agincourt.

"All things are ready if our minds be so."

William Shakespeare, Henry V

Stand and deliver.




After the Battle - "A Royal Fellowship of Death"



Shakespeare does not include it in his historical drama, which after all was written for his English audiences and the Crown, but as I recall during the Battle of Agincourt King Henry V ordered the execution of a hundred or so French prisoners, because he feared their numbers would turn and in a rearguard action overwhelm his much smaller and highly vulnerable force.

This occurred after a successful raid by the French on the English supply vans, which were guarded by 'old men and boys.' Shakespeare portrays this as a dishonourable deed against the rules of war, but makes no mention of the expediency of killing prisoners in his play. Such is the chronicle of war.

If anything the Battle of Agincourt was fortuitous for the English, having everything to do with the choice of terrain and defensive position, the vagaries of the heavy rains and mud which seriously hurt the French cavalry, even to causing heavily armoured knights to be unhorsed and drown, and the superior range and power of the English longbow.

In a very real sense in their overconfident eagerness for victory, the French chose the wrong tactics for the wrong place at the worst time to try and halt the English army from retreating from France. They ill-advisedly went 'in for the kill' to settle the score decisively, and in turn were slaughtered in one of the bloodiest battles of the Hundred Years War.

The Henry IV-Henry V plays of Shakespeare were among my favorites both in high school and University. The comedic character of Falstaff in Henry IV is among Shakespeare's most memorable creations from the non tragic plays. Kenneth Branagh's version of Henry V is exceptionally well done, and among the most enjoyable.

Gold Daily and Silver Weekly Charts - Straining at the Leash

Yesterday we had 32,000 ounces of gold bullion come into customer storage at HSBC, and 64,000 come out of customer storage at Scotia Mocatta.  There was no movement in the registered category.

If you look at the last chart, you can see the details of the individual warehouse holdings.  In addition to outlining the movements of bullion in and out, in green and red, I have also rank ordered the holdings of registered bullion in blue.

As you can see, JPM by far holds the most registered bullion in their vault.  As a reminder, the Comex has on that same statement the disclaimer that they take no responsibility for the bullion statements given to them by parties they assume to be reliable.

Mr. T Ferguson had an interesting commentary today wherein he rightly noted that JPM brought in a couple of tranches of gold into the Comex recently that were 'exceptionally round numbers.'  And they were, down to the metric tonne.

I had assumed that this bullion came from a single source, and it has to be in 100 oz bars as you will recall.  And it has to go through a process to be admitted to the Comex, although by the disclaimer we see that JPM is the party standing behind that statement, and no one else that I can determine.

So, if the bars were received, let's say, from storage by an agreement with some central bank on a lease arrangement, I wonder if one would bother with going through the laborious process of refining them again into bars, or merely recertifying them with a friendly refiner.  And one has to wonder if they are 'unemcumbered' by any conflicting claims.

But what struck me as most odd on the JPM front is how much of the registered gold they are holding, around 283,102 ounces out of a total of about 707,000.  That is about 40 percent of the total registered gold.    I thought they were trying to get out of that business of storing and dealing gold.   

However this turns out, I suspect we will not see the details of what has been going on up close.  But my opinion is that it will be advisable for traders to start settling up now as best they can, and not try to get lucky and skin a few more dollars out of a market whose fundamental structure is starting to look dangerously unstable.  

And if I were in the Exchange or the Regulator, I would not hope to stand quietly behind the fig leaf of my disclaimers and otherwise-too-busy-to-look-and-understaffed life, and start giving a look at what the heck is going on behind closed doors.   Maybe I am wrong, but I see smoke starting to come out of the cracks and seams.

It looks to be about one significant event away from a serious debacle that could prove to be highly embarrassing to a number of Very Serious People.  Not to mention otherworldly economists, bankers, and pundits who dwell in the realms of well spun models land.

But what do I know.  I am just a humble proprietor of my little domain.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Here Comes Twitter

Stocks caught a big today with tech having a bit of an edge.

The big news came out after the bell as Goldman announced that Twitter would be priced somewhere between 17 and 20 dollars per share.

Also after the bell Amazon announced some slightly better than expected earnings and sales numbers.

Microsoft beat revenue as well. So after the bell tech is rising.  The SP 500 caught a bit of a bid, but the Banks were hit with fresh news of a DOJ probe into the Mortgage Backed Securities activity, so that held back the SP a bit.

I will be watching the Twitter IPO very carefully and looking for an opportunity to get on the shorter side of equities sometime after that if I see things forming in that direction.  Goldman is going to make a major effort to get Twitter out well, and avoid the travesty that was the Facebook IPO.

And in a thin market, barring some unforeseen event, it is not hard to move the markets where you wish, especially if quite a few wiseguys are incented to go with the flow.

Have a pleasant evening.

Ochberg: Citizens Living with a Disordered Overclass in Business and Government

As you may know I enjoy listening to Frank Ochberg.  I find his speaking style and his explanations to be very enjoyable, and relaxing.

And I am taking quite a bit of liberty in applying his thoughts to the idea expressed in the title. 

He is primarily known as an expert in Post Traumatic Stress Disorder, and I have been watching his videos in order to be a more effective caregiver, and a better friend to others.   We are all wounded and imperfect in our own ways, and progressing hopefully towards something better.

How do you define better?  Well, that is where morality and ethics come in.  And unfortunately they are quickly chucked overboard as an impediment by a narcissistic culture, much to its own eventual detriment.

He speaks on a wide range of behavioural topics. He has had some interesting things to say about psychopathy which I have shown here in the past.  But Robert Hare is the most prominent name in that area.

He is a cognitive behavioural therapist, and I have a passing knowledge of this only from courses I took as an undergrad, and some work I did for a professor in a related field of 'social styles.'  I don't pretend to be any subject matter expert in this, except for what I have read and seen first hand.

I came across a few new videos from Ochberg's series last night that I thought it would be useful to share.

One new thing did occur to me this time in watching, most likely in light of my having read the book This Town, by Mark Leibovich.  It was an update on the Beltway I had been seeking, since my own involvement there ended about fifteen to twenty years ago.  It was a little worse than I expected.  In many ways London, New York, and Washington have come to resemble The Capitol in The Hunger Games.

Large organizations can take on various characters and personalities that can change with time. They are often referred to as corporate 'cultures.'   If you change companies, you can often see the change in environment, how employees are viewed, how incentives and disincentives are given, and how problems are approached.

Narcissism, and its corrosive effects, first became evident to me in my corporate career, and it was an eye opener.

I believe that today in the US and UK at least, we have seen the rise of a political class dominated by a spirit of narcissism and Darwinistic privilege. It started with the Reagan and Thatcher administrations, but has carried through every one since then to greater or lesser degrees.  Clinton certainly made his own unique contribution in marrying the Democratic party to Big Money.

This is not to say that everyone becomes that way who happens to be in government, but rather, the 'tone' of the organization and its incentives tend to promote and reward that sort of behaviour, making it more acceptable and predominant than it might have been in the past.

And this is certainly no perfect analogy, because adult citizens are not children, just as adult employees are not children. But there is the kind of 'power imbalance' between boss and employee, and Congressman and citizen, that brings some validity into a comparison of responsibility and caring and attendance to oaths and duties that quite frankly I think have been discarded in this age of narcissism.

So, here are a few thoughts on some of these personality types, for your viewing enjoyment.

I have also included an unrelated piece on how men might best support their companions in the recovery from stressful situation. I found it to be very insightful.

So what are we to do about our crazy aunts and uncles, faux moms and dads in government who have taken oaths to 'serve, protect, and defend?'   And the serially abusive Big Daddy Warbucks who seek to bend the law and the country to the service of their personal whimsies and wills. 

Luckily in the intermediate term we can do what children have been doing throughout history.  We can bid them adieu, shun them as best we can, and in the meantime encourage the adults to speak up and bring some goodness and positive qualities to our society.   This is not easy because it is not as personally enriching for them as a corruption fueled by selfish greed.  

Sometimes the 99 percent seem to take on the character of a battered spouse these days: lied to, manipulated, and abused.  And there are enough who fall victim to the Stockholm syndrome and the corporatist propaganda, and allow their anger to be channeled towards their 'own children,' among them the weak.

It may be good to remember that many of those urging us to cut down government and the law are speaking from the very heart of the corruption and narcissism in our society. And once the laws are all cut down, who will be able to stand alone against the cold winds of corporate power that will blow across the land?

Enjoy.

US Dollar Valued In Gold Since 1718

How many ounces of gold can $1000 buy?

The answer over time is instructive. Here is some knowledge about money.

It is remarkable how few economists really understand this, and what it means, what it implies. 

Here is Paul Krugman's opinion on the currency war and the US dollar in a recent piece called Godwin and the Greenback.    I think it speaks for itself, approaching the language of economic jingoism.

And he is certainly not the worst economic voice out there, which is what makes this so disconcerting.   At least he is not an austerian, those who would crucify the public for the sins of the one percent.

Thanks to my friend Nick at Sharelynx.com for this.

Nick impishly added in a note that the US defaulted on its gold obligation in 1933 and 1971, a 38 year gap.  And it has been 42 years, so we might be due again.  

I am not a great believer in cycles.  But I am a confirmed believer in what Thomas Mann called the stupidity of cleverness as being among the worst forms of foolishness. It is the capability of knowledge, but without wisdom and sound judgement.

We seem to have a surfeit of clever ones eager to play fast and loose with the nation's currency these days as a means of pushing off genuine reform, and delaying the reckoning between the people and the banks, and the powerful few that control them.

Postscript (Oct25):    In discussing this chart further with Nick, I think the data is accurate back to about 1790 or so.  As you may recall, the US used various forms of currency prior to declaring its independence.  As someone might wish to extrapolate what a currency might have been, relating it to other currencies, so this is what I think has been used prior to 1792.  

I would have preferred not to have used it since it adds *nothing* to the analysis, but it is not my call.  However I do not agree that this valuation is good prior to 1792 because I do not understand the method that was used to derive it.  That does not mean it is wrong.  It means that I have less confidence in it that the rest of the chart because it is based on a derivation that I have not examined.

Gold Daily and Silver Weekly Charts - Don't Fear the Reaper

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood.

For these few gold has been the asset of last resort."

Antony C. Sutton


"Like liberty, gold never stays where it is undervalued."

J. S. Morrill

Gold and silver were being capped most of the day on rather light volumes.

The CME inventory report for yesterday shows JPM was again the reaper for the bullion banks, bringing in 32,150 ounces of gold bullion to customer storage.   It appears that 1 bar each left the customer vaults of HSBC and Scotia Mocatta.  There was no change to the deliverable category.

As a reminder, next Monday the 28th is an expiration for November options on the Comex.  November is not a particularly big month for the gold and silver futures.

The mining stocks were hit today along with a general pullback in equities.  That often concerns those who watch them because it can signal a bear raid in the metals, with wiseguys positioning in related markets ahead of the hit.  But let's see what happens.

There seems to be a seasonal manipulation in gold and silver during December, most likely tied into year end shenanigans perhaps.   You can read prior articles about this here.

If they do that sort of thing again this year, I think they might be setting themselves up for a difficult first quarter with regard to available physical supply for delivery. It seems that the wiseguys will hit the wall again, taking it just a bit too far in short term greed, but one can always hope that wiser heads might prevail. If they do something and it doesn't break, the immature tend to double down and do it again. And again. And then it ends, badly.

Despite the antics, the structure of the physical gold bullion holdings in the US markets looks a bit stretched on the downside.  I am growing ever more persuaded that higher prices will be required to bring more metal to meet market delivery demands.   But since there has been a massive drawdown in the ETFs in the face of unrelenting demand for physical gold out of Asia, it could be a good trick. 

Better that they start earlier rather than later.  An exchange failure is not a desirable event.  And if a major scandal hits the Fed, it could not come at a worse time for them since they will be facing a massive confidence game next year with regard to tapering. 

Gold is flowing from West to East. This is something that obtain very little recognition in the mainstream media, and certainly not on from the financial media spokesmodels who appear as though they would be quite comfortable serving as the jaded but carefree hosts and hostesses for The Hunger Games.

As for me, I am ready for a perfect Manhattan, up with a twist. It's been a rather long week already. As Chekhov once said, "Any fool can face a crisis; it's the day to day living that wears you out."

Have a pleasant evening.