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Stocks slid hard today on poor economic news from the US, more significant signs from Europe of a test of the European Union and a Greek default that might cause repercussions in the global banking industry.
There was a flight to safety into the US dollar and into gold and to a lesser extent silver. Gold looks to be making a move to break out of its consolidation range, but it has not done so yet.
Silver continues to struggle after the big smack down, but the inventories on the Comex are still in a very steady decline. Someone sent me a piece from Ted Butler in which he says that over the years he has not been able to correlate the price of silver and the Comex inventory levels.
Well, I think if there is plenty of available supply that makes sense. If the inventory gets low, then the dealers would just procure more.
However, when available supplies start to tighten beyond a certain level, especially after years of price manipulation causing distortions and underinvestment on the supply side, then a demand supply trade off comes into play and the correlations and the significance of the data can most decidedly change.
I was a little disappointed with his analysis since he has studied the Comex for the past twenty plus years, but offered no insight into Comex deliverable inventories from an historical perspective, and in particular, as a percentage of open interest. What was the prior low, and what else was going on in the industry at that time? How low was it?
I will make one prediction. The deliverable Comex inventory will not fall below zero. And that is exactly where is has been heading, slowly but surely, for the past three years, like a train wreck in slow motion. Should there be any sort of default incident, Obama should find a new head for the CFTC.
If you have seen the movie 'Super 8' you will understand it when I say that one can only wonder what ugly thing will be crawling out of a Comex train wreck, looking for payback after years of abuse.
VIX spiked over its 200 DMA today. Keep a close eye on where it goes next.
I shifted gears on my short positions late in the day, from triple short to the same units in an SP index short. Both sides of the paired trade were working for the account as gold spiked higher. I did take a few more profits. I own no miners now except for one special situation.
This is still option expiration and even with Greece overhanging the market, the wiseguys are more concerned with their bonuses than with anything else unless it hits them in the face.
Carlyle is doing a review of the investment banks to see who can claim the honor of handling their prospective IPO. I wonder how much of that resume will include managing the market in order to get that pig out in rough waters. If that's the case look for JPM and Goldman to have lead roles.
My first thought is that the Carlyle IPO would mark Land's End, and the cliffside boundary. Let's see what happens.
There were more large silver withdrawals from the Comex Deliverable Inventory with 773,018 ounces taken out of the Brinks depository. Additionally, there were withdrawals of 1,418,178 ounces of silver from the eligible (customer) inventory.
Comex will have to add to their deliverable inventory from some other sources in a tight market. Typically that implies higher prices.
Someone with credibility suggested to me yesterday that a panic liquidation in all assets may be in the cards in the minds of the Wall Street banks and the monied class. When you cannot win the game, you kick over the card table and turn out the lights.
Since they are sitting in large pools of cash, thanks to the Fed, this would allow the monied interests to buy good assets up on the cheap, to fill the holes in their balance sheet as they write off their remaining fraudulent assets. A reset for them, and a misery for the rest.
I remain a little skeptical that this is their intent, but it would 'work' to their benefit. After all, 'first by inflation, then by deflation...'
More likely is a longish period of stagflation and continued kicking the can down the road. And a gradual exposure of more fraud in the financial markets, with fake paper assets undermining the real economy and genuine wealth.
And then it gets ugly.
