Gold Daily and Silver Weekly Charts - Interesting Development at the Comex

I thought it was interesting that 63,877 ounces of gold bullion left the registered inventory from Scotia Mocatta yesterday.  That brings the deliverable category down to a new low of 416,563 ounces for this leg of the bull market. 

In the past these big declines have tended to mark an intermediate price trend change within six months or so.  Let's see if that holds true this time.

As an aside, I wish to remind you again that the registered, or deliverable category, is not the sum total of all bullion at the Comex.  There are 7,711,145 ounces of bullion in storage that can be placed into a deliverable state with a procedural action. 

For my purposes, this is more of a indicator of pricing preferences, or a willingness to sell, rather than some likely default scenario. I know I have said that quite a few times, but I wanted it to sink in, especially for those who choose to misrepresent what this data implies, for whatever reason, bullish or bearish.

And I will probably post the latest chart on this later tonight.  Because one would tend to think that when available supply placed on the market becomes exceptionally low at certain prices, it could likely indicate higher prices will be required to bring additional supply to market. 

Not all supply is equal, in availability and quality, and prices are, after all, set at the margins.  Water water everywhere, but not a drop to drink, and all that. 

When fellows make the case that all the gold in the world is part of the supply in the same way for the purposes of supply and demand calculations I have to chuckle to myself.  Nothing could be further from the truth in almost every commodity I can think of, including gold.  Things are held by different actors for different purposes.

There are also those who will say, 'you cannot trust this data it could be faked or wrong.'  Yes, a lot of things could be this, or could be that.  Life is a school of probabilities.  But I notice these same people do not seem to hesitate to use the data they prefer for their own purposes, which also could be faked or wrong. 

So I think we can stipulate that we have to use any data we have with some reasonable caution and skepticism, especially in markets that are opaque.  There is plenty of gaming and fraud in these markets.

But if someone wishes to start dismissing the meaning of some data because of some degree of doubt, then they may as well apply that same stringent criteria to all the data which they use.  And in many cases if they do this, they would be compelled to shut up, because they will have nothing meaningful to say.  Alas, such integrity is very rare indeed.

So I think I will prefer to look at all the data available and pertinent, and draw reasonable inferences, testing them along the way, always looking at multiple sources and confirmations.  There is nothing wrong with formulating hypotheses.  That is what is known as 'the scientific method.'   It is what you do with them and how you use them that counts. 

And to that end if working with other people to find out what's what proves fruitful, I will do it of course, always and everywhere. That promise is the practical side of working hard on a blog for 'no pay.'  There are some others, but not easily accounted for on worldly ledgers. And it is more useful than watching sports, or reality TV, or whatever people do these days with their leisure hours.

But some sources of information are relatively dry wells, and not worth the time and effort to try and pull out anything, of even marginal value. 

Yes there is the value of educating the stubbornly ignorant, and the hope of mutual benefit, always.  And the mule may need a good washing, but that does not mean that I'm the one who is going to do it.  These days I would rather wait for rain.

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - The Year of Divergences

Non-Farm Payrolls on Friday remains the 'big tickle' for Wall Street.

Stocks were largely flat ahead of the big event.

Sears was hammered after hours as the reality of the failing consumer continues to leak out from behind the stage props.

Obama made a speech today about rescuing beleaguered cities with 'promise zones.'  Who thought up that name?   I suppose it is better than Hoovervilles..

The Republicans continue to delight in needlessly tormenting the unfortunate on behalf of their paymasters.

And the band played on.

Have a pleasant evening.

The Roots of the Next Crisis, and the Dark Hallway Beyond

“Those who fail to exhibit positive attitudes, no matter the external reality, are seen as maladjusted and in need of assistance. Their attitudes need correction...

Suddenly, abused and battered wives or children, the unemployed, the depressed and mentally ill, the illiterate, the lonely, those grieving for lost loved ones, those crushed by poverty, the terminally ill, those fighting with addictions, those suffering from trauma, those trapped in menial and poorly paid jobs, those whose homes are in foreclosure or who are filing for bankruptcy because they cannot pay their medical bills, are to blame for their negativity.

The ideology justifies the cruelty of unfettered capitalism, shifting the blame from the power elite to those they oppress."

Chris Hedges

Here is a recent conversation I had with a friend about the current state of the US recovery.  As an accountant with a wide range of exposures, I enjoy hearing his perspective since I no longer have that sort of current insight into the corporate culture in America.  I have years of background running large businesses in corporations, and some forays into large scale M&A work, so I have seen quite a bit of it. The methods rarely change, merely the guises and degrees.

Here are excerpts from his side of the conversation with only one parenthetical comment of my own.

"I don’t think we’re seeing profits in a traditional sense. Instead, it appears to me that we’re watching a long, drawn out LBO’ing of America. It appears that companies are liquidating capital and returning it as opposed to earnings spreads on revenue.

It seems like we’re seeing the final blow-off phase that started with the stock option becoming the primary form of compensation for corporate talent. By drawing out the LBO, they re-stock their options each year with a guaranteed return thanks to the Fed and their own Treasury Departments.

The problem is that you can’t have systematic corporate buybacks with employment/economic growth as they create diametrically opposite outcomes. The more work I do, the more I conclude that the US economy has not expanded since 2006.

I was looking at mutual fund data the other day and it showed that people moved their fixed income money into domestic equity - $185 billion in liquidated bond funds to buy $175 billion in equity funds. This happened after the Fed announced tapering was on the table. Just like the gold market, I suspect that “someone” forced the liquidation of bond funds and herded the money into equity funds to keep the rally going.  (I think it is perfectly reasonable to flee bond funds at any time that interest rates are turning higher.  Bond funds often take it on the chin in such a deleveraging of a long term interest rate trend.   However, I think the whole taper thing was hyped and used by the wiseguys, as are most things these days by our financial masters of the universe. - Jesse)

Coincidentally, corporations used half a trillion in cash flow on buybacks. It’s a liquidity game but with limitations. What’s the next asset that can be liquidated or levered? They’re still working on gold but sometime soon, the price of gold will be set in the East, where the gold resides. Agricultural commodities are being liquidated but that ensures a drop in planting next year. Oil is too valuable on the geopolitical front to liquidate.

There are certainly winners in this economy but far more losers. At some point, the weight of the losers acts against the winners, many of whom are levered up with confidence. Corporations can liquidate equity capital but we all know how the LBO’d companies operated in the 1990’s. In many ways, they’ve gotten corporations to behave like consumers did in the 2000’s, only this time they’re trained to buy back their own stock. Every cycle has natural limits.

We know that corporate cash flow is no longer growing and we know that it’s more expensive to sell debt today than a year ago. We also know that the Fed sees the stock market as their proof of success. So how does this shakeout? If corporations are a lemon, how much juice can you squeeze out of the lemon?"

Although I do not wish to be an alarmist, I have to say that this trend of attempting to sustain the unsustainable has gone on longer than I had previously thought possible.

I am fairly sure that the next crisis will bring these things to a head and some sort of resolution. But therein also lies great danger. Philosophies that have grown time can have deep roots, and when faced with what to them is an intolerable change, can react somewhat excessively. They may even welcome the opportunity to act excessively and decisively, at least in their own minds, as the path to winning.

When a ruling subculture that has become accustomed to crushing and liquidating things for its own power and pleasure, whether it is natural resources, the environment, crops, animals, land, or social organizations, eventually runs out of things, it can become frustrated and angry in its seeming impotence to continue on, to keep expanding.

Indirectly and somewhat benignly at first, but with a growing efficiency and determination over time, it will begin with the weak and the defenseless, attacking and objectifying them, even in the most petty of ways and impositions. It will turn to its critics, and then everyone who is defined by them as 'the other.'

That is when a predatory social and economic philosophy can turn into pure fascism, and start liquidating people.  And finally it liquidates and consumes itself.

But really, no one wakes up one morning and suddenly decides, 'Today I will become a monster, and wantonly kill innocent women and children.'

Otherwise ordinary people get to that point slowly, one convenient rationalization for their 'necessary and expedient' behavior at a time. After all, they are the good people, they are the strong, they are the most successful and the favored.

 They are the entitled, and not these others who would seek to drain them, drag them back down. They are the champions of progress and achievement and civilisation, the hardest working, and the epitome of mankind.  

What could possibly go wrong? 

"He prompts you what to say, and then listens to you, and praises you, and encourages you. He bids you mount aloft. He shows you how to become as gods. Then he laughs and jokes with you, and gets intimate with you; he takes your hand, and gets his fingers between yours, and grasps them, and then you are his."

J. H. Newman, The AntiChrist

If you are one who thinks that the above 'could not possibly happen here,' and I am sure that there are many, you may wish to read the following vignette from modern US history. Alan Nasser, FDR's Response to the Plot to Overthrow Him

The Recovery™ In One Chart

"A new tyranny is thus born, invisible and often virtual, which unilaterally and relentlessly imposes its own laws and rules...

Such an economy kills. "

Jorge Mario Bergoglio, Francis I


"When you won, you divided the profits amongst you, and when you lost, you charged it to the Bank [of the United States]...

You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table), I will rout you out."

Andrew Jackson

Corporatism by any other name, or brand...

h/t for the chart to those wild and crazy guys at GMU.