Friday, June 29, 2012

Friday Thoughts

Update on the action in the precious metals + why the EU is way ahead of the U.S. in several respects.

Unless the o/i report is wrong, sometimes it is and they make adjustments reflected two days later, yesterday's gold o/i went up 912 contracts. To me this increase isn't the cartel shorting into momentum- buying by black box funds, it's dip buyers making fundamental buys. The computer hedge funds do not buy on days like yesterday. That's bullish. Second, yesterdays silver smash was all about the liquidation of the July contract ahead of 1st notice today. Silver o/i in July dropped 6268 down to 3952. Interestingly 6704 bought/rolled into Sept silver. My bet is that buying occurred late in the day after the SPX rallied back huge. This too is bullish. Furthermore, and I'm sure July o/i wall fall a bit today, but as of yesterday there were still 19.7 million ounces of silver which are funded for potential delivery. Those contracts can still be sold, but it's a lot of silver standing for delivery. I wouldn't read much into yet, but it's definitely something to keep an eye on. Finally, today's action shows what happens when cartel manipulation wakes up the physical buying world in the eastern hemisphere. Indian import ex-duty premiums were as high as $15 last night which means India was buying physical gold on the sell-off driven by the paper Comex very aggressively. China and Japan were also active buyers last night. When these buyers buy, the physical supply disappears.

Obviously today's snapback in the metals was fueled by the news out of the EU summit. A lot naysayers like Bill King of the King report are adamant that the ECB and the FED are done printing. I say that may be true, but that only happens if the ECB and the Fed want to see the banking system collapse. Germany has $109 billion in direct investments, most of it sovereign and bank loans, to the Club Med countries plus Ireland:

(click on chart to enlarge)

86.3 Billion euros = approx. $109 Billion U.S.

Most of that would be held by banks AND there would be substantial off-balance-sheet OTC derivative exposure. The real exposure just by German banks to southern Europe/Ireland could well be several hundred billion dollars. With that at stake, the best Merkel can do is put up a really dog fight for her own political benefit. Ultimately she will not go down in history as the person who triggered the EU/U.S. banking system collapse. Same analysis applies to the U.S. banks and the Fed. That is why I believe Bill King and Ray Dalio are wrong about no more printing.

The other interesting point of note - and no one in the media, even the good sources of analysis - have thought about this, but at least Europe is having systemic reform discussions. Whether or not they amount to anything is another matter. But at least the conversation is taking place. That is in direct contrast to the U.S., where not only are the systemic reformation discusssions NOT taking place, but the U.S. continues to accelerate its deficit spending and debt accumulation at both the Federal and State levels. Obamacare is a great example. I don't recall which organization put it out (people can google it) but a study was done that went thru the Obamacare legislation line by line and determined that it would add something $3 trillion to the Federal deficit over the next 10 year. I may be low on the $3 trillion but that's the number I recall. To me the EU is way ahead of the U.S. in this regard and it means the next move in the currency will markets will be: 1) dollar tanks 2) euro rallies 3) gold/silver really move higher.
Have a great weekend.  I'm out next week so posting might be spotty.


  1. I think the big item in the 3 trillion is related to the pushdown of medicaid to states--they counted it as saving rather than a transfer of costs to states.

    then you have the small stuff like 500b new taxes which counts as savings for a new program, or medicare savings--which they could do with or without Obamacare and likewise the reduction in doctors fees.

    the discussion on the bogus savings never was allowed to see the light of day.

  2. Am I the only one who noticed that pushing the Obamacare decision release date to Thursday June 28th also pushed anything related to the SWIFT expulsion of Iran and its trading partners right off the headlines? Is anyone dumb enough to think this was just a coincidence?

    Has anyone heard any news about this? Is Iran out? Did China give Obama the finger? No wonder they wanted a big headline on Thursday.

  3. Sharp stuff Dave, Thanks for the effort. Hope next week has some down time too. Does your delivery forecast include adding contracts thru the month? We have had pretty serious pick up for several months. March was really strong.
    Hope next week is good for you
    Best KC

  4. Enjoy your down time Dave!! Not sure how we will get by without your stellar analysis.
    I don't care what the media says, or any other outlet-- my savings continue to go 100% silver. You are not the only reason for that decision but your concise and wise analysis certainly helps make the decision easier.

    Justin from Canada

  5. Talking about bogus...

    Banker to the Bankers Knows the Numbers Are Lying

    The Bank for International Settlements, which acts as a bank for the world’s central banks, should know fudged numbers when it sees them. What may come as a surprise is how openly it has been discussing the problem of bogus balance sheets at large financial companies.

    “The financial sector needs to recognize losses and recapitalize,” the Basel, Switzerland-based institution said in its latest annual report, released this week. “As we have urged in previous reports, banks must adjust balance sheets to accurately reflect the value of assets.” The implication is that many banks are showing inaccurate numbers now.
    So there you have it. More than four years after the financial crisis began, it’s so widely accepted that many of the world’s banks are burying losses and overstating their asset values, even the Bank for International Settlements is saying so -- in writing. (The BIS’s board includes Federal Reserve Chairman Ben Bernanke and Mario Draghi, president of the European Central Bank.) It fully expects taxpayers to pick up the tab should the need arise, too.

  6. Thanks for what you do.

  7. CNBC Host States Silver Manipulation is a Fact, NOT a Conspiracy!

    CNBC invited Chris Whalen of Tangent Capital onto Squawk Box to discuss JP Morgan’s Q2 earnings report July 13th, the widening LIBOR scandal, and the European debt crisis.
    Shockingly, at 9:26 into the clip, the CNBC host Andrew Sorkin (not Whalen, the CNBC host Sorkin!) brings up Barclays’ manipulation of LIBOR rates, and states: ‘You hear about these things and you used to think these are conspiracy theories! You used to hear things that people are manipulating LIBOR, people are manipulating the silver markets-
    CNBC’s Michelle Caruso-Cabrera: ‘And they are!!‘
    Sorkin: ‘And they are!!‘
    Chris Whalen: ‘It’s because these markets have become so concentrated that a few players can do it.‘

  8. It's printing to infinity as the fractional financial system is such that during good times everything is leverage up to 30-40 times and when the proverbial hits the fan then top up with money which will be printed into existence - that's the system and ultimately it will collapse soon rather than later

  9. The original advice you received, to send the CA a letter stating that the debt was settled in full and provide a copy of the original letter demonstrating this fact, is sound imho. You might also want to pull a copy of your credit report to make sure they aren't reporting a debt they shouldn't even be collecting.
    Bank Action