April metals preview

Not a lot of time, except for one quick but important observation.

Let's go back to the first week of July 2011. With the end of QE2 arriving, and no sign of more QE, gold fell to a $1480 low.  It then proceeded to blast off over the following 2 months (The only thing that kept it from going all the way to $2000 was when the, ahem, "market" decided that the Swiss Central Bank's decision to print lots of francs was incredibly bearish).

Now, pretend that on the first week of July 2011 you wanted to predict where gold would be on April 1, 2013.  You decided to stay on the conservative side and assume that price would increase only linearly and at the same rate it had been increasing since the bull market began in 2001. You would have gotten $1920 as the best prediction for April 1, 2013 (and it doesn't much matter where in 2001 you chose time zero). 

Well, interestingly, you get essentially the same line today. Meaning, gold should be at $1920 (+/- error). You can't even tell the two lines apart unless you look really closely: one is red, one green. (You can of course fiddle with where to start in 2001 to make them even closer).

Holy grail or holy fail?

So, continuing fun with principal components, I decided to look at measures of GLD volatility. Based on some work by our friend Biosci, I looked at the standard deviation of day-to-day changes over time. But over how much time? If we limit ourselves to popular Fib numbers, what's the most meaningful time interval over which to look at standard deviation of %change in price?

Well, that's the fun part of PCA. I just throw 'em all in and let PCA sort 'em out (by extracting the most important info).

To allow visualization, let's limit ourselves for now to three dimensions (axes = 233 day, 144 day, and 89 day standard deviation). We can first graph all our data points, with the colors of the points representing the date (using a rainbow gradient, where blue is old and red is most recent)

Planned Destruction or stupidity in Europe?

Humans confuse the hell out of me. We elect the unemployable to positions of rule. We elect the most inexperienced into the highest offices. We promote the most incompetent into the highest positions. We pay enormous sums of money to reckless gamblers to manage our money. Humans are lied to all the time and by and large are willing participants in that lie by choosing to ignore what we know to be lies to maintain civility. We are participants in 12 lies a day in our normal interactions with friends and colleagues. This is just the norm to boost our self esteem and boost our ratings with our peers and vice versa. Society could not function if every liar was challenged.  Aberrant humans take this number to different heights and exploit this weakness.
Psychopaths, sociopaths and gangsters hold sway because when humans are faced with disproportionate violence or injustice it just confuses and stuns them into submission. There is a hesitation on the recipients part when someone breaks the social norms. That hesitation is interpreted as weakness by both participants. To preserve ego the hesitant recipient allows the moment to pass and the lie is accepted.

Mugabe receives Nobel Prize for Economics


Reuters news:
President Robert Mugabe was honored today with the Nobel prize for Economics shortly after the news that the EU had suspended sanctions against Zimbabwe. The EU lifted most sanctions after 33 years because of the March 16th vote In Zimbabwe where a new constitution was voted on by 95% of Zimbabwe.

Fed head Ben Bernanke gushed,  "This is fantastic news and it's obviously long overdue".   Mr. Bernanke was dressed elegantly in a little black off the shoulder number designed our own Jeanne d'Arc. The Fed head has been a long time student of Mugabes theories and it's often thought within the inner circles of academia it was Mugabe who actually penned Bernanke's famous theory on helicopter money drops.

Breaking news on Cyprus

Cyprus banks to remain closed until Thursday http://www.enetenglish.gr/?i=news.en.article&id=406
In Celebrity news: The NBA and NFL players will strike if they get confirmation Kim Kardashian is getting liposuction on her famous derriere

My STFU thesis

I'm about done with my dissertation here at ScrewTape Files University (STFU). I've actually been sitting on it for awhile, patiently awaiting Lewis Cypher's return from one of his bi-monthly pleasure jaunts to Thailand so he can look at the damn thing and pass it on to the graduating committee. (He owns a villa in Nonthaburi out of which he runs a business of some sort. I think it's a gelato joint. I tried google earthing the address he gave me, but all I see are police cars, so that's got to be wrong.)  Anyway, I thought I'd post my work in progress here for Screwtape readers to comment on. It's called "The Second Principal Component of Multiple Fibonacci Moving Averages, Medians, Maxima, and Minima as leading Price Indicator."

In short, every day gold has dozens of numbers associated with it: the X-day moving average, moving maximum, moving minimum, etc., where X can be any Fibonacci number (I've limited myself to 8,13, 21, 34, 55, 89, 144, 233).  For example, check out the 233-day moving minimum, which captures gold's "floor" pretty well. (Data from GLD, hence starts middle of 2005)

Putin signs off on Cyprus on condition he can pose for Playgirl

The back chatter on the diplomatic channels has it that Russia's Premier has bowed to inevitable pressure and the loss of Russian money to Cyprus, which will be used to backstop the Greek banks and government again. Although publically he will continue to rail against the theft of funds from his countrymen, Merkel has pulled some strings and obtained for him top billing for April's edition of Playgirl. Putin is pushing for a further concession involving posing with Chuck Norris and said, "Not in a gay way. I want to do a cowboy type theme along the lines of a Fist Full of Dollars or Brokeback Mountain"

In addition to the Playgirl spread, Russia will control the Cyprus ports within the year.

In other news Finance ministers and other leaders are assuring their respective flocks electorate that Cyprus was a once off and would not happen here. Irish Finance minister, Noonan: "The EU’s guarantee on deposits under €100,000 was “absolutely sacrosanct”". He added "and you can take that to the bank".

Run, Boris, Run

Sorry this will be a quick and dirty post with little or no effort at
editing for grammerz etc. So back off spelling Nazi.

(Possibly) there is an agreement in the works for Cyprus that eliminates the need for a Parliamentary vote because it's "not a tax". At minimum we are looking at winding up one crappy bank and transferring the deposits of under 100K into another crappy bank and those evil Russian guys who are all obviously guilty of something or other and deserve everything that's coming to them by way of some percentage confiscation.
The good people at Goldman are reassuring their clients not to worry as this sort of stuff will only happen in Cyprus. Mr. O’Neill of Goldman: “I am sure it will not set a precedent.”

Ooookay Jim and why is that? Jim didn't say exactly why. But y'know he's tall, white and has an nice accent so he must be right.  On the other hand those Russian guys are short, swarthy and talk funny so you just know they are up to no good.

Picked this up from another site but it is worth repeating.

- By Charlie Reese

Politicians are the only people in the world who create problems and then campaign against them.

Have you ever wondered, if both the Democrats and the Republicans are against deficits, WHY do we have deficits?

Have you ever wondered, if all the politicians are against inflation and high taxes, WHY do we have inflation and high taxes?

You and I don't propose a federal budget. The President does.

You and I don't have the Constitutional authority to vote on appropriations. The House of Representatives does.

You and I don't write the tax code, Congress does.

You and I don't set fiscal policy, Congress does.

You and I don't control monetary policy, the Federal Reserve Bank does.

Eric Sprott's Fantastic Gold/Silver Figure

Eric Sprott's Fantastic Gold/Silver Figure

Eric Sprott is reported to have said in a March 16, 2013 King World News Blog (http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/16_Eric_Sprott_-_Jim_Sinclair%2C_%2411%2C000_Gold_%26_Skyrocketing_Silver.html)

'Well, the funny part about gold and silver:  If you put all of the gold in the world that is above ground and compare it to the known silver above ground, the ratio is 150 times more gold than silver....'


I have pointed out before (http://screwtapefiles.blogspot.com.au/2012/08/so-how-much-silver-is-really-out-there.html) the fallacy in comparing all above ground gold to 'known' amounts of above ground silver, which is basically the amount held in identifiable depositories of 1000 oz LBMA good delivery bars in Warren’s databases.

Let's say that there are 150,000 tones of gold above ground, to keep it simple, which would be a somewhat low but still acceptable consensus amount (As I recall, that figure was actually proposed by Eric Sprott).

If we divide that by 150, we get 1000 tones for Sprott's 'known' above ground Ag, which is also a mere 4,822,650 Troy ounces, but make it 5 million, again to keep it simple..

Identifiable silver held by ETFs, vehicles like Sprott's PSLV, and COMEX depositories is approximately 1,000,000,000 T. oz, once again to keep it simple.

That amount divided by the simplified figure of approximately 5 M T. Oz gives a result of 20 times the total amount of 'known' silver than Sprott says exists.

Of course, there is far more than 1 billion T. Oz of above ground silver, estimated to be at least twenty times more (see also http://screwtapefiles.blogspot.com.au/2012_10_01_archive.html).

So, 20 x 20 = 400, the approximate multiple by which Sprott's figure for the ratio of gold to silver is wide of the mark if you base it on a credible figure for above ground silver in all forms.

Could Sprott possibly be 'talking his own book' once again?  Exaggerating by a factor of 400?

New Pope sighted in bowl of Corn Flakes

There is a lot of crap being written about the who the next pope will be.
Click bait posing as news and even the preppers and doomers are gettting
excited about the possibility of the next Pope being Black
fulfilling St. Malachy's prophecy and heralding the end of the world.

So here are the facts:
St. Malachy was a real guy doing real godly work in the 12th century.
There are 112 prophecies attributed to him starting at the 12th Century and the run up until today. They describe the personalities of each successive pope. He describes a Black Pope as the last Pope. Black may not mean he has a year round tan.

Sprott funds confirm other ETFs have metal

Regular readers will know I have a thing for Eric Sprott. Not in a religious sense (although I have read plenty of religious-like fervor surrounding the man), just a fuzzy feeling knowing the guy is a brilliant marketer. Today's article celebrates Eric Sprott because the recently released documents from the Sprott-based Palladium and Platinum funds give validation to other funds (a kind of reverse-zen thing).

Let's first talk about brand power. A few years ago our local supermarket recently started selling their own mobile SIM card - I remember being really surprised that they had launched their own carrier and for a little while I was awestruck by the power of their monopoly (which here in the antipodes includes not just grocery items but also key markets like petrol, hardware stores, etc). It wasn't until my internet service provider started offering their own mobile SIM cards that the penny finally dropped and a bit of investigation revealed that these 'brands' will piggy-back on the infrastructure of one of the major providers (for example iinet uses Optus), normally offering slightly different price packages. Bottom line it's the same service in different wrapping paper, but it's beneficial and convenient for all parties involved because it reduces overall cost and allows economies of scale while still retaining brand identity and (I presume) maximizing market share.

Screwtales: Fed Gold and German Tanks

Satisfied that GM Jenkins has the skinny on gold price movements, I've been busy in the other cellar trying to finish a new database article. A few readers asked me to look at the National Geographic documentary titled 'Inside Americas Money Vault' (link link), specifically regarding bars shown in the first section of the clip - Bron Suchecki added a few more observations which made a small article worthwhile so here it is, for anyone interested.

With the new clip, we attempted the same as the recent 'Bob Pisani Revisited' article - to see if the database can tell a story about the gold bars we see on the camera. This is normally cut and dried - there is either a match in the data or there is not. There are plenty of great visuals in the clip, at high resolution.

March 2013 metals preview

 I'd be very surprised if gold has a daily closing price below $1530 this month. At any rate, I'll be looking forward to taking long positions with any dip below $1560, and more aggressively the lower beneath that it may go.

I figure the average trading price for gold this month will be > $1575, perhaps >$1600. Given that the average price has fallen for 5 months straight, a more dramatic low would be absolutely unprecedented for this bull market. Of course, "this time could be different," and anything can happen, but I prefer betting against such possibilities, especially with the fatuous bearish sentiment permeating the PM markets. In fact, there's a lot of idiocy permeating all "markets" these days - an idiocy painful to bear, in the same way that Stockholm Syndrome is disturbing to witness. Plainly, if you don't see the financial markets as primarily a vehicle set up so that clever sociopathic parasites can steal your money with impunity, you're the proverbial sucker at the poker table.

Though I'd be surprised if there's a violent sell-off this month, I still don't think the post-2011 correction is over. These "three line break charts" (for explanation, see last week's post) should give us a clue when the correction may have ended. In short, keep your eye on the mining stocks. The weekly GDXJ ratio with the Dow Jones Industrial Average has displayed a three line break to the upside right at every good upswing since pre-QE2. (Note that GDXJ was first offered in late 2009; I would know, as I bought a shit ton from $22-28 for my core stock portfolio when gold had just broken $1100. I haven't sold a single share, so I'm sitting on 40% losses, though gold has averaged well over $1500/oz over the past 3 years. Go figure.)

My theory on the miners is that they're just about the only sector that the Exchange Stabilization Fund (a.k.a. the Plunge Protection Team) isn't pumping full of hot gas. So they are performing how lots of stocks would be performing in a deflationary environment. That's why their ratio with other stocks appears to have some significance.