and.....
http://www.silverdoctors.com/silver-cot-report-91412-commercials-crushed-by-qe%E2%88%9E-added-11-8m-oz-net-short-prior-to-fomc/
Silver COT Report 9/14/12
Commercials sold off an incredibly massive -91 longs on the week and purchased a respectable -2,261 shorts to end the week with 46.13% of all open interest, an increase of +0.31% in their share since last week, and now stand as a group at 236,360,000 ounces net short, a MASSIVE INCREASE OF 11,760,000 more net short ounces from the previous week.
Clearly, the commercials were preparing for a massive raid on Thursday, until Bernanke dropped their pants by announcing QE∞.
This means that rather than the massive raid that was apparently planned for Thursday’s FOMC release by the cartel, they now find themselves with nearly a 250 million ounce net short position with the reality of QE∞ staring them in the face.
Everyone now will be buying the dips in gold and silver in order to protect themselves from the Fed’s official policy of currency devaluation to infinity. The cartel will have to cover these shorts at some point- expect this to begin in an orderly fashion, and potentially result in a short covering disorderly move to the upside in silver.
Large speculators wound up in the sell column as they unloaded -912 longs while picking up a miniscule -36 short contracts decreasing their net long position to 157,410,000 ounces, a decrease in their net long position of about 4,740,000 ounces from the prior week.
Small speculators bucked the trend of their larger speculative counterparts and bought up a massive 1,853 longs and covered -1,447 shorts for a net long position of 78,950,000 ounces an increase of 16,500,000 ounces net long from the prior week.
Commercials resumed adding to their short positions after several weeks of primarily long selling to rake in profits on this rise in silver spot.
We see the majority of open interest change in the small speculators who also happen to hold the least of the contracts by percentage. They bet long as they also unloaded, or were forced out of, a significant percentage of their short positions. They also bet right considering the FED’s decision, yesterday, to engage in QE3, though they should probably take profits and get out quickly. In the paper game, if you can make $1+ an ounce for a couple of day’s work then that is a success story.
If forced to take a position on what this round of quantitative easing is going to mean for the precious metals markets, my choice is not much. These FED purchases are aimed at buying up toxic mortgage backed securities and the money printed to acquire those filthy pieces of meaningless paper is not going to find its way into the metal’s markets. This is just another preparatory event to shore up some banks for the coming collapse storm later this Fall or Winter. If it was bond buying that would be a different ballgame but this is strictly toxic waste cleanup operations to spread the hazardous waste amongst the taxpayers like the fluoridating of the water of the masses.
My rationale is that the commercials would have gotten some advance warning and would have bought long but that did not happen. To further support this theory, the managed money did not bet long either. This could be because the commercials have bought short for seven straight weeks and they know a solid correction is coming. Take the Wednesday raid out of the picture and silver is up $1 since the FED announcement.
After the FED announcement, we saw 34,000 contracts (170,000,000 ounces) trade in just one hour. Price has been stagnant since then and leveled off at $34.70. Interestingly, volume has been heavy today in both silver and gold so let’s hope some small speculators are making some profits on all those longs they bought because by their actions everyone else thinks a raid is coming.
http://www.zerohedge.com/news/bofa-sees-fed-assets-surpassing-5-trillion-2015-leading-3350-gold-and-190-crude
( silver price would be about 67 using a gold / silver price ratio of 50.... note the ratio has swung between approximately 20 and 90 between 1970 - 2010 , ratio presently at 51. Clearly a lower number for the ratio would imply a higher price for silver and no on knows what the " right " number might be .)
BofA Sees Fed Assets Surpassing $5 Trillion By End Of 2014... Leading To $3350 Gold And $190 Crude
Submitted by Tyler Durden on 09/14/2012 18:44 -0400
Yesterday, when we first presented our calculation of what the Fed's balance sheet would look like through the end of 2013, some were confused why we assumed that the Fed would continue monetizing the long-end beyond the end of 2012. Simple: in its statement, the FOMC said that " If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability." Therefore, the only question is by what point the labor market would have improved sufficiently to satisfy the Fed with its "improvement" (all else equal, which however - and here's looking at you inflation - will not be). Conservatively, we assumed that it would take at the lest until December 2014 for unemployment to cross the Fed's "all clear threshold." As it turns out we were optimistic. Bank of America's Priya Misra has just released an analysis which is identical to ours in all other respects, except for when the latest QE version would end. BofA's take: " We do not believe there will be “substantial” improvement in the labor market for the next 1.5-2 years and foresee the Fed buying Treasuries after the end of Operation Twist." What does this mean for total Fed purchases? Again, simple. Add $1 trillion to the Zero Hedge total of $4TRN. In other words, Bank of America just predicted at least 2 years and change of constant monetization, which would send the Fed's balance sheet to grand total of just over $5,000,000,000,000 as the Fed adds another $2.2 trillion MBS and Treasury notional to the current total of $2.8 trillion.
In other words, for once we actually were shockingly optimisticon the US economy. Assuming BofA is correct, and it probably is, this is how the Fed's balance sheet will look like for the next 2 years:
Or, in terms of US GDP, the Fed's balance sheet will have "LBOed" just shy of 30% of all US goods and services.
It gets worse:
Since the Fed is effectively becoming the marginal player in both the MBS and Treasury markets, a very relevant question is how much private market debt is left to sell. Short answer: not much. According to BofA's calculation, the Fed will own more than 33% of the entire mortgage market by 2014.
That's half the story.
On the Treasury side, in just over 2 years, "Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014." You read that right: in just over 2 years, the Federal Reserve will hold two thirds of the entire bond market with a maturity over 5 years(which by then will be part of the Fed's ZIRP commitment, yield 0% and essentially be equivalent to cash).
No wonder that David Rosenberg is worried that the Fed will soon run out of securities to buy (well, there are always equities of course, but the Fed will not monetize those until some time in 2015 when hyperinflation is raging).
And speaking of hyperinflation (and our earlier note that nothing "else is equal") the real question is if indeed the Fed will own $5 trillion in "assets" in 27.5 months, what does that mean for gold and crude? The answer is plotted below:
In case it is unclear, the answer is:
Luckily the Fed has already factored all these soaring input costs (and "alternative money" prices) in its models, and there is nothing to worry about. Lest we forget, the Fed can crush inflation cold in 15 minutes cold... somehow. Even when unwinding its balance sheet would mean sacrificing 30% of US GDP and, let's be honest about it, civil war.
* * *
That's it in a nutshell. Those who are interested in the nuances of the BofA analysis, which is a replica of our own, can read on below:
The Fed Bazooka
Given our growth forecast, we expect the Fed to follow up the expiration of Operation Twist with an open-ended outright Treasury purchase plan at the December meeting. We expect the pace could be between $45 billion (which would be equal to the current size of Twist) and $60 billion/month for two years [in 10 year equivalents]. We expect a long program given the slow improvement in the labor market as well as the Fed’s focus on a “substantial and sustained improvement” in the employment situation.
Table 2 compares different asset purchase programs by the Fed in terms of the net notional and duration take-out. Were the Fed to engage in renewed Treasury purchases post the end of Twist (in the same maturity distribution), this could easily become one of the largest programs in terms on monthly 10y equivalent demand from the Fed. Note that even MBS buying takes duration out of private hands, which would put downward pressure on rates
Mortgages: Fed buys most of monthly issuance
We estimate that Fed purchases will take out about 60% of monthly MBS production. However, our mortgage strategists note that historically the Fed has concentrated its buying in 30y conventionals. For example, in August the Fed bought $23bn of conventional 30s, $2.5bn of conventional 15s and $3bn of GNs. This compares with gross issuance at $122bn, which is split into $88bn in conventionals ($66bn in 30s, $22bn in 15s) and $34bn in GNs. In other words, the Fed has concentrated 80% of its purchases among conventional 30y. A similar pattern would suggest that the Fed would buy an additional $30bn in this sector, which could end up being almost 90% of all issuance in conventional 30y. This explains the significant tightening in the mortgage basis, and would argue for the Fed to buy some other sectors as well.
In terms of outstandings, we expect the Fed to end up owning more than 33% of the total market by the end of 2014, which is also significant since many mortgage investors tend to reinvest paydowns. These investors would need to be persuaded to sell MBS to the Fed, which would require tighter spreads.
Treasuries: Fed will own a 45-50% in the long end in a year
Given our growth forecast, we expect the Fed to follow up the expiration of Operation Twist with an open-ended outright Treasury purchase plan at the December meeting. We estimate further what the potential ownership of the Fed could look like in the Treasury market over the course of the next two years. We assume that: 1) Purchase sizes are in the same distribution as Twist, sans the sales; 2) Treasury coupon auction sizes remain constant; and, 3) The Fed does not change the 70% per issue maximum SOMA limit.
Table 3 and Table 4 simulate the Treasury universe during the course of 2013 and 2014. Fed ownership across the 6y-30y portion Treasury curve is likely to reach about 50% by end of 2013 and an average of 65% by end of 2014. Given the current issuance schedule, we believe it is very likely that the Fed changes its purchase buckets through the next round of Treasury purchases. In particular, the Fed will begin to run out of issues in the 8y-10y bucket and will be forced to buy newly issued 10y notes should they choose to maintain the same distribution. We believe this is unlikely, and that the Fed is likely to redistribute its purchases and possibly include the 5y portion of the curve to provide some room.
and miner strikes spreading will be a net positive for metals - sooner or later this will spread to South America....
UPDATE: 7 SOUTH AFRICAN PROTESTERS ARRESTED AS AQUARIUS PLATINUM SUSPENDS KROONDAL OPS
SEPTEMBER 14, 2012 BY SRSROCCO
Striking platinum miners in the Rustenburg area now want, Xstrata’s operations, Implats and Amandelbult to be shut down next week, along with Amplats, Lonmin and Aquarius which have already shut down to protect workers.
Aquarius Platinum has suspended operations at its Kroondal mine near Rustenburg on Friday – the fourth mine to stop operations in a protracted labour dispute. Police swooped on striking protesters outside and arrested seven people.
…Sebei said protests were continuing to close all mines in the area and named Samancor, Xstrata, (both of which operate chrome mines in the region), Impala Platinum – the world’s No. 2 platinum miner – and Amandelbult (which is located some way away from Rustenburg). He also named Murray & Roberts – a mining contractor employed by Aquarius.
The protestors had given Murray & Roberts and Aquarius Platinum management 15 minutes to respond to a request to close operations.
“We came here peacefully to ask you to close operations, because we believe workers underground are being underpaid,” workers’ leader Godfrey Lindani had said.
Police then swooped on the protesters and Eye Witness News and the SABC reported that tear gas was fired.
…….Nearby Lonmin has been closed for more than a month and Amplats suspended operations on Wednesday.
Operations were halted at Gold Fields KDC west mine near Carletonville on Sunday when workers there went on strike.
and is good ole Blythe being set up to be the fall gal.....
Blythe Masters Appointed to Regulatory Affairs In Addition To Rolling the Dice at JPM
Can a pit boss also be a good casino host?
"Blythe Masters, a widely known figure in the securities industry who oversees JPMorgan's commodities businesses, has been given the additional assignment of running regulatory affairs for the corporate and investment bank under her boss James Staley.
"Having her in this role will be critical to helping us drive the business's strategy in light of changing regulations," Cavanagh and Pinto wrote in the memo.
In her regulatory role, Masters will report to Barry Zubrow, the former chief risk officer who came under the microscope after the bank in early summer reported an expected $6 billion trading loss. Zubrow has been head of the bank's corporate and regulatory affairs office since January."
It appears that Blythe Masters will be dual reporting to James Staley and Barry Zubrow.
Dual reporting is an interesting situation to be in. It is generally a sign of an unresolved management conflict.
As you may recall, Mr. Zubrow was appointed the head of Regulatory Affairs in January 2012, after the London Whale breeched and then blew up on his watch as Chief Risk Officer, a position now held by a Mr. Hogan.
"John Hogan, who only became chief risk officer in JP Morgan Chase in January, will likely be facing some uncomfortable questions following the bank's revelation yesterday it had made $2bn in trading losses since the beginning of April. Hogan, 46, who previously been head of risk in the investment banking division, replaced Barry Zubrow as chief risk officer for the whole firm in January, when Zubrow took on the newly-created role of head of corporate and regulatory affairs."
Generally people appointed to Regulatory Affairs have some serious background as a regulator. I suspect that as one of the chief risk centers and derivatives jugglers at JPM, Blythe Masters role will be to assess and manage the impact of any government changes in her highly volatile domain. It smells like it could be one of those top down corporate inititatives, generated in response to a crisis and a slide presentation by McKinsey and Company, that look good on flip charts but are useless and awkward in implementation. A trip to Liaison Land.Or it could be the precursor of a fall from grace.
More change is coming I am sure.
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