Lessons From Squanto

Authored by MN Gordon via EconomicPrism.com,

Governments across the planet will go to any length to meddle in the lives and private affairs of their citizens.  This is what our experiences and observations have shown.  What gives?

For one, politicians have an aversion to freedom and liberty.  They want to control your behavior, choices, and decisions.  What’s more, they want to use your money to do so.

Here in the United States, bureaucrats, flush with authority, will stand in the way of a fellow who’s striving to find his own way by his own means.  Licenses, permits, fees, employer identification numbers, state board of equalization registrations, workers compensation insurance…you name it.  All this – and more – are needed prior to hanging out your shingle and making your first sale.

Many cities in the land of the free require school kids to get a permit just to operate a lemonade stand.  And don’t even think of opening an auto shop, let alone a medical practice.  You’ll spend your first year’s profits getting your hazardous materials business plan approved by the fire department.  What a waste of time and resources so you can store a couple tanks of oil and gas and keep a couple waste drums to put the dirty rags in.  Does all this rigmarole make you safer?

After that, your time will be spent keeping up the requisite documentation and reporting.  Actually acquiring and serving customers will be secondary.  Then, after paying federal, state, and local taxes, you’ll be left with less money than if you’d just kept your day job.  Why bother with the risk if there’s no reward?

Perpetuating Mistakes

Certainly, some government programs were initiated with well-meaning intentions.  Food stamps, for instance, are issued so people can buy food so they can eat.  Isn’t that a good thing?  On surface, the answer is yes.  But below the surface unintended consequences simmer.

By making more and more people dependent on the government for their daily bread, the government is, in effect, crippling them.  The assistance, in many cases, does more harm than good.  It completely snuffs out a person’s aspirations.  Some may even put their ingenuity to the task of gaming the system.

You see, nothing demoralizes a person like being dependent upon the benevolence of the state.  Yet once someone has slipped onto the receiving end of its disbursements, breaking free is exceedingly difficult.  To do so, a dependent must go from being comfortably poor to being uncomfortably poor.

“Give a man a fish and you feed him for a day; teach a man to fish and you feed him for a lifetime,” goes the English proverb.

Politicians, unfortunately, have missed the wisdom of this axiom entirely.

Instead, like most of their plans, they’ve set up programs that make people indefinitely reliant.  Moreover, they don’t give a lick that their schemes are giant money sucks with few redeeming qualities.

Up and down, in and out of the economy these programs go.  Entire industries, like defense contractors, are fully dependent upon the government’s cheese.  Other promised transfer payments, like social security and Medicare, are fully entrenched into the fabric of society.

This is why it’s impossible to cut the federal budget, even if many of these programs are mistakes.  It doesn’t matter if the nation can afford them or not.  Politically, these mistakes cannot be undone.  They must be perpetuated.

Lessons from Squanto

Over the last decade the federal debt has increased from $9 trillion to over $20 trillion.  That’s more than double in just 10 years.  Where has this debt based money gone?  Where has it been spent?

A good part of it has been frittered away paying for social transfer payment programs.  An abundance of it has collected in and around Washington and Wall Street.  Whatever else, the Pentagon has pumped out to its preferred contractors.

What will happen when the federal government tacks on another $11 trillion over the next decade?  What if they double the debt again, taking it to $40 trillion?  We don’t know, exactly.  But there’s a good chance we’ll all find out.

In the meantime, one thing is certain.  A day of reckoning always arrives at the worst possible time.  But, in this case, the approaching day of reckoning will be especially difficult.

The federal government’s balance sheet has been larded up with massive amounts of debt.  This debt is needed to fund programs that several generations of Americans have become wholly reliant upon.  These people expect that these programs will support them until the day they die.

What will happen when the debt charade breaks down and these dependents are cutoff from their expected payments?  What sort of madness will prevail when half the populace realizes in unison that they’ve been snookered?

Indeed, there will be an ugly shock and a painful adjustment.  Given the scope and complexity of the impending break down this could go on for decades.  However, those with the will and desire to pick up the pieces and make something of them will be greatly rewarded.

Remember, the Pilgrims didn’t receive monthly government checks when the Mayflower first landed at Plymouth Rock.  So, too, Squanto didn’t show up at the first Thanksgiving feast with a bucket of extra crispy KFC purchased using a government issued EBT card.  Rather, Squanto taught the Pilgrims how to sow and fertilize native crops and trade furs with other native tribes, and they reaped the fruits of their labors for a lifetime.

The point is, the day will come when government dependent industries and recipients of government transfer payments, including FDR’s promised social security, will be abandoned.  Thus, taking steps today to ensure your financial independence from the state is of grave importance.

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Guggenheim CIO Warns “Everything Is Liquid Until You ‘Need’ To Sell”

The holidays came early to the world's investor class, as instead of 12 Days of Christmas, Scott Minerd, Global CIO of Multi-billion-dollar Guggenheim Partners, dropped his 12 lessons for today's meltup-market participants.

In a series of tweets, Minerd offers some clear-cut advice for the complacent many...

He begins by noting "The rally in risk assets is probably not over, but strength is an opportunity for investors to move towards the exits."

Then explains...

Merkel's failure to effect a coalition increases the risks of longer QE from #ECB.

 

The myth of higher long term rates in the US ignores the risk that the business cycle's terminal rate may be lower than many think.

 

With the neutral rate stuck at zero, a December rate hike will move the #Fed into restrictive territory.

 

The Senate plan to delay a corporate tax cut into 2019 is likely to create a massive drag on the US economy. Bad policy!

 

The shape of the yield curve is telling us that we are on track for a recession and that monetary policy is becoming restrictive. The #tax bill is not a reason to rethink this signal.

 

Market phase has moved from recovery to fundamental and now to speculative. There's little price appreciation now, just clipping coupons. It is time to become more conservative and book gains.

 

To paraphrase Hemingway, credit downturns happen slowly and then all at once. Don't let yourselves be surprised by a sudden increase in spreads and defaults.

 

We are at a moment in time where complacency in the markets will be badly punished in accounts, bonds, and careers.

 

People who snooze will get run over by the bear market in risk assets.

 

The markets have had a great run, and it is easy to get complacent after such a long period of returns.

Ending with some crucial advice for everyone..."Everything is liquid until you NEED to sell. Plan accordingly."

As Minerd concluded recently, based on the historical relationship between market cap to GDP ratios and subsequent 10-year returns, today’s market valuation suggests that the annual return on a broad U.S. equity portfolio over the next 10 years is likely to be very disappointing.

As such, investors may want to seek better opportunities elsewhere.

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The Source Of The Next Crisis

Authored by Kevin Muir via The Macro Tourist blog,

In 1992, the CBOE hired Robert Whaley to develop a tradeable volatility product on equity index option prices. A year later, in 1993, the VIX was born when the CBOE started publishing real-time quotes on the implied volatility of the calculated S&P 500 index options. In those early days, I very much doubt Robert ever imagined his volatility index would someday be the cornerstone of some of the world’s most actively traded ETFs. In fact, for the next decade, no VIX instruments traded at all, and it wasn’t until 2004 that the VIX future was listed. And then, it took another five years before the first ETF based on those futures hit the exchanges. But what a ride it’s been.

Nowadays, everyone knows the VIX index. It’s no longer some arcane index reserved for derivative traders, but instead a highly liquid, easily traded way to bet on future implied volatility. And I doubt most participants realize that last part. They are not betting on current volatility. They are not betting on future volatility. They are betting on future implied volatility. Remember that point. It’s important. We’ll come back to it later.

During the 2008 Great Financial Crisis, implied volatility went through the roof.

It had spiked during other crises, like Long Term Capital Management and the Asian crisis, but nothing like 2008.

The Great Financial Crisis saw VIX explode to over 90. It was truly mind boggling. The amount of future volatility the market was pricing in was unprecedented. No one trusted anyone, the financial system was imploding, and everyone was desperate to buy insurance.

And then, just like that, like all crises, it passed. But in the ensuing years, the panic might have been over, but it wasn’t forgotten. And since buying VIX had been the home run trade of the last crash, investors kept going back to VIX long positions like Lindsay Lohan goes back to the bar. So even though the actual volatility of the stock market had declined to normal levels, investors kept paying too much for the insurance, betting that future volatility would once again rocket higher.

This chronic overpricing led to one of the greatest trades of the past few decades. Sure, buying VIX before the 2008 spike was profitable. But you needed to be nimble and get the timing right. After all, it wasn’t up there for long. Yet, shorting VIX - that was the trade that kept giving. For the past 7 years, it has consistently been one of the most outstanding trades the financial world has ever seen.

Don’t believe me? Look at this chart of the VXX ETF. The VXX has split countless times, so this chart reflects those splits. From 2009, when it was trading at a split adjust level of almost $120,000 per share (yup - you read that right - 120k), it is now trading at $32.

Just for kicks, I figured out the Sharpe Ratio of the VXX over the past year. It is -5.3! This means shorting VXX has been a consistent, and hugely profitable strategy, with surprisingly low draw-downs.

Hedge fund managers do terrible unspeakable things for Sharpe Ratios of 2.5 or 3, so finding an asset with 5+ is probably awfully demoralizing.

It’s no wonder everyone is shorting VXX.

Which brings me to present day. For the longest time, I felt the concerns from the VIX were overblown.

For years, market pundits have been bandying about charts meant to scare investors about the potential dislocation in the VIX market. I even wrote a piece called, The VIX Article no one will like.

Yet the frenetic pace of VIX shorting has intensified to a level that frightens me. There is now $1.2 billion of market cap of the inverse VIX ETF XIV, with another $1.3 billion of SVXY (another inverse ETF). This is insanity. Robert Whaley never expected his little VIX product to be the epi-centre of a multi-billion dollar casino. To me, this just reeks of the old Warren Buffett quote - “what the wise do in the beginning, the fool does in the end.”

I wonder how many of these short VIX investors understand the products they are buying? With VIX currently at 10, a simple move back to 20, the longer term average, would mean a doubling of the index, and if it was quick enough, could wipe out these two inverse ETFs. For example, the XIV has a provision to wind down if the NAV declines by 80%. Think about that. One missile from Little Rocket Man aimed at Guam or Hawaii, what do you think VIX trades at? My guess is that opens at 25 and gets uglier from there. Or how about a simple flash crash? It’s not as if these markets are deep and liquid. If Central Banks step back (or heaven forbid pull out some pink tickets), it could easily cascade. Regardless, at these VIX levels, 80% moves are by no means unrealistic.

What about the VIX futures? ETF managers use them to hedge their products, but there are also outright speculators. What’s the margin required on these instruments? The exchange minimum is $6,200 for the front month - representing 53% of the underlying, $4,000 for the next month - which works out to 31% and the far months are $2,500 - at just 17% of the total value of the contract. Again, this is not nearly enough. And shrewd brokers that understand risk, like Interactive Brokers, are adjusting for this reality. IB has decided to require margin for a 10% overnight move in the S&P 500. Harsh, but not out of the realm of possibilities. They have calculated that this would translate into a VIX level of 37. That means, IB clients need to put up more than 300% of the underlying value of the contract if they want to short VIX futures. Probably overkill, but given that few other brokers understand this risk, maybe justified.

If we get a sharp move higher in VIX, there will be snowball effect. If it is big enough, monster positions, like $2.5 billion of short VIX ETFs will have to be bought back in a hurry. And let me break it to you, there is no one large enough to take the other side of that trade. At least no one willing to do it without extracting many pounds of flesh first.

Don’t forget, VIX futures are the forward levels of implied volatility, not actual volatility. VIX can trade at 50 while the S&P 500 index has an actual volatility of 15. There is nothing but arbitrageurs keeping this in line. Yet in a crisis, stupid shit happens all the time. How many new sellers will be there ready to takeover an upward spiraling VIX position? Let me break it to you, it’s going to be a lot higher than the current quote.

Now there really isn’t anything new in my concerns. Yet another wanna-be-wise guy warning about the over popularity of the short VIX trade. Take a number and join the queue.

But recently I was talking with MacroVoices’ Erik Townsend about my worries. After letting me stumble around citing my reasoning, Erik said, “you know Kevin, it’s actually much worse than that,” and here is where Erik’s deduction outshone my own, “in that unwind scenario you are describing, there is a high likelihood that some market participants will find they do not have adequate margin, and will find themselves in a negative equity position.” I instantly understood the brilliance of Erik’s comment. Let’s say VIX rises 80%, and the XIV gives notice that they are closing the fund. They have another 20% of equity to buy back their short, but what if it skids through that? What if it costs them an extra billion dollars to get their short back in? Who is on the hook? Chances are, it’s the clearing houses.

A VIX spike is dangerous not only for everyone that is playing in the VIX square, but for all market participants. Given the size of the VIX complex, it has the potential to destabilize the entire financial system on its own. If the move is abrupt and large enough, it will not only bankrupt many different parties, but will cause a ripple effect in other markets. Not only that, but chances are that a VIX spike will be the result of some other factor that markets will need to deal with, so the threat to the clearinghouse system from a VIX debacle will only exacerbate the problem.

Erik instantly grasped the real worry. It’s not that a bunch of target managers will lose their fortunes that they have accumulated over the past half decade shorting VIX. No, the real worry is that they lose a whole lot more.

Erik gets it. Interactive Brokers gets it. Guys like Jesse Felder who have been warning on this for a while get it.

I finally get it. Shorting VIX, at these low levels, in the size they are doing, is not only dumb, but crazily dangerous, not only to the parties trading it, but also to the stability of the entire financial system.

I always emphasize that the next crisis won’t look anything like the past one. And when hedge fund managers make fancy presentations of the coming collapse in high yield credit or real estate, I usually just ignore them. After all, that’s what happened last time. It won’t be the same. But how ironic would it be, if the instrument that was the hands-down winner during the last crisis (VIX), ended up causing the next crisis because too many people were short it?

*  *  *

PS: As Erik outlined in the recent MacroVoices podcast, if there is a situation where short VIX players find themselves in a negative equity position, the authorities will go looking for someone to share that cost. It might not be fair, it might not be right, but there is a chance they will arbitrarily decide to take away profits from those that were long. They could do this many ways, but an easy solution would be to fix the VIX level at a lower level than where the market was trading. They would cite “disruptive” conditions or some other BS like that. But make no mistake, in a crisis situation, the authorities will do whatever it takes to keep the system solvent. That might include “fixing” the VIX. Be aware if you are trading from the long side, counting on the profits to protect your portfolio. There is simply so much risk in this VIX complex, I would be wary. And if you insist on giving it a whirl on the long side, my advice - get out before the shit really hits the fan.

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An Equal-Opportunity Thanksgiving Day Cartoon That Can’t Offend Anyone

'Offend' or 'Defend' - take your pick... but give thanks for the freedom to choose which (for now)...

 

Source: Townhall.com

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Gun Control Activist Wants You To Ask Your Thanksgiving Host If They Have Weapons

Authored by Mac Slavo via SHTFplan.com,

With Thanksgiving upon us, many are planning festivities which include feasts and gatherings with friends and family. 

But some others, like gun control activists, seek to make your holiday as miserable as possible.

Shannon Watts, the founder of Moms Demand Action for Gun Sense in America, used the trending hashtag #ThanksgivingWeek to call on parents to inquire about guns in homes where their child may be visiting this year.

Watts has been fighting against gun owners for years, pushing for gun control legislation, and has encouraged businesses to adopt gun-free policies. She is also the board chair for Rise to Run, an organization focused on encouraging communist young women to run for office.

But once again, proving that leftists are actually the violent ones who wish for the death of those who don’t believe the same fantasies they do, the lemmings who follow Watts were out in full force.

What most leftists don’t realize is that most gun owners don’t care about their emotions.

They probably will relish a Thanksgiving dinner without the political diarrhea that so many gun control activists spew. If I were asked the question Watts proposed, I would tell the person asking that it’s none of their business and if they don’t like then tough.

Because the cold hard truth no liberal wants to realize, is that gun control will only affect those willing to follow those laws and punishes those who have committed no crime. 

There’s no other way to look at it, and until the communists on the left can realize that, Thanksgiving may be more enjoyable without them.

Personally, I think that liberals and communists have an issue with gun rights because those are the people who can tell them “no” and back it up.  It’s hard to control a person who’s armed when you only bring your feelings to the fight.

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NFL Ratings Slump Worsens As ESPN Forced To Slash $80 Million In Salary Costs

As the NFL continues to try to address the ongoing civil war between Dallas Cowboys owner Jerry Jones and Commissioner Roger Goodell, not to mention the intermittent hostile fire from the White House, viewers are increasingly deciding they've had enough and are abandoning professional football viewership altogether.  As the NY Post points out today, the embattled league saw ratings dip 6.3% in Week 11 meaning 1 million fewer people tuned in to see players take a knee during the national anthem versus last year.

The TV audience for NFL games steepened its slide in Week 11, losing 1 million viewers versus last year’s season-to-date average.

 

The 6.3 percent slump — worsening from comparable declines of 5.6 to 5.7 percent during the previous three weeks — plagued a week whose off-the-field drama made gridiron tackling seem almost tame by comparison.

 

After starting 11.8 percent behind last year’s TV audience for NFL games in Week 1, league viewership had either held its own or narrowed the gap through Week 8.

 

The 6.3 percent shortfall in Week 11 reflects an average viewership of 14.9 million for the NFL’s 68 national telecasts this year versus 15.9 million for the season-to-date in 2016.

NFL

Meanwhile, the ratings dip, combined with massive subscriber losses (see: ESPN Lost 15,000 Subscribers A Day In October), has taken a huge toll on ESPN which Yahoo News reports will have to cut some $80 million in salary costs to offset their plunging top line. 

ESPN is poised to slash an estimated $80 million in salaries and other costs in coming weeks, sources tell Sporting News.

 

The third round of layoffs in two years at the Disney-owned sports network is expected to come down after Thanksgiving and before Christmas. Sporting News broke the news that ESPN planned to lay off up to 60 people in late November and early December. Richard Deitsch of Sports Illustrated followed up with a report that said 100 positions could be impacted.

 

ESPN lost a whopping $1 billion in affiliate revenue after dropping 13 million subscribers in just six years, according to the SportsBusiness Journal. Sports insiders agree ESPN overpaid for the NFL's "Monday Night Football" ($1.9 billion annually) and the NBA ($1.4 billion a year). During 2016, ESPN's prime-time viewership fell 19 percent, according to the SBJ. Rather than driving Disney's profits, ESPN has been dragging them down, spooking Wall Street analysts.

 

Meanwhile, ESPN management threw money at many anchors, analysts and reporters whose contracts were up in recent years to stop them from jumping to FS1 and other competitors. Some lost those high-paid TV gigs this spring. But ESPN is still on the hook to pay their full salaries until they get a new job elsewhere. Not many have over the past six months. Given the length of some of these expensive deals, not many will in the future, according to Awful Announcing.

 

"ESPN is dealing with three simple math problems. They have fewer subscribers than they planned for. They have higher costs than they planned for. They lower ratings than they hoped for," said one source.

Perhaps it's time for the NFL to admit that while most Americans can agree that professional football is really fun to watch, roughly half of them are going to disagree with whatever political stance its players decide to cram down their throats during games...so maybe best to just stick to football.

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Ethereum Soars To Record High After South Korea Regulator Confirms “No Plan” To Regulate Cryptos

In September, South Korea surpassed China in total crypto trading volumes, and as the world’s second largest Ethereum exchange market, South Korea is evolving into an Ethereum powerhouse with a rapidly growing number of active developments, domestic projects and communities.

image courtesy of CoinTelegraph

As CoinTelegraph reported previously, the majority of traders in the South Korean Ethereum market are speculative investors and tend to be largely influenced by any movement in the industry that could lead to a decline in Ethereum price. However, a fairly large portion of investors are avid supporters of Ethereum as a technology and an infrastructure for decentralized applications.

At the moment, ICOs seem like the largest market for Ethereum. In the upcoming years, it is likely that the performance of decentralized applications will evolve as a major factor for the market cap of Ethereum. In an interview with JoongAng, a leading finance news publication in South Korea, Buterin emphasized that it could take two to five years for Ethereum to scale to a point in which decentralized applications with millions of users can be launched and sustained.

There are many multi-billion dollar conglomerates and financial institutions in the Ethereum industry developing decentralized applications and platforms on top of the Ethereum protocol. The emergence of efficient and innovative scaling solutions will create a better environment for decentralized applications and will allow highly anticipated projects such as decentralized cryptocurrency exchanges and marketplaces to evolve.

If support and enthusiasm toward Ethereum in South Korea are sustained in the mid-term, it is highly likely that the South Korean Ethereum exchange market could evolve into an Ethereum powerhouse. As Buterin noted in the interview with JoongAng in the upcoming years, applications of Ethereum in a variety of industries will be tested and implemented.

Buterin explains:

“I would say that Ethereum’s main benefits are in its generality and in its utility to many kinds of industries. There are applications in finance, identity, supply chain tracking, health care, energy and many other areas. This is a result of Ethereum deliberately being designed as a general-purpose programming platform.”

And now, given the overnight news from South Korean regulators, it appears Ethereum has that chance...

As CoinDesk reports, the governor of a South Korean financial regulator has said it has "no plans" to supervise cryptocurrency trading, according to a report.

In remarks made to reporters today, Choe Heung-sik, chief of the Financial Supervisory Service (FSS), said that, since his agency does not view cryptocurrencies as "legitimate currency," the FSS does not intend to supervise trading of the digital assets.

According to a Korea Times report, Choe added the South Korean government believes that cryptocurrencies are used in speculation, not as payment tools. As a result, the watchdog considers that cryptocurrencies are not financial products, nor is trading them a financial service.

He said:

"Though we are monitoring the practice of cryptocurrency trading, we don't have plans right now to directly supervise exchanges. Supervision will come only after the legal recognition of digital tokens as a legitimate currency."

The watchdog head's comments come amid growing popularity of cryptocurrency trading in South Korea, and may have been prompted by the recent outage of major domestic exchange Bithumb, which recently experienced a technical outage that reportedly lost traders billions of won.

But his comments appear to have quelled any anxiety among speculators, as is clear by the reaction in Ethereum - the South Koreans' confidence is back...

 

Which leaves Ethereum solidly in 2nd place among crypto market caps...

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Does The CoT Structure Prohibit A Rally?

 

Does The CoT Structure Prohibit A Rally?

Written by Craig Hemke, Sprott Money News & TF Metals Report

 

 

Does The CoT Structure Prohibit A Rally? - Craig Hemke

 

Can the Comex metals rally from here given that the CoT structure is not yet fully "washed out"? Of course they can! While it's sometimes easy and obvious to assume that rallies are imminent by the CoT structure, history shows us that a fully-washed CoT isn't imperative for a bottom and rally.

 

Let's start with an example of a full wash, rinse and spin in Comex gold. Note the all-time lows of December 2015. That's as clean and washed as you're likely ever going to see.

 

DATE PRICE COMMERCIAL
NET SHORT
12/1/15 $1060 2,911 (ALLTIME LOW)
5/3/16 $1290 294,901
5/31/16 $1210 214,038
7/5/16 $1375 340,207 (ALLTIME HIGH)

 

So, in this example, if you were waiting for a full CoT washout in May of 2016, you missed a $165 move in June.

 

DATE   PRICE   COMMERCIAL
NET SHORT  
12/27/16 $1150 134,022
4/18/17 $1290 211,064
7/11/17 $1210 73,916
9/12/17 $1330 272,098
11/14/17 $1283 225,791 (range of 210,000-233,000 since 9/26/17)

 

In 2017, the range of positions hasn't been as large but again, the CoT didn't need to go to net flat in July before a new rally could begin.

 

So, anyway, the moral of the story is...While we'd all like to have the CoT give us a clear indication of a bottom, it doesn't always do so. In fact, the CoT is far more useful at warning of TOPS than calling bottoms.

 

To that point, again note that THE ALLTIME HIGH in the Gold Commercial NET short position came on July 5, 2016 with price UP more than 30% from its bear market lows of just seven months earlier. Additionally, note that the price high of 2017 also came at the 2017 Commercial NET short high of 272,098. This was the highest Commercial NET short position since the CoT of October 4, 2016. And where was price then? $1280.

 

As this pertains to Comex silver, we always pay attention to the Large Spec Net Long Ratio. This is derived by dividing the Large Spec GROSS short position into the Large Spec GROSS long position. History has shown that anything below 2:1 starts to get bullish, near 3:1 is neutral and above 4:1 starts to get bearish.

 

As of last week, this ratio was 3.39:1. Some history:

 

DATE   PRICE   LARGE
SPEC NET LONG RATIO  
10/27/15 $16.25 4.19:1
12/15/15 $14.05 1.28:1
4/26/16 $17.25 4.75:1
6/7/16 $16.50 2.92:1
7/26/16 $20.10 4.62:1
1/3/17 $16.10 3.40:1 (Note this level, date and price)
2/28/17 $18.40 6.04:1 (ALL-TIME HIGH)
4/18/17 $18.30 5.24:1
7/18/17 $16.10
off of $15.30 low
1.12:1 (LOW SINCE 7/28/15)
9/12/17 $17.90 3.75:1
10/31/17 $16.70 2.70:1
Last week $17.07 3.39:1 (Note
same ratio as 1/3/17)

 

Again, the point of laying all of this data on you is to dispel the notion that the only time the Comex metals can rally is IF AND ONLY IF the CoT has been fully washed and rinsed. As you can see, recent history proves that this is NOT the case. That said, any rallies that DO develop from here may be somewhat limited in size, strength and duration given the CoT neutral starting point.

 

 

Questions or comments about this article? Leave your thoughts HERE.


 

 

Does The CoT Structure Prohibit A Rally?

Written by Craig Hemke, Sprott Money News & TF Metals Report

 

 

Check out these other articles by our contributors:


John Rubino - Next Generation Crazy: The Fed Plans For The Coming Recession

Dave Kranzler - The Big Money Grab Is "On" As Middle America Collapses

Gary Christenson - Gold, Bubbles, S&P 500, and Currency Wars

Sprott Money's Ask The Expert - Danielle DiMartino Booth


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Did The Putin/Assad Meeting Cement The End Of America’s Mid-East Dominance?

Authored by Tom Luongo,

I’m not a terribly religious man.  But, I’d like to believe there is a special corner in Hell reserved for those that fomented the Syrian Civil War.

From its beginnings in Libya with gun-funneling through the U.S. embassy in Benghazi to yesterday’s meeting between Russian President Vladimir Putin and Syrian President Bashar al-Assad, this entire affair will be remembered as one of the most cynical and abusive periods of history.

The Syrian ‘Civil War’ was meant to be the crowning achievement of U.S./Israeli/Saudi policy in the Middle East, the apotheosis of neoconservatism.

Had it succeeded it would have transformed the world into a living hell governed by the likes of Hillary Clinton, George Soros, Angela Merkel and the U.S./U.K. banking cartel.

Syria was to be the wedge that blew open not only the Middle East but Central Asia as well.  It would stop the resurgence of Russia as a world power, subjugate Europe to an endless nightmare of forced cultural assimilation and completed bankrupting the United States to bring it in line with the a failing European integration project.

Supranational treaties like the TPP, TTIP and the Paris Accord were designed to create a superstructure that would supplant national sovereignty without any input from the people who were most affected by it.

Putin’s Turning Point

With Vladimir Putin’s pivotal speech at the United Nations on September 28th, 2015, opposition to this vision was expressed in the most forceful, and frankly, humanist terms one could imagine.  I’m going to remind you of the most important passage as it relates to Syria.

In these circumstances, it is hypocritical and irresponsible to make loud declarations about the threat of international terrorism while turning a blind eye to the channels of financing and supporting terrorists, including the process of trafficking and illicit trade in oil and arms. It would be equally irresponsible to try to manipulate extremist groups and place them at one’s service in order to achieve one’s own political goals in the hope of later dealing with them or, in other words, liquidating them.

 

To those who do so, I would like to say — dear sirs, no doubt you are dealing with rough and cruel people, but they’re in no way primitive or silly. They are just as clever as you are, and you never know who is manipulating whom. And the recent data on arms transferred to this most moderate opposition is the best proof of it.

 

We believe that any attempts to play games with terrorists, let alone to arm them, are not just short-sighted, but fire hazardous (ph). This may result in the global terrorist threat increasing dramatically and engulfing new regions, especially given that Islamic State camps train militants from many countries, including the European countries.

In truth, the whole speech is worth revisiting.  It is a stark reminder that Putin, normally very reserved in his words, laid all of his cards on the table and directly accused the United States of declaring war on the world.

And within 48 hours Sukhois were flying over Syria, bombing targets opposed to Syria’s government, allowing one military victory after another for the beleaguered Syrian Arab Army.  Shortly thereafter a coalition formed around Assad’s government including Iran’s Republican Guard, Hezbollah’s military wing and China’s tacit financial and moral support.

Putin told everyone, “Enough is enough” at the U.N. Then he backed up his words with actions.  War is always regrettable.  It is almost never justified.  But, when faced with an implacable enemy, there was little else to be done.

And I submit that the neoconservative forces driving the anti-Assad policy decisions are that implacable enemy.

The End of ‘Assad Must Go’

That action began the process of unraveling the carefully constructed narrative that was the Syrian Civil War.

But, enough history.

Yesterday Putin introduced Assad to the military commanders who are most responsible for the stabilization of his country.  Syria as a political unit has survived.

Saudi Arabia’s old guard are imprisoned, impoverished and losing influence around the world by the minute.  Israel’s neoconservative government, led by madman Benjamin Netanyahu, is fulminating impotently at the turn of events, and, of course, ISIS has all but been wiped out in both Syria and Iraq.

The U.S. continues to talk out of both sides of its mouth, allowing some ISIS members cover to escape to be used again another day, presumably against Iran and/or Lebanon, while taking credit for ISIS’s collapse and the capture of Raqqa.

This reflects the deep-seated issues within the vast U.S. diplomatic, military and intelligence communities and the difficulties President Trump is having bringing these disparate groups to heel while not appearing weak and ineffectual.

You need only look at the odd event over the weekend of military helicopters arriving at the CIA’s headquarters at Langley to know that, at a minimum, there is an internal war occurring within the U.S. government.

The best explanation I’ve heard (and this is by no means a corroborated fact) is that the U.S. military put on a show of force against Obama administration hold-overs in the CIA still operating its terrorist proxies in Syria.  And that these operations are in direct conflict with U.S. military goals there.

If that is the case then Putin is right to simply ignore the Americans and move policy talks forward at an accelerated rate, ignoring the talks in Geneva and giving Assad all the support he needs to continue on as Syria’s leader, if that is what the Syrian people want.

Given Assad’s open support of his military and the way the war against ISIS and other separatist groups was led by Syrian forces on the ground, there is little doubt that Assad will win that support in any upcoming elections.

Putin Won’t Gloat

The big question is, however, what price will be extracted from the U.S. for their part in all of this.  Putin will not put Trump in a bad position.  The loss of face for the U.S. has already occurred internationally.

The Obama administration’s complicity in this sorry chapter of Middle East history has been mostly laid bare for anyone with eyes open enough to see.

Putin will offer Trump a way to save face for the U.S. while laying all the blame on Obama, Clinton, McCain and the rest of them.  If you don’t think this ties into Robert Mueller’s ‘Russia-Gate’ investigation run amok, you aren’t paying attention.

Mueller is trying to desperately save everyone implicated here from treason charges.  But, I expect, everything about the U.S. political scene is about to change radically. 

Once Judge Roy Moore enters the Senate (the odds of that not happening are close to zero), Trump has an impeachment-proof majority in the House and the Senate and can shut down Mueller or get him to play ball.

Trump has the opportunity to play peace-maker here.  He can solidify his position as the handler of Saudi Arabia’s and Israel’s worst actors and keep them on a short leash.

In fact, one could make a credible argument that is what the purge in Saudi Arabia was all about.  Mohammed bin Salman’s counter-coup was done with Trump’s blessing.

Putin can act similarly to allay suspicions of Iran’s and Hezbollah’s intentions.  He can also restrain Assad from retaliating against his enemies, though rightly deserved, in order to build a lasting peace.  And once the talks are over and the threat of Kurdish independence is over, Turkey will withdraw its troops from Syria.

Putin called Trump earlier in the week to update him on what comes next.  It’s obvious that the two have been in contact about how things are progressing in Syria.  And, Trump, for his part has smartly left the clean-up work to Putin while he deals with his domestic neoconservative problems.

Whatever happens after this - framework for long-term peace or an uneasy ceasefire with Russia playing the go-between for the time being - the U.S. has lost all credibility in the region outside of Riyadh and Tel Aviv.

And we have no one to blame except ourselves.

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