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What Is Wrong With This Chart?

Tyler Durden's picture


Spot the 3 differences...


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Thu, 02/17/2011 - 19:43 | 972258 Richard Head
Richard Head's picture

Backwardation, bitches!

Thu, 02/17/2011 - 19:47 | 972266 nope-1004
nope-1004's picture

1) Less supply

2) Lesser supply

3) Lessest supply.


Thu, 02/17/2011 - 20:36 | 972461 Careless Whisper
Careless Whisper's picture

4) and NO supply for you because the shorts need to cover.

when i go on youtube i go deep. i found this dewd who is in canada but is from the soviet union. he knows about silver, inflation, and government lies about the economy. i think he's got some interesting things to say. what do you think?


reminds me of soviet union in 1990s, where all fundamentals were for the collapse, but you couldn't actually see it because the mainstream media would convince you everything was fine -- and people hope, and wait, and do nothing...

Thu, 02/17/2011 - 21:38 | 972714 batting500
batting500's picture

Its called "Normalcy Bias"...not seeing problems ahead despite lots of strong clues.


Good Luck...

Fri, 02/18/2011 - 02:13 | 973281 slewie the pi-rat
slewie the pi-rat's picture
What Is Wrong With This Chart?

A:  Nothing!


Q #2:  Spot the 3 differences...

Tyler, this is a pretty "tricky" question!!!

the bottom line (orange) shows the contracts in contango.

the middle line (green) shows the early contracts sill in mind contango and the far contracts entering backwardization.

the top line (white) shows the whole situ in backwardiZation, TODAY, less than a week (!) after the green line.  some clowns think this points to a silver shortage, but it could also be the "paint", where da boyz n banksta'z are BUYING the contacts in backwardization, letting the near contract long guys and the cash buyers drive the price moonward, while they, the far contact long guys will force the "shorts" into their worst nightmare, ever (!), when they demand delivery, the people who sold them the contractZ can just delare a major farce, right?

i'm really enjoying watching this while all the elmer fuddZ are on the first tee w/ their "advisors", getting ready to send their balls "underwater" in this "can't fail" scenario, just like they did with their "REAL estate".

slewie to graceland:  isn't this fabulous?  NOW elmer knows how to trade! of course you have been telling EVERYONE for years now, that it is NOT what your silver stash is "worth" in green stamps, but how many OUNCEZ of physical you POSESS...zzz.  could there BE a funnier sit-com than trading against the sh^t-conZ? 

i think i might have somewhere around 5 million people following my ideas, right now.  here are my archives, the public record of what i have said, as well as you, too.

when you get to the bottom of p. 2, hit the "wanna see more" link, ok.

do your homework;  decide what is best for you.

here's what i like:  physical gold & silver US Mint productZ.


and peace.

any questions?

oh, i almost forgot tyler's tricky question: what are the 3 differnces.

there are three LINES, but there are only TWO differnces.

nice, Tyler.  amazing, really!!!

more peace.

Fri, 02/18/2011 - 08:49 | 973568 johnQpublic
johnQpublic's picture


he asked whats wrong with the chart

and the answer is.....

when you click on the "explain this chart" help button, it does not work

prize for me!

Thu, 02/17/2011 - 23:26 | 973008 A Nanny Moose
A Nanny Moose's picture

Nice vid.

"and now back to Moose and Squirrel"

Fri, 02/18/2011 - 04:13 | 973402 chumbawamba
chumbawamba's picture

All good, solid advice.

As an aside, I'm sure he realizes that as a Canadian he can't vote for Ron Paul, but it is cool that he's so down with him.  Something about a guy with a heavy Russian accent singing the accolades of Ron Paul warms my cockles.

I like the wheat/potato/shovel/silver lesson.  Very succinct.  Practical.  Realistic.

Two Thumbs Up.

I am Chumbawamba.

Fri, 02/18/2011 - 09:19 | 973623 jus_lite_reading
jus_lite_reading's picture

Thank you for this video from another very fundamental perspective. It helps to see other people using their brain.

I also loved that quote about the Soviet Union collapse because almost 2 years ago, a former colleague said 'the US is headed toward the same fate as the USSR in the '90s and TPTB know it; the start of the end has arrived.'


Thu, 02/17/2011 - 23:03 | 972967 Problem Is
Problem Is's picture

"Lessest supply."

Crissakes Timmay...
It's a good thing your daddy employed Obummer's mommy at the Ford Foundation...

Thu, 02/17/2011 - 23:24 | 973002 Atlas Shrugging
Atlas Shrugging's picture

Would it be worth it to trade some gold for 2 monster boxes of silver Eagles? 

Fri, 02/18/2011 - 04:26 | 973409 chumbawamba
chumbawamba's picture

It depends.  What is "some" gold?  Ten ounces?  Fuck yeah.  Thirty ounces?  Fuck no.

Eventually, you will want to get out of silver and into gold (if you are shooting for long-term wealth preservation) or some other asset.  Silver will go through a bull cycle and at some point it's value relative to gold will be at a much lower ratio than it is currently, but it will fall back (blow-off top).  Gold is where you'll want to be for long-term wealth.

Everyone will be trying to time their move from silver to gold.  Everyone will be watching for the blow-off top.  It may not come for years, decades even.  But the question is, will there be gold available to move into when the time comes?

Hold onto your gold dearly, and only trade it if you know you have a sure thing in the alternative.  Because with gold, you already have a sure thing.  Trading it away is risk taking.  Just as long as you know.

Of course, I speak of physical gold.  Fuck you paper trading dipshits.

I leave you with some silver porn.  Ironically, another Russian(?):

I am Chumbawamba.

Thu, 02/17/2011 - 19:46 | 972269 Forgiven
Forgiven's picture

I don't know for sure, but it looks scary and I'm afraid.   I'm going to have to stick my head back into the sand.


Thu, 02/17/2011 - 20:22 | 972425 I think I need ...
I think I need to buy a gun's picture

I'm scared to of a revaluation or new monetary system this weekend

Thu, 02/17/2011 - 19:46 | 972271 H. Perowne
H. Perowne's picture

Zero contango. Don't cry, Blythe.

Thu, 02/17/2011 - 19:47 | 972274 Hephasteus
Hephasteus's picture

I don't get it. 2 say 30 dollars in july. One says the other 2 is dragging it down to 31.

Let me guess. one of those 2 is blythe.

Now we need to know what color is for what silver market.

Thu, 02/17/2011 - 20:12 | 972387 bruinjoe93
bruinjoe93's picture

The bottom graph are prices as of 1/18/2011 for silver futures all the way to 2015.  It is in contango.


The middle graph has a slight backwardation.


The top graph displays a widening backwardation problem.


The greater the backwardation the more severe the silver shortage.


Thu, 02/17/2011 - 20:18 | 972409 UGrev
UGrev's picture

Thanks for explaining that without sounding condescending to us newbs :)

Thu, 02/17/2011 - 20:23 | 972428 Hephasteus
Hephasteus's picture

Thank you joe figured it out shortly after posting that.

Thu, 02/17/2011 - 21:32 | 972689 william the bastard
william the bastard's picture

Oh come on now ya peeked. Ya did. Ya did.

Thu, 02/17/2011 - 19:48 | 972278 watchingdogma
watchingdogma's picture

Spot now 31.80?  So .80 backward to most forward month versus $1.00+ the other way in mid January?  I'm not well versed in all of the nuances of this situation - anyone care to give a lesson?

Thu, 02/17/2011 - 22:35 | 972894 chubbar
chubbar's picture

Using your numbers, if I had 100,000 ounces of silver sitting at the Comex I could sell it today for $31.80 which would net me $3,180,000 and then I could simultaneously buy a contract to purchase 100,000 ounces for $31.00 (eventually costing me $3,100,000) pocketing the difference ($80,000) and saving me storage fees for the next 4 years. This arbitrage tends to pull more silver out of storage the steeper it gets. The fact that it is steepening is indicative of a shortage because the players are not wanting to part with their silver for fear of non-delivery or because the silver is already spoken for, as I understand it.


Thu, 02/17/2011 - 23:36 | 973023 centerline
centerline's picture

Thanks for the perspective.  Makes sense.  Likewise, the shift from contango to backwardation occured pretty rapidly here.

Fri, 02/18/2011 - 03:28 | 973368 akak
akak's picture

Is "contango" the dance that Bernie Madoff and Blythe Masters are going to dance together in prison?

Fri, 02/18/2011 - 15:23 | 975226 BigJim
BigJim's picture


Thu, 02/17/2011 - 20:25 | 972282 Hughe Crapper
Hughe Crapper's picture

Contango, warehouse for free, backwardation.

#delivery #supplyconstraint #runningoutofstock ;)

Thu, 02/17/2011 - 19:49 | 972283 Glasgow Gary
Glasgow Gary's picture

Wow, it only took 4 weeks to take the whole curve from contango (in orange) to backwardation (in white). But what's interesting is that along the way, the farther month held at $30.00 for two weeks, as the curve was going through its structural change. That probably is indicative of something. Will have to give it some thought. It may, however, speak to the powerful backwardation that was about to unfold.

Now, of course, the back month has risen. But, only a dollar. People: if you are a theorist of this things like Fekete et al, the failure of the final month to move much should make you afraid. Very afraid.

Unless of course your long *physical* silver. :-)

And yes, byt the way, this chart is warning you to not play in paper silver.


Thu, 02/17/2011 - 21:47 | 972738 John Bigboote
John Bigboote's picture

Are you Gordon Gekko? I miss Gordon Gekko.

Thu, 02/17/2011 - 22:06 | 972794 william the bastard
william the bastard's picture

He needs his socks folded. You up to it?

Thu, 02/17/2011 - 22:13 | 972824 John Bigboote
John Bigboote's picture

Do you know that because you are his gay lover?

Thu, 02/17/2011 - 22:20 | 972849 william the bastard
william the bastard's picture

I didn't realize your avatar was "Big Boote" Whoa. Ahh nice, kinda.

Stepping lightly out the door backward face to face with you sir, Mr BigBooty, sir. I guess you know where the bread is buttered. Chino? San Luis O?

Thu, 02/17/2011 - 22:26 | 972870 John Bigboote
John Bigboote's picture

It is I, John Bigboote (big-boo-tay). You are forgiven. No harm done.

Thu, 02/17/2011 - 23:24 | 973000 SloSquez
SloSquez's picture

Now I'm really scared!!

Fri, 02/18/2011 - 08:54 | 973572 snowball777
snowball777's picture

No, he's the socks.

Thu, 02/17/2011 - 19:51 | 972284 razorthin
razorthin's picture

I know nothing about futures.  But the spot inverse h&s has been confirmed.  See how it all comes together?

Thu, 02/17/2011 - 19:51 | 972291 barliman
barliman's picture


Backwardation - nothing wrong here as a growing trend

...unless you are long JPM on margin, maybe


Thu, 02/17/2011 - 19:56 | 972317 barliman
barliman's picture


and the gapping on options across the same delivery dates as potential crucifixtion of the shorts accelerating ...

...What's the line ... "Would you prefer to be on the cross or banging in the nails?"


Thu, 02/17/2011 - 19:59 | 972330 barliman
barliman's picture


... but I won't believe the silver genie is out of the bottle until a certain succubus is found slumped in her chair from having (supposedly) eaten a 9mm round.

Not as dramatic as the cross but a lot more final.


Thu, 02/17/2011 - 22:10 | 972810 Founders Keeper
Founders Keeper's picture

[... but I won't believe the silver genie is out of the bottle until a certain succubus is found slumped in her chair from having (supposedly) eaten a 9mm round.]---barliman

IMO, the silver genie escaped the bottle back at $19/oz. The rest is just a matter of patience.


Thu, 02/17/2011 - 23:09 | 972974 SWRichmond
SWRichmond's picture

The second time it crossed $17 on the way up it was a done deal.

Fri, 02/18/2011 - 04:58 | 973425 Snidley Whipsnae
Snidley Whipsnae's picture

When I watched silver head north of $7 I started buying physical. I had no special insight, looked at no charts...just watching the train wreck in progress...

The dollar and it's fiat cousins are in serious trouble... and Ben's 'helicopter' speech didn't help it.

Thu, 02/17/2011 - 19:59 | 972324 MolotovCockhead
MolotovCockhead's picture

Does it mean we should short JPM?

Thu, 02/17/2011 - 20:01 | 972337 barliman
barliman's picture


read my second reply to myself

personnally, I think BAC falls before JPM. but then I AM an optimist.


Fri, 02/18/2011 - 03:05 | 973346 slewie the pi-rat
slewie the pi-rat's picture


and that would be b/c after they and/ their ilk have been declared "too big to fail" once, and have gotten BIGger, they would then be too big NOT to fail, right?

our goobermint at work.  screwing EVEYbody but the "cronies", and you folks are still playing, and still in paper?

don't eat 9'er mikemikeZ OR a cali forty-fiver.  life is precious.  isn't it?


Thu, 02/17/2011 - 22:28 | 972875 whatsinaname
whatsinaname's picture

pointless. they dont have to mark their paper losses to market.

Fri, 02/18/2011 - 09:16 | 973617 snowball777
snowball777's picture

Better to just hand your fiat out to the poor instead.

Thu, 02/17/2011 - 19:51 | 972292 cossack55
cossack55's picture

Is this a new captcha method?

Thu, 02/17/2011 - 21:27 | 972673 RockyRacoon
RockyRacoon's picture

I'm expecting an essay test captcha any day now.

Thu, 02/17/2011 - 23:41 | 973037 A Nanny Moose
A Nanny Moose's picture

I am still trying to figure out how to get the two digits and the "-" into a field limited to two characters. Input check ruingn amok, or I am just that dumb?

Fri, 02/18/2011 - 01:44 | 973253 I only kill chi...
I only kill chickens and wheat's picture

Why the Neg #'s captcha, I'm only postive. If silver hits 40+ I'll

sell a little physical and give it to Springfield Amory.

Fri, 02/18/2011 - 02:22 | 973293 slewie the pi-rat
slewie the pi-rat's picture

tyler likes porn;  he wantZ ya afraid to "log" out.


Fri, 02/18/2011 - 09:17 | 973618 snowball777
snowball777's picture


Thu, 02/17/2011 - 19:52 | 972294 Yen Cross
Yen Cross's picture

 Ascending converging 1-18 price line crossing, the 2-11 slightly decending price line. Couple that with the slightly descending 2-17 line from (roughly 31.60) and you have triange of volatility. The medium term trade is disconnected with the short term trade.

Thu, 02/17/2011 - 20:19 | 972415 Vernon Wormer
Vernon Wormer's picture



Fri, 02/18/2011 - 03:37 | 973382 slewie the pi-rat
slewie the pi-rat's picture


FABULOUS, YENx!  bEST O' sHOE!  explosively so, given the time-frame.  There will be no bridgework left on this site, Zo0nX.

Thu, 02/17/2011 - 19:57 | 972322 SashaBelov
SashaBelov's picture

I'm long silver with 1/2 of money that i'm managing (unofficialy) since late 2008 - spot price against usd and eur, so I look forward to posible explosion in price very much, but couldn't backwardation also mean that market anticipates that i future prices will fall a bit? I mean, I startet managing money in 2008 when oil was also in backwardation, because expolosive rise in front month contract didn't enable enought confidence that this price levels will be sustainable through longer period...  and lack of confidence was shown to be justified back than.


Well, I'm just saying that backwardation could be only a result of too rapid rise in front month and nothing more... but, anyhow, i'd like to learn something new if anyone is so nice to tell me what more that means.




Thu, 02/17/2011 - 20:02 | 972340 BW
BW's picture

Sounds logical to me. 

Fri, 02/18/2011 - 00:34 | 973130 IQ 145
IQ 145's picture

 Congratulations on your critical thinking; which is often missing nowadays. No-one can tell you anymore because you have already detoxified the hysterical message of the "internet wisdom", and you see that this backwardation is not a "guarantee". As far as I know, there is no guarantee. It is a bullish signal, of course, and the recent price behaviour has been very bullish; the market tried to correct and just ended up pausing for a short while; the chinese buying, or far east buying in general, is very important as we can see from the daily charts. I congratulate you on putting your money in Silver, as far as I can see its the best thing that one can do in the present circumstance. I would like to point you at, which you will find easily with Google; if you read all their statement about their business you can see that this is a very simple business model; it's actually transparent. You'll see that they audit the silver bullion in the vaults daily and publish the results, and so forth. If you don't believe the internet wisdom, that everyone wants to steal your money and they don't really have any silver, and blah blah, blah; then you can look at this for a place to put some more of your funds. They really do have the silver, and they really don't want to have an exciting life as international criminals, chased around by Interpool. I should tell you also that there is no price suppression of silver or gold; for every short contract on the Comex there is a corresponding long; always. Now you can use your own logic and figure out the rest yourself. The "cult belief" came from some testimony about manipulation on the Comex, which persons like myself had known about for twenty years; these manipulations lasted for 24 hours, or 48 hours, and of course they were for the profits of the people who produced them; the floor traders and the locals. Just imagine that New York has to call China in the afternoon and tell them, "you can't buy any silver today, we forbid it !". This is the only way you can suppress an international market; there is no other way; obviously this is just nonsense. This does not mean that Silver will not rise spectacularly in price over the next year or two; I believe it will; but for normal market reasons; eg. peoples opinion as to how to protect their purchasing power. Cheers, best of luck, Sasha, I believe you have the winning horse here, for sure.

Fri, 02/18/2011 - 02:40 | 973320 slewie the pi-rat
slewie the pi-rat's picture


very cogent, 145.  however, the logic of not allowing the possibility of having a little "day or two manipulation for profit to the manipulatorZ" ever to be considered "price suppression"  escapes slewie.

oh:  check out my archives!  we may have already met under a diff name.  yours, not mine.  if not, why don't you study up a bit, sir?

and, when you get the part on p.2 where it seZ:  "repeat the search with the omitted results included." click, OK?  that will give you, or anyone, the full 12 pages or whatever they are, now, of my archival, archetypal ravings.
do your homeWORK?  this is going viral, pdq.


Thu, 02/17/2011 - 19:58 | 972325 jimijon
jimijon's picture

Excuse my ignorance, but what does the key mean?

LastPrice:2/17/2011  that is today

LastPrice:2/11/2011 last friday

LastPrice:1/11/2011 month ago.

So does this mean a month ago they thought silver would be worth more in mid July.

Then last week they saw no change and now they think silver will be cheaper in the future?

So we went from contango in paris to flatliners to basterdization?

Thu, 02/17/2011 - 20:14 | 972395 Yen Cross
Yen Cross's picture

Do you mean the last handle? Time relative?

Thu, 02/17/2011 - 20:24 | 972429 AUD
AUD's picture

The outside contracts are not being bid as heavily as the closer months. The current month should more or less track the spot bid, converging as the expiry date nears.

Backwardation is saying that there is less and less interest in 'rolling over' your loan of physical silver. A futures contract is still a loan even if they are settled in $.

Thu, 02/17/2011 - 21:23 | 972651 Captain Benny
Captain Benny's picture

The key means the date at which that snapshot of the curve was taken.  So you see three different plots, Jan 11, Feb 11, Feb 17....  The x-axis is the contract delivery month, the y-axis is the price.  This is truly unprecedented.  This kind of thing should never happen in precious metals trades, except for small flukes that work themselves out in the market within matters of minutes to hours.



Thu, 02/17/2011 - 19:59 | 972329 sellstop
sellstop's picture

It may also mean that not very many expect silver to be that much higher in the future. Speculation in the front months, etc....

Look out!


Fri, 02/18/2011 - 09:18 | 973622 snowball777
snowball777's picture

Your scenario has the big speculators on the wrong side of the trade.

Thu, 02/17/2011 - 20:01 | 972339 ms84124
ms84124's picture

Now also shows in VXX

Thu, 02/17/2011 - 20:05 | 972342 bob_dabolina
bob_dabolina's picture

Spot the 3 differences...


Well...I see three lines.




That is three differences.

And Tyler please...If you see something. Say something.

Thu, 02/17/2011 - 20:27 | 972444 impending doom
impending doom's picture

Mistadobalina Mistabobdobalina Mistabobdobalina won't you quit
You really make me sick with ya fraudulent behavior
You're gonna make me flip and then an army couldn't save ya
Why don't you behave ya little rugrat
Take a little tip from the tabloid
Because I know I'm not paranoid
When I say I saw ya tryin' to mock me
Now you and your crew are on a mission tryin' to hawk me
But it isn't happenin' ya fraudulent foes
You used to front big time now I suppose
That everything's cool since the style of apparel you adopted
You used to make fun of but now you wanna rock it
So you gotta kick it with the homies
But D-E-L is already hip to your cronies
Me and CM-PX thought about this and never have we seen a
Brother who could look like Mista Mista Mistadobalina

Thu, 02/17/2011 - 20:40 | 972484 bob_dabolina
Thu, 02/17/2011 - 21:33 | 972694 impending doom
impending doom's picture

I used to be such a fan of Del. He was my first exposure to intelligent hip hop. And, btw, those guys are not my friends, or anyone else's.

Fri, 02/18/2011 - 00:58 | 973183 Bolweevil
Bolweevil's picture

Doomerdroppingknowedge. +1

Fri, 02/18/2011 - 01:33 | 973237 OldPhart
OldPhart's picture

I've been judiciously quiet so as not to expose myself as yet another uncultured ignoramous.  I saw the same three differences of color, too.  I don't "work" the markets nor use charting/tracking software.  I read and absorb the arguments of those who seem to know what the hell they're doing.  My silver ventures are a double subscription the the US Mint for silver proof sets and silver eagles.  Occasionally I go out and buy five or ten ounces at a time from NWMint or dealer.  Put them all together and I might be  thousandairre.

This site needs a link to "ZeroHedge for Dummies" somewhere.

Oh and,

Math question: * plus (-41) equals fourteen

had me sitting stumped for a couple of minutes.  It's been a long damned day.

Fri, 02/18/2011 - 05:30 | 973444 slewie the pi-rat
slewie the pi-rat's picture


olefart to oldphart:  you may find a use for those eagles, even tho i hope not, personally.  they will, undoubtedly pry the silver proof sets from yer cold, dead hands.  i have a few friends who are into proof sets. one has some proof sets from the 50's with the Franklin Half dollars.  they are so neat.  for "accounting" ourposes, these sets are "worth" 91 cents each.  why?  b/c that is the coins say RIGHT ON THEM.  my other friend, who is also into 'your' silver sets also has a 2005 American Legacy Set, with a "face value" of $4.96.  i call her up once in a while and say:  "Would it be ok if i come over and visit yer 2005 legacy, if i bring the coffee?" she always says ok and then:  you are soooo kinky, slewie!  we always end up with tears rolling down our cheeks, from this set, which she paid $90 for. i'm not running for office;  i'm trying to help people decide what WE can do with as little negative fallout as possible about the horrible messes in which we find ourselves, today.  these coins are not silver, except for the 2 "silver dollar commemZ", but the Kennedy half is flawless and George's hair on the 5 state Q's radiates light.  these coins are the most ultra/deep cameo's i have ever laid my old eyes on.  the two Jefferson nick's have the "liberty" in thom's handwriting from somewhere or other, and the American Bison and Ocean in View reverses.  the penny is the original VDB engrave.  The only "silver" in the set are the TWO dollars.  the first is the Chief Justice John Marshall Commem w/ the reverse of the interior of the Old Supreme Court Chamber.  Burr v. the United States is my favorite among the casesmentioned in the packaging.  The second silver dollar is the 230th Marine Corps Anniversary.  The obverse is the Marines and the Navy Corpsman raising the flag of the United States atop Mt. Suribachi during the Battle of Iwo Jima, on February 23, 1945, as depicted on the Marine Corps Memorial.  The reverse is the emblem of the Corps.  After a Roosevelt dime, there is one more dollar:  Sacgawea and her infant son, with the eagle in flight on the back.

Dry your eyes, People.  we have work to do.

Thu, 02/17/2011 - 20:04 | 972350 FischerBlack
FischerBlack's picture

Backwardation? Isn't that supposed to be impossible in PMs? Except for like an hour or something?

Thu, 02/17/2011 - 20:14 | 972389 topcallingtroll
topcallingtroll's picture

Not necessarily. The government has control of short term treasury lease rates, but not lease rates of other items.

Thu, 02/17/2011 - 20:49 | 972518 FischerBlack
FischerBlack's picture

The other possibility here is that the market expects future delivery failures. That is, there's no demand for future silver because there may not be any. This is a very strange thing. Thanks for posting it, worth watching.

Thu, 02/17/2011 - 22:51 | 972941 Philidor
Philidor's picture

Backwardation is possible in all commodities excepting money itself.  (So yes, if everyone measured their wealth in silver coins, backwardation would likely not show up.)  A case in point occurred in copper a few decades back, with a roughly 40% annualized backwardation. Turned out that some new copper mines were coming on line, vastly expanding the *future* supply of copper, but not the current supply which the market desparately wanted.  My point about the monetary vs. commodity nature of PM can be illustrated by the corresponding "carry arbitrage" example to "exploit" silver backwardation:  suppose you own 1000 oz of silver, with $30 spot price price backwardated to $29 for delivery in say, 3 months.  You sell your silver now, for $30000, and buy the 3-month contract for $29000 (ignoring margins, etc.). In three months, you have your silver back AND you've pocketed $1000.  An arbitrage, right?  Not necessary, depends upon your viewpoint.  If you are holding dollars and silver both for monetary purposes, maybe so. But if you view it as a commodity, you will have to take into account the dollar value of your 1000 oz., which may have declined -- no arbitrage.  SO: Either backwardation is present because either (1)  the market believes that silver is just a commodity AND forecasts that there is likely to be more supply or less demand for silver in the future, OR (2) the market is quite worried about a particular credit issue regarding the second leg of our carry arb, namely that you will actually get your physical 1000 oz. back upon expiry of your futures contract!  A lot of us believe that new sources of silver are unlikely to show up and demand interest is unlikely to fade, so that the observed backwardation is explained by (2), that is, it may actually reflect Comex credit/delivery risk.  (For reasons why you might want to think of BOTH dollars and silver as useful monetary units, see )

Thu, 02/17/2011 - 23:26 | 973001 SWRichmond
SWRichmond's picture

I sort of agree with your first sentence.  IMO PMs are real money, an we are experiencing deflation in all things wrt real money (PMs).  The currency-thingies we all carry in our wallets and such are "sort of" money; that is, we use them as money, men with guns enforce their use as money, most people believe they are money, and so they sort of function as money.  But they aren't money, they are currency-thingies.

So as the deflation grows, the demand for real money grows, which we experience as an increasing demand for converting currency-thingies into real money.  The buying power of real money wrt almost everything grows, and real money starts to become scarce, just as one would expect in a deflation.  This shows up as "real money" supply problems and an increase in the number of currency-thingies needed to exchange for units of real money.  Whether or not one can call it "backwardation" isn't really relevant anymore, is it? 

It IS backwardation if one views silver as a commodity.  PM bugs always thought that a prolonged and deepending backwardation in gold would be the harbinger of the collapse of violence-backed currency-thingies.  I now prefer my way of looking at it, as it explains a lot more of what I see.

Fri, 02/18/2011 - 00:40 | 973134 IQ 145
IQ 145's picture

 Good for you, bravo. Love your screen name; I just loved playing over some of Philidor's classic games; truly a genius !

Thu, 02/17/2011 - 20:05 | 972355 mynhair
mynhair's picture

Morons can't find their asses with one or both hands?

What'd I win?

Thu, 02/17/2011 - 20:08 | 972363 EscapeKey
EscapeKey's picture

Our supply of government apologetic Keynesian assholes seems to have dried up.

Thu, 02/17/2011 - 20:15 | 972400 topcallingtroll
topcallingtroll's picture

Good one!

Thu, 02/17/2011 - 20:11 | 972368 ziggy59
ziggy59's picture

spot today, is actually above any of the amounts the futures  than its to be for the next 4 yrs?


so has it peaked according to the futures?

Thu, 02/17/2011 - 20:10 | 972375 topcallingtroll
topcallingtroll's picture

So no one is willing to point out another obvious interpretation? Cmon somebody else do it. I am getting tired of always having to be the troll around here!

Thu, 02/17/2011 - 20:13 | 972388 nope-1004
nope-1004's picture

Futures price is falling, therefore, better sell now before it all collapses?



Thu, 02/17/2011 - 20:20 | 972416 topcallingtroll
topcallingtroll's picture

Good guess, but that was already mentioned previously! However with my recent luck it probably will collapse since i just bought back in again. But i have sworn off trolling. Silver to da moon....booyah!

Thu, 02/17/2011 - 20:31 | 972452 impending doom
impending doom's picture

"...I have sworn off trolling." Could've fooled me. Maybe it's kind of like how I've sworn off alcohol...

Thu, 02/17/2011 - 20:53 | 972532 william the bastard
william the bastard's picture


Thu, 02/17/2011 - 21:34 | 972696 impending doom
impending doom's picture

As do you.

Thu, 02/17/2011 - 21:37 | 972706 tmosley
tmosley's picture


Thu, 02/17/2011 - 21:40 | 972722 william the bastard
william the bastard's picture

no fail you putrid sick child fucxker

Thu, 02/17/2011 - 22:51 | 972939 woolly mammoth
woolly mammoth's picture

That's sick. Insults and sick are too different things. Your sick.

Thu, 02/17/2011 - 22:53 | 972946 tmosley
tmosley's picture

Why do you continuously accuse others of doing what you do?

Worst case of normalcy bias I've ever seen.

Fri, 02/18/2011 - 05:11 | 973434 spdrdr
spdrdr's picture

Mos, it goes far beyond "normalcy bias".

Try "projection" as a concept.  Google it, with "psychology" in the search frame.

Thu, 02/17/2011 - 21:38 | 972707 william the bastard
william the bastard's picture

You're cursing it into a top you know. You'll never get out alive. The brainwash, the virus, the implants. You've sold your soul. And for what? A shallow cum-by-ya booyah from robots? Acceptance into the cyborg mass of sticky automotonic excrement. Good bye my friend, goodbye.......If you see Crame.... Beck...G Gordo...

Fri, 02/18/2011 - 03:22 | 973361 StychoKiller
StychoKiller's picture

Stop taking so much Defaulta, you'll be less hallucinatory in the morning!

Fri, 02/18/2011 - 00:43 | 973141 IQ 145
IQ 145's picture

 Please don't worry; everything will be fine. The market doesn't know you bought in ! I have been doing this for a really, really long time; I actually participated in the great run up from $5 to $25 in '79-'80, (I got out too early, it's easy to do !). I've never seen a stronger bull market; if this is a head fake it got past me.

Thu, 02/17/2011 - 20:20 | 972417 Amish Hacker
Amish Hacker's picture

If you were an end user, and you absolutely needed the product, you would be willing to pay extra for real supply today, rather than accepting the promise of supply in some future month.

Thu, 02/17/2011 - 20:27 | 972443 TeMpTeK
TeMpTeK's picture

Stole my thunder perfectly  +1

Thu, 02/17/2011 - 20:14 | 972392 Tric
Tric's picture

Is it accurate to notice trends in these curves?  Should we expect the backwardation to steepen from here? 

Fri, 02/18/2011 - 00:46 | 973150 IQ 145
IQ 145's picture

 The received wisdom on this subject is that the longer the backwardation remains intact, the stronger a signal it is; we don't know what to expect, of course, we can only wait. We don't have much experience with this you know; it's extremely rare!

Thu, 02/17/2011 - 20:13 | 972394 Bastiat
Bastiat's picture

Bird in the hand is worth 1.016 birds in the future.

Thu, 02/17/2011 - 21:23 | 972655 william the bastard
william the bastard's picture

Guano included. Adjust your palms accordingly

Fri, 02/18/2011 - 09:21 | 973626 snowball777
snowball777's picture

Uhhh..... 0.984 birds in the future.

Thu, 02/17/2011 - 20:15 | 972398 dryam
dryam's picture

Soon we will all be seeing some nice exponential graphs.

Thu, 02/17/2011 - 20:15 | 972401 Rusty Shorts
Rusty Shorts's picture

What's up with the dates at the bottom of the chart?

Thu, 02/17/2011 - 20:20 | 972413 bob_dabolina
bob_dabolina's picture

In honesty this just means there is a shortage.

People want silver. And they want it NOW (not tomorrow) RIGHT NOW!!!



Thu, 02/17/2011 - 20:19 | 972414 Bastiat
Bastiat's picture

Futures contract dates, RS.

Fri, 02/18/2011 - 22:45 | 976518 Rusty Shorts
Rusty Shorts's picture

Thank you Bastiat.

Thu, 02/17/2011 - 20:22 | 972422 Yen Cross
Yen Cross's picture

 Oh and excuse me I was talking short term. That chart is weak! I'm assuming Jan11 2010. Then the grid compression. Then the opening 5-12 thru July 15th. Then the compression again into, I assume current market value.

Thu, 02/17/2011 - 20:22 | 972423 Turd Ferguson
Turd Ferguson's picture

Better keep an eye on those Backward Asians.

Thu, 02/17/2011 - 20:25 | 972433 Bastiat
Bastiat's picture



Thu, 02/17/2011 - 21:23 | 972539 william the bastard
william the bastard's picture

You laugh at an idiot racist? That's not polite.

Thu, 02/17/2011 - 22:11 | 972818 Turd Ferguson
Turd Ferguson's picture

Jeez, you really are fucking clueless, aren't you?

Thu, 02/17/2011 - 22:17 | 972838 bigredmachine
bigredmachine's picture


Thu, 02/17/2011 - 22:22 | 972856 william the bastard
william the bastard's picture

He'd have to be.

 Look how tiny his head is.

Fri, 02/18/2011 - 09:25 | 973639 snowball777
snowball777's picture

If you can't use a clever pun to reference gargan-szechuan Asian market demand, it is a sad day indeed.

We need humor-based captchas!

Fri, 02/18/2011 - 15:40 | 975285 faustian bargain
faustian bargain's picture

We need more youth in Asia.

Thu, 02/17/2011 - 20:30 | 972451 TeMpTeK
TeMpTeK's picture

lol +2

Thu, 02/17/2011 - 20:42 | 972462 Bastiat
Bastiat's picture

Sumo match in the silver pit:  I think that's Blythe with the camcorder.

Thu, 02/17/2011 - 20:52 | 972526 bigredmachine
bigredmachine's picture

I guess any ass can start a blog, dont let it get to your fat head

Thu, 02/17/2011 - 21:11 | 972605 Bastiat
Bastiat's picture

Yeah and maybe if you can make a few accurate market calls (before they happen) someone will read it.

Thu, 02/17/2011 - 21:32 | 972688 RockyRacoon
RockyRacoon's picture


Thu, 02/17/2011 - 22:04 | 972786 ColonelCooper
ColonelCooper's picture

And when a few hundred people ask you to, maybe you should try it.


Thu, 02/17/2011 - 22:10 | 972808 william the bastard
william the bastard's picture

There's a hoomo in the house! Hiya Col rabies. Through whipping the dogs tonight?

Thu, 02/17/2011 - 22:56 | 972952 tmosley
tmosley's picture

You accuse everyone of doing what you yourself do.  You are revealing yourself to be a real monster here.

Thu, 02/17/2011 - 22:15 | 972835 bigredmachine
bigredmachine's picture

What the fuck is that about. You fucking retard.

I am hunting for your stupid ass. better hide that outfit.

Fri, 02/18/2011 - 00:11 | 973062 Coldfire
Coldfire's picture

I was at my bank today; there was a short line.
There was just one lady in front of me, an Asian lady who was
trying to  exchange yen for dollars.
It was obvious she was a little irritated. She asked the
teller, "Why it change?  Yesterday, I get two hunat dolla fo yen.
Today I only get hunat eighty?
  Why it change?"
The teller shrugged his shoulders and said, "Fluctuations."
The Asian lady says, "Fluc you Westerners too!"

Fri, 02/18/2011 - 00:48 | 973157 mcguire
mcguire's picture


Fri, 02/18/2011 - 00:52 | 973165 penisouraus erecti
penisouraus erecti's picture


Fri, 02/18/2011 - 09:27 | 973645 snowball777
snowball777's picture


Fri, 02/18/2011 - 00:10 | 973068 Coldfire
Coldfire's picture

darbo post.

Fri, 02/18/2011 - 00:49 | 973158 IQ 145
IQ 145's picture

 Well, I look at the chart for Hong Kong trading hours every day, it would be difficult to overestimate the importance of the Eastern Markets today.

Thu, 02/17/2011 - 20:26 | 972436 Sophist Economicus
Sophist Economicus's picture

Nothing is wrong with this chart, and I'm loving it for as long as it lasts

Thu, 02/17/2011 - 20:32 | 972456 Yen Cross
Yen Cross's picture

Hey Sophie, if you want to play connect the dots on any time frame (and) that fits your fancy, than have at it. I'm long xag from the high 29's currently. I'm going to pull a little off the table and reload, or set some options. Watch the commodity currencies, and the dxy. All knowing one.

Thu, 02/17/2011 - 20:53 | 972531 Sophist Economicus
Sophist Economicus's picture

I've covered my position (ahem, behind) by selling a little slv. This feels a little frothy to me too, but I cannot part with any directly! I'm like that guy in the story about Livermore. 'we're in a bull market and I don't want to loose my position'

Thu, 02/17/2011 - 21:01 | 972568 Yen Cross
Yen Cross's picture

That is a solid trade. Although it's stretched. Best wishes.

Thu, 02/17/2011 - 21:16 | 972623 Sophist Economicus
Sophist Economicus's picture

Thanks. I must admit that I stay away from FX. It is the craps table of the financial world. One can play a solid game and still have the rug pulled out from underneath, and I have the lumps to prove it! I'll leave that world for better traders than I....

Thu, 02/17/2011 - 21:33 | 972695 Yen Cross
Yen Cross's picture

 FX requires a very serious commitment. It is very rewarding done properly. Thank you for your kind remarks. Trade well.

Thu, 02/17/2011 - 20:26 | 972437 DrRaolDuke
DrRaolDuke's picture

Thats right! There are 3 differences in spot.

Thu, 02/17/2011 - 20:31 | 972455 Hedge Hunter
Hedge Hunter's picture

Hu is buying all the silver?


Thu, 02/17/2011 - 20:33 | 972463 Yen Cross
Yen Cross's picture

Hu is selling copper piping in the ghost cities.

Thu, 02/17/2011 - 20:43 | 972495 bob_dabolina
bob_dabolina's picture

Hu is building empty cities?

Fri, 02/18/2011 - 09:28 | 973649 snowball777
snowball777's picture


Thu, 02/17/2011 - 20:32 | 972458 Hedge Hunter
Hedge Hunter's picture

Hu is buying all the gold?


Thu, 02/17/2011 - 22:02 | 972783 Confucious 222
Confucious 222's picture

Hu's on first?

Fri, 02/18/2011 - 01:43 | 973252 OldPhart
OldPhart's picture


Thu, 02/17/2011 - 20:39 | 972480 awgee
awgee's picture

From Nadler:

CPM researchers found that “There were hundreds of thousands of ounces in 100-ounce bars available for immediate delivery, and NWTM said it was steadily producing more each day.” CPM added that “the rest [of the “urban myths” regarding silver “tightness” and exclamation marks regarding backwardation] is noise.” Nothing new. At all.

Y'all see that?!  Backwardation is an urban myth and noise.  What is wrong with y'all?  Nadler posted it, so ya know it's gotta be right.  I mean, how often is Nadler wrong?  Right?

Fri, 02/18/2011 - 01:11 | 973207 ChookChoker
ChookChoker's picture

I used to think Nadler was a useful contrarian opinion. Now I realise he is just an annoying tool. It pisses me off that Kitco still publish his drivel. He is continuously, blatantly incorrect.

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