Scanning the data on futures betting suggests that there is some insider knowledge out there preparing to profit from a major fall in the VIX, and a rise in precious metals.
I’ve posted about the VIX before. It a well-established measure of disturbance, uncertainty and panic in the markets; the higher it is, the nastier things are. But in the wacky world of Bourses where you can bet on two flies crawling up a Wall Street window, you can also bet on what the VIX will do via its own futures Bookie, the VXX. Most futures bet sector bands take the measure or price they’re looking at, and stick an x in it…hence VIX/VXX. These betting shops are like a cross between an Egyptian gambling pit with loaded dice, and a cock-fight where the Champion has been fed 15 mgs of Valium an hour before scratch-off.
This from an American source over the last few days:
‘The VXX….somebody is buying puts [bets on a fall] for March big time….Just looked at February puts on the VXX and it is even more heavily skewed….more on the VXX….it gets even more heavily skewed to the puts on the June contracts….”
I’ve looked at this myself and spoken to a couple of people. I think the bloke is right: somebody is betting bigtime that confidence will improve during the Feb/June window of 2013.
Zero Hedge reckons VIX over-confidence is related to a sense that the Debt Ceiling is now ‘solved’ – although of course it isn’t. The question we have to ask is, are any of the folks placing these BIG puts really that dense? My answer would have to be, “No way”. However, if these putters knew that either (a) Obama was going to get a new higher ceiling through or (b) an agreement was very close offstage between Congress and the President, then they’d be justified (ethics and criminality aside) in placing big bets.
Beyond the US debt ceiling, there is some negative position-taking on gold.
Ambrose Evans-Pritchard believes a new Gold Standard is on the way, because the Central Banks are buying so much of the shiny metal. I agree about the new Standard at some point, but I also think many other banks are buying gold because of its newly heightened value on a balance sheet…and the urgent necessity for repair thereof.
However, if such a Gold Standard revival were announced during late January/early February, then VIX sentiments would become far more positive about that too (also pace my previous posts about gold-backed eurobonds, and the German gold repatriation).
The Central banks want the gold price capped for many reasons, but the latest and most important ones involve the needs outlined above in terms of backing paper and repairing balance sheets. So they have a vested interest in not paying too much for gold….as indeed do the Chinese.
So as a bet, gold prices being artificially suppressed makes sense.
There are also signs of precious metal Big Dick jiggery-pokery beyond gold. Eight days ago, an unprecedented 572 tons (18,378,092 ounces of physical silver) was added to the SLV ETF universe…. the biggest one day addition of silver to SLV in ordinary course operations. It is also more silver than was added to the ETF in all of 2012, when just 544 tons were added in the entire year. In one freaking day.
Somebody out there is expecting a mega-increase in demand for silver. And guess what? My source adds, looking at the March option puts, “Someone has some rather large bets that silver is going up”.
None of this is going to be based on genuine fundamentals: it feels like some big shovers and makers are about to stage one last set of counterfeit events to clean up at the expense of the mugs: a major rise in confidence, another fall in gold, and a major rise in silver.
Stay tuned.
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