adapt to change

market vibes

August 20…)

“Time is money.” Ben Franklin

Chris Waller, a voting FOMC member and an outspoken dove, speaks at 11:00 AM EDT today. He is on the short list of potential candidates to chair the Fed. Keep an ear the rails.

In equity news, according to the FT: “[MIT] researchers said 95% of organizations are getting zero returns from their investments in generative AI.” The article continued, “The story is spooking people,” said one trader close to a multibillion-dollar fund. I can see why it would; very 1999-ish.

U.S. corporate yields are the lowest relative to Treasuries in 27 years, according to Bloomberg. It takes a shortage to create a 27-year low or high in anything, in this case, a shortage of high-quality corporate bonds. The market is the final arbiter of rates.

In oil, foreign journals are reporting India has resumed buying Russian crude, lifting 2 cargoes yesterday because Russia is discounting at levels to compensate them for sanctions.

The consensus estimate for DOE data today is a 3 million barrel build in crude, an 800,000 barrel draw in gasoline, and an 800,000 barrel build in distillates.

API Petroleum data yesterday.

• Crude Oil: -2.4 million barrels (draw)

• Gasoline: +1.0 million barrels (build)

• Distillates: +0.5 million barrels (build)

• Cushing (Oklahoma): -0.1 million barrels (draw)

Interesting clip from a reader posted in MV comments yesterday (@Inside_China_Biz is a digital content platform, primarily a YouTube channel with a strong presence on X. Apparently well-rated among its peers according to Grok. (TY PJ)

In the markets

The difference between 1999, when 95% of the internet names were unprofitable, and AI names in 2025 is coded alienation of price discovery from economic facts. It is not that investors don’t know fact from fiction. They do. But investors have delegated management to BlackRock types and wealth managers at money center banks. In my opinion, coders have inoculated AI algorithms to ignore anything that might require selling, except perhaps during swans of various colors when the Duke Brothers say “sell!”

What we saw in stock markets yesterday, I think, was a human response to the reality that profitable AI is actually fewer than 5% of all companies (MIT via FT). Ironically, these are the very same companies that have been programmed to ignore negative news! I laugh! But it is not funny. One day it will be tragic..

Technically, open interest is falling on rising volume. Therefore, it is probable this news has been around the inner sanctums for several days. It was curious to see the Dow so strong recently. Now we know why.

Volume in gold is down to a yoga heartbeat. Open interest is in a similar vegetative condition. It is my guess the $100/oz decline since August 8 was a single day of selling (or two), and the subsequent days of erosion were a slow-motion down auction the market needed to absorb it. There are no stressed risk-on longs to sell at these prices, only the point of control to facilitate trade should anyone want to buy an auctionable quantity.

If, however, something were to shift in FX or geopolitics unexpectedly, the POC will become the pivotal force that drives losers to manage risk. For what it’s worth, the greybeards of gold have seen prices stay rangebound for years… Wait at the bus stop for the bus.

A modest down auction in silver. Other metals are mixed, but they, too, are as far from frothy as outer space.

The September rolls to December are coming in palladium, copper, and silver. August Bitcoin rolls to September next week. October platinum rolls to January in a month. As the earth turns, time spreads and option decay are the enemy.

In other markets oil is up a little but spreads are not moving. Bonds, FX and bitcoin are motionless.

my vibe

I don’t advise readers to buy or sell. I do occasionally say what I am long or short if I think it’s good information. It’s a much better way to impart a view but I don’t do it often because I am often wrong.

However, I am facing another 44 cents per ounce to stay long silver until December 1. Almost a dollar to stay long since last May and silver did nothing. If I own equities that pay nothing, and I do, I have time risk in those as well.

These are the hardest markets to make money that I have seen since gold in the mid-90s, and then I was a floor member with all the edges the algorithms have today. Time can be more dangerous than a black swan.

In my most humble opinion, it is more profitable to make nothing (T-bills) than it is to pay Wall Street contango and theta. If I buy gold at $3,360 this morning, it has to be notionally $3,560 or higher in August 2026 for me to break even. My passive long in silver has cost me $2.00 per ounce from September to September so I keep my size under the price of pain and I have a time stop as well as a price stop. For that reason I liquidated half of my silver in May.

Patience is a virtue in many things. In markets it’s a vice.

Zweig rules #8 and #11

Tempus fugit (Virgil),

JJ

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Charts and data CQG and Bloomberg

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