evening wrap, january 5
market vibes
A bit longer than the usual evening wrap…but a lot to cover tonight…
A brief line or two from the cheap seats on Venezuela.
Thirty-five years ago, on December 20, 1989, U.S. forces invaded Panama to arrest General Manuel Noriega, a military dictator who had been indicted in the U.S. on drug trafficking, money laundering, and racketeering charges as early as 1988. Noriega surrendered on January 3, 1990, and was flown directly to Miami, where he stood trial in federal court and was convicted and imprisoned. The operation was justified on grounds of protecting American lives, combating drug trafficking, and enforcing lawful U.S. indictments.
While not identical, the U.S. has a history of interventions in Latin America: Guatemala (1954), Dominican Republic (1965), Chile (1973), and Grenada (1983). Some were CIA-orchestrated coups for various reasons and some were direct military interventions. All were successful regime changes. In the 80s, Reagan started a proxy war in Nicaragua that ultimately led to the Iran-Contra scandals (in violation of congressional law) and the total collapse of the country.
A few weeks of looting and chaos ensued after Noriega was removed. A force of 15,000 troops remained and shortly schools, businesses, and services resumed. By mid-1990, the country was functioning under the new government, but corruption and unemployment were/still are problems. A standing force of 10,000 U.S. troops stayed in-country to secure the canal. Note: Clinton returned sovereign control of the canal to Panama in 1999.
Venezuela is 10 times the size of Panama and corruption is deeply embedded in the culture. It would not surprise me, having watched these operations for most of my life… and the typical playbook which this seems to be… to see a force of at least 50,000 Americans in Venezuela for 6 months to a year and half that ad infinitum to look after the oil, in my opinion.
I could be wrong, but there is no governement, the population is desparately poor and it’s been gang rule for a long time. This is big stuff.
Moving along to the markets
Initial margins were raised on December 31 to $32,500 effective January 1, 2026 for COMEX silver. Variation margins were raised to $25,000. Open interest fell 7,000 (35 million toz) immediately, driven by short covering and met by long liquidation. Decelerating volumes remain brisk.
This is no surprise. Internally average entry prices are rising apace for both longs and shorts. However, there seemed to be a healthy constituency of buyers willing to pay $75.00 per toz and higher today. It will be interesting to see if open interest falls again tomorrow. If the primary buyers are still short covering, it’s structurally dispositive to negative.
There were no major changes in COMEX inventories in the last week of December. Jan/March COMEX settled at $0.493 contango for a 4.49% annualized cost of funding the carry, which is the cost of money. At least on the COMEX there is no sign of stress either way. Silver seems well maintained above $70 and the physical issues seem significantly easier. As for London and China, metal could still be tight.
