Friday, October 30, 2009

Thursday, October 29, 2009

Rally Played Out?

Looks like the dollar may roll over off the top line of the trend channel. Too bad. I was hoping to get some cheaper silver. May have to move sooner than I thought....

Wednesday, October 28, 2009


This today from Bloomberg....

"Oct. 28 (Bloomberg) -- Senate Democrats plan to extend an $8,000 tax credit for first-time home buyers and allow benefits for some people who already own residences, a spokeswoman for Majority Leader Harry Reid said.

The proposal would let homeowners qualify for a $6,500 credit if they have lived in their residence for five years."

Ooh yes, widen that net boys, but they cover that....“The compromise we have now would expand the credit beyond first-time home buyers,” Lachapelle said."

When will people learn?..sighhhh.

One thing we'll be left with from all this madness is a fond sense of the ridiculous when it comes to today's media....

I love it, .....“Already we’ve seen the impact of this credit in jump- starting the housing sector,” Banking Committee Chairman Christopher Dodd, a Connecticut Democrat, said on the Senate floor."

What the hell is that? Jump-starting!? No, this motha' needs a defibrillator. Perhaps they had something else in mind....

One more reason to buy silver and gold. Oh and do read the article; there are other fascinating ways your government plans on squandering our future slave wage tax. Stay tuned.

By the way, Peter Schiff is running for the Senate against the Outlaw Dodd. You can support him here...

Tuesday, October 27, 2009

There's the Rally

Well, it was a little faster than I thought but I'm glad I reacted as quickly as I did. I know some others did as well. Now we wait for our next buying opp. My target for silver is $15.50. If it hits that, I buy irregardless of what the market is doing.

Friday, October 23, 2009

Mea Culpa!!!

Any of you who read this blog and have listened to my ramblings should know that I have long touted that another stock market crash cometh. I have even posted how it would happen. One of the reasons I believe this is that if the dollar comes under too much pressure an intervention would be needed.

Last fall, before the market crashed the Fed had been pulling liquidity from the markets. This, for many reasons I will not get into was a key factor in the crashing of the market. This process takes 6 months or so to manifest. The Fed started pulling liquidity from the markets back in March. Now, new information has come my way that you must be aware of.

Here is a post by Karl Denninger at the Market Ticker…..I’ll have comments throughout and comments that follow.

Possible Credit Dislocation: Be Warned
I have reason to suspect that the "monetary transmission mechanism" is full of rocks (again), and we are about to have another instance of what could colloquially be called "fun." (Yes, that's sarcasm.)
Here's what we know and what I can deduce from it:
• JP Morgan's "cash position" was analyzed by a writer who published on SCRIBD, which showed that actual cash held has deteriorated radically. By more than half in the last year. The deterioration is continuing, not slowing.

• I am hearing repeated anecdotes from multiple areas that foreclosed property held by banks with multiple full-price offers that include a financing requirement are being sold instead to people with actual cash at radical reductions from that price. This implies that these financing contingencies are regarded as not only potentially no good but factually no good, as if the banks know for a fact that the credit pipeline will (not might), within weeks or months (in the time required to close), disappear. There is no other rational explanation for this behavior.

• Citibank's credit-card terms change implies a willingness to accept and even provoke a complete and intentional destruction of their credit card business as a very high probability outcome, given that nobody in their right mind will accept a 30% interest rate who has an alternative. The obvious implication is that only those who can't transfer balances out will remain and if your credit is that impaired there's a good chance you will default - either intentionally or otherwise. This too implies foreknowledge of a near-complete impending freeze in the credit markets. (From SP: this means there will be a mad dash to cash. That’s why the market crashed last year, everyone moved to cash. It also caused the dollar to rally and gold and silver to get hammered! It’s very important for the Fed to crush gold and silver even though they give a rip about the currency. Capiche?)

• The change in terms on credit accounts is NOT confined to Citibank. I have received a fax from a customer of Infibank with substantially identical terms, in which both the standard and penalty rate was adjusted to 29.99%. This strongly implies that whatever Citibank smells the problem is not confined to them.

• Both of these credit card "adjustment" letters are of course marginal rate changes. That is, they are both based off the PRIME rate. The importance of that is missed by many. Don't be one of them (more on that below.)

• I recently received a back channel communication indicating that The Fed is aware that this has been and still is a solvency problem and has so briefed certain members of Congress. This from a source believed reliable, but which cannot be independently confirmed.

This data is not conclusive. But - if you are dependent on credit access and these anecdotes are in fact indicative of actual knowledge of an impending lock-up you are at grave financial risk.

Note that "margin" type rates that are based on the PRIME rate could hurt you far worse than you believe. With PRIME at historic lows should any such dislocation spike the prime rate your interest rate could go much higher with little or no notice or ability to do anything about it.

IF this is going to manifest as a dislocation of some sort it will probably occur within the normal closing window for real estate transactions (30-45 days, sp), since the anecdotes related to that have the best-defined "reach", and the discounts being accepted to avoid this risk are massive to the point of denoting near-certainty of this event in the minds of the market participants who are electing to accept these cash-discounted offers.(Money talks, sp).

Therefore, if you are dependent on such credit access I would take immediate action to do whatever is necessary to mitigate, to the extent you are able, the consequences of such a dislocation.

Consider how you survive returning to what essentially amounts to a cash economic posture in your business and personal life.

Note that the indications above are far stronger than what we saw going into last fall before the wheels came off. As a consequence if these actions are those of people with real knowledge (and this is not a guess on their part) I would expect the outcome to be worse than what we saw last fall in terms of economic impact.

Those who are short dollars (synthetically or in the actual market) need to beware - if I am reading this correctly you're about to get a really ugly surprise.
If you want to speculate on this outcome levered bets on radical dollar appreciation look like one of the best choices out there, followed closely by bearish levered bets on commodities. I would not consider such a speculative play that is not characterized by defined risk, as this analysis is based on nothing more than observation of behavior by market participants that all point toward their foreknowledge of an event that might happen in the reasonably-near future and is not, at present, backed up with actual significant credit-spread widening or other objective criteria.
Disclosure: Initiated a small speculative, defined-risk play LONG the US Dollar (UUP CALL options for March 2010)

From Finn: If you’re confused you need not be. It’s simple. The dollar is in its death throes and it can be manipulated highly on a short term basis but the long term trend cannot be altered. The easiest way to cause a dollar rally is to force contract settlement. The easiest way to do that is to take down markets and call debt due. Everything is pointing to this outcome and I have been saying it for months.

So in short, the market will crash, the dollar will rally and gold and silver will get beat down providing us with an excellent opportunity. GIRD YOUR LOINS. This is the biggest market you have ever participated in. These events happen every COUPLE OF HUNDRED YEARS! This will test all of your mettle.

Here is what I am going to do next to immediately even if it does cost me a little bit in gains over the short term, and again, read my disclosure below.

1) I am moving to cash over the next few days or a week. I’m going to try and get a few more cues from the market place and will then liquidate all my stocks and sell my gold and silver in my account.
2) I WILL NOT be selling ANY of my bullion. It is in my belief that after this next crash faith in the markets and currencies will be shaken to the core. The potential rush to metals could be staggering. It may not happen immediately but it will cause shortages and trying to pick up bullion after such an event could be nigh impossible.
3) After a crash, I will move back into my positions and buy back my silver and gold in my account.

I do believe any rally in the dollar would be short lived. In currency terms that could be from 1 week to a month or two. I will of course keep you all updated on this scenario and will also provide what I believe to be some decent investment opportunities for this play.

In closing, I’m going to post a chart you should all be familiar with. Keep in mind that after the market crash of ’29, Hoover and many prominent economists said the recession was over. There was nothing more to fear. Good times are upon us again. Then, shortly after, the markets crashed again for a full 90% loss of their 1929 highs. The situation today is far more grim than 1929 and ’32.

One other note, I do believe that there will be one last push for a short dollar trap. One last chance for the banks, currency traders and the Fed to suck people into the belief that the dollar will “collapse” any day now. I don’t believe it. That means you could see gold and silver go a little higher in the short term. This is the cue I am going to look for and will then liquidate everything. If I don’t believe that will happen I’ll move beforehand.

If any doubt this info read my previous blog post and then go do your own due diligence. I always appreciate information as well.

Good luck and do remember, this is all speculative based on mine and others research. But if you invest, you speculate and you must live with the consequences.

You Bought Silver at $8!!! Fool!!!

It was October of last year, silver was around $8.90 or so. I ran into someone who is an aspiring financial advisor. He asked me how I was doing and I told him fine and that I was buying as much silver as I could. He started shaking his head at me and told me the silver play was amusing (I'm used to people shaking their head at me).

Now, I guess when you see silver go from $21 an oz to less than $9 an oz you would think that play was over, right? Just like the play was over for Goldman, Bank of America and Citi, right? Wrong. Oh but they're mainstream....and when you buy their stock advisors get commissions. I digress.

So now, here we are and all the buzz is precious metals (if you're paying attention). Had I taken his advice I may have made some returns in the stock market, true. But how much risk will I have subjected myself to? The S&P has a P/E ratio of over 140. 140!!!!! Not only that but the validity of the rally is in serious doubt. Where is all this growth coming from? Earnings? Sure I could show earnings too if I laid off half my workforce. The growth wouldn't be from the Fed and banks intervening and speculating in the markets would it? Check out this chart from James Turk's website .

He wasn't sure of the author of the chart and I'll give props if that person contacts me. Looks a little suspicious doesn't it? How long can that go on? Will you still be in the market? If it crashes will you sell in time? Will you keep all those gains? Good luck. You probably never saw the last shellacking you got coming did you?

The reason I have been buying silver and have been telling everyone I know to do so as well and did not take my friend's advice is because I had the AUDACITY to conduct my own research. Much of it. Many, many hours. While most folks were watching American Idol I studied. Rigorously. And for my efforts, this is what I get, read an email I recently received (but first read my disclaimer at the bottom of the page)...

"I have been buying Gold & Silver for about 18 months. I moved my 401k Plan completely into gold stock mutual funds last June. Last fall my portfolio was crushed, as was most of the world. I stayed in the game and continued to buy at very attractive levels. I have made a lot of money (on paper) this year. My 401K plan is actually about 5% higher now than when I moved everything into gold last June. Of course in hindsight, if I had the foresight to move out of gold before the crash and back into it after the crash I would have about 150% return on my money. No one is that good, but when I read someone saying there is going to be a large correction, I listen because of the potential opportunities.

In the last 12 months I have been buying gold and silver at every dip in the road. Based on some of your recommendations in the Spring, I bought a number of Silver stocks that are up 125 to 175 % since I bought them. (Thank you, Steve)"

That folks is why I do what I do. That is exactly why I write this blog.

Thank you R for writing that message to me.

Wednesday, October 21, 2009

Silver Will Outperform Gold

As I previously posted, I was a little chagrined that gold had reached all time highs but silver has yet to approach it's all time highs, even though in my view, it's more important to society than gold in many ways.

Homework: why do you suppose silver has the highest number of short contracts of any commodity against it's yearly production even though it's one of the smallest markets on the COMEX?

If you can answer that, I'd be mightily impressed.

Silver has a lot of catching up to do and it's in this bloggers opinion, that one day, the price of silver will surpass the price of gold. Don't simply disagree because you an opinion, try and figure out why I believe that (hint: start by watching the videos on the right).

Now on to an article that inspired these thoughts today from Bloomberg...

Silver, ‘Bullion’s Bridesmaid,’ May Outpace Gold: Chart of Day
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By Kim Kyoungwha and Lee J. Miller

Oct. 20 (Bloomberg) -- Silver may outpace gold through mid- 2010 as a recovering global economy increases industrial demand, said Citigroup Inc.

The CHART OF THE DAY shows the ratio of gold to silver. An ounce of gold bought 59.4 ounces of silver on Oct. 14 when gold for immediate delivery jumped to a record $1,070.80 as investors sought an alternative to the weakening dollar and a hedge against inflation. That compares with 48.5 ounces when gold first exceeded $1,000 on March 13 last year and 43.6 on April 19, 2006, the lowest level in the past 10 years.

“Silver is set to benefit from stronger gold, but also the improving outlook for global industrial production,” said David Thurtell, a London-based analyst at Citigroup, in an interview. “I think the gold-to-silver ratio can get to the low 50s.”

When gold reached $1,000 for the first time, silver traded above $20 an ounce, compared with $17.82 now. Silver has already climbed 56 percent this year, more than double the 21 percent advance in gold. Gold is on course for its ninth straight annual gain while the U.S. Dollar Index, a gauge against six major currencies, has fallen 7.4 percent this year.

“The dollar’s decline has been pushing gold to a series of record highs,” Harjas Wadhwa, vice president for New Delhi- based AUM Capital Market Private Ltd., said. “If gold moves higher from here, you’d expect silver to outperform,” he said. “It has a lot of catching up to do” since “bullion’s bridesmaid” was more than $20 an ounce when gold first surpassed $1,000, he said in a report.

Industrial applications such as electrical switches and batteries accounted for 50.3 percent of silver demand in 2008, compared with 40 percent five years earlier and 51 percent in 2007, according to The Silver Institute. Use in jewelry comprised 18 percent, followed by photography with 12 percent. “Net investment” about doubled from 2007, to 5.7 percent of demand, according to the Washington D.C.-based institute. The world economy will expand 3.1 percent next year after shrinking 1.1 percent in 2009, the International Monetary Fund forecasts.

To contact the reporter on this story: Kyoungwha Kim in Singapore at Kkim19@bloomberg.netLee J. Miller in Bangkok at

Friday, October 16, 2009

Dollar Rally, Blink You Might Miss It

Ok, so the dollar's gonna show up briefly. Don't get used to it.

Here's an excerpt from one of my favorite writers on silver, David Morgan. The source is listed below.

"The easiest thing to say with conviction is, if you’re not in this market you absolutely need to buy physical gold and silver here. Whether it stays above a thousand or drops below is a moot point. When gold goes to 2,000 or 3,000 or more, if you bought it as it broke through 1,000 and then went back under 1,000 for a while, it might make you sad for a day, a week, maybe a month . . . but it’s going much higher in the longer term. So that’s one thing to keep in mind."

Any dip in silver and gold now is a gift. Take advantage of it.


Thursday, October 15, 2009

Off the cuff call

Ok, we see headlines today like this...

10/15 Gold futures fall below $1,050 an ounce as dollar rebounds...source

Gold has come down from the $1,070 level on dollar strength? Nonsense. Who writes this stuff, first graders? I guess since the dollar's rallying that explains why oil went over $77 today. No, the dollar is worse off now than when we hit $1070.

In all likelihood there was simply some profit taking. Surely there's a whole schlew of people thinking they've seen the top. Really they just don't know where it is and since we've never been here before they're ascared. That's right. Ascared. I guess there's nothing wrong with locking in profits but trading in this type of environment, to me, is just silly.

So here's the call, simply: we rebound in Asian trading. Nothing fundamentally has changed and I expect no divine intervention so a brief pause then we carry on. That's that.

Wednesday, October 7, 2009

Recurring theme...silver shortage

Excerpt from source......

Because of unprecedented demand for American Eagle Gold and Silver Bullion Coins, the United States Mint suspended production of 2009 proof and uncirculated versions of these coins. All available 22-karat gold and silver bullion blanks are being allocated to the American Eagle Gold and American Eagle Silver Bullion Coin Programs, as mandated by Public Law 99-185 and Public Law 99-61, respectively. Both laws direct the agency to produce these coins in quantities sufficient to meet public demand. The proof and uncirculated versions of the American Eagle Gold and Silver Proof Coins are not mandated by law.

Tuesday, October 6, 2009


Why Your World Will Be Turned Upside Down...

Surely most folks will not even ATTEMPT to understand how these events will effect your life. And that's too bad really, because surely we are all (partially?) responsible for each other.....

The demise of the dollar

In a graphic illustration of the new world order, Arab states have launched moves with China, Russia and France to stop using the US currency for oil trading

By Robert Fisk

Tuesday, 6 October 2009

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars.

In the most profound financial change in recent Middle East history, Gulf Arabs are planning – along with China, Russia, Japan and France – to end dollar dealings for oil, moving instead to a basket of currencies including the Japanese yen and Chinese yuan, the euro, gold and a new, unified currency planned for nations in the Gulf Co-operation Council, including Saudi Arabia, Abu Dhabi, Kuwait and Qatar.

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars.

The plans, confirmed to The Independent by both Gulf Arab and Chinese banking sources in Hong Kong, may help to explain the sudden rise in gold prices, but it also augurs an extraordinary transition from dollar markets within nine years.

The Americans, who are aware the meetings have taken place – although they have not discovered the details – are sure to fight this international cabal which will include hitherto loyal allies Japan and the Gulf Arabs. Against the background to these currency meetings, Sun Bigan, China's former special envoy to the Middle East, has warned there is a risk of deepening divisions between China and the US over influence and oil in the Middle East. "Bilateral quarrels and clashes are unavoidable," he told the Asia and Africa Review. "We cannot lower vigilance against hostility in the Middle East over energy interests and security."

This sounds like a dangerous prediction of a future economic war between the US and China over Middle East oil – yet again turning the region's conflicts into a battle for great power supremacy. China uses more oil incrementally than the US because its growth is less energy efficient. The transitional currency in the move away from dollars, according to Chinese banking sources, may well be gold. An indication of the huge amounts involved can be gained from the wealth of Abu Dhabi, Saudi Arabia, Kuwait and Qatar who together hold an estimated $2.1 trillion in dollar reserves.

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank. But it is China's extraordinary new financial power – along with past anger among oil-producing and oil-consuming nations at America's power to interfere in the international financial system – which has prompted the latest discussions involving the Gulf states.

Brazil has shown interest in collaborating in non-dollar oil payments, along with India. Indeed, China appears to be the most enthusiastic of all the financial powers involved, not least because of its enormous trade with the Middle East.

China imports 60 per cent of its oil, much of it from the Middle East and Russia. The Chinese have oil production concessions in Iraq – blocked by the US until this year – and since 2008 have held an $8bn agreement with Iran to develop refining capacity and gas resources. China has oil deals in Sudan (where it has substituted for US interests) and has been negotiating for oil concessions with Libya, where all such contracts are joint ventures.

Furthermore, Chinese exports to the region now account for no fewer than 10 per cent of the imports of every country in the Middle East, including a huge range of products from cars to weapon systems, food, clothes, even dolls. In a clear sign of China's growing financial muscle, the president of the European Central Bank, Jean-Claude Trichet, yesterday pleaded with Beijing to let the yuan appreciate against a sliding dollar and, by extension, loosen China's reliance on US monetary policy, to help rebalance the world economy and ease upward pressure on the euro.

Ever since the Bretton Woods agreements – the accords after the Second World War which bequeathed the architecture for the modern international financial system – America's trading partners have been left to cope with the impact of Washington's control and, in more recent years, the hegemony of the dollar as the dominant global reserve currency.

The Chinese believe, for example, that the Americans persuaded Britain to stay out of the euro in order to prevent an earlier move away from the dollar. But Chinese banking sources say their discussions have gone too far to be blocked now. "The Russians will eventually bring in the rouble to the basket of currencies," a prominent Hong Kong broker told The Independent. "The Brits are stuck in the middle and will come into the euro. They have no choice because they won't be able to use the US dollar."

Chinese financial sources believe President Barack Obama is too busy fixing the US economy to concentrate on the extraordinary implications of the transition from the dollar in nine years' time. The current deadline for the currency transition is 2018.

The US discussed the trend briefly at the G20 summit in Pittsburgh; the Chinese Central Bank governor and other officials have been worrying aloud about the dollar for years. Their problem is that much of their national wealth is tied up in dollar assets.

"These plans will change the face of international financial transactions," one Chinese banker said. "America and Britain must be very worried. You will know how worried by the thunder of denials this news will generate."

Iran announced late last month that its foreign currency reserves would henceforth be held in euros rather than dollars. Bankers remember, of course, what happened to the last Middle East oil producer to sell its oil in euros rather than dollars. A few months after Saddam Hussein trumpeted his decision, the Americans and British invaded Iraq.