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COMMENTS
NOW APPEAR HERE
AUGUST
13 2008 9:14PM - I am making a major change
effective immediately. For over 2 years I have been
writing comments here while refusing to use a blog
even though it would have been so much easier and would
have allowed reader interaction. Why? For one, because
I did not want to be known as a "blogger".
I know, stupid. Also, the blog format didn't allow a
huge amount of flexibility. Or at least not until recently.
Also, I had no reason to "promote" myself
so I didn't need the blog features like easy linking
to articles, tagging or social networking. For obvious
reasons some of those things are going to change as
I launch the subscription service.
Thus,
effective immediately, my comments will now appear at
http://www.silveraxis.com/todayinsilver/.
That location may yet change, but that's it for now.
For a while, I may post brief summaries of my comments
on the homepage here after I have posted them
in the blog but for the most part the comments will
appear there first, and only there. That assumes everything
goes smoothly, of course. I plan to improve the
blog functionality in the days ahead so ignore everything
for now other than the comments themselves. Also, I
would appreciate if you would still come to the homepage
first to check out any "service announcements", posted
commentaries from others, the Silver Alerts, etc., some
of which may or may not be integrated in the blog. I
haven't figured it all out yet, but I'm working on it.
I'd appreciate if you would e-mail
me if you see any major technical glitches, can't access
the blog, etc.
AUGUST
13 2008 8:05PM - Confirmed: As of this afternoon
CNI is sold out of all silver but the 90% bags. Thanks
LC! If anybody knows of a source that still has
inventory, please let me know. Tulving is now sold out
of everything as well except for 90% bags of Half Dollars
(less than 10 left) at 20 cents over spot and they
also have in quantity the 2008 silver Philharmonics,
which is the first true bullion coin in silver with
a face value in Euros. At a premium to spot of $1.89,
the Philharmonic purchased from Tulving with silver
more than 2 dollars below its 200 day moving average
is a very interesting option. Heck, if I was buying
these days I'd pick up 500 of them to go with 500 Maple
Leafs and 500 Eagles. And I'd do that every year. Say,
that's not a bad idea. Unfortunately, the U.S. Mint
is apparently going out as far as Christmas on dealer
allocations of the 2008 silver Eagles, so if you don't
have yours yet you might be out of luck (and you
might be out of luck even if you did already order but
haven't received them). One last thing, many dealers
are also out of a number of gold bullion items
so this time it's not just silver.
AUGUST
13 2008 5:20PM - Good thing I got some of
those September 550 corn call options, even though I
was a bit too early. I planned to bid at 12 ($600),
actually filled at 7 3/4 ($375) and traded down
to 1 ($50). Corn and most of the other grains closed
limit up today and so far corn is up another 13
cents in the Globex session, making the calls worth
about $1,000. This is the bounce I was looking for and
in less than 24 hours it has already gone far enough
to close out at least half of the trade. I'm going
to try using Globex to sell some these corn call options,
something I haven't done before. I guess that's another
blessing for Globex for those who are keeping count
of the score. If it doesn't work, I'll be selling early
in tomorrow's session with the hope corn doesn't
retrace much of the limit up move before then. Oh
yeah, this out-of-nowhere reversal by commodities is
not a bad thing for silver, either.
AUGUST
13 2008 4:15PM - It looks like many of you
have taken my and other stalwart bottomfeeders' advice
and bought silver at these stupid levels, with the result
being that bullion dealers are once again sold out of
just about everything. For example, www.tulving.com
only has 1 oz. generic rounds and 90% pre-1964
junk bags of U.S. coins at the moment. Meanwhile, it
looks like www.APMEX.com
has limited supplies of silver Eagles but the minimum
premium is $4 per coin. More importantly, they just
announced
yesterday that they are seeing a gold and silver shortage
in the secondary retail market. Yet at least one
dealer, CNI (www.golddealer.com),
shows it has inventory with decent premiums. But how
deep is the inventory, I wonder? If some of you aim
to find out, please let me know.
I
take it as quite a positive sign for the continuing
strength of the bull market in silver that both a strong
rally and now a strong correction have left
the retail silver bullion shelves mostly empty. All
within the same year. More proof of my observation from
a few weeks ago that physical silver is being bought
when the price is up, when the price is down, and when
the price is flat. Eventually, that kind of thing will
catch up with overall supply, even if it may have always
been pretty much adequate to meet both industrial and
investment needs in the past. Those idyllic times
may be ending soon!
Meanwhile,
SLV has held true to form, giving up only 3 million
ounces of silver on the slide from $19.50 to $14.00.
Clearly, this selloff was not due to dumping on the
physical market. On the other hand, if there was significant
latent physical demand (such as the need to cover a
naked short position of 15-40 million ounces of
silver owed to SLV), I don't believe prices could have
collapsed the way they did.
So
why did the price collapse so violently that
it was even uncharacteristic for silver? Surprisingly,
it wasn't due to net liquidations in the futures
markets, which is the usual suspect. Open interest in
COMEX silver, unlike COMEX gold, has held steady at
around 130,000 - 140,000 contracts (futures only)
since the crash began. So, if nobody was selling, how
is it that the price could fall so much? Well, I didn't
say nobody was selling, I said there were no net
liquidations. In other words, somebody was selling
at a low price
(likely in a panic) while somebody else was buying at
even a lower price (probably
with a smile). And I doubt there was a lot of commercial
short covering in silver, because that should have reduced
the open interest (we'll know better when the COT report
comes out this Friday afternoon).
Instead,
I believe a trader or group of traders may have goaded the
silver selloff into its extreme state of violence by
attacking obvious support zones where many stop
loss orders are expected to be sitting. This may have
triggered
the domino effect that each time took silver down by about
50 cents absent a similar move by gold or any other
market. Interestingly, several of these 50 cent
selloffs occurred in the after hours Globex
session where trading is already somewhat thin,
which of course made the trick easier to accomplish.
I was personally trading during several of these selling episodes
and very carefully observed in real time exactly what
was happening on both the Globex and CBOT (mini-silver).
Yes,
I know, this sounds a lot like those conspiracy theories
about a cartel whose job is to keep the gold and
silver price suppressed no matter what. Well, I've
already pointed out that COMEX gold has seen substantial
contract liquidation, which is consistent with a capitulation
by speculators just like every other time gold has taken
a big dive. No mystery there. And even if there were a
cartel, we must still put most of the blame on the hot
money A-holes for making every decline so dramatic.
At the same time, we must also credit them for making
every advance so dramatic.
In
any case, what I'm about to point out about silver
is that a relatively small player, perhaps a very wealthy
individual, a descent-size hedge fund or the like --
and not necessarily a cartel with unlimited resources
-- could have played a big hand in the recent blood-letting.
I'm not saying any individual or group was responsible
for the decline itself since silver and gold
had clear reasons to do that, many of which I've already
discussed (including the key failure of September silver
to surmount $17.985 or to hold $16.035). It's just that
the severity of silver's recent fall defies conventional
explanation.
One
of the things I found interesting during the current
episode is that my own stop loss orders never suffered
much slippage. Since a true stop loss is a market order
once the contract has traded through a given stop price,
these orders can sometimes be filled many cents
below the stop, increasing the amount of loss or reducing
the booked profit. This is called slippage (the term
is also used to describe trading losses incurred when
positions are rolled forward to future periods). Yet
almost all of my orders in the past few days were
filled within a cent of the stop price. Even in the
overnight sessions. Normally you don't see these "quality"
fills just above and below obvious areas of support
like the round numbers, moving averages, etc. Especially
in a very fast moving market.
It's
as if someone was literally shaking positions loose
and then snapping them right up. Time and time again.
Now, there are other possible explanations for what
I personally witnessed, but the theory I've come up
with has the advantage of being both plausible and intriguing.
To wit, someone may have been looking to accumulate
a rather large position in silver at a decent price.
Clearly it would have to be someone with deep pockets who
didn't care about the mounting losses on the many positions
already acquired while the plumbing operation continued.
In the end, this trader or traders may have accumulated
as few as several thousand contracts or perhaps
more than 20,000. The upper figure doesn't come cheap--I
calculate the cost including margin might be as high
as $500 million. Still, that amount is entirely within the
reach of many individuals and funds. It also tends to
demonstrate the desire to have the position in place
quickly but to hold it for some time.
The crazy thing
is that the lower end of my theoretical haul--just a few thousand
contracts--could possible account for a dollar or perhaps
even two dollars of silver's decline.
Why
didn't this happen in the gold market? Because it is
too big for something like this. A trader would have
to commit ten times as much capital or more and still could
not move the gold price by a similar amount. Besides,
this trader wanted silver, not gold. What intrigues
me is that I may have stumbled across the first sign
that a 21st century version of the Hunt Brothers might
be active in the silver market right now, quietly accumulating
positions. If so, this is no mere Hunt wannabe judging
by the sophistication of the first confirmed operation.
At
this point, I imagine many of you are shaking your heads,
disappointed to find out that I have a soft side for
conspiracy theories after all. Well, the truth is that
I am actually a big conspiracy theory fanatic. Always
have been. But that doesn't make me any less skeptical
than you. In fact, my disappointment in finding out
that just about every conspiracy theory that I've ever
investigated is a load of crap makes me particularly
pragmatic and circumspect. At the same time, my fascination
does mean that I would absolutely love to be the one
to uncover a real conspiracy, especially if it involved
something else that fascinates me, namely silver. All
I'm trying to say is that you should take these comments
with unusually large grains of salt.
If
my speculation is true -- and again I'd like to emphasize
that it is just speculation -- then does this constitute
illegal market manipulation of the silver market? Not
necessarily. There is nothing inherently illegal about
a trader placing orders in a tactical manner that takes
advantage of known strategies employed by other traders. This
type of thing happens in the stock market all the time.
The problem here is that a lot of the just-concluded "tactical
trading" in silver appears to have taken place when
the market was fairly illiquid. Just how illiquid? Well,
there are certain times in the after hours session when I could
discern (using market depth, trade volume, order size,
etc.) that I was just one of a few live traders
making live trades. Especially in CBOT mini-silver where
I test and refine ideas before trying them out on the big
contracts.
Let
me now repeat again that the "tactical trading" I
observed is
unlikely, in my opinion, to have had anything to do
with the concentrated commercial traders who are net
short. After all, they did not cover in silver as they did in
gold. Also, they don't need an illiquid market to
move prices, they can already move prices with
no trouble in the regular, liquid session. At the same time, I cannot rule
out their complicity. To the extent some of their positions
are not hedging physical metal, they may have a motive.
A while back I pointed out that the U.S. Mint has a
hedging program that their counterparty most likely
would use to gain a commercial designation for their
COMEX trading. To my knowledge, this is the only publicly
disclosed instance where we can clearly see the connection, but
there are likely other instances that have not been
disclosed because the transactions are not material
or they involve private parties. We'll have a better picture when this week's COT report
is released Friday afternoon. If that shows the commercial
shorts decreased their short commitment by an unusual
amount in terms of both net positions and concentration,
that would tend to argue for their participation in
the massacre.
Even
then, I can't recall an episode before where so much
of the damage was done in the after hours session
instead of the main COMEX pit session. Especially since
selling in spot markets (some of which were open
when the selling episodes took place) has by itself never
before been vigorous enough to account for such large
price drops. This should be even more true now
that we can see what the world's biggest confirmed
owner of silver is doing day to day. If SLV was not
a major source of selling, it is hard to believe somebody
else was.
For
now, my only conclusion of merit is to put an asterisk
beside my recent comment that Globex (and CBOT) after
hours trading was a blessing to the small silver
and gold trader. Unfortunately, we may have just witnessed
the flip side of that coin, a curse. Who put that
curse on silver and why remains to be seen, but at least
now we have a new idea.
AUGUST
12 2008 12:25AM - I'm getting lots of questions
asking if I can see how far down the bottom might be.
The answer is no. That said, I am going to point
out something that may turn out to be rather important
in defining the action over the next few days. Last
September, open interest in COMEX gold started to rise
strongly from its typical 300,000 - 400,000 or
so level (futures only) to over 550,000 contracts by
November 2007. Open interest peaked at almost 600,000
in January 2008 and has been declining since. That decline
has accelerated in recent days, and counting today's
action, open interest could perhaps stand under 350,000
contracts again. In other words, the entire speculative
element that was driven by the emergence of the credit
crisis last August may have now been worked completely
out of the gold market. If true, we may be just
about at the point where we can start thinking about
fundamentals again and perhaps even expect some positive
action from bargain hunters. Consequently, au/ag
prices may very well start to stabilize during the remainder
of the week. Perhaps a final rinse might be required.
And while I can't calculate the precise distance, I
am starting to see the bottom. I might, of course,
be totally wrong -- I could just be seeing
a mirage or the top of a cloud.
Nah
. . . it sure looks a lot like the ground to me.
Here
now is some reader mail along with my ruthless
but caring response.
"No.
I am not throwing in the towel. I can't I have so much
invested!
I
am in shock. Nothing makes any sense. Does this mean
we are now in a bear market for precious metals?
How
can the dollar be rallying when we still have massive
CDO and SIV problems, as well as a huge national debt
plus inflation.
I
am sick to my stomach.
If
it ever rallies again at what price should we sell our
silver?"
ME:
You're sick because you "have so much invested"! It's a natural feeling, I
assure you. The only cure is battle-hardened thick skin or getting yourself
less invested.
Yes, this current episode is extraordinary but not
unique. It is important to keep in mind that gold and silver tend to be more
volatile from day to day in both their bull and bear markets than stocks.
Still, even the Nasdaq, in its epic rise from 1995 to 2000, saw its share of
sickening drops. Nothing like this of course but comparable.
It
requires special fortitude, immense patience and deep conviction to ride out
the waves without having your gold and silver shaken loose. And that is
precisely what happens in these swoons--gold and silver being shaken from
the weak grips of the amateurs into the open arms of the pros.
Is this now a bear market in
gold and silver? The Aden sisters say it will be if gold crosses below such
and such moving average. Well, I think it just might cross below their sacred
moving average. Don't worry, it
doesn't make them right about a bear market. Some other guru will always come along and give you a
different threshold for a bear market. Don't listen to any of them. Instead,
think for yourself and ask some questions. What has fundamentally changed?
The Eurozone might slow down? We already knew that. The dollar could rally
for some time? We knew that too. Oil may retreat from its ridiculous $150
level? Not news to you or me.
What price should you sell your silver? It
depends on what your goals are. In my case, I bought a specific quantity of
physical silver that I think will be able to pay off my mortgage before the
bull market is over. I will sell that silver without a second thought as
soon as that price is reached. I have other silver I plan to hold until
death and pass down to my grandkids. Some silver I will sell the next time
we rise 30% above the 200 day moving average. There might be other reasons
to sell silver. Selling because you are afraid or sick is not a reason; it
is the realization of a poor buy decision.
I'm sorry if the above
seems overly harsh or too frank but there isn't much room for sentimentality
or mincing words in this type of situation. This is a brutal market that
preys on the weak. Only the strong survive, and they do
so by holding on for
dear life.
AUGUST
11 2008 5:40PM - Ouch, if these prices get
any better the pain is going to kill us! I wish I could
see the bottom from here but once silver broke $16.035
it was falling on momentum, panic and fear. Neither
technical mumbo jumbo nor anything you might find
on a chart mean anything in these circumstances. The
only thing that matters is silver is still falling and
continues to be a better and better buy every day. The
drop today happened on the back of gold finally breaking
down below $850 which immediately ran literally thousands
of stop loss orders culminating in a very fast decline
of $30+. Silver got no credit for having already fallen
much further than gold and instead got creamed again.
Nothing
matters here to those selling gold and silver, not even
what looks to be the start of a major confrontation
(involving only words and stares, we hope) between
Russia and the U.S. and its allies. And despite what
many PM "experts" will tell you, the selling
isn't being done by central banks or some cartel but
rather by speculators who liked, but now apparently
hate, gold and silver. Not for their inherent
and monetary properties but what they can do for
this quarter's bottom line. I say good riddance to these
jerks. And please don't come back.
So,
what to do? If you are fully loaded, nothing. If you
are leveraged, hopefully you haven't been wiped out
(some traders definitely have been). If you have money
to buy gold and silver, then buy. Just please don't
tell me you are throwing in the towel, it will just
make me sad and prompt me to give you a stern lecture.
AUGUST
10 2008 7:10PM - Geopolitical risk looks
to be building back into the crude oil and PM markets
this Sunday evening (Monday already in the Far East)
as Russia and Georgia hurtle toward each other in a
dangerous escalation of their "Summer Olympics" conflict
over two small corners of The Caucasus. Whether this
becomes all out war or just another flare up that has
yet again claimed the lives of many innocents on
both sides, the situation looks to have serious
short and long term implications for regional security
and the relationship between the great powers. So far
as of 6:45 PM PDT on Sunday night, oil is up a buck,
gold is up 5 bucks and silver is up a dime. In other
words, the early risers don't think much will go
wrong here. But, what "could" go wrong?
On
Christmas Eve, 1979, the Soviet Union invaded Afghanistan.
Gold was trading around $460 that week and silver was
rising strongly through $23. Exactly four weeks later
the prices of silver and gold had doubled in a classic
blow-off peak. And even though gold and silver began
a bear market decline the very next day that wouldn't
end for more than 20 years, gold didn't trade below
its Christmas 1979 price until March 1981. Silver, ever
the volatile one, did decline below its Christmas 1979
price by March 1980 but it briefly surpassed that level
again for a day in September 1980 before finally giving
up the ghost.
Now
mind you, Afghanistan was no close ally of the U.S..
Neither did it seek NATO membership nor had
it been promised future entry into that less-and-less
exclusive club like Georgia has been.
Our
pragmatic side says the odds favor a de-escalation of
hostilities between Georgia and Russia in the days
ahead, perhaps followed by a Chechnya-style low intensity
conflict or a UN-observed peace deal. Our wild, reckless
side says these hostilities might be the prelude to
WWIII, reminiscent of another WW started because of
entangling alliances that dragged nation states into
centuries-old backwoods disagreements.
Be
that as it may, this event has demonstrated very
clearly that we should hold some gold and silver not
only because of what will happen at some point
in the indeterminate future, but what could happen
over a single weekend, even during the Summer
Olympics. Or, of course, the Christmas holidays.
AUGUST
10 2008 4:20PM - Phew, I've finally been
able to catch up with almost all of the e-mails
from the past few days and it looks like there will
be 12 free subscriptions at this point. There's still
a few hours left so perhaps there might even be more.
The "winners" will be hearing from me early
in the week.
A
bit now on what the service is probably going to include
once it is fully implemented. If you don't care, there
is no need to read the rest of this posting.
Please
realize not all of the below features will be functional
on Day 1 of the launch since that would delay
things at least another year! The basic foundations,
however, of the service--exclusive commentaries
about the au/ag market, the resource stock functionality
and the basis early warning system--will be ready to
launch soon.
Of
course, the central foundation of this thing will
be the "babbling and mumbling" from yours
truly, as well as other contributors I deem worthy.
Some of this will be exclusive (meaning it won't appear
on SILVERAXIS or elsewhere), some will appear here on
a delayed basis and some will appear here pretty much
at the same time. The new service will be less specific
about silver as compared to SILVERAXIS mainly because
it will include expanded commentary from people who
are experts in gold, commodities, exploration stocks,
money, or what have you. There will be more overall
content of course and it will be updated more frequently
while SILVERAXIS will maintain at least the current
level of upkeep (which is admittedly pathetic at times).
This will ensure fairness to both (a) those loyal readers
who cannot afford or don't want to pay for the privilege
of listening to (yet another bunch of) blowhards
or windbags and (b) those who recognize value when
they see it and are in a position to take advantage
of it.
Now
for the key planned features:
-
The commentaries in the paid service will sometimes take
different forms to foster interaction with the reader.
Some examples under consideration include conference format
(real time), blog format (where members can post their
own comments and replies), teaching modules (with lesson
plans and problems to solve), etc. Members will
also be able to sign up for an e-mail version of our
exclusive commentaries and perhaps even a printed
version if there is sufficient demand.
-
There will be emphasis as part of this service on explaining
concepts such as the basis, options, ETFs, etc. and
how to apply them. In addition, when I talk about a
particular option or trading strategy on SILVERAXIS,
the paid service will include greater detail including
actual trading symbols, timing, success/failure of
my own personal trades, and follow ups.
-
I will provide my proprietary basis calculations and
update them frequently. The service will include an
early-warning feature that indicates the possible approach
of Professor Antal Fekete's "Last Contango".
There will also be detailed trading ideas using
the basis, including methods for "arbitraging"
between gold and silver. If and when we can generate
sufficient membership fees, we should be able to
acquire data in real time and generate even more powerful
basis trading and early warning tools.
-
All Founding Members will have unlimited (within reason)
chance to ask questions, share ideas and otherwise communicate with
me and my partners. This is the main reason for restricting the
number of Founding Members. Relevant and important excerpts
will be taken from these Founding Member communications
and shared with all members (while maintaining anonymity
of course). Members who are not Founding Members will
have the ability to ask and have their questions and
comments answered in an open format but it will
not always be possible to reply to these in
as much detail or as timely as Founding Members. In
fact, Founding Members will hopefully answer many of
these questions themselves and we might only have to
add that: yes, we agree with the answer provided by
so-and-so Founding Member. Don't worry, this is not
something that we expect Founding Members to do,
but rather something we think a few will very much want
to do. Unfortunately, the potential time commitment
related to this portion of the new service means that
I personally will need to prioritize my communications
and thus I may not have as much time as I've had in
the past to respond to e-mail from SILVERAXIS readers.
I will still try to do so, but it will likely be more
sporadic than it has been in the past.
-
The service will cover the "best" and most
"interesting" silver, gold and metal mining
and exploration companies. We will comment on each of
these companies, provide links and hints that will
help members conduct investor due diligence, cover
what newsletter writers and brokers have to say, and
discuss critical news and developments as they arise.
We will not make official buy and sell recommendations
per se, but it will be easy to figure out where our
preferences lie. We will also disclose whether or not
we have a position in a particular stock. Another planned
feature is to provide in-depth buy and sell ideas for
a very small universe of highly prospective stocks,
which we would follow very diligently using special
reports. This feature would have very restricted first-come,
first-served distribution and be available at an
additional cost to regular members but would be free
to some Founding Members based on total distribution. Since
resource stocks might be the only thing about our
service that really interest some members, we plan to
make sure these features alone justify the price
of admission.
-
We plan to conduct anonymous user surveys, encourage
members to provide country, region and industry "location
reports", and provide other opportunities for
member input that will help all of us gain a better
understanding of the global silver, gold and metal markets.
This type of leveraging for mutual benefit of a motivated
(i.e., paying), non-agendized precious metal investment community
has never been attempted and it's about time.
-
The "user group" we plan to found will
at all times respect (and in fact encourage) anonymity.
For example, Founding Members will be identifiable only
as "FM1", "FM2", etc. Nicknames
can be used by those who prefer a bit of familiarity
especially those who plan to contribute frequently (or,
having been in jail, would prefer not to be known simply
by a number). We feel the most important characteristic
of this community will be to keep an open yet skeptical mind
and to be always eager to learn or teach something new
or from a different perspective. Of course, no
member will be required to do anything or share anything.
Indeed, the emphasis will be on quality, not quantity,
and thus we might actually discourage too much
participation.
- Founding
Members will lock in a low (relative to later members)
introductory rate that is good for life. "Life"
means as long as the Founding Member is a subscriber
and the service is in existence. And Founding Members
willing to spread the word about our service will
be able to get a refund of even this low subscription
fee. Exactly how low will it be? I don't have
the exact figure just yet, but it will definitely be
less than $100 per year if subscribing under an
annual auto-renewal plan. Some of you are probably saying,
"Tom, you're crazy to start out this low with all
of these planned features!" That's probably true.
I've even had credible people in the PM industry tell
me that my SILVERAXIS comments alone are worth $100-200 per
year. But, I'm no salesman and would absolutely cringe
if it turns out the service is not worth what you pay
for it. In fact, if you ever feel that way, please just
let me know and I will simply refund your subscription. Other
than that, we set the Founding Member introductory
rate so low as a Thank You for trusting us with your
hard-earned money and of course also for reading
our "babbling and mumbling" all this time.
Well,
that's most of it but I'm sure there is something else
that I've forgotten. It may seem like a lot but the
truth is that our ability to get all of these features
off the ground will depend in part on the amount of
participation and encouragement we receive as well as
being able to find the help to make it happen. However
far we go, one thing I personally guarantee is
that subscribers will get their money's worth.
AUGUST
8 2008 10:25AM - The word is out there that
central banks are intervening in the currency markets
in support of the dollar. James Turk, in his latest
dispatch, points out that foreign holdings of Treasury
and agency securities in the custody of the Federal
Reserve have been climbing at an accelerated pace in
the past 3 weeks. He says this is direct evidence of
manipulation in favor of the dollar. Oh, were it that
simple! I've reviewed the weekly changes of securities
held in the Fed's custody and there doesn't appear to
be anything particularly unusual in the offing. Absent
statistical modeling that includes correlation analysis,
there is not much substance behind these claims. A few
billion or even tens of billions is not going
to make a squat of difference in the currency markets
and certainly cannot explain the large decline in the
Euro and spirited rally in the dollar. Instead, what
can explain it is a shift in sentiment against
the perverted thinking that the Eurozone was going to
be immune from a global slowdown. I mean, come on, what
was the ECB thinking by raising rates in July? What
we are seeing now is simply the unwinding of unrealistic
expectations.
Yet
again, silver has been one of the biggest victims of
this latest reversal of market wrong-headedness despite
the fact that speculative elements in other markets,
including gold and copper, are much larger. To wit,
gold has now just returned to its bottom of early May
(around $850 spot) whereas silver has collapsed almost
a full dollar below its own (around $16). But don't
despair too much, dear reader, for this is precisely
what makes silver such a great opportunity. I'm convinced you
will feel much better in a few months if you go out
and buy some bullion today.
With
the silver price almost $2 below its 200 day moving
average, which is similar to mid-August 2007 but otherwise
has no precedent during the current bull market, the
idea that there is a wholesale "shortage"
of silver bullion in London or anywhere else can now
be examined in the full light of day and properly assigned
the probability that it deserves: zero. Yet apparently
the detractors are not satisfied with libeling Barclays
and its silver ETF, SLV. They now make the claim
that Central Fund of Canada is experiencing delays in
receiving the silver that it already shows as held
in portfolio. This is truly sad.
But
let us not be sad ourselves. Instead we should relish
the thought that the recent decline in the price of
silver will allow a new wave of investors to join
us in enjoying the white monetary metal for fun
and profit. With that said, I am officially flipping
the "Alert Flag" for the speculative term
to Green,
which represents the first change since last October
when I turned it from Green to Yellow. There is the
possibility of further downside but this is not about
picking exact bottoms, it is about risk and reward.
I think it is fitting that this change (reversal) to
Green gets made right about the same price level as
the previous change to Yellow. Back then, who would
have believed that we would be at the same place 10
months later?
AUGUST
7 2008 11:25PM - It's pretty impressive,
and indicative of just how good a floor $16.035 was,
that silver so far has managed to hold that level despite
the dollar soaring to 75 on the index as the
Euro plunged through 1.5300 on its way to 1.5193, its
lowest print since early March. At the moment September
COMEX silver can be had for $16.05. Alas, the wicked
winds continue to gather strength and may very well
turn out to be even stronger than what the virtual
brick wall of $16.035 can withstand.
Now
keep in mind, all this is happening as Freddie Mac and
Fannie Mae head toward nationalization in the months
ahead. Plus, the Federal Reserve's balance sheet continues
to deteriorate at a seemingly unstoppable pace with the
latest count
showing that a total of $366 billion of Federal
Reserve notes (the funny money featuring the portraits
of dead Presidents) is no longer backed by U.S.
Treasury securities or gold but rather by private sector
credit. That is 46%, which is precisely 46% too high.
What I'm trying to tell you is that if you're heavy
into fiat and financial assets but light into monetary
assets (silver and gold), you'd be crazy not to trade
in some of the former for the latter before
the week is out. Au/ag prices may still get "better"
or they may not, and silver could even go to $10, but
it ain't going to zero. And that means a lot in
these uncertain times.
Bottom
line, if you ask me what one source you should consult
on a regular basis to keep your faith in the eventual
triumph of innocent gold and silver over the evil financial
schemes of men, it would be the Federal
Reserve Statistical Release H.4.1. I'm honored to
have received such positive response to a paid subscription
service, but in truth you don't need anything else than
that report, and the best part is that it's free.
What
isn't free or even cheap is the premiums on bullion
products as Gene Arensberg points
out, but the stuff being hocked on www.tulving.com
and a few other online destinations don't seem that
particularly bad. A premium of $1.75 over spot on silver
Eagles is about the same as it's been the past couple
of years. On the other hand, both the JM/Engelhard 100
oz. bars and 1 oz. generic rounds are about two
bits higher than they have been offered prior to
this year. Meanwhile, junk bags of 90% U.S. silver coins
are selling at spot and so they remain the outstanding
bargains of the PM universe.
AUGUST
7 2008 11:20AM - Well, we have our $16.035!
September COMEX silver bounced from that exact
level at 10:43AM. The question now is, will that hold?
I'm long futures at this point with a stop just below
$16. The opportunity was just too perfect to pass up
even if it turns into a losing trade.
AUGUST
7 2008 10:40AM - Au/ag still seeking bottoms
as the Euro has just about reached 1.53 while the
dollar approaches congestion near 75 on the dollar index.
Silver is within cents of my $16.035 "God forbid"
technical target. Some of my call option trades in COMEX
silver triggered this morning as well as in GLD (the
Sept. 95 call option bid 0.60). This remains a
risky trade but profits in the PM market rarely fall
out of trees. One thing to really watch now is the Euro.
A decline below 1.5280 might mean the next stop is 1.5000
and unless au/ag decouple from the dollar, the monetary
metals would be set to go lower still.
There
continue to be some encouraging signs that an au/ag
bottom might be near, namely the crosswinds that have
utterly confused the market about the present state
of the U.S. economy. The slew of reports out this morning
is illustrative:
*Wal-Mart
July Sales Miss Estimates
*People
Seeking Jobless Benefits Hit 6-year High
*June
Pending Home Sales Up Unexpectedly
*Retailers
Report Mixed Sales Results in July
*AIG's
Posts Huge 2Q Loss, Shares Plunge
These
headlines are contrary to the idea that the business
cycle in America has turned the corner. It's only because
the Eurozone doesn't seem to be faring much better that
the dollar has been rallying. That's a paper-thin excuse,
however, and will easily blow over at the next
strong gust. The key for gold and silver is whether
or not a slowdown in Europe will create a banking and
financial crisis there which drives people to the shelter
of the monetary metals. So far the evidence is
inconclusive.
Alright,
enough suspense, I am officially
announcing another free membership contest for the imminent
subscription service.
I use the term "imminent" lightly because
we are not going to make the mistake of committing to
another launch date until we are absolutely certain
everything will be ready. We have made a personal commitment,
however, to do our darned best to get it going as soon
as possible. And as you can imagine, we have also made
a considerable financial commitment setting things up.
In any case, to be fairer to all of my North American
and international readers, this won't be a fast-fingered
deal where the first X responses win.
Instead,
all e-mail sent to tom@silveraxis.com
with "FREE SUBSCRIPTION" in the subject line
between now and midnight PDT this Sunday, August 10th,
is eligible. The "winners" shall be picked
at random with the number of "prizes" based
on the overall response rate (but will be no less than
10 even if just 10 of you respond). Also, even if you
don't win, a response will place you on the special
list of "Founding Members" who will be entitled
to preferential rates, free goodies and whatever else
we can come up with to entice you to hand over a bit
of your hard-earned cash to hear us blabber and mumble.
And please don't worry about any indiscretion on our
part. We, like you, really hate spam and would
never dream of giving your e-mail or personal details
to anybody else.
A
note of caution to those of you who like to procrastinate
like us: We are planning to strictly limit the number
of Founding Members to just a few hundred and hope to
fill the remaining open spots pretty quickly. Even if
at this point you would never consider paying for anything
we might peddle based on the stuff spewed forth on SILVERAXIS,
it might not be a bad idea to "volunteer"
for Founding Member status just in case we actually
come up with something valuable that blows the field
away (which is exactly our plan and partially explains
the launch delay).
By
the way, the "we" does mean there will be
more to this than just my own conceited commentary.
For now, my partners shall remain incognito but they
will be revealed in due time. Also, I will finally be
putting a personal bio and resume up on SILVERAXIS that
will reveal a lot more about me and probably help explain
how and where I get some of my crazy ideas.
In
closing, I would like to apologize to the several of
you who sent an e-mail last November in response to
a similar pitch but never received as much as a confirmation
from me. Yes, I still have all of your e-mails and I
plan to reply to each of them as part of this new-and-improved
effort. And yes, all of you are already on the super-duper
Founding Member List. Have no fear, I am much better
prepared this go and have set aside the proper time
to make sure I do this right. Just please remember to
put "FREE SUBSCRIPTION" in the subject line
or header of the e-mail to make it a bit easier.
AUGUST
6 2008 8:20AM - Even though the dollar is
climbing, au/ag has caught an updraft as a result of
strong physical buying out of Asia and London as evidenced
by the big shrinkage in basis. This morning, Freddie
Mac reported bigger than expected losses and that also
stoked the fire. Unfortunately, the dollar looks to
break above 74.50 (per the September dollar index futures)
and if it does, there is clear sailing up to at least
75. At the same time, the Euro appears destined for
1.530 before taking a break from its decline. As such,
we may very possibly see new lows in au/ag this week.
I'm out of my futures positions with small gains and
for now will be strictly using call option strategies
like the ones discussed yesterday to fish the coming
bottom.
AUGUST
5 2008 4:05PM - Just following up on my corn
and copper put option trades with some updates for those
who are interested. I have now taken partial profits
on corn but due to some clumsy trading my total gain per
position was a measly 28 cents--$1,400. That may seem
pretty good, but I should point out that I pretty much
picked the top and held the position during a $2 fall
in corn prices. Thus, if using futures contracts the
profit would have been around $10,000 per position.
And had I not messed with it, the option alone should
have generated a profit of 65 cents or $3,250. I know,
shoulda, woulda, coulda . . . but mind you, that's on
a put option that cost $275.
Alas,
all my bids for 2009 corn put options have gone
begging as the bottom pretty much dropped out of corn
prices literally a few hours after I put in my orders
in the middle of July. It is in these far-dated corn
put options where the real money is likely to be
made, but now even the $4.50 puts are too expensive
given the balance of risk and reward. On the other hand,
the September '08 call options have become ridiculously
cheap, even considering they expire in less than 3 weeks.
Assuming corn can hold $5.00, the $5.50 call option
for 12 cents ($600) would seem like a steal. It should
double on even a minor technical bounce from the current
$5.25 corn price. Perhaps such a bounce will also provide another
opportunity to buy some long-dated put options? We'll
see.
I've
had better luck with copper although I'm not quite satisfied
with the size of my position there either. I was
perhaps a bit patient with my bids and only got filled
on about half my orders before the copper price started
to fall. That's probably fine considering just how contrarian
and peculiar this trade really is, making discipline
even more important than usual. I note that copper
continues to hold up relatively well and is practically
the only metal that has been consistently in backwardation.
Of course, the possibility of a reversal in the sentiment
that has made copper's anti-gravity tricks possible is
precisely what makes the trade so powerful.
At
this point, some of you might be wondering why I seem
to be obsessed with copper and corn on a website
"dedicated to investment opportunities in silver".
Well, recall that I previously mentioned that corn and
copper are bellwethers for the commodity sector and
that silver and gold prices are vulnerable in the short
term to a severe correction in commodities. Taking advantage
of such short term vulnerabilities represents one of
the best opportunities to make profits in gold and silver.
It then stands to reason I should actually be trading
commodities to get first hand exposure and a better
feel for these markets, no? Especially since commodities
are in a historic, once-in-an-eon place from both
a fundamental and technical perspective. I only wish
I could have as good a trade in silver or gold to discuss
right now as the $2.50 copper put options. No worries,
I'm sure at some point I will.
AUGUST
5 2008 1:40PM - In the last few hours the
contango has all but disappeared from the silver price
(contango is the premium in COMEX futures price over
the spot price) and has shrunk substantially in the
gold price. This can mean several things but most likely
signals physical buyers stepping in to hunt for bargains.
This could provide some price support but the question
is, for how long?
The
dollar is poised to cross the 74 level on the index
but appears to have some areas of resistance all
the way up to 76. Meanwhile, the Euro has strong
support at 1.530 (currently at 1.546). Crude oil could
fall to the $110 area but put option valuations indicate
that it would face stiff buying demand below that level.
All
in all, we are probably very close here to a temporary
bottom in au/ag timewise. I wouldn't be very surprised
to see silver take a final dive down to $16.035 before
heading back north, especially since the market
seems to be a slave to technicals. Unfortunately, it
is not possible to determine with much certainty whether
$16.035 (or whatever the low print is during the next
several days) turns out to be the final, final bottom.
From a trading perspective, however, we have already
reached an extremely good fishing spot and as I said
yesterday, it may still get "better" (i.e.,
worse for the silver price).
In
fact, the low in silver may very well be put in between
here (around $16.45 in September COMEX silver) and $16.035.
I am in the process of testing this thesis by going long
the futures but I've also identified a couple of option
trades that could do pretty well. The first is the COMEX
silver September 18 call option. I'm putting in a standing
bid at 8 cents ($400) and looking to sell on a
bounce around 20 cents ($1000). The 8 cent bid would
probably get filled if silver were to continue its decline
toward $16 in the next few days. This option expires
in 3 weeks so assuming it gets filled, it will
either work out immediately or go bust. Another option,
with more time, is the COMEX gold October 950 call option.
My standing bid will be at $600 (with a $1500 exit target)
which should hit if gold declines to $850-860.
If
you like stock options, the equivalent trade in GLD
would be the September 95 calls with a bid of 0.60,
target 1.50. A good strategy might be to buy in sets
of 3, selling one at the initial target, one at
double the target (3.00) and holding the last one
'til kingdom come. I hope those poor souls who
bought all those September 100 calls for 2.00 and above
aren't hurting too badly--they can now be had for 0.35
and while a long shot, that's probably not a terrible
bet at this point.
AUGUST
4 2008 11:45PM - The silver price fell so
quickly through 3 of the 4 targets I provided Friday
that there wasn't much of a chance to try going long
at those levels. Technically speaking, this type of
action is discouraging. Both au/ag prices are now back
at the 200 day moving averages and that is normally
an excellent buy point. Yet it looks like the buying
could get even "better" shortly.
In silver, only $16.035 lies below but this target is
valid only for a couple weeks or so. If prices head
to that level quickly, we can expect some sort of bounce
there, or perhaps even a final bottom. By contrast,
if prices hold their current level, rise or grind slowly
down, my crystal ball is too foggy to provide any useful
fortune telling.
I've
just reviewed a fairly compelling technical analysis,
however, that presents the case for gold bottoming
in the $729 range and starting a new rally from there.
Although not addressed in this research, the equivalent
silver price would be a tad under $15. The good
news is these numbers are significantly higher than
my worst case bull market correction to $500 gold and
$10 silver. The bad news is $729 and $15 are quite a
ways down. The other good news is even if these levels
were to be reached, the chart action would probably
look like a steep "V" and the massacre may
be over before you and I knew it. Do I think au/ag are
going down that far? No. But I will sleep at night if
they do.
Okay,
let's put aside the above speculation and talk about
the real deal. If you have not yet, but would like to,
establish a long term position in au/ag and have
some patience, it is never a bad idea to acquire the
monetary metals at or below the 200 day moving
average. Thus, it would be completely foolish to
advise against buying now. Always, of course, buy au/ag with
money you don't need (anytime soon) to pay living or
retirement expenses, much less the kids' college tuition.
Expecting a gain (or even just to hold
value) from au/ag over a short time frame such
as a few months is asking for trouble. On the other
hand, if you were to put together a plan to carefully start
accumulating au/ag right now at or below their 200 day
moving averages with the aim to complete your purchases
by late September, I believe you would be very happy
with the results in a year or two. Same goes for silver
stocks, especially the ones I've recently mentioned.
I note that U.S. bullion dealers seem to have okay inventory of
silver coins and bars at the moment with somewhat high,
but still reasonable, premiums. Given that generic 1
ounce silver rounds can fetch upwards of $1 premium
over the spot price, I would suggest you concentrate
silver purchases on Silver Eagles and 90% pre-1964 junk
bags.
AUGUST
1 2008 2:10PM - Yesterday we got the 2nd
quarter GDP report that came in just shy of expectations
but revised the 4th quarter 2007 down to -0.2% vs. the
previously reported 0.6% growth. Big deal. Yet this
was enough to send the dollar reeling and silver immediately
took the opportunity to dash past the $17.655 level
after a night of struggling to surmount it. Alas, $17.985
held its ground, the dollar soon started to recover
and we are left at the end of the week pretty much where
we started it.
The
technical picture may seem muddled, but buried
deep in the muck I've found four silver prices where
we might expect a significant bounce or even the start
of the next rally. If the first one fails, I expect
silver to fall to the next one. If that fails, the target
becomes the one below, and so on. If I get the chance,
I will be literally fishing these spots for silver with
very, very tight spots. They are: $17.425, $17.090,
$16.990 and (God forbid) $16.035. All basis September
COMEX.
Let's
talk silver explorers and miners for a bit to close
out this typically uneventful summer week.
After trading as low as 28 cents last week, U.S. Silver
finally caught a break as it announced
late last week what could be the start of a major expansion
plan on the East side of their Silver Valley property
where the idled Caladay shaft burrows 5,000+ feet
into the earth. Then this week, more hints of a turnaround
were revealed with news
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