Nonsense Makes Sense
My previous post on F&F Nationalization and the reader comments thereto should explain why today’s nonsensical market action might actually make sense if you think “up = down” and “black = white” as most people in the world seem to be thinking nowadays.
Silver hit $11.90 today. Those who got the special technical report last month from Eidetic Research will know that is a pretty heavy line in the sand, and so far it has held. A break of that level would not be good as the downside potential would then be all the way down to the $9 range. Ouch.
For a while this morning it looked like the U.S. dollar might be disconnecting from gold and silver but then all the other markets save COMEX closed and the precious metals sold off as predicted by several of my readers (see comments on F&F post). No, I don’t think that was just the markets doing what they are supposed to be doing. Clearly once London and the other places where physical — not paper — metal is transacted were closed, the paper sellers on COMEX no longer had to bother with the pesky physical buyers who dare stand in the way with their pedestrian bargain buying. Even then, gold managed to eek out a small loss while staying above $800 as the U.S. dollar rallied more than a point on the Dollar Index, just about reaching the 80 level that has been my target for a few weeks. So perhaps we might be seeing the start of a disconnect after all. Or, more likely, the U.S. dollar has just had its blow-off peak and will now renew its descent into the bowels of Hell (or at least 0.52 on the Dollar Index, whichever comes first).
It’s pretty clear what’s happening–the market’s “frustration” is being taken out on silver. Why silver? I suppose because it is small enough of a market. And it’s not the only one. Heck, look at palladium: down 55% from a high of $579 to $259 today. Even platinum, with the very real threat of supply disruptions due to power issues in South Africa, is down more than 40% or almost $1,000 per ounce. There’s a metal pretty much nobody expected could possibly drop by that much given the fundamentals. Same deal with rhodium, down 60% from JUST 2 MONTHS AGO. It sure seems like the smaller the market, the more severe the fall has been. So, the answer to “why silver?” is “because they can”.
Look, silver could just as well go down under $10 as it could have found a final bottom today. When “black = white” anything is possible in the very short term. If that scares you enough to say goodbye to the greatest investment opportunity of your lifetime (that’s a double entendre by the way, as in it could take a lifetime to realize the opportunity!) then it is just as well. For the rest of us who have the patience of a lifetime to see this thing through, the opportunity just gets better and better.
Now for the deal on the password protected entry that precedes this one with the title “The System”. This is related to the Three Steps Back post last week wherein I said that I would be sharing certain information only with confirmed attendees of the GSUL 5 Session in Canberra, Australia to be held November 11-14. If you’d like to see this post and the others that I will be writing in the weeks ahead, all you need to do is let me know and I will register you for GSUL 5.
And here is something to consider for those who cannot make the trip to Australia. I would say that you should register anyway. Why pray tell? Because that way you will get the attendee-only price on the DVD set from GSUL 5 (trust me, that alone will make it worthwhile) as well as a bunch of other benefits like personal advanced instruction on the basis from me and perhaps the Professor (still working on that), an hour of live assistance by phone or in person, free unlimited e-mail support and a bunch of other stuff like the password to the previous post. Indeed, if there is enough interest I will try to work out something even more special assuming the technology permits it. But I need to hear from enough of you to make it worthwhile. By the way, the cost of the GSUL 5 session is AU$790 which works out to about US$650. I personally think that is a fantastic deal, even if you can’t attend the session in person. This is coming from someone who would make a horrible used car salesman. Once again, please contact me to register, not the Professor or Mr. Barton (who has graciously taken on the challenging role of setting up this hopefully-not-last session of GSUL), to make sure you get all of the above benefits and more.
Perhaps the only thing that can stop the FED and the Treasury is another powerfull central bank that wishes to proceed opposite to the FED.
I just hear the laughable story that the Peoples Bank of China is running low on money because they bought so much US Treasuries! LOL
Well then, why not start selling now? Dollar is up and bond prices are high. Perhaps the Bundesbank may want to join in and buy some more gold.
Trick Question: why is euro gold rising since mid august?
Anyone know what it would cost to start smelting 100 or 10 oz bars out of 1000 oz bars?
Has anyone ever considered that the price for 5,000 ounce
futures contract makes perfect sense at $12 if you realize
that you are buying mostly a paper promise. If push
comes to shove, at best those “contracts” are backed
by 20 cents on the dollar with real physical silver. A
rational investor should discount Comex “promises”
with this in mind.
There are examples of the “soundness” of all sorts of
paper instruments turning out to be hot air every day.
Freddie and Fannie are the latest examples.
If the “real” price of silver turns out to be $60 an ounce,
paper silver at $12.00/ounce may prove to be overpriced.
Those contracts may prove to be backed by less than 20 cents
on the dollar. Would a 5000 ounce contract be worth any
more than 500 physical ounces if there was a “run” on
the Comex silver warehouse?
The problem I see, is there is no catalyst to get silver going short term 1-2 months. It certainly does not trade on supply demand fundamentals. Apparently all the shortages and delay’s we hear about have not effect either, except down in price. Most of the silver mined is a by-product of zinc and copper and I hear the demand for those metals have tapered off over the past few months, with global economies slowing. Also the cost for mines like CDE and HL to mine the actual silver is rising rapidly. From about $3-$4 a ounce to about $6-$8, not to mention the projected silver output of some mines is down from those projections at the beginning of the year. Mean while the investor demand world wide for the actual metal is going through the roof. Now the problem is two fold as I see it, as the price is driven lower, the buying increases. Now I would imagine we are getting close to the point where people throw in the towel so to speak and the buying slows down significantly. The second part is, when and if this thing ever gets turned around. The buying on the upside may dwarf what we are seeing now in this downturn. People don’t want to be left off the train so to speak, you think there are delay’s and shortages now!!
Technical analysis of the silver market is poor at best because of the size of the market, wild sentiment swings and possible manipulation. Technically gold is holding up much better and generally speaking wherever gold goes silver should follow but in a more extreme way. So despite the rampant pessimism in the silver community from endless watching of the silver price it is probably better to watch the price of gold for true confirmation of where silver is going. So far the low’s in gold have held so I guess the situation in the silver market is not as dire as people seem to think.
Maybe someone should start tracking the eBay silver price and make a chart.
Tom,
Please write an article, directed at politicians and regulators. Send it to all 100 Senators. Post their email addresses, and your readers can follow up with complaints of their own.
It will take a tidal wave of complaints to spur new regulation. Elections are around the corner, so we have their ears. Soon they will be less responsive. Anyone who owns the ETF or metal stocks, has been criminally effected, and deserves immediate consideration.
We need a champion, to bring this activity to light. Be the man, take the bull by the horns, and start the ball rolling. I will write to any politician you contact, to back you up. Many others will too.
Panic by big money will take PM’s to an unbelieveable level. Remember, there are 10 million millionaires and 1,000 billionaires in the world. When this paper/financial collapse starts in earnest, in October, they will head into the 6,000 year old wealth preservation entity.
I believe Gold/Silver will go to the highest bidder. We will be able to name our price. Watch it happen.
as i said sense makes no sense in my other analogous post.i am afraid the rout will probably end at about 8 to 9 dollars an ounce.even warren buffett makes no sense.he called gold a barborous relic yet whom was one of histories largest silver investors in history..what we are seeing is market rigging on a truly gargantuan scale.they will recapitalise the banks by crashing the markets one at a time.wiping out investors one at time.finally the biggest crash of all the dollar.then they will invent a new currency (visa vee brazil cruzeiro/real or argentina whatever they call the currency now)unfortunatley for me they have already stole 40k dollars from my paper etf silver account in my pension fund cant invest in the physical in the uk..i am thinking of selling but to invest in what.any ideas or pyramid schemes nonsense suggestions welcome.
i see the lehmnan deal maybe in trouble.with the koreans perhaps the far east is coming to its senses .
The Dow is an arm’s length from 10,800 below which lies the doors to deflation. That is if you believe TA. Even the Dow is manipulated, but if you believe the likes of Russel (& other Dow theory junkies) you can manipulate the Dow only so much - primary trend etc etc. Which means that the Dow cannot be allowed to flirt with this level. Which means that the dollar would NOT BE ALLOWED to rise above a ceiling.
IMHO Dow dollar index 80 is max. This level is huge resistance. Meanwhile PM would plunge one last time to its nadir at dollar 80. BUY THEN with both hands.
However if Dow breaches 10,800 or so SELL & run into T-bills - braveheart or what.
Chris;
Just wanted to clarify. It’s illegal to own physical silver in the UK?
no you can own physical silver in the uk theres no restrictions.except theres 17.5% vat(sales tax) on the purchase price.however inside your pension fund which you can manage yourself you can only buy the etf.or perhaps you can use a scheme.like goldmoney.as your money is in trust as such until you retire .you cannot use it to purchase physical metal yourself.i hold physical bars also.outside of my pension fund.but i had to pay 17.5% vat.and more than 12% premium..there are very few dealers in uk . you can get it on ebay but sometimes it is even higher premuim.check ebay uk.
http://www.investmentrarities.com/weeklycommentary09-09-08.html
This is Ted Butler’s latest article. As he suggests, I sent an email to Jamie Dimon, and cc’d the SEC and the CTFC. I suggest we all do the same.
This is a copy of my letter. Short and sweet.
Dear sir,
As a holder of SLV, the silver ETf, I would like to know if your company is short as much as a third, of the entire COMEX short position. If so, do feel this is legal? I am in contact with the CTFC and the SEC on this matter, and would like a response.
Sincerely,
The govt. is now in control of all the markets. Fundamentals mean nothing-obviously!. Those who would take the other side of the trade are stepping aside. Wtih all the $ holders in the world there is little opposition to a stronger $, until…? Keeping the economy looking good is the primary objective for the current admin. to try and get their republican candidate (re) elected. Right now looks like they will be successfull as hard to believe as that should be. Unless powerful financial market opposition to a Repub. win surfaces I think we’re stuck with this market. The will card is Russia-who do they really want to see elected? You’d think Obama as he is less likely to push on them. But maybe they don’t mind the confrontation? Maybe they think McCain’s militaristic leanings will further doom us in the long run. In any event they have the clout to turn things around-just start dumping their Treasuries and there goes the $. If they want Obama it comes before the election. If McCain then after. The Iranians and their friends will follow the Russians. No rocking the boat for them and I don’t think they want McCain but who knows, an Obama victory might unleash the Israeli’s. I’m fully invested, gold silver, energy and holding tight.
Being fascinated with Professor Fekete and your studies of the gold and silver basis, I’m very interested in GSUL 5, but am in the “no way can I get to Australia” club. At least not without more expense than I can justify, given my preference for saving everything I can now for the disaster called the future.
Speaking of justifying expenses, could you provide more details on the pricing differences for the DVDs (attendee and non)? I would love to the opportunity to be part of this class, and be able to communicate with the two of you directly, but even $650 is more than I’m likely to want to spend, from a value perspective.
See, I’m not a trader seeking profit from this info (I detest creating taxable gains, thus further supporting the beast), but a saver, and an amateur monetary scientist wondering how a natural, rational monetary system should function in order that society prosper.
Basically, from an educational standpoint, I don’t know if my money would be better spent on your upcoming service, or this class, or neither.
My true wish would be that Professor Fekete utilize the internet more than holding expensive, week-long sessions in person. I’ve gained more understanding from reading his Monetary Economics 101 and 102 series than nearly any other source. (So much that I reprinted his section on Ayn Rand’s “Hymn to Money,” giving it out as an educational gift along with a Silver Eagle.)
I was extremely saddened to see that he stopped this series, and keep checking his site to see if he will ever finish the syllabus laid out for the remainder of 102, and the entirety of 201 and 202. Maybe someday?
Finally Tom, I want to thank you for the time and effort you put into Silveraxis. For it is here, and only here, that the theories of Professor Fekete engage reality in a visible manner.
I agree with keseri. 80 on USD is a formidable resistance level. Twice today, mini-rallies stalled at around 79.75. I am still of the opinion that gold needs to suffer a fearful selloff before the PMs can resume the bull.
Todays action looks like the begining of a gold selloff. Jeez, the gold silver ratio is almost 69! Hopefully it won’t break $675!
It looks like the big boys are trying to find safe haven in the bond market. That herd is going to get burned just like the cattle at the begining of the movie Mars Attacks. Do you smell barbecue? In May these idiots were saying its time to get back in the financials! HaHaHa!
The stock market is toast. Daily three to four percent swings on the major indexes is probably going to become common. The LT trend is lower, much lower. Everybody knows the jig is up but the funds benchmark against each other so they can proudly say they lost less of your savings than the other guys. Oh, and by the way, we still get our “management” fees. It sucks when the best-case-scenario is brutal stagflation.
Anyway, I’m getting ready to start buying silver with every spare nickel of sidelined cash I can scrounge. It might take a few years to pan out, but a 100% gain at the the recent high looks like a gift from heaven.
Forwill:The herd may get burned but it feels to me like silver investors are getting burned. As for the ‘jig’ being up I doubt that, the world will spin as normal, and there will be more spin from governments, people will buckle down their belts and get on with life. Silver investors will probably suffer endless frustrations along the way to $100. There are a few more years in this dying but not dead economic system yet.
OPEC just cut…for all you round the clock traders like me…could shake things up a bit! lets hope at least
If you plot the 3/5/7 day EMA on $DJIA at stockcharts you will notice a distinct declining trend since Sep 25 (Vol 500 million) whereas the latest Vol number is double that of Sep 25. Which means a selloff in the Dow. During this period Silver fell from ~$14 to what it is today at ~$11.
My sense is the market has been brainwashed into believing a deflation scenario during the last few trading sessions. (Mish’s is saying everywhere - hey didn’t I tell you?). I will not buy this deflation thing untill Dow decisively breaks 10,800. however, that will not happen. Or it will not be allowed to happen. Yes, The Dow will hold support. Bernake will cut rates very soon. this will enable bank’s to raise capital on their T-bills that they exchanged with Ben for their junk. meanwhile ALL markets will roll.