Additional Thoughts: Look Out Below...Plus, Are Asian Silver Traders Taking On JP Morgan?

Housing - Zillow was out with a report today in which - well, I'll let the headline from the Housing Wire speak for itself:

Home price depreciation to worsen market into 2011

Zillow's catalyst for this is higher foreclosure liquidations based on current delinquencies and the high degree negative equity embedded across home ownership. They forecast a price bottom in mid-2011.  I will beg humbly to differ. They do not mention rising unemployment or higher interest rates. Throw that into the mix and I would argue that another big, long leg down is getting ready to commence. Here's the link to The Housing Wire's report on the Zillow report:  Look out below.

Interest Rates - Today's 30yr Treasury auction was very ugly.  It required an over 50% takedown by the Wall Street banks (Primary Dealers) to get it done and it printed outside of the expected yield range.  It looks like a couple western CB's also helped get the deal over the finish line.  This ties into housing because it is going to require increasingly higher interest rates in order for the rest of the world to choke down our Government's insatiable spending appetite.  Unless of course the Fed continues monetizing...

Inflation - In conjunction with a couple of my posts on inflation over the past week or two, this one doesn't need much elaboration.  From today's Financial Times: 

Food price fears as US warns on crop yields

You can read the whole article HERE.  It may require a free registration.  Here's the salient quote:

The agriculture department on Tuesday cut estimates of US corn yields for a third successive month, forecast record soyabean exports to China and warned of the slimmest cotton stocks since 1925. “The combined production shortfalls and dramatic potential stock drawdowns mean a much tighter supply picture than just a few months ago,” the agency said in a separate grains report.

Bottom line:  it will cost a lot more to feed your family this winter...

Is the BIG silver squeeze finally on? 

“Of course they are. $30 is just going to be a small pause along the way to much higher prices.”

Since 2002, I've been wondering when deep pockets would start taking on the massively illegal paper Comex/LBMA shorts in silver.  Apparently that squeeze is being implemented by a group of Asian traders operating out of London.  If you have not read this blog entry from Eric King's King World News, go grab yourself a cocktail and get ready to let this information grip your imagination.  Here's the LINK.

It would appear that this group of traders are not just using futures to fight the big banks who are short silver, they are backing it up with massive purchases of physical silver.  I've always thought that this occur when the big accumulators of physical gold and silver could no longer buy what they want at these artifiicially low and highly manipulated price levels.  That is, when a big perceived imbalance develops between demand and supply. The initiation of a paper squeeze would be designed to take the market up to a price level which would induce profit-taking sellers of large quantities.  It will be interesting to see how the price goes before large scale selling emerges.  It will likey be significantly higher than where the price is today. 

This afternoon we reloaded a lot of stock positions that we had liquidated on yesterday morning's bounce. If this intel is bona fide - and my gut instinct plus 9 years of experiencing in investing/researching/trading exclusively this sector tells me this is good information - then this move in silver is just beginning and the silver stocks - especially the juniors - will spike up to trading levels that will make Dennis Gartman pass out with shame.

I'm off to NYC tomorrow for a long weekend.  If you leave a comment after mid-day tomorrow, it likely won't get posted until Sunday evening.