Wednesday, November 10, 2010

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. 


  1. Can you give us your list of favourite junior silver miners please ? If you've posted it before I must have missed it. Thanks and keep up the great reporting.

  2. ECU and SDRG are the two pure silver juniors that I own. I also own SVM. We just re-established a position in SSRI and we have a big HL position. 70% of all silver is derived mostly as by-product of other base metals. There are very few pure silver mining companies.

    ECU may be sitting on the largest silver deposit in the world. More to come on that one...

  3. I have first hand knowledge of this. The physical is being delivered to and stored at the new facility opened at HK airport last year.

  4. This move has been a certainty since they bought a ton out Hong Kong and saw the price climb from $750 their fix price through JB Slear to $800 in two days. This opened their eyes like dynamite. But the man who must take the greatest credit for all of this move is Donald Trump. It was his stupid program that showed an entrepeneur buying silver on the COMEX and then selling it on ebay. This left the HK guys speechless as it was on mainstream TV and they couldn't deny their eyes. A picture is worth a 1,000 words and 10 minutes on the tube is worth a 1,000,000. That and the guys taking delivery of the silver on the COMEX like the aliens in Men in Black taking away the furniture as they shipped off the earth before it was due to be destroyed took away all their doubts.

    It's been two years since then but they have finally arrived, all in all the Chinese are only slightly faster than the Japanese.

  5. I heard from a very reputable source that it was actually Dos Equis own "The Most interesting Man in the World".

  6. Here comes the USD!

  7. Thanks for the miner stock ideas Dave, you always have the good stuff.

    On the one hand I get a bit nervy with all the silver related stories going around, but then when you really look at it, everyone still hates the stuff.

  8. "Buy A Silver Coin, Destroy JP Morgan"

  9. It appears that the wholesale takedown across all commodities was a straightforward raid.

    Imho, this was an intervention since QE does not "work" if it is nullified by a 20 percent rise in commodities,the rise in the cost of living eats up any purported wealth effect.So, simple, kill the commodities.take away the trade.
    This seems likely to continue,Or they are certainly obliged to try. regrettably.

    Questions. Can the whole commodity spectrun be stood on? Not sure. Are silver and gold exceptions to this , given that neither feeds into the day to day cost of living.Plus silver has the JPM/Physical driver.

    Friday was a transparent attack on Commodities. One mans opinion, and I don't dig it. It seems to me they capped CRB at a round number 20 percent gain post the QE announcement, before it got completely out of hand.Will they continue to try, well does a bear the woods?