You Know How You Get To Carnegie Hall?

Practice.  After practicing short term gold and silver forecasting for 10 years, I tend to shy away from posting my short term views on here because it only leads to readers busting my balls when my calls are wrong.  It's safe to assume that - in general - my longer term outlook (3-5 years) is for at least $200-300/oz. silver.  Likely higher but that's what I'll go on record publicly with.

Having said that,  I do believe that the silver market - after the vicious manipulated take down that took silver from $50 in April to a recent intra-day low of $26 and change on Sept 26, I am confident that silver is ready to take-off again.  Now, having said that, we will still get a lot volatility because of the market manipulation to which even CFTC board member Bart Chilton publicly admitted (note: of course, he did not explain why the CFTC does not crack down on it).  I know many of you have read the recent uber-bullish price calls by James Turk and John Embry.  I purposely have not read those yet because I like to form my own convictions before I see how they match up against the trading convictions of people whom I highly respect.  After looking at hourly and daily silver charts yesterday before the market closed, I decided that most of the downside risk has been washed out and that there is a high probability silver will begin to make a big mover higher.  We started accumulating AGQ in our fund and we lifted all of our bullion hedges.

While the risk of a manipulated take down always exists, if silver can grind thru the mid-40's it should easly and - as John Embry termed it - "cleanly" move well above $50.  I know Turk is calling for $70 silver and Embry is looking for high $60's in the "short term."  I won't put out a specific price target but I will say that I believe the price outlook of both Turk and Embry are achievable - if they do occur - by May.  Now, if I'm wrong about this go ahead and bust my balls and I'll post those comments unedited.

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I wanted to comment quickly on the currency swap deal announced by the Fed today.  In a nutshell, what this facility does is make available a massive quantity of U.S. dollars to non-U.S. banks who have immediate dollar liability requirements (payments) that are not being funded by their income producing assets (i.e. they are insolvent, for the most part).  To cut through the spin, it is likely that there were one or more very large European banks that were close to collapsing and the Fed bailed out the situation.  From the Fed statement today: 

[T]hese central banks have also agreed to establish temporary bilateral liquidity swap arrangements so that liquidity can be provided in each jurisdiction in any of their currencies should market conditions so warrant. At present, there is no need to offer liquidity in non-domestic currencies other than the U.S. dollar...

That tells me that one or more big banks were on the brink of default.  The Fed also cut the interest rate charged for use of the swap facility from 1% to 1/2%.  This really underscores the severity and immediacy of the problem.  Interestingly, a friend from NYC called me this morning and told me that Deutsche Bank is trying to sell its asset management division.  This is a cash cow asset and it tells me that, not only is DB desperate to raise liquidity, but it has to resort to unloading good, core assets because there is no bid in the market for its crappy assets.  In other words, Deutsche Bank is running out of room with which to hang itself...these problems are also impending in the U.S.  The stock price of Bank of America nearly lost the $5 level yesterday and I fully expect Bank of America to either be bailed out by the Taxpayer or collapse within 12 months.

One more little tidbit for those watching for history to either rhyme or repeat:  when the Fed initiated a massive global dollar liquidity credit line like this in December 2007, it was followed by the collapse of Bear Stearns three months later in March 2008.  The entire U.S. banking system nearly collapsed a few months after that.  The point here is that this Federal Reserve - ultimately U.S. Taxpayer back-stopped - liquidity bailout is nothing more than kicking the can down the road.  The question is, for how long?

One more point of note:  China announced just prior to the Fed action that they were lowering their bank lending reserve requirements.  Both the move by the Fed and by China are moves that will likely have to be followed up sometime soon (i.e. within 2-4 months) by a very massive Quantitative Easing - aka money printing - program.  The money printing - aka currency devaluation - is on the verge of becoming globally viral.  This is why gold and silver are moving very strongly today, as well as fiat/risk-based assets like stocks and junk bonds.

It's on the basis of this fundamental back-drop that I am confidant that my outlook for silver (and gold) is quite justified and highly probabilistic.