Sunday, June 6, 2010

You All Worried About The Action In Silver?

Please sell what you have because supply is getting extremely tight and I need to buy more. Judging from the comments on this blog, the amateur gold investing community is freaked out and in panic mode right now, letting absolute morons like Prechter and "Mish" lure them into thinking the bull market in the metals is over and ready to crash.  Why do people pay attention to those two anyway? The first one had a lucky call in 1987. What's he done since then? He's been pounding the table for $50 gold since 2002. And Mish? He couldn't analyze himself out of a paper bag to save his flower garden from aphids. It's absolutely astonishing that anyone listens to either of those two clowns. Knowledge without experience is not really knowledge. Neither of those two have any real experience trading the markets with real capital.

Ted Butler alluded to the fact that the Central Fund of Canada (CEF), which just did a huge stock deal and purchased a massive amount of gold and silver, has to wait 5-6 months for the silver to be delivered.  Anyone see the problem there?  A friend and colleague of mine with a good call into the managers of the fund confirmed this.  If silver was in bounteous supplies, how come CEF can't get its silver delivered right away?

While I differ with Mr. Butler on his view that the CFTC will ultimately do the right thing and clean up the corruption in the gold/silver futures market, I have to say - in following his work for over 8 years - that he knows more about the dynamics of the silver market than ANY market professional I've ever been exposed to knows about any market, and that includes the Nobel professors I had at U of Chicago. His "bullish" meter for silver right now is 90%. If JPM takes silver below its 200 dma this week (around the $17.40 area), his meter will hit 100%. Historically his bullish meter is remarkably accurate.

The Denver Post ran an article on the front page of its business section about gold being in a bubble. I have never in 9 years of doing this sector of the market, exclusively, ever read anything so factually devoid and lacking any real analysis. I was absolutely stunned that the business editor permitted the article to run. Seriously, the article contained almost nothing factual, lacked any kind of real analysis and thought and didn't even really make a case for gold being in a bubble. Just one question: In the context of any market bubble being defined as when every single market participate is buying as much of that investment as they can get and is willing to pay any price, how can gold possibly be in a bubble when only about 2% of the U.S. population owns gold, very few insitutional funds are buying gold and "sell your gold for cash" ads are permeating every possible media outlet? Shouldn't all these sellers be buying gold to fit the most basic characteristic of a bubble? I can come up with many other reasons as to why it's a waste of time to mention "gold" and "bubble" in the same article. But I will note for the record that the Denver Post article featured the George Soros comment about gold being the next big bubble. Yet, it failed to report the fact that within two weeks of Soros making that comment, it was revealed that his hedge fund had quietly become one of the largest holders of the GLD trust. If George bothered to read my work on GLD, maybe he would have been busy accumulating actual physical gold and had it delivered to a private depository where he could verify that it really exists.

And let me end with this quote from Mark Lundeen, posted by "Joe" in the comment section:
Monetary Policy is being managed by a moron. What else should I call someone who is trying to save a financial system by destroying its unit of trade?


  1. Well I am an amateur investor thats for sure!

    I noted the "double top" in silver because its a technical thing, if one is a short termer that MAY mean something or it can resolve in a breakout. I did not mean any harm.

    I think I have always been clear on my long term view of the metals.

    I would disagree with you on Mish; I find his work to be very good and I am pretty sure he manages money for Sitka Capital. He is not a pure metals guy, but I do not think that makes him a chump.

  2. Great article Dave and it's so good to have a voice of reason amongst the stooge propagandist peoples that work for the monied elite.

  3. I'll tell you when to sell silver and gold. When the likes of Mish and Prechter say "buy". Anyone who follows these guys deserves the arse pounding they've been getting.

  4. Aren't you being a little hard on Mish? He's bullish on gold even if it's from a deflationary point of view. I enjoy his blog and I feel a little disagreement on silver shouldn't be reason enough to beat up on him. Of course, maybe you two have a history I'm unaware of.

    I agree with you on what little I've read of Prechter.

  5. Thanks for straighting me out on Ted Butler. I was under the impression he had been bullish for the last 20 years and had been dead wrong until recently.

  6. I just checked... sounds a bit weird, but how come that you can still order and receive massive amounts of silver via Tuliving, Coininvestdirect, Tax Free Gold, Goldline and many other places some of which are only happy to sell you 100 Kg of either gold or silver per customer. If it was a shortage I guess those businesses would not be able to market the 100 Kg Canadian Leaf coin and 1000 Oz bars of silver with a very low over the spot price. Any comments?

  7. Anonymous - those are retail quantities. And Tulving is sold out of many of his stock silver products.

    CEF is buying millions of ounces in 1000 oz bars in one shot and they have to wait months for their order to be delivered.

    The U.S. Mint has suspended production of proof silver eagles and is on allocation for the bullion silver eagles.

    Gonna have to disagree on your assessment of the situation.

  8. "Ward, I think you were a little hard on the Beaver last night"

  9. "...Prechter is looking like a genius right now."

    And the E*Trade Baby is looking like Lawrence Summers.

    Anonymous, how come you don't fact check your own posts? You cannot order and receive "massive" amounts of Silver from the sources posted.


    Ben Carlos

  10. Dave, one can argue that if you order 1.000.000 TV sets or the same amount of wheat or Karl Marx's book "Capital" you might also have to wait for a number of months. the total silver anuually seems to be almost a billion Oz including scrap, perhaps only a bit less and so far it covers all industries and satisfy every coin collector and it doesn't seem like even 10% of the wealthy buying each silver for $100 miln which is the only way there would have been a shortage of silver, the same with gold. If there was then 20% of wealthy Chinese would buy the lot...

  11. Mish reminds me of Bill Fleckenstein with slightly better hair, but only slightly less of a douche.

    Where were these two geniuses ten years ago?

    Fleck would not believe the Government would intervene in markets four or five years ago and thought Gold was a "Relic" in 2001.

    Mish, very poor in debate form whether it be on Financial Sense or with Marc Faber, basically has deluded himself into fame by pompously correcting others. The comedy is he is most often wrong and although deflation has been with us for the better part of 40 years. He discovered that camp recently.

    Mish is a hack, a pandering, whining, bitch-cake of a man. Not that you are required to have an Ivy League Dipscamploma to have a brain, but MISH's brain is best left to hock investment advice we never hear about.

  12. silver has been in deficit "consumption" for many years now, the Central Banks sold their stockpiles in the 1990's in order to contain the price and now the global above-ground stockpiles are dwindling. The Comex reports supposedly holding something like 115mm ozs (i haven't checked the number recently). If that silver is really there, how come CEF has to wait 6 months for delivery?

    If the price of silver were allowed to go a lot higher, which would occur if our Govt would enforce the anti-market manipulation laws in place, then perhaps the supply/demand of silver would balance out.

  13. Dave, this is because if they satisfy every customer with 1 mln + Oz orders they will only have enough for about 100 costomers and it would be stupid to offload the whole lot to just 100 people. Perhaps with valuable resources we will soon have the limits imposed per customer, say 1000 Oz max per customer per year, beacuse unless you use it for industry why would you need any more than that? It would be like someone ordering 10000000 packs of Orange juice. It might be interpreted as if one
    person wants to deprice the whole country for Orange Juice for a week... What do you think?

  14. sure, the "technical indicators" show a "double top" which traditionally warrants some concerns from a "technical" standpoint about the possibility of some"technical" weakness indicating a possible move to the downside. Wow! So what? Everybody is so painfully and paranoiacally poised on that knife edge of expectation, that every little wobble gets their undies in a knot. I first came across this buzz about oh no silver! over at marketoracle. The technical wunderkind Clive Maund has a lengthy article on the coming collapse of all commodities in an equities landslide into 2011. His "Doctor Copper" is telling him the same thing about Silver which he says is perched precariously, preparing to plummet precipitously to penetrate the 200 day MA. Oh no! While acknowledging Clive's extraordinary technical analysis, he was predicting a gold swoon some weeks it blew out $1245, but not before he backtracked a bit and saved a little face for the benefit of his angry subscribers. He as musch as admitted he "missed the train" on gold. Jesse, as usual posted his own balanced and well-reasoned analysis, looking for a retrace to $15 and a great buying opportunity. As for the rest of the clown posse, I about fell off my stool at your comment about "Mish", LOL. As far as I'm concerned, Shedlock Denninger, and especially the clown prince Prechter are all on an extended lunch break. I agree with you completely on Butler. He earns and deserves respect especially for his work on Ag and you aren't too shabby either Dave. Always look forward to your insightful and informative posts. Heigh Ho Silver! and away....

  15. You have to imagine what the shadow supply chain looks like when CEF can’t get silver for 5-6 months. These contracts are for 24 hr delivery how is the COMEX pushing out delivery six months?

    Well the COMEX lawyers sell will be “the COMEX have 50 m ozs on hand and 60 m ozs in the bank and you will get priority if it all folds up and the supply contracts are as follows” so really you are taking no risk.

    What is wrong with this picture?

    1.We have seen last week that people were worried about 2.5 m ozs being moved from the Nova Scotia depositories. Well 2.5 m ozs isn’t in itself a big deal. However, if that 2.5 m ozs is being used to lever a shadow supply chain of six months the fact that the professionals don’t trust the chain to hold together is extremely concerning. Hence the discussions about this transfer. As the reality of the shaky foundation of the pipeline becomes more apparent more and more holders will start to squirrel their silver away in their own vaults so the seurity goes.

    2.We have in silver up to 90% of the refining production undertaken in China. The CEF relies on the fact the shadow supply chain as put forward by the lawyers and the COMEX is real. Clearly it is not. The Chinese jiltney brokers will be aggressively taking delivery positions because they know that the moment that the COMEX default they will collect their silver under offset contracts with the local refiner and their security position is the whole of the refining supply chain. They can push up to the limit of the refining chain without risk through their jiltney brokers and they will be piling into this pipeline right now.

    The COMEX justification of the shadow silver supply chain will be an unstable fraud.

    It is for this reason the chain can’t hold together and whatever else may or may not occur the likelihood is that when the collapse occurs the Chinese will divert the whole of the refining supply chain to domestic demand (six months consumption approximately) and the whole market will start popping as manufactures have to compete for monetary reserves.

    At some point the CEF will realise they have been had as suckers as will the rest of the shadow supply chain buyers.

  16. Ben Carlos

    Perfect assessment of Mish!

  17. re: "shadow supply chain" - great analysis!!

  18. Anonymous re: "spreading the silver out to feign supply" - I think there is definitely that element to the situation. That's why the coin dealers have inventory but big customers have to wait months.

  19. It's bad when people lump you in with Fleckenstein. There's another jerk-off who I used to get into email arguments with about his view that markets aren't manipulated. He finally stopped answering my emails because he couldn't refute my facts.

    He still wouldn't know how to spell "gold" if it weren't for Fred Hickey.


  21. I think you confused Mish with Denniger.

    With all due respect to Karl, that merits an apology. ; )

  22. And a major WTF...

    What's with all the Mish bashing?

    He's been bullish on gold since $800!!!

    You guys need to go back over his previous postings. He's not a goldbug, but he's bullish on gold.

  23. Opposition to PMs, particularly recalcitrance against owning physical gold and silver, is nothing more or less than an example of the triumph of a certain sort of monetary propaganda that has tributaries leading back to pretty much every economic doctrine that has been in vogue in the west for generations.

    The collective "dogma" is as wrong headed and pernicious as subscribing to a belief in a flat earth or one that asserts that our planet revolves around the sun. And what may be most remarkable about this, for lack of a better phrase, warped phenomenon, is no matter how wrong and long the market proves the anti-PM crowd-which is more like a horde, a barbarous horde at that, than a crowd, they continue to bank away with their tawdry anti PM message.

    As Joe Kernan said earlier, begin to worry when the most prominent members of "The Horde' come out in favor of owning PMs.

  24. I don't read Mish. I find him to be quite pedestrian and I don't want to poison my thoughts with his mostly drivel. BUT, another commentor posted a comment on the previous post that said Mish thinks we could get a sell-off in all things that would take gold back to $680.

    It's apparent to me that Mish doesn't watch the markets closely. The day we had the 900 point cliff dive in the Dow, gold spiked up and the HUI closed up 1.5% that day. Expect more of the same down the road.

    Mish has his deflation view and he argues and defends it with arrogance and dogmatism. He confuses the finacial sector shifting its debt onto the Treasury with "debt destruction." He confuses housing price collapse with deflation. Debt is not being destroyed, it is being shifted around like deck chairs on the Titanic. We don't have price deflation of necessities. We have any "asset" with defaulted debt attached to it, like housing, undergoing price declines. That's not deflation. Maybe the Fed's M's are somewhat declining, but credit currency globally continues to expand at a rapid pace. Necessities are rising in price.

    Mish looks for answers under the street light because that's where the light is shining. But that's not where the truth necessarily lies. He doesn't know who to think out of the box.

  25. "I don't read Mish. I find him to be quite pedestrian and I don't want to poison my thoughts with his mostly drivel."

    I would have to agree. With the first part. But the obvious question here is that if you don't read him, how could he 'poison your mind with mostly drivel'?

    "BUT, another commentor posted a comment on the previous post that said Mish thinks we could get a sell-off in all things that would take gold back to $680."

    Here's the post your commenter referenced

    Clearly he doesn't read him either.

    I frankly find Mish to be one of the most informative and insightful bloggers out there.

  26. That class action lawsuit against the silver manipulators is due this week according to this site. Doubt that it will happen though.

  27. Edwardo - that is an perfect description of the dynamic going on. Thanks for sharing that.

    Tulving is now out of about 1/3 of its silver SKU's.

  28. I don't like 'Mish' because he's never wrong. Everyone makes bad calls, and Mish made some WHOPPERS a couple years back, when I got 'teh internets' out here in Redneckistan. I fail to understand how little slips of paper can get more valuable when we have criminals (in my humble opinion) deciding to print, print, print. Comrade Short Bucky ain't getting any taller...remember Quantitative Easing, and soon to be QE II, then QEIII in all likelihood. Fiat paper has never lasted too long in this world, and it won't now.

    The only things that are keeping prices from rising nowadays are bankster shenanigans (like the Fed 'holding' over a trillion banksterbucks and paying interest on it, reducing the velocity of money, etc) and demand destruction (folks who lose their jobs aren't buying discretionary items, just necessities). I see inflation in the things I need, deflation in the things I want. Why can't Mish? Why can't Prechter? Because the instant they do, they will become much less valuable a tool for shearing the sheeple.

  29. Mish has been wrong for years, arguing deflation. I tried arguing with him a few years back that Bernanke stands on the rooftops to proclaim he will debase the dollar, but Mish essentially told me I was a putz.

    He has tried to change his tune and revise history recently, saying that he was referring to housing only, yada, yada, but that is not what he was writing a few years back.

  30. Sorry, that last post should have been directed at Anonymous. My bad. ...Fail!

  31. "I don't like 'Mish' because he's never wrong. Everyone makes bad calls, and Mish made some WHOPPERS a couple years back"

    Maybe, but in three years of following him, I have never known him to make a seriously wrong call (e.g. Denniger with precious metals), and if he does make a mistake, he admits it.

    What bothers me is you are perfectly willing to take one of your reader's inaccurate criticisms of Mish at face value. This reader clearly didn't know WTF he was talking about. Fail!

    Cognitive bias will make you poor in spirit... And in wallet.

  32. Great information Dave. Denninger, Mish, Prechter and the rest of the oddballs have been off course for so lo that it's useless even discussing them as legitimate.

  33. @ Joe

    I have read them all.

    Prechter continues to wallow off the deep end.

    Denniger has been wrong only about PMs. He's been right about everything else.

    Mish has been right! I challenge anyone to dig through his blog and find a serious error.

    Frankly I'm starting to wonder about the "groupthink" evident here.

  34. Dave, I live in Denver and read that Post article as well. I just rolled my eyes.

    Why is it that every 'expert' can see a bubble in gold almost all the time, but can never, ever see a bubble in anything else?

    The powers-that-be have done an excellent, long term job of training the sheeple to believe in fiat and always distrust gold. Pity. Gonna cost 'em. (the sheeple that is..)

  35. Yup. That article was embarrassing for the Post. Even worse, I emailed Aldo Svaldi, the auther, and he insisted on defending his writing. Just pathetic.

  36. Everyone here knows the real bubble is in paper, especially treasuries.

    When they pop, where do these experts expect the money to go into?