Monday, October 24, 2011

It Gets More Unbelievable Everyday

Obama is going to make a direct attempt to transfer more of this country's dwindling wealth from those who can still pay their bills to those who can't.  It looks like he's going to be able to implement an initiative to use taxpayer money to help very underwater homeowners refinance their mortgages without any Congressional authorization.  You know, it gets to a point at which you have to pull the plug on bad investments destined to get worse. Housing is one of those "investments."  I'm still trying to figure out why the originators of those mortgages, a lot of them private banks, are not going to be required to eat the loss.  If any of us make a bad investment we eat the whole loss.  How come banks get bailed out by "us?"

He is also going to roll out some kind of plan to bail out student loan borrowers.  You know, a lot of these student loans were granted to people enrolled at piece of shit for-profit colleges owned by corporate parents like Apollo Group (University of Phoenix) and Corinthian Colleges (DeVries).  For sure, there's some legitimacy to the education provided at these schools, but they are first and foremost set up to be giant student loan processing factories.   Now Obama is going to bail these guys out too.  The owners of these businesses generate a high level of revenues from student loans, take none of the risk associated with them and get all of the upside benefit.  Sounds a lot like the banking model, huh?   If you don't believe me, consider that Goldman Sachs has a very big ownership position in this industry.  It's some good mixed in with a lot of fraud and the Taxpayer gets the bad debt's the story LINK

Anyone who owns muni bonds is taking a lot risk that is not reflected in the rates being paid, even after the tax benefit effect.  Harrisburg, PA has filed bankruptcy, it looks like Stockton, CA is next and probably some cities in Rhode Island:   LINK  These are the "Greeces" of the United States - the relatively small problems which are getting all the focus despite the glaring fact that big States like California, Illinois and New York are hopelessly insolvent.  At some point there will be an avalanche of municipal defaults and muni investors will get annihilated.  The next time your genius financial advisor calls to pitch you on some "cheap" munis, you are an idiot if you don't hang up the phone and change advisers...

And now what, now that we know that it's not a question of whether or not the EU and our Fed will fire the printing press back up, but to what degree?  I truly believe that the current spike in the stock market is a combination of a massive short-squeeze/cover rally (NYSE short interest hit a record a couple weeks ago, leaving it ripe for a short-squeeze rally) combined with knee-jerk anticipation of the next big money printing initiative (i.e. massive currency deval).  We've seen glimpses of the size and format of the EU money printing program and the details of what the Fed has planned conceptually are starting to leak out.  It is my view that the market is already pricing in this "event" with this straight-up move in the market and we'll get a "buy the rumor, sell the fact" type of dynamic.  When the dust settles everyone will look around and see that the latest slug of printed money didn't solve any problems but left the paper fiat currencies further devalued. 

This currency devaluation, while not overt like the one implemented by the Swiss National Bank a couple of months ago, will manifest itself in the form of much higher prices for gold and silver.  This would explain why the big bank manipulators have been covering their paper short positions on the Comex - especially  in silver.  The best signal yet that the market has given us that this correction has run its course and a big, move higher will soon begin is that the large, speculative hedge funds have been selling down their long positions and adding to their short positions, taking the other side of the commercial manipulators. In 10 years of studying and trading the metals market, every time the hedge funds have taken the other side of the banks like this a massive move higher has soon followed.  Remember, in 2008 silver went from $21 down to $8.  But if you happened to buy in at $21 and held thru today, you are up 66% on your investment.  Got anything else that has given you that kind of investment performance?   The next move up should be even more eye-popping - how come your investment advisor wants to sell you munis and treasury bonds instead of gold and silver?


  1. What do you think about the farce of paying 700 million + dollars for the training of the Iraqi police? The job is being outsourced. What are they really doing in Iraq with that money???

  2. Hiya Dave. I just wanted to clarify your observations on hedge funds. Are you saying that them piling into metals shorts has been a past indicator that prices will rise? If that is indeed the case I get some satisfaction out of it, both for the metals and the hedge funds. Any insight into why this happens?

  3. (Dave)

    It's not my observation per se, it's a fact based on the data patterns of the weekly COT report over the last several years. I don't know why specifically this patter repeats over time. I think a lot of it can be explained by the fact that a large portion of hedge fund money chases momentum based on moving averages, fibonacci retracement patterns, pivots and other "black box" technical trading triggers. It seems like the large specs (hedge funds primarily) get pushed on this basis into selling their long positions when the cartel goes into manipulation mode, triggering stop losses, and then eventually the indicators tell the black box hedge funds to go short. That's the only explanation I've seen and come up with. All I know for sure is that the data patterns verify this trading pattern...

  4. It's amazing how it just doesn't end ! Just when you think that there's no more that they can do to induce any further damage BAM ! More bleeding and bigger wounds !

    Former Soviet Premier Nikita S. Khrushchev long ago predicted that America would defeat itself from within.

    Are we going to allow him to be right !?

  5. Agreed Dave.

    Till now, COT data has told a story of predictable consequence to COMEX market structure.

    My concern however is when that predictability fails.
    Why should we trust COT data any more than other gov data?

    I think the only "reliable" indicator and strategy now is to use extreme price swings coupled with disciplined scaled BTFD stacking strategy.