Remembering The Last Time This Happened To Silver……

If you’re a silver investor, you may have that strange feeling you’ve been here before.  That’s because you have.  Here’s a chart comparing the price action of  SLV from 12/17/2007 – 8/11/2008 to the price action of SLV 2/01/2011 – 9/23/2011:

Can you tell which is which?

The correct answer is: It doesn’t matter.  Same movie, different year.  In the case of 2008, the illustrated smackdown in silver preceded the Lehman collapse by about 4 weeks.  Silver would not bottom until October 24, after Congress sold the grandkids into slavery for the sake of Goldman Sachs and other abominations of capitalism.  I don’t know exactly what is going to happen in the next month or so, but I am sure it’s going to be huge and I’m sure that once again when everyone else panics,  the smartest response will be to buy silver.

Silver was $4.18 when those planes hit the twin towers, $11.20 when Congress and Wall Street hijacked America (TARP – 10/3/2008), and $17.69 when the flash crash happened (5/6/2010).  It’s not a bubble;  it’s a rapidly vanishing resource, and when the next shoe drops, you should buy it.

In July, I told readers that the “set-up” for a market crash simply wasn’t there - that has changed.  In 2008, large traders piled into the US dollar just prior to the carnage (just like they are now).   As the dollar soared in the ensuing weeks, everything else (most notably America’s future) went in the crapper.  Silver was dirt cheap – you just had to be smart enough to recognize that.

There are however some notable differences between 2008 and 2011:

• We’re $5 Trillion deeper in debt.
• There’s 50 million fewer ounces of registered silver at the COMEX

On October 24, 2008 the LBMA silver fix was $8.88 and there was about 83.4 million ounces available for delivery at the COMEX.  On April 28, 2011 the silver fix peaked at $48.70 and registered silver stood at 33.3 million .  So just to review, a 450% increase in the price of silver produced a 63% decrease in the amount of silver offered for settlement:

Abandon all hope of price discovery ye who enter here.  Clearly the COMEX is hurtling toward the date with destiny you’ve been told about over and over (it’s only a matter of when).  When silver dipped to $8.80, the market value of the registered inventory at the COMEX was a measly $740M.  After the recent price gyrations, registered silver is now 31.04 million ounces, so that value now stands at $950M, or less than half the value of today’s SLV transactions ($2.1B).  How crazy is that?  I think Ben Franklin would say something like:

Those who would trade paper silver to get more fiat, deserve neither fiat nor silver.

***

The Muppet Show (Elmo Strikes Back)

You know things are grim when CNBC has to tap the godfather of pseudo-capitalism.

Senility must be awesome.   You get to talk “Straight from the gut” because everyone knows your brains are tapioca pudding.   You can point out the obvious (“Greece is broke”), while completely ignoring the more obvious (with more than $1.6 million in debt  per employee, GE is broke-er).  You get to bitch about the government giving $500M to Elizabeth Warren’s consumer protection agency, forgetting GE got $3.1B government dollars last year, and was saved from bankcruptcy by a $139B FDIC-INSURED line of credit in 2008 (which is just one reason those of us with still-functioning grey matter feel the need for such an agency).  You get to talk like a know-it-all capitalist, oblivious to the fact that that the house that Jack built has vaporized more than $400B in share-holder wealth since 2000, while racking up more than $550B in debt (and yes, I realize that GE’s balance sheet says more than $75B of that debt has been retired, and is now “cash,” but until somebody from GE swears under oath that GE is not using Repo 105 or some other gimmick….).  No one’s ever going to bring up that your “enterprise” pays more in fines than it does taxes.  Nope, the poor excuses for journalists that are your legacy will sit there and pretend you’re spitting out the wisdom of Solomon.

But Elmo don’t play that. 

A muppet of few words, Elmo sums up the recent perplexing moves in just a couple graphics.

Whenever the US dollar staggers a few steps away from the fiat currency graveyard, it has a dramatic effect on prices of everything.  So the only question is how often do you expect to see the US dollar surge 7% in less than a month?

Here Elmo compares gold (GLD), silver (SLV) S&P 500 (GSPC) and the US dollar (UUP), on a more than 48-hour basis.

Get in touch with your own inner muppet.

***

To expand on this a little, I urge you to re-examine charts from 2008.  There was a highly-touted “commodities crash” mid-2008 (here’s the corn chart, for example).  That collapse was characterized by a remarkably strong US dollar, which continued to be strong through the Lehman crisis, TARP etc.  This is deja-vu all over again, except this time around the Fed will have no other option but to run the printing press full tilt (read dollar collapse). 

September 11 – Ten Years Later (Selected Statistics)

No doubt September 11, 2001 changed everything.  But the business of actually measuring those changes has been as overlooked by most as the nationalities of the hijackers.  The following is presented in the interest of truth, justice and the American way:

Correction: Saudi GDP change should be 216% (we both know I’ll never get around to redoing the graphic).

Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety.

~Benjamin Franklin

Never forget.