Mark McHugh

Archive for the ‘Open Thread’ Category

Remembering The Last Time This Happened To Silver……

In Open Thread on Tuesday, September 27, 2011 at 6:54 am

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)

In Open Thread on Friday, September 23, 2011 at 11:04 am

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)

In Open Thread on Sunday, September 11, 2011 at 9:51 am

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.

What A Long Strange Trip It’s Been…

In Open Thread on Sunday, August 14, 2011 at 8:51 pm

After some of very dramatic moves stocks ended last week pretty much where they started….which is pretty much where they were 13 years ago in 1998. 

 If you ignore inflation that’s a zero percent return (the BLS claims inflation was 38.5% 1998-2011).   To actually break even vs. inflation since 1998 the S & P 500 would have to be about 1630.

The average price of gold in August 1998 was $285.  Even adjusting for inflation, gold is up by more than 450%.  Silver was $5.18 in August 1998.

Any Questions?

The US National Debt was 5.5 Trillion in August 1998.  It has since increased by 9 Trillion (160%) since then.  That increase equals $29,000 per citizen.   The unemployment rate was 4.4% in 1998, its stated rate is 9.1% today (of course, anyone paying the slightest bit of attention knows it is much higher).

Was it worth it?

Funny story:  In 1999, the Congressional Budget Office (CBO) was projecting that the NATIONAL DEBT WOULD BE GONE BY 2012!!!!!

Along the way, somebody decided that NOT taxing the rich would be disatrous for the economy, so I guess this is their idea of “success.”   Maybe failure is the new success.

I see nothing that will change the patterns presented here.

Do you?

Really, Really, Really Bad Theatre

In Open Thread on Monday, August 8, 2011 at 12:41 am

Standard and Poor’s has downgraded US debt….and NOW the sky’s falling?

Seriously?

The US government isn’t creditworthy, and hasn’t been creditworthy for at least three years now.  I know it. You know it.  China knows it.  So why is this news?  I mean shouldn’t this be filed under, “No shit, Sherlock.”???

A: Yes, yes it should. 

Do you understand that S & P’s parent company is McGraw-Hill, the largest publisher of educational material in the US?  Now ask yourself this: Why would they bite the hand that feeds them?

A: They wouldn’t.  Not in a million, billion fricking years.  There is only one reason S & P would downgrade US debt….They were told to do so.

What you are witnessing is a bull massacre, not a bear raid.  Think about it, everytime congress bends America over for Wall Street the market rallies to confirm the “wisdom” of our elected officials.  You could bank on it……..until now.

Every momo in the world was betting on a stock rally when the debt limit was raised.  Options and futures activities confirm this.  So Wall Street was going to have to pay out on some very large bets if stocks rallied as expected.  Crooked casinos aren’t designed to pay out, so stocks started moving down, somewhat slowly.  Instead of taking the hint, more momos went long.

This wasn’t supposed to happen.  They actually thought they debt ceiling drama would draw shorts for them to steal from.  No such luck.

The Fed-induced stock bubble is the closest thing Obama has to an achievement.  He needs to preserve it and the only way to do that is to feed Wall Street victims (meaning bears).  Thus all the chicken-little crap you’re seeing unfold.

I’m telling you again, the “set-up” for a market collapse isn’t there.

Too many people are betting on black, so red’s gonna come up until people start betting red…..

You sure you wanna bet on red? 

 

 

Don’t Get Sucked In!!! (It’s only a movie)

In Open Thread on Friday, July 29, 2011 at 8:33 am

Now is not the time to panic.

Sure there’s a “The sky is falling!” sentiment in the air, but I’m telling you, like most of the things your TV tells you to worry about, it’s simply not real.

Over the last five years, I’ve learned where to look to find panic and uncertainty and I’m telling you, it’s just NOT there.  This is pure theatre.

Stocks are more than 25% above their 52-weeks lows, so sure, they can afford to show some big red days to scare you.  So what?

THIS IS NOT THE MARKET CRASH YOU ARE LOOKING FOR!!!!!!

If you short anything, you’re most likely gonna get your face ripped off very shortly.

Just be warned.

(Sorry I don’t have time to explain this better right now)

 

Fun with Dick and Jane’s Addiction

In Open Thread on Thursday, July 21, 2011 at 8:56 pm

Here’s the most useful bit of folk wisdom I can pass along:

Do it once, you’ll like it.  Do it twice, you’re hooked.

It was imparted to me regarding heroin, and it shriveled any curiosity I might have ever had regarding the stuff.  No rush is worth the kind of self-inflicted slavery that that addiction brings.  An addict’s life quickly spirals into a series of twisted rationalizations, trying in vain to recapture the euphoria once felt.  There is never an exit strategy, just soulless renditions of  Perry Farrell’s refrain ( I’m gonna kick tomorrow!!!).  Darwin eventually provides one, but not before the addict’s selfishness has done permanent damage to everyone they once cared about.

The easy money endlessly pumped out by the Fed and squandered by the government has been compared to a heroin addiction.  It’s an appropriate metaphor.  Sure  it makes pain vanish in the short-term, but after a while it’s no longer a question of achieving some desired effect, it’s something we need to survive.  And although no one actually believes this, America seems powerless to stop this monster.  Why?   Meet America’s closeted heroin addicts:

See Dick.  See Jane,  See the chart.  See the recession.  Bad recession Bad.  See the Fed.  See the Fed cut.  Cut Fed cut!  See Dick and Jane refi.  See the next recession…..

What I’m getting at here is that the Fed has responded to every recession in the last thirty years exactly the same way…cutting rates.  Nothing’s shocking about that, but here’s the really important part:   In every case, the thirty year fixed mortgage pre-recession lowest rate, was higher than the post recession highest rate (these are quarterly averages).   So what was an unbelievably low rate before a recession became an unthinkably high rate thereafter, again and again and again. 

See Dick and Jane think houses are great investments.  Little do they realize that 65% of the price appreciation of houses over the last thirty years came from the heroin provided by the Fed and congress.  That $2000/mo. McMansion payment that gets a buyer a $400,000 mortgage at 4.41%, would only fetch a $137.000 mortgage at 17.5% (click here if you don’t believe me). 

If you’re thinking, “That can’t happen!” guess what?  You’re hooked too. 

See Dick and Jane TEA party?  May I suggest the slogan, “Give me Liberty, but don’t let my house go any further underwater!”  Apparently no one has explained to Dick and Jane that  they are the biggest beneficiaries of this “nanny state” thing they detest.  97% of all US mortgages are either written or guaranteed by the government.  While the debate over the debt ceiling rages on with all the substance of a “Tastes great! – Less Filling” commercial, the stash that keeps house prices propped up isn’t even on the table.   Fannie and Freddie are not subject to the debt ceiling and have unlimited credit lines.  Maybe that’s why you’ll never catch the dragon.

See Dick and Jane rob Grandma.  Anyone even vaguely familiar with the behavior of  junkies knew this was coming.  Fannie and Freddie are unfunded liabilities, social security is not, but good luck explaining that to a strung out whore.   Social security has been overfunded to the tune of $2.5 T.  In 2010, the US government collected 4.5 times as much revenue from social security than it did from corporations (both data points can be verified here). 

You can’t fix the housing market, you can only give the housing market another fix.   After that it’s just a matter of learning to tolerate abominations.Darwin’s coming.

Raising Taxes Absolutely Promotes Job Growth

In Open Thread on Wednesday, July 13, 2011 at 11:53 am

Disclaimer: I’ll admit the title is a tad misleading. 

I am astounded how many people DON’T get this. 

The idea that raising taxes kills growth stems from the realm of pure fantasy.  It’s idiotic. 

Consider this:

You run any small to medium size business (good for you).  We’ll say you run a good little trucking company, OK?  You’re not Lebron James.  You’ve got no extraordinary skills, but you’re still OK.  You should make a nice living and I don’t begrudge you that for one second.  Here’s the problem, if the tax law says you can keep as much money as you can make and your tax rate won’t change,  people act differently.  They pay their workers as little as possible, they won’t hire, they won’t maintain or replace the trucks.  In short, they will take, take, take expecting the world to cower in fear of them because they represent “jobs.”   It’s the sweatshop mentality.

That’s exactly where we are now.  The rich get richer and the poor get food stamps.

Let’s change Joe Trucker’s landscape.  Once his income exceeds $500,000 (just as an example), Joe will pay a 75% tax rate on every dollar above $500,000.  Greedy Joe made $2 million last year, so if he does the same this year, he only gets to keep $375,000 of the second $1.5 million.  Joe’s gonna keep and scream “it’s not fair”, “you’re killing small business you fools!”, “I’m a JOB CREATOR GODDAMMIT!  WITHOUT ME YOU CAN”T EXIST!!!”

You get the picture….

If you simply say, “shut the fuck up, Joe.  All you do is truck stuff around….big fuckin’ deal.”  Joe will pout.  So what?  After the hissy fit, Joe will realize that no matter what he does, he can’t keep all the marbles.  If he continues treating his employees like shit and letting his fleet deteriorate, while his competitors adapt to the new policy by buying new trucks, hiring and providing better service, Joe will lose everything.  He’ll become a walking, talking joke without a friend in the world…..

And Joe knows this (he’s pretty smart, remember?)

Joe’s not going to start paying Uncle Sam a million a year in taxes (don’t be stupid).  Joe will act in his own best interest given the circumstances.  He will build value in his business, instead of trying to wring every last nickel he can out of it.  He’ll buy new trucks, he’ll hire….

In short, he’ll do exactly what everybody wants him to do.

So raising taxes, doesn’t help the government’s spending problem, because changing tax policy doesn’t raise revenues.  It does however change behaviors.  The government has no choice but to cut spending, and that’s a good thing.  Total government spending (Federal state & local) is now over 40% of US GDP.  The notion that the private sector can support that much weight is insane.

The government’s role in “job creation” is not to hire more people.  It is to create an enviroment to make others hire.  Their approach has been ass-backwards and is destroying the country.  Tax policy is the stick that moves the horse.  Use the fucking stick, you morons.

Seriously, how can it be that nobody gets that?

***

I just gotta add this: 

Horses, Carrots and Sticks

Everybody (even politicians and Ivy-league economists) knows that making horses do what you want involves carrots and sticks.  Most of us on this side of the rainbow understand how they should be employed, but Wall Street has brainwashed Washington.  They’re stuffing the horse full of carrots, using the stick to beat anyone who questions them and wondering why the horse won’t move.

Think we should give them more carrots?

News Flash: There’s ALWAYS Been a Gold Standard

In Open Thread on Tuesday, July 12, 2011 at 2:44 pm

You may think the price of gold swings wildly….that’s really not true.

You just have to view it through the right lens.  I think CQCA Business Research has found a great formula for pricing gold: Using the US monetary base.

If you check out this post and the chart, you’ll see that the monetary base = about 1.75 Billion Ounces of gold, or right about where it was in the early 1970s.   That was the beginning of a 2000% move.  I think the coolest thing about the chart is that it shows how gold has pretty much stayed in a range with monetary base, between .5 Billion to 2 Billion ounces.  When it went below .5B it was time to sell and when it went over 2B it was time to buy, buy, buy,buy,buy.  It’s around 1.75B now…..nowhere near time to sell.

If you ever find yourself with access to a time machine, don’t go to America in the early 70s to buy gold, it was still illegal for US citizens to hold.  I might  reccommend  January 1, 1975, and trust me, it’s so you could relive the disco-era.  That’s when US citizens could own gold again, and it was $185 an ounce.  It would quaduple over the next five years.  Not bad…

But when I look at this chart, I realize that gold was much more expensive in 1975 in terms of monetary base.  So maybe I’ll pass on the time traveling.

Right here, right now, there’s is no other place I’d rather be….

~ Jesus Jones

If you’ve been following the debt ceiling talks, you know there’s still no grownups in the room.  Gold’s got a looooong way to run. 

Check out CQCA Business Research .  There’s a whole lot a fresh thinking posted there.

Update:  CQCA will be added to the blogroll.  I have been remiss in adding many of the people who have helped me.  To those supporters who would like, just leave a comment saying so and I’ll be glad to add you to the blogroll too.

Who Voted to Increase the Debt Ceiling (List from 5-31-2011)

In Open Thread on Saturday, July 9, 2011 at 12:31 am

NOTE!!! THIS IS NOT THE VOTE FROM AUGUST 1, 2011!!!

I haven’t put together that list yet (I do this for free), I’ll get to it as soon as I can

Thanks mainstream media, for once again providing a blogger with the opportunity to pick up your slack (a search for “debt ceiling vote results” proved fruitless…surprise, surprise).  So here’s the complete list of US Representives that thought it was a good idea to raise the US National debt ceiling on May 31, 2011.  The voting public will express their opinion November 6.

Until then, enjoy the lap dances at CNBC. 

Despite the propaganda blitz, only 19%   of Americans actually wanted their representatives to vote to raise the debt limit, according to Gallup.  47% did NOT want the limit raised.  The other 34% are too lazy to form an opinion (good luck getting them to turn out on election day).

Meanwhile the red guys and the blue guys continue their charades.  “Raise taxes on the rich!” “Cut spending!”

Here’s the joke:  When all is said and done, the public debt ends up in the very private bank accounts of the super-rich (this is true everywhere on planet Earth), so the rich want the debt ceiling raised, not the poor, not the vanishing middle class.  They set up the system that way.  The last thing they want to happen is a US debt default.   The poor are already  good at being poor, the rich not so much.   If we don’t raised the debt ceiling congress will have to cut spending and attempt to tax the rich.  If there’s one thing rich people hate, it’s paying taxes (count on that).  Guess what they’ll do to avoid taxes?  Spend like hell.  And presto! we will suddenly find the “private sector spending” that has eluded all these morons.  Since there will be no new tax dollars flowing to Washington, they will have to cut spending even more…..Not raising the debt ceiling will accomplish what everyone says they want, so why not not do it?  Congress never bothered to to pass a budget for 2011, so all’s we’re really asking them to do is show the same lack of initiative regarding our debt enslavement.  Is that too much?

The only places people seem to believe “taxing the rich will ruin everything…..” and “we have to raise the debt ceiling”  are inside my TV and in the trollosphere.  I’m actually proud of my countrymen again.  We’re moving beyond the red-team-blue-team brainwashing and learning to hate politicians for the vermin they are.

So with no further adieu, here’s the list (so far) of cretins willing to admit that they think they’re smarter than those they represent:

Alabama – 7th Terri Sewell
Arizona – 4th Ed Pastor
Arizona – 7th Raul Grijalva
California – 10th John Garamendi
California – 12th Jackie Speier
California – 13th Fortney Pete Stark
California – 14th Anna Eshoo
California – 15th Michael Honda
California – 16th Zoe Lofgren
California – 17th Sam Farr
California – 27th Brad Sherman
California – 28th Howard Berman
California – 30th Henry Waxman
California – 34th Lucille Roybal-Allard
California – 35th Maxine Waters
California – 39th Linda Sanchez
California – 51st Bob Filner
California – 5th Doris Matsui
California – 6th Lynn Woolsey
California – 9th Barbara Lee
Colorado – 1st Diana DeGette
Colorado – 7th Ed Perlmutter
Connecticut – 1st John Larson
Connecticut – 4th James Himes
Connecticut – 6th Christopher Murphy
Florida – 17th Frederica Wilson
Hawaii – 1st Colleen Hanabusa
Hawaii – 2nd Mazie Hirono
Illinois – 1st Bobby Rush
Illinois – 2nd Jesse Jackson, Jr.
Illinois – 4th Luis Gutierrez
Illinois – 5th Mike Quigley
Illinois – 7th Danny Davis
Illinois – 9th Janice Schakowsky
Indiana – 7th Andre Carson
Kentucky – 3rd John Yarmuth
Louisiana – 2nd Cedric Richmond
Maine – 1st Chellie Pingree
Maryland – 2nd C.A. Dutch Ruppersberger
Maryland – 3rd John Sarbanes
Maryland – 4th Donna Edwards
Massachusetts – 1st John Olver
Massachusetts – 2nd Richard Neal
Massachusetts – 3rd James McGovern
Massachusetts – 4th Barney Frank
Massachusetts – 5th Niki Tsongas
Massachusetts – 7th Edward Markey
Massachusetts – 8th Michael Capuano
Massachusetts – 9th Stephen Lynch
Michigan – 13th Hansen Clarke
Michigan – 15th John Dingell
Michigan – 5th Dale Kildee
Minnesota – 4th Betty McCollum
Minnesota – 5th Keith Ellison
Mississippi – 2nd Bennie Thompson
Missouri – 1st Wm. Lacy Clay
Missouri – 5th Emanuel Cleaver
New Jersey – 10th Donald Payne
New Jersey – 12th Rush Holt
New Jersey – 13th Albio Sires
New Jersey – 8th Bill Pascrell, Jr.
New Jersey – 9th Steven Rothman
New Mexico – 1st Martin Heinrich
New Mexico – 3rd Ben Ray Lujan
New York – 11th Yvette Clarke
New York – 12th Nydia Velazquez
New York – 14th Carolyn Maloney
New York – 16th Jose Serrano
New York – 17th Eliot Engel
New York – 18th Nita Lowey
New York – 21st Paul Tonko
New York – 4th Carolyn McCarthy
New York – 8th Jerrold Nadler
New York – 9th Anthony Weiner
North Carolina – 12th Melvin Watt
North Carolina – 13th Brad Miller
North Carolina – 4th David Price
Ohio – 10th Dennis Kucinich
Ohio – 11th Marcia Fudge
Oregon – 3rd Earl Blumenauer
Pennsylvania – 14th Michael Doyle
Pennsylvania – 1st Robert Brady
Pennsylvania – 2nd Chaka Fattah
Tennessee – 5th Jim Cooper
Tennessee – 9th Steve Cohen
Texas – 18th Sheila Jackson-Lee
Texas – 20th Charles Gonzalez
Texas – 30th Eddie Bernice Johnson
Texas – 9th Al Green
Vermont Peter Welch
Virginia – 11th Gerald Connolly
Virginia – 3rd Robert Scott
Virginia – 8th James Moran
Washington – 2nd Rick Larsen
Washington – 6th Norman Dicks
Washington – 7th Jim McDermott
Wisconsin – 4th Gwen Moore

Source: http://clerk.house.gov/evs/2011/roll379.xml

Previously:  Why everyone hates you: A guide for politicians

The dirty secret of the debt ceiling debate: No one wants Treasuries

Understanding the National Debt (Sesame Street edition)

Four Things

In Open Thread on Thursday, June 23, 2011 at 9:02 pm

1)  I’m not dead -  or depressed or anything bad.  I’ve been busy as hell, and for now, I’m just going to leave it at that.   I am astounded at the number of people who continue to stop by the blog, day after day, to see if I’ve written anything new.  Thanks, but………Where the #$% were you guys when I was actually writing?

No matter.  YOU LIKE ME!!

(OK, maybe you don’t like me.  Maybe I annoy you so much that you just can’t resist the temptation to agitate yourself.  Maybe you just can’t find anything you want to read.  I can relate, but you can’t stop me from getting all misty about what I perceive to be undying support).

Now onto a couple of important things that I’m not seeing reported anywhere.

2) JP MORGAN’S HOUSE ACCOUNT HAS TAKEN 80% OF THE COMEX GOLD DELIVERIES SO FAR IN JUNE!!!,

That’s right, the Morgue itself is on a buying spree – not it’s “customers”.  In case you’ve forgotten, when JP trades for its own account, they tend not to make mistakes.

Of the 5,968 contracts settled so far, they’ve taken 4775  (80%).  Follow the fun here:

http://www.cmegroup.com/delivery_reports/MetalsIssuesAndStopsYTDReport.pdf

3) Banks to Taxpayers: “YOU’LL GET NOTHING AND LIKE IT!”

Few things drove up my blood pressure like the appointment of taxpayer charity case General Electric’s CEO, Jeff Immelt, to the Federal Reserve Bank of New York’s “Class B” Board of Directors.  Class B directors are elected by member banks to represent the public.  Apparently bankers have a keen sense of irony.  Why else would they elect the CEO of a zombie-dinosaur-parasite to represent us?

On March 9, 2011, Jeffy resigned from the NY Fed BOD…..and nobody noticed.  Not me, and not the Fed, who announced his departure April 28 (seven weeks later).  The public is now represented by an empty chair where Jeffy used to be, and I’ll be the first to admit that that is an improvement, but not exactly what I had in mind.

For those of you keeping count, the banker’s now have elected TWO empty seats to represent the public.

I’m hereby throwing my hat in the ring.

And speaking of irony, the reason Immelt left the BOD was because he was offered a job for which he was even more unqualified: Chairman of the President’s Council on Jobs and Competitiveness.   This is now becoming a black hole of irony from which escape is impossible.  The vacant seat at the NY Fed will most likely be the only job Jeffy creates.  In his tenure as GE’s CEO, Immelt has created negative 24,000 American jobs.

To review Obama’s choices:  1) He picked the single person most responsible for the Madoff fraud to chair the SEC (Mary Schapiro).  2) He has now picked the CEO of a company that has $1.6 million in debt per employee, pays no federal taxes (sorry Jeff, fines don’t count) and who has lost more American jobs than anyone else in the last ten years to advise on jobs and competitiveness.  He now only needs to appoint Jamie Dimon Treasury Secretary to complete the triple crown of ultimate head-up-your-assery. 

4) JPM has vanished from the silver market.

Speaking of Jamie and all this other wierdness, I find it interesting that JPM (house account) has not delivered or taken delivery of a single silver contract in all of May and so far in June.  They delivered only eight contracts in April, and since then, nada, zilch, zippo, the goose egg….

Yes I know I published a piece entitled Guess Who’s Almost Out of Silver? on April 8, but I still find their absence very eery.  I guess I thought we’d be tapping the strategic silver reserve…..oh wait, we did that for sixty years.  This should be interesting.

5) Bonus Things (a silver lining).

  • Registered silver continues to disappear from the COMEX.  Track it here.
  • Physical silver continues to disappear from the SLV warehouses as well.  You can track it here (shares outstanding * .975 = ounces in trust).
  • Despite all the “silver crash” hype.  Silver is up 13.7% YTD vs. 2.4% for the S&P 500.  Of course, the nominal gain in stocks gets swallowed up by the 4.4% drop in the dollar (and then some). 

from Finviz:

Remember this:  All roads lead to global currency devaluation.  There simply is no “Plan B.”  Don’t get confused.

SLV Trading Volume Soars – While Shares (and Silver) Vanish?

In Open Thread on Thursday, May 5, 2011 at 12:16 pm

Nowadays everybody has to learn to do more with less.  For reasons I’m not smart enough to understand, the SLV is becoming a shining example of that old adage.  Since its inception in 2006, the SLV has traded more than 100 million shares exactly 10 times, 9 of which occurred consecutively (April 25, 2011 – May 5, 2011 (today)).  In fact today was all-time, #1 volume day for the SLV (295mm).  So no doubt the SLV is doing more.  What’s utterly amazing is they are doing all this crazy volume 33 million shares less (and ounces of silver) than they had just 7 trading days ago.  So in the last 9 trading days, trading has totaled more than 4 times the number of shares currently in existence.

Now that’s doing more with less! 

SLV shares outstanding chart from Stockrageous.com , they also have historic shares outstanding data available for download.

Even mighty Apple at its mo-mo-mo-iest never came close to this kind of volume relative to shares outstanding.  In October 2008, AAPL traded 160% of its outstanding shares for the entire month.  At the present pace, SLV will trade well over 1000% of its shares outstanding in May.  Un-believable.  Maybe Blackrock’s Kevin Feldman would like to write another letter explaining to all us conspiracy theorists how the world’s larget ETF is 97.5% backed by silver, and how more trading volume = less silver held in trust.  Maybe Kevin would also like to explain exactly when Blackrock decided to deviate from its 2009 SLV prospectus…..

 (Screen capture from 2009 SLV prospectus)

Fun Facts:  Despite having exceeded the 264.5 million ounce limit in 2009, JP Morgan is still the sole custodian of SLV.  As of this writing, JPM still has exactly zero ounces of registered silver in its COMEX vault.

Maybe Kevin would like to retract that statement about “protecting shareholders interests” now, or maybe he would like to publicly thank Jamie Dimon for holding even more silver than the trust intended him to be responsible for. 

Selloff, what selloff?

I think it rains because I left my sun roof open, but I don’t go on national television declaring that to be the case.  Saying that the CMEs recent margin hikes are responsible for the plunge in silver is supported by even less evidence (open interest in the July futures contract has risen by 50% since April 20).  Furthermore, would somebody please explain to CNBC’s Bob Pistrami that there hasn’t been a selloff in the SLV, and even if there had been, it would have zero impact on the price of silver.  Now if Bob wanted to report that 33 million ounces of silver vanished from the trust for no apparent reason, that would be accurate reporting.  If you look at the COMEX report, you’ll see that there’s not much going on there, but once again, JPMs “customer” is  the preeminent seller of silver.  Keep in mind, they were buyers a couple weeks back at higher prices.  Buy high, sell low.  That would be even funnier if I didn’t believe the US taxpayer was subsidizing this trade.

…And the COMEX supply of registered silver remains tighter than ever:

Recap:  More volume = fewer shares; Tighter supply = lower prices.

Kidding aside, the time to capture criminals is when the crime is in progress, and if you’ve ever wondered what “yellow journalism” looks like, turn on CNBC today.

 

Remembering the Great Silver “Bubble”……..of 1974?

In Open Thread, Silver on Tuesday, May 3, 2011 at 10:16 am

2011 is not a replay of 1980 for silver.  No way, no how.  But recent price action is reminiscent of another time period.  Does this sound familiar?

In less than 12 months, silver doubled.  After a brief consolidation, silver surged another 33% in just six weeks, and without taking a breath, it exploded another 70%.  The shiny metal skyrocketed by more than 275% in 25 months, and prices stood 5 times higher than they had been  just ten years prior….

1980?  Hells no.  That’s what silver did from 1964 (the last year the US mint produced 90% silver coins for circulation)  until 1974.  I’m sure it seemed parabolic too, especially considering stocks had been stagnant since 1966 (and would remain so until 1978).  Here’s a chart comparing the interim high of $6.76 (times 10) reached on February 6, 1974,  and the 330 trading days ending 4/21/2011 (silver @ $46.26).

37 years later, I can still hear the stock momos of the day screaming Bubble, bubble, bubble, BUBBLE!  And for a brief moment in time, they appeared to be correct.  In the next 6 years, silver would “collapse” by 40%….only to explode again by more than %1000.

(Author’s note: The recent pullback in silver is not reflected on the chart, but closely mirrors its 1974 counterpart….I made the graphic last week and was just not inclined to redo it.)

But 2011 isn’t 1974 either…….

  • In 1974 US Gross Domestic Product was $1.49 Trillion,  today it is more than $14.6 T (+880%).
  • The US National Debt was $475 Billion in ’74, today it is more than $14.3 Trillion (+2,900%).
  • The US government  had a stockpile of 189 million ounces of silver vs. 7 million ounces today (-96%).

As big as the government’s 1974 silver stockpile might seem today, it was teeny-tiny sliver of what they once had.  From the end of World War II until 1974, the US government sold or consumed 3.8 Billion ounces of silver.  No one seems to know exactly how much was sold, to whom, or at what price, but surely most was sold for less than $2/oz.  

The late seventies run to $50 silver was characterized by a dominant buyer (the Hunt Brothers).  The US government, the Federal Reserve and the COMEX had to take drastic action to prevent the Hunts from cornering the silver market (and when crooked referees have to change the rules to make you lose, I consider it a win).  When the Hunts were disposed of, prices dropped sharply.  In recent years, the silver market has been dominated by a seller (JP Morgan).   What do you suppose happens to prices if the dominant seller is disposed of?  

In 1980, Federal Reserve Chair Paul Volcker had the testicular fortitude to raise the Fed funds rate to 20% to stop inflation.  It was the last time any serious attempt was made to defend the dollar.  Since then we’ve developed new “statisical methods”,  whose purpose is to ignore honest measures of money supply, unemployment and inflation (who needs food and energy?),  to justify suicidal monetary policy. 

 The other key development in 1980 was the enactment of the 401(k) laws: The biggest, bestest bailout Wall Street ever got.   The tax revenues anticipated by allowing tax-deferred (read tax-free) dollars to flood Wall Street will never materialize because the money isn’t there.  Consider this your hidden bonus track:

This is simply the greatest scam ever conceived and nobody has noticed yet.  Someday everyone will understand that chart,  I urge you to understand it now.

You can dress it up in your own mind however you want, but in late 2008, Wall Street went on life support.  It survival is now based upon the Federal Reserve’s willingness to print money,  Washington’s appetite for deficit spending and abandoning justice.  And the only “recovery” we’ve seen is in the bonuses of those most responsible for putting the system at risk in the first place.  Take away their silver before someone else does.

Silver is still in the early stages of another +2500% move, but despite all the chatter about having “adult discussions” regarding this or that, there aren’t any grown-ups present.  The odds that they will take the actions necessary to defend the US dollar are zero, and that’s all you really need to know.

But if you insist on having a sell signal…..

One of the side effects of killing the last big spike in precious metals was raising mortgage interest rates over 15%.  When that happens again, it might be time to sell silver.

Source: LBMA historical silver fixings

http://www.lbma.org.uk/pages/?page_id=54&title=silver_fixings

Is The SLV Wired To Blow?

In Conspiracy, Government, Humor, Leveraged ETF, Mary Schapiro, Open Thread, SEC, Silver, stocks finance on Friday, April 29, 2011 at 8:13 pm

I’m not real big on suspense, so I’ll tell you upfront, I think so.  Once again, we may be about to find out what happens when regulators are asleep at the switch.

As of this writing there are 364 million shares of SLV outstanding.  In the past five trading days (April 25 – 29) more than 755 million shares have been traded, and get this, more than 10 million ounces of silver were taken from the trust between the 26th and the 28th, taking available shares with them.  From Stockhouse.com :

Note: Stockhouse.com is the only free website that I know of that accurately tracks the number of ETF shares outstanding and changes (wish I could say the same of my broker).  Enter the ETF ticker with the suffix “.SO”

At what point does trading volume relative to existing shares become unbelievable?

Information on institutional holdings of ETF shares is also hard to find. but according to nasdaq.com, 86 million shares of SLV are held by institutions, but that does not include any holdings reported since April 1, 2011.  And speaking of missing data, does anybody know where China Investment Corp’s 13F‘s  are?  The sovereign wealth giant filed its initial holdings with the SEC on February 5, 2010,   but no additional data has been released.  The SEC requires the form to be filed within 45 days of the quarter’s end. 

The point is that the SLV has become one of the most heavily traded instruments on our exchanges and there is an all too finite number of shares.  There’s at least some evidence that the SECs institutional holdings data is outdated and/or incomplete.   What happens when all the shares are spoken for?  If it hasn’t happened already (I suspect it has), it should soon…..

Then what?

Will the SEC suspend sales of the SLV?  Will the SLV start trading at huge premiums to NAV?  Will the SEC even notice?

I don’t know about you, but I’m going with “SEC will never notice,”  because they have no mechanism in place to ensure “shares owned” doesn’t exceed shares outstanding (remember Mary Schapiro’s only qualification to Chair the SEC is her inability to recognize a Ponzi).

Obviously if SLV starts trading at huge premiums, it isn’t tracking the price of silver anymore.  It will have a market dynamic unto itself.  Suspending sales until more silver is deposited with the trust  will immediately cause a run on physical silver the likes of which has never been seen before.  The silver exchange on the COMEX will blow up in a matter of minutes, followed shortly thereafter by JP Morgan and the class structure of western civilization.  If you don’t know how tight the silver supply is getting, take a peak at this chart from 24HOURGOLD:

Kudos to 24hourgold.com for doing a better job tracking the rapidly vanishing supply of registered silver than the COMEX!!!!  (Hope it’s OK I stole a screenshot).

To make matters even worse, SLV trades options.  Lots and lots and lots of options.  So when the shares outstanding are all sold, there will be people with call options, who have bought the right to buy shares of SLV at a given price.  Forcing cash settlement means the SLV no longer can claim to track the price of physical silver, because the purchase of silver by an authorized participant to create the shares to cover the options would have surely moved the price of the metal.

So once again America, ignoring the grim reality of the situation is the only logical course of action.  The SEC knows all too well that that’s what porn sites are for.  So unless somebody posts this on Pornhub……

I’m sure that Tyler Durden’s instincts will be proven correct again, when he stated that Blackrock’s Kevin Feldman’s defense of the SLV was a red flag in and of itself.  Blackrock is the sponsor of the SLV, and Kevin urged everyone to read the prospectus.  That was probably not such a good idea.  Be extra careful when you try to download the prospectus, I got the following warning:

Comedy ensued after using Firefox (safe mode) to view the prospectus:

“The sponsor does not exercise day-to-day oversight over the trustee or the custodian” 

Which seems to conflict with Kevin’s letter:

“At BlackRock, we take the responsibility of protecting shareholder interests very seriously and spend a lot of time constructing our iShares products to help ensure they meet investor expectations.”

So in reality Blackrock takes protecting shareholders about as seriously as the US Department of Justice takes perjury.  To his credit, Kevin did link to a list of bars the SLV holds in some vaults over in England.  The list was prepared by JP Morgan, because if you can’t trust them regarding silver, who can you trust?  Rather than spoil all the potential ways the SLV might not meet “investor expectations”, I thought it would be fun to make a contest of it (see comments).

The SLV pimps out the price action of the silver it holds to shareholders.  It can terminate the trust for a long list of reasons, not the least insignificant of which is if  the Authorized Participants (who actually own the silver) feel like it.

Suddenly everybody has an opinion of what the price of silver should be, but as JPM is now finding out, if you don’t have silver to sell your opinion doesn’t count.

I don’t wish any ill on SLV shareholders, but make no mistake, you don’t own silver.  History has not been kind to people who made similar mistakes,  and recent history should tell you no one is looking out for you. 

 Miscellaneous Fun Facts:

  • In February, 2007 the author contacted the SEC via email regarding Countrywide Financial CEO Angelo Mozilo’s insider trading.
  • In March 2007 the author applied for an SEC bounty regarding Angelo Mozilo’s insider trading (up to 10% of recovered amount) .  Countrywide’s stock was trading at about $37 at the time.  It would trade over $40 in May and implode to less than $5 by late 2007.
  • On June 4, 2009 (27 months later) the SEC charged Mozilo with insider trading and securities fraud.
  • In October 2010 Mozilo agreed to pay $67.5 million in fines to the SEC to settle the charges against him.
  • At its peak, Countrywide had a Market Cap of more than $26B.  Angelo Mozilo has an estimated net worth of $600 million.
  • The SLV currently has a Market Cap of approximately $17B.
  • The author never received a bounty from the SEC, because the Dodd-Frank “Financial Reform” legislation repealed the previous SEC bounty program.  Bounties can no longer be paid based on an outsider’s analysis of publicly available information.
  • In 2010, the author applied for a job as an “abusive trading practices specialist” with the SEC.  He received no reply.
  • In February 2011, the US dropped its criminal investigation against Mozilo.
  • Paybacks are a bitch.

Common sense (and a little math) tells me that the SLV is already a fraud.  When that becomes obvious to all is anyone’s guess, but based on my past experience, neither the SEC nor the CFTC will recognize it until about two years after it implodes.

***

Update:  Thanks a million to Steve Quayle!!!  He is the only major blogger who has linked to this story thusfar (kind of makes you wonder how much some of these other guys value truth).  This story needs to be discussed.  If you’ve got a blog, take this story and run with it!

****Max Keiser has now added the story too, Thanks Max!

****Jesse’s Crossroads cafe brought it big time!! Thank You, Jesse!

***

 I have to recognize all the people who helped this post see the light of day.  It had been getting easier for me to get things I’ve written promoted….then BAM!  The doors really got slammed in my face with “…Wired to Blow.”  I was confused and angry.  Then I realized something….

One way or another, most of the financial blogoshere is still pretty tight with Wall Street, and every financial pro who has recommended the SLV to clients dropped the proverbial due diligence ball.  I believe that’s why so many didn’t want this story told.  They’re probably going to have some explaining to do soon.   Luckily, a couple of big bloggers (Steve Quayle, Max Keiser and Jesse ) came to help, and I’m very grateful.  But they weren’t the only ones.

I get way more than my fair share of support from relatively small bloggers, just like me, and I have been remiss in recognizing their support.  I spend too much time feeling threatened and jealous of their talent.  But I must say, they really came through for me.  Just look at all the places I got hits from here.  All kidding aside, I am touched.  If you’re new here, feel free to take any of my original content (pictures and/or words).  If it is not credited to anyone else, it’s mine and therefore yours to share.  I’ll be adding a bunch of you guys to the blogroll very soon.

Thanks again,

Mark

Why Silver Is Still The Best Revenge

In Government, Open Thread, Silver, stocks finance on Thursday, April 14, 2011 at 10:21 pm

Author’s note:  Some of the info contained in this piece was published rather hastily earlier this week.  Please excuse the redundancies. 

Face it, former Goldman Sachs CEO Hank Paulson, who served as US Treasury Secretary just long enough to loot taxpayers is never going to jail. Neither are Alan Greenspan, Ben Bernanke, Angelo Mozilo, Phil Graham, Franklin Raines, Barney Frank…(I could do this all day).  Justice (much like truth) is a luxury Americans can no longer afford.

Silver is something most Americans can still afford, but aren’t smart enough to buy.  Maybe it’s because the concept that the supply of anything could be less-than-infinite is rejected here.  Or maybe they’re afraid someone might laugh and call them a conspiracy theorist.   Too bad, because they’ve already missed out on some really good laughs, with more to come.   The latest round of  jokes came from the CME group’s year to date metals delivery notices report.   Since December 2010, only 11 firms have been foolish enough to be net sellers of physical silver at the COMEX.   Here they are:

Net, JP Morgan delivered 12.2 million ounces of the shiny metal from December 2010 until last week; more than four times as much physical silver as all other market participants combined.  So the idea that JPM is the entity holding down the price of silver is an incontrovertible fact, not a conspiracy theory. It’s not even worth discussing. 

What is worth discussing is how much longer JPM can continue delivering silver at this blistering pace.  JPMs 4-month total would be more than 90% of US mining production for the period.  So how JPM acquires its silver should be of interest, and that requires some speculation.   The largest silver stockpile in World history is a good place to start.  On June 1, 1955 The Wall Street Journal reported that the US government had a “useless” stockpile of about 3 billion ounces of silver, and blasted the Treasury for paying the outrageous price of 90.41 cents for an ounce of silver (click here for excerpt, or here  if you are inclined to pay $4.95 for proof the WSJ was a worthless rag 56 years ago too).

***

 Fun with Math: If you had 3 billion ounces of something on June 1, 1955 and began selling 1 million ounces per week, you’d run out 57.49 years later, on Tuesday November 27, 2012.

 ***

The point is that in 1955, the US government was in possession of more than 10 percent of all silver ever discovered up to that point in human history. Fifty years later, it was all gone according to the 2005 US Geological Survey.   The price of silver has now risen more than 4,000% despite the complete liquidation of the largest stockpile of the stuff ever known.   That’s better than stocks, houses, oil and just about everything else you can imagine, with the exception of gold, which was illegal for US citizens to own in 1955.  One can only wonder what the price might be without that liquidation.  Well, that and who the US government sold all that silver to, and under what terms exactly.  That’s probably a good question to ask your congressman the next time he tells you Social Security is broke.  Anyway, the US government says it doesn’t have any silver left and apparently JPM and the customer(s) they represent have lots and lots. Nothing odd about that, right?

I say “apparently” JPM has lots and lots of silver because they delivered more than 12 million ounces in four months.   I have to wonder how many more times they can pull a rabbit that big out of their hat. In March 2011 folks at the COMEX decided to make JPM’S vault a certified COMEX vault.   As of April 11, that vault contained 30,844 ounces of silver. JPM has averaged about 150,000 ounces in physical settlement per trading day during the past four months. Which means that stash should last about two hours….

Maybe JPM still has lots and lots of silver elsewhere, right?  Certainly they should.  In November 2010, Jason Hommel estimated that JPM has silver obligations totaling 3.3 Billion ounces.   So if Jamie Dimon is in fact the man on the silver mountain (and maybe that explains the picture), why is he sending customers to the COMEX floor?  From the CME group’s YTD metals report:

JPMs customer(s) were by far the biggest net sellers of silver in March 2011, selling 374 contracts (5,000 t oz each), while buying none. So far in April, 119 silver contracts have been issued and JPMs customer have taken 94 of them (79%). Sentiment shifts don’t get any less subtle, even if you ignore the fact that they sold low and bought higher. So either they’re:  

  • suddenly expecting much higher prices 
  •  the most misguided investors on planet Earth, or
  • desperately in need of silver (after all, the stuff is very useful).

(This is the part where you need to think for yourself)

I’ll tell you right now, JPMs apologists are going to scream, “Obviously they’re not the same people!”  and you are free to accept that explanation.  The question remains however that if this party wanted physical silver why wouldn’t they just purchase it directly from JPM?   Wouldn’t JPM be happy to sell some of its hoard, now at 30-year highs directly to a customer?   They should have lots and lots, remember?   And who (besides the US government) would sell everything they have, only to buy it back for more in a month? 
 

Fun Fact:  JP Morgan’s London Branch is the custodian of the iShares Silver Trust (SLV) and neither the SEC nor the CFTC seem the slightest bit concerned. 

The SLV is the largest silver ETF, holding more than 360 million ounces of the element with the best electrical conductivity. As the prospectus says, “The custodian is responsible for safekeeping the silver owned by the trust….and is responsible for any loss of silver to the trustee only…Because the holders of ishares are not party to the custodian agreement, their claims against the custodian may be limited.”

I expect we will be seeing more silver showing up at JPMs COMEX vault shortly, if only for appearance’s sake.  Remember this:  The supply of a natural resources is finite, the ability to make promises you can’t keep is not.  Few questioned AIGs ability to honor its obligations until it was far too late.  The same kind of ignorance is in play in the silver market today. 

Silver has now embarrassed every pie-charting, asset allocating, Fibonacci retracing, Elliot waving, reversion-to-the-meaning dimwit trying to pass himself off as a “financial professional.”  Most have never recommended silver, and they know tough questions will be coming shortly from their future ex-clients.  So right now they’re praying, to whatever deity people who have based their World view on ignoring the difference constants and variables pray to, that silver is a bubble.  Fat chance.

***

More Fun Facts (and a bizzare comparison):  As of this writing, the US Treasury has sold 13,803,000 ounces of silver YTD.  At $40 each, that’s about $552mm, or  0.012% of GDP.  Meanwhile, Treasury’s net issuance of new paper has totaled $239B or5.13% of GDP.  If you charted that difference in height, it would be like comparing Dubai’s Burj Khalifa  to a Port-a-Potty (I’m not going to do that).  The Port-a-Potty may not get much respect (and I’ve seen a few woefully disrespected) but is absolutely necessary.  I’m not sure how necessary a giant needle (requiring the cooling equivalent of melting 22 million pounds of ice per day)  in a barren wasteland is. 

***

Draw your own conclusions regarding  bubbliciousness.  Still I can’t help but getting a little misty when I see the paperbug’s concern for the silverbugs.  Thanks guys, but your sentiments are about as insane as people on the Titanic  screaming to those already in life boats, “Come back!!! This ship is unsinkable and we’ve got technical analysis to PROVE it!”  Sure you do, but methinks you’re just after our lifeboat.

In case you haven’t noticed, the same people who call record numbers of Americans on food stamps a “recovery”, while piling up unpayable debts on others to stay large and in charge, call silverbugs crazy.  They act like trading infinitely printable paper for an irreplaceable vanishing resource, that has also served quite nicely as money throughout human history, is a silly idea.  Last time I checked, scientists haven’t yet found a way to turn bullshit into silver.

In April 2010, Jason Hommel filed an antitrust complaint against JP Morgan with the US Department of Justice, who still haven’t managed to send a single bankster to prison (Madoff turned himself in), so don’t hold your breath.  Taking silver at the artificially low prices still being offered is as close to revenge as the common man is ever going to get.

I leave you with lists of the top five contributors to the campaigns of financial reform “champions”  Chris Dodd and Barney Frank from Opensecrets.org.
 

 

 

Previously:
If you don’t know why you should own silver, please read:
https://acrossthestreetnet.wordpress.com/2010/12/15/what-the-silver-vigilantes-understand-that-you-probably-dont-arithmetic-human-nature-and/
 

CME group metals data links:
Daily
Month to Date
Year to Date
Silver Stocks (XLS)
 

Disclosure: Author is an unapologetic conspiracy theorist.

UpdateThis has now been the busiest day ever on the blog (and there’s three more hours to go) .  Thanks to everyone who made it possible, especially Coinflation.com, Max Keiser , and Steve Quayle

Another Update: If you are a silverbug (in case you haven’t noticed, I’m proud to be called that), I highly recommend About.Ag.  The site is 100% dedicated to providing accurate information on silver (chemical symbol Ag).  The page explaining the COMEX futures market is a must read.

Guess Who’s Buying Silver NOW?

In Open Thread on Monday, April 11, 2011 at 10:21 am

OK, so the JPM vault that contains a whopping 30,844 ounces of silver (about two hours worth, given the torrid pace at which JPM delivers) was just approved by the COMEX in March.  JPM’s probably got lots of silver stashed all over the place, right?  Maybe, maybe not.  One thing is for sure, JPMs customer(s) are some of  the worst investors the world has ever seen.  After selling almost 5 million ounces in the first three months of 2011, they’re buying now.  That’s right, in March alone they delivered 374 contracts (@ 5000 ounces each) and bought…..zero.  So far in April, they’ve bought 92 contracts and sold, you guessed it….the goose egg.  And yes, they are indeed buying at new highs (See here and here).  How bad would it suck if we learned that this clueless market participant was in fact the US government?

If you’d like to track the hilarity yourself, here’s links for the daily, MTD and YTD action on the COMEX.  Daily updates on COMEX silver stocks can be found here (xls format).

Apparently there are still quite a few out there who believe this is all part of some Jamie Dimon mindfreak.  Good luck with that.

Guess Who’s Almost Out of Silver?

In Open Thread on Friday, April 8, 2011 at 10:42 am

According to Jamie Dimon, he did America a favor when he agreed to take bailout money from taxpayers (and we didn’t even have the decency to thank him).  Last week ,we learned that the JP Morgan CEO likes his catastrophe’s predictable,  but as Mick Jagger once observed, “You can’t always get what you want.”   

So in case you’re wondering who might be stupid enough to buy silver at $40, chances are extremely high it’s going to be  the guys who sold at $15, $20, $25, 30, 31, 32, 33…..because as Mish once astutely observed, “for every long, there’s a short.”  On April 6, Bloomberg reported Comex Silver Stockpiles as of April 5, and if you scroll down through the report, you’ll notice that JP Morgan has enough silver to fill, wait for it, 6 contractsYep 30,844 troy ounces, that’s all. 

Now consider this:  Since December, JP Morgan and their customers (whoever they may be) have sold more than  12.2 Million Ounces of physical silver (net).   Here’s JP’s activity year-to-date from the Comex report:

I will not insult your intelligence by explaining this any further.

Shine on you crazy Dimon!

(No shit, that’s really him)

The Dirty Secret of the Debt Ceiling Debate: Nobody Wants Treasuries

In Open Thread on Friday, April 1, 2011 at 11:43 pm

On this side of the rainbow, “How much money should an uncreditworthy entity be allowed to borrow?”  is a rhetorical question.  In Washington DC, it’s a topic of much rhetoric.  In fiscal year 2009 Congress borrowed 53.5 cents of every dollar they spent.  In FY2010 they borrowed 48 cents of every dollar (*check your numbers, Santelli).   So they’ve borrowed and spent 3.5 Trillion to produce 255 Billion in GDP growth (7% efficiency!),  never even bothered to pass a budget  for FY2011, and still haven’t managed to get a single bankster put in jail.  Now these whores  are lecturing us about “moral obligations.”   They also swear they’re gonna straighten up and fly right this time.

There is one little detail they forgot to mention – no one actually wants to lend them money.  Welcome to the last resort.

Everybody knows that the Federal Reserve has the unique ability to create money out of nothing.  What most don’t know  is the Fed, not the Treasury, provides most of the explanations as to who is buying Treasuries (read the footnotes).  So to those who said, “I told you so!” when the Treasury revised China’s holdings by $268B in February, welcome to the pee-pee in your coke moment.  That revision brought China’s purchases to $577B in the two year period ending June 2010.  That was:

  • More than 5.5% of China’s GDP.
  • 116% of China’s trade surplus with the US.
  • More than 4 times China’s defense budget.

And you swallowed it.  Of course had you done even a little research you’d have understood that the data is about as helpful as an eight month old snapshot of the Universe:

“The collection of accurate country-level data on cross-border financial activity ranges from straightforward to virtually impossible, depending on the type of data to be collected and the method of collection”

~From “Why Treasury’s Data is Crap

by The Federal Reserve

I can hear you still clinging to your Scooby-Doo thesis, but anyone who speaks of “demand” in the US Treasury market at all displays their ignorance.  Like this is some giant game of Hungry, Hungry Hippos.  Take a peak at this report and you’ll see that ownership is an antiquated concept when discussing  US debt.  Transactions of long-term Treasuries with foreigners during the last two fiscal years totaled more than $50 TRILLION, ($160,000 per US citizen) .  So if you insist on having a six year-old understanding of things, I suggest  Gnip-Gnop

 

Speaking of six year-olds, I blame the tooth fairy for all of this.  Most American children’s first brush with economics is the notion that somebody or something out there is actually willing to pay money for their crummy, little teeth.  It is a convenient lie that distracts children from the pain and anxiety of losing body parts.  Most of us evolve beyond this delusion, the rest become US congressmen and TV pundits.  Face it America, no one wants your debt.  The tooth fairy is all you’ve got left, and it’s been that way for a while.

When I fill up at the local gas station using my debit card, the money is gone from my account before I can drive home and log on to my bank’s website (less than 5 minutes).  Details about Treasury purchases are trickled out at an agonizingly slow pace that literally takes years to complete.  That’s right, years.  This time delay, combined with explanations that are vague at best make intelligent discussion about purchasers of US Treasuries impossible.   The more you dig into the data, the less sense it makes.   With the recent release of the Fed’s discount window activity, I’d like to know how many believe demand for the last 3.5 Trillion of US debt wasn’t fueled entirely by the Fed.  Now they’re playing Got your nose  with us.

So the next time Maria Bartiroma asks Lady Gaga, or whatever sock-puppet she happens to have on her show, “Who will buys US Treasuries when the Fed steps away?” An enlightened response might be, “I have no idea who was buying US Treasuries before the Fed stepped in. Do you Maria?” To which she will most likely reply, “So what sectors do you like going forward?”

 ***

 



*Generally I shy away from correcting hot-headed Italian-Americans, but I believe Rick Santelli values truth and accuracy.  I’m not sure how Rick calculated his recent claim that the government borrows 43 cents of every dollar they spend, but here’s how I calculated my numbers:

In FY2009 & 2010 government spending was $3.5177T and $3.4558T respectively.

Source: http://www.cbo.gov/ftpdocs/120xx/doc12039/HistoricalTables%5B1%5D.pdf (page 1)

Total borrowing was $1.8851T for FY 2009; $1.6518T for FY 2010

Source: http://www.fms.treas.gov/bulletin/b2011_1.pdf (Table OFS-2)

US GDP 2008: $14.369T (World Bank – 2010 data not available)

Source: http://www.google.com/publicdata?ds=wb-wdi&met=ny_gdp_mktp_cd&idim=country:USA&dl=en&hl=en&q=gdp

US GDP 2010:  $14.624T (IMF)

Source: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal)

Guest Post: 14 Points to Save America

In Open Thread on Friday, February 4, 2011 at 10:21 am

Submitted by S. Gompers (click on the headline to view as a single page)

“It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to heaven, we were all going direct the other way – in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.”

       ~Charles Dickens, English novelist (1812 – 1870)

It is funny how this quote from A Tale of Two Cities seems to be the very essence of the age we live in today.  Many see hope, light, darkness or despair reflected in their views of one party or the other depending on their faith or views of one another.  Everyone is concerned for the future, yet strongly abide by the very party lines that got us here in the first place. Reality is, both sides have been striving to derail the American experiment for many years. Evidence of this lies in the rhetoric thrown at one another as being somehow more important than real solutions for what ails the nation. Ignore the problems, but create plenty of distractions to keep the masses preoccupied.

To save the nation, I feel that the following 14 points should be implemented while we still have time to break out of our current free fall.

1) –  If candidates are sincere, they must refuse to accept money from financial institutions or lackeys thereof (one must first get elected to have any effect on the other points) and demonstrate their sincerity to the American people that they are truly interested in returning our nation to its intended Representative Democratic Republic.  Our “Representatives” have manipulated our current system into such a sorry state that we now have an un-named, unmanageable, unworkable system of government.

2) –  End the FED. With a vote by Congress in 1913, the government gave legal legitimacy to a cartel of the largest bankers and permitted them to inflate the money supply at will, providing for themselves and the financial system liquidity in times of need, while insulating themselves against the consequences of overextension of credit and bad loans.

This form of financial socialism that has benefited the rich and the powerful through the creation of the FED has caused, or greatly contributed to, the unprecedented economic instability in the decades afterwards and must be laid to rest.

The current alleged functions of the Federal Reserve System include:

  • To address the problem of banking panics.
  • To serve as the central bank for the United States.
  • To strike a balance between private interests of banks and the centralized responsibility of government.
  • To supervise and regulate banking institutions.
  • To protect the credit rights of consumers.
  • To manage the nation’s money supply through monetary policy to achieve the sometimes-conflicting goals of maximum employment, stable prices, including prevention of either inflation or deflation, and moderate long-term interest rates.
  • To maintain the stability of the financial system and contain systemic risk in financial markets.
  • To provide financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system.
  • To facilitate the exchange of payments among regions.
  • To respond to local liquidity needs.
  • To strengthen U.S. standing in the world economy.

All this private banking system has managed to do is successfully privatize the profits, while socializing the losses onto the backs of generations of Americans who have not even been born yet.  If anyone feels these goals as stated by the FED have been achieved, speak now or forever hold your peace.

3) - Restore a Constitutional monetary system outside of the central banking structure.  The mechanics of this item has yet to be addressed or determined, as most focus on issue number 2 and seem to have not thought this far in advance.

4) - End lobbying and restore a Government of the people, by the people, by majority rule, instead of a government of the lobbyist, for the special interest, focusing on a rule by a very elite minority.  This item in its own right will strip the ruling minority of its carrot and stick method of subjugating the masses by controlling the “elected representation” that the people elected to represent them.

5) – Prosecute those responsible for the financial destruction of America.  Only through the realization that crime does not pay can future ponzi schemes and frauds be averted. Speak softly and carry a big stick people, as long as crime is rewarded, it will be rampant.

6) - Investigate all “lawmakers” who were contributory to aiding the crime of the century by repealing laws such as Glass-Steagall, etc., and uncover the money trail of special interest money desiring the same.  We must stop the flow of money to politicians to serve other masters than the American people. They get “rewarded”, while we pay for the crimes that are implemented is not in the healthiest interests of our nation.

7) - End the selling out of our national interests to foreigners.  When the government spends more than it collects every year, it borrows. It prints up Treasury Notes and Bonds etc.

This puts the government in a catch-22. It can’t raise taxes, because nobody likes that. It can’t charge tariffs (tax) on products coming into the country and put the cost of our government onto foreign countries and foreign manufactures. It could do this, especially since we now import 80% of what is sold in the U.S., but it can’t, because we believe in “UNfree trade”. Besides, most of our imports are from American based companies who went overseas to avoid paying taxes and hire cheaper labor in the first place.  Instituting tariffs would spoil their whole plan, especially since much of their plan was assisted with U.S. taxpayer’s dollars to get out of paying taxes.

8 ) – Stop participation in Agenda 21 and Codex Ailimentarius.  G.H. Bush signed Agenda 21 in 1992. He did not need ratification or Congressional approval because this is not a treaty, it is merely a set of “soft-laws”. In 1993 Bill Clinton by Executive Order, created the President’s Council of Sustainable Development.

Sustainable Development is essentially the “land grab”. The Wild lands Project is the “water grab”. Health Care Reform is the “body grab”. Cap and Trade is the “private property grab”. Participation in any programs that ultimately weakens American Sovereignty must cease.

9) - Remove the U.N. from U.S. soil.  The United Nation’s basic philosophy is both anti-American and pro-totalitarian. Our Declaration of Independence states the “self-evident” truth that “men … are endowed by their Creator with certain unalienable rights.” But, in its Covenant on Civil and Political Rights, the UN ignores God’s existence, implies that only it grants rights, and then repeatedly claims power “as provided by law” to cancel them out of existence. If any government can place restrictions on such fundamental rights as the right to keep and bear arms, freedom of speech, freedoms of the press, association, movement, and religion, soon there will be no freedom.

The United Nations was founded by Communists and CFR members whose common goal was to implement a Socialist World order. Sixteen U.S. officials who helped create the United Nations did so as secret Communists. These included Alger Hiss, chief planner of the 1945 founding conference, and the Assistant Secretary of the Treasury, Harry Dexter White. The Soviet Union under Stalin and the Communist Party USA worked vigorously to launch the United Nations. Since its beginning in 1921, the Council on Foreign Relations has always worked toward world government. The key CFR founder, Edward Mandell House, in his book, Philip Dru: Administrator, called for “Socialism as dreamed of by Karl Marx …”

Edward Mandell House helped to pick the charter members of the original Federal Reserve Board as well. Edward was the son of Thomas W. House, a gun runner for the Confederacy, financier, and agent of the Rothschild’s during the Civil War who was linked to the anti-Lincoln, pro-central bank interests.

43 members of the U.S. delegation at the United Nations founding conference were, or would later become CFR members.

10) - Stop deregulation, and enforce regulation to the fullest extent of the law to prevent fraud by showing that it does not pay, and you will not get a free pass.

11) - Stop selling natural resources to foreigners.  If you want to buy wood, buy dimensional lumber, not our trees.  If you want to buy steel, you buy steel, not our iron ore. These are just a few examples of many that could be made on this subject to create jobs, increase tax base, and protect American markets.

One day Americans who grew up in the land of plenty will wake up in a barren wasteland watching America’s bounty leave our country while they stand broke and starving wondering what happened, if we continue down this slippery slope.

12) - Stop and repeal ALL unbalanced trade deals that are leveraged against the interests of America. As a major trading Country, the U.S. exports many things and we import everything you can imagine. When America imports more than we sell abroad, we make up the difference known as the trade deficit by shipping dollars overseas. Right now, the rest of the world owns $3 trillion more of us than we own of them. And for many years we’ve been purchasing more imported goods than we’ve been selling of our own to other nations. After averaging $80 billion annually during the 1980s, the trade deficit sky rocketed into the $300 billion range in the 1990s. And by 2003, this figure had exploded to over $500 billion. That’s about 5 percent of our gross domestic product (GDP), a level that when it has occurred in other countries has preceded a sharp decline in the value of those nations currency.

Foreign investors unfortunately have a say in the value of our wonderful fiat currency, as our current system is modeled, and in the next few years they’re going to say some very bad things about it if we do not end the combined policies that are threatening its alleged valuation.

Our annual trade deficit is larger than the budgets of the military, Social Security, and twice as big as Medicare. There is simply no way this can end well.

The dangers of a high trade deficit are illustrated in this excerpt from a speech by Peter Morici, and illustrate how reducing the gap would actually increase domestic GDP.

“Cutting the trade deficit in half would boost U.S. GDP growth by one percentage point a year, and the trade deficits of the last two decades have reduced U.S. growth by one percentage point a year

Lost growth is cumulative. Thanks to the record trade deficits accumulated over the last 10 years, the U.S. economy is about $1.5 trillion smaller. This comes to about $10,000 per worker.

Had the administration and the Congress acted responsibly to reduce the deficit, American workers would be much better off, tax revenues would be much larger and the federal deficit could be eliminated without cutting spending. The damage grows larger each month, as the administration and Congress dally and ignore the corrosive consequences of the trade deficit.” 

~ Peter Morici is a professor at the University of Maryland School of Business and former chief economist at the U.S. International Trade Commission.


13) - Stop encroachment on our personal liberties and Constitutional rights.  I cannot stress this point enough, and to the herdists I say, BOTH PARTIES ARE RESPONSIBLE. From the gun laws that have been instituted, to the repeal of Glass Steagall, to the Patriot Act, to the Homeland Security Act, and many more back to the creation of the FED and the manipulations and the distortions of truth by both parties by the architects of the Bankers Manifesto since 1892.


14) - End Obamacare and allow people who are forced to change jobs the right to buy insurance affordably that will cover pre existing conditions.  Universal healthcare is an Agenda 21 mandate.  Health care needs reform, but this is not reform.

If we don’t do these things soon, my advice for the next two generations of Americans is simple, buy wheelbarrows, you are going to need them to carry the money you will need just to buy a loaf of bread, assuming your papers are in order and you are allowed to go to the grocery.  

Or just buy your Zimbabwe Notes in advance.

Talking Tradition?

In Open Thread on Thursday, February 3, 2011 at 11:06 pm

“Traditionally Gold is viewed as a hedge against inflation…..”

I hear that idiotic statement (or ones like it) come flying out of my TV every single day.  It is a classic example of how you can completely misframe a discussion and this simple tactic is rampant in our media.  If you allow yourself to be sucked into the false premises of the discussions, your fate is already sealed.  Here’s what you probably should be thinking when you hear the above statement:

“…..No…Traditionally gold is money and traditionally fiat currencies arrive at their intrinsic value, which is nothing.”

In the scope of human history that statement is undeniably true, yet never voiced in the American media.  Why?

Misframing discussions like this is becoming a cornerstone of America.  Am I the only one noticing?

New Vocabulary Phrase – Odious Debt

In Open Thread on Wednesday, January 26, 2011 at 11:37 am

Here’s a concept people all over the world need to get familiar with:

From Wikipedia:

In international law, odious debt is a legal theory which holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, such as wars of aggression, should not be enforceable. Such debts are thus considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

The way I see it, most of our national debt falls into this category.  Clawbacks, anyone?

Why Everyone Hates You – A Guide For Politicians

In Open Thread on Thursday, January 6, 2011 at 7:24 pm

The US Congress is welcoming 112 new members this week.  Congratulations, if you’re one of them.  Now get this through your thick, newbie head. No one likes you.  No one thinks you’re smart.  Chances are the only reason you got this gig is because your predecessor couldn’t follow simple instructions.  So stop thinking of yourself as a champion of  __________ or the protector of _________.  You’re hired help, nothing more, nothing less.

The Parable of the Lousy Waitress

Once upon a time, there was a beautiful waitress (with ample bosoms) who believed in holistic medicine or something.  Whenever a customer ordered coffee, eggs and toast, she brought orange juice, tofu-spinach quiche, and healing crystals to unblock their Chi.  People got pissed, so she got canned and became a crack whore.   The End

Before you start taking pointers from the 423 members of Congress that we haven’t voted out yet, make sure you understand the difference between eggs and tofu-spinach quiche, because that is the essence of America’s growing animosity towards its elected officials:  They don’t listen.  Right now, I’ll bet you’re thinking “You’ve never tried my quiche.”   And that’s why we hate you.

Time and time again our elected officials have taken it upon themselves to decide what’s best for us, completely ignoring the will of the people.  Quiche, quiche and more quiche.  It’s getting old.   We never authorized congress to make future generations debt slaves.  We never said it was OK for you to grope us at the airport, or photograph our kids nude.  Funny but I don’t recall even being asked.

As quickly as Hank Paulson managed to cram TARP through, Americans were still asked about it.  We said, “NO!”  53% of Americans agreed “A government bailout of the financial industry would burden American taxpayers and only help the financial institutions that are failing.”  CBS poll – question 50.  Only 34% felt the bailout necessary.  If you’re a new member of congress, chances are you’re sitting in the very seat your predecessor peed in when he decided to vote for TARP.

Fun Fact: TARP never happened.  The money authorized to purchases troubled assets was never used for that purpose.  Yet some members of Congress are still inclined to comment on the success of TARP.  I guess they’re referring to the “bait and switch” they fell for, which is kind of like saying “good thing I fumbled, huh?”

In January 2010, the Senate confirmed the re-appointment of Ben Bernanke as Chairman of the Federal Reserve, despite a 21% approval rating.  All kidding aside, there are few jobs in this world with more clear-cut directives, yet this egghead managed to screw up these very simple tasks and bring the world to the brink of collapse.  Be sure to thank your colleagues for reappointing him so he could finish the job.  We may as well be praying to crystals at this point….

Enough about the past though.  Let’s turn our attention to the next loogie in our eye.   60 Minutes   just did a poll January 3 asking “What would you do first to balance the budget?”.   Here’s the results:

It doesn’t get any simpler than that, does it?  The only question the 112th Congress should be asking is, “How would you like those eggs?”  But instead, like the lousy waitress, they’ll imagine themselves smarter than the rest of us and start rationalizing that what we really need is some nice quiche.

 And that’s why.

Did you say JP Morgan is Short 3.3 Billion Ounces of Silver?

In Open Thread on Friday, December 17, 2010 at 8:00 am

Ummmm….no.  In my last article, I quoted Eric Fry, who said:

Based on some of the latest conjecture, Morgan’s short position totals a whopping 3.3 billion ounces. If, therefore, the buzz about J.P. Morgan and silver is even half true, the prestigious investment bank could be cruisin’ for bruisin’.

I failed to identify the source of that so-called conjecture (because I didn’t know myself at the time), and I apologize for the lapse in due diligence.   That estimate was originally published by Jason Hommel of Siverstockreport.com on November 13, 2010.  Jason wrote:

If my reading of the OCC report is any indication, then JP Morgan’s short position in silver could be as high as 25% to 50% of the entire world banking system’s short position of $200 billion in silver (and that was when silver was $15/oz.)!

JP Morgan’s short position in silver could thus be as high as 3.3 billion ounces if we are conservative, and estimate their position at only 25% of the BIS report numbers.   By $500/oz., JP Morgan’s short position could be worth a negative $1.5 trillion, and that’s just for starters.  It could grow worse if they add to their short position, in a misguided attempt to manipulate a market that is clearly moving against them.

Before I go any further, let me explain something.  A few years back, I decided that Jason’s views on silver were a little extreme for me.  In other words, I concluded that Jason was probably full-blown, bat-shit crazy.  This brings me to my second apology in as many paragraphs.  Sorry, Jason.  People who are too far ahead of the curve for the rest of us often appear as cranks.

Anyway, financial blogger Kid Dynamite, published an article at seekingalpha.com (who will not be getting an apology from me today) challenging the estimate.  KD also failed to identify Jason Hommel as the source.  But Jason showed up to defend the estimate.  What followed was a remarkably civil discussion between two very sharp pencils.  The entire article can be found here, but you may have a hard time getting all the comments (350) to load (nice work, SA).  Just Jason’s comments can be found here.  I highly recommend the discussion, but there’s a couple of key points I’d like to stress:

  • Jason and Kid Dynamite have to agree to disagree on what the Bureau of International Settlement (BIS) numbers mean, thanks to footnotes like this: While data on total options are shown on a net basis, separate data on options sold and options bought are recorded on a gross basis, i.e. not adjusted for interdealer double counting.”  I am not the slightest bit embarrassed to say that I have no idea what the fuck that even might be supposed to mean.  If this isn’t deliberate obfuscation, I don’t know what is.
  • Jason makes reference to a massive (-54% or $110B), unexplained downward revision in the data, and asks in vain, “What Changed?”  I can attest firsthand to incomprehensibly huge revision to government data, made without apology, explanation or fanfare.  My frustrations stem from ownership of  Treasury securities which I wrote about here.  I sent THREE copies (two registered) of a list of questions and have received NO REPLY (not even a Christmas card).   Very few people read this kind data, fewer still notices these astronomical revisions and anybody who asks questions get stonewalled.  Think about that.
  • The discussion also reveals the role paper speculators play in inhibiting price discovery on the COMEX.  These are people that wish to be rewarded for increases in the price of silver, however they have no desire to own silver and everybody  knows it.  They are chum for JP Morgan, and rightly so.  They’re bad gamblers.  They sit at the table, knowing the other guy is bluffing, only to fold month after month after month.  Weep not for them, America, they asked to be victims and deserve to lose everything.

Which brings us back to the really cool part.  As long as JPM remains pre-occupied with running over these wishy-washy souls, the rest of us can get real silver (the shiny, klinky metal kind) super cheap.  How many ounces of silver has JPM shorted?  Lots, but only they would know for sure.  The rest of us have to guess.

If you’d like more evidence that Jason Hommel is not insane, I recommend this interview Jason did with Mike Maloney of Goldsilver.com.  At no point during the interview does Jason foam at the mouth, nor does he lunge at Mike for his repeated interruptions (which quite frankly, I probably would have).

What The Silver Vigilantes Understand That You Probably Don’t (Arithmetic, Human Nature and other Stuff)

In Open Thread, Silver, stocks finance, Treasuries on Wednesday, December 15, 2010 at 6:03 pm

Sorry about the insulting headline, but every last shred of evidence I can find suggests that the most people remain utterly clueless about silver, despite the efforts of the silver vigilantes, led by Max Keiser and Mike Kreiger.  Their brilliantly simple plan (go get some physical silver) promises to topple the criminally insane fraud that has become US economy.  It doesn’t require politicians or regulators to lift a finger either, you simply take advantage of what is undoubtedly an artificially low price.  I can completely understand anyone who is skeptical of that last statement; I’m sure you’ve been burned before, but that doesn’t mean you should stop seeking truth.  

Part 1. A little math.

I’m not sure when performing basic arithmetic made you a conspiracy theorist, but here we are.  

The 2009 World’s population was about 6.8 Billion.  According to the Silver Institute, total silver supply in 2009 was 889 million ounces.  That means there was .13 ounces of silver produced for every human being on the planet.  That looks like this:

Yep, your fair share of Worldwide silver production is a little less than the silver content of two pre-1965 dimes.  That’s all.  A bargain at about four bucks when you consider the amazing properties of this element.  FYI: World oil production per capita is 190 gallons. 

This….

 …represents more than ten years of  worldwide silver mining production divided by 2009 population.  Less than $35, and hell of lot easier to transport than 7,600 quarts of Quaker State.  Please note that so-called “World production” includes government sales and scrap.  Government sales and “scrap” have accounted for more than 25% of  “World Silver Production” from 2000 to 2009.  I’m not sure I believe that one out of every four ounces of silver gets recycled, but understand that without that bonus production, demand exceeds supply by 37%. 

Part 2. Who needs silver?

Just about everybody, it turns out.  Sadly, another way to get yourself labeled a conspiracy theorist is by reading government documents like the Constitution, or the Department of the Interior’s 2009 U.S. Geological Survey which states:

The physical properties of silver include ductility, electrical conductivity, malleability, and reflectivity. The demand for silver in industrial applications continues to increase and includes use of silver in bandages for wound care, batteries, brazing and soldering, in catalytic converters in automobiles, in cell phone covers to reduce the spread of bacteria, in clothing to minimize odor, electronics and circuit boards, electroplating, hardening bearings, inks, mirrors, solar cells, water purification, and wood treatment to resist mold. Silver was used for miniature antennas in Radio Frequency Identification Devices (RFIDs) that were used in casino chips, freeway toll transponders, gasoline speed purchase devices, passports, and on packages to keep track of inventory shipments. Mercury and silver, the main components of dental amalgam, are biocides and their use in amalgam inhibits recurrent decay.

 Yet you can actually find dunces out there claiming that digital cameras have made silver obsolete.  You should live so long…

Fun Fact:  Silver (not gold, copper or anything else) is the element with the highest electrical conductivity.

Part 3. People lie…..

“…I want to make it equally clear that this nation will maintain the dollar as good as gold, freely interchangeable with gold at $35 an ounce, the foundation-stone of the free world’s trade and payments system.”

John F. Kennedy, July 18, 1963 

“That we stand ready to use our gold to meet our international obligations–down to the last bar of gold, if that be necessary–should be crystal clear to all.”

William McChesney Martin, Jr. (Federal Reserve Chairman) December 9, 1963

And…..

Lesson:  When someone says you can exchange paper for precious metals – make the swap before they change the rules.

Since the invention of paper, people have been writing bogus notes, and if there are two time-tested methods to become wealthy beyond your wildest dreams, they are:  1)Selling stuff that doesn’t exist and 2) Selling stuff you don’t actually own.  Unless you believe there has been a sudden outbreak of integrity in the banking industry, there’s no reason to believe these dynamics are not still in play, is there?  As recently as 2007, Morgan Stanley settled a class-action lawsuit with 22,000 clients who bought and paid storage on “phantom” silver (check out the Ted Butler article Money for Nothing).

At today’s prices, a million dollars in gold weighs less than fifty pounds, but a million dollars in silver weighs more than 2,300 pounds!  So ask yourself, how many rich people are storing their own silver?  How many hedge funds hold physical silver in their own storage facility?  Or have they entrusted the storage to the big banks?

JP Morgan is the custodian of the ishares Silver Trust (SLV), which now holds over 350 million ounces of silver, provides  sovereign and corporate investors with precious metals solutions (JP’s website), and is the largest short seller of silver in the history of the world.  Berkshire Asset Management’s  Eric Fry writes:

Based on some of the latest conjecture, Morgan’s short position totals a whopping 3.3 billion ounces. If, therefore, the buzz about J.P. Morgan and silver is even half true, the prestigious investment bank could be cruisin’ for bruisin’.

For perspective, 3.3 billion ounces is roughly equal to:

1) One third of all the world’s known silver deposits;

2) Two times the world’s approximate stockpiles of silver bullion;

3) Four times the annual mined supply of silver;

4) 30 times the inventory of silver at the COMEX.

If you can, forget about the conflict of interest, and ponder the enormity of the explosion.

 

Part 4. A little more math. 

 Estimates of total silver production since the dawn of man range from 46 to 53 billion ounces (roughly 11x gold production), but unlike gold, we’ve used pretty much all of it (although squandered might be a better word).  It’s in our cemeteries (fillings) and scattered throughout our landfills.  There hasn’t been a significant surplus since 1990.  Ted Butler and others estimate that there is far less silver bullion in the world than gold bullion and they back up their case with numbers  that the paperbugs have never even bothered to refute.  So why does gold trade at more than 45 times the price of silver?  Because JP Morgan, the US government, and every other psuedo-capitalist parasite wants it that way.  But that’s a truth for another day.

Part 5. Other things you should know.

 The Treasury has sold 34 million one ounce American Eagles so far in 2010.  Those sales total less than one Billion dollars. Apple (AAPL) trades about that much every hour the market is open.  Meanwhile the Treasury has issued more than 1.5 Trillion in new debt (1,500 times more) in 2010.  Just for fun, let’s multiply 1500 by 34 million.  A transaction of that size would have equaled every last bit of silver ever discovered at $30 an ounce.    Yet you can actually find people who believe silver is the bubble.

Treasury doesn’t make it easy to buy silver.  They’ll sell you bills, bonds and notes directly online, but not precious metals at anything close to market price.   The mint only does business with  11 Authorized Purchasers (a list can be found here),  Why the lack of savvy?

China can blow up the COMEXs silver market in the blink of an eye, at any moment.  They can do it with their pocket change, as a goof.  And if we piss them off enough, they will.

Part 6. So what’s silver worth.

The short answer is: more.  If silver were priced based on its occurrence relative to gold, it would be over $125/oz.  If it were priced on its availability – somewhere around $2,000.  But if you are content to let the likes of Blythe Masters dictate the value based on truckloads of worthless paper promises, you can expect ultra-low prices until the whole thing blows up.  Of course at that point, we’ll be so busy killing each other for food no one will have time to say, “I told you so.”

The silver vigilantes just want you to re-learn what the phrases like, “cold, hard cash,”  and “payment in full” are supposed to mean.  There not asking you to sink everything you have into physical silver,  just a little.  Silver can’t be printed into oblivion, or stolen by a cyber attack.  Why wouldn’t you want to own some of your very own? 

A paper dollar from 1960 is worth exactly the same as a paper dollar in 2010, but  four quarters from 1960 are worth more than $21.  Given the fiscal insanity of the US government, I can’t imagine the US dollar surviving another 50 years, but I’m quite sure that silver will still be useful.  Please consider getting some.

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Update: All indications say this piece is the most widely read thing I’ve ever written.  I would like to thank everyone who helped make that possible especially Max Keiser, Steve Quayle and my friends at Zerohedge.  For the record: ANYONE (except seekingalpha.com – long story) is welcome to my original content here (which is like 99.9% of what’s here).  It would be nice if you mentioned me, but I won’t hunt you down if you don’t.

Some Personal Favorites:

M. C. Escher – Economist   (This graphic in particular)

Giant Leaps  – My best (and most ignored) work.

Tin Foil Hat America (the Eskimo Test) – provides insight into my madness

I can’t believe it’s no Capitalism! – graphic

Candy from Strangers – Who’s buying our debt? (I still don’t know)

“Shut-up And Eat Your Paint Chips, Kid” – Miseducating America (the ZH discussion  was great, and I love the Daily Bail’s graphic (not mine))

Understanding the National Debt (Sesame Street Edition) 

Hopefully there’s other wortwhile stuff here, but I think that’s all the shameless self-promotion any of us can stand.

Thanks for stopping by!

Douchebag Proud of Wasting 35 Years! (it’s the New American Way)

In Open Thread on Tuesday, November 30, 2010 at 8:25 pm

Every once in a while, a commercial so obnoxious comes along I just can’t ignore it.  I feel compelled to transcribe this one from Exxon Mobil:

It was 1975.   My professor at Berkley asked me if I wanted to change the world.  I said, “Sure!”  “Let’s grow some algae.”  And that’s what started it.  Exxon Mobil and Synthetic Genomics have built a new facility to identify the most productive strains of algae.  Algae are amazing little critters.  They secrete oil, which we could turn into biofuels.  They also absorb CO2.  We’re hoping to supplement the fuels that we use in our vehicles and to do this on a large enough scale to someday help meet the world’s energy demands.

To recap, that’s 35 years – Umpteen million dollars –  Zero results.   Good thing we didn’t have guys like him on the Manhattan project.

There’s been a paradigm shift here in America all right.  “Changing the World” has become a euphemism for “Wasting your life.”   Worse yet, Scientist Joe has the audacity to suggest that provided people keep pissing money in his direction, he just might be able to help a little.  The other thing you can’t deny is had he not found this gig,  Joe would most certainly have found gainful (for him) employment with the US Government.  Same results, of course.

Remember this lazy, self-important  dick the next time Larry Kudlow tries to sell you that the Chinese are hacking our computers to steal all our super-secret secrets.  I don’t doubt that the Chinese hack our computers, but I really think they’re doing it for laughs, not knowledge.  Unless the Chinese are interested in knowing things like:

  • How to not stop a leaky pipe at the bottom of the ocean.
  • Why Boeing can’t get the Dreamliner out of the hangar after more than 3 fucking years of delays.
  • How to milk construction jobs for years (they built  a 15 story building in 6 days)
  • Why we haven’t executed Hank Paulson for treason yet.
  • Or how somebody like Joe Weissman thrives in America.

Guess where the World’s fastest maglev train is?  It was built with German Technology.   Now look where your computer, your high-def TV, and all your kid’s toys (most of which, be honest, you have no idea how they work) were made, and tell me that you believe we know things they don’t.  You’re an idiot if you believe that and what’s worse,  you’re a conceited idiot.

Or would you prefer to bitch about how those sneaky chinks manipulate their currency by, get this,  pegging it to ours?  Pull up any Forex chart you want and tell me what that shit’s supposed to be.  It’s more manipulation than market and I applaud any country that thumbs it nose at that pro wrestling casino.  It shows that they care about their country and their people.

Feeling good about doing bad – Welcome to your new normal, America.