Tuesday, April 20, 2010

Simply Irresistible

"If you overstate your assets and understate your debt you used to go to the clink. Now it is called a Jobless Recovery."
-Jim Sinclair

New Signs that Home Prices May Be Stabilizing
A new sign that home prices may be stabilizing-fewer sellers are slashing prices while their homes are on the market.

Twenty percent of sellers slashed prices by an average 10 percent in April, and while that may sound like a lot, it's a good deal less than the 27 percent who did so in April of 2009, all according to real estate website Trulia.com.

Granted, sellers still slashed a collective $23 billion dollars from their original expectations, but at least the numbers are headed in the right direction.

"Market stabilization is helping to define fair market value, and this helps agents and consumer price better," says Trulia's Ken Shuman.


I'm sorry, I couldn't resist. "New Signs" in the headlines! This report may be the most pathetic "stretch of the imagination" yet where "signs" are concerned. Considering that this story is sourced out of CNBC, it is no wonder. If the housing market has gotten so bad that the financial news media has to stoop this low on the "less bad scale", maybe hopelessness is just around the corner.

But, hey! Today, we are going to take a look at what I believe, with 100% conviction I might add, is the investment opportunity of a lifetime. Silver. Yes, even at today's prices Silver remains THE INVESTMENT OPPORTUNITY OF A LIFETIME.

Silver is on the cusp of a price explosion right here, right now, today. Investment demand is about to overtake industrial demand and "physical" supply is insufficient now to cover both sides of this supply/demand equation.

By Theodore Butler
A number of recent events have converged that hold the potential to launch the price of silver upward in the near future. It is important that positions be established before, and not after, a big price rise. The public hearing held by the CFTC on March 25 created widespread attention to silver and position limits and the short side concentration. Scams of this type are harder to maintain under widespread scrutiny. The manipulators and regulators have clearly been put on notice. This creates a decidedly inhospitable environment for additional short selling. Without aggressive new paper short selling, the price should fly.

Recent data from the Commitment of Traders Report (COT) suggests that the largest COMEX silver and gold short, JPMorgan, is not increasing its short positions on the impressive price rally from the beginning of February. The COMEX silver manipulation has always been about concentration on the short side. Without it, the price of silver would have been much higher. This is always the litmus test for manipulation; what would the price be if a big concentrated position didn’t exist? In silver, we may be about to learn the answer to that question. It does not matter much if the other commercials sell, if JPMorgan refrains from selling because JPMorgan is the controlling entity in silver. There is no law against selling short, nor should there be. This is quite different, however, from short selling in an overtly concentrated and dominating manner.

Many of the commercials in COMEX silver are actually long silver futures contracts. These traders are those I call the raptors. Since the raptors are long, they have every right to sell if they choose. In fact, they have sold almost 5000 contracts from the price bottom of Feb 5, leaving them with 16,000 contracts net long. Aside from JPMorgan, there appears to be roughly 7 other commercial traders net short COMEX silver, the 2 thru 8 largest short traders. These traders have sold additional silver contracts short on the price rally from Feb 5, to the tune of 7,000 additional contracts. During this time, JPMorgan appears to have bought back almost 3000 contracts. This is a distinct change of pattern for JPMorgan.

Back in September 2009, on a several dollar price rally to $17.50, I reported that JPMorgan was essentially the sole short seller of silver, to the tune of 10,000 to 12,000 contracts. This was clearly manipulative behavior that ultimately led to the price lows of early February. This time, JPMorgan’s behavior is very different. Not only have they not sold on this rally, they have bought back short contracts. This time, the 2 thru 8 commercial traders have been the big new short sellers. As of the most recent COT, these commercial sellers now hold their largest short position since July 2008. My guess is that these commercial short sellers do not realize that JPMorgan may be exiting its concentrated and controlling silver short position, and are putting themselves in grave danger by selling more. Whereas, in hindsight, there was perhaps no real chance JPMorgan could be over run if it were increasing its silver short position, these secondary commercial short sellers may not have JPM’s market muscle and could more easily be overrun. Time will tell.

Less obvious, but even more important have been developments in the physical silver market. A full-blown silver shortage will make a mockery of rational price projections and additional paper short maneuvers. No entity can contain prices during a commodity shortage. A true commodity shortage is always a material problem, not a money problem. Only more of the specific material, not cash, can ease the lack of sufficient supply. And there are no visible government silver inventories at the ready to douse the fire of a physical shortage. In a shortage, the price becomes secondary to timely delivery of a physical material. Yes, there are private holdings of silver bullion and some percentage of those holdings will be available at a higher price. But only the silver owners will decide at what price their holdings are sold.

An eventual silver shortage has always been the lynch pin of my silver analysis. An actual physical shortage is the necessary result of a downward price manipulation. The only question is the timing of such an outcome. For silver, the timing has been longer and more difficult to pinpoint due to the large amount of world inventories accumulated over hundreds of years. Since most of this accumulated silver inventory was previously in the unreported category, it was nearly impossible to determine the total amount or at which prices this inventory was available to the market. As long as material from the unreported category of silver inventory flowed easily to market, any shortage was held at bay. But now there are signs suggesting the silver wolf may be at the door.

Recent withdrawals from the big silver ETF, SLV, continue to suggest there is little available silver bullion remaining in the unreported category of silver inventories. The 9.5 million ounce total withdrawal from the SLV over the past five or six weeks has come on a strong price rally in silver, something out of kilter with usual behavior. Normally investors sell on weakening prices and buy on increasing prices. Thus, the withdrawal of metal from the SLV during a period of price gains suggests the withdrawals are not related to investor liquidation. Instead, the most plausible explanation is that the silver was needed someplace else. Indeed, the SLV metal withdrawals coincided with inflows into the COMEX-approved warehouses and other ETFs. Since it would be less noticeable to deliver silver from unreported inventories the switching from reported to other reported inventories could mean there is no great quantity of silver remaining in the unreported category. If true, this could set off shockwaves in silver. A fight could develop over reported inventories.

Other signs point to this possibility as well. For one, there has been frantic movement, in and out, from the COMEX warehouses. This always suggests tightness of supply to me. Since it would be a lot cheaper and easier to deliver metal already stored in these warehouses, rather than bring new material in, this strongly suggests the silver already held in COMEX warehouses is very tightly-held and not available for sale. Why go to the bother and expense of bringing in new stuff, if you can just deliver the stuff already there? Also, for the past month, JPMorgan has been the predominant deliverer, in its proprietary trading account, of COMEX silver. This may indicate they are very interested in closing out as many short positions as possible. Certainly, JPMorgan can’t be comfortable with all the recent attention they have been receiving as the big silver manipulator. Their silence to this notoriety (as well as their absence from the CFTC hearing) is telling.

Finally, demand for silver has been super-strong. Recent U.S. Mint data indicate a blistering pace of US Silver Eagle sales. For the first three months of this year, the Mint has sold over 9 million ounces of Silver Eagles, more than the full year total in 15 years of the 25 year history of the program. Current production and sales of Silver Eagles is equal to total U.S. mine production, (U.S. is the world’s eighth largest producer). Even after last year’s record sale of almost 29 million U.S. Eagles, the pace of monthly sales this year is 25% greater this year. Contrast that to the sale of U.S. gold Eagles, where the monthly average this year is 24% behind last year’s monthly average. Clearly, demand for silver is very strong.

This combination of strong investment demand and clues that available metal may be limited points to a clash between supply and demand. These are the essential ingredients of a physical shortage. While silver is a manipulated market and you must always be prepared for artificial sell-offs, the price force exerted in a real shortage is something few of us have ever experienced. This is definitely a time to buy and hold.


Silver/Gold Ratio Reversion 3[MUST READ]
Adam Hamilton, Zeal Intelligence LLC, Zeal LLC
Silver’s recent rallying action is starting to catch traders’ attention. Since the end of its latest correction in early February, this white metal has surged 23% higher. It has well outperformed gold, which only climbed 9% over this same 9-week span. And based on silver’s strong historical relationship with gold, odds are today’s silver rally is only beginning. Silver’s gains should accelerate in the months ahead.

The primary reason is silver remains seriously undervalued relative to gold. While it sounds strange to apply valuation concepts across metals, in the case of silver and gold it is very appropriate. The gold action utterly dominates silver traders’ sentiment and hence silver price action. When gold rallies, they get excited and aggressively buy silver. And when gold sells off, they get scared and swiftly dump silver.

Over the decades as silver traders watched gold for silver-trading cues, naturally silver’s behavior converged to mimic gold’s ever more closely. This became a self-fulfilling prophecy. The more that silver traders watched gold and followed its lead, the closer tactical silver action mirrored gold’s. This led even more silver traders to monitor gold and elevated this yellow metal to the dominant driver of silver sentiment.

Silver’s ironclad relationship with gold is easily quantifiable through the Silver/Gold Ratio. The SGR simply divides the silver price by the gold price and charts the result over time. Thanks to late 2008’s epic stock panic, the SGR today is still way out of whack compared to historical precedent. While silver has already recovered greatly relative to the gold price, it still remains nowhere close to rectifying the panic-driven gap.

This persistent-yet-gradually-closing valuation anomaly of silver relative to gold continues to create excellent opportunities for silver traders. As silver continues to normalize with prevailing gold prices, its price will rise driving all silver-related investments including silver stocks much higher.


Is Silver Ready to Surge?
by Sean Brodrick
Main Street may know something that Wall Street’s chattering class doesn’t know. Because while Wall Street always seems to give silver short shrift, mom-and-pop investors are buying silver at a furious pace.

Here’s what I mean: The U.S. Mint sold more Silver Eagles in March and in the first quarter of the year than ever before. A total of 9,023,500 American Silver Eagles were purchased in the first quarter of this year, the highest amount since the coin made its debut in 1986.

I think that we may be seeing the start of something big in silver

Supply Squeeze. The 2009 numbers aren’t in yet, but in 2008, silver saw its demand decrease by 0.9% to 832.6 million ounces. In fact, both the price and demand for silver have been trending higher for the past 10 years. It’s also good to remember that the average bull market in commodities lasts around 17 years.

Silver miners couldn’t meet demand in 2008 — only about 657 million ounces came out of the ground — a gap of 175 million ounces. So, the world relied on recycling to fill the gap.

Industrial Demand for Silver. Silver is a precious metal, but it’s also an industrial metal — used in everything from flat-screen TVs to zinc-lithium batteries. The industrial uses for silver keep growing and growing. Silver is not only beautiful, it’s malleable, it’s the best conductor for electricity and heat of all metals, it’s reflective, and it’s even an anti-bacterial agent. It’s a chemical catalyst, and approximately 700 tons of silver are consumed every year in the production of plastics.

New industrial uses for silver come along all the time. For example, one new source of silver demand comes from the electronics industry and the use of silver in photovoltaic applications for solar energy panels.

What’s more, silver’s industrial status means that 50% of global production is consumed — used up, never to be seen again — every year.

Silver is trying to break out now. Maybe it will head lower. But if it can break out to the upside the next stop should be its old high at $21.44. And if that overhead resistance shatters, we could see $25 silver pretty shortly after that.

This may sound like pie in the sky, especially because silver is up 21% from its low this year on February 8th, and up a whopping 103% from its low back in November 2008.

But take a longer-term view. The historical ratio of the price of gold to silver is 16 to 1. Moving closer to that would give us a silver price of around $70 an ounce! I’m not saying we’re going there. I’m saying there’s no reason we can’t.


Silver Short Squeeze: Once in a Lifetime Opportunity
By Jason Hamlin
Silver has been performing very strongly over the past month, has broken through previous resistance and continues to move higher despite the large concentrated short position by commercial traders (JPM and HSBC) on the Comex. There are signs that an increasing number of hedge funds and individual investors are demanding delivery of physical silver as the dangers of unallocated paper promises become more widely understood. So far this month, 453 silver contracts have been delivered on the Comex or 2.3 million ounces. There is a similar story with the ETF SLV in which nearly 15 million ounces of silver have been withdrawn since late February.

These funds and investors seem to be following the lead of Greenlight Capital, which shifted their gold position from GLD to physical gold during July of 2009. Passport Capital has also signaled their intention to take physical delivery in its $1.2 billion Global Strategy hedge fund rather than owning the ETF GLD. When funds with this amount of capital begin to shift into a relatively small precious metals market that is overly leveraged by naked shorts, the potential for an explosive short squeeze increases significantly.

Given the massive leverage (as high as 100-1) used by the banks that are naked shorting silver with paper contracts on the Comex, speculation has increased that a group of wealthy investors, Asian traders or funds may look to exploit this long-running manipulation scheme. This would be accomplished by demanding a huge quantity of the physical metal be delivered all at once, thus forcing the naked shorts to scramble to come up with the metal that is known to be in short supply. The short squeeze would then send the silver price blasting dramatically higher. I won’t go off the deep end and give this outcome a high probability, but it is certainly higher than it was just a few months ago and prior to the widespread manipulation exposure given by CFTC whistleblower Andrew Maguire, GATA and most recently the New York Post.

All of this adds up to what could be a once-in-a-lifetime opportunity to generate massive returns in a short time period. If you are not already invested in silver, you just might miss the ride.


From Ed Steer’s Gold & Silver Daily
On Friday, April 17th
Since February 26th... 16.7 million ounces of silver have been withdrawn in ten consecutive tranches. That's 5% of SLV's silver removed by 'authorized participants'... almost ten days of world silver production. What entity [or entities] needed silver that badly, or in such a hurry... and how tight must the supply line be if they have to resort to getting it from SLV? I can tell you this, dear reader, if the silver users who have withdrawn this metal from SLV had to source it from the Comex... I can absolutely guarantee that the price of silver would not be $18.50 spot right now!

On Wednesday, April 21st
...the U.S. Mint had some sales to report. They showed that another 10,000 one-ounce gold eagles and another 609,000 silver eagles were sold. That brings gold eagle sales up to 43,500 for the month... and silver eagles are up to 1,756,000. Silver eagle sales are outselling gold eagles by about 40-1. You can never own too many silver eagles, dear reader.

And that goes for Canada's silver maple leaf as well.

...the Royal Canadian Mint produced 9,727,592 silver maple leafs last year. And that, dear reader, is an absolutely stunning number! It blows the old record right out of the water by many millions. She also went on to say that the mint also produced 569,000 one ounce silver coins in support of the 2010 Winter Olympic Games held in Vancouver earlier this year. There were also hundreds of thousands of other silver coins the mint produced in various levels of silver purity. So Canada has done its part in taking silver off the market.


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