Tuesday, February 15, 2011

No Surprise

Stocks fall after surprisingly weak retail sales
NEW YORK (AP) -- A surprisingly weak retail sales report drove stocks lower on Tuesday, giving the Dow Jones industrial average its second straight day of losses.

The Commerce Department said Tuesday that retail sales rose just 0.3 percent in January, the smallest increase since June and half of what economists had predicted.

Kim Caughey Forrest, equity research analyst at Fort Pitt Capital Group, said higher prices for gasoline and raw materials are beginning to be passed along to consumers. That's hurting retail sales and spending, she said.

"Without wage gains," she said, "people are going to buy less."

Surprisingly weak. Why didn't I find it surprising? Kim is brilliant. Why didn't the President bring her in as his economic adviser?

World Bank: Food prices at "dangerous levels"
ST. LOUIS (AP) -- Global food prices have hit "dangerous levels" that could contribute to political instability, push millions of people into poverty and raise the cost of groceries, according to a new report from the World Bank.

The bank released a report Tuesday that said global food prices have jumped 29 percent in the past year, and are just 3 percent below the all-time peak hit in 2008. Bank President Robert Zoellick said the rising prices have hit people hardest in the developing world because they spend as much as half their income on food.

"Food prices are the key and major challenge facing many developing countries today," Zoellick said. The World Bank estimates higher prices for corn, wheat and oil have pushed 44 million people into extreme poverty since last June.

The report comes a day before Finance ministers and central bank chiefs from the Group of 20 leading economies meet in Paris. Zoellick said he's worried some countries might react to food inflation by banning exports or implementing price controls, which would just aggravate the problem.

Nice call, way to stay ahead of the curve Robert... "I'd say 'ol chap, looks like the horse is already out of the barn. A bit late to be closing the door, wouldn't you say old man?" Bumbling Ben bernanke's monetary policy is what's really aggravating the problem...though he refuses to admit it.

Global Demand for U.S. Assets Declined in December
Global demand for U.S. stocks, bonds and other financial assets fell in less than forecast in December as the outlook for the economy brightened, figures from the Treasury Department showed today.

Net buying of long-term equities, notes and bonds totaled $65.9 billion during the month, compared with net buying of $85.1 billion in November, according to data released today in Washington. Purchases were forecast to decline to $40 billion, according to the median of five estimates in a Bloomberg News survey.

A polished turd is still a turd...

COMEX silver inventories at 4 year lows
The gradual drain of COMEX silver inventories seen in recent months continues and COMEX silver inventories are at 4 year lows. Total dealer inventory is now 42.16 million ounces and total customer inventory is now at 60.68 million ounces, giving a combined total of 102.847 million ounces.

The small size of the physical silver market is seen in the fact that at $30 per ounce, the COMEX silver inventories are only worth some $3 billion. The US government is now paying some $4 billion a day merely on the interest charges for the national debt. It is also the same value as Twitter’s new venture round of financing or Ford’s debt pay down in the first quarter.

Talk of a default on the COMEX is premature but the scale of current investment demand and industrial demand, especially from China, is such that it is important to monitor COMEX warehouse stocks.

Current Silver Definition Move Not Like the Others
By Gene Arensberg
Please consider the following.

•In the 2004 DM the Big Sellers of silver futures, the combined commercial traders, were willing to take the short side of silver futures to as high as 91,212 contracts (456 million ounces in December 2004 or more than 75% of all contracts open).

•In the 2006 DM the combined COMEX commercial traders were willing to take the short side of a net 87,195 contracts (436 million ounces peaking in December of 2005 and more than 60% of all contracts open).

•In the 2008 DM the Big Sellers were confident enough in lower silver prices to take the short side of up to 75,790 COMEX contracts (379 million ounces in February of 2008, but then only a little over 40% of the total open interest).

Today, with silver at the highest price yet for this silver bull market on a COT reporting Tuesday, the combined commercial futures traders are “only” willing to take the short side of 51,117 contracts (255 million ounces February 8 and “only” about 37% of all contracts open even though silver is near 30-year highs). Compare to the three DMs above.

Even with silver trading at $30 the ounce the largest futures sellers are not willing to sell nearly as much paper silver into the futures markets as they were in any of the prior three DM examples. One could argue that part of that could be simply that silver is at a higher price now. However, do we need to point out that the same sellers of silver are also the sellers of much more expensive gold futures? And, do we need to point out that with gold near all time highs recently those Big Sellers of precious metals had taken the short side of near-record numbers of gold contracts (Sept 2010, 302,740 contracts net short). And, do we need to point out that in the previous three DM rallies for silver, which all answered rallies for gold that the Big Sellers were then LESS net short gold in each of those rallies than they were in September – the exact opposite of the silver Big Seller story?

The point is that this particular DM is different. It is historic in size, it is definitely telling us that SOMETHING HAS CHANGED in the tiny silver market and it behooves all of us to pay attention to just how well bid any future dips in price are. If we intend to game the next leg higher for silver metal, we’d probably better think in terms of being willing to pay a bit more than we’d “like” at least for the initial tranche.

Silver Is on the Brink of a Breakout by Hyperinflation

Why Silver Backwardation Matters by Hard Assets Investor

Watch the Gold/Silver Ratio
By James Turk
February 12, 2011 – In precious metal bull markets, silver outperforms. Its price climbs at a faster rate than gold’s price. The reverse happens in bear markets. Silver’s price drops at a faster rate than gold’s price. The following chart of the gold/silver ratio illustrates this phenomenon.

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