Tuesday, May 15, 2012

Gold And Silver: BE RIGHT, AND SIT TIGHT

"I do know one thing though. Every single holder of the “Big Silver Short” has gone belly up! It started with Drexel Burnham in the 1980′s then got passed to AIG then Bear Sterns and it now presides at JP Morgan.
If no one takes the torch from JPM we will see the end of Silver market manipulation very soon."
 -Bix Weir, www.RoadtoRoota.com



It was the change in my own attitude toward the game that was of supreme importance to me. It taught me, little by little, the essential difference between betting on fluctuations and anticipating inevitable advances and declines, between gambling and speculating. I think it was a long step forward in my trading education when I realized at last that when old Mr. Partridge kept on telling the other customers, "Well, you know this is a bull market!" he really meant to tell them that the big money was not in the individual fluctuations but in the main movements that is, not in reading the tape but in sizing up the entire market and its trend. And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it. Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance. – Jesse Livermore




Knowing the Game
Theodore Butler | May 9, 2012

So how is the price of silver and gold set on the COMEX? The price is set as a result of the continuous competition between what are called commercial traders and speculators (aka non-commercials). However, the term commercial trader is a misnomer for the most part as these traders are usually just speculating. The way US futures markets are supposed to work is that hedgers (real producers and consumers) transfer price risk to speculators. In reality, it hardly works that way at all. Very few silver miners hedge production. Additionally, real hedgers don’t trade excessively on a short term basis and such short term trading makes up over 90% of daily trading volume in silver and gold on the COMEX (and in other markets). Therefore, the trading is between two competing speculative groups, one being called commercials.

Perhaps the best way to view the commercials is as market makers who take the opposite side of any trade the speculators desire to buy or sell as a group. There must be a long for every short and vice versa and the commercials will take the opposite side of whatever side the speculators choose. The problem is that the speculators generally are influenced by technical price signals and even those speculators who aren’t purely technical also tend to buy as prices rise and sell as prices fall. Almost all of the speculators are fiercely independent traders with no affiliation with other speculators. Even though there is no reason to suspect collusion among the speculators, the fact is that these very independent traders generally buy and sell en masse; buying on the way up in price and selling on the way down. The speculators are not trading as a group intentionally; that’s just an unintended consequence of them all relying on price changes to buy or sell. The speculators take positions because they believe each trade has the potential to be profitable.

Very much unlike the speculators, the commercials have a completely different objective. Instead of focusing on the profit potential of any individual trade, the commercials’ mission is to master and manage the speculators as a group. It’s kind of like men are from Mars and women are from Venus; the speculators and the commercials have two completely different mindsets in their respective approach to the markets. The speculators are focused on the next trade and their positions; the commercials are focused on mastering the speculators. In my opinion, the speculators have no clue or may not care that they are the target of the commercials. This gives the commercials a big advantage.

Because the commercials have a leg up on the speculators in knowing how the game is played, the commercials have been able to develop a market approach very different from the speculators’ approach. Unfortunately, many of the techniques developed by the commercials would appear to be flat-out illegal. In fact, I believe a strong case can be made that because the commercials’ approach is of managing the speculators, the net result is market manipulation pure and simple. The first definition for manipulation I uncovered on Google says it all, “exerting shrewd or devious influence especially for one’s own advantage.”

The commercials, particularly in COMEX silver and gold, have perfected a number of techniques to aid themselves in manipulating the speculators, including the ability to set prices on a short term basis, particularly when the markets are thin (overnight) and by High Frequency Trading (HFT) at other times. These techniques have been discouraged by the regulators in many markets, but not in gold and silver. Having the ability to set prices at will gives the commercials a big leg up on controlling the speculators behavior. Think of it – one group of traders (the speculators) relies on price signals to buy or sell and the other group of traders (the commercials) has gained control of the price signals. It would not be an exaggeration to view the speculators as puppets and the commercials as the puppeteers. That this set up is anti-free market goes without saying.

Perhaps the simplest proof that what the commercials are doing is illegal lies in the fact that the commercials are collusive in their actions. In fact, collusion is required for the commercials to pull off their scheme. Let me define collusion as Merriman-Webster does, “a secret agreement or cooperation especially for an illegal or deceitful purpose.” What simple proof can I give to show that the commercials are collusive? I think government data should do the trick.

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Sprott Berates Berkshire's Buffoons And Says "All Markets Are Manipulated"

Tyler Durden's picture


From the moment we all got to peek behind the over-leveraged financial system reality thank to Lehman's collapse, the-powers-that-be have made every attempt to stop this whole thing unraveling. Eric Sprott humbly suggests, when the CNBC anchor in the following clip questions recent gold price action as evidence of something wrong in his thesis, that just as Jim Grant opines, "All markets are manipulated" and that Central Banks (who are desperately trying to revive the dying system in every extreme monetary scheme possible) simply do not want to see the price of gold rising. He then notes that Silver is likely to be the investment of the next decade (although offers no strong thesis other than levered gold). Shrugging off the obfuscation from Omaha, "People who sell paper gold and paper silver can rule the markets in the short-term but physical participants will win the day in the long-run". Detailing some fundamental drivers for gold's advance, as the investment of the last decade and so for those three gentlemen (Buffett, Gates, & Munger) who missed it, I don't know that I should respect their opinion at this point in time.


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From Dave In Denver, The Golden Truth

Perhaps the Truth about Buffet's hatred of gold is best expressed in graph which shows the long term performance of Berkshire Hathaway stock priced in terms of gold - this is the market expressing it's view:


(Click on chart to enlarge)
 
(source:  link)

Priced in terms of gold, Buffet's wealth as represented by the price of his Berkshire Hathaway stock has declined 30.5% in the last three years and a staggering 77% since late 1999.  Did Warren or Charlie happen to bring up this little factoid at their annual shareholder soiree this past weekend?  Buffet's cult-like mush-brained followers slavishly follow him around lapping up any crumbs he might drop for them like the pied-piper, thus it wouldn't have mattered anyway...
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- King World News, May 10, 2012


Today Egon von Greyerz told King World News that “these are massive historic events we are witnessing.”  Egon von Greyerz is founder and managing partner at Matterhorn Asset Management out of Switzerland.  Von Greyerz also said, “investors need to be positioned for more chaos in the future.”  But first, here is what Greyerz had to say about gold:  “A lot of investors are nervous today, you can see that in the markets.  But if you look at the gold market, for example, the fact that the gold price is down 17%, in terms of dollars, from the $1,920 level and down less than 10% in euro terms, we are still consolidating at a very high level.”

Egon von Greyerz continues:  

“The 2008 correction lasted about the same amount of time, seven or eight months, but that correction was 30%.  Stepping back and looking at this minor correction, in this massive uptrend, where gold has risen twelve consecutive years, this reaction barely registers on the longer-term chart.

It was very clear fifteen years ago that the credit bubbles and the derivative bubbles were going to create a situation with either a hyperinflationary depression or a deflationary implosion and collapse.  That was so clear and predictable.

Things sometimes take a bit longer than you expect.  You know we moved heavily into gold in 2002 and instructed our investors to do likewise at $300.  The timetable of destruction was difficult to predict, but the dominos have been falling and will continue to do so in a nightmarish manner....

So, there is no reason for investors to be concerned or nervous.  If you look at a monthly chart of gold, starting in 1999, the correction in gold can hardly be seen.  This is just a normal correction, in a political and economic situation where dominos are falling because of the bubbles created by central banks.

People have to remember these are massive historic events we are witnessing.  We all expect things to happen very quickly, but things take longer than we anticipate.  Take the gold stocks as an example.  The gold stocks are now at the same level they were back in 2006, when gold was around $700. 

These mining shares are so cheap, Eric.  I’m a great believer in holding physical precious metals, and mining shares are not the same in terms of wealth preservation.  Nevertheless, the opportunity is so great that investors should position part of their assets into gold stocks because the quality shares will go up many multiples from where they they are currently trading. 

For what it’s worth, this correction may not quite be finished yet.  It could last another couple of weeks or so, perhaps longer, but it’s totally irrelevant if it does.  It just appears, for now, that there is a little bit of technical pressure which may continue for a while.”

Von Greyerz also added: “The focus will eventually shift to the United States.  We know the US bonds will never, ever be repaid with today’s money.  So what we have seen in the bond market has not been a flight to safety at all because the bonds can’t be repaid.  And as the focus shifts to the US, that bond market will be tested.

In Europe, we have seen suffering, but we haven’t had true austerity yet.  True austerity would mean they take away social benefits, they cut pensions dramatically, and that’s not happening anywhere.  People have been unhappy with the reductions so far, but that’s nothing compared to the cuts they are yet to experience.

If we have a hot summer in Europe, I could see rioting starting very quickly and spreading from country to country.  It is worrisome, but sadly, that’s where we are and it’s going to get worse.  Quite frankly, investors need to be positioned for more chaos in the future. 

If investors have cash, they should buy physical gold and silver as well as the mining stocks because they will be a lot higher in the next few years.”
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Does anybody else find it a bit "odd" that Gold's recent "top and decline" have coincided with last Fall's rise in the US Debt ceiling?  Close observation of the chart below suggests that Gold's "price" has risen substantially with each increase in the nation's Debt Ceiling.  

Folk's, THE TRUTH IS OUT THERE.  Give it time, the price of Gold must and will continue to rise...as will the Debt Ceiling:






Boehner tees up next round of debt-ceiling fight, Geithner pleads for no 'drama'

Published May 15, 2012
FoxNews.com

House Speaker John Boehner on Tuesday plans to tee up another debt-ceiling brawl, announcing that Republicans will insist on the same kinds of demands that Democrats claim brought the country close to its first-ever default last summer.

The speaker, in an address in Washington Tuesday afternoon, plans to say that when it comes time to vote on a debt-ceiling increase, he'll once again call for "cuts and reforms" greater than the amount of that increase.

"It's the right thing to do," Boehner said in prepared remarks. "This is the only avenue I see right now to force the elected leadership of this country to solve our structural fiscal imbalance."

That fight could happen by early 2013, potentially during a frantic post-election lame-duck session of Congress.

Treasury Secretary Tim Geithner, preempting Boehner's remarks, made an appeal Tuesday morning to avert that battle and simply raise the debt ceiling without the chaos.

"Only Congress, of course, can act to raise the debt limit -- and we hope they do it this time without the drama and the pain and the damage they caused the country last July," Geithner said, speaking at the Peter G. Peterson Foundation's 2012 Fiscal Summit, which Boehner will address later Tuesday.

House Democratic Whip Steny Hoyer, on Capitol Hill, also said the debt ceiling "shouldn't be a political issue," claiming Boehner knows that.

The looming debt-ceiling debate will coincide with a slew of other debates over unresolved tax and spending issues -- including the potential expiration of the Bush tax cuts.

Last summer, Republicans insisted on spending cuts greater than the amount of the debt-ceiling increase. After weeks of tense negotiations on Capitol Hill, and market turmoil, Congress struck a deal -- though that deal has had mixed results. The "super committee" charged with finding more than $1 trillion in budget savings as a product of that deal failed to reach an agreement, triggering massive automatic cuts to defense and other areas of domestic spending which Congress is now trying to fiddle with.

A Boehner aide told Fox Business Network that the speaker's office still needs to discuss with members what the next debt-limit increase might look like -- in terms of how long it would last and what kind of cuts would be demanded in exchange.

Boehner, in his prepared remarks, said he wants "real" cuts and not "gimmicks."

"We shouldn't dread the debt limit. We should welcome it. It's an action-forcing event in a town that has become infamous for inaction," Boehner said. "When the time comes, I will again insist on my simple principle of cuts and reforms greater than the debt limit increase."

The national debt is now at $15.7 trillion.
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King World News, May 14, 2012


With global stock markets tumbling, along with gold and silver, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management.  Embry discussed gold and other major markets, but first, here is what Embry had to say regarding recent derivatives turmoil:  “This makes me very uncomfortable because I’ve always been very wary of the whole derivative situation.  I believe the notional value of the outstanding derivatives is comfortably north of one quadrillion dollars.  The Bank of International Settlements changed the definition, so they said there is only $700 trillion worth of them, rather than one quadrillion.”

But it doesn’t make any difference, these (derivatives) are many, many multiples of the world GDP.  If these things get in any trouble, and I think the JP Morgan thing may be the first sign of significant trouble again, it’s fantastically important to the whole financial situation.  In a rational market the gold price should have been up $100, not down $40 in the wake of this.

I would defer to Jim Sinclair, who I have the utmost respect for on this one.  He has said for a long time that the derivative situation ‘guarantees quantitative easing to infinity,’ which is one of the great statements of all-time....

“I think this JP Morgan revelation just confirms that everything Jim’s been saying for a long time on this subject is dead right.  The fact that we will have QE to infinity would suggest that an intelligent person would be buying every single ounce of gold and silver he can get his hands on at these prices.

They are trying to sell this idea that gold goes down on the ‘risk off’ trades that we are experiencing now.  And that the ‘risk off’ buyers all go running into the US dollar and the US bond market.  I think those are two of the riskiest things on the planet.  But somehow they are still getting this ‘Pavlovian response’ that when things are bad out there, you should sell your gold and buy US bonds.  It’s ridiculous.

It’s important, at this time, that people who have been around, and have a pretty good grasp of what’s unfolding, should express their views to the public just to counteract the propaganda they are receiving from mainstream media.  It’s tough enough out there without being lied to all of the time.”

Embry had this to say regarding gold:  “What they want to do is keep it (gold) in a range.  Right now that range is $1,550 to $1,900.  Can it go below $1,550?  Sure, in the short-run it could.  But the fact is the big move coming from these levels is going to be to the upside.

Trying to pick a bottom is always a difficult thing to do.  Put it this way, you’re a lot closer to a significant bottom than you are to a top.”

Embry also added: “North America was a great place to live in the post-war era and I think it was one of the greatest eras in history.  I think a lot of us took that for granted because that’s all we knew.  It’s coming to an end.

It’s a terrible development because if you destroy the entire middle class, you are going to turn into a third-world country.  And you run the risk, in the worst circumstance, of revolution.”

This is John Embry at his finest.  Embry discusses key markets, gold, the mining shares and what to look for next.  The KWN audio interview with John Embry is available now and you can listen to it by CLICKING HERE. 
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The Silver Door Is Closing
Published on May 4, 2012 by


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TFMR Podcast #19 - Jim Willie

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