Friday, April 15, 2011

Silver trumps SLW

The most interesting equity move lately has not been Google losing their shirt, nor has it been Zipcar making the post peak production of oil look like a joyride, nor Goldman's capitulation on commodities.  It is the fact that SLW has given up that huge margin of equity that it had above the price of physical silver.  This does not surprise me, as the shell game of the President's Working Group on Financial Markets is very close to being up.

The Fed is running out of leverage.  They have turned trillions of dollars over to buy toxic assets, they have marginalized their whole gold bullion portfolio and leveraged it all the way up.  They are losing money this and that way on MBS.  The only thing they had going for them is that they knew to buy the dip in the Spring of '09.  They bought SLW then, and they have been selling those shares lately.  Soon they will be out of that equity position.

What will the PPT (the abbreviation for the "Group") do when their equity position on SLW and various gold miners is up?  Who knows, but crashing the market will do more than make them look like fools.  It will scare the other Central Banks of the world out of dollars.  Each bank has equity positions, most notably the BOJ's Shirakawa who owns ETFs.  The world over is ready for any bluff that the PPT try for.

So here the game sits, the board almost done, with the debt ceiling on pace to be razed in a matter of weeks if not days; the gig is up.  No more opportunities for the PPT, and the Fed itself, other than to let its gold vault do the dirty work.  The loans that they have spun can only stay solvent if gold appreciates.  Price target set at way over $1850, but $1850 is now in sight.

There is one other thing that can happen.  Silver could be sequestered and used as an asset alongside gold.  This would likely set in motion a new currency.  The IMF and World Bank would become involved.  This will crush the Neo Keynesian end game, rates could rise, killing the dollar for good.  Who knows what would happen with equity positions in corporations, but with the admittance by finance that there is no sound reserve currencie, precious metals and oil will surely benefit, because they do have real value.  They are real assets.  Oil is the lifeblood of the economy, and precious metal is real monie.


  1. You are starting to make sense to me.

  2. Hey Joe. Goldman's cheap talk and all the central bank's hacks indeed can indicate they're short of money.

    On the other hand, bankstaz are still not in the mode of asking themselves Hamlet's question so it's still all about money. If it's about money - you don't care how you appear to public. That means Protectors could cut oxygen supply from the coma patient for a while, causing moderate correction. Not only would they frontrun everyone (especially their own customers), but that allows them to reenter long positions on, for example, SLV. Load up on Brent and friends. COVER some Silver shorts.

    Only question is whether they could afford Gold correcting to, say, 1100. Would that bust their loans if it recovers quickly enough ? Massive buy limits set at 1150, a bit of market panic and then we're back to normal. Nothing has changed (perhaps a few uninformed and overleveraged sheep losing some fiat) - your only cost is to stop working for a while (PPT). Benefit - chance (maybe the last one) to run for commodities and - perhaps more significantly - since crash happened and everybody is on their knees, screaming for more drugs - QE3 portal opens.

    Of course PIMCO could have been used as banks' mouth to tell everyone that they're damn serious about ending QE after June. But on the other hand Gross is long cash, and slightly net short bonds - to me it could mean temporary bond crash (you would have gone full short if you believed it's really the end of long bond bull market). In that scenario GL would be right, but in long term (skipping next several months).

    So the only strong argument speaking against market crash is BRICs' investment in US.

    So are we going straight to 1850 or with some breaks (1600 by end of June, then down do 11XX, 12XX or 13XX, then up again) ?