Saturday, November 6, 2010

The Silver Alpha

A love affair with silver is so natural. The fundamentals are astoundingly positive and bullish in price prospects. My basic argument has been repeated many times. Industry has countless uses for silver, significant demand. But industry has only miniscule isolated uses for gold, in trivial demand. So silver wins on the Demand side of the equation. Central banks own a huge amount of gold. They frequently sell it, even through their slippery surrogate the Intl Monetary Fund. Central banks own zero silver. So silver wins on the Supply side of the equation. My motto is that gold fights the major political and financial war, but silver will ride in on a shiny white horse and take much larger spoils. That effect has already begun. Since the significant game changing FOMC meeting on September 21st, where the telegraph message delivered to the world financial markets was made by megaphone, the impact has been clear and stark. Compared to closing prices on September 21st versus October 29th, just five weeks, the silver price had risen from $20.64 to $24.56, up 19.0%. During the same timespan, the gold price had risen from $1274.30 to $1357.60, up 6.5%. My claim, a loose forecast often repeated, has been that the silver breakout gains would be at least double and possible triple the gold gains. We have seen exactly that in recent weeks.

An extremely fuzzy factor is the CFTC attention. The Commodity Futures Trading Commission is supposedly investigating the Big Four Banks for gigantic concentrated short positions in the silver market, for naked shorting of silver, and for collusion with other banks. Commissioner Bart Chilton has made a lot of noise, but has done next to nothing. Some find encouragement, an absurd notion in my view. Let me know when court injunctions are slapped at JPMorgan. Several class action lawsuits against JPMorgan have begun, also encouraging, but unclear on substance. They crop up every couple weeks, the latest citing a RICO aspect. Let me know when the full force of the USGovt regulatory bodies order JPMorgan, Goldman Sachs, Citigroup, and Bank of America to liquidate even 10-20% of their short positions. Unless and until such action occurs, the CFTC chirping is just that, noise from the managerie of obedient pets who work on short leashes at the behest of bankers. Mail room clerks do not give orders or make demands to the executive suites, not now, not ever. The regulatory chiefs are mere squires to the bankers, and will follow orders, not give them. By the way, the Big Four positions are naked short positions in all likelihood. They are immune from posting collateral, as required by the metals exchanges. So they routinely sell a stack of silver whenever the price moves have been made, like in the wee hours this Wednesday and very early at the New York open. Good Morning New York resulted in almost a full $1.00 drop in the silver price, undoubtedly another naked short raid before the QE decision by the US Federal Reserve and its statement. The full impact of the ambush decline was reversed by afternoon. Right before important events deemed negative nasty to the USDollar, the Big Four go wild with naked shorts, called ambushes. The evidence, the trails, the fingerprints are easily seen except by blind men, official gold industry wonks, and USGovt regulators. (more)

Hirsch: Oil Crisis Is Coming Soon, to a World Near You

Oil guru Robert Hirsch says peak oil production will arrive a lot sooner than most of the world would like.

“World oil production hit a plateau in mid 2004 and stayed in a narrow fluctuation range in spite the Great Recession,” Hirsch said during a recent presentation. “We believe that world production will likely stay on its current plateau and ... decline in 2 to 5 years.”

Hirsch’s personal preparedness measures include being completely out of bonds, almost out of stocks, adding some gold and annuities, moving closer to mass transit and shopping — and trading in his gasoline guzzler for a Prius.

World GDP and world oil-production growth rates have been tightly coupled for decades, Hirsch notes. However, he believes the correlation will work in reverse: Declining world oil production will drag down GDP.

“Our best-case mitigation does not overtake expected world oil-production decline for over a decade,” Hirsch says. “If the rate of world oil-production decline is higher that 4 percent, the challenges will be even worse; if lower, then less.” (more)

HES Radio: World Financial Report

The World Financial Report brings you timely information on the worlds most exciting markets like oil, precious metals, currencies, commodities and hard money markets like very rare color diamonds and collectibles. The World Financial Report makes predictions and gives investment advice and has been very successful in identifying trends in the marketplace.

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Bank Holiday Rumors Swirl Amidst Currency Crisis

With the world on the verge of a currency war as the Federal Reserve follows through on its dollar-killing quantitative easing program, rumors are once again swirling of a “bank holiday,” during which US citizens will be prevented from withdrawing money or at least limited in the amount of the withdrawal they can make.

The bank holiday is rumored to be set for next week, with Thursday November 11 pinpointed as the likeliest date.

According to radio host Steve Quayle, a pastor was told by one of the managers of a prominent east coast bank that banks would close for an undetermined amount of time, and that when they reopened, “all withdrawals by checks would be limited to $500 per week – no matter what the balance in the account is.”

Limiting the amount of money customers can withdraw or blocking the facility altogether reminds us of a Citigroup advisory that was sent to customers at the start of the year which stated that the bank reserved “the right to require (7) days advance notice before permitting a withdrawal from all checking accounts.” The story stoked fears that financial institutions were preparing for bank runs.

On his website, Quayle asks, “When in U.S. History has a sitting President taken off on an overseas trip for an extended period of time, with 65 airplanes, 34 warships reportedly 3,000 people including his friends and cohorts, at the pinnacle of an economic and political upheaval?” (more)

Gold set to extend post-Fed gains; peak in 2011: Reuter's poll

Gold's record-breaking climb should continue for at least six months, corresponding to the planned duration of the Federal Reserve's monetary stimulus, according to a Reuters poll conducted on Thursday and Friday.

Two out of three respondents see gold prices topping out between $1,400 and $1,500 an ounce on an interim basis, with most analysts surveyed expecting prices to peak during the first or second quarter of next year.

Thirteen of the 20 analysts, traders and fund managers polled by Reuters said the price of bullion will remain in an uptrend well into the first half of 2011, after the Fed on Wednesday unleashed a program to buy $600 billion of government bonds in a new round of quantitative easing (QE). (more)

The Fed's QE package has reinforced the argument for holding gold, as it pushes the dollar firmly onto a downward path and raises the risk of inflation.

The Economist - 6th November - 12th November 2010

The Economist is a global weekly magazine written for those who share an uncommon interest in being well and broadly informed. Each issue explores the close links between domestic and international issues, business, politics, finance, current affairs, science, technology and the arts.
In addition to regular weekly content, Special Reports are published approximately 20 times a year, spotlighting a specific country, industry, or hot-button topic. The Technology Quarterly, published 4 times a year, highlights and analyzes new technologies that will change the world we live in.

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Fed's Trillion$ Purchase of Bonds is a Fraud

Fed's Trillion$ Purchase of Bonds is a Fraud

Dick Fojut writes:

The nine PRIVATE Banks that OWN the (so-called) "Federal Reserve" aren't going to "buy" a (near) Trillion in U.S.Government Bonds using any "money" of their own! Their "purchase" is a FRAUD!

At a cost to the "Federal Reserve" Banksters of only ink, paper and labor, our Treasury's hired printing presses will print off a TRILLION in "Federal Reserve" paper "Dollars" - backed by nothing but thin air!

With that Trillion in "legal" play-money (manufactured out of thin air) - the Fed Banksters will "purchase" a Trillion in REAL Government Treasury Bonds - obligating future American taxpayers to re-pay the Fed Banksters a Trillion PLUS Interest, in REAL money!

At least the Chinese purchased US Bonds using their own REAL cash! (more)

Largest 15 US States are Spending Over 220% of Their Tax Revenue

The big news this week in terms of ginormous government transfer payments is, as usual, out of the Fed, as it embarks on an equally ambitious and ill-fated mission to buy $600 billion of US Treasury debt. Unsurprisingly, it’s not the only immense transfer of wealth taking place between governmental bodies. As spotlighted by Meredith Whitney, CEO of the Meredith Whitney Advisory Group, the feds are continuing to subtly bailout state governments at record levels and in an ongoing and unsustainable fashion which she describes in a recent WSJ opinion piece.

From The Wall Street Journal:

“What [...] investors fail to appreciate is that state bailouts have already begun. Over 20% of California’s debt issuance during 2009 and over 30% of its debt issuance in 2010 to date has been subsidized by the federal government in a program known as Build America Bonds. Under the program, the U.S. Treasury covers 35% of the interest paid by the bonds. Arguably, without this program the interest cost of bonds for some states would have reached prohibitive levels. California is not alone: Over 30% of Illinois’s debt and over 40% of Nevada’s debt issued since 2009 has also been subsidized with these bonds. These states might have already reached some type of tipping point had the federal program not been in place.

“Beyond debt subsidies, general federal government transfers to states now stand at the highest levels on record. Traditionally, state revenues were primarily comprised of sales, personal and corporate income taxes. Over the years, however, federal government transfers have subsidized business-as-usual state spending not covered by state tax collections. Today, more than 28% of state funding comes from federal government transfers, the highest contribution on record. (more)

15 Most Undervalued Stocks in Rally Mode

The following is a list of stocks in rally mode with relatively low PEG ratios.

To create the list, we started with a universe of stocks trading 10% or more above its 20-day SMA, 20% or more above its 50-day SMA, and 30% or more above its 200-day SMA. We then narrowed down the universe by only focusing on stocks with relatively low PEG ratios (i.e. a measure of valuation)

PEG and momentum data sourced from Finviz. Full analysis below.

The list has been sorted by the PEG ratio.

1. Royal Caribbean Cruises Ltd. (RCL): General Entertainment Industry. Market cap of $8.45B. PEG ratio at 0.66. The stock is currently 11.91% above its 20-day SMA, 26.3% above its 50-day SMA, and 33.78% above its 200-day SMA. Short float at 7.87%, which implies a short ratio of 3.84 days. The stock has gained 94.02% over the last year.

2. China Yuchai International Limited (CYD): Diversified Machinery Industry. Market cap of $983.93M. PEG ratio at 0.69. The stock is currently 17.21% above its 20-day SMA, 33.73% above its 50-day SMA, and 51.92% above its 200-day SMA. Short float at 2.62%, which implies a short ratio of 1.57 days. The stock has gained 150.71% over the last year.

3. Questcor Pharmaceuticals, Inc. (QCOR): Biotechnology Industry. Market cap of $773.39M. PEG ratio at 0.77. The stock is currently 20.37% above its 20-day SMA, 22.76% above its 50-day SMA, and 42.32% above its 200-day SMA. Short float at 12.29%, which implies a short ratio of 9.64 days. The stock has gained 174.01% over the last year. (more)

Bloomberg Businessweek - 08 November - 14 November 2010

Bloomberg Businessweek - Worlds leading business magazine. Timely, useful, provocative, innovative. Each issue of Businessweek features in-depth perspectives on the financial markets, industries, trends, technology and people guiding the economy. Draw upon Businessweeks timely incisive analysis to help you make better decisions about your career, your business, and your personal investments.

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