Tuesday, January 25, 2011

Watch This Hedge Fund Manager's Terrifying Video Of What The World Will Look Like When The Dollar Collapses

Damon Vickers, a hedge fund manager in Seattle, has made a terrifying video (embedded below) of what might happen if the world markets crash. He says it happen any day now, at any time -- even right now!

Because there's a risk someone might take Vickers' apocalyptic warning too seriously, we'll tell you the good news ahead of time. Vickers has written a book that has all the answers. Just buy the book, and you'll be fine.

(Also, if possible, go back in time to June and follow the genius advice he gave on CNBC, which totally panned out exactly as he planned.)

If you don't have time to watch the video, Vickers' apocalyptic prediction goes a little something like this:

The Fed prepares to do its QE trick at the Wednesday bond auction, pushing the dollar down even more. China announces that it won't buy any more U.S. notes until the U.S. stops devaluing the dollar. The news hits the wire... Traders around the world become net-sellers of equities, bonds, and Western currency... No one has any liquidity, except China... Within minutes, electronic trading systems short circuit under the load of sellers... Some traders choose oblivion, others join the rash of suicides, others slip away quietly and are never heard from again... Panic sweeps the globe... most nations activate their police and militia to quell angry rioters... Elsewhere, the fisherman still fishes, and the farmer still hoes his fields, and the baker still bakes his bread... The world now shares a common currency... and prepares for a global currency exchange and debt re-set.

-- Which all happens in 14 days. (But remember, get the book and you'll be fine.)

0 What Happened to Silver?

The silver market has been extremely volatile as of late, and today’s action has proven no different. After peaking at 27.95 overnight, silver hovered around unchanged before dropping precipitously for no reason, ending the day down almost 2%.

The large intraday price drop is certainly cause for concern among investors, but digging into the day’s volume action may be a bit more revealing.

Both silver futures and the SLV displayed average to light volume today. The silver futures traded ~56.4k contracts compared to an average of 58.8k contracts over the last 45 days. The SLV traded 21.99 million shares compared to an average of 27.25 million shares.

What this all means is that the conviction in the selloff of silver appears to be waning. Even in the face of another big selloff in silver, with no reason in sight, silver traders did not panic and begin selling into the swoon. Rather, it appears that most holders stood pat and did nothing.

Most traders like to see high volume behind either a downside or upside breakout in order to confirm its conviction. Furthermore, they view decreasing volume behind a continuing trend as a sign that a reversal is imminent. The tailing off of volume behind silver’s selloff is an interesting phenomenon that will have to be monitored. (more)

Inflation-Protected Bonds Diverge With Forecasts for 1.7% Rise in Prices

There has been no better place in the U.S. government bond market since 2008 than in debt that protects against faster inflation. Now, traders say the securities may be poised to fall as consumer prices rise too slowly to justify the gains.

Treasury Inflation-Protected Securities returned 17 percent the last two years, compared with gains of 1.9 percent in Treasuries, Bank of America Merrill Lynch indexes show. Yields on 10-year TIPS show bondholders expect the consumer price index to increase 2.17 percentage points a year on average over the life of the debt. The rate rose 1.5 percent in 2010 and is forecast to climb 1.7 percent this year, based on a Bloomberg survey of more than 60 economists.

“We’re nowhere near any inflationary type of levels,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s private wealth unit in New York. “There’s a lot of slack in the U.S. economy, especially in the labor market. It’s too soon to get too bullish on TIPS.” (more)

BNN: Investing in Gold and Silver with Eric Sprott

Do gold and silver still retain their lustre as an investment? BNN asks Eric Sprott, CEO, Sprott Asset Management.

click here for audio

Ultra Petroleum: A Natural Gas Stock to Keep Your Portfolio Warm

As cold weather moves in and grips the Northeast, natural gas investors are increasingly boosting exposure to producers benefiting from the winter season storage drawdown.

Despite overall U.S. natural gas in storage remaining 1.7% above the 5-year average, national storage remains within the 5-year range, with east coast storage running 5.7% below normal and west coast storage in line at 0.3% above average.

Cold temperatures support natural gas prices, with last week’s storage draw the 6th highest on records dating back to 2002. In the week ending January 13th, the average temperature in the lower 48 states came in at an average 28.3 degrees, down 6.4 degrees from the prior week and 4.7 degrees below historical norms (National Weather Service’s Degree Day Data).

The Northeast remains colder than usual. The average January low in Boston is 22 degrees while the average high is 36 degrees. In the coming 10 days, Boston is expected to see an average low of 16.8 degrees and an average high of 28 degrees. The average Boston observed temperature over the past two weeks was an average 21-degree low and an average 32-degree high. (more)

Silver in backwardation, set to move up

Although the silver price has declined by 11% over the past three weeks, tightness in the physical market continues as the metal is again in backwardation, i.e. the spot price is higher than the futures price.

James Turk of GoldMoney provided the following comments to King World News: “Silver is in backwardation which is an extremely important development. Backwardation happens regularly in most commodities, but it is rare in the precious metals.”

“Silver is in backwardation not just in the short-term, this time it is extending twelve months forward! The last time this happened Eric was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks.

“A similar type of move would clearly put silver well above its previous high. What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.”

Also, Goldcore alerted us to another positive development in the silver market, reporting a massive increase in silver bullion demand from China, with the country’s imports surging fourfold in 2010. As on so many other fronts, China is turning out to be a game changer.

UN wants new global currency to replace dollar

In a radical report, the UN Conference on Trade and Development (UNCTAD) has said the system of currencies and capital rules which binds the world economy is not working properly, and was largely responsible for the financial and economic crises.

It added that the present system, under which the dollar acts as the world's reserve currency , should be subject to a wholesale reconsideration.

Although a number of countries, including China and Russia, have suggested replacing the dollar as the world's reserve currency, the UNCTAD report is the first time a major multinational institution has posited such a suggestion.

In essence, the report calls for a new Bretton Woods-style system of managed international exchange rates, meaning central banks would be forced to intervene and either support or push down their currencies depending on how the rest of the world economy is behaving.

The proposals would also imply that surplus nations such as China and Germany should stimulate their economies further in order to cut their own imbalances, rather than, as in the present system, deficit nations such as the UK and US having to take the main burden of readjustment. (more)

The College Degree Scam

The cost of a college degree has skyrocketed in recent decades, rising 439% since 1982 (below, left) according to the Bureau of Labor Statistics as reported by CNN Money in Is College Still Worth The Price?

For more than two decades, colleges and universities across the country have been jacking up tuition at a faster rate than costs have risen on any other major product or service - four times faster than the overall inflation rate and faster even than increases in the price of gasoline or health care (see the chart to the right). The result: After adjusting for financial aid, the amount families pay for college has skyrocketed 439% since 1982.

It is not an accident that I date the Empire's decline to the early 1980s. Even as the cost of college soars, it remains true that there are considerable advantages in having a degree in terms of earnings (above, right). If we look at the BLS unemployment numbers, Table A-4 indicates that in December, 2010, the seasonally adjusted jobless rate for those with a Bachelors degree or higher was only 4.8%. Clearly, there is significant advantage in having a degree if you want a job—any job, good paying or not. (more)

Food Crisis II

A story I’ve been warning about for years is making sensational headlines right now.

It’s a story most people don’t realize could make a huge impact on all of our portfolios in a number of ways.

“US Crop Stock Forecasts Deepen Fears of Food Crisis” read a recent Financial Times headline. The US government cut its estimate for key crops. This came only a week after the UN warned the world faces “food price shock.” Corn and soybean prices jumped and now sit at 30-month highs. Inventories are very tight. Corn is up 94% since June!

And the world worries about a repeat of 2008, when food riots erupted in poor countries around the world.

This has been in the works for a long time. It was there for all to see. The ratio of arable land to people has been falling for decades. Gains in crop yields have slowed. Population has expanded and income levels have grown. Diets have shifted. More people are eating more meat, which is much more grain-intensive to produce.

And the love affair with biofuels puts food production in direct competition with energy. Plus, there are water scarcity issues affecting food supply. My readers have made tremendous gains from this trend by owning shares of agricultural fertilizer producers Potash (POT) and Mosaic (MOS). (more)

Euro Rises Against Dollar, Extending Two-Week Rally

The euro rose against the dollar Monday as traders seized on hawkish comments from European Central Bank president Jean-Claude Trichet.

The euro bounced around a narrow trading range throughout the morning before breaking higher against the dollar after Trichet reiterated in a Wall Street Journal interview that the central bank would respond to ongoing inflation by raising interest rates. The higher rates would make the euro a more attractive investment option than the lower-yielding dollar and yen. The U.S. and Japan are expected to hold their interest rates near zero for the foreseeable future.

"Trends continue in the euro's favor," said Steven Barrow, head of G-10 strategy at Standard Bank in London.

Trichet first floated the idea of a rate hike two weeks ago, helping set off a sharp rally in the euro. The euro has also been buoyed recently by passable bond auctions in Portugal and Spain, two countries which market participants consider susceptible to the ongoing sovereign-debt crisis.

The euro is up about 6% since hitting a four-month low on Jan. 10.

Traders also received another batch of relatively upbeat economic data from the euro zone. Private-sector growth accelerated to a six-month high in January. Growth in the services sector helped offset a modest slowdown in the pace of manufacturing expansion in the 17-nation bloc. (more)

How The Federal Reserve And The Zombie Banks Are Monetizing The National Debt Right Before Your Eyes

Governments spend money. They spend money on social programs to keep the people docile and happy, wars to keep up the illusion of safety and security, and—almost as an afterthought—infrastructure. Ordinarily, they get the money for all of these things from taxes and other fees that the government collects. On the other hand, central banks print money. Most of the world’s economies depend on fiat currency—currency that has value because someone says it has value. The person who says it has value is the central bank. They are the custodians of the currency—they take care that it retains its value.

Tons of people say that a fiat currency is unstable, and doomed to fail, and that we will all rue the day that we accepted that abomination into our lives!—and blah-blah-blah, rant-rant-rant.

But in most cases—all cases, actually, regardless of what the tin-foil hat brigade might rant—fiat currency works like a charm. The proof of this is the last 40 years: All of the world’s major currencies have been fiat since at least 1970. The dollar has been fiat since 1973, and by certain definitions, fiat since 1933, or even 1913—and it’s still around. That’s been because of the Federal Reserve (the U.S.’s name for its central bank). (more)