Friday, October 30, 2009

Silver Unmasked

Most individuals have no clue about the dynamics of silver, thinking there is an infinite supply of it both above and below ground. But those savvy investors who incorporate commodity based stocks in their portfolios likely own the silver ETF (SLV) or silver miners with a high degree of leverage to the price of silver. The largest of this group include Silver Wheaton (SLW), Pan American Silver (PAAS), Coeur d'Alene Mines (CDE), Silver Standard Resources (SSRI), Hecla Mining (HL). There are also numerous junior and exploration companies that will provide extraordinary returns over the long term.

Silver is often thought to be a metal and little else. It is often assumed that silver is rather cheap due to the lack of scarcity. But both of these assumptions don't reflect the true underlying dynamics. (more)

Commetary on Gold , Dollar and equities

Market Cheers Over Ugly GDP Report

Today the market is cheering over what is actually an ugly report.

A misguided Cash-for-Clunkers added a one-time contribution of 1.66 percentage points to GDP. Auto sales have since collapsed so all the program did is move some demand forward.

Government spending increased at 7.9 percent in the third quarter which is certainly nothing to cheer about.

Personal income decreased $15.5 billion (0.5 percent), while real disposable personal income decreased 3.4 percent, in contrast to an increase of 3.8 percent last quarter. Those are horrible numbers. (more)

BNN Market Call with Jaime Carrasco, investment advisor, Blackmont Capital.

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Stock analysts issue 'Black Tuesday' warning Trends on anniversary of 1929 collapse indicate markets on verge of 'crash'

On this 80th anniversary of the "Black Tuesday" stock market collapse, some analysts are experiencing déjà vu, warning a major crash in the stock market is imminent.

Graham Summers, senior market strategist at OmniSans Research, wrote in the firm's daily e-letter yesterday that the markets may finally be on the verge of the crash he has been predicting for more than two months.

"Well, judging from the market's action today, I believe we may be within 48 hours of getting the "Official Sell" signal I've been waiting for," he wrote in "Gain, Pains, and Capital." (more)

Gold to Rise to $2,000 Amid ‘Massive’ Inflation, Superfund Says

Gold may rise to a record $2,000 an ounce in the next three years as investors hedge against “massive” inflation sparked by governments printing money, according to Superfund Financial Singapore Pte’s Aaron Smith.

“In the next few years, after the deflation cycle, we’ll see massive inflation,” Managing Director Smith, 30, said in an interview. “Soon, when you go to buy a cup of coffee, you’ll pay $20 or $30 because the dollar won’t be worth anything.”

The company’s Superfund Green Gold A Fund, which has more than doubled since its inception in 2005, has lost 15.6 percent this year because of higher volatility, said Smith, who joined in 2002. Gold rose to an all-time high this month as governments including the U.S. boosted debt to combat the global recession. (more)

How 56.5 Million Households Live

The recent American Consumer Survey had some thought provoking data regarding the typical American household. Wages over the past decade have been stagnant. At least that is what is propagated in the common datasets but in reality, not only has income not grown it has actually declined. The U.S. dollar during this time has been crushed as well. So incomes moving in a horizontal fashion may appear to be steady for Americans, but in reality the purchasing power has fallen due to inflation (not recently) and the declining dollar. Think of the rising cost of housing, healthcare, food, and automobiles. In the last decade, even after the housing bust, prices are still higher yet incomes still lag. (more)

Has the S&P 500 Topped Out For the Year?

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Blow to Nymex as Saudis drop benchmark

Saudi Arabia yesterday decided to drop the West Texas Intermediate oil contract as the benchmark for pricing its oil, dealing a blow to the New York Mercantile Exchange.

The decision by the biggest oil exporter could encourage other producers to abandon the benchmark and threatens the dominance of the most heavily traded oil futures contract.

The move reveals the growing discontent of Riyadh and its US refinery customers with WTI after the price of the benchmark became separated from the global oil market this year.

The surge in oil inventories in Cushing, Oklahoma, where WTI is delivered into America's pipeline system, depressed the value of the WTI contract against other benchmarks, throwing the oil market into disarray.

In January, WTI, which usually trades at a premium of $1-$2 (U.S.) a barrel to Brent, fell sharply, leaving it at a discount of almost $12 - a record gap. (more)