Friday, November 6, 2009
Silver: Declining supply, increasing demand
In 1900 there were 12 billion ounces of silver in the world. By 1990, the internationally respected commodities research firm CPM Group say that figure had been reduced to around 2.2 billion ounces of silver. Today, that figure has fallen to less than 1 billion ounces in above ground refined silver. It is estimated that more than 90% of all the silver that has ever been mined has been consumed by the global photography, technology, medical, defence and electronics industries. On current supply/demand trends, the amount of above ground refined silver is projected to shrink to even lower levels in the coming years. Industrial demand has been outstripping mining supply for most of the last 20 years, driving above ground supply to historically low levels. Few in the investment world are aware of this important fact. (more)
When the U.S. Dollar Rallies, the Stock Market Will Crash
Interest rates. The Fed does not need slinky women in plunging necklines to peddle money. All it needs is low interest rates. When rates are pushed lower than the rate of inflation, the Fed provides a subsidy for borrowing. This is not as hard to grasp as it sounds. If I offered to give you $1.00 for very 90 cents you gave me in return, you would buy as many dollars from me as you could.
The Fed operates the same way. It generates market activity by creating incentives for borrowing. Borrowing leads to speculation, and speculation leads to steadily rising asset prices. This is how the game is played. The Fed is not an unbiased observer of free market activity. The Fed drives the market. It fuels speculation and controls behavior by fixing interest rates.
When Lehman Bros flopped last year, markets went into freefall. A sharp correction turned into a full-blown panic. The bubble burst and trillions of dollars in credit vanished in a flash. Trading in exotic debt-instruments stopped overnight. A global sell-off ensued. Markets crashed. For a while, it looked like the whole system might collapse. (more)
The Fed operates the same way. It generates market activity by creating incentives for borrowing. Borrowing leads to speculation, and speculation leads to steadily rising asset prices. This is how the game is played. The Fed is not an unbiased observer of free market activity. The Fed drives the market. It fuels speculation and controls behavior by fixing interest rates.
When Lehman Bros flopped last year, markets went into freefall. A sharp correction turned into a full-blown panic. The bubble burst and trillions of dollars in credit vanished in a flash. Trading in exotic debt-instruments stopped overnight. A global sell-off ensued. Markets crashed. For a while, it looked like the whole system might collapse. (more)
Another View At Goldman's Trading Perfection And Statistical Improbabilities
When a firm's trading performance challenges not only all preconceptions of realistic trading, but also of statistical distributions, one can merely stand back and watch in awe. Attached is a graphic of what a rigged, backstopped and manipulated market is all about. The chart demonstrates Goldman's YTD trading track record: out of 194 trading days in 2009, the firm has made over $100 million on 116 occasions! This alone accounts for $11.6 billion in revenue (and is likely much more as Goldman could have easily had a $1 billion trading day in the rightmost bracket as it is open ended). Assuming midline averages for any given bucket and multiplying by the amount of days that the firm traded within these, Goldman Sachs has made $15 billion courtesy of the skewed and very highly improbable (but not impossible, thank you taxpayers and Ben Bernanke) chart. (more)
Why Gold Has a LONG Way to Go
A couple weeks ago, I had my TV tuned to a business show that loves to give predictions on the markets and the economy. On that day, one of the program's regular guests declared it was time to "short" gold, that it had reached its top, and that the precious metals bull market was over. I'll try to be nice in my rebuttal.
So, what was his reasoning: technical analysis of wave counts? falling demand? a telling ratio? sun spots? No, he noted that upscale department store Harrods in London began selling gold bullion and coins "over the counter," ergo, the top was in. Nice try, "Bert," but this is amateurish. You really shouldn't be playing with the big boys if that's the basis of your call. (more)
Jim Rogers Sees Short-Term Dollar Rally
Legendary investor Jim Rogers sees the dollar rebounding in the short-term but remains bearish about its long-term prospects.
The greenback has dropped to 14-month lows recently.
“Everybody in the world has become more and more skeptical about the dollar,” he told the Financial Times.
“The Chinese, the Russians, everybody realizes now that there’s a problem. The dollar’s a terribly flawed currency.”
But Rogers has bought dollars during the past three months in expectation of a rebound. (more)
The greenback has dropped to 14-month lows recently.
“Everybody in the world has become more and more skeptical about the dollar,” he told the Financial Times.
“The Chinese, the Russians, everybody realizes now that there’s a problem. The dollar’s a terribly flawed currency.”
But Rogers has bought dollars during the past three months in expectation of a rebound. (more)
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