Tag Archive for silver

Nightmare On Wall Street

February 4, 2013 www.hedgephone.com/network

The sovereign debt bubble continues to expand despite the proclamation by world leaders that everything is “fixed.” While we would agree that many, if not most, asset classes are essentially “rigged” by central banks, we doubt that anything will be fixed in the sovereign debt space without write offs and write downs or currency devaluation. Saddling the people with more and more debt as a solution to the debt crisis is simply not going to work in the long run in my opinion. Sure, deficit spending and money printing are obvious, sensible responses to economic contraction but at some point governments need to deal with the underlying cause of the problem without focusing on individual symptoms in a vacuum.

Banks like Goldman Sachs (GS) are being handed billions of dollars every day by the FED and are using this money to pump up stock prices, but how long can the charade last? This is short termism at it’s pinnacle, and all of this in-your-face nouveau-pumping may eventually be followed by a dump — either of paper currencies or of risky assets. Some of the banks receiving this money are arguably insolvent without receiving this massive intervention. Surely, their assets are not entirely liquid, and without a buyer of last resort, governments around the world have stepped up and taken out many dicey bank investments at the offer price. Obviously, this is a terrible moral hazard and stinks of “Banana Republic” finance, but until the unwashed masses figure out that credit default swaps are affecting them day to day, I doubt anything will be done to break up the mega-banks.

Here is some raw data on the Fed’s “pumping” from BusinessWeek:

“The Federal Reserve will amplify record accommodation tomorrow by announcing $45 billion in monthly Treasury buying that will push its balance sheet almost to $4 trillion, according to a Bloomberg survey of economists.

Forty-eight of 49 economists predict the Federal Open Market Committee will purchase Treasuries to bolster an existing program to buy $40 billion in mortgage bonds each month. The panel pledged in October to continue that plan until the labor market improves “substantially.”

“It’s going to be massive and open-ended in size,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities Inc. in New York and a former New York Fed economist.”

Basically, the Federal Reserve is going to print as much money as is needed to keep the stock market up and asset prices moving higher. What does this mean for the long term? Such an unprecedented market pump has never been attempted in history and it would seem to many, including yours truly, that the Fed’s balance sheet may never be able to contract without massive consequences.

In my view, the pumpers are everywhere on the financial news media outlets and most re completely “in your face” about their stock market bullishness and investment bravado. Just look at the most recent AAII investor sentiment survey for your evidence that the bullishness is pervasive and a bit concerning:

Survey Results
Sentiment Survey
Results Week ending 1/30/2013 Data represents what direction members feel the stock market will be in the next 6 months.
Bullish 48.0%
down 4.3
Neutral 27.7%
up 4.3
Bearish 24.3%
up 0
Note: Numbers may not add up to 100% because of rounding.Change from last week:

Bullish: -4.3
Neutral: +4.3
Bearish: +0.0

Long-Term Average:Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%

 

It’s pretty clear that “everyone” likes the market right now, which means you should probably hold more gold or cash in your portfolio mix than you would normally. We do not like bonds, and over the long term we think the (TBT) is a better investment than the (TLT).

Amazon.com (AMZN), where the company is trading for over 16X book value and a whopping 3,000 times earnings. The company badly missed earnings and sales estimates, yet investors pushed the shares to a new all time high anyway. Creating a massive, multi-billion dollar pump and dump scheme is easy if you have a trillion dollars to invest like most I-banks have to control markets with right now. While we are certain Amazon and Salesforce (CRM) will eventually roll over like Apple or worse, in the short run we think the investment community is being sold on equities by boosting these so-called “leaders” or “darlings” to new, even more obscene valuations. By pumping Amazon to astronomical multiples, Wall Street can convince anyone who is listening that the S&P 500 (SPY) is dirt cheap at 15X earnings by comparison, never-mind the fact that the overall market trades for a price to peak earnings multiple of over 18X. All of this can be accomplished thanks to the promise of never-ending FED manipulation, aka open ended Quantitative Easing.

All in all, investors have to view markets as a centrally planned pump and dump. Sure, it’s okay to play along for the ride for a while, but make sure you sell before the music stops! I suggest investors own the Sprott Physical Silver Fund, (PSLV) and (GLD) in the money call options as a hedge against central bank money printing. Keep in mind, that many skeptical investors choose to hold physical directly versus “paper” metals listed on an exchange. In other words, in the short run, we think the banks will continue “pushing down” metal prices as much as they can. In the long run, physical metals are likely the asset class of choice other than farmland, timberland, oil fields, etc…

Below is a longer term chart of the Fed’s rapidly expanding balance sheet: (when will this money move out of the banks and into middle market businesses?) Stay tuned for more of the inconvenient facts. For now, be cautious on equities and constructive on real, non paper assets.

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I’ve Been MIA, But Hedgephone is Back

December 6, 2011 Commodities

If you have a chance, check out my other blog at www.dollarprophet.com

Also, our friends at www.bboldjewelry.com has great ideas for Christmas grifts of handmade artisan jewelry…

As readers know, I am a long term bull on commodities and silver is still undervalued by historical standards in my view. Speaking of silver, the price of the poor man’s gold has consolidated around $32 an ounce for a long time now and the metal looks poised to break out one way or another. While I am a believer in the long term fundamentals behind the bull market (IE the long term fundamental problems with paper money backed by, well, absolutely nothing) there is no gaurantee that in these heavily manipulated financial markets true price discovery for the metal will ever occur.

That’s why I like the strategy of owning farmland, silver, commodity index funds like RJI and RJA, and other hard asset investments which can gain in value regardless of the stock market, the economy, etc…

While commodities are certainly much more popular than they used to be, silver as and investment has not become wildly popular among the masses. Stocks are still the investment of choice for most people. Even though silver is up a great deal, the investment community has yet to embrace the bull market which from a contrarian perspective means that the run may continue in the coming years.

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Why Gold, Silver, and Fancy Color Diamonds as Investment Make Sense

October 26, 2011 www.hedgephone.com/network

Tuesday’s sell off, which was predicted overnight by our proprietary market model is based, in my view, on rational fears over the disintegration of the drive toward “global governance” which relies on a central bank of the world to mop up the current economic and financial crisis instead of a more straight forward debt deleveraging approach. This drive toward “fiscal integration” is also heralded by none other than the Pope himself, and what is clear is that nobody wants to talk debt jubilee/forgiveness and breaking up the TBTF banks right now except for the people who are protesting over austerity and corruption across the globe. As Don Corleone put it in the Godfather Part 3, “Finance is the gun and politics is the trigger.”

Europe’s debt issues are clearly too large to be solved by any type of bailout or ESFS 200 to 1 leverage scheme and the only real solution is to instill democracy in those debt zombie nations which should not be controlled by corporate lobbyists or banking interests but their people. In effect, the only way out of this will be some type of debt jubilee mixed with the either the dissolution of the Euro as a currency or a replacement of the current Euro scheme with a silver backed currency system and a massive right down and nationalization of investment banks. Glass Steagall must be reinstated around the globe and investment bankers should be treated like utility workers. Politicians need to be civil servants and should have to agree to work for free and also run an election based solely on civilian, not corporate, fundraising.

Many people argue that gold is too scarce to be a practical medium of exchange in a gold backed monetry system, but what is utterly clear to most people with eyes and ears is that the current FIAT money and the fractional reserve banking systems are not working anymore and need to be replaced or at least drastically overhauled.

The current leverage in the system is also too large and onerous to actually be paid back and it seems as though the balance sheets of world nations need to be cleansed via a global debt forgiveness or reset mechanism. While such a “reset button” type default scheme seems drastic, the alternative looks to be the slow destruction of the global economy which at first will involve significant deflationary pressures as the Euro crumbles followed by hyperinflation as the U.S. Dollar is devalued along with paper money in general. This trend is already well in place.

While I am clearly not advocating an overnight return to the gold standard, I am not able to turn a blind eye towards the macro-economic reality of the banking/FIAT/federal reserve system which sets a value to paper at some arbitrary price. Money needs some type of reality based valuation and by allowing private central banks to have any involvement in the creation and contraction of the money supply we will always have a degree of corruption/fascism/totalitarianism underlying the global financial system. Isn’t that what our forefathers battled tirelessy against when founding this great nation?

What all of this sovereign debt means to savers and investors is that now is the time to buy hard assets in the form of gold, silver, color diamonds, raw land, farm land, and other commodity linked investments while staying short the Nasdaq bubble names via put spreads like CRM, AMZN, LNKD, and the QQQ. Of course, such a “short innovation” and long hard currency pairs trade will have huge short term risks for investors, but over the longer term this trade has been incredibly profitable all the way back to 2001 and should continue to make money over the longer term — just take a look at a one year chart of Netflix versus the price of gold.

When looking at the debt to GDP ratios of the US (101%) it’s pretty easy to see that unless we find a way to cut spending and grow the economy we could very well end up in an economic debt driven feudalistic zombie scenario like the following nations: (% debt to GDP)

Hungary (120%)
Australia (138%)
Italy (146.6%)
Spain (179%)
Greece (182%)
Germany (185%)
Portugal (223%)
France (250%)
Norway (251%)
Austria (261%)
Sweden (282%)
Denmark (320%)
Belgium (336%)
Netherlands (376%)
Switzerland (402%)
UK (413%)
Ireland (1,380%).

As you can see, lending money to these countries looks to be about as sound of an investment as buying a share of the Brooklyn Bridge. These countries are all broke.

So where are the wise investors putting their hard earned money now? My best idea for long term capital preservation is the gold, silver, and fancy color diamond markets because hard assets cannot be printed like paper money and should continue to rise with the increasing sovereign risk in European and other nations.

Visit www.usdiamonds.net to learn more about color diamonds

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Sunday Night Futures Update, ECB Bond Buying, Silver and Gold

August 7, 2011 Equities

So much for “Sunday Fun-Day” tonight… Most longs are likely soaking up their tears with a glass of Merlot this evening with the Russell 2000 futures off 3% tonight and the Nasdaq 100 down over 3% as well. Gold and silver are SURGING, with gold up over 2% and Silver up ove 5% tonight. I view Silver as the better play here and if the metal holds the $40 mark we could easily see a retest of $50 which is a nice 25% gain from here. With the downgrade, however, I want my readers to stop thinking of gains and losses in terms of Dollars and begin to get them to think of gains and losses in terms of gold and silver. At any rate, the ponzi-nomics continue and Bernanke and the other central banksters will be printing furiously in the near future which should be good for silver and gold most certainly while equities have a lot of problems facing them in the near future.

So for our part our long gold and silver and short stock thesis which we have been HAMMERING our readers with over the past year still pretty much holds right now. There are some cheap names I am looking at right now including OSK, HAST, PBR, STO, HES, and others but the technology stocks trading over 100X earnings look to be obvious and profitable shorts here.

All in all, stay safe out there — these markets are brutal for those with a “buy and hope” strategy.

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Revisiting Market Direction Models for Gold, Silver, IWM, SPY, QQQ

August 2, 2011 Equities

So our model is now fully confirmed. The signals show us that we are in a full on bear market for the IWM and SPY and moving there for the QQQ. The IWM and SPY are below the 200 day moving averages. We got you into a short position in stocks on 7/7/2011 because the overall market was putting in a double top.

While I am a value investor at heart, the macro environment means that in many ways economics trumps valuation based stock picking. While many names remain significantly undervalued, the overall equity index funds are quite overvalued with the S&P 500 trading at a CAPE or PE10 or Shiller PE of over 23X… By simply buying stocks when the Shiller PE is 10X and shorting them any time it hits 22-24X — investors can effectively “time” most of the major turns in the market from 1900 to 2011. While anything can happen going forward the skew of risk to reward is clearly to the downside going forward for equity prices.

I am a patriot, and American, a passionate and compassionate human being and that’s why I started Hedgephone — to help my friends, family, and acquaintences to protect and grow their investments.

If you are too poor to invest in stocks, try to cut your spending and put what little you have into silver, or pay off your debts. Paying off debt or even declaring bankruptcy is in many cases a good idea. If you are out of a job, consider manual labor as a way to make some money in the short run — people need their lawns mowed, ditches dug, firewood chopped, etc…

All the best HP’S!!!!

Signals:
GOLD: Bullish
Equities: Bearish

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4 Dollar Hedges to Own: NEM, FCX, SGOL, PSLV

July 26, 2011 Commodities

With the US dollar losing its status as the World’s Reserve Currency, investors should probably be looking for ways to hedge their fiat currency risk with hard assets, foreign stocks, and hard currencies. The bailouts and “socialism for the rich” practices of western governments has placed the American dollar directly in the cross hairs of global investing trends in the name of “saving the financial system.”

Unfortunately, governments of the western world are almost unilaterally committed to debasement and devaluation of their currencies to drive exports and spur the global economy at this point, which means that investors would be wise to avoid the pending collapse of these currencies by hedging risk accordingly. As Rick Santelli puts it, “gold isn’t money, it’s better than money.”

Read the rest of this article here:http://seekingalpha.com/article/281487-4-top-hard-asset-investments-to-buy-and-hold

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Futures Update: Selling in the Dollar and the KneeJerk Boost to Stocks, Gold and Silver Lower

July 26, 2011 Commodities

Well, the squid or all the Presidents HFT men are bidding up stocks, sending USD to channel lows, and knocking down the metals a bit…

My feeling is to move out of gold and silver and into DBA, RJI, STO, COP, BG, MOS, POT, BG, etc……

Time to play Agriculture right now and not metals… the charts are just too parabolic at present although the bias is toward higher prices so long as silver stays above $40 — tonight looks ugly for metals bulls and stocks bears…

Move to commodities with an IWM put spread as your hedge… I will be anyways…. all the best HP’s

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Futures Update: The Dollar and Stocks Tank While Gold and Silver “Nuts” are Banking, Here’s Why

July 24, 2011 Macro Economic Viewpoint

       For months now, I have been warning readers of www.hedgephone.com that the end of the Dollar as the World’s Reserve Currency was close at hand. While I myself have been urging people to buy gold and silver, like many other traders I have not been bullish enough on these “hard currencies.” It’s hard to predict moves in currencies and also to time the gold and silver rally perfectly, and I haven’t been bullish enough on the metals in the past, recommending a 30% allocation to the metals.

       What is finally clear to me and to most people with ears, is that something very fishy is going on at Treasury and the Federal Reserve. The onion is being peeled back right now, and lots of Americans are starting to tear up and wake up to the subversive moves happening in our economy.

       To be fair, I am not a huge fan of conspiracy theories, but I have to give credit to Alex Jones and his movement because he has been proven to be right almost every time about his theories on our government and their plans to merge our country with Europe and the rest of the world in a currency and fiscal union. The IMF SDR looks to be the endgame here, as our reckless central bankers and Treasury Czars are simply bankrupting the country at an ever increasing pace.

       So how should we invest if we have lost faith not only in the U.S. Federal Reserve Note, but also the full faith and credit of our debt and therefore our bonds?

       One thing is certain, cash is trash and so are government bonds. It’s time to get out of U.S. assets altogether — Swiss Francs, Canadian Dollars, Australian Dollars, Silver, Gold, Platinum, Palladium, Commodity Futures, etc… all look to be far more secure here than “trusting” the government with an investment in USD or US Treasuries.

       Americans have to wake up and smell the ponzi — unfortunately, it may be to late to take back our economy, but it may not be too late to take back our country. We all need to wake up and vote for Ron Paul in 2012 or at least prepare for a further destruction of our Constitution by purchasing firearms and metals. I am a huge advocate of peace, and I hate to advocate heavily arming yourself to protect your family, but without loyal Constitutionalists there is simply no hope for American Sovereignty anymore in a system that is built for the Bankster by the Bankster. Our country’s independence appears to be highly threatened presently, and for that reason Americans have to learn how to protect themselves for what’s happening and not just roll over and give in to what I view as a increasing tyranny.

       Anyways, I hope very much that I am wrong, but I feel that it’s more than likely that a threat to our nation’s solvency, independence, and Constitution is very real and ever-present.

       In my view, platinum has moved up much less than gold or silver and could make a nice complimentary investment along with physical silver and gold to hedge against the planned destruction of our nation’s currency.

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Bounce Looks Sticky, but Having Long-Short Portfolio is Advisable

June 20, 2011 Equities

The markets rallied with fierce determination today, but the gains may not hold over the longer term. The withdrawl of QE will likely put stocks under pressure. that being said, having an eqal amount of long and short positions (with a dollar for dolla long-short exposure) looks like a smart way to invest right now. Although many pundits and sell side analysts are pumping the heck out of the market, the interview given by Robert Shiller recently is really all you should focus on here — most stocks are trading for a high PE10 or CAPE price/earnings as well as a historically high Tobin’s Q…. The 13X earnings numbers being touted are based on NOL’s one time gains, profit margins that have never been higher, etc… etc…

The meltup begun with the announcement of QE2 in August will likely continue until the end of the month, but I expect the luster to wear off once QE ends.

Your levels to watch:

IWM: $80 for resistance, $78 for support

QQQ: $55 resistance, $54 support

SPY: $130 for resistance, $127 for support

All in all, I feel holding cash, covered calls, some physical silver, etc… make a lot of sense here but as we are over the 200 day we have to respect this bounce… The market is still oversold and the final pump may not end until the end of money printing….

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Silver and Commodities Moving Higher

June 9, 2011 www.hedgephone.com/network

The Dollar is moving lower yet again… It seems we can’t get a bid for stocks without sacrificing our currency (and as a result our Nation’s net worth)… Silver, Gold, Corn, Soybeans, Crude — the entire commodity complex looks strong and I think we could get a small bounce in equities before the end of QE2. Once QE2 is over, I would not be suprised to see a crash in risk assets meanwhile if QE3 is announced, they may actually push NFLX to $300 and the Russell 2000 to new highs, which is pretty much our economic policy at a glance. In any event, expect the markets to move higher in the short run and lower in the long run (aside from commodities which are the only asset class not in a bubble aside from raw land)… Silver looks bullish here.

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