Sprott Latest (MUST READ!) and a Turdite Video

Two quick things this morning. First check out this email and video I received yesterday. We should all be proud of the initiative our fellow Turdite has shown!

Turd, you've been a real inspiration to me. Reading your blog posts over the last few months (and, more recently, the forums here on the new site) have encouraged me to learn more about what's really going on with the American/global economy.

To make a long story short, once I got a handle on just how big and scary the situation is, I decided to boil it down into a format that ANYBODY could understand. Since my day job is video production, I created a little animated presentation that covers as many of the bases as I could in five easy-to-follow minutes.

Like you, I've done this without seeking credit or compensation. It's purely a public service. Since you have called - from the beginning - for your readers to educate the sheeple around them, I hope that this will be a tool that Turdites everywhere can use.

Please take a look and let me know what you think! I hope you will find it worthy of sharing far and wide.

All the best,

- "Paladex"

Next, I just received the latest "Sprott Update" via email and I figured I should post it in its entirety. YOU ABSOLUTELY MUST TAKE TIME TO READ AND UNDERSTAND IT. If you'd like to receive this directly, too, click here:
http://www.industrymailout.com/Industry/Subscribe.aspx?m=22439               

June 2011    

Caveat Venditor!

By:  Eric Sprott & Andrew Morris

The recent bear raid on silver has left many concerned about the sustainability of its historic run. Silver, being a relatively obscure market for most mainstream commentators, attracted much attention in the ensuing days following the May 1 takedown. Indeed, though the 30% drop in silver occurred over only four days, seemingly all eyes were on silver, with commentators who could’ve cared less about the silver market only a couple of months ago, suddenly tripping all over one another to make the bubble call. Silver bubble 2.0? Hardly. Anyone who has been fortunate to have been invested in silver over the past few years would unfortunately be used to such blatant takedowns. The Chinese don’t call it the "Devil’s Metal" for no good reason. With so much talk these days about the risks of investing in silver, we think that perhaps it may be timely for us to weigh in on the matter. The silver market is riskier than ever, but for reasons the vast majority of pedestrian commentators have failed to grasp.

There is no doubt that speculative dollars have been flowing into the silver market. We note that in April record trading volumes were registered in the SLV1, Comex futures2, LBMA transfers3, and the Shanghai Gold Exchange futures4. In fact, converting the average daily trading volume in the aforementioned silver instruments to the amount of ounces of silver they are supposed to represent, there were on average, over 1.1 billion ounces worth of silver traded every day in the month of April5. Truly a staggering number when contrasted against the actual amount of silver available for investment. To wit, the world will only supply about 979 million ounces this year from mine and recycling of scrap, of which it is estimated that 657 million ounces will be used up for non-investment purposes6. So in effect, that leaves roughly only 322 million ounces available this year for investment purposes. Converting to days (recall that at least 1.1 billion ounces traded each day) it leaves only about 1.3 million ounces per trading day of available supply. So, we are essentially trading the amount of physical silver actually available for investment, 891 times over each day! It really begs the question; just what are people trading in these markets?

Consider the largest and most prominent of those markets - the Comex, which we believe has owned an effective monopoly on silver price discovery for decades. In fact, the Comex churned over 800 million ounces of silver futures and options on average each day in April7. Indeed, notwithstanding the massive but very opaque over-the-counter silver derivatives market, trading on the Comex dwarfs both the physical and the other (known) paper silver markets, combined. Despite its dynamics being relatively complex and generally not well understood by most, the world’s financial community continues to view trading on the Comex as representative of the fundamentals for the physical silver markets. A market built on a high amount of leverage, both the buyers and sellers of Comex futures and options contracts are able to establish a position in "silver" with pennies on the dollar in collateral and even more astonishingly, no physical silver backing the contracts at all. The following charts illustrate just how unreal these markets have become.

Chart A:
paper_chart1_june2011.jpg
Source:  Bloomberg, Sprott Asset Management

Chart B:
paper_chart_2_june2011.jpg
Source:  Bloomberg, Sprott Asset Management

In chart A, we compare the total open interest in Comex futures and option contracts to the actual amount of silver held in registered inventories able to be delivered against those contracts, since 2009. In chart B, with the steeply-sloping line shows the ratio of open interest (i.e. paper silver ounces) per ounce of physical silver held in inventory. We believe the historical trend of rising open interest and falling inventories deserves considerable attention from anyone attempting to understand the silver market. And though we do note that since October 2010 the trend of rising open interest appears to have abated, the inventories have been evaporating steadily and thus the ratio of the two measures has continued to trend higher. In fact, since 2009 the ratio of paper silver to physical silver has increased fourfold from approximately 8 times to almost 33 times, where it stands today.

What is the significance of this discord between paper and physical supply on the Comex? Recall, that over 800 million ounces traded each day in April on that market. Further, consider that as at the end of April there were only 33 million ounces of registered inventories to back up all of that paper trading. Just imagine if a mere 5% of all of that buying actually stood for delivery; the entire inventories would be more than wiped out. Yet despite the steady erosion of these already scant Comex inventories - a characteristic which would surely be interpreted as most bullish in other commodity markets - the price of silver has actually declined since April. We endeavour to provide a framework for understanding this phenomenon below.

Those who were following the developments in the silver market in April and May (we note that there were many who were) will likely recall that the CME Group raised both initial and maintenance margins five times within less than a two week span effectively raising the minimum amount of capital required to participate in the silver futures market by 84%8. This is significant due to the amount of leverage in the futures market and also due to the losses resulting from the precipitous selloff which began on Sunday, May 1st, when several thousand contracts were wantonly dumped onto the very thinly traded after-hours silver futures market causing the silver price to plunge 13% within the span of less than 15 minutes9.

For example, consider a hypothetical speculative trader who went long, say 200 July 2011 SI futures contracts on April 28th. At that time this trader would have been required to post an initial margin of $2.565 million for a position of one million ounces of "silver" and thus would have been levered 18.5 times10. Below we present what the trade blotter for this trader might look like over the next few days assuming he maintained his position.

paper_0611128_table1.jpg

Following the initial trade, each day the trader’s positions would be marked-to-market and any losses or gains would be applied against his account’s equity balance. Should the losses on the position bring the equity balance below the maintenance margin level, the trader would be required to deposit the additional capital required to bring the equity in the account back up to at least the initial margin requirement level.

While the margin increases alone would have forced a decision for this leveraged long to either post the additional margin or close enough positions to bring margin balances in line with substantially higher requirements, the trader was actually fighting a battle on two fronts. This is because in addition to the margin increases, the trader was also experiencing massive losses to his capital due to a rapidly falling silver price. So it is also important to consider the extent of losses to the trader’s equity following the precipitous drop which began on the evening of May 1st. In our scenario, before finding a bottom around May 17th, the cumulative losses would have amounted to over $14 million, or over five times the initial margin deposit of $2.565 million that was required to take on the position on April 28th. This meant that with margin call after margin call, the capital committed to the position ballooned almost 700% by the time the silver price finally bottomed in mid May. The significance of such a dramatic erosion of capital on a leveraged position cannot be overstated, particularly in the context of rising margin requirements. The CME Group would know this very well, and so it strikes us as particularly suspect that they would continue to raise margin rates in the face of such a sharp selloff. A selloff, we might add, which emanated from highly unusual trading activity on May 1st that, in our opinion, just reeks of manipulation. How else can one explain the dumping of several thousand SI futures contracts within the course of 15 minutes, in one of the most illiquid hours of trading, without seemingly any regard for price or a fundamental catalyst to speak of11? Though we will let the reader connect the dots as to what the intent of the CME Group and the seller’s of SI futures contracts on May 1st really was, we can certainly observe what effect these actions had on the market by looking further into the weekly Commitments of Traders (COT) reports published by the CFTC.

The COT provides us with the weekly open interest held by various categories of silver futures market participants, and thus gives us clues as to how these participants reacted in response to these margin increases and ensuing volatility. We present the following table showing net open interest for the various categories, converted into silver ounces, which we obtained from the COT report for selected dates.

paper_0611128_table2.jpg

First, note how in the three weeks following the margin hikes, the speculative12 net long position dropped from 212.7 million ounces to 170.1 million. This very clearly indicates that the speculative longs, when faced with rising margin requirements and losses to capital, did close out a substantial amount of their long positions. The commercials who were short those 212.7 million ounces appear to have been taking every opportunity to cover their own positions. Rather than shorting further into the ensuing weakness, the commercials covered approximately 42.6 million ounces in the three week period.

Another piece of information gleaned from the COT data is that despite what many commentators were hailing as a bubble caused by excessive speculation in the futures markets, the net speculative long positions had in fact been dropping over time. Even during the April run up preceding the five margin hikes, the net speculative long position actually decreased by 23%.

That commercial short position deserves further mention. What is unique and of interest to many silver market observers is not only the size of the short position on the Comex, which is dominated by those "commercials", but also the concentration of the short interest. We provide the percentage of the total open interest held by the four largest short sellers on a net basis in the table above. Note that the net position of the four largest equates to 29% of the total open interest as of May 17th. Further we would also note that the concentrated short interest of the big four, though still quite high has actually dropped substantially over the past year coinciding with the signing of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the resultant public discourse on position limits. Comments from CFTC commissioner Bart Chilton acknowledging the "repeated attempts to influence prices in the silver markets," and that, "violations to the Commodity Exchange Act (CEA) have taken place in silver markets and that any such violation of the law in this regard should be prosecuted," perhaps have also had an impact on the behavior of silver market participants.13 And though the CFTC’s investigation into the silver futures and options market remains open after three years, we remain hopeful that its findings will further serve the interests of the investing public who rightly expect a fair and transparent silver market void of manipulative forces.

Could the drop in open interest and the reduction of the concentration in the commercial short open interest be perceived as an indication that those top four short-sellers are positioning for the inevitable imposition of position limits rules? Perhaps, and if so, it would follow that likely the short sellers seized the opportunity to further reduce their "liabilities" by buying up contracts in early May at a 30% discount.

Let there be no mistake, we view the current setup as extremely bullish. In our view, whatever froth and excess was present in the paper markets has likely been shaken out in the recent selloff. The remaining longs do not seem willing to part with their silver at these prices. These are the strong hands with longer time horizons that are likely not overly leveraged or are willing and able to withstand substantial volatility. Moreover, perhaps the "game" on the paper silver markets which has been meticulously documented over decades by Ted Butler14 and others, will soon be coming to an end.

What is perhaps most important is that despite what has recently transpired in the paper silver markets, the robust demand fundamentals for silver have not changed in our view. For confirmation of this, look no further than the physical silver market (i.e. the real silver market) which is providing us with evidence almost daily of a sustained bull market for physical silver. The US Mint recently stated that, "demand for American Silver Eagle Coins remains at unprecedented high levels."15 Likewise for the Perth Mint16, the Austrian Mint17, and the Royal Canadian Mint18 as well. The Chinese, who were net exporters of silver only four years ago, imported 300% more silver in 2010 than 2009 and such large quantities of imports are expected to continue19. Last year, Indian silver imports increased nearly six-fold, and this year consumption is expected to rise nearly 43% according to the Bombay Bullion Association20. In Utah, silver (along with gold, of course) will now be accepted in weight value as legal tender21. According to Hugo Salinas-Price, a prominent Mexican billionaire, there is now "very strong support for the monetization of silver" in the Mexican congress22. We suspect the Europeans are likely to account for an increasing amount of silver purchases going forward as well. In fact, we just can’t imagine a better outlook for silver fundamentals. This really makes us question who could be short such massive quantities of silver and why? Particularly in those leveraged paper silver markets, where as we demonstrated, only a fraction of the outstanding notional ounces are actually available in physical quantity.

We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger. And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity. With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question. Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices? Let the Seller Beware!

For more information about Sprott Asset Management’s views on silver and its silver bullion funds, please visit www.sprott.com.

 

1 Bloomberg
2 http://www.cmegroup.com/trading/metals/files/MoMU-April2011.pdf
3 http://www.lbma.org.uk/pages/index.cfm?page_id=51&title=clearing_-_most_recent_figures
4 http://www.sge.sh/publish/sgeen/sge_price/sge_price_daily/index.htm5 Source: Bloomberg, CME Group, LBMA, Shanghai Gold Exchange. Figure also includes trading of Comex silver options which had registered a record open interest in the month of April.
6 Andrew Kaip, David Haughton and John Hayes. "A New Paradigm for Silver: Demand is Expected to Outstrip Production Growth," BMO Capital Markets. April 3, 2011, p. 35. Note: "Non-investment" demand includes industrial, silverware, and photographic demand
7 http://www.cmegroup.com/trading/metals/files/MoMU-April2011.pdf
8 http://www.cmegroup.com/clearing/risk-management/files/SI_2009_to_may_2011.pdf
9 Bloomberg
10 A trader can always post more than the required amount of margin in his account.
11 http://www.cmegroup.com/clearing/risk-management/files/SI_2009_to_may_2011.pdf
12 For explanatory notes including definitions for each category of trader listed on the COT, please visit: http://www.cftc.gov/MarketReports/
CommitmentsofTraders/ExplanatoryNotes/index.htm
13 http://www.cftc.gov/pressroom/speechestestimony/chiltonstatement102610.html
14 For further information please visit http://www.butlerresearch.com/archive-free.asp
15 http://www.usmint.gov/pressroom/?action=press_release&id=1251
16 http://www.perthmintbullion.com/blog/blog/11-02-23/Sales_Record_For_2011_1oz_Silver_Kookaburra.aspx
17 http://www.bloomberg.com/news/2011-05-13/silver-boom-continues-at-austrian-mint-gold-demand-retreats-on-price.html
18 http://www.ft.com/intl/cms/s/0/7f316ac4-3acc-11e0-9c1a-00144feabdc0.html?ftcamp=rss#axzz1Nvybz2Te
19 Andrew Kaip, David Haughton and John Hayes. "A New Paradigm for Silver: Demand is Expected to Outstrip Production Growth," BMO Capital Markets. April 3, 2011, p. 17
20 http://www.ft.com/intl/cms/s/0/e64ca6b2-65e5-11e0-9d40-00144feab49a.html#axzz1OijZiJ4o
21 http://www.nytimes.com/2011/05/30/us/30gold.html
22 http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2011/5/18_Hugo_Salinas_Price.html
Sprott at a Glance
With a history going back to 1981, Sprott Inc. offers a collection of investment managers, united by one common goal; delivering superior long-term returns to our investors. Sprott has a team of best-in-class portfolio managers, market strategists, technical experts and analysts that is widely-recognized for its investment expertise, performance results and unique investment approach. Our Investment Team relentlessly pursues a deeper level of knowledge and understanding which allows it to develop unique macroeconomic and company insights. Our team-based approach allows us to uncover the most attractive investment opportunities for our investors. When an emerging investment opportunity is identified, we invest decisively and with conviction. We also co-invest our own capital to align our interests with our investors.  Our history of outperformance speaks for itself.

Our Businesses
The company currently operates through four distinct business units: Sprott Asset Management LP, Sprott Private Wealth LP, Sprott Consulting LP and Sprott U.S. Holdings Inc.

Sprott Asset Management LP is the investment manager of the Sprott family of mutual funds, hedge funds and discretionary managed accounts. Sprott Asset Management offers a Best-in-Class Investment Team led by Eric Sprott, world renowned money manager. The firm manages diverse mandates united by the same goal: delivering superior returns to investors. Our team of investment professionals employs an opportunistic, high conviction and team-based approach, focusing on undervalued securities with the greatest return potential.
For more information, please visit www.sprott.com

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For more information, please visit www.sprottwealth.com

Sprott Consulting LP provides active management services to independent public and private companies and partnerships to capitalize on unique business opportunities. The firm offers deep bench strength with a highly-talented and knowledgeable team of professionals who have extensive experience and a proven ability to design creative solutions that lead to market-beating value improvement.
For more information, please visit www.sprottconsulting.com

Sprott U.S. Holdings Inc. offers specialized brokerage services and asset management in the natural resource sector. Global Resource Investments Ltd., our full-service U.S. brokerage firm, specializes in natural resource investments in the United States, Canada and Australia.  Founded in 1993, the firm is led by Rick Rule, a leading authority on investing in global natural resource companies. More than just brokers, the team is comprised of geologists, mining engineers, scientists and investment professionals.
For more information, please visit www.gril.net

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Have a great day!! More later. TF

 

163 Comments

SilverTree's picture

The Perfect Storm

The man who stole a leopard's picture

Ages ago

Feels like ages ago that Eric Sprott rang the closing bell on the NYSE, and later sold off $30 million of PSLV.

Old Major's picture

Debt

http://www.powerlineblog.com/archives/assets_c/2009/02/toon022709-thumb-410x277.gif

Sterling's picture

And I was beginning to think

And I was beginning to think that the EE wouldn't initiate a raid today.  Maybe they got stuck in traffic.

averagejoe's picture

tight

Still sitting on my paper short hedging my physical.  Any profits will be rolled into physical.

GL all on your trading

ClinkinKY's picture

Corporate Taxes

The video is well done but the bit about the "small amount of corporate taxes" is misleading. Corporations do not pay taxes. They simply pass this cost along to the consumer in the form of higher prices for their goods and services.

Eric Original's picture

Good stuff Turd.  Thx!

Good stuff Turd.  Thx!

Turd Ferguson's picture

 Yes, I discussed this with

MODERATOR

Yes, I discussed this with the "producer" yesterday but he wanted to leave it in.

Response to: Corporate Taxes
MIDDIE's picture

@ Paladex

Nicely done!  Two hat tips to you.

mcc99's picture

Re the video

I posted a comment as follows:

The way countries together as a whole have gotten out of this problem in the past is to reset the currencies in use.  Germany did this before WWII.  But the way to do this on a global scale will be adopt a plan whereby countries collectively agree to forgive enough of a %age of their debts to one another and adopt new currency systems.  If a debt is denominated in USD and the USD is no longer used, then the debt's value falls to nothing.  My guess is something like this will happen.

Mike Victory's picture

quality

brilliant stuff t.

thanx

ewc58's picture

Beat ya by 10 minutes Turd

I posted the same link under your Chart Daddy post at 9:49 :-)

Read it with my coffee. Eric is on fire.

I'm going to ask for some feedback on a few Calls I'm considering in response to James Turk continuing to call for a hot summer for gold prices... Would welcome any thoughts Turd & the Turdites may hold... Thanks in advance all...

Turd Ferguson's picture

Buy Time

MODERATOR

ewc: I'll be using the doldrums to accumulate December calls whenever price dips below 1500. 

Aronnax's picture

Could we be seeing one of the first honest-to-goodness FUBMs...

... developing in a long while? Though volatility in itself is not a good thing, could the renewed active tug of war indicate that buying interest is perking up?

So It Goes's picture

Education

Even though I have been reading about this subject for several years - I just learned even more.

Thanks to all for sharing.

ewc58's picture

The Turk made me do it!

Ok my Turdish Friends, on the notion that James Turk could (not will) be right about the price of gold soaring this summer, I've scrounged up a few hundy to place a couple of long shot Calls.

These trades are meant to be a super short window, upside hedge in case the doldrums don't pan out, gold pops, and miners head up with it. The goal is to get a lot of gas in the tank so I can buy more phyzz and some shares, fast.  These trades are basically 3 point heaves from semi-downtown, and as I'm not laying much out, it's ok if I clang 'em off the rim. All I need is one. If things go badly, I'll just get James T to give me a Goldmoney storage fee credit :-)

I'm considering three 7/16 calls, looking for feedback in terms of whether you like these picks in this scenario, or maybe like another miner better for this:

NGD / $11 strike / 20 contracts / .10 Ask 

GG  / $50 strike / 5 contracts / .42 Ask

GDXJ / $36 strike / 7 contracts / .30 Ask

Thanks in advance for your thoughts

Paladex's picture

Corporate Tax

Turd, thank you for the kudos and for sharing the video!

@ClinkinKY, yes, Turd is on the record as disagreeing with my corporate tax comments. My point is simply this: if it's a bad idea to tax corporations, it's even worse to tax individuals.

Tim Geithner got up a few days ago and said that individuals and unincorporated small businesses that make over $250,000 per year should pay more taxes. Yet, apparently, companies like Exxon and AT&T pay plenty? That's what I object to: not that corporations aren't paying enough, but that individuals are expected to pay so much more.

Regardless, the fact that people care enough to debate the issues I presented is very encouraging to me. Remember, this video is not for the "cognoscenti" who already have a good handle on what's going on, it's for your friends and neighbors who aren't sure why the debt is a problem, what the difference between the deficit and the debt is, or what happens when Uncle Sam can't pay his bills anymore. This video is intended to help them get up to speed on the big picture ... Then they can join the discussion on the finer points of tax policy too.   smiley

stoneeh's picture

Re: Sprott article

"To wit, the world will only supply about 979 million ounces this year from mine and recycling of scrap, of which it is estimated that 657 million ounces will be used up for non-investment purposes. So in effect, that leaves roughly only 322 million ounces available this year for investment purposes."

Much less than that. Sprott probably has his numbers from the GFMS which is part of the EE and generally understates demand.

"Consider the largest and most prominent of those markets - the Comex, which we believe has owned an effective monopoly on silver price discovery for decades."

True, but the 18 hours or so per day the COMEX isn't open, the GLOBEX has the monopoly on both trading volume and price discovery. So essentially the GLOBEX is more important, since it also shuts down price discovery on the Asian other oversea exchanges with its comparatively humongous volume.

"Just imagine if a mere 5% of all of that buying actually stood for delivery; the entire inventories would be more than wiped out."

If it wasn't for EFSs and EFPs and other forms of paper settlement, yes.

Other than that, great article with lots of essential information, have nothing else to add, Sprott as usual is spot on. Which makes it understandable that he has more than 80, 90% of his personal assets (that is a 10 figure USD number, mind you) in PMs. You really have to understand the market to have that kind of conviction.

Regarding position limits.. seriously, did we even hear/read something about that the last few months? They were supposed to be enacted, as mandated by law, by December or January, as I recall?

SilverWealth's picture

good

Sounds like a good strategy Turd. Buy the weakness in increments everytime these criminals raid the market with their fright-wig 3 minute waterfalls. Have I mentioned today how much I despise these little rats?

Will there be Bankster-hunters eventually like there were Nazi-hunters after WWII? I have asked this question before. Watching the riot videos off MaxKeiser.com you see the intense rage and it seems only to be growing and getting less and less stable.

Eric Original's picture

ewc58

I'm kind of liking the GDXJ calls the best.  Look at a YTD chart.  GDXJ has spent more time north of your chosen strike price so far this year.  Therefore best chance of getting back into the money at some point?  Plus you take out any company specific risks.  As wonderful as GG and NGD are, some bad news can always happen and screw you even though you were right on the big picture.

Disclaimer:  totally amateur option player talking trash here.

stoneeh's picture

Awesome video btw. Keeps it

Awesome video btw. Keeps it simple and allows people to come to their own conclusions. Good job to maker of the video.

- Markus

SilverWealth's picture

grains and nat gas

Check out the spike in UNG this morning off the previous weakness.

Grains on sale today for those who are interested. One could always wait though until the sale is off and then head down to the grocery store once they mark up prices again. This is what the trading textbooks published by the Bankster-owned companies would have you do. Don't buy eggs when they are 20% off. Wait until there's a lineup around the side and they are marked up 10% then feel good about buying when everybody else is buying...

Shill's picture

Go go go

NGD and TBT kicking ass and taking names...go go go

agNau's picture

Agreed on Corp. Taxes.

There is a threshold level, just as with individual taxes.
Were it not for the continuous inflation, individuals would have been in the streets long ago. My view is that the continuing "inflating" of the Dollar mainly since the gold window closure by Nixon, has been THE driver of global growth. The main recipients of the benefits of that growth mainly being the US. Money creation, and unending stimulus through lower rates(this is about to end as the fed is metering out the final slivers now), has created an artificial environment. After Volcker raised rates to nosebleed levels, Green-expand metered out continual lower trending rates and liquidity to foster virtualy continuos growth. The normal "winter/deflationary" cycle was always interrupted with more punch from the stimulus bowl.
It is very simply seen by viewing a 40 year chart of yields on the long bond. The end outcome is very easy to see.
Greenie knew and bowed out quite graciously to applause, before TSHTF. He knew he had run the monetary system into the dirt.
To date, rising taxes have been offset by rising inflation/wages. As the dollar Drops in value, and wages are increased, those increases are absorbed into the continuous growth model. Today we have reached the end of the road. The only stimulus left is the printing press. Without lower rates there is no way to pass the costs along. The PONZI exposed.

On the Sprott article:
I have stated here, and on numerous other sites. That SILVER is the Achilles Heel of this monetary system. The EE owns the majority of the Gold. They own little Silver.
Gold & Silver are known as "sister" metals. When one moves the other is not far behind. The EE control of everything hinges on suppression of the metals price.
Think about it.

SilverIsKing's picture

Today

Given the disparity between open interest and silver available for delivery, raids are to be expected today although while they seek to shake out longs by crashing the price, they can cover their shorts by buying up contracts as well.  What this means is a lot of volatility with wide swings.  While the commercial shorts may pay a huge cash premium to settle their short positions, it would make more sense financially for them to just buy up contracts in the open market at $34.XX - $35.XX rather than pay 50% premiums (~$5X.XX) when they can't deliver.

RedRover's picture

Going Long?

Are any of you guys doing January paper calls for SLV?
If so, what is your "strike price prediction" by Christmas?
I predict a minimum of 45, by 12/15/11.

SilverWealth's picture

Cotton

Bal may just be beginning a mini-sale down at your local department store. I guess people are going to stop buying any cotton now.  Its down now from 110 to 72 and that must mean that people will be going shirtless in the streets this fall.  Anyway its probably best to wait until it rallies back up to 90 and 'proves itself'. That is what my bankster sponsored trading analysis textbook tells me. Wait at the very least until the banksters have bought their cotton and 'confirm' the strength.

Eric Original's picture

interesting short article

http://dealbook.nytimes.com/2011/06/29/a-new-investment-strategy-preparing-for-end-times/

"Investment professionals have a new pitch: The sky could soon be falling."

stoneeh's picture

Further OI reduction

Oh.

My.

God.

2000 further contracts covered in silver. OI down to 112k. More than 10k less than at the already very bullish setup at Turd's Bottom at 26,5$. And we're still around 35$!

Do you guys realize how bullish that is? Fuck doldrums, this is gonna launch soon and in a big way.

Oh, and I still stick by my triple digit silver forecast sometime this year (meaning it might not close the year over a 100$, but will at least stick its nose above it within the year). A little late already, but at least my earlier forecast of 50-100$ silver by the end of the year will will be reached, 100%.

- Markus

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