In this interview via Reuters, Mr. Rogers talks about his desire to short treasuries (eventually), which he says will be “one of the great shorts of our time”. Also discusses why he’s currently long the dollar, and why the world needs a “controlled disaster” before something much more volatile inevitably occurs.
h/t Silver Doctors
Back in April I entered a contest at ShortScreen.com. Ended up winning an iPad2!
So thanks to Dave Pinsen and the guys over there. My blogging productivity is at near-year lows, thanks to the new precious. And my 24 mo kid monopolizes it if I take it out around him. Two, and he plays Angry Birds. By himself. I’m glad I won this thing, because I probably wouldn’t have swallowed my anti-Apple pride and bought one.
The goal of the contest was to make a compelling short case, to be voted upon by their premium members. My pick, DEER, a Chinese consumer firm with (alleged) book issues fell from around $9 to $8 during the month ($6.69 today.)
They have some nice-looking tools for screening out short opportunities, and an App called Portfolio Armor that helps you find the cheapest puts to hedge long positions. Check it out.
Guest post by Jesse (highly recommended reading -Adam)
Gold Daily and Silver Weekly Charts – and Le US Douleur – More Volatility Ahead for Silver
Silver was hit harder as the US equities fell, and gold maintained some resilience.
The intraday moves had the character of bear raids and sharp selling in size, rather than steady liquidation.
Notice that the dollar too was weaker today, although it remains in a short term uptrend.
The number of contracts standing for May delivery of silver ROSE today according to Harvey Organ. The Comex delivered no actual silver, but the trading desks offered plenty of paper, as overall open interest rose again.
Someone asked me what it might be like if the Comex was unable to meet its deliveries, and there was a cascading effect to the metals encumbered by counterparty risk in the two big ETFs, if they were hit by a wave of redemptions as large shareholders sought to lock in supply.
I did not see their scenario of multiple days of up limits until the market clears, simply because it seems to be a few large members important to the exchange who seem to be ‘holding the bag’ in this case. Market solutions are for the little people and relative outsiders like the Hunt Brothers.
Rather, I would anticipate a declaration of force majeure, and a forced settlement in cash and shares of SLV, which themselves are probably representations of bullion rather than the metal itself. I do not know what the rationale for this might be, and it is not quite clear to me that they would even need one except for cosmetic purposes.
When you have power and have learned to use it with ruthless hypocrisy, the only thing you need to respond to is a greater force of power that calls you to accounts. This is one of the great lessons from the recent financial crisis. When the government and the regulators do not uphold their responsibilities, fraud becomes fashionable.
The Comex has about 32 million ounces of deliverable silver on their books, and they are dragging out the delivery process each month, as virtually no new inventory becomes available to replenish their supply.
I was a little shocked that the parabolic rise in price and the subsequent calculated smackdown in conjunction with the increased margin requirements shook no new significant inventory loose for the dealers, only more paper profits. Customer withdrawals continue as well, with almost 3.5 million ounces leaving this month.
However it transpires, if it does, it will be memorable. I am looking at the supply and demand as the numbers are published, and not at anything esoteric or private. So I would imagine that the CFTC and the least sophisticated traders in the market can see the same things unfolding. I hear things from time to time about back room discussions about the resolution of all this, and have to work to separate them from the tide disinformation, of which there is quite a bit more than you might imagine. People are very concerned about a potential shock to the credibility of the system. Of course, they may be utterly out of touch with current reality. Trust is in short supply, and the natives are growing restless.
Rumours, and disparaging talk, and theoretical discussions are well and good, but as they say, show me the money, or in this case, the bullion.
Where is it, how much of there is it, and what are they going to do when and if the supply of silver bullion drops below 30 million ounces deliverable, which is really a pittance given the size of the market? A silver futures contract on Comex is 5,000 ounces, and so that represents a mere 6,000 contracts. There are a total of 123,000 contracts open today. Last Friday the volume was an eye popping 126,000 contracts! This at times seems less a market, and more a game of musical chairs, or a shell game. And if the allegations are true about the LBMA, and their leverage, then what we have here may be a recipe for a severe market dislocation.
And this is why I expect the silver market to remain highly volatile, with some amazing moves ahead, both up and down. And stretchers perhaps, to carry out some players from the pits, as they get caught offside in high frequency moves, and an increasingly disorderly trade. And this due to the failure to reform the financial system.
And for us, the smaller investors, caution is advised.
From Sovereignman.com
By Simon Black
April 18, 2011
Asuncion, Paraguay
When I woke up this morning and scanned through my usual digest– boots on the ground reports from overseas contacts, market summaries from Asian and European bankers, commentary from friends still in the intelligence community– a couple of things caught my eye that I want to tell you about.
Dagong Global Credit Rating Co is China’s leading credit rating agency. Credit rating agencies are the firms who are responsible, among other things, for scoring the credit risk of a particular asset or sovereign nation.
When they rate a security as “AAA”, premium safety, investors pile in. They’re an integral part of the financial system.
You undoubtedly remember that the world’s leading agencies– Fitch, Moody’s, and S&P, were all complicit in slapping AAA premium ratings on so many toxic mortgage-backed securities… and maintaining sound ratings for far too long on bankrupt nations like Greece and Portugal.
The entire industry lacks credibility at this point, and China’s Dagong agency aims to do something about that.
This morning I read Dagong president Guan Jianzhong’s remarks at a recent conference of Asian rating agency CEOs held in Kuala Lumpur, Malaysia (one of my favorite cities).
In his speech, Guan called for the establishment of a global rating agency that follows clearly outlined international standards, effectively putting an end to the cowardly analysis that dominates the industry now and replacing it with a healthy dose of reality.
Putting its money where its mouth is, Dagong has a long-standing, negative outlook on US debt that doesn’t pull any punches. From its November 2010 report:
“In essence the depreciation of the U.S. dollar adopted by the U.S. government indicates that its solvency is on the brink of collapse, therefore it wants to cut its debt through the act of devaluation with the national will; such a move has severely harmed the interests of creditors.”
Following suit, S&P stunned financial markets this morning by revising its US outlook to ‘negative’, citing politicians’ inability to address medium-term and long-term challenges.
In total contrast, US News and World Report published an article a few days ago entitled Why you should buy U.S. Treasuries,” which amounts to the worst advice I’ve seen in years.
"Trust me, I'm good for it."
The article is devoid of any clear analysis which could support loaning our hard-earned savings to the most indebted nation in the history of the world in a rapidly depreciating currency at rates which have little chance of keeping up with inflation; instead, the author relies solely on patriotism:
“It has always been a bad idea to bet against America and our ability to prosper even against overwhelming difficulties. America will cut back its spending, innovate, and pay off its debts. We will earn our way out. It’s just how we do it…”
A more accurate statement would have been, “that’s how we used to do it…” Fact is, America’s economic problems are deep-seeded and neither political party can put forth a viable strategy for righting the ship. Even S&P is starting to realize this.
Even worse, it’s not just the politicians that don’t get it. From top to bottom, the culture in government service is an entrenched “me first [at the expense of taxpayers...]” attitude which encourages shortsighted decision making, and in some cases, even fraud.
If you’re still betting on America to come out on top, you’re taking a big risk. America first emerged as a major economic power, not because of government policies or political leadership, but because of the strong incentive that individual Americans had to work hard, take risks, and create value for others.
The incentive isn’t about patriotism… it’s about the benefit of their families and loved ones.
Americans like this still exist, and their desire to see their families and loved ones flourish through enterprise and value creation is as strong as ever. As the economic situation worsens with each passing day, more and more of these value creators look to greener pastures outside of America.
Maybe you should consider the same.
_______________________________________
This article courtesy of SovereignMan.com: Notes From The Field, a free newsletter dedicated to individual freedom, internationalization, asset protection and global finance. For a complimentary subscription, visit www.SovereignMan.com.
