Marc Faber Still Likes Gold and Silver, But Says Next 3 Months May Be Rough

In the clip below, Mr. Faber says gold and silver may fall over the next 3 months, as the end of QE2 slows the flood of Fed liquidity. He “wouldn’t short” the metals, and is “accumulating gold”.

Offers fascinating perspective on Chinese reverse-merger stocks, and how the situation is similar to early industrial America where, “the foreigners got fleeced, constantly”.

He reiterates that QE3 will come, but not as early as some would like. The Fed needs markets to fall a bit first. Oil (consumers feel most), gold/silver (unofficial inflation gauges), stocks (EEK – My 401k is dropping, print!). Worth watching (shot last week):

I do wonder how low silver could go this year, before QE3 comes to the rescue fall/winter (best guess). In 2008 silver surpassed the $20 mark, only to be knocked back down to ~$9 by the credit crunch. Could silver retrace as much this time? I don’t think it’s all that likely, or I would’ve sold some physical.

Inflation is higher now, meaning the Fed will have a tougher time selling QE3. Will markets need to drop further, to compensate? Oil markets are buying the new deflation theme, thanks in part to that perfectly-timed strategic reserve release.

Then again, silver inventories are pitifully low at COMEX. Is a mass squeeze on naked shorts really possible? I don’t know. So many factors to consider.

5-year silver

Guest Post: Silver Most Likely to Go “Super Nova”

Gold Daily and Silver Weekly Charts – La Douleur du Monde – Most Likely to Go Super Nova

By Jesse of Jesse’s Cafe Americain

“It appears that there is an undeliverable force heading towards an unmanageable object.”

At some point the shysters will lose control of the monetary papier-mâché which they have created. And the subsequent reaction could be epic, with the almost inevitable force of nature, like a tsunami rolling in.

Only a few people understand this. So it could be quite the surprise to many.

In the meantime the bankers and politicians are scrambling for the goodies pouring out of the financial piñata which they cracked open in the financial crisis.

The banks have plenty of gold to lease into the bullion banks, and then on into the markets and as collateral for leveraged paper obligations. But they are running out of silver, which causes me to believe that the silver cartel will break first, and will lead the way higher, as it has been doing.  A handful of Too Big To Fail Banks seem to be short more silver than can possibly be delivered without incurring terrific losses, even by today’s distorted standards.  From the looks of it, it appears that there is an undeliverable force heading towards an unmanageable object. Further complicating matters is the possibility of a magnitude 9.6 sovereign debt earthquake in the markets.

Unless there is some forced settlement, some draconian government intervention, silver appears to be a leading candidate for the manipulated market most likely to go super nova.

If the equity market does not fall apart over Greece et al., I would imagine that the trading desks will try to stand on the metals until a little closer to quarter end, then its elevator going up. But watch out for a Greek related problem. I am not sure how the markets might react to this if it really is another Lehman like event. So as you might expect I am running a paired trade, and net short into the close.

The dollar chart is a big problematic. I can make a scenario for a break either higher or lower from the chart. I think we will know the move when it comes, but predicting it in advance is a dicey thing, except for the broken clocks.

If the sovereign default situation goes badly there *could* be a liquidation selloff that would impact silver, and to some extent gold. This is why I am holding paired trades that are short stocks and long bullion. I further adjusted the risk downward today, and lengthened the shorts.



Re-published with author permission.

I don’t always vote in Republican primaries…

I vote Ron Paul

The Paul campaign is pushing to raise $5m by the end of this quarter (in 7 days) They’ve already raised $3.2m so far in this drive. An impressive take for a grassroots campaign. No $36k-A-PLATE dinners like Pres. Obama staged tonight in Manhattan (one of three fundraisers today).

If the thought of Ron Paul shaking up the DC status quo intrigues you, consider donating here.

via Redditarians.

Fed’s Bullard: “When it does blow up it will be too late”

In a recent interview with Bloomberg, James Bullard, president of the St. Louis Fed, offered a blunt warning on America’s disastrous financial trajectory.

Lawmakers and investors shouldn’t take comfort in low U.S. borrowing costs because markets are often “complacent” about the risk from excessive deficit spending, said James Bullard, president of the Federal Reserve Bank of St. Louis.

When it does blow up it will be too late,” Bullard said in an interview last month in New York. “When markets lose confidence in the U.S. and say that they don’t trust us any more, rates will skyrocket and the crisis will be upon you.”

He’s right, of course. Interest rates can’t stay low forever. If (when) the world does start to lose faith in America’s ability to reign in spending and cut debt, things could get crazy for a while. And quickly.

Mr. Bullard points to Greece as an example. Just a year and a half ago, the Greek 10-year yielded around 5.5%. Today that number is closer to 17%. 18 months later.

Trying to raise more debt at those levels would be ludicrous. Like trying to run a national budget on a high-interest credit card. Unsustainable, impossible. Nobody wants to buy your debt, you’ve sold quite enough already. But thanks.

While it is somewhat refreshing to hear such talk from a sitting Fed president, let’s be real. It’s meaningless, and in actuality Bullard is just one of the more hawkish doves. Hoenig’s on the way out, and he was the closest thing to a senior power-wielding “quasi-hawk” we had.

To say that most of Bullard’s colleagues do not share his concerns would be an understatement. And unfortunately, they’re the ones who call the shots.

Bill Dudley, ex-Goldman director and current head of the powerful NY Fed, who continually reassures us about the recovery’s “self-sustaining” nature, is among the uberly-dovish leaders.

By the way, isn’t it difficult to imagine how one could possibly, in any way, call the current economy self-sustaining? Self-destructive would work. But to say this recovery is organic in any way, as the central bank simultaneously injects historically-unprecedented amounts of liquidity into the market, is borderline moronic.

Interest rates are prices, and they are screwing with this fundamental aspect of the economy in a very dangerous way.

And they’re not just “juicin things up a lil” or “primin’ the pump a bit” at this point. They’re sloshing gasoline all over the place. More fuel to come, right after they let things cool down for a little while. My guess: QE3 starts late fall, early winter at latest.

Dudley is only co-captain of the dove brigade, of course. He shares that honor with the Bernank and Janet Yellen, both dedicated printers with a natural, clueless optimism about them. And a knack for ignoring things that affect small people, like price inflation.

There are no extremists at the Fed. No major opposing schools of thought, or vigorously debated theories. Only varying levels of conformity, best I can tell. Those at the Fed who experience (much frowned-upon) bouts of “hawkish urges” are hopelessly outnumbered, and outgunned politically.

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