Thursday, March 20, 2008

No, we have no Silver Today!

A fellow I know was considering entering the market so I called him this morning and said "If your going to do it, this week's correction is the perfect time"

So off we went down to Scotia Bank where there was a modest line of people making currency and metal transactions.

Being 5th in line it took about 10 minutes for us to get to the front giving me time to watch those being served and be nosey. In that time I saw at least 3 metal transactions take place and 7 oz or more of gold leave the building. One person asked a question and walked away muttering.

When I got to a teller I found out quickly what the previous client was probably annoyed by;

There was no silver

None, zip, squat, zilch.

No silver maples, no silver bars large or small, they had nothing.
Scotia claimed they should have got at least some maples this week but did not, they said "try again later".

There has been recent talk of silver shortage at the retail level and I now have proof. I tried 2 currency exchange places which had nothing and I still plan on dropping in to a coin store but I know they don't readjust their prices to market (at least downward) in a timely manner.

As far as I'm concerned today was an excellent entry point and it's a shame my friend missed this opportunity.

If the retail supply is this tight the banks should be drawing off the COMEX to re mint and fill orders but I somehow don't think they will bother. The banks while selling metals have been involved in shady behaviour for decades, case in point the Morgan Stanely incident where they were not buying bullion when certificates where purchased.
The big banks have little interest in supporting metal ownership over fiat currency and have great interest in NOT seeing the COMEX stocks drawn down.

I'm at a loss on how to advise you to acquire silver at this time. APMEX is short, Northwest Territorial Mint has been habitually late in filling orders and smaller vendors are scrambling to find bullion. The has not been able to keep up with silver eagle orders and even Ebay listings are thinner than I remember 2 years ago.

All I can say is try every vendor you can find, the price is too good to ignore. If you already hold metals don't panic, this kind of correction was expected and is not a problem.

Wednesday, March 19, 2008

Teetering on the brink, the story goes main stream.

OK you don't get more main stream the the Globe and Mail and today they ran a piece that sounds like something I'd write but more literate!

Global capitalism teeters on the brink

We've moved from a world of risk to a world of uncertainty
Thomas Homer-Dixon

Wednesday, March 19, 2008

The U.S. central bank is slashing interest rates, accepting piles of near-worthless securities from commercial banks as collateral for emergency loans, and pumping hundreds of billions of dollars into the economy. A problem that began last summer in the lowest-grade U.S. mortgage market has spread around the world, moved relentlessly up the quality ladder and sucked credit from the global financial system like oxygen from a flame. Each intervention by U.S., European, Japanese and Canadian central banks to stabilize the situation has been swamped by surprises that have escalated the crisis to a new level.

Over the weekend, experts talked about the risk of the financial system's wholesale collapse. Some even drew parallels between today's situation and the credit crisis that produced the Depression.

What's going on? Are we simply in the midst of another gut-churning fluctuation of a world economy that's prone to intermittent volatility but that always seems to find its footing? Or are we glimpsing a deeper emergency, one that goes to the heart of modern global capitalism?

The U.S. Federal Reserve's latest efforts may stabilize markets for the time being; stock markets were sharply higher yesterday. But there's reason to believe the crisis is the product of systemic problems in the world's economy.

Three key factors - each operating and gaining momentum over decades - have come together to cause this crisis. The first is the sheer productivity of modern global capitalism. The world's businesses, spurred by global competition and a never-ending race to boost productivity and keep costs down, excel at producing a steadily rising flood of goods and services. To ensure that these goods and services are bought and that factories and businesses keep humming, the global economy needs a constant infusion of liquidity provided by cheap debt.

Second, in the past three decades, a neo-conservative ideology that asserts markets are infallible and, as a result, disparages any kind of state regulation has come to dominate thinking about economic matters, especially in the United States. Alan Greenspan, the long-time Federal Reserve Board chairman until 2006, was an ardent advocate of this view, and it became an article of faith in powerful U.S. political and economic circles - not surprisingly so, since it justified letting economic elites pursue their interests with little government interference.

Third, enormously powerful computers and software, along with fibre-optic communication, have allowed financial wizards to conduct business transactions in the blink of an eye around the world and to create financial instruments - derivatives, swaps, structured investments and the like - of mind-boggling complexity. For all intents and purposes, these new instruments have blurred the boundaries of what we call money. Several decades ago, central bankers could sensibly talk about and, if necessary, control the money supply. Now, what counts as money isn't at all clear, and many things that look and behave like money can't be regulated.

Since the dot-com implosion and the recession in the early years of this decade, these three factors have converged in a toxic brew. Central banks, especially the Greenspan Fed, wanted to reinflate their national economies, so they looked the other way as unregulated quasi-banks created a colossal edifice of credit - a tightly coupled global architecture of debt instruments that no one fully understands. And we're now realizing that something close to endemic fraud aided and abetted this enterprise: Credit-rating agencies such as Moody's and Standard & Poor's put their triple-A imprimatur on securities underpinned by crummy assets; investment banks held major liabilities off their books; and nearly everyone in the business established the value of complex securities by reference to numbers churned out by impenetrable computer models - not by reference to prices in real markets.

So the rules of the game have now changed. Our global financial system has become so complex and opaque that we've moved from a world of risk to a world of uncertainty. In a world of risk, we can judge dangers and opportunities by using the best evidence at hand to estimate the probability of a particular outcome. But in a world of uncertainty, we can't estimate probabilities, because we don't have any clear basis for making such a judgment. In fact, we might not even know what the possible outcomes are. Surprises keep coming out of the blue, because we're fundamentally ignorant of our own ignorance. We're surrounded by unknown unknowns.

Commentators and policy-makers are still talking in terms of risk. Markets, they say, need to reassess and reassign risk across securities and companies. But, in reality, markets are now operating under uncertainty. No one really knows where the boundaries of the problem lie, what surprises are in store, or what measures will be adequate to stop the bleeding. And the U.S. Fed is making policy on the fly.

We do know, however, that we're not dealing with a liquidity problem. We face a massive solvency problem: Banks and investment firms aren't so much worried about financing their next investment; instead, they fear for their survival, because core assets - particularly loans on their books - have been suddenly and dramatically devalued. In this environment, the tools available to central bankers may not work. You can encourage people to borrow by pumping money into the economy, but you can't force people to lend.

Thomas Homer-Dixon holds the George Ignatieff Chair of Peace and Conflict Studies at the University of Toronto and is author of "The Upside of Down"

So what do we know from this article?

The system is in trouble because of the creation of financial instruments that few understand and that blur the definition of money. The people trading these are blatantly ignorant of the risks or the basic fundamentals of economics, and the media, Government and schools have created 2 generations of idiots that don't know basics like inflation is an increase in the money supply not the increase in prices.

Paper is a promise, paper only has a perceived or implied value that may or may not be honoured. Gold and silver have been money for as long as recorded history despite the recent attempts to commoditize metals into just another industrial product. Metals have all the criteria you want in a stable form of money, they are portable, divisible, scarce, durable, uniformand unforgable.

As your read more and more articles like this ask yourself, Do I want something real to hold onto or an empty promise?

Tuesday, March 18, 2008

Modern Hovervilles rising out of the housing crash

The truth is apparently only available on British news you won't find this story on CNBC

The next 2 months are the peak for mortgage resets, the end is nowhere near.

Sunday, March 16, 2008

Financial Ruin, who's next to Fall?

There is a lot of speculation as to the next victim of the subprime mess, first off all Country Wide had huge losses and gets taken out by Bank of America.

U.K's Northern Rock becomes a ward of the state after an adequate offer to buy could not be found. While Virgin did bid it was a low ball offered that was refused, leaving the Government holding the bag.

Bear Stearns received a bailout from JP Morgan who will borrow funds from the Fed discount window and funnel them over to Bear Stearns, while sounding kinda hinky there are laws allowing this. This however is initially a 28 day deal and a more permanent solution to Stearns insolvency must be found.

BREAKING NEWS, after the run on the stock Friday and the belief the bailout was a failure JP Morgan announces their purchase Bear Stearns for $240 Million, 1/15th of it closing value Friday. Two years and a hell of a lot of leverage and an 85 year icon goes poof!

So who could be next on the list?

Well ones to watch this week are Lehman Brothers who is expected Monday to write down $1 billion and has been granted a new $2 Billion unsecured credit line to sustain it's liquidity, and Goldman Sachs who is expected to have write downs Monday to the tune of $3 Billion.

Lehman and Merrill are both under specualtion as the cost of insuring their debt has skyrocket recently

Despite all the talk about the big boys in the banking industry small banks are also going under with 2 already reprted failed this year and 3 last year.

Hume Bank March 7 2008
Douglass National Bank Jan 25 2008
Miami Valley Bank Oct 4 2007
Netbank Sep 28 2007
Metropolitan Savings Bank Feb 2 2007

Expect to see more and more of the small players drop out as the big boys will be too busy saving their own asses or bargain hunting big game to even notice them the small banks failing.

For now I'd say a resonable watch list would be Lehman Brothers, Merrill Lynch, Citi, Goldman Sachs, ignore the bear it got eaten!