2010 prediction review

I’m a little surprised this year by metals market, not because they performed different than my predictions, I was spot on with gold hitting $1400 and silver clearing $25+. What I was surprised about was the fact that these two did so when without much greater weakness in the dollar index. This says one or two things to me

1. Every nation is in a cycle of competitive monetization making gold and silver appreciate far more than the dollar index would otherwise indicate. (we are all screwed)
2. That there is one hell of more potential in metals than even I believed.

Face it, I’m not one of those writers predicting $20k gold, my modest 5 year prediction (oct 09) is for $3000 and $120 silver but if we can make these kinds of gains this year with the U.S. dollar index still above 80, what the hell happens when it actually breaks down?
My “all hell breaks loose” scenario begins to be more realistic and that scares me. Personally I would prefer austerity, deflation and an eventual steady state economy, to inflation, out of controlled growth, and the world turning into a desolate Easter island scene.

I think the pressure on the comex is growing and it was good to see some aggressive withdrawals in Nov/Dec, while its bounced back a bit we saw silver stocks down to about 103 million ounces in mid dec. I believed we would break below 100 but at least the momentum is going in the right direction into next year.

Another hit for this year was my prediction that 43 million Americans would be on food stamps in 2011, considering last months numbers put it at 42.9 million I’m pretty sure Dec can add a meagre 100,000 to the rolls. I think my 5 year at 60 million food stamps receipts is still quite doable, assuming of course food stamps still exist when the government goes FUBAR.

Oil, I saw $100 and we’ve just recently touched $90, so a miss. In Canada we have seen regional shortages and price spikes attributed not to shortage of crude supply but the closure of the Montreal refinery and a corresponding shortage of distillates. Big oil has us by the short hairs and figure they can cut production and then rationalize higher domestic prices rather than refurbish and update old refineries. The bonus however people will become acclimatized to higher fuel price and with hopefully begin to adjust their behaviours.

I missed bank failures badly 157 vs 250. I don’t see how the at risk list can keep growing at this pace yet the actual failures does not keep up,, my guess is they are pushing failures off to the future somehow with flawed accounting practices. A great deal of commercial property is financed by region banks so I still expect another huge wave of mid tier failures.

All in all the trend I see is continuing but I seem to be over anxious about how fast the fall will be, I know Rome did not fall in a single year but damn I don’t want this to linger and linger I just want it all to blow up, get it over with so we can start working on a new model.

Locally I see an awakening with many Transition towns, Post carbon groups and such popping up in many communities, this is a good thing and with luck many of these groups will establish and flourish before all hell breaks loose. Me I’m waffling between adapting in place with illegal chickens in my backyard or going all out and moving to a planned eco community where a number of families can attempt total food security, reskill in sustainable living and build a functional, inclusive and caring community. Pipe dream??????

I know I’ve not been posting a lot this year but I still appreciate my readers and their feedback, I know you’re still out there from my hit counter and the occasional Adsence cheques and I thank you for your support. There are many voices on the web saying much the same thing and sometimes I feel I’m just a very weak voice in a large off key choir. I’m often frustrated by the intransience and stupidity of the main stream but regardless I will continue to post when I can. It’s imperative however that we all look a little inward and begin focusing our efforts in preparation for an ugly future. It’s obvious that we cannot educate or save the majority in time but please be open to your neighbours, friends and family. Share if you can, educate where you can, encourage where you can and be respectful to those who screwed up. The future could suck real bad or we can work to make it suck less, Your choice.

Clear sailing towards silver riches

I’ve bought a reasonable pile of silver over the last 5 years and I’ve held it through some crazy gut wrenching turbulence, some that came damn close to shaking my confidence in bullion. Today that fear is entirely gone.

I watch the market daily and I’ve seen the recent attempts to drive down prices and I can say with great confidence that the tide has turned decisively in our favour. Sure they can knock the price down occasionally but no longer can they nuke the market back 30% in a matter of days, their control is slipping.

There are a number of very encouraging signs in today’s silver markets that ensure this quite profitable run will continue for some time.

1. The number of new converts in both blogdom and the financial media who are not scared to state the obvious facts about silver’s supply and demand issues.

2. Advanced technologies are using more silver each year. Solar, high temperature super conducting cables, antibacterial coatings/fibres, and silver/zinc batteries are all expected to see significant demand growth

3. Despite higher prices, demand is making the market for physical silver very tight. Many reports claim there is little to no small silver around for delivery.

4. Few pure silver mines are opening ensuring that a quick fix to supply issues is not going to happen.

5. The amount of silver on deposit with the Comex is shrinking at a nice steady rate. While physical inventory has shrunk to about 107 million ounces, outstanding contracts for “potential delivery, represent more than 700 million ounces. At some point industrial users will panic if inventory shrinks too much; that’s when the real fun starts for us.

I can’t promise prices will not slump a bit from today’s level but I have no fear that this market can be brutalized the way it has been in the past. If you have the means and can find anybody with silver for delivery make that purchase while you can.

I don’t have time to check ALL the vendors and inform you who has stock but I do know that First Majestic Silver restocked this week and have sizes in stock today.

My last couple of purchases have been from First Majestic and I’ve been very happy with the product and the service. Those 1kg bars are beautiful, well packaged and stack so very nicely.

Tell them I sent you, maybe they’ll buy some advertising or send me a mug ;)

Silver poised to soar on manipulation report

If you read nothing this week you should read this short quote from Bart Chilton of the CFTC with regards to the silver market.

"There have been fraudulent efforts to persuade and deviously control that price,"

No hedging or waffling in that statement is there?

While the CTFT has not reported on its two year investigation into silver market manipulation, I believe this quote is an attempt to telegraph to the market that these complaints will be totally substantiated and very soon.

While I'm not entirely clear as to the extent of CFTC powers to fix this problem, I assume it could lead to criminal charges, fines, position limits perhaps even trading bans.

This could very well be the event that finally frees silver to find its own price level, one which I believe will be a hell of a lot closer to its historical ratio than it is now. My bet is a 30:1 silver to gold ratio (or better) within 2 quarters if the report comes out proving manipulation. That would be about $44/oz

It could however be a lot more explosive than that so I’d suggest you get out there and clean out the coin stores now. Paper will be repudiated very soon, demand delivery on contracts and certificates if you have them or cash them out and go find physical bullion somewhere else in the market. Many junior miners still look quite undervalued; if you have money locked into retirement plans do some research on pure silver plays.

I think this is going to get fun.

Another silver failure to deliver story

This could just be a case of Scotiabank behaving badly, being overzealous, not understanding how to deal with a Power of Attorney, or just having zilch in the category of human decency. What ever the reason Scotia deserves all the bad press they can get over their treatment of this dying women.

On the other hand this could just be a large bullion bank doing its best to make damn sure this obviously savvy lady did not convert her silver certificates into bullion, figuring if they delayed until she died her kids would be more than content cashing them out in fiat dollars. In the end she did finally get her bullion but how many other dying customers would have gone to this effort?

Which is worse, no compassion or being self serving bastards? Not much of a choice is it?

Banks are evil, corrupt and working for their best interests not yours. Please people, if you have paper silver demand redemption and tell your friends, neighbours co-workers etc the same message.

The warning shot heard round the world

All of a sudden everyone started screaming back and forth across the room “Fuck, don’t believe the screens this can’t be right“, yelled one trader, an IT guys popped his head up “hey, what’s wrong everything was ok a minute ago….. SHIT! That ain’t right.”

Such were the opening moments of yesterday’s crash/glitch/clusterfuck on a Canadian Bank’s trading floor as reported by a friend of mine. There was nothing confidential or secretive about what he told me, mostly he just explained his utter disbelief that complex trading systems would not notice and default a aberrant sized trade like the one some analysts claim started yesterdays run, yet traders tell him it sometimes happens. He’s also often amazed at how isolated traders from the real world but that’s another story.

I too find it disconcerting that these big banks, trading houses, and exchanges which process more artificial wealth than really exists don’t have any sort of failsafe to abort truly huge and obviously bogus/erroneous trades. I actually don’t find it surprising, just very unnerving. After all, we know that risk and money making is name of the game and whether it’s selling fake paper silver, leveraging ones position 30-40X or drilling deep water wells without a $500,000 dollar part that could avoid a blow out, people will eventually screw up. These complex systems which everyone relies on are no place to be cutting corners but people are stupid and markets reward risk not prudence.

The irrationality of markets where you can sell more derivatives than the entire value of decades of world GDP is staggering. The ability to sell stocks you don’t own or which in some cases don’t exist is irrational at best. The selling of commodities that can’t be delivered is unethical and should be illegal, yet these are the normal behaviour of our markets. If you’re not scared yet you’re a fool!

Speaking of prudence what the hell are people thinking running to the U.S dollar as a safe haven? If you looked at the risk of U.S monetary collapse for today only, things look pretty good but that’s not the point. Converting to the U.S. dollar as a safe heaven is akin to moving from Poland to the Ukraine in 1939, yes you’ve saved your ass for the moment but eventually a Panzer will still come through the front door. To be truly safe people need to move into physical bullion before the there is a real default in the Euro zone, U.K, U.S. or Japan.

I hope you noticed I didn’t say IF there is a real default because at this point it’s virtually impossible that it won’t happen. Just look at the EU’s big Greek bailout which requires Spain, Portugal, Italy, and Ireland along with the more solvent states to cut Greece a cheque. How the hell can 4 countries which are being downgraded and will require their own bail out chip in to cover Greece’s bar tab? Does that make sense to you? Of course in these days of fiat currency they could just institute a rash of currency devaluations/inflation. In my opinion destroying your currency so you can pay back dollars with pennies is a de facto default.

I’ve predicted for a couple of years that the EU was in danger of splintering and I think its inevitable now. Of course those Germans who think it’s a good idea have yet to realized that balkanization does nothing to safeguard their banking system which holds a great deal of the bad PIIGS debt. Either way Germany is screwed but a regional recovery would be more manageable when the corpse of southern Europe is unshackled from the North.

I'm not the only one talking about monetization or EU members leaving the union

Yesterday was a warning shot to point out that the market is to big, to complex, to reliant on computer trading programs that are obviously not adequately safeguarded, and filled with too many fraudulent/ethereal products. At this point the system is broken and likely impossible to fix. In addition the debt markets are in a mess with the demand for debt greater than the supply of credit hence the large monetization’s happening in the U.S. Most western countries deserve their debt to be rated junk and nearly all U.S. munibonds should be well below junk by now. In my opinion every paper promise is worth no more than 40% of its stated value, while productive land and physical commodities are worth several times their current value.

My advice for people would be start buying that gold and silver now while you still can, especially the silver considering the FCDC hearings on market concentration, and the rumours of a Department of Justice antitrust investigation regarding JP Morgan’s silver trading practices.

Stock up on food, water purification equipment, seeds and medicine. (I know someone will add personal defence items and that’s your call but I don’t need that conversation here.)

Dump non commodity based equities. For those stocks you insist on holding long term like dividend stocks, demand delivery of your certificates even if you have to pay for the service. Also make sure you vote your shares so the company can gage how big the illegitimate float is.

Vacation close to home and/or spend the money making your house and lifestyle more resilient to disruptions in energy supply.

Learn to garden.

Get to know and make common cause with your neighbours. Central government will be of no use in a collapse, community will be invaluable.