Truth, Fiction or Internet News?
Here's a link to the latest in Silver Issues: http://www.examiner.com/precious-metals-in-national/rico-suits-against-two-banks-metals-to-soar-review#ixzz1RC1yGhJs
The hi-lights are the following: “On 30 June 2011, Federal RICO Suits were filed against JP Morgan Bank and HSBC for gold and silver manipulation, resulting in extremely large short positions which the Banks then precipitated drastic selloffs in Jan 2008 and Feb 2010 by manipulating the prices of both the bullion itself, underlying options, ETFs and other mining stocks as well. Chris Weber of Weber Global Opportunities announced this weekend that silver should rise rapidly to at least $100/ounce, as it is very undervalued due to the alleged manipulation by the Bullion Banks named.”
Now the interesting part of this story – is that I cannot find a shred of evidence that this story is either true or false. No corroborating story – and on the Internet that’s a little weird! But most economists still believe that Silver – below $75 an ounce is a buying opportunity. With the Governments of the world printing paper dollars like madmen, I'd suggest to all of you that Gold and Silver still have a very bright future. Buy one 10-ounce bar of silver and you will be amazed at the "weight" of it. It's really an amazing thing and for the recent price of $35 an ounce, it’s still affordable. If you did nothing but use it as a paperweight, you'd be making a wise investment. Why - because one day we will see Silver at $75 an ounce and not many paperweights appreciate by 100%!
Now, you’ve heard me preach time and time again that we cannot cure our economy without curing housing. Factually:
- On Friday at 10:27 AM - Legislation was introduced in the House calling for the merger of Fannie Mae and Freddie Mac into a new company to purchase mortgages and sell them to investors as government-backed securities. Now didn’t we do this in the 2008 nightmare – and with the same ratings agencies around – how do we prevent Déjà vu all over again?
- Factually – approximately 17,000 borrowers with FHA-backed mortgages go delinquent each month - mostly due to unemployment. This new bill is asking Uncle Sam to "help" the situation by pushing the FHA to give unemployed homeowners 12 full months of "no payments". So is the new, ‘young’ business model to buy a house with an FHA approved mortgage – then lose your job – then take on part-time (under the table work) while you live in your house rent-free?
- Factually - most of these mortgages are packaged and sold as investments. So who’s going to purchase this new ‘batch’ of mortgages fully knowing that a significant portion could be allowed to go without paying a dime for 12 months? AND based upon that – how is this helping housing?
The Market:
On the 27th of June the DOW was at 11,950, and looking darned close to losing all control. To quote Jim Cramer: "I don't like this market here". From that "low" the DOW powered up and up and up, and was flirting with 12,700 by July 7th. That's one of the most powerful moves "up" we've seen any market make in that amount of time. Which begs the question, "Why?"
- Is it because the Feds said that they were ending the extra stimulus? Nah!
- Is it because despite oil coming off its high – big names were telling us that they’re seeing less demand from the consumer. Nah!
- Is it because on Thursday the ADP employment report hit, and they said that 157K new private payroll jobs had been added – which is quite a number considering last month we added around 35K. So despite no resolution to the debt ceiling issue, no idea what "Obamacare" is really going to cost, gasoline still above $3.50 a gallon, sinking housing – companies went on a hiring binge? Nah!
- Is it because initial jobless claims for first time unemployment were still above 400k at 418k? Nah!
- Is it because the jobs report on Friday just STUNK to high heaven? The estimate was to add 125k jobs – and we simply added 18k. BUT wait – due to the ‘birth-death’ model we added a fictitious 131k included in that 18k number – so we actually LOST 116k jobs in the past month! Nah!
- Is it because everyone is waiting for QE3 to be announced and most traders will try and stay invested, so that when the big announcement comes, they can reap the benefits of the big pop? BINGO!
Now, our guess going forward is a sideways and down stutter step that begins next week. The cheerleaders want nothing more than to see the market rally more and bust through the old highs at 12,800. But, I think some backpedaling has to happen first. We gained 900 points in a little over a week on nothing but air and hope. With ‘hope’ still being a four-letter word – we need some substance and on Friday we didn't get it. Now if the first earnings reports of the week are found to be "good" then we could indeed move back up and challenge the May 1st highs. But even if that happens, I'm having a bit of a hard time understanding what will push the market higher. At ‘some’ point you have enough people not working, or on unemployment that they simply cannot buy products other than necessities. While I find it amazing that we've allowed some people to collect unemployment for 99 weeks, without good higher paying jobs to wean them off the Government handouts, I tend to see the economy mired in a mess for a long time.
Yes we should get some form of a fall run-up, everyone counts on it for bonuses – but between now and then, a lot of sideways chop with a tilt toward "lower" makes more sense to me than anything. Often times markets climb what is called a ‘wall of worry’ and debt ceilings, presidential races, jobs, and Europe certainly add to our ‘wall of worry’ – and what normally follows is a market roll-over. The market has been pretty ‘silly’ as of late – so be on the look-out for that market roll-over.
Tips:
Our long term holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.
Gold and Silver are once again above their $1,500 and $35 levels respectively – so watch for potential breakouts here. AND the miners have done very well for us as of late – as people realize that their earnings will be spectacular based the materials being at these numbers.
We sold out of 4 of our 5 short-term long positions on Friday morning, ringing out some very healthy profits. Heading into next week, our best guess is that we're going to be sitting on the sidelines some, trying to determine how they're going to move this market. Now having said that – look at WTSLA – the chart is getting interesting and the compensation package of its leadership is just as interesting. When we see these elements – just like AMSC – it begs us getting involved and often for the better.
But we’re still taking our profits and buying more gold, silver and energy.
Please be safe out there!
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