Archive - Apr 25, 2011

The Silver market is in a bubble stage right now. No one really knows how long this will last, whether Silver goes up another $5, 10, 20 doesn`t really matter for investors who are buying the physical metal in the form of coins because when the bubble ends they are going to be sitting on a depreciating asset.

Tuesday is my 40th birthday so please be kind as you read through my comment on life, health, work, markets and friendship. I'm also soliciting advice and donations for my blog...

On almost any metric applied, QE2 ends up not only falling well short of its proposed goals, but actually turns certain metrics like GDP growth negative compared with the prior quarter, and heading in the wrong direction.

Over the past hour Zero Hedge has been inundated with reader comments notifying us that Ampex has, validating the earlier post speculating about a possible silver shortage at the metals distributor, launched a "reverse ïnquiry" in which it will pay "you $3.00 over the current spot price of Silver for your Silver American Eagles. ANY year, ANY quantity!" and "We will pay you $38.00 over the current spot price of Gold for your Gold American Eagles. ANY year, ANY quantity!" So aside from this first public confirmation that one of the biggest wholesale retailers of precious metals is now inventoryless [sic], we can certainly see why Asia has decided to take silver down in the afterhours electronic session.

Well, it's official: Ron Paul has launched his 2012 presidential campaign. Per the National Journal: "Rep. Ron Paul, R-Texas, whose outspoken libertarian views and folksy style made him a cult hero during two previous presidential campaigns, will announce on Tuesday that he's going to try a third time. Sources close to Paul, who is in his 12th term in the House, said he will unveil an exploratory presidential committee, a key step in gearing up for a White House race. He will also unveil the campaign’s leadership team in Iowa, where the first votes of the presidential election will be cast in caucuses next year."

Equities (unch) managed to algorithmically outperform credit (wider) and un-sync from correlation and vol on the day amid rather tepid conditions. Up-in-quality remains in cash and synthetic credit and protection in vol seems bid again (for now).

Whether or not you like QE (yes, there are some insane people who think it’s a good idea… unfortunately they work for the Fed), this is the reality our financial system faces. Indeed, if the Fed were to quit QE for good the resulting crisis would make 2008 look like a picnic (the 2008 collapse was triggered by the CDS market which was only $50-60 trillion in size, les than one third of the interest rate based derivatives market).

Grant Williams chimes in with another (first one is here) off the beaten path observation on the ongoing parabolic rise in silver (and for those confused no, silver is not tracking the CPI). "We have discussed at length in the various iterations of this publication going all"the way back to my BTIG days, the various ‘conspiracy theories’ surrounding alleged shorts in the silver futures market which are allegedly held by, amongst others, JP Morgan and HSBC. Initially, these theories were dismissed as the ramblings of the insane and, speaking as one who was called insane many times, even I have to admit that the stories were somewhat far-fetched. Far-fetched? Certainly. Impossible? Hardly. Implausible? Less so now. There have been all sorts of assertions about the fact that the short positions purported to be in place on the COMEX couldn’t, in fact, exist. These assertions, like the accusations which they attempt to answer, are all offered without proof - the general defence being along the lines of “it’s too preposterous to be true” which, to me at least, is an extremely weak offering. As silver has exploded higher, various estimates have been made at the potential losses being accumulated by those parties short of silver futures. The sums are astronomical. If we take JP Morgans alleged short position as an example, and we assume there is some truth to the assertions about the size of that position, a move to $50 could potentially cost JP Morgan upwards of $4 billion - or, as it’s still known, ‘real money’.

"I think they might be pressured into launching a version of QE3 in June, but I think it will look very different from QE2. I expect that it would target longer dated treasuries and possibly even mortgages, in an effort to create the most political support. I also believe it will be more open ended. Rather than saying we will spend $X billion in 6 months and here is our purchase schedule and target portfolio, he will create a ‘war chest’. QE3 will be positioned as we have $X billion that we are prepared to use to purchase longer dated treasuries and mortgages if and when we see the need to add support. This would be a true compromise. It does not force the Fed to create a schedule of auctions like QE2, in fact if the data remains stable they don’t have to do anything. That should appease the hawks. By targeting maturities that directly impact mortgage rates, its more palatable to the average American, and by keeping the activity less obvious they can deflect any links to inflation more easily. It also keeps the purchases open at a time when there must be some real concern that this alternative tool could be restricted in the future." TF Market Advisors

RANsquawk Market Wrap Up - Stocks, Bonds, FX etc. – 25/04/11

"Looking forward, our prior period comps for net adds are going to get tougher, and while we expect our net adds the rest of this year to continue to exceed those of the prior year, it won’t be at a pace of nearly 2X like in Q1. With net adds forecast to grow every quarter on a Y/Y basis, we remain in the first half of the S curve of adoption. As always, we will remain focused on improving our service, keeping Netflix in the first half of the curve, and thereby increasing Y/Y net adds, as long as possible."

The world's most telegraphed call comes and goes, however since it has been priced in about 7 times already, has absolutely no impact on the price of silver. And yes, we were off by about 8 hours. Also, for those who observed this is the third margin hike in as  many months (previously here and here) with neither doing anything at all to halt the price surge, you are absolutely correct.

And so another one joins the commodities craze: "The world is using up its natural resources at an alarming rate, and this has caused a permanent shift in their value. We all need to adjust our behavior to this new environment. It would help if we did it quickly." No, not Malthus. Grantham.|

In accordance with the BATS Clearly Erroneous Trade Policy, BATS, on its own motion, has determined to cancel all trades executed between 09:28:00 and 10:03:00 that were executed at or above or at or below 30% from the consolidated closing price for the stocks in the attached list. This decision cannot be appealed. BATS has coordinated this decision with other UTP Exchanges. BATS will be canceling trades on the Member’s behalf. Please see the attached list.