Rosenberg Goes Bearish On Silver

Tyler Durden's picture

While the jury is still out on whether David Rosenberg went bullish on equities just as the market topped out (Rosenberg certainly denies it), it is without doubt that in his note today to premium subscribers, in addition to some traditionally cautious and correct observations on the economy, the former Merrill strategist has "just said no" to silver. It remains to be seen if there will be another clarification note following this one should silver (and/or gold) resume the gradual roll higher (especially since with just 90 contracts traded on the HKMerx, the brand spanking new contract may need to lower margins to attract participation). Quote Rosie: "for now I think it is time to step back and adopt a more defensive and cautious posture towards the group...I would not recommend being aggressive in the commodity space until many of the clouds that have recently surfaced begin to part."

Full extract:

Of all the commodities, the chart of silver going into this current corrective phase looked the most asymptotic. As is the case in the markets, the harder they climb the harder they fall. But inevitably, support is found, and generally at the 200- day moving average, which in this case is $29 an ounce.

We went into this with pro-risk trades being fuelled by QE2, sky-high margin for equities, a general view that inflation was the correct trade and a sustained decline in the U.S. dollar. The net speculative long positions in the futures and options market for most commodities, including silver, did suggest that a squeeze on these longs could generate some outsized price action and it must be remembered that the market for silver is far smaller than it is for gold.

Plus, a lot of the risk-on trades were predicated on a sustained weak U.S. view, and while the greenback is in a secular bear market, it had moved into a huge oversold position technically and the net speculative short position had surged to a sufficiently high level that like silver, any shift here could trigger an outsized move and it has. Once the speculative shorts in the dollar and longs in several of the areas within the commodity space are squeezed out and the spot prices are realigned with the broad trend lines, it will be safer, in my view to accumulate. But in the interim, and knowing how commodity markets can behave for a period of months or quarters (2008-09 should not be forgotten), given their inherent volatility, we should probably expect to see a downswing sustained for the next several months. Beyond the technicals and the positioning, we also have to see how successful the Asian central banks are, especially in China and India, at curbing their heightened inflation pressures without upsetting their economic apple carts.

I am still a long-term commodity bull, and I think there will be a massive buying opportunity for those who are patient and have a view beyond 2011; however, for now I think it is time to step back and adopt a more defensive and cautious posture towards the group. On a positive note, the dislocations in the market have created interesting opportunities for alternative resource strategies, which focus more on relative value mispricing rather than outright direction. Moreover, if the six months after QE1 ended last year is any indication, we should be expecting to see a firm USD and some softness in the CRB index through the second half of the year. Being nimble will be crucial, as always, but I would not recommend being aggressive in the commodity space until many of the clouds that have recently surfaced begin to part.

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DaBernank's picture

C'mon Rosie, buy a shitload of AGQ and ZSL and see what happens - live a little!

TruthInSunshine's picture


Gas prices, energy prices, food prices - NOT hurting American Consumer (nor almost all retailers).

Got it, people?

The Bernank says there is too little inflation, but that even if there were inflation (wink), it wouldn't be a bad thing.


Hugh G Rection's picture



You think I'm going to let a Jew tell me what to do with my money?

Ted K's picture

+7 (to bring you to equilibrium with the junks).  I mean really with Soros talking opposite to his book and Goldman's proprietary trading, and Paulson (both Henry and John) selling out the country that gave them a safe place to hide from the Germans, these folks get a free pass???  Sorry assholes, hating these people is not the same thing as anti-Semitism, anymore than criticizing Israeli Army committed Genocide in Gaza is Anti-Semitism.

Dental Floss Tycoon's picture

Silver up 4 percent on the news.

Cognitive Dissonance's picture

I live and work relatively near to the heart of the fiat beast, Washington DC. With two thirds of the population engaged in working directly for the government, in the military or working on the various military bases as civilian employees, the CIA/NSA etc, working for defense or services contractors or subs/sub-subs and so on, the bewitching is pretty strong here.

At least more so than other large cities in the mid west or on the west coast. Yes, I know that is a broad statement. You must actually live here to see and feel it. Aware people who visit from other places are often very surprised by the vibrations coming from the beast.

Anyway, I saw my first small neatly printed sign in a small hardware store Monday quietly telling their customers that they take Silver and Gold in payment. An admittedly small act of rebellion, but huge when you consider the location. I'm sure there are others around here as well. It was like seeing the first spring flowers.

tmosley's picture

I never would have expected spring to come to Washington before it hit Texas.

The only places you can trade directly in silver around here are farmer's markets.

TheTmfreak's picture

I'm in the area myself and I haven't seen that quite yet. Doesn't surprise me though.

No questions asked this place is definitely uh different than the rest of the country. I'm actually as physically close as it gets to DC without having to actually work there. But I sure can see it from the office windows...

KidDynamite's picture

CD - at what price/exchange rate would they accept silver/gold as payment?

Cognitive Dissonance's picture

I didn't ask.

I know the owner by sight only and I gave him a thumbs up while pointing to the sign. He responded with a big shit eating grin like this. :>)

Pegasus Muse's picture

After multiple tours in the NCR I can tell you most military types are clueless about almost all matters monetary.  They get their LES at the end of the month and check their Direct Deposit and pay their bills.  That's as deep as they get.  Now ask a troop the rate of fire and max effective range of his M16A3 assault rifle he can regurgitate those facts in his sleep.

Good to read times are a changin. 

ZakuKommander's picture

Actually, I'm not surprised.  TPTB are always ahead of the curve (while keeping the hoi polloi as far back as possible).  That's, of course, why they're TPTB.

TheTmfreak's picture

According to Wammyassclown Gold doesn't buy bread though.

PulauHantu29's picture

Good! Go bearish. Every time it drops provides more opportunities for investors to grab more silver as paper currencies falter.

in4mayshun's picture

I thought this guy was supposed to be smart. "Wait until the clouds clear...?" C'mon Rosie. Ya lets wait til the clouds clear and every moron on the planet is buying silver. No thanks. I'll buy mine now while it's still on sale.

GetZeeGold's picture



That was the thinking so much.



Missiondweller's picture

Actually the author makes a good point. Between QE1 and QE2 there was a market dip that provided some buying opportunities. He makes the point that he is long term bullish on commodities. He mearly pointing out that between QE2 and QE3 there will be some more opportunities and you'd benefit from waiting a bit for those opportunities.

slow_roast's picture

I agree with him completely.  How is the removal of at least $58B/month in liquidity not bearish for everything?  Particularly since margin is near record levels and a major unwind could occur.  The market is more dependent on now on QE than previously, at least in sustaining higher and higher prices, so it seems quite logical to stand on the sidelines.


I'm watching everything trying to go higher today, while sitting in 90% cash, and have little want for any of it.  I don't see how the risk/reward isn't telling everyone to sell and see what happens post QE2.

Banjo's picture

slow_roast: IMO you are trying to buy picking the bottom. If you're not fast enought with your 90% cash you might be left buying $40 silver or $1650 gold.

Rosie does have  a point a broad based market contraction if and when QE2 is completly withdrawn. I would not want to be timing those markets.


Dental Floss Tycoon's picture

"How is the removal of at least $58B/month in liquidity not bearish for everything?"

It is not being removed it is being rolled.




ZakuKommander's picture

He jumped the shark when he started charging for his "wisdom."

cowdiddly's picture

After that trip bottom at 33? he thinks it will go down? LOL I took the other side of that at 34.20 we will see how it works out

pazmaker's picture

Silver back up over $35 today

JW n FL's picture

dont worry.. silver hits $40.. which means golds at $1550's.. and the FED Flush.. will push the prices back down at 2 times the cost for those who own gold and silver.. our tax dollars flush the price and the value of what we own goes down! thats DOUBLE!! WINNING!!! TIGER BLOOD BITCHEZ!!!

TruthInSunshine's picture

OT (I said it, so on to Rosie's tragi-call, if you want):

A new Chinese video game, being promoted and used by the Chinese Military, Glorious Mission pits Chinese Soldiers directly against U.S. Soldiers.

Why not Russian, Japanese or NATO Troops?

PLA First Person Shooter: Glorious Mission
walcott's picture

nice deception again. This guy is lying and buying.

Went to the wal-mart Toilet paper up $2.00

from $5.87 to $7.87. Detergent what was 296 oz's now 250 oz's.

With $2.00 increase in price.

If things are deflationary why the hell is the price of everything going up big time?

Like telling people the gas chambers were showers.


nope-1004's picture

When was Rosie bullish on silver?

I don't recall.  I know he's always been talking deflation.... he obviously doesn't buy the groceries in his house.


Id fight Gandhi's picture

I hate the self check outs too. Shit, just pay some poor soul minimum wage. The money saved from theft at those checkouts alone would cover their pay. But some brilliant fuck in corporate thought to buy machines at 50k a pop.

walcott's picture

artificially drive the physical buy back price down with their judefetzen.

And then sell physical at twice bogus buy back price.

Starve the masses while they hole up in 3k a night park ave. hotels.

Doing God's work.

Gubbmint Cheese's picture

would make a bit of sense.. if gold/silver ran up due to QE2.. it would fall a little without it. I figure the commodity complex will be weak until they start yapping about QE3 - which means (if you believe QE3 is inevitable) now is the time to buy gold and silver on weakness.


Bay of Pigs's picture

With or without QE, every single correction in gold and silver the last 11 years has been bought and met later with new highs. That is a fact. 

So has anything changed fundamentally right now? No, it hasn't.

Temporalist's picture

Thanks BP I was going to say the same.  QE or not the trend has been in place.  The only thing QE did was buy the financial system more time to dole out Freebux.

slow_roast's picture

So buying pullbacks is a sucker's mission now? Buy the run-ups! Okay, got it. Thanks.

Bay of Pigs's picture

I didn't say that. I simply pointed out that gold and silver were in a long term bull market well before QE started.

strannick's picture

Skyhigh margin? The same amount margin that has been in place for years?

Just prior to the $6 May 1st crash, the Comex market was being manically traded by HFT bots, presumably on the part of the chronically short bullion banks, on daily volume that exceeded annual mined supply.

Like ZH has previously noted, the speculative longs in the COT report for the time were not frothingly parabolic, but were at all time lows.


Clorox Cowboy's picture

I think he meant to say "I would not recommend being aggressive in the commodity space until someone else takes the risk, reaps 90% of the reward and leaves a few crumbs for the timid."  And that's precisely why he will find himself late to the party yet again...the ability to analyse fundamentals in hindsight is not going to replace a good trader's sense of timing.


theotheri's picture

Can't understand why he generates so much attention.  He is virtually never correct in his predictions.  Imagine if he were an engineer giving structural stability reports on buildings.

HamyWanger's picture

Rosenberg is probably one of the biggest contrarian indicators in America, with Denninger and Prechter. Every single call he made was an utter and complete disaster.

Tyler likes him because he is the only ex-bank analyst in the world who is bearish on the economy, with Bob Janjuah. Maybe he wants to prove that ZeroHedge is not necessarily anti-bankers. 

Like every mainstream analyst, Rosenberg goes bearish on something when the correction is over. Telling to short silver after a 40% drop is way beyond surreal. 

Robot Traders Mom's picture

Just like 2007 when he said he is bearish on housing?

Fuck you troll. Go pay a hooker to get laid and fucking leave ZH.

TruthInSunshine's picture

I think Hamy is HarryWanger's comedic twin brother, who jests about his brother's true calling: Urinal cakes.

Piranhanoia's picture

mmm.  Fine dining and free if they aren't chained down.

HamyWanger's picture

David Rosenberg goes bearish on something: time to drop the shorts and go long. 

Tater Salad's picture

Hamy Faggot, I think you forgot the fact that Rosenberg called the SPX to the effin tick in '09!


Sounds like you're on top of things, and yes, you go long dip shit.  Hold my drink and watch this...


Manthong's picture

For that quantity, you might consider ignoring the premiums and spot price and just start buying a 10 oz bar or say $400 worth of 90% coins a week. At least you get some of that fiat converted now. The odds of hitting the exact bottom are way against you and the main goal for long term wealth preservation is accumulation. I buy physical low, I buy it high. At this level, the near term price is not my concern. But, if you ever figure out how to precisely time that lowest dip, please share the information.

TideFighter's picture

Even Rosie's hindsight is 20/100.