An interesting twist....especially when they make you pay back the defaulted mortgage loss to Country Wide and the Friends of Angelo.....those friends now being BoA. Angelo must be getting a chuckle over this at whatever beach he is currently sunning himself on.
5 yrs ago Morgan Stanley was sued for not actually buying PM's that they were billing storage fees for. The metal was all unallocated or on paper. They settled out of court. Now UBS is being sued for the same thing (bait and switch with unallocated vs allocated PM's).
Trying to squeeze blood from a stone. You can send the liar loan liars to jail, but what will that accomplish? Most of them don't have any money, even if you can get a judgement.
For those who are still holding out hope that the Tea Party, or some other group, will ride to the rescue, and save the economy of the U.S., well just forget that. This is never going to happen we are in to deep. Even if we do turn the tide it will be long after most of us are dead and gone before the U.S. sees any light in that tunnel.
Go on line to Utube and type in “Argentine Inflation” and watch a few videos. This is where we are headed, and hard assets is the ONLY thing that will save your family,
As always best of luck. Thanks for the great article 57 loaded
Good article. When factoring in those much lower current M2 growths among the G7 vs the E7 countries listed, the G7 have come up with additional hidden methods to pump in liquidity w/o having it show up in M1 or M2. Such is the beauty of modern western banking. The E7 are still doing it the old fashioned way as the US did back in the 60's and 70's...by increasing the M&M's. I don't buy for a minute that the liquidity increases among the G7 nations is on the order of 2-5% per yr as M2 would tend to suggest. It's what you don't see that really counts (such as derivatives, laundering TBonds via the primary bidders, perpetual currency swaps, agency debt machinations, etc.). How have we added a fresh $TRILLION+ per year in bond auctions without it showing up in M1, M2, or M3? The only monetary aggregate that has been boosted (ie almost tripled) is M0 which has increased from $850 BILL in Sept 2008 to the current $2.4 TRILLION. That's been done to allow the too-big-to-fail banks to keep from having to get bad loans off their books while the FED front runs higher reserves.
Speaking of Argentina, here is the ferfal/Argentina/frugal squirrels commentary on economic collapse which I first saw posted on these boards a few years ago. Kind of interesting to go back and read it again. Also interesting to see what he had to say about gold...
GOLD!!
Someone hit me in the head please because I messed up about the gold issue. Everyone wants to buy gold! “I buy gold. Pay cash” signs are everywhere, even on TV! I can’t believe I’m that silly! I just didn’t relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins. Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold. What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you’ll not be loosing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag worth of gold rings. Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas.
So, my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of the item. In my case, gold coins would have been an excellent investment, saving me from loosing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins. Forgive me for not talking about this before, but I didn’t realize this until today, when I visited my local market warehouse and saw a “Buy Gold” sign.
The Tree of Liberty must be refreshed from time to time with the blood of patriots and tyrants. -Thomas Jefferson
A fairly brief article identifying how gold was "managed" in the 20th century starting with the FED in 1913. A good refresher for anyone but excellent introductory material to those new to the PM's game. I particularly like the synopsis of control methods used in the 80's and 90's. The author points out that with derivatives, the bankers were able to find a way to increase money supplies w/o having it show up in M0, M1, M2 and M3. While gold derivatives and leases worked for quite some time to manage the gold price, the market is now increasingly demanding physical. Author also points out that selling physical gold to depress the gold price never really worked for more than the short term. It failed in the 1960's, 1970's, and in the last decade. But what did work more effectively were highly leveraged derivatives (ie Ponzirama).
My wife and I watched “Inside Job” on pay for view last night. Really worth seeing if you want to know who the players are in the coming down fall of the American financial system.
Meanwhile Gold Gold hit $1470 this morning and Silver hit $40.25 WOW!
I hope that Jim Bunning runs for Mitch McConnell's seat in the Senate. It would be a vast improvement and the payback would be extremely gratifying. There's about 430 folks in Congress who's last appearance needs to be in feathers.
Q: Are You Printing Money? Bernanke: Not Literally
I heard an interesting quip yesterday evening. I can't attribute the quote because I never caught his name.
If you rob Peter to pay Paul, you can definitely rely on Paul's vote.
This is obviously not new information as evidenced by our current economic situation but I thought it capsulated the concept in brief and succinct terms.
This is what I've been saying for years. Our economy has been built on excess. Excess that we have become accustomed to. At least 10% of GDP could be eliminated and no one would miss it, except for those who have jobs built upon excess. The 5% unemployment we had for such a long time was the real smoke and mirrors. But as we come off this excess, it will "feel" like the end of the world, when in reality it is just getting back to a sustainable way of life. There is still a lot of excess that can and probably will be wrung out before economic "boom times" can return. Widespread inflation will remain at bay.
<< <i>This is what I've been saying for years. Our economy has been built on excess. Excess that we have become accustomed to. At least 10% of GDP could be eliminated and no one would miss it, except for those who have jobs built upon excess. The 5% unemployment we had for such a long time was the real smoke and mirrors. But as we come off this excess, it will "feel" like the end of the world, when in reality it is just getting back to a sustainable way of life. There is still a lot of excess that can and probably will be wrung out before economic "boom times" can return. Widespread inflation will remain at bay.
Lots of excesses out there. Excesses in consumption, in corporate lobbying efforts, in tax codes, in not taxing corporations and banks, in financial regulation non-enforcement, in otc derivatives, in govt intrusion in daily lives, etc. Interesting that the govt's dept of commerce is suggesting a VAT (taxing the symptom) rather than going after the multitude of root causes that result in consumption excesses (taxing/regulating the root causes). If we lopped off 50% of govt I don't think it would be missed. It's certainly unneccessary. We could start with 10% per year.
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
I'm not convinced. The nearest out-of-the-money June put option is $1.25, which implies a cost of 9% annually to protect a yield of just over 3%. It's possible that there are more put options than call options on this ETF simply because more investors expect the price to fall rather than rise.
Technically, gold bulls remain in strong overall technical command. There are still no early technical warning signals that a market top is close at hand. For gold, unlike silver, the recent lack of high intra-day price volatility is bullish. Gold prices are in a three-month-old uptrend on the daily bar chart and in a 10-year-old uptrend on the longer-term monthly chart. Bulls' next near-term upside technical objective is to produce a close above resistance at $1,550.00. Bears' next near-term downside price objective is closing prices below solid technical support at this week's low of $1,492.00. First resistance is seen at Thursday's record high of $1,538.80 and then at $1,545.00. First support is seen at the overnight low of $1,532.10 and then at Thursday's low of $1,523.90.
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I'm not convinced. The nearest out-of-the-money June put option is $1.25, which implies a cost of 9% annually to protect a yield of just over 3%. It's possible that there are more put options than call options on this ETF simply because more investors expect the price to fall rather than rise.
If the cost is 9% annually to protect a yield of just over 3%, then why in the world would investors buy puts at such a premium if the Fed just got finished saying that rates are going to stay low for a long time?
It seems to me that manipulating the market wasn't good enough. Now they have to gamble (rather poorly), in an attempt to leverage up our taxpayer dollars in order to keep Treasuries looking viable. These guys are really nasty.
Gold looks good under these circumstances. The only thing that's changed is the order of magnitude. Isn't leveraged gambling on Treasuries a way of disguising hyperinflation?
Q: Are You Printing Money? Bernanke: Not Literally
<< If the cost is 9% annually to protect a yield of just over 3%, then why in the world would investors buy puts at such a premium if the Fed just got finished saying that rates are going to stay low for a long time? >>
The Fed has less control over long-term rates than over short-term rates. Investors may be betting that long-term interest rates will rise despite the Fed's efforts, due to rising inflation and excessive money printing. There's also a small but real risk of treasury-bond default if Congress fails to raise the U.S. debt ceiling. Such a default would likely slam the price of t-bonds, generating big profits for holders of put options.
During the next few weeks the U.S. congress will vote on extending the debt ceiling.
Like many of you, I own some paper Gold and Silver in the form of Funds, as well as my insurance hard asset Gold and Silver.
There are several possibilities of things that might happen when the debt limit comes to a vote. The conservatives have an opportunity to stop the liberals and their spending budgets in there tracks. If the debt limit is not raised the funding for on going programs, and the extension of many other programs will become unfundable.
Currently the situation we have is the congress spends way over the tax receipts taken in, and the Fed as the lender of last resort buys the debt un-funded by outsiders and prints the money to give to the Treasury to pay the bills.
Forget not having QE3 or 4, or 5. The Fed cannot stop printing the money as long as congress spends way in excess of its Tax receipts.
If the house refuses to extend the debt limit. We will have riots in the streets within 4 weeks. I believe that because the Treasury is going to pay the debt interest first to protect sovereign funds, pension funds, and Fat Cats, in order to save its credit rating.
If this first scenario happens gold and silver should take a BIG dip. How BIG who knows this will depend on the buying in other parts of the world.
What more likely will happen is that the House will refuse to extend the debt limit at first, and with a week or two cave to pressure and agree to raise it on some BS promise of future cuts in the budget.
If this happens the markets will take a dive, but be right back up with a month or less.
I have considered placing stop losses on my Metals funds, but if the second scenario happens I will get stopped out and incur at least a 15% Tax before I can get back in.
How do all of you think this will play out the next few weeks?
I see it as win-win for metals. If they don't extend the debt ceiling, then a default becomes a certainty. A certain or near certain-default on US treasuries or somewhere else in government spending will send money fleeing the bond and treasury markets. If they extend the debt ceiling, it means more de-basing of the US dollar, also a win for metals. Of course, they could raise rates, but that would probably help metals as well, IMO. The only threat to metals, IMO, is a true and deep cut to spending, especially entitlements, and that isn't going to happen.
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Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime.
Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime.
I agree, but I also think that there is more chance of the metals ETFs declaring a default or a force majeure than there is that the Congress will stop spending or that Congress will fail to raise the debt ceiling.
I think that paper metals are at risk, more so every day. I do expect real uncertainty and lots of volatility. It's not going to be "fun" for anyone.
Q: Are You Printing Money? Bernanke: Not Literally
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing.
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing. >>
Proof, you give the scenario that I believe will send PM's to ridiculous heights. A paradigm shift if you will. If one can fathom the depth of our debt, then ten times the previous PM records are conceivable if there is a default. In dollar terms we may see $8k but in Canadian dollars, Aussie, etc...could be just 2,000.
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Too crazy this time it's not 2008 IMO. It surprised me last time but no big deal didn't last long. This time you have a bunch of money to go somewhere, the stock market? How's that worked in the 21st century? You halved your money twice in less than 8 year so don't think many older baby boomers forgot that.
In addition:
1. Could see a big shortage as we've seen this decade. 10 bucks on an ASE now. 2. Japan melt down, both nukes and ecomony. 3. Europe a mess 4. USD is all of a sudden a bigger mess. 5. All the middle east is a mess. 6. Russia waiting in the wings for the payback of us spending so much on the military that they couldn't keep up, that caused the spit up and the Berlin Wall coming down. 6. China execute their long term plan of sending the USD under. They already say they're getting rid of 2/3's of their dollars and are big buyers of PM's. 7. Big demand in the Middle East and South America too. 8. How about food shortage, gas price, and price in general. What do you invest in to maintain your purchasing power? 9. How many more natural disasters are we going to have this year? They seem to be destroying big sections of the world. 10.Emotions- in good times and bad they override any chart or wall street wish and they've always have. Notice no one on Wall Street will ever predict a downturn but really use the same human emotions to pump the market up. Seems most only recognize human emotions in the not so normal commodities cycles and call it a bubble.
Bottom line where you putting your money to hold buying power? I'll take my chances with PM's for now. Once inflation really kicks in by years end holding cash just loses you 15 to 20 percent a year more than likely. I'm of the mind it's at least 8-10 percent now for things you need.
<< <i>Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing. >>
That's possible, we're really into uncharted territory here.
My thinking - that the dollar will rise in the short term - is based on supply/demand factors for cash itself. If the U.S. temporarily halts the printing press, for whatever reason, demand for dollars is not likely to drop to an equal extent, since the U.S. dollar is still the preferred/contracted currency for many transactions.
So you wind up with demand for actual cash temporarily overwhelming supply, made worse by a reverse multiplier effect (thanks to fractional reserve banking). My theory is that the U.S. dollar would rise in the short term and PM's could easily tank again, as happened in 2008. This rush to the dollar would not necessarily be for "flight to safety" reasons, but simply because more cash would be needed for domestic and international transactions than the U.S., in the short term, would be able to provide.
So shall we give this idea to our good buddies in Washington? HA HA
It will not be necessary to confiscate the gold and silver of individuals in order to go back on a gold and silver standard. All the government has to do is confiscate the ETF’S.
Are the ETF’S the new Hunt Brothers?
Here is some info. on SLV I wonder what is in GLD???
First Silver ETF Now 5 Years Old; Products Have Had 'Transformational Impact' 29 April 2011, 02:38 p.m. By Allen Sykora (Kitco News) - The silver market has hit the five-year anniversary of what has proven to be a landmark event--the launch of the iShares Silver Trust (SLV) exchange-traded fund.
The total demand from them last year consumed the bulk of the world’s new silver supply not otherwise consumed for various kinds of fabrication demand, according to data from the consultancy CPM Group.
The Web site for SLV shows that as of May 1, 2006, the amount of silver in the trust was a modest 653.17 metric tons. Flash forward to Thursday, and the Web site showed total holdings stood at 11,053.2 metric tons, or 355.4 million ounces, with total assets listed at $17.3 billion.
For 2010, additions to global ETF holdings were 123 million ounces, Rannestad reported. In 2009, ETF holdings rose by 155 million ounces.
So far, much of demand for ETFs has been fairly “sticky,” Klapwijk said. This means investors have not been quick to bail out on price pullbacks.
"This rush to the dollar would not necessarily be for "flight to safety" reasons, but simply because more cash would be needed for domestic and international transactions than the U.S., in the short term, would be able to provide."
The actual, physical cash that moves around is small. Everyday cash to manage transactions is screwed down to the absolute minimum with digibuk transactions dominating the movement of value for goods and services. I have noticed, from personal observation and occasional querries of cashiers, that people are spending cash much more readily right now than just a year ago. For example, Christmas spending as cash was commented on as being noticably up by many of the sales people I asked. Maybe it's because cc accts have been trimmed or abandoned, maybe it's because the banks are hosing the account holders and so the spenders prefer to just go it with cash and leave the fees behind. Maybe it's just because people can't live with the credit traps and indebtedness that goes along with the use of bank cards. Cash transactions do not dominate sales by any means but the use of cash is noted as being higher than the previous year.
Even the slightest blip in the smooth movement of physical cash would bring the whole thing down within a few days, if even that long. It is a very good time to have a private stash of actual frn's somewhere other than in a sdb or a debit account and preferrably not as Bens but as the more lowly of the species. It is easy to estimate that a months cash income would be an adequate amount to set aside but that seems so arbitrary. If you look at what you spend on weekly maintenance such as food, healthcare, supplies and consumables (don't forget pet food) and then you would have a clearer picture of your actual cash needs. It is probably a good thing to keep a cash stash just in case; it's not like your money is going to go away or anything and hey, it's cash and even better yet, it's YOUR cash and nobody even knows you have it...the ultimate secret weapon.
<< <i>"This rush to the dollar would not necessarily be for "flight to safety" reasons, but simply because more cash would be needed for domestic and international transactions than the U.S., in the short term, would be able to provide."
The actual, physical cash that moves around is small. Everyday cash to manage transactions is screwed down to the absolute minimum with digibuk transactions dominating the movement of value for goods and services. I have noticed, from personal observation and occasional querries of cashiers, that people are spending cash much more readily right now than just a year ago. For example, Christmas spending as cash was commented on as being noticably up by many of the sales people I asked. Maybe it's because cc accts have been trimmed or abandoned, maybe it's because the banks are hosing the account holders and so the spenders prefer to just go it with cash and leave the fees behind. Maybe it's just because people can't live with the credit traps and indebtedness that goes along with the use of bank cards. Cash transactions do not dominate sales by any means but the use of cash is noted as being higher than the previous year.
Even the slightest blip in the smooth movement of physical cash would bring the whole thing down within a few days, if even that long. It is a very good time to have a private stash of actual frn's somewhere other than in a sdb or a debit account and preferrably not as Bens but as the more lowly of the species. It is easy to estimate that a months cash income would be an adequate amount to set aside but that seems so arbitrary. If you look at what you spend on weekly maintenance such as food, healthcare, supplies and consumables (don't forget pet food) and then you would have a clearer picture of your actual cash needs. It is probably a good thing to keep a cash stash just in case; it's not like your money is going to go away or anything and hey, it's cash and even better yet, it's YOUR cash and nobody even knows you have it...the ultimate secret weapon.
Got CASH? >>
very good point....i have felt for quite sometime the "new-yet-to-be released" $100 bill was meant to fill a void here in the USA equal to or more than counter the old (non-safety stripe) Benjamins that are easily counterfeited and used overseas.
i think cash will be used more and more in the upcoming years in USA.
a bird in hand is worth a bird in hand electronically now, but someday...it may be radically different.
"It is a very good time to have a private stash of actual frn's somewhere other than in a sdb or a debit account and preferrably not as Bens but as the more lowly of the species"
Agreed, a few small bills might be a lot more useful than pieces of metal in the majority of the likely temporary monetary crisis scenarios.
Also good to have a gun around too, so you can offer potential trade "partners", paper, silver, or lead, as circumstances dictate
Also a good point that gold/silver confiscation from "the people" would be a large operation and probably not worth it. Confiscating from institutional holdings would be far more efficient and yield better results without pissing off the populous. Of course, the gov't is not known for efficiency or doing things the best way.
In the past few weeks, members of both political parties have finally introduced plans to save America.
And it's about time.
Because the country's finances are a horrowshow.
Unfortunately, because our leaders are still pretending that we can have it all, Americans haven't yet clued into the fact that the only answer is BOTH higher taxes AND less spending.
In other words, kicking our debt and deficit problem is going to be painful. And everyone's going to pay.
nm .... sorry can't link free articles...Google "Silver Mad Investors" and search under news to read it.... here is the copy/paste sans graphs
When silver prices hit a three-decade high last week, David Zornetsky decided to do some buying. Searching for a job, the 31-year old in Beacon, N.Y., hoped to use gains from silver to finance a move to New York City and to pay down student loans. "I had been hearing that silver could go up to $150 an ounce this year," says Mr. Zornetsky.
Instead, silver has suffered its worst one-week drubbing since 1980, when an infamous alleged attempt by Texas's Hunt brothers to corner the silver market came undone. This week's brutal tumble sent silver-futures prices down to $35.28 an ounce from nearly $50 in just five trading days, and has left Wall Street pros and individual investors dazed, some dealing with sudden losses.
"I don't understand," says Mr. Zornetsky, whose silver investment fell about 25%. "Silver is supposed to do very well this year."
Behind silver's historic collapse is a market that came loose of its moorings, fueled by speculative traders, many of them small investors who may have jumped in at just the wrong moment.
"If gold is a Monte Carlo casino, silver is a slot machine in Las Vegas," says Andy Smith, a senior metals strategist at Bache Commodities.
Even the most sophisticated investors are divided about precious metals. For many of Wall Street's most-respected names, such as hedge-fund manager John Paulson, silver and gold represent protection from central banks that continue to spray money into the world's financial system, threatening to push inflation higher. But others, like George Soros, view those fears as overstated, arguing that the Federal Reserve is unlikely to let inflation get out of hand. Mr. Soros's funds have sold silver and gold positions in recent weeks.
All kinds of commodities have run up this year, but few markets surged liked silver. That's because silver is different than most others, making it more susceptible to quick peaks, as well as plunges.
Silver Saga View Interactive
The largest bubble in silver's history was set off by two brothers' alleged attempt to corner the market. For one thing, silver is smaller than many other markets, which means it scares off some larger investors who might otherwise step in to temper big moves. Gold has nearly four times the amount of tradeable futures contracts as silver. The value of new gold supply last year was $217 billion, with 17% of the total supply held by the world's central banks and multinational financial institutions. By comparison, the new supply of silver amounted to $49 billion in 2010, according to GFMS Ltd., a London-based metals consultancy. And less than 5% of silver is held by central banks and institutions, analysts estimate.
A big chunk of the world's silver is instead held by individuals in the form of coins, medals and bars, though it's hard to get accurate estimates of this figure.
Such investors are attracted to the relatively low price of silver, but they can also be prone to panic. Long-time fans of precious metals often are mavericks who can be suspicious of mainstream securities firms, wary of financial catastrophe and reluctant to keep their money in the bank. They often rely on the advice of newsletter writers, obscure websites and coin-shop proprietors or their own research.
Once considered a haven for those with bleak economic outlooks or dystopian views of society, gold and silver began to rise early in the last decade, as investors searched for ways to protect against the falling dollar.
Silver tumbled to $9 an ounce during the financial crisis of 2008, as investors dumped all kinds of holdings, but buying resumed in early 2009. The bull market accelerated last August, when the Federal Reserve and other central banks announced aggressive measures to buy bonds and pump money into the global financial system, steps that raised concerns about the value of the dollar and other leading currencies.
View Full Image
Jason Henry for the Wall Street Journal
Florida retiree Donna Badach says silver accounts for 60% of her net worth, and she is confident in its rebound. Silver buying moved into high gear over the past eight months, suggesting that prices had begun to reflect a speculative frenzy, rather than currency or inflationary fears. Silver climbed 165% between late August and last week, well above the 26% rise in gold.
In recent months, trading volume of silver-futures contracts, which allow investors to purchase or sell a certain amount of silver, soared.
So far this year, those contracts' daily volume has more than doubled compared with the same period last year, another sign of the rabid interest in silver.
Day traders, or individuals who quickly buy and sell stocks, began to focus on silver, much as they did with Internet stocks in the late 1990s. A majority of the 350 individual traders hosted by T3 Trading Group in New York began buying and selling silver, rather than stocks.
"It's been 1999 all over again," says Evan Lazarus, a 35-year old trader who manages T3 Trading. In April, Mr. Lazarus shifted his own trading to leveraged exchange-traded funds, or those that rise or fall in price twice or three times the move of silver. "Silver is the new stock market."
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Andrew Burton for The Wall Street Journal
Day trader Evan Lazarus invested heavily in silver exchange-traded funds, calling silver 'the new stock market.' Many individuals piled into such funds. Over a three-week period last month, assets at a half-dozen silver ETFs soared about $4 billion, or more than 20%.
Newsletter writers helped fuel the market's surge. "It is obvious to anyone with any ability to think, that precious metals are a must investment!" said longtime silver backer David Morgan, whose newsletter has 1,000 subscribers and thousands more who read email alerts. The note came after Standard & Poor's warned of a possible downgrade of the U.S.'s credit rating. "Where else can anyone invest for capital preservation outside of precious metals?"
By last week, the price of 32 ounces of silver equaled one ounce of gold. In contrast, over the past three decades, it took an average of 63 ounces of silver to buy an ounce of gold. The last time silver was as pricey relative to gold was in 1983.
When Chairman Ben Bernanke reaffirmed the Fed's low-interest rate policies on April 27, silver soared close to $50 an ounce, a 31-year nominal high.
That week, a team of risk-management specialists at the CME Group, which operates the Comex, the biggest silver trading exchange, picked up on a sudden spike in volatility, according to Kim Taylor, a CME executive. The team decided to hike margin requirements, forcing traders to come up with more cash or other collateral to ensure there was sufficient capital in their accounts to cover losses if the volatility continued.
View Full Image On Tuesday and Thursday of this week, CME raised requirements again. Those moves increased trading costs by about 80% and a number of investors cashed out.
"What all members need to think about now is protecting your gains," Mr. Morgan urged his newsletter readers. "REDUCE YOUR RISK."
Lou Forte found himself both a winner and loser in silver's wild ride. On Monday morning, when the dollar briefly strengthened on news of Osama Bin Laden's death and silver showed immediate weakness, Mr. Forte, a 35-year-old day trader from Westchester County, N.Y., bought a silver ETF. It soon rallied. He sold at a profit. Next, he correctly bet prices would fall. On a roll, he tried to call the bottom again, buying early on Thursday. But this time silver kept plunging and he suffered losses.
"I traded through the Internet bubble and traded through a lot of crazy days, and this has been one of the most gut-wrenching times in my 13 years of doing this," said Mr. Forte. "The volatility is enough to make you vomit."
Silver ETFs, favored by many individuals, have suffered among the most pain, and there are signs investors are getting out. More than 36 million ounces of silver has been dumped into the market between April 26 through this past Thursday, more silver than all the American Eagle silver coins that investors bought from the U.S. Mint last year.
After this week's bloodbath, "some of these people probably would never touch silver again," says Mr. Smith of Bache Commodities.
Though silver is a playground of smaller investors, it has also attracted growing interest by hedge funds and other pros. They've formed two sides of an intellectual debate, pitting those who fear severe economic disruption against those who think the Federal Reserve can steer the economy to calmer territory.
Mr. Soros's fund, now run by Keith Anderson, spent the last two years accumulating silver and gold holdings in the expectation that deflation, or a sustained fall in prices, would boost interest on precious metals by skittish investors. Their holdings in that case would soar.
But Mr. Soros's firm recently exited its gold and silver positions, according to people close to the matter, because the firm is convinced the Fed's aggressive actions have eliminated the possibility of deflation. They have faith the Fed will succeed in keeping a lid on inflation by signaling its intention to raise interest rates, perhaps over the next six months.
Others dumping precious metals lately doubt the Fed will take much more aggressive action to help the economy, at least for now. That could potentially reduce appetite for a range of investments, including silver.
John Burbank, who runs hedge fund Passport Capital in San Francisco, became a fan of precious metals in 2002. Earlier this year, however, he sold his entire $150 million stash of gold, convinced the Fed won't extend its so-called quantitative easing measures beyond June.
"Silver prices have been parabolic, but the time to buy again will be months away," he says.
Bulls on precious metals, like John Paulson, who has focused his buying on gold, say the Fed won't be able to rein in inflation once it begins in earnest. Silver is more attractive than gold, some of these investors say, partly because its inflation-adjusted all-time high is about $140 an ounce, about four times where it trades today. Gold, which traded Friday at $1491.20 an ounce, is actually closer to its adjusted all-time high.
Silver remains up 14% in 2011, one of the best investments, despite the recent plunge. Indeed, some hedge funds, such as Kyle Bass's Hayman Capital, bought silver early Friday, sensing the white metal had reached bargain levels and was due for a bounce, says a person close to the trader.
Some smaller investors are holding on, too. Donna Badach, a 55-year-old retiree, started buying silver in 2003 at an average cost of $25 an ounce. She now has a cache of silver coins and bullion, which she says are stored in a "private depositary" and account for 60% of her net worth. She buys silver "for insurance purpose," because "it's so shaky to see what's going on all over the world."
"I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something."
—Tom Lauricella contributed to this article. Write to Gregory Zuckerman at gregory.zuckerman@wsj.com and Carolyn Cui at carolyn.cui@wsj.com
<< <i> "I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something." >>
She needs to "wake up to reality."
Good write ups....a little bit for everyone, buffs, hawks & bears.
"Bongo drive 1984 Lincoln that looks like old coin dug from ground."
<< <i> "I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something." >>
She needs to "wake up to reality."
Good write ups....a little bit for everyone, buffs, hawks & bears. >>
I don't know......
$100 may be in the cards, afterall.
Quite possibly after QE3 happens.
"Gold is money, and nothing else" (JP Morgan, 1912)
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
Fannie is one of the "greatest" US companies. It's far bigger than WM (Waste Management) which also handles and processes the nation's garbage. Fannie is the future depository of currently held govt junk assets, such as agency debt now held by the FED. It will eventually make it's way to F&F being priced at 100% to model. The FED took the first step in buying up a $TRILLION in agency debt from nations around the world, while handing off more liquid treasuries. While F&F formerly had $200 BILL ceilings built into them, those limits were removed by Tim Geithner in late 2009. If that's not a great company for the FED and Treasury what is?
Riddle me this...how can an insolvent company be a model of US businesses?
Fannie Mae is 5th on the 2011 fortune 500 list.
Fannie Mae will take an 8.7 bill loss this year and will request 8.5 bill from tax payers.
and, it's kind of like oil companies in that it is everyones portfolio from their retirement plans and their funds.
You can be the 5th largest company in the US and still take an 8.7 bill loss. And, that's after a 100 bill bail out.
The current model is "redistribution of wealth" through Keynesian economics. That's how Fannie can be cited as a model of US business. Nothing has changed.
I agree with Storm888. Until the regime change, silver's due for another run. If regime change doesn't happen, it won't be easy regardless of how high silver goes.
Q: Are You Printing Money? Bernanke: Not Literally
The drop last week in silver was designed by the government, the same way they, and the Wall street boys , cut up the Hunts in the 80’s.
The socialist do not want people in the gold and silver market they want people in TREASURIES.
Just as they hated the Hunts, they hate the folks not keeping their money in the banks or buying those, “SAFE GOVERNMENT SECURITIES.”
The way they killed the Hunts is exactly the same way they drove the price of silver down last week, they simply changed the Comex rules bankrupting a bunch of traders, and Obama or Bernanke called Soros and told him to dump his holdings.
Yep, GS. It's not the gov so much that wants everybody in paper, it's the banks; the gov is just the muscle. I love cash and hard assets, it's the one little thing I can do to protest.
Comments
An interesting twist....especially when they make you pay back the defaulted mortgage loss to Country Wide and the Friends of Angelo.....those friends now being BoA.
Angelo must be getting a chuckle over this at whatever beach he is currently sunning himself on.
5 yrs ago Morgan Stanley was sued for not actually buying PM's that they were billing storage fees for. The metal was all unallocated or on paper. They settled out of court.
Now UBS is being sued for the same thing (bait and switch with unallocated vs allocated PM's).
roadrunner
Box of 20
Go on line to Utube and type in “Argentine Inflation” and watch a few videos.
This is where we are headed, and hard assets is the ONLY thing that will save your family,
As always best of luck. Thanks for the great article 57 loaded
<< <i>when thinking about a bubble...this may help >>
Good article. When factoring in those much lower current M2 growths among the G7 vs the E7 countries listed, the G7 have come up with additional
hidden methods to pump in liquidity w/o having it show up in M1 or M2. Such is the beauty of modern western banking. The E7 are still doing
it the old fashioned way as the US did back in the 60's and 70's...by increasing the M&M's. I don't buy for a minute that the liquidity increases
among the G7 nations is on the order of 2-5% per yr as M2 would tend to suggest. It's what you don't see that really counts (such as derivatives,
laundering TBonds via the primary bidders, perpetual currency swaps, agency debt machinations, etc.). How have we added a fresh $TRILLION+ per year
in bond auctions without it showing up in M1, M2, or M3? The only monetary aggregate that has been boosted (ie almost tripled) is M0 which has increased
from $850 BILL in Sept 2008 to the current $2.4 TRILLION. That's been done to allow the too-big-to-fail banks to keep from having to get bad loans off their
books while the FED front runs higher reserves.
roadrunner
GOLD!!
Someone hit me in the head please because I messed up about the gold issue. Everyone wants to buy gold! “I buy gold. Pay cash” signs are everywhere, even on TV! I can’t believe I’m that silly! I just didn’t relate it to what I read here because they deal with junk gold, like jewelry, either stolen or sold because they needed the money, not the gold coins that you guys talk about. No one pays for the true value of the stuff, so big WARNING! Sign on people that are buying gold coins. Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold. What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you’ll not be loosing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag worth of gold rings. Small time thieves will snatch gold chains right out of your neck and sell them at these small dealers found everywhere. This is VERY common at train stations, subways and other crowded areas.
So, my advice, if you are preparing for a small economical crisis, gold coins make sense. You will keep the value of the stuff and be able to sell it for its actual cost to gold dealers or maybe other survivalists that know the true value of the item. In my case, gold coins would have been an excellent investment, saving me from loosing money when the local economy crashed. Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins. Forgive me for not talking about this before, but I didn’t realize this until today, when I visited my local market warehouse and saw a “Buy Gold” sign.
20th century gold primer
A fairly brief article identifying how gold was "managed" in the 20th century starting with the FED in 1913.
A good refresher for anyone but excellent introductory material to those new to the PM's game.
I particularly like the synopsis of control methods used in the 80's and 90's. The author points out that with derivatives,
the bankers were able to find a way to increase money supplies w/o having it show up in M0, M1, M2 and M3.
While gold derivatives and leases worked for quite some time to manage the gold price, the market is now increasingly
demanding physical. Author also points out that selling physical gold to depress the gold price never really worked
for more than the short term. It failed in the 1960's, 1970's, and in the last decade. But what did work more
effectively were highly leveraged derivatives (ie Ponzirama).
roadrunner
Meanwhile Gold Gold hit $1470 this morning and Silver hit $40.25 WOW!
forbes article about falling dollar and no one apparently wants to try to do anything other than Ron Paul
from Friday (two pages), you will need to click through
<< <i>wow i had to bump this thread from page 7...
forbes article about falling dollar and no one apparently wants to try to do anything other than Ron Paul
from Friday (two pages), you will need to click through >>
Probably because he's the only one that abides by the spirit of the founders
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
I knew it would happen.
<< <i>wow i had to bump this thread from page 7...
forbes article about falling dollar and no one apparently wants to try to do anything other than Ron Paul >>
This is why the dollar is doomed.
is there a limit to PM prices from business insider yesterday.
If you rob Peter to pay Paul, you can definitely rely on Paul's vote.
This is obviously not new information as evidenced by our current economic situation but I thought it capsulated the concept in brief and succinct terms.
Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That’s 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959
Knowledge is the enemy of fear
<< <i>This is what I've been saying for years. Our economy has been built on excess. Excess that we have become accustomed to. At least 10% of GDP could be eliminated and no one would miss it, except for those who have jobs built upon excess. The 5% unemployment we had for such a long time was the real smoke and mirrors. But as we come off this excess, it will "feel" like the end of the world, when in reality it is just getting back to a sustainable way of life. There is still a lot of excess that can and probably will be wrung out before economic "boom times" can return. Widespread inflation will remain at bay.
Commerce Department data suggests that in February, U.S. consumers spent an annualized $1.2 trillion on non-essential stuff including pleasure boats, jewelry, booze, gambling and candy. That’s 11.2% of total consumer spending, up from 9.3% a decade earlier and only 4% in 1959 >>
Lots of excesses out there. Excesses in consumption, in corporate lobbying efforts, in tax codes, in not taxing corporations and banks, in financial regulation non-enforcement, in otc derivatives, in govt intrusion in daily lives, etc. Interesting that the govt's dept of commerce is suggesting a VAT (taxing the symptom) rather than going after the multitude of root causes that result in consumption excesses (taxing/regulating the root causes). If we lopped off 50% of govt I don't think it would be missed. It's certainly unneccessary. We could start with 10% per year.
roadrunner
"Ask, and it shall be given you; seek, and ye shall find; knock, and it shall be opened unto you." -Luke 11:9
"Hear, O Israel: The LORD our God is one LORD: And thou shalt love the LORD thy God with all thine heart, and with all thy soul, and with all thy might." -Deut. 6:4-5
"For the LORD is our judge, the LORD is our lawgiver, the LORD is our king; He will save us." -Isaiah 33:22
<< <i>more underhandedness from the Fed
I'm not convinced. The nearest out-of-the-money June put option is $1.25, which implies a cost of 9% annually to protect a yield of just over 3%. It's possible that there are more put options than call options on this ETF simply because more investors expect the price to fall rather than rise.
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If the cost is 9% annually to protect a yield of just over 3%, then why in the world would investors buy puts at such a premium if the Fed just got finished saying that rates are going to stay low for a long time?
It seems to me that manipulating the market wasn't good enough. Now they have to gamble (rather poorly), in an attempt to leverage up our taxpayer dollars in order to keep Treasuries looking viable. These guys are really nasty.
Gold looks good under these circumstances. The only thing that's changed is the order of magnitude. Isn't leveraged gambling on Treasuries a way of disguising hyperinflation?
I knew it would happen.
The Fed has less control over long-term rates than over short-term rates. Investors may be betting that long-term interest rates will rise despite the Fed's efforts, due to rising inflation and excessive money printing. There's also a small but real risk of treasury-bond default if Congress fails to raise the U.S. debt ceiling. Such a default would likely slam the price of t-bonds, generating big profits for holders of put options.
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Precious Metals VS the USD
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
During the next few weeks the U.S. congress will vote on extending the debt ceiling.
Like many of you, I own some paper Gold and Silver in the form of Funds, as well as my insurance hard asset Gold and Silver.
There are several possibilities of things that might happen when the debt limit comes to a vote. The conservatives have an opportunity to stop the liberals and their spending budgets in there tracks. If the debt limit is not raised the funding for on going programs, and the extension of many other programs will become unfundable.
Currently the situation we have is the congress spends way over the tax receipts taken in, and the Fed as the lender of last resort buys the debt un-funded by outsiders and prints the money to give to the Treasury to pay the bills.
Forget not having QE3 or 4, or 5. The Fed cannot stop printing the money as long as congress spends way in excess of its Tax receipts.
If the house refuses to extend the debt limit. We will have riots in the streets within 4 weeks. I believe that because the Treasury is going to pay the debt interest first to protect sovereign funds, pension funds, and Fat Cats, in order to save its credit rating.
If this first scenario happens gold and silver should take a BIG dip. How BIG who knows this will depend on the buying in other parts of the world.
What more likely will happen is that the House will refuse to extend the debt limit at first, and with a week or two cave to pressure and agree to raise it on some BS promise of future cuts in the budget.
If this happens the markets will take a dive, but be right back up with a month or less.
I have considered placing stop losses on my Metals funds, but if the second scenario happens I will get stopped out and incur at least a 15% Tax before I can get back in.
How do all of you think this will play out the next few weeks?
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I agree, but I also think that there is more chance of the metals ETFs declaring a default or a force majeure than there is that the Congress will stop spending or that Congress will fail to raise the debt ceiling.
I think that paper metals are at risk, more so every day. I do expect real uncertainty and lots of volatility. It's not going to be "fun" for anyone.
I knew it would happen.
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing.
<< <i>
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing. >>
Proof, you give the scenario that I believe will send PM's to ridiculous heights. A paradigm shift if you will. If one can fathom the depth of our debt, then ten times the previous PM records are conceivable if there is a default. In dollar terms we may see $8k but in Canadian dollars, Aussie, etc...could be just 2,000.
<< <i>Treasury bonds are not dollars. They are debt denominated in dollars. If a default occurs, it may precipitate a credit freeze and a flight to cash (actual dollars), temporarily tanking precious metals, stocks and other asset categories. Like 2008 only worse. I think gold (and silver) would ultimately prevail, but it could be a bumpy ride in the meantime. >>
Too crazy this time it's not 2008 IMO. It surprised me last time but no big deal didn't last long. This time you have a bunch of money to go somewhere, the stock market? How's that worked in the 21st century? You halved your money twice in less than 8 year so don't think many older baby boomers forgot that.
In addition:
1. Could see a big shortage as we've seen this decade. 10 bucks on an ASE now.
2. Japan melt down, both nukes and ecomony.
3. Europe a mess
4. USD is all of a sudden a bigger mess.
5. All the middle east is a mess.
6. Russia waiting in the wings for the payback of us spending so much on the military that they couldn't keep up, that caused the spit up and the Berlin Wall coming down.
6. China execute their long term plan of sending the USD under. They already say they're getting rid of 2/3's of their dollars and are big buyers of PM's.
7. Big demand in the Middle East and South America too.
8. How about food shortage, gas price, and price in general. What do you invest in to maintain your purchasing power?
9. How many more natural disasters are we going to have this year? They seem to be destroying big sections of the world.
10.Emotions- in good times and bad they override any chart or wall street wish and they've always have. Notice no one on Wall Street will ever predict a downturn but really use the same human emotions to pump the market up. Seems most only recognize human emotions in the not so normal commodities cycles and call it a bubble.
Bottom line where you putting your money to hold buying power? I'll take my chances with PM's for now. Once inflation really kicks in by years end holding cash just loses you 15 to 20 percent a year more than likely. I'm of the mind it's at least 8-10 percent now for things you need.
JMO
<< <i>Understood, and I'm not saying you're wrong, but I also think that as a default becomes more and more likely, treasury selling will become intense, and where will the money go? Not US stocks, I believe those will plummet too. I bet commodities are one destination, not to mention a "flight to safety" surge. A default would probably prompt an intervention by the IMF or other majory countries, but overall I see the US dollar index decreasing in such a situation, not increasing. >>
That's possible, we're really into uncharted territory here.
My thinking - that the dollar will rise in the short term - is based on supply/demand factors for cash itself. If the U.S. temporarily halts the printing press, for whatever reason, demand for dollars is not likely to drop to an equal extent, since the U.S. dollar is still the preferred/contracted currency for many transactions.
So you wind up with demand for actual cash temporarily overwhelming supply, made worse by a reverse multiplier effect (thanks to fractional reserve banking). My theory is that the U.S. dollar would rise in the short term and PM's could easily tank again, as happened in 2008. This rush to the dollar would not necessarily be for "flight to safety" reasons, but simply because more cash would be needed for domestic and international transactions than the U.S., in the short term, would be able to provide.
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It will not be necessary to confiscate the gold and silver of individuals in order to
go back on a gold and silver standard. All the government has to do is confiscate the ETF’S.
Are the ETF’S the new Hunt Brothers?
Here is some info. on SLV I wonder what is in GLD???
First Silver ETF Now 5 Years Old; Products Have Had 'Transformational Impact'
29 April 2011, 02:38 p.m.
By Allen Sykora
(Kitco News) - The silver market has hit the five-year anniversary of what has proven to be a landmark event--the launch of the iShares Silver Trust (SLV) exchange-traded fund.
The total demand from them last year consumed the bulk of the world’s new silver supply not otherwise consumed for various kinds of fabrication demand, according to data from the consultancy CPM Group.
The Web site for SLV shows that as of May 1, 2006, the amount of silver in the trust was a modest 653.17 metric tons. Flash forward to Thursday, and the Web site showed total holdings stood at 11,053.2 metric tons, or 355.4 million ounces, with total assets listed at $17.3 billion.
For 2010, additions to global ETF holdings were 123 million ounces, Rannestad reported. In 2009, ETF holdings rose by 155 million ounces.
So far, much of demand for ETFs has been fairly “sticky,” Klapwijk said. This means investors have not been quick to bail out on price pullbacks.
The actual, physical cash that moves around is small. Everyday cash to manage transactions is screwed down to the absolute minimum with digibuk transactions dominating the movement of value for goods and services. I have noticed, from personal observation and occasional querries of cashiers, that people are spending cash much more readily right now than just a year ago. For example, Christmas spending as cash was commented on as being noticably up by many of the sales people I asked. Maybe it's because cc accts have been trimmed or abandoned, maybe it's because the banks are hosing the account holders and so the spenders prefer to just go it with cash and leave the fees behind. Maybe it's just because people can't live with the credit traps and indebtedness that goes along with the use of bank cards. Cash transactions do not dominate sales by any means but the use of cash is noted as being higher than the previous year.
Even the slightest blip in the smooth movement of physical cash would bring the whole thing down within a few days, if even that long. It is a very good time to have a private stash of actual frn's somewhere other than in a sdb or a debit account and preferrably not as Bens but as the more lowly of the species. It is easy to estimate that a months cash income would be an adequate amount to set aside but that seems so arbitrary. If you look at what you spend on weekly maintenance such as food, healthcare, supplies and consumables (don't forget pet food) and then you would have a clearer picture of your actual cash needs. It is probably a good thing to keep a cash stash just in case; it's not like your money is going to go away or anything and hey, it's cash and even better yet, it's YOUR cash and nobody even knows you have it...the ultimate secret weapon.
Got CASH?
<< <i>"This rush to the dollar would not necessarily be for "flight to safety" reasons, but simply because more cash would be needed for domestic and international transactions than the U.S., in the short term, would be able to provide."
The actual, physical cash that moves around is small. Everyday cash to manage transactions is screwed down to the absolute minimum with digibuk transactions dominating the movement of value for goods and services. I have noticed, from personal observation and occasional querries of cashiers, that people are spending cash much more readily right now than just a year ago. For example, Christmas spending as cash was commented on as being noticably up by many of the sales people I asked. Maybe it's because cc accts have been trimmed or abandoned, maybe it's because the banks are hosing the account holders and so the spenders prefer to just go it with cash and leave the fees behind. Maybe it's just because people can't live with the credit traps and indebtedness that goes along with the use of bank cards. Cash transactions do not dominate sales by any means but the use of cash is noted as being higher than the previous year.
Even the slightest blip in the smooth movement of physical cash would bring the whole thing down within a few days, if even that long. It is a very good time to have a private stash of actual frn's somewhere other than in a sdb or a debit account and preferrably not as Bens but as the more lowly of the species. It is easy to estimate that a months cash income would be an adequate amount to set aside but that seems so arbitrary. If you look at what you spend on weekly maintenance such as food, healthcare, supplies and consumables (don't forget pet food) and then you would have a clearer picture of your actual cash needs. It is probably a good thing to keep a cash stash just in case; it's not like your money is going to go away or anything and hey, it's cash and even better yet, it's YOUR cash and nobody even knows you have it...the ultimate secret weapon.
Got CASH? >>
very good point....i have felt for quite sometime the "new-yet-to-be released" $100 bill was meant to fill a void here in the USA equal to or more than counter the old (non-safety stripe) Benjamins that are easily counterfeited and used overseas.
i think cash will be used more and more in the upcoming years in USA.
a bird in hand is worth a bird in hand electronically now, but someday...it may be radically different.
Agreed, a few small bills might be a lot more useful than pieces of metal in the majority of the likely temporary monetary crisis scenarios.
Also good to have a gun around too, so you can offer potential trade "partners", paper, silver, or lead, as circumstances dictate
Liberty: Parent of Science & Industry
In the past few weeks, members of both political parties have finally introduced plans to save America.
And it's about time.
Because the country's finances are a horrowshow.
Unfortunately, because our leaders are still pretending that we can have it all, Americans haven't yet clued into the fact that the only answer is BOTH higher taxes AND less spending.
In other words, kicking our debt and deficit problem is going to be painful. And everyone's going to pay.
Read more: http://www.businessinsider.com/heres-why-the-us-is-screwed-2011-5?op=1#ixzz1LRkSAWiR
Here's Why The US Is Screwed by Henry Blodget
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Greece Denies It
What to believe?
When silver prices hit a three-decade high last week, David Zornetsky decided to do some buying. Searching for a job, the 31-year old in Beacon, N.Y., hoped to use gains from silver to finance a move to New York City and to pay down student loans. "I had been hearing that silver could go up to $150 an ounce this year," says Mr. Zornetsky.
Instead, silver has suffered its worst one-week drubbing since 1980, when an infamous alleged attempt by Texas's Hunt brothers to corner the silver market came undone. This week's brutal tumble sent silver-futures prices down to $35.28 an ounce from nearly $50 in just five trading days, and has left Wall Street pros and individual investors dazed, some dealing with sudden losses.
"I don't understand," says Mr. Zornetsky, whose silver investment fell about 25%. "Silver is supposed to do very well this year."
Behind silver's historic collapse is a market that came loose of its moorings, fueled by speculative traders, many of them small investors who may have jumped in at just the wrong moment.
"If gold is a Monte Carlo casino, silver is a slot machine in Las Vegas," says Andy Smith, a senior metals strategist at Bache Commodities.
Even the most sophisticated investors are divided about precious metals. For many of Wall Street's most-respected names, such as hedge-fund manager John Paulson, silver and gold represent protection from central banks that continue to spray money into the world's financial system, threatening to push inflation higher. But others, like George Soros, view those fears as overstated, arguing that the Federal Reserve is unlikely to let inflation get out of hand. Mr. Soros's funds have sold silver and gold positions in recent weeks.
All kinds of commodities have run up this year, but few markets surged liked silver. That's because silver is different than most others, making it more susceptible to quick peaks, as well as plunges.
Silver Saga
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The largest bubble in silver's history was set off by two brothers' alleged attempt to corner the market.
For one thing, silver is smaller than many other markets, which means it scares off some larger investors who might otherwise step in to temper big moves. Gold has nearly four times the amount of tradeable futures contracts as silver. The value of new gold supply last year was $217 billion, with 17% of the total supply held by the world's central banks and multinational financial institutions. By comparison, the new supply of silver amounted to $49 billion in 2010, according to GFMS Ltd., a London-based metals consultancy. And less than 5% of silver is held by central banks and institutions, analysts estimate.
A big chunk of the world's silver is instead held by individuals in the form of coins, medals and bars, though it's hard to get accurate estimates of this figure.
Such investors are attracted to the relatively low price of silver, but they can also be prone to panic. Long-time fans of precious metals often are mavericks who can be suspicious of mainstream securities firms, wary of financial catastrophe and reluctant to keep their money in the bank. They often rely on the advice of newsletter writers, obscure websites and coin-shop proprietors or their own research.
Once considered a haven for those with bleak economic outlooks or dystopian views of society, gold and silver began to rise early in the last decade, as investors searched for ways to protect against the falling dollar.
Silver tumbled to $9 an ounce during the financial crisis of 2008, as investors dumped all kinds of holdings, but buying resumed in early 2009. The bull market accelerated last August, when the Federal Reserve and other central banks announced aggressive measures to buy bonds and pump money into the global financial system, steps that raised concerns about the value of the dollar and other leading currencies.
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Jason Henry for the Wall Street Journal
Florida retiree Donna Badach says silver accounts for 60% of her net worth, and she is confident in its rebound.
Silver buying moved into high gear over the past eight months, suggesting that prices had begun to reflect a speculative frenzy, rather than currency or inflationary fears. Silver climbed 165% between late August and last week, well above the 26% rise in gold.
In recent months, trading volume of silver-futures contracts, which allow investors to purchase or sell a certain amount of silver, soared.
So far this year, those contracts' daily volume has more than doubled compared with the same period last year, another sign of the rabid interest in silver.
Day traders, or individuals who quickly buy and sell stocks, began to focus on silver, much as they did with Internet stocks in the late 1990s. A majority of the 350 individual traders hosted by T3 Trading Group in New York began buying and selling silver, rather than stocks.
"It's been 1999 all over again," says Evan Lazarus, a 35-year old trader who manages T3 Trading. In April, Mr. Lazarus shifted his own trading to leveraged exchange-traded funds, or those that rise or fall in price twice or three times the move of silver. "Silver is the new stock market."
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Andrew Burton for The Wall Street Journal
Day trader Evan Lazarus invested heavily in silver exchange-traded funds, calling silver 'the new stock market.'
Many individuals piled into such funds. Over a three-week period last month, assets at a half-dozen silver ETFs soared about $4 billion, or more than 20%.
Newsletter writers helped fuel the market's surge. "It is obvious to anyone with any ability to think, that precious metals are a must investment!" said longtime silver backer David Morgan, whose newsletter has 1,000 subscribers and thousands more who read email alerts. The note came after Standard & Poor's warned of a possible downgrade of the U.S.'s credit rating. "Where else can anyone invest for capital preservation outside of precious metals?"
By last week, the price of 32 ounces of silver equaled one ounce of gold. In contrast, over the past three decades, it took an average of 63 ounces of silver to buy an ounce of gold. The last time silver was as pricey relative to gold was in 1983.
When Chairman Ben Bernanke reaffirmed the Fed's low-interest rate policies on April 27, silver soared close to $50 an ounce, a 31-year nominal high.
That week, a team of risk-management specialists at the CME Group, which operates the Comex, the biggest silver trading exchange, picked up on a sudden spike in volatility, according to Kim Taylor, a CME executive. The team decided to hike margin requirements, forcing traders to come up with more cash or other collateral to ensure there was sufficient capital in their accounts to cover losses if the volatility continued.
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On Tuesday and Thursday of this week, CME raised requirements again. Those moves increased trading costs by about 80% and a number of investors cashed out.
"What all members need to think about now is protecting your gains," Mr. Morgan urged his newsletter readers. "REDUCE YOUR RISK."
Lou Forte found himself both a winner and loser in silver's wild ride. On Monday morning, when the dollar briefly strengthened on news of Osama Bin Laden's death and silver showed immediate weakness, Mr. Forte, a 35-year-old day trader from Westchester County, N.Y., bought a silver ETF. It soon rallied. He sold at a profit. Next, he correctly bet prices would fall. On a roll, he tried to call the bottom again, buying early on Thursday. But this time silver kept plunging and he suffered losses.
"I traded through the Internet bubble and traded through a lot of crazy days, and this has been one of the most gut-wrenching times in my 13 years of doing this," said Mr. Forte. "The volatility is enough to make you vomit."
Silver ETFs, favored by many individuals, have suffered among the most pain, and there are signs investors are getting out. More than 36 million ounces of silver has been dumped into the market between April 26 through this past Thursday, more silver than all the American Eagle silver coins that investors bought from the U.S. Mint last year.
After this week's bloodbath, "some of these people probably would never touch silver again," says Mr. Smith of Bache Commodities.
Though silver is a playground of smaller investors, it has also attracted growing interest by hedge funds and other pros. They've formed two sides of an intellectual debate, pitting those who fear severe economic disruption against those who think the Federal Reserve can steer the economy to calmer territory.
Mr. Soros's fund, now run by Keith Anderson, spent the last two years accumulating silver and gold holdings in the expectation that deflation, or a sustained fall in prices, would boost interest on precious metals by skittish investors. Their holdings in that case would soar.
But Mr. Soros's firm recently exited its gold and silver positions, according to people close to the matter, because the firm is convinced the Fed's aggressive actions have eliminated the possibility of deflation. They have faith the Fed will succeed in keeping a lid on inflation by signaling its intention to raise interest rates, perhaps over the next six months.
Others dumping precious metals lately doubt the Fed will take much more aggressive action to help the economy, at least for now. That could potentially reduce appetite for a range of investments, including silver.
John Burbank, who runs hedge fund Passport Capital in San Francisco, became a fan of precious metals in 2002. Earlier this year, however, he sold his entire $150 million stash of gold, convinced the Fed won't extend its so-called quantitative easing measures beyond June.
"Silver prices have been parabolic, but the time to buy again will be months away," he says.
Bulls on precious metals, like John Paulson, who has focused his buying on gold, say the Fed won't be able to rein in inflation once it begins in earnest. Silver is more attractive than gold, some of these investors say, partly because its inflation-adjusted all-time high is about $140 an ounce, about four times where it trades today. Gold, which traded Friday at $1491.20 an ounce, is actually closer to its adjusted all-time high.
Silver remains up 14% in 2011, one of the best investments, despite the recent plunge. Indeed, some hedge funds, such as Kyle Bass's Hayman Capital, bought silver early Friday, sensing the white metal had reached bargain levels and was due for a bounce, says a person close to the trader.
Some smaller investors are holding on, too. Donna Badach, a 55-year-old retiree, started buying silver in 2003 at an average cost of $25 an ounce. She now has a cache of silver coins and bullion, which she says are stored in a "private depositary" and account for 60% of her net worth. She buys silver "for insurance purpose," because "it's so shaky to see what's going on all over the world."
"I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something."
—Tom Lauricella contributed to this article.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com and Carolyn Cui at carolyn.cui@wsj.com
<< <i> "I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something." >>
She needs to "wake up to reality."
Good write ups....a little bit for everyone, buffs, hawks & bears.
<< <i>
<< <i> "I don't believe the correction will last long. Silver will hit $100 before the end of this year," says Ms. Badach, who had worked in the mortgage-banking industry in Hillsboro, Fla. "I have never felt so sure in my life about something." >>
She needs to "wake up to reality."
Good write ups....a little bit for everyone, buffs, hawks & bears. >>
I don't know......
$100 may be in the cards, afterall.
Quite possibly after QE3 happens.
"“Those who sacrifice liberty for security/safety deserve neither.“(Benjamin Franklin)
"I only golf on days that end in 'Y'" (DE59)
Fannie Mae is 5th on the 2011 fortune 500 list.
Fannie Mae will take an 8.7 bill loss this year and will request 8.5 bill from tax payers.
and, it's kind of like oil companies in that it is everyones portfolio from their retirement plans and their funds.
You can be the 5th largest company in the US and still take an 8.7 bill loss. And, that's after a 100 bill bail out.
Is this place great or what!
<< <i>Riddle me this...how can an insolvent company be a model of US businesses?
Fannie Mae is 5th on the 2011 fortune 500 list.
Fannie Mae will take an 8.7 bill loss this year and will request 8.5 bill from tax payers.
and, it's kind of like oil companies in that it is everyones portfolio from their retirement plans and their funds.
You can be the 5th largest company in the US and still take an 8.7 bill loss. And, that's after a 100 bill bail out.
Is this place great or what! >>
Freedom is slavery
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Ron Paul's 10% Solution
Coin's for sale/trade.
Tom Pilitowski
US Rare Coin Investments
800-624-1870
Fannie is the future depository of currently held govt junk assets, such as agency debt now held by the FED. It will eventually make it's
way to F&F being priced at 100% to model. The FED took the first step in buying up a $TRILLION in agency debt from nations around the world,
while handing off more liquid treasuries. While F&F formerly had $200 BILL ceilings built into them, those limits were removed by Tim Geithner in late 2009.
If that's not a great company for the FED and Treasury what is?
roadrunner
Fannie Mae is 5th on the 2011 fortune 500 list.
Fannie Mae will take an 8.7 bill loss this year and will request 8.5 bill from tax payers.
and, it's kind of like oil companies in that it is everyones portfolio from their retirement plans and their funds.
You can be the 5th largest company in the US and still take an 8.7 bill loss. And, that's after a 100 bill bail out.
The current model is "redistribution of wealth" through Keynesian economics. That's how Fannie can be cited as a model of US business. Nothing has changed.
I agree with Storm888. Until the regime change, silver's due for another run. If regime change doesn't happen, it won't be easy regardless of how high silver goes.
I knew it would happen.
The socialist do not want people in the gold and silver market they want people in TREASURIES.
Just as they hated the Hunts, they hate the folks not keeping their money in the banks or buying those, “SAFE GOVERNMENT SECURITIES.”
The way they killed the Hunts is exactly the same way they drove the price of silver down last week, they simply changed the Comex rules bankrupting a bunch of traders, and Obama or Bernanke called Soros and told him to dump his holdings.