Tuesday, May 31, 2011


Any thoughts of an abatement of the increase of food stamps recipients were squashed today as I pulled up the latest government statistics on those productive citizens of the US that receive assistance in the form of food stamps.
As you might recall last month, the increase in people taking stamps had its lowest gain in more than 25 months, so foolishly I thought that there would be a chance that the number of folks on the government dole might have a chance of actually decreasing this month. 

Once again, my assumption was completely wrong as we find that this month's increase equaled the 1 year average growth rate.  44.6 million families received benefits at an annualized cost of $6 Billion.  The average family receives about $284 a month in free food. 

So, let me see here.  We have a stagnant economy where food, energy, and all costs are increasing.  We have a poor job environment where there are no prospects for wage increases, a terrible housing market, and a US dollar that is frankly in the toilet.  On top of all that, the Fed's transfusion of QE II is now ending.  That's that bad news of course, the good news is that awesome companies like Linked In have gone public and have captured the hard earned money of investors on the hopes that there will be other suckers that come and pay higher prices for a company with little revenues, but a whole lot of potential (snicker).

Perhaps it is just me, but I thought the goal was to turn the economy around, not add more and more folks to the government assistance list.  We know that the Fed has been doing, but what is our CONgress or administration doing to make our nation's small businesses get back on track?  Do any of them have a plan?  Perhaps these are the wrong questions.  Maybe I should be wondering what it is that 1 in 7 Amerikans know that I don't.  These guys may know the tricks that I don't when it comes to receiving $284 a month in these tough economic times.  My guess is that these guys will continue to convince others that the water is just fine and that others should join them.



Chinese speculators put the "If you build it they will come" theory to test as this story highlights the absolute bubble that China has created in real estate.  One must ask if the emerging markets are truly decoupled (as we've seen they are not) and what impact a crash in real estate prices will have on the US economy.



Friday, May 27, 2011


While scanning the news I was struck by the irony of this story from the San Francisco CBS affiliate.
Samuel Kioski was arrested recently for an inventive application of Ben Bernanke's magical printing tricks.


Allegedly, Mr. Kioski was an ATM technician who replaced almost $200,000 of real money for fake copies of dollar bills.  In his "rampage" Samuel opened up a total of 7 machines, grabbed the real cash, and dropped in bad forgeries into the cash dispensers.  The police stated that the fake money was not even a good attempt as he simply made the bills on a copy machine. 

The repairman was able to sneak away since last July with his haul, but was found two weeks ago in Arizona. 

See, Mr. Kioski didn't quite understand that you must have a PHD from Yale or Harvard and also deal in billions rather than hundreds of thousands to get away with this sort of trick.  Our central bankers have pulled off the exact same scheme, but instead of going to jail, they are lauded as heros.  Think back to the scary days of the economic collapse.  When the full impact of the Lehman implosion was being felt, we watched as Goldman Sachs, Bank of America, JP Morgan, and others swapped their toxic assets with us for clean, crisp, and freshly printed digital dollars.  We taxpayers (our leadership and the Fed) were more than happy to trade worthless paper (MBS) for our currency in the name of avoiding disaster. 

Compare the TARP swap with the trade Mr. Kioski made and you'll find little difference between his moves and those of the Fed, Treasury, and the bankers; little difference besides that it was a small amount and not sanctioned by the thieves at the NY Fed. 


So the takeaway from this story is that if you are going to pull a fast one and take money from folks, you must follow these rules to get away with your booty.

1)    Take money from taxpayers, not banks
2)    Rip folks off for billions or trillions, not thousands
3)    Wear suits and talk about the end of the financial system, everyone will hand over the money immediately
4)    Go to Davos, not somewhere like Arizona
5)    Take your wife with you, then she won't file a missing persons report


Wednesday, May 25, 2011


Please watch this video from the Financial Times, it is a strong piece that I highly recommend.

From http://www.ft.com/
"Felix Zulauf, former head of asset management at UBS, warns that storm clouds are gathering over the markets. He discusses with John Authers, head of Lex, his grim outlook: that Europe faces a double dip, China is slowing, bonds "look awful" and an overheating commodities sector will be hurt badly. He was interviewed at the CFA Institute Annual Conference in Edinburgh."

Unfortunately, I cannot embed the item, so click here and it will open a new window that will allow you to watch this video.


Overall, Felix is suggesting that the next few months will be rocky due to tightening in the emerging world and poor growth in the developed world.  Europe is dangerous he says.  I cannot stress enough how good of a use of time this 10:30 seconds is.  There is clear, focused, and is unambiguous. 

Germany is at risk because it exports much of its product base to the PIIGS, which is a high source of risk. 

A dramatic slowdown in Chinese construction is ahead.

Chinese leadership will continue to tighten to attack inflation. 

Emerging currencies may rise a bit, but their outperformance is over and we will see a significant correction and a resurgence in the USD.  This will begin in the fall of this year.

Yes, we'll see some type of stimulus from world governments

Base metals and commodities sectors will suffer a huge setback, especially with that slow down in China and emerging countries.

Utilities, Consumer Staples, and Food & Beverages

5 years out, bonds look awful!

We have seen the lows.  It could take another 2 or 3 years before bonds really take off.  The use of stimulus will be the key to really accelerate this.  As soon as the authorities see that asset prices are failing there will be a global coordinated effort to reflate.

Be Careful!


Thursday, May 19, 2011


I have been trading MOS quite a bit lately and have been making money on the long and short side of things.  I simply wanted to put up a post with a chart that I have been using that has been a great tool in determining when to buy and sell and when to switch sides.

Currently I am short as of yesterday afternoon when I saw MOS hit $69.  I felt like that would be strong resistance on the upside, so it was natural to enter a short there.  I see that MOS is in a downward channel.  The $67.15 level has been one where it has had support, (although it did break through earlier last week), and that $66.75 area is also support. 


I will probably play this quite tight today, by selling 1/2 a position when we near $67.15.  Right now, my stops are around $68.35 to keep me winning.  If MOS would drop through the $67.15 area, it could very well trade down to the bottom of the channel which is somewhere around $65.00 on the weekly chart.


Be very careful and nimble.  You must use stops, although MOS is under pressure, all commodity plays are potential huge upward reversals if the US dollar continues to drop.


Tuesday, May 17, 2011


I read an article this evening that centered on the strange happenings in China recently where watermelons are exploding as rain fell on the land in the midst of a recent drought.  While the rain is needed, experts suggest that it truly isn't the cause of the projectile flinging watermelon bombs, it is the use of the chemical forchlorfenuron on the melons that is reason for the crazy phenomenon.

(click on the link above for the Bloomberg article)

While the simple notion that these guys use anything that will destroy entire fields of melons is scary enough, you've got to take the extra step and ask, what else are they using on food that is imported to the USA?  Wow!  So, let me get this straight, some sort of super growth agent causes watermelons to grow so large that they simply blow up?  Why am I not a bit amazed to find this out?

I love the money quote near the bottom, "About 10 percent of watermelons burst normally, with the rate depending on variety and weather, Xinhua said yesterday citing Xu Jinhua, of the Jiangsu Academy of Agricultural Sciences."  Hmmmm, I wonder if that happens in the USA?

Speaking of unnatural substances and additives, I wonder what the results of QE I and QEII will bring?  Let's think about this analogy a bit more.  In China, the farmers know they probably aren't doing what is really good for the melons or those that consume them, but for the sake of making a harvest and making money (greed) they forgo doing what is honest and right to simply maintain a job and living standard.  In a similar way, we have the Federal Reserve that applies it's own version of forchlorfenuron in the form of super liquidity and abnormal credit support to feed and nourish the "ailing or under growing fruit" of our economy.  Specifically, our economy's bad harvest has been in the banking sector and areas like auto manufacturing and housing.  The Fed too would say that without the unholy stimulus, the fruit might not grow big enough or even may not yield any harvest at all.  And you know what, the Fed and the farmer would be absolutely accurate in their thought process that if they don't act, results could be bad for themselves and those that depend on them to produce. 

The problem behind this justifiable thinking is simply that it is short-sighted and never accounts for the long term material effects of these heroic acts of instant gratification.  Yes, the watermelons grow for the farmer, yet they over do it and explode.  If they don't explode they may have the long term impact of poisoning the unlucky folks that choose to consume their fruit.  Likewise, the Fed makes a choice for today and tomorrow and six months from now, not one that centers on the ultimate outcome of three years or five years down the line.  The Fed doesn't naturally have a hand in developing a manufacturing base or fostering an environment where jobs can be developed for the long haul, no, it props up a broken banking system and through other government agencies sustains a car industry and home building industries that are a disaster, all the while forcing Moms and Pops to take more risk in their assets.

The Federal Reserve is becoming the worst kind of public company that manages their "numbers" for the next quarterly earnings release.  The result of using extraordinary measures is that the initial use of them to save the system has plugged the Fed into the role of "saving the system" on a quarterly or even daily basis. 

What happens if the economy slows?  What happens if we have a flash crash?  What happens if we need some extra money to meet our deficit spending needs?  What happens if interest rates tick up?  The clear answer is simply to call on the Fed who is more than willing to step in AND now is even more willing to communicate through media press conferences after meetings now.  Think of the press conferences now as the quarterly earnings conference call.  The Fed will manage their numbers and do all sorts of accounting tricks to always come in above the "whisper".  Heck, if the Fed needs Jeff Skilling, I think he's available to do all sorts of his Enron-esque accounting tricks.  I'm not sure if he's much of a farmer, but I'm darn sure he's good at spinning a yarn and managing fruit until it bursts.

See once you spray on some chemicals on your garden and the fruit grows like mad, are you really likely to not add that same topical additive to your next year's product?  Not a chance.  The Fed, the markets, and the economy are now accustomed to the introduction and infusion of the Fed's exogenous stimulant and they probably won't perform well and yield much without the damaging liquidity substance.  The problem we've always had with the Fed though is that their actions always end up blowing bubbles, just like these bursting watermelons.  Often, too much of anything is a bad thing.  Just like those Chinese farmers, Ben Beranke just won't stop until he's destroyed the whole field.


Edit -
As I was proofing this document, I had one other thought related to the Chinese minister that mentioned that they had a loss rate of 10% typically on their watermelons due to explosion.  Clearly, the current results suggest that something is really wrong, but more importantly isn't it striking to note that they know that they will have a 10% loss rate and yet they keep on spraying the chemical on it? 

This is important because I think the Fed is using Mom and Pop as their version of the acceptable 10% loss.  In other words, the regular guy that is getting ravaged by low yielding interest rates and high inflation in hard asset commodities like gas and food is the acceptable version of an exploding watermelon on the crop produced by the Fed.  They have made a decision that by adding QE 1 and QE 2 and perhaps even further stimulus that they will simply have some shrinkage, but those are acceptable to be able to take in the harvest.  Clearly the Fed is not organized to serve the average citizen of the United States, corporate giants are the intended targets of the miracle stimulant provided by the Fed.

Monday, May 16, 2011


Bloomberg highlighted a trend that I think will continue for some time, until pricing of college tuition drops significantly.  The article reports that a recent survey of parents suggests that they feel strongly that higher education is not providing good value.


I've lamented for a long time that the notion that EVERYONE needs to go to college is simply a disaster. 

First, not everyone needs go to college.  The idea that a client service representative in a call center needs to have a college education to do account maintenance on your Sprint phone bill is laughable.    Yes, high quality phone talent is wonderful, but there are bright teens and twenty somethings that can do this without having to endure the rigor or financial cost of 4 or 5 or 6 years of undergraduate education.

Second, not every student that goes to college has the skill set to actually achieve the goal.  In other words, they don't have what it takes.  There are a few things that happen if a student just isn't cut out for it to make it through their time. 
A)  They drop out at a significant cost of their time and money
B)   They overwhelm the system and require professors to dumb down their material (public school system anyone?)
C)  They make it through and somehow earn their way but learn nothing and frankly have a piece of paper that is really a piece of crap.

Third, the ranks of those going to college creates a tidal wave of applicants that makes demand too large for the system.  Due to this we have seen for-profit colleges arise and more importantly we've seen tuition costs for higher education at public and private institutions sky-rocket well above regular inflation.  When there is too much demand, it pushes prices higher.

Fourth, there would be no excess demand if college expense loans were not so prevalent and/or backed by the US government.  The government's interference in this space all but guarantees their will be too much demand, there will be fraud, and there will be many people hurt by the availability of money and credit to fund a college education.

As a student that paid for my undergrad and graduate studies on a cash basis via waiting tables and bartending I was able to make it through without any loans.   Given the huge rise in costs, I know that I'd probably be successful trying to repeat that feat because I have a tenacious spirit and am absolutely against having debt that would start me off in a hole.  Having said that, I am not sure I could do it as easily with the cost of tuition and expenses in today's world.

I will admit that college educations allow for professionals to earn about $20,000 more a year than those that don't attend college.  Well guess what?  They should.  But I would tender that those same kids that don't go to college or shouldn't go to college should end up in some vocational program or apprenticeship.  If you don't think that can be lucrative, just have a plumber or electrician come to your house.  My goodness, if I didn't love what I did so much I could make a great case for entering in a profession that could bill $325.00 an hour!  My attorney doesn't make that, nor do many of my physician clients!

This makes we absolutely laugh and cry at the same time.  Texas Governor Rick Perry recently proposed that the Texas Legislature attempt to find ways to make a 4 year degree cost around $10,000.  I think this is a responsible approach and a necessary one.  With the advent of virtual classrooms and electronic distribution of materials, why would it cost a student over $37,000 for a four year degree in Texas (not including room and board)? 

So what is the response from Texas Alumni Director Bill McCausland? - http://www.chron.com/disp/story.mpl/ap/tx/7547544.html
"If you strive to make the University of Texas (at Austin) the No. 1 public school in the country, I don't think a dramatic increase in enrollment or reducing tuition are the steps necessary to get us to that. They seem to counter it," Bill McCausland, interim executive director of the UT Ex-Students' Association, told the American-Statesman."

Is this guy a clown or what?!  This quote doesn't highlight the rest of his statement where he goes on to say that making costs more affordable and also making virtual teaching and classes available would "lessen or cheapen" the college campus experience.  This is the garbage that kills me!  The "college experience" is fine if that is what you want to pay for, but it frankly is just a joy ride and a waste of the student's money or their parent's money.  I want to be able to provide a degree, not a keg party for my kids.  (Yes, I provided many keg parties for myself back in the day and it didn't help me achieve anything good in my life).

If you are reading this and think that I'm of two minds that I favor reducing college costs and limiting the amount of people getting access to college, you are right on track.  They are not mutually exclusive (meaning that just because tuition costs less I believe more people should come), no I actually advocate a reduction in costs and a limiting of the amount of people that do college. 

As I wrapped up undergrad it was obvious to me that I was competing with everyone in my job that had a degree.  In answer to that I immediately enrolled in grad school.  The point here is that now that everyone has a degree you must immediately go further to stand out and be special.  This reminds me of the quote from Syndrome in the Incredibles.  "When everyone is special, no one will be".  We've effectively cheapened the value of the college education where everyone can get a degree, now they are worthless.


Sunday, May 15, 2011


Bloomberg had a post up this evening that is going to probably be the first of a string of commentaries and interviews from Fed leaders that state that"Now is just not the right time to stop stimulus".


Atlanta Fed President Dennis Lockhart stated that the Fed should remove stimulus only after the recovery is much more sustainable!  Are you kidding me?  Hasn't he recession officially been over for 2 years?  Haven't we stimulated the economy with trillions upon trillions of wasted worthless dollars already?  So the thought is now that the recovery is not sustainable?  What amount of time would sustainable be?  3 years?  5 years?  According to their definition we'd need to apply stimulus until growth finds its way into the system despite the highest corporate tax rate in the world and a regressive system that continues to make business evil. 

As a trigger or a condition for pulling back, Lockhart wants to see expansion and health growth.  Just like a drug addict, the economy is showing us now that it is entirely dependent on stimulus to function.  In the same fashion as a user, the US economy now is fixated solely on getting that next high.  Withdraw it or threaten to withdrawal it and you get a serious reaction and tantrum. 

In addition, Lochart commented on the inflation in commodity prices and claims that indeed he agrees with Chairman Bernanke that rising commodity prices are simply just transitory.

Remember, this is probably just the beginning of the media blitz where we are told that the only why that we can keep things going is to have more intervention from the Fed.  We are told by Bernanke now that we must raise the debt ceiling or else we'll face doom.  We are told that the recession will come back if we don't supply as much liquidity as possible.  We'll see more Fed Presidents and more government officials telling us that we must be saved by the Fed's actions.  I guess I must ask what good have they done if all we have gotten is a delayed effect of what we have tried to avoid all this time?  Where are the jobs?  Where is that sustainable growth?  The Fed can make us "feel" like we are going somewhere, but we are certainly not getting anywhere.  We're doing a lot at a huge cost to accomplish nothing. 


Wednesday, May 11, 2011


I'm going to try something new this month where I produce the monthly macro report, but break it into two or three slices over the course of a couple of days.  I think this will help you as readers actually take a few moments and look at and digest the data, and it will also help limit my writing fatigue.

TOTAL RAIL TRAFFIC CHART - http://railfax.transmatch.com/
May rails during the first week of May are above last quarter's dip.  The tonnage exceeds last year although the rate of excess over previous months and quarters is certainly declining.  We did have declines in coal, autos, forest products, and food vs last year.  However, year to date all categories are showing increases since 2010's end.

Canadian Pacific continues to have worse tonnage shipments compared to last year.  They are the only major player that is facing this issue and therefore this is why I continue to highlight there production.  I'm not crazy about shorting this one at all unless we see a breakdown of the $60.50 area.  At that point, CP would be a true winner from the short side.

Despite the poor weekly performance, Motor Vehicles continue to be shipped at a much higher clip than last year.

Hauling of waste and scrap continues to be muted and in the last few weeks has actually dipped below the 2009 and 2010 trend line. 

SCRAP COMPOSITE INDEX - http://www.scrap.net/cgi-bin/composite_prices.cgi?id=100000&num=5
As noted above with the rail shipping of scrap and waste, the Scrap Composite Index has briefly stopped its ascent.  As we always mention, Alan Greenspan always watched scrap prices as a tell for the direction of the economy.  Since it was good enough for the 2nd biggest bubble blower in the free world, it is good enough as an indicator for Goatmug.

MIT / MOODY'S TRANSACTION INDEX - http://web.mit.edu/cre/research/credl/rca.html
The Moody's / MIT real transaction index data for March 30th 2011 showed another decline of 1.2% on all national real estate transactions.  If you were calling for a recovery in asset prices related to commercial properties, you'd still be looking for it.

NAR HOME SALES - http://www.realtor.org/research/research/ehsdata
NAR reported that home sales actually increased for the first time in several month.  While that may be the case in total, I am interested also to see the distribution of the sales across different price points.  In my area which is mostly affluent, I am seeing a tremendous amount of interest for homes that are in the $800,000 to $1,000,000 and above.  Where I live, that is a very large amount of money (perhaps unlike New York or San Franscisco).   

As you examine this posting from a NAR press release, we will note that this is exactly the case.  Comparisons of prices from one year ago demonstrate that homes from the $100,000 to $750,000 level continue to face declines while those that are able to afford the priciest abodes are actually paying up. 

I've highlighted quite a few times that this economy is becoming two, one where the rich are happy to carry on their lives with little impact, and then another where the middle class and poor scratch to earn an existance.  Clearly, Greenspan's housing bubble took the middle class to the cleaners as they reached beyond their means and were caught in a trap of their own greed and "right" to live in a specific way.  Now you may say that there are those that are blameless, that they couldn't help but purchase houses in a market that was over done because the price was the price.  I will only retort that this is absolutely not true.  They made a decision that was they they deserved a house and that renting was below their means.  They never once looked at their home choice as an investment that could lose, rather many just saw the potential for gains.

If there is some good news this month, it is that the rate of change of food stamp users is finally beginning to slow.  Despite the fact that food stamp usage once again increased, at the slowest pace since November of 2008.  At the end of Febuary we saw that 44.2 million Americans were using food stamps.  This amount is a 11.6% increase year over year.
While this is great news, it should also make you sick to know that the US Government (you) is paying $5.9 Billion a year to support these families.

There you have it for part one.  We are seeing continued stability in the rail shipping area, just an uptick in residential housing, and continued transaction weakness in commercial real estate.  The good news is that food stamp usage growth is slowing too.  In general perhaps we'll see a continued drop in commodity prices as we find out if Mr. Bernanke was correct in his thought that commodity price inflation was merely "transitory".



On January 6th of this year I posted an article called MCP BREAKDOWN about the craziness of the valuation of a company in a "hot" sector.  Molycorp (MCP) has been the darling of Wall Street receiving loads of hype and a tremendous amount of attention.  A perfect storm has developed as the company is exploiting a space where there is real need in terms of the product that they intend to mine and geopolitical issues related to the supply that is already available in the world.  Back in January and the preceding months China had taken overt actions to limit the amount of rare earth metals they were going to sell on the world market.  Obviously the threats of controls jacked up prices and also pushed stock prices of those mining companies through the roof.

As we all know, investing is about anticipating the next move, not just catching the one that is in play today.  If you are not looking forward, you will end up catching the tail end of a rally only to be left holding the bag.  (Ask buyers of silver at $48.00 how that feels just one week later).  Is the "anticipation effect" enough to justify the valuation of MCP where it is?
I'm not sure is the clear answer, but everything in me says no.  Recall in the post that I discussed how revenues were expected to be $15 Million for the year and the valuation of the company was close to $5 Billion?  It is great to see that since that time revenues have increased to $35 Million, but of course the valuation of the company is even greater now that the stock has traded almost $20.00 higher.  Now this post is a bit late to the party since MCP is now trading around $63.00 a share, but it is still noteworthy because that price level is still about $8.00 greater than when I called it overvalued in the first place! 

Who knows what the future will bring, but one thing experience has taught me is that companies that have rise fast and furiously often produce situations where obscene valuations don't match the hope and speculation about future growth.  More often, these situations usually don't end well for the stock holder.

Take a look at the chart and notice there is some weak support at $63 where it has bounced as I finish this note, however, the bottom of this ascending channel could take MCP down to the $50 area.

Be Careful!


Wednesday, May 4, 2011


I will probably have more to say on this subject, but please view this video, it is well worth your 3:22.

On that note, I'm struck by how many inconsistencies we are having getting the story out.  I feel like I'm getting the Pat Tillman version of the account on the bin Laden assassination as everything has been shared, unshared, and then changed.  Here are a few that I can think of now.

STORY 1 -  Pakistani Intelligence was involved in the raid. 
STORY 2 -  Oh, no they weren't and the President of Pakistan suggests that it is an attack on their sovereignty.

STORY 1 - Osama was holding a rifle when killed
STORY 2 - Ooops, he was without a weapon.

STORY 1 - Osama used a woman as a human shield
STORY 2 - Osama's wife yelled something and got shot

So, I wanted to add my own little rumors to the pot.

STORY 1 - Obama ordered the Code Red on bin Laden
STORY 2 - Former President Bush ordered the attack.

STORY 1 - NAVY SEAL TEAM 6 performed the attack.
STORY 2 - NAVY SEAL TEAM 6 supported Dick Cheney who, armed with shotgun took care of business on May 1.

I can only wonder how many more versions of the story we are going to hear.


Tuesday, May 3, 2011


Mosaic is making a run for the bottom a very long term channel bottom.  This presents several options for those that are more focused as traders. 

15 MIN - 20 Day Chart on MOS - NASTY

Where one sees blood, other see a purchasing opportunity, and it is always a good idea to look for the trade that would be on the opposite side of yours if you took a trade. Obviously one that has a bias toward going long can attempt to go long near the $71.55 area, setting a stop just below around $69.00. This provides an opportunity to catch a bounce with little risk. Personally, with all commodities looking pretty weak and entering into May (historically one of the crummiest months for stocks), I am not in this camp at all.

The good trade has been to be short MOS, and I have enjoyed that position for several days.  As we near this significant area of support, I am on high alert because I do not want to give up my gains.  As I examine this trade I have now entered in stops at $73.50 to prevent me from giving up a large portion of these great profits.  On the flipside, if the $71.55 area breaks down I am looking for a potential move to $65.00

Long term 3 Yr Weekly Channel is close to being broken. -

Daily View - 200 Day

As always, be careful.


Sunday, May 1, 2011


Interesting.  If you haven't noticed, the way I usually put posts together is that I have about 100 ideas floating around in my head and I'll see a news story or blog or other item that will make me think that I'd like to write on that.  Obviously I do a ton of writing at insane hours like 1:00 or 2:00 AM, but you can only get so much done.  What I end up doing often is simply writing a few ideas down and then saving a draft of the post to eventually come back to.  Most of the time, that works just great.  In this case, it didn't as the subject asset is flying again.  And if you were wondering, I still have 11 more posts in "draft status" after getting this one done, so there's lots in the hopper, I just need more time!

Think back almost 1 week ago last Monday when silver hit the $49.50 mark and early in the trading day we were all giddy that this level had been hit.  Almost immediately, I became nervous and started checking all of the silver and gold sites to see what price I could sell my silver at.  Yes, I want to hold some for Mad Max, Thunderdome type calamities, but I'm a trader by nature and if nothing else I need to know what the levels are in the market.

I even went so far as to devise a strategy for selling 1/2 a position so I would not regret any movements that reversed this huge move (recall that silver has been up almost 30% in one month)!

Later that day of course, silver got a good clobbering and that spurred the following article on CNBC's website, which I actually agree with 100%.

Buyers Beware: Silver Crashed 11% in 24 Hours - http://www.cnbc.com/id/42726288

Well, that was a one day deal pretty much, and as usual we saw a tremendous rebound in silver allowing for the shiny metal to regain almost all of those losses during the remainder of the week.

I think it was on Wednesday when I received this email from Apmex, a gold and silver seller.  (NO, I DON'T RECOMMEND THEM - AND I DON'T DISLIKE THEM.  They are expensive, so I have never bought from them.)  When I got this email, I absolutely pronounced to myself that this marked the top of silver's run.  A blanket email stating that they would pay anyone $3.00 over spot for any of their silver eagles.  This was $.50 better than the place I usually use, and they are very good, so the APMEX number sort of was over the top, especially for them.  If you have been around enough, when you see weird actions it usually signals important inflection points, and I figured this was one of them.

I had a conversation also last week about SLV the silver ETF and I declared that I had no way of knowing where it would go or what kind of technical pricing targets to suggest (other than ones waaaay to the downside).  I noticed this post later that day and figured it was just one that reinforced that view.


I'm not so sure about that.  Here is a screen shot from http://www.kitco.com/ that shows precious metal pricing.  As of 10:45 PM CST tonight we see that silver is getting crushed overnight.  Earlier it was down around 9.5%.  I am seeing stories related to China's slowdown causing a drop in commodity prices to fall.

The slowdown will be blamed on tightening measures taken by China to attempt to cool their overheating economy.

The other big news is that Amerika is stating they have killed Osama bin Laden.  Perhaps he died last week as the stories have said, but effectively he died several years ago as Al Qaeda has been rendered impotent for some time.  His organization attacked Americans and Muslims alike and were becoming to be seen throughout the world as the vile serpents that they were.  Amerika used Bin Laden to promote attacks on Iraq and Afghanistan and we gave him more power and influence for a time than he deserved.  Hopefully the death of this evil man will bring closure for the families of 9/11 victims. 


Perhaps the joy of the decapitation of one of the heads of the beast, Al Qaeda, has caused all of the inflation and economic turmoil in the world to disappear therefore sending silver plunging.  I'm not buying it.  I do think that silver is going to correct, but I don't think it's run is over.  I'll do a review of the charts in another post this week, but at a quick glance we could easily see $37.00 in this draw down.  It might be worth it to take a 1/3 position there if it nears that target.  It could go lower to $32 to add the rest of the position.  Longer term, this is still a good trade (if you buy at my targets, not if you buy tomorrow!)  as China, India, Brazil and all others seek to escape runaway inflation and buy precious metals.

Be Careful!