Interpreting the Silver Move Yesterday

The game is rigged. The small guy cannot compete. Today’s margin raise in #Silver is an example. You cannot compete with the unintended consequences of flawed market structure no matter how smart you are.

They have unlimited cash for margin borrowed at fed discount window. You have a 20% rate Mastercard with unredeemable points (capital one lies).

They tell their creditor, the US Treasury, what assets on their books are worth (mark to myth). You get told what yours are worth by the banks or some objective 3rd party and must pony up the cash to cover the difference.

They have no need to assess VaR, their balance sheet is infinite. You have to think about your next pay check and must decide whether 2 cars are really 1 too many.

When the comex raises margins, all these things force you to puke your longs, and incentivizes them to add to shorts.

And somehow the info comes out post floor hours, during the thinnest trading time of all. Not hard to push a market on news like that. But more telling is that the silver market drops precipitously before the close.

Your superior intelligence and bankroll mgt is no match for their fed sponsored balance sheet. You will not win in the long run.

Casinos change decks midgame too you know.

If you’re right, they raise margins, prevent physical delivery, tax sales, make ownership illegal. You cannot win.

Like everything else, those that are in power want only to stay in power. Free competition is a risk for incumbents in fin, pol or govt.

Right now levers are being pulled, rules lobbied against and changed, markets managed to make sure they stay in power. Its not a conspiracy, just self interest.

There are good people with good intentions out there trying to keep the markets level and fair, but the money determines the rules now in a significant way. Rules can be gamed.

We are a nation of laws , not ethics, and you cannot legislate morality without leaving a loophole somewhere.

Raising margins was not an exchange ploy to hurt you. But when was the last time margins were raised after a sell off? It has probably happened but I’m willing to bet the action is lopsided to the rally side.

Raising margins was not a scheme to crush you. But why is it needed, when for every long there is a short? And when the shorts have infinitely more capital than you, and there is no short squeeze of physical (as evidenced by the contango in the spreads) Trading SLV doesn’t help, they arbitrage both sides from one account.  You unfortunately do not have a letter of exemption for position limits and  for carrying positions in 2 markets and cross margining agreement with your clearinghouse.

By  Elizabeth Thawne

ZeroHedge

Silver reached a new 30-year high today of $27.70 per ounce up 59% since NIA declared silver the best investment for the next decade on December 11th at $17.40 per ounce!

Please be aware that we expect the silver market in the short-term to be very volatile. Although we believe silver prices will go substantially higher over the long-term, silver prices will not go straight up. Profit taking could occur at any time. In our opinion, any short-term dips in silver will be excellent buying opportunities for the long-term.

The New Logic Of Gold And Silver Today
by Gary North

Nov. 6, 2010

It’s old thinking to consider metals as strictly an investment. No longer is it a big-boy’s investment game. This growing metals-mania is no longer of an ‘investment’ mentality at all; the view of owning hard metals today is . . . protection. We’re not watching metals going up–we’re watching the fiat currencies all slipping into the privy. Once that notion is accepted, no price is too high for the metals: they represent security.

Buying precious metals is a no-brainer. Metals are time tested. Even in a slump, the value of metals are a relative constant, but today, with the dollar at eminent risk– metals have never been more right. The governments and commoners, around the world, are buying metals. The Chinese government has urged its people to store wealth in metals. India, the Mid-East, North America has the buzz on for metals.

The big question isn’t ‘should I’, but how much can I afford? A one-ounce bullion gold coin may be beyond the reach of many, but the smaller denominations, more expensive by weight, are affordable to many budgets. A one-ounce bullion silver coin still costs less than a bucket of Kentucky Fried Chicken.

Pre-64 silver coins (90%) are trading at 19 times face-value. (Mercury dime $1.9075)

….read more by subscribing to Gary North’s Specific Answers – Wealth Building Strategies, plus Q&A Forums HERE

I love gold, but it seems that this market is long overdue for a near-term pullback

In Today’s Breakfast with Dave

• While you where sleeping: it’s a miracle, everything continues to rally

• “They’re making a mistake, the ones that are buying the bonds … It’s quite clear that stocks are cheaper than bonds…” Is Warren Buffett correct on this one?

• ISM … up or down? A softer manufacturing data point was shrugged off by the markets, then a better non-manufacturing result was the launching pad for a huge rally

• Consumer fatigue: there is a prevalent view that the American consumer is doing just fine… if 2% growth that is underpinned by government life support is “fine”, then we know we are into a new paradigm

….read full article HERE