"Our government...teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy." Supreme Court Justice Louis D. Brandeis
This morning I added a lengthy intraday commentary here.
A fifth margin increase in silver is baked into the cake for Monday May 9th. Let it not be said that the CME does not care about its biggest customers.
There was a bounce today, and sighs of relief from the beleaguered metals bulls. My own portfolio was exhibiting some fairly impressive G forces today, that made up for the faux pas of coming back in a day early. Adjustments have been made, and thank God for hedges.
So what next. Nothing goes straight up or down, and silver certainly had gotten far ahead of itself. But as noted yesterday, I do not think that we are seeing an analog of the 1980 Hunt Brothers market corner rally which was fairly specific.
But who can say what will happen? Certainly not most of the commentators whom I have read, or the people who took the time to write in and tell me what a dope I am, and how silver is going to $22.
I cannot say it enough. It is not about predicting and making one way bets. It is all about managing risk in the short term, and paying attention to the market. I signalled my own sell within a day of the top, and came back in a day and a half before the bounce, for a trade. I would have preferred to have waited longer, but the CME surprised me with the extra margin requirements. And so I adjusted my strategy and came out without taking 'the big hit.'
I think what bothers some people who write in is that I am still a long term holder of the metals. They send the oddest messages, feigning personal omniscience, and assuming some sort of undeserved pride in finally not being as wrong as they have been for a long time.
Well, sorry, but until the fundamentals change I don't change that long term portfolio, and certainly not in response to big moves either down or up, that are here and gone like flashes in the pan. That is for the short term trading portfolio.
It bothers me a bit that the Comex does not seem to be addressing the very low levels of deliverable silver in their warehouse, and the incredibly large short position held by a few of the TBTF banks who are playing with public monies as far as I can tell. That remains a potential problem even if they raise margins to 100%. And lower prices through rules changes do not help supply problems, the last time I checked. It tends to dampen supply and make the problems even worse given enough time.
I have a bias to gold, I admit. But if you want to flee a manipulated market, I am not so sure that gold is so much different than silver, but certainly quite a bit less volatile, and more widely held as a a form of wealth by sovereign nations.
I still cannot get over the fellow blogger who claimed that gold cannot be money because its value fluctuates, and some people hold it using leverage. I don't suppose the forex market is familiar territory to someone who could say this. Everything is subject to speculation. The crux of the matter is counter party risk and the ability, or lack thereof to manipulate supply in the long term.
Bart Chilton has indicated that the CFTC should look into the recent market action. To what end? They never release any of the pertinent data, and certainly don't do anything about it. And I suspect they won't until the aftermath of this latest banking fraud, after something breaks and a crisis ensues. I like Bart, and think he wants to do the right thing. I have also been in management situations that I think are similar to the one he is in now, so he has all my sympathy and good feelings as a lonely voice for truth, a pillar in the stream.
Greece is threatening to leave the EU, and I am sure that many of ther others in the EU will say, "Well let them." And yet it is not quite that simple, because the reason for leaving would be to default on their debts. Perhaps of benefit for Greece, but very bad for their creditors.
Would this extinction of euro debt result in a stronger euro as in the model of the monetary deflationists? Sometimes it is instructive to take your assumptions and apply them to someone else, to see if they are self-serving.
Greece's euro debts are held to a large degree by German banks. And a Greek default would encourage Ireland to do the same, and its debt is largely held by English banks. And in turn these banks are highly interconnected to the multinational banks. The financial market is still a mine field of counter party risk, and the Anglo-Americans and the rest are in a currency war.
The banks and their servants in office are fighting and gutting regulation every day, and there is little doubt in my mind that there will be a new financial crisis, worse than the last, that will shake the dollar denominated debt to its very foundations. But that's just my opinion, and I cannot tell what the time frames might be. However, I think I know what to look for. I also still believe that the UK will lead the way in the downward spiral of the western financial oligarchy.
The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained recovery.
"The extreme volatility seen in the price of silver—exacerbated by tightened margin requirements—and the la large swings in the price of gold, price of oil and in certain U.S. dollar exchange rates, do not in any way change the long-term outlooks for the U.S. dollar or for the long-term hedges against a collapse in U.S. dollar purchasing power. The current markets leave open the potential for near-term jawboning (official or through market intermediaries) and government intervention (overt or covert) to encourage relative U.S. dollar strength.
Despite whatever volatility there may be, the U.S. dollar remains on track for an eventual complete collapse in a hyperinflation, and the roots of that hyperinflation remain embedded in the system. The primary hedge against losing U.S. dollar purchasing power remains physical gold (and silver), with some funds outside the U.S. dollar. As discussed in the Hyperinflation Special Report (2011), I still like the Swiss franc, Canadian dollar and Australian dollar."
John Williams, 6 May 2011
