Gold Daily and Silver Weekly Charts - Gold, Silver and Stocks in a Financial Panic

Gold is resilient, bouncing off its tentative right shoulder support. Silver is just awesome, taking no prisoners.

The commodity commentary on the Bloomberg network was particularly ridiculous today. They drew a parallel between the commodity rise into 2008 and the subsequent sharp decline with the rise into 2011, suggesting that there will be a similar decline, without ever mentioning the cause, using ominous sounding words and innuendo.

Uh, as I recall there was a stock market crash in 2008 that pulled down everything including commodities. Funny, they keep forgetting to mention that while predicting a waterfall decline in commodities, and endlessly touting equities.

I will repeat as I have done so over and over, that if there is a general liquidation of all financial assets, gold and silver will take a hit as well, along with most other commodities. Silver will decrease further because it has a high beta or variability.  Since the miners have a correlation to stocks they will take a hit depending on their beta.

This will most likely represent a buying opportunity if you have the right time horizon and capitalization, and of course depending on your economic outlook, because gold and silver tend to  recover more quickly than stocks if there is an economic recovery.

Why?  Because money supply and credit expansion lead productive GDP growth, and in some cases as we have now to a much greater degree than normal because the transmission mechanism between credit and the real economy is broken, with a heavy tax being placed on the inflow of new money by the outsized financial sector. 

This is how it also happened in the Crash of 1929 and the decline of US equities and valuations into the trough in 1933.  And it will most likely happen like this again even when there is an eventual recovery with legitimate and substantial reform.   I expect that reform to also include a significant restructuring of US debt, the international money reserves and arrangements, and of course the US dollar. 

*Could* something else happen?  Yes, and in that case I would do something else.  That is what is called decision making based on data, not speculating on nonsensical quackery and theories, ignoring the actual data provided by the markets and the economy until you run out of money to play the game.

If there is a waterfall decline in stocks, which is a possibility, I would expect to have my trading account weighted to the short side by the time it gets underway, and make a significant sum of money as I have done the last two times this happened in the past ten years.  I would expect not to touch any of my long term gold and silver holdings and take the charges of turning over long term assets such as bullion.  I will not touch them until something fundamentally changes in the makeup of the dollar based money system.

Trying to get positioned well ahead of improbable events is generally pretty dumb, the hallmark of an amateur, but especially if you are doing so using financial instruments like triple ETFs with lots of valuation slippage, and take them as long term positions, thereby almost guaranteeing a loss even if you are eventually right.

Yes anything can happen, but as Walter Bagehot so appropriately observed, 'Life is a school of probability.' 

SP 500 and NDX Futures Daily Charts - Another Day, Another Save, But Not Out of Trouble

Earnings came in somewhat mixed today, but there was some ominous trend news on PC sales this morning.

After the bell, Google missed its earnings per share number.

The bulls saved it for the day, again on lighter volumes, but stocks appear to be struggling, and may even be in a bit of trouble.

I turned more cautious into the close, adding to short positions to hedge bullion longs.

SP 500 Futures Intraday and NAVs of Certain Precious Metal Trusts and Funds - A Whiff of Fear

I would start shifting to a net short if the SP futures crack 1290 to the downside.

Until then I would rather be long gold and silver, including some miners, from the dip as mentioned yesterday, and use any stock index and other asset shorts to hedge positions in miners and perhaps silver.

The Net Asset Value Premium chart is included below.  There is hardly a bubble like activity in those premiums although the divergences are interesting.  They indicate a fear of a break in supply in the physical silver market in my opinion, and not just among retail investors. 

People in the trade know Sprott has the silver AND that they can take delivery of it if push comes to shove and they need actual possession of it for some reason.  There is no other way that I can explain this except as some arbitrage trade.  There must be a fairly sophisticated fear of a risk of a default in the silver bullion market and PSLV is being used to hedge that risk. At least that's my take on this, but I could be wrong.

The economic data continues to indicate a growing stagflation in the US.  Fresh information out of the European sector suggests that a 'retructuring' of sovereign debts may be coming.  The same could be said of the US, but its nice to own the ratings agencies and be providing liquidity lifelines to half the worlds multinational banks.  It adds a panache to one's financial profile,  and is certain to buy at least a few friends amongst TWCTF (those who control the flow).

There could be a cage match brewing between the Anglo-American controlled World Bank, and the European dominated IMF, especially if the BRIC's obtain some representation there.   In most cases of intense diplomatic discussion it is wise to follow the money, and war, including currency war, is continuation of diplomatic efforts by other means.

Carl Levin has referred Goldman Sachs to the SEC and the Justice Department for multiple counts of perjury and violations of various securities laws.   His YESness is trying to raise a billion dollars for his presidential re-election campaign, and those internet donations are not flowing freely from the masses.  So would you like to place any bets on a meaningful investigation and any forthcoming indictments?  Well apparently some are willing to make that bet.  Goldman CDS Jumps on Levin Claims

I'd rather bet that this is some variation of the Chicago-style extortion rackets, with a bait and switch kicker. Been there, seen that done last election. But make little mistake there is almost no one keeping almost anyone of size honest these days between the government and business. The Wall Street satanspawn have co-opted the process.

Without reform of the international trade regime and the imbalanced FIRE sector there will be no sustainable recovery.