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A coincidence of the Greek crisis and the end of QE2 had a lot of bears leaning into the short side of the market. When Greece was finessed for the short term, and the end of QE2 did not produce the forecast immolation, the short term trends turned sharply, and it was 'risk on' with the dollar and gold and bonds weakly falling and stocks soaring.
So what next? In the short term this equity move looks a bit overdone, but until volumes pick back up it may drift even higher unless something happens. I think it would be hard to be too cynical about this market and the US governance model in general. Lies, easy money, oath-breaking, and double dealing seem to be prevalent.
Zynga Files One Billion Dollar IPO
Late breaking Friday after the close news, the SEC is escalating their investigation of St. Joe's and names chairman Bruce Berkowitz.
Overall the problems in the economy and the financial system are not being dealt with effectively at the source, and the coverups continue. Any time a reform, or even an assertion of the law and justice, is undertaken, the financiers respond with threats of crashing the economy. This is due in large part to their faithful servants in the Republican and Democratic parties, and the weak-kneed American president.
Have a pleasant holiday weekend Americanos, and we'll see how Asia opens on Sunday evening your time.
Silver proved to be a little more resilient than gold today, although both held their levels fairly well as the Street was engaged what is snarkily called 'window dressing,' which basic means rigging the valuations of the market.
Nothing has changed. Let's see how the holiday shortened week trades as we kick off the third quarter, and in two weeks, US earnings season with Alcoa.
The US dollar index continued its decline, as fund managers put forward a herculean effort to optimize their bonuses by buying equities.
On the bright side, Hans Nichols of Bloomberg Washington is reporting that Timmy Geithner may be leaving the government after the budget deal is done. Just another compelling reason to hope for a quick resolution.
Or maybe not.
One shudders to think who Obama might put forward, and what the confirmation process might look like in Congress unless he chooses someone to the right of Andrew Mellon.
Given his past history of selecting unexpected candidates somewhat over-friendly to corporations and Wall Street, one can only wonder.
The paint was going on thick and heavy today for the end of quarter, as the trading desks and hedge funds were optimizing their bonuses. Let's see how we go into the US holiday weekend.
I am using this opportunity to combine two items of interest to precious metals investors. I do not consider them to be particularly related. In other words, I do not consider any of the funds to have the same counterparty risk as some other financial assets purporting to represent an avenue towards the protection of precious metal ownership such as GLD and SLV and even Comex Futures contracts and options.
I do still think the premium on Sprott silver reflects the scarcity of bullion and the relatively friendly terms of taking ownership of metals from the fund, but this is just a theory.
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"We have a very tough time understanding those bearish arguments against silver. We look at the real silver market, and based on the supply and demand data coming from the real, physical markets for silver, the fundamentals are only getting stronger.
And yet there exists another silver market, which as we’ve shown, is not very connected to the physical realm at all. And though silver investors have for decades suffered the tyranny of a rigged paper monopoly over silver price discovery, it appears to us that the tides are turning. In the age of QE to infinity, investors are being more scrupulous with their capital and as such they are demanding physical silver in quantity.
With more and more dollars flowing into the silver markets and a finite supply of physical to meet that demand, the theoretical losses for the paper silver short-sellers are near infinite. And with such a skewed and obvious risk/reward payoff vastly favoring the longs, we pose the following question.
Who is most at risk in the silver markets: the buyers of a scarce and real asset that serves a growing multitude of purposes, or the sellers, who are short a quantity of silver which may very well not even be obtainable at anywhere near current prices?
Let the Seller Beware!"
Sprott Asset Management, Caveat Venditor
I should add that buyer must also beware, because of the growing counter-party risk as the leverage extends and the available supply shrinks. If the dominos start to tumble, we have seen that the counter party risk can quickly cause the problem to reach critical mass. This is because the financial sector is grounded in leveraged speculation and gaming, and not in the real economy.
For years I had watched the charts showing the 'netting' effect of the derivatives markets, and how the nominal risks were really much lower because of the netting effect. However, once the markets were actually stressed, the netting fell apart because of a couple of major participants who could not deliver.
I think the same situation still exists in a number of markets due to the very weak financial reform and lax oversight of the Fed, the SEC, and the CFTC in particular. And of course the extreme moral hazard of bailing participants out of their oversized risks when they fail.
When you go to collect your silver, you may find only a stack of paper IOU's depending on which vehicle you are using.
