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Quantitative easing yes, and the reflation trade of course.
But if you look you may notice that the rally today was a bit narrow, and driven in part by heavy buying in call options that eventually forced market makers into the equity market to buy stocks to hedge their positions. Financial and material companies were leading the pack.
Still, as you can see, do not jump into a bearish posture or you will be forced to make your losses good and feed the beast. This looks like a Ponzi scheme, but that does not mean it can cannot go on for some time.
It is my understanding that the Sprott Trust 'books' the silver when it makes the deal to acquire it, but the actual silver will not be obtained and delivered to their vaults for some weeks as the market gathers the bullion together and ships it to them.
This was a very large purchase, and it will be interesting to see if we can determine where it is coming from as inventories draw down. Many analysts watch the reports from the Comex each day for example, and how the various levels of supply fluctuate. Then again, in this paper driven world of fractional reserve inventories at the LBMA and the unallocated accounts of certain holdings it may not show up at all, at least for now. The paper game is pervasive.
Our estimate based on the available data is that they purchased 6.5 million ounces of silver at an average price of 25.82 US dollars per ounce. This is a 1.2% premium over today's spot price of 25.51, and a much larger premium over yesterday's paper prices that went as low as 24.10 intraday.
It is interesting that even on very large purchases it appears there is a premium to be paid to acquire actual unemcumbered bullion versus fractional reserve paper claims. Handling charges? lol.
Some might consider the price that Sprott paid to be a 'leading indicator' of where silver will be going. I think when the paper Ponzi scheme actually collapses silver will be much higher than that. After all, "he who sells what isn't his'n must buy it back or go to prison." Unless, that is, they are running the game. Then they just pay a fine and admit no guilt.
By the way, I have heard that it was J Aron (Goldman) leading the bear raid on gold with a 'monster short' in the futures pits yesterday. I wonder who they were acting for and whose money they lost? The CFTC could always pull the tickets and inquire, but it might very well be one of their colleagues down the street. As you may have heard, it is said that Goldman itself is accumulating bullion. I have heard of this for quite some time, and you may recall that I said when the time is right a big player like the squid will slither out of their lair and strangle the metals shorts, and perhaps ruthlessly so.
As an aside, I get a few 'sour grapes' emails almost every day out of the many hundreds I receive. I try to read and respond to each one, with a few exceptions for the spam filter. Some think I am too liberal, some think I am too conservative. Some think I am even guilty of the crime of being French! I am not but would gladly claim that prize. If you can offer me dual citizenship please do. lol. Some believe I speak about spiritual matters too much, or mention personal matters even obliquely, or don't invite them to my restaurant for 'free meals when they are in town.' Sometimes the self-centered and self-righteous indignation is remarkably funny. How dare anyone exist who does not do so for their personal and immediate convenience! Well, we see these types on the highway almost every day, so I imagine they must be on the internet as well.
But by far the greatest complaint I am getting is that I "write about gold and silver too much."
I write about the things that I love and that interest me: good food, good people, beautiful ideas and things, the vagaries of human nature, the Spirit.
I can think of no more interesting or important phenomenon than the decline and replacement of the US dollar as the world's reserve currency. And if you are in any way influenced or affected by the world of money, believe me when I say that it is of importance to you as well. And there is no more certain sign right now of what is happening than the bull market in gold and silver, and certain other commodities.
It is time to get your affairs in order. There are times ahead that will try men's souls.
Volatile day in the metals with bear raids abounding from the New York open.
Gold and silver would not be denied.
Here is a nice summary of what the Fed announced from Everbank World Markets.
"The Federal Open Market Committee announced they would be purchasing $600 billion of treasury securities over a time period ending in June of 2011. These security purchases will be concentrated in the 3 to 7 year area with an average duration of 5-7 years. The official statement said the purpose of these purchases was to promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate.
The FOMC also directed the NY Fed to continue to reinvest principal payments from agency debt and agency mortgage-backed securities into longer-term Treasury securities. Based on current estimates, the NY Fed expects to reinvest another $250 to $300 billion over the same period. This brings the total of the stimulus package to just under $1 trillion dollars."
Benny and the Fed delivered a 600 Billion dollar in new monetization program today, not including rollover purchasing which should take the total purchasing for 2011 a bit closer to a trillion.
The program will be for 8 months, rather than the expected 6, and will not include MBS or the 30 year Bond, which was particularly hard on Big Daddy today which you can see from the second chart below of the 30 year bond.
As a side note, coming into today's FOMC meeting, Bloomberg says that Goldman Sachs was advising traders to 'buy the long end of the curve.' Surprise, surprise, surprise. LOL.
