Political Metals

The Comex is headed for a default unless they can secure a large new supply of silver and increase their inventories.   Or allow the price to climb higher until the market finally clears and existing supply re-enters the market.  Where will that be?  From the looks of things, higher, probably where the trend price with inflation would have been, barring sufficient new investment in production. When flagrantly betrayed, the market can be a harsh mistress.

And the same thing is happening, in relative slow motion, in the gold market which was the real point of this all along. But the difference is that in the gold market the bullion banks have been able to turn to the central banks for protection and supply over many years, drawing down their sovereign inventories and masking it at times with accounting tricks. That is, until that trend changed a few years ago, and the central banks became net buyers after twenty five years of selling, motivated primarily by the BRICs and the much abused and crumbling dollar reserve currency arrangement.

I wonder if the bankers can find a willing seller, a new source of silver.  And at what price.  And with what will they offer payment, what depreciating paper promise?

Someone asked me again today, have you ever seen a market go up like this without a correction? Well, of course not. Nothing ever goes straight up. They are asking the question to get the answer they want, ie. consolation for an existing opinion. The real questions to ask are WHY something is going higher, and to think about how much it might correct, and what it will do after that. Saying something will go down after it goes up is not an investment strategy, it is a sucker play. People go broke following these faux contrarian plays.

Yes, I am cautious on silver in the short term, and yesterday I did take all my trading positions off the table, without touching long term positions. Let that action speak for itself, within the context of my goals and needs. And I am especially cautious now in most US markets because of lax regulation. But I liked and respected the perspective Jim Rogers had to offer. And yet he will be the first to tell you he does not know the future, and neither do I.    But I think it is going to take a liquidy panic selloff in broad assets to break the silver bull.  I hope it does not go parabolic and at least consolidates here somewhere, to set up a more orderly appreciation such as is happening in gold.

But I am not assuming that these are normal market conditions. I think that the financial engineers and their bankers are becoming very concerned, and even afraid, for good reasons. What has been hidden will be revealed, what has been whispered will be shouted from the rooftops. They will spin stories to hide it, and probably engage in scapegoating, blaming Islam or China or high profile speculators like Soros, or some other group for what is in reality the direct result of their perfidy.

As we have seen in the past three years, the markets have been made a sham, riddled with fraud, puffed up but lacking substance. And in each case there is a violent correction that exposes the graft and corruption. And this is ongoing, because as William K. Black recently said, they have ‘left the felons in charge of the system for the sake of stability.’

But at the end of the day, the result remains the same, no matter how they try to shift the blame and the pain.

As the Americans like to say, ‘the jig is up.’

“They have sown the wind, and will reap the whirlwind. Their stalks of grain wither and produce nothing to eat. And even if there is any grain left, foreigners will consume it.” Hosea 8:7