Saturday, June 4, 2016

The Charade Continues

I marveled at the markets this past week or so as prices on the Standard and Poor's 500 and other major indexes JUST WON'T GO DOWN!! 

It was almost humorous to see the big opening moves down each day over the past week and then see prices climb back for the rest of the day.

While I don't know for sure, it was reported last week that Anonymous hacked into the Federal Reserve trading accounts and discovered that the Fed owns more than 50% of many major corporations.

Would anyone really be surprised?  I mean people who watch and study the market closely, not the average guy.  Most of us who have been involved in markets for 30 years or more see that nothing works anymore.  No level of technical or fundamental analysis works.  The markets reflect the activities of the central banks, to include the Federal Reserve's Plunge Protection Team (PPT) and their crony's the High Frequency Traders.  Many believe that Citadel is actually a pseudo-extension of the Federal Reserve.  And the game extends to our national elected officials who not too long ago rejected a bill that would prohibit them from buying stocks on the knowledge they have (i.e., insider trading).  For sure, why would they cook the golden goose?

So for my part, I have maintained a position in SDS and have more or less ignored it for quite awhile now.  We are back to the low points where I had done my last accumulations but have chosen to buy no more.  It is my contention that the Federal Reserve and their agents will keep the markets up at least until the election in November.  This seemed to have been confirmed when US President Barack Obama met privately with Federal Reserve Chairman Janet Yellen.  Of course no notes were taken of the meeting.  One can only guess what the President and Chairman might be discussing. 


Well, all is not lost.  A review of the markets to date shows the following:

It's clear to see that Silver and Gold have been the standouts this year.  And of course, it only makes sense with world central banks continuing to print more money to monetize debt.  I recall reading that some $10 trillion in sovereign debt now carries negative interest rates.  How unfortunate it is for us minions that we can't take on more debt and get paid for doing it.  It would be like being promised free gasoline if you buy a new car.  Imagine.

So paper currency is really worthless.  After all interest rates do reflect the cost of money and there is no cost.  Think about that when you are slaving away at your job and for what?  You get paid in worthless fiat currency.  What a delusion.  So for a few years now, I have been mindlessly buying physical gold and silver.  I do so with pleasure as I can't wait to unload the worthless fiat currency.  I have thoroughly brainwashed myself in this truth.  If I believe it, then it must be true, right?

Well I do have something solid that for the millennia has held value.  And I do love the idea that these precious metals were forged in the fires of some exploding super nova gazillions of years ago.  Also that all of the gold that was ever mined is still in existence today.  Who knows who could have handled some of the gold?  Perhaps Alexander the Great or Jesus?  Who can say?  It lasts forever.

So I could continue on about the value of hard assets that include real estate as well, but living in Illinois and even worse, Cook County, both virtually bankrupt entities, property taxes can and will grow to the sky to the point that the governments will eventually seize all properties due to tax delinquencies.  Imagine that, the Fed will own all the mortgages and the governments will be fighting for the title.  Anyway, I digress.

I do favor silver at this point and here are some charts to justify my thoughts.

This chart shows the Exchange Traded Fund that reflects the value of silver.  The price here is a little less than the actual physical silver because, well let's face it, this price reflects a digital entry or paper certificate.  Theoretically, there is supposed to be the actual commodity backing it, theoretically.  So it costs less than the actual stuff you can put in your pocket.  And rightfully so.  Gee, am I feeling cynical this morning?

It does appear that we have had a nice bounce after several years of downward movement.  Keep in mind that real buyers of precious metals feel that price is irrelevant since paper money has no intrinsic value at all.  Anyway, for those who do like to buy low and sell high, Silver has made a strong move up and the 20 week moving average is now trending higher.  The trend is your friend.


For a long time now, for as bad as gold has been, silver has been even worse!  The chart above shows the gold/silver ratio.  Gold has been almost 80 times more valuable than silver!  This is extremely abnormal since silver and gold are mined together with a ratio of 15 ounces of silver to one ounce of gold.  By recent historical levels, one would expect a gold/silver ratio of about 30.  It got up to 80!

The chart shows that this ratio has broken down some and rebounded, but only to the moving average.  Let's see if it continues breaking down, as it should.


This chart too is starting to break down meaning that silver is starting to outperform stocks.  This is a no brainer as we saw in the table that silver is up 18% on the year while stocks are just managing to keep their heads above water.

Could be that silver will continue to be the big winner, besting both stocks and gold.

A word of caution though, if you do buy physical precious metals, be sure to keep them close at hand and not in a bank safety deposit box.  If currencies do collapse (think of Venezuela, Argentina, Greece, Cyrus, etc.) you will not be able to get into the bank to access your valuables. 

Bottom Line:  I'm curious to see if I'm right and the markets do stay up until the election.  This would go to prove just how rigged the system really is.

1 comment:

  1. Trend in FII flows: The FIIs were Net Value of Rs -1075.62 the cash segment on Thursday while the DIIs were Net Value of Rs 926.68 as per the provisional figures.

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