, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Well Gold and Precious Metals bounced off the 200 day moving average and made my (DGP) call yesterday look like pure genius. For Stocks it looks like we may have hit the end of the intermediate wave (Elliott), there may be one more push at 8000, if it fails watch out. Alcoa earning came in much worse than expected and I don’t think we will see too many bright spots in the coming earnings season. So be very careful on getting into US Stocks remember “Stupid Is As Stupid Does!”. Today I am including some warnings I received via Investor Underground and then an excellent piece from my friend Ted Butler on why you should also be buying Silver and buying it now!- Good Investing! – jschulmansr


Exposed! Five Myths of the Gold Market and find out:

·        Who’s been driving this record bull-run in gold?

·        What Happens When Inflation Kicks In?

·        Why most investors are WRONG about gold…

·        When and How to buy gold — at low cost with no hassle!

Get this in-depth report now, plus a gram of free gold, at BullionVault


Notes From Investment Underground

Source: Crisis Strategy Alert.com


Is this the end of the sucker’s rally? Reality hits bulls hard… Banks’ losses to exceed those of the Great Depression… Will Alcoa’s earnings report mark the top? Why the government should stick to tending the lawns at Arlington Cemetery… Richard Russell: the primary trend is still down… Obama builds his house of cards ever higher… Insider rumors at the PPIP… A mysterious distortion in gold… And more!

*** Here at Notes we’ve been warning investors of that the recent rally in stocks was nothing more than a sucker’s rally. It’s been clear to us that although technical indicators showed that U.S. stocks were oversold – heavily oversold – economic fundamentals, or the primary trend, just didn’t support a sustained rally. At the time of writing, the Dow, the S&P 500 and the Nasdaq are all down over 1.5%.

*** The reason for the sell-off today and yesterday: reality. Yesterday, traders took fright Mike Mayo’s “sell” recommendation for banks. Mayo, who has a reputation for independence – a rare thing on Wall Street these days – reckons Geithner’s PPIP shell game won’t be able to prevent Wall Street’s losses exceeding those of the Great Depression. Today, it’s earnings, or lack thereof. How bad is the earnings picture? Bellwether aluminium producer Alcoa is expected to post a loss of 60 cents a share, against earnings of 44 cents a share at the same time a year ago. The first quarter is likely to show earnings at S&P 500 companies declined 37%, according to Thomson Reuters, the eighth straight decline in quarterly earnings. Go figure.

*** Will Alcoa’s earnings mark the top of this rally? It’s quite possible, says Investors Daily Edge financial analyst Rick Pendergraft. He even went so far as to provide us this handy chart to see the top in action.


Enable images to view this chart 

This is what Rick told Crisis Strategy Alert ’s senior analyst, Charles Delvalle:

    Alcoa’s results are due after the bell today. If Alcoa losses more than 60 cents a share (which is what analysts expect) or if Alcoa provides god awful guidance, expect this market to fall back on its face.

*** It has been a mark of this crisis that every rally in stocks sparked by a government announcement has eventually reversed. Traders clearly want to believe that government action can relieve their pain. It can’t. As my dad said yesterday in the Daily Reckoning , “Maybe the government should make sure there are enough parking places. It should probably make sure the grass is cut at Arlington Cemetery. But there’s no way it can do a better job of getting people what they want than they will do themselves. Even in a depression.”

*** Dad’s all flush after attending the big Richard Russell shindig last Saturday night. For those of you who don’t know, Russell is a doyen of the financial newsletter business. He’s been publishing his Dow Theory Letters for half a century now. And he’s one of the world’s leading experts on Dow Theory and U.S. stock markets in general. The People’s Bank of China subscribes to Russell’s letter. To say he’s a big hitter is an understatement. This is what Russell had to say recently about the rally in U.S. stocks (courtesy of the Daily Reckoning ):

    People in this country don’t realize how bad things can be. I lived through the Great Depression. I remember people standing in bread lines. It was hard to get a job, any job, back then. But now, you see the restaurants are still full. People are still spending money. They may be worried and they may be beginning to save, but there’s no sense of urgency. And there’s a rally on Wall Street. You know, every bear market produces a rally. You can expect the market to retrace its steps by one- to two-thirds.
    And every bear market has a surprise. I think the surprise is that this is going to be a lot worse than people expect.

Of course, you could bet against Russell’s 50 years experience. But here at Notes we won’t be joining you. “The primary trend is down,” says Russell. The bear market will continue until it “has fully expressed itself.” We couldn’t agree with him more.

*** That stocks are selling off shouldn’t surprise anyone. The financial sector led this rally, with spurious news of January and February profits at Citigroup. But the crux of the problem remains. As we said yesterday, banks are still marking the bulk of their toxic assets at 90-95%. This is deliriously optimistic nonsense. The assets are probably worth half that at best. There is roughly $8.1 trillion worth of loans at risk right now on the balance sheets of the U.S. banking and thrift system. So far, banks have taken $1.2 trillion in writedowns against these loans. The question is how many more trillions in writedowns are still in store.

*** Nouriel Roubini reckons total writedowns will reach $3.6 trillion. That’s another $2.4 trillion to go. The IMF forecasts that total writedowns of banks and insurers could reach $4 trillion – another $2.8 trillion. But the government, through its various guarantee programs, is now supporting 72% of banks’ total liabilities, which equates to a dollar amount far in excess of either Roubini’s or the IMF’s worst case scenarios for loan losses.

*** This is bad news for banks. It’s also bad news for America. That’s because U.S. deficits are increasing along with banks’ needs for more government backstops for their bad loans. Here’s how it works. The Treasury borrows money directly via its bond auctions. Or the Fed buys up U.S. government and agency debt and then uses the newly created money to plug banks’ balance sheets and fund the myriad federal economic support programs (which so far top $9 trillion). As this process accelerates (only a fraction of these $9 trillion in obligations are currently funded) the assets backing the banking system – U.S. Treasuries and the dollar – themselves become devalued. At this stage, all bets are off.

*** In other words, all that’s happening is the government is building the house of cards higher and higher. Government backing is responsible for any improvement in the credit markets. But take away that backing and there is no real improvement in risk. To put it another way, risk is being transferred from the corporate sphere (the banks) to the public sphere (the U.S. taxpayer). This is reflected in U.S. sovereign CDS widening, which reflects the market perception of the creditworthiness of the U.S. Today, the Financial Times reports that U.S. sovereign CDS widened 8% to 51.67bps.

*** Even George Soros – an initial supporter of the government’s interventions in the markets – thinks the U.S. is in for a surprise. A bad one that is. Speaking to Reuters Financial Television, Soros said the U.S. economy is in for a “lasting slowdown” and could face a Japan-style period of relatively low growth coupled with high inflation. Soros also articulated what most thinking investors already know. “The banking system, as a whole, is basically insolvent,” he said. Amen to that, brother.

*** Reuters reports that the U.S. Treasury Department is planning to delay the release of any completed bank stress test results until after the first-quarter earnings season, “in order to avoid complicating stock market reaction.” Think the Treasury made this decision because its stress tests are full of good news?  

*** The Geithner-Summers “legacy loan” program (the PPIP) could end up costing taxpayers than even we expected here at Notes . According to Columbia University economics professor Jeffrey Sachs, inside bidding within the program could stitch up the taxpayer to the tune of trillions of dollars. This from the Sachs, writing in Huffington Post:

    Consider a toxic asset held by Citibank with a face value of $1 million, but with zero probability of any payout and therefore with a zero market value. An outside bidder would not pay anything for such an asset. All of the previous articles consider the case of true outside bidders.
    Suppose, however, that Citibank itself sets up a Citibank Public-Private Investment Fund (CPPIF) under the Geithner-Summers plan. The CPPIF will bid the full face value of $1 million for the worthless asset, because it can borrow $850K from the FDIC, and get $75K from the Treasury, to make the purchase! Citibank will only have to put in $75K of the total.
    Citibank thereby receives $1 million for the worthless asset, while the CPPIF ends up with an utterly worthless asset against $850K in debt to the FDIC. The CPPIF therefore quietly declares bankruptcy, while Citibank walks away with a cool $1 million. Citibank’s net profit on the transaction is $925K (remember that the bank invested $75K in the CPPIF) and the taxpayers lose $925K. Since the total of toxic assets in the banking system exceeds $1 trillion, and perhaps reaches $2-3 trillion, the amount of potential rip-off in the Geithner-Summers plan is unconscionably large.

This may sound farfetched. (It certainly sounds like a huge scam.) But as Sachs points out, “Both BusinessWeek and the Financial Times report that the banks themselves might be invited to bid for the toxic assets, which would seem to set up just the scam outline above.” 

*** Gold prices rose today as stocks continued their slide. The yellow metal rose to just over $883 an ounce – another bad omen for stocks. But this isn’t where the real story is at. The real story has to do with a strange distortion in the gold markets. The last time this distortion happened, investors made as much as 15,650% or more.  

Well, it’s happening again. Investors around the world are snapping up gold bullion… mining stocks… gold ETFs, you name it. And for good reason: Our country’s spending binge is likely to cause massive inflation over the next few years. And gold is a great way to protect your wealth. Understand how the distortion works, and how to capitalize on it immediately, and you could make more money over the next 18 months than you’ve ever made in your life. Read this report to learn more.  

*** Are we in a depression? Communities in Detroit, New York state, North Carolina and Massachusetts certainly think they are. They’re printing up Great Depression-style scrips (local currencies) to keep cash circulating. According to this article in USA Today, about a dozen local communities are printing up their own scrips.

*** Members of Crisis Strategy Alert had plenty of warning of the dangers of the sucker’s rally. On March 27, James Dale Davidson sent this alert to members:

Remain cautious. An inherent feature of capital markets during depressions is their ability to mislead. Most investors do not appreciate the demonic efficiency of market crashes in eradicating wealth in the wake of credit bubbles.

Consider the track record of the stock market after 1929. Many people recall that the Dow declined 89% from its peak in September 1929 to its trough in July 1932. This implies that it would have been easy to stay short and make a tremendous fortune while the market tanked. Wrong.

What is less appreciated is that the market found a way of wiping out bears as well as bulls.

 The bears were busted by seven bear-killing rallies of 15% or more. The bulls were creamed by eight declines of 25% or more. Bulls, value investors, momentum traders – even the horoscope traders – if there were any, were wiped out. It did not matter what investment criteria impatient bulls applied, they were wiped out by premature calls of the bottom.

Any conventional investment plan was a failure. That is why Crisis Strategy Alert is a necessary addition to your investment arsenal.

It is your chance to take advantage of the years that I have spent studying past depressions.

Until tomorrow,

Will Bonner



Now for Silver! 

A Simple Decision

By: Ted Butler of SilverSeek.com

One thing you can say about the recent sharp sell-off in silver, at the very least, is that it forces you to think. In fact, my friend and mentor, Izzy Friedman, wrote an article with that title a couple of years ago. http://www.investmentrarities.com/07-03-07.html Nothing focuses an investor’s attention more than a sudden decline in price, especially in an item one thought was undervalued to begin with. This is as it should be.

I’m not going to completely rehash the premise of the original article, but instead try to simplify the lesson of this most recent sell-off in silver. Why did it occur? And what should you learn from it?

Was there any obvious real world developments in actual silver supply and demand fundamentals that caused the price to decline? Not from anything I‘ve observed. Investor demand for real metal remained strong for every measurable category from strong ETF flows and record coin production and sales, to dramatic COMEX warehouse withdrawals, to continued disruptions in silver production and refining. Industrial consumption, admittedly weak, didn’t suddenly plunge anew in the last few weeks.

The explanation for the sell-off was the same as it ever was – price rigging on the COMEX. The big commercial shorts engineered the market lower to force leveraged longs on margin to sell, in order for the big shorts to buy back futures and other derivatives. Once again, the derivatives market tail wagged the real world price of silver dog. The good news is that the concentrated short position, while still large and manipulative, appears to be just about as low as it’s going to get, after this recent sell-off and the engineered decline over the past 8 months.

OK, if that’s the answer to why silver sold off, what’s the lesson? The lesson is that you must approach silver in such a way that you are not a victim of the manipulators. Buy for cash, don’t borrow or go on margin. You can’t prevent silver from dropping due to these rigged sell-offs, but you can prevent your silver from being taken away from you by forced margin call selling.

There’s a simple decision that every silver investor must make. You must decide whether you believe that the price of silver is manipulated or if it is functioning as a free market. This may sound weird at first, but if you decide that silver is not manipulated in price, but is trading free from control, you shouldn’t buy it or continue to hold it as an investment, in my opinion.

That’s because if you believe that the price of silver is free from an active downward manipulation, you must believe it is priced in accordance with everything you see around you. You must believe that consistent record demand for an item should result in sharply lower prices. You must be comfortable with delays and rising premiums being compatible with lower prices. You must be able to disregard documented proof of an unprecedented concentrated short position as unconvincing, and regulator stalling and double-talk as reassuring. You must see something I don’t see.

Instead, if you do see manipulation permeating the silver market, that is the best reason for buying. If you see manipulation, you see an artificially depressed price, a price screaming to be bought. If you see manipulation, you see a condition that can’t last, that must end. If you see manipulation, then everything makes sense about silver’s price history and circumstances. If you see manipulation, you know the usual commentary about silver is nonsense. If you see manipulation, you can understand the sharp sell-offs. If you see manipulation, you know it will end explosively to the upside.

While deciding for yourself whether silver is manipulated or not, here are some additional reasons to consider silver at this time. 


Amid all the recent attention I’ve placed on the continued manipulation in silver, some may mistakenly assume that diminishes the case for silver. Nothing could be further from the truth. I’m convinced that silver is a better buy than ever before. Here are detailed reasons why I believe that is the case.

One, the near-term emotional temperature of the market is low. There is no bullish “fever” where uniformed investors are driven to buy silver because of a sharply rising price. That will happen, but it’s not true now. While silver is still above the price lows of last fall and higher than year-end prices, the recent price action is nothing to write home about. The price has been below most of the important moving averages, causing silver to be “oversold.” This is a much better time to buy than when prices have already climbed and many are buying just because prices are rising. At those times the risk of a sharp sell-off is high. Now the risk of a prolonged price decline is much lower. Now is the time to buy low.

Two, leveraged speculators who normally buy COMEX futures contracts and Over The Counter (OTC) derivatives do not hold a historically significant number of long contracts. The big dealers have been so successful at forcing long speculators out of the market, that the speculative long position is at important low levels. This means that long speculators have already been forced to sell and no big selling from them appears probable. On any rise in price, they are likely to buy, adding a force to rising prices. Buy before they turn buyers.

Three, available wholesale silver inventories appear to be tight. These physical silver inventories are falling into stronger hands. For decades the world’s largest stockpiles of silver were the COMEX warehouse inventories. These COMEX inventories were considered mostly commercial in nature with some portion being held for investment purposes. The COMEX inventories peaked at around 280 million ounces in the early 1990’s, and accounted for 90% of all visible silver inventories. After the introduction of silver Exchange Traded Funds (ETFs), there was a profound shift in the location and structure of world visible silver inventories.

Now, the combined inventories in the ETFs and other investment vehicles tower over the holdings in the COMEX by almost 4 to 1. (Over 400 million ounces in the ETFs compared to 120 million oz in COMEX inventories). Given the long-term nature of ETF investment holdings, this massive and historic shift in inventory composition means much less silver is now available to the market. This will exert a strong upward influence on price.

Four, all signs indicate that physical investment demand for silver on both a retail and wholesale basis is strong and could surge further. Until a few years ago, there was no net silver investment buying for decades. That pattern has changed with a vengeance. Clearly, the introduction of the ETFs has played a major role in this investment transformation.

The strong buying that we have seen does not appear to be “hot” money, but sober and determined accumulation. It wasn’t surging prices prompting buyers over the last six months. It’s due to a growing awareness and conviction about silver’s real supply and demand fundamentals. Importantly, there has been practically no buying of silver on a leveraged or margin basis. It’s mostly been cash on the barrel. These strong silver buyers will wait for significantly higher prices before selling. With higher prices inevitable at some point, the hot-money crowd should come in and blow the doors off the price.

Five, silver production is tightening, given the byproduct-nature of silver mining. As I have written recently, base metals production like copper, lead and zinc appears to have fallen significantly, also reducing the production of silver as a byproduct.

Six, world economic and financial conditions appear lined up to favor higher silver prices, no matter what occurs. If financial conditions remain unsettled, flight to quality buying in silver appears likely. If the world does return to better economic growth patterns, silver will benefit as a result of increased industrial consumption. Heads silver benefits, tails it also benefits.

Seven, more investors than ever have come to realize that the silver market has been manipulated and the government regulators and exchange officials are unable to persuasively address the growing evidence of a silver manipulation. The manipulation debate has become widespread in metal circles. It isn’t going away. The best the regulators have been able to do is to stall and pretend to be investigating. Fewer people are being fooled by such actions. A scam like the silver manipulation can’t continue when so many know about it. This scam will end suddenly and sharply in a price jump to the upside.

Eight, industrial demand for silver will continue to grow in the years ahead. New uses for silver appear regularly. A robust worldwide economy will initiate a new phase of silver demand. Higher prices will not diminish this demand because small amounts of silver are used in each industrial application.

Reasons nine and ten, silver prices are cheap on several important objective measurements. Silver is cheap compared to its own recent price. It is down more than 40% from its highs of one year ago, in spite of the strongest physical demand in history. More investment silver has been purchased over the past year than at any other period in history. At precisely the same time that prices have declined so sharply, more ETF-type buying has occurred than ever before and more Silver Eagles have been sold by the US Mint than ever before. We have witnessed the highest premiums on all retail forms of silver in history. This isn’t just me saying silver is cheap, this is the investment world voting with its collective wallet. Clearly, there is something wrong with this picture that can only be explained by manipulation on the COMEX and the OTC market by a few giant financial institutions, led by JPMorgan.

Silver is cheap on a cost of production basis. Never have the net operating results of so many different silver miners been so poor. The common denominator is too low a price for their main product. Silver is up three-fold from the lows of a few years ago, yet the silver mining industry still suffers. That’s because the cost of production has risen faster than the price of silver. That must be rectified.

Silver is dirt cheap relative to gold. While there is less above ground silver than gold, silver’s price has rarely been this low compared to gold.

The manipulation that explains why silver is so cheap cannot exist in a bona fide physical shortage. If the price stays low, growing numbers of investors buy real silver. That makes it harder for the manipulators to keep the price contained with paper derivatives. Some fret the scam can be continued indefinitely. If it were just a question of printing more money or more paper derivatives, perhaps that might be true. But it’s not about an unlimited supply of paper silver, it’s about a limited supply of physical silver that guarantees the manipulation will end soon. The termination of controls on the price of silver will be something we look back upon and marvel over how long it existed. Just make sure you are looking back while holding as much real silver as you can.



Claim a gram of FREE GOLD today, plus a special 18-page PDF report;

Exposed! Five Myths of the Gold Market and find out:

·        Who’s been driving this record bull-run in gold?

·        What Happens When Inflation Kicks In?

·        Why most investors are WRONG about gold…

·        When and How to buy gold — at low cost with no hassle!

Get this in-depth report now, plus a gram of free gold, at BullionVault


 See ya tomorrow! Good Investing – jschulmansr


Last week I watched a video analysis of the S&P and Crude Oil markets. The technical analysis was right on at the time, but those markets have changed quite a bit in the last few days. The S&P had a huge rally and Crude seemed to steady out, so what’s the new analysis? Glad you asked!

Below are two free videos, one on Crude Oil and one on the S&P, that gives us an indepth technical look into these markets. Again the videos are free and very informatitive. Just Click on the Links Below…

S&P Video Analysis Crude Oil Projections:

Here’s your chance to analyze that stock you have been thinking about adding to your portfolio. Just enter the ticker of any company, name of a commodity, or forex pair and get your complimentary technical analysis. It cost you nothing and and no payment info will ever be requested. This is an Awesome Free Service!

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Nothing in today’s post should be considered as an offer to buy or sell any securities or other investments; it is presented for informational purposes only. As a good investor, consult your Investment Advisor/s, Do Your Due Diligence, Read All Prospectus/s and related information carefully before you make any investing decisions and/or investments. –  jschulmansr