Gold continues its rise. So does silver, also on our list.
The giant short on silver and the exploding silver market. First, the chart.
This amazing piece is from Seeking Alpha. If you don’t want to read all these words, skip to the video below:
It is widely known that J.P. Morgan (JPM) holds a giant short position in silver. Furthermore, some observers are accusing the bank of acting as an agent for the Federal Reserve in the market — every tick higher in the price of silver undermines confidence in the U.S. Dollar. A lower silver price helps keep the relative appeal of the U.S. dollar and other fiat currencies high.
By selling massive amounts of paper silver in the futures market, JPM has been able to suppress the price of the precious metal. It is believed that these short positions are naked (i.e. they are not backed by any physical silver). In fact, reports indicate that JPM is short more paper silver than physically exists in the world.
An article by Max Keiser which appeared in the Guardian on December 2, 2010 claims that the size of the short position is 3.3 billion ounces of silver.
In recent days, rumors have been swirling on the internet that JPM’s massive short position is about to blow up in their face in the form of an almighty short squeeze and potential COMEX default as large traders demand physical delivery of silver that COMEX does not have in their vaults.
J.P. Morgan is currently under investigation by the CFTC for allegedly manipulating the price of silver. The investigation into the bank can be traced back to November 2009 when London metals trader and whistleblower Andrew Maguire contacted the CFTC to report market manipulation prior to it actually occurring.
Maguire had been told by J.P. Morgan commodity traders that the bank was manipulating the price of silver and subsequently reported this to the CFTC. He also gave the CFTC two days’ notice about an impending silver manipulation that would take place around the Nonfarm payrolls number on February 5, 2010.
The manipulation played out exactly as Maguire had predicted. You can find the emails between Maguire and Ramirez here. Shortly after this information came to light, the whistleblower was involved in a bizarre hit and run accident in London which caused him and his wife to be hospitalized.
The price of silver has absolutely exploded in recent months as these reports have surfaced, and it is clear that blood is in the water. The predator (J.P. Morgan) has now become the prey. Every tick higher in the price of silver brings more pressure on the bank to cover their short position. This in turn puts more upward pressure on the silver price.
It is not clear if JPM has been actively trying to reduce their exposure or not – but something is definitely going on. The price of the widely traded iShares Silver Trust ETF (SLV), which tracks the spot price of the precious metal is levitating.
On August 23rd, the SLV closed at $17.61. The ETF closed on Friday at $28.60 and the price of silver is now trading at 30 year highs. Over the last three months, SLV is up over 47%.
In the overnight futures session on Sunday night, silver is currently trading 2.27% higher at $29.935. Something is going on. Making matters worse for JPM is the fact that a viral campaign (See video below) to buy physical silver and “crash” the bank is now spreading like wildfire on the internet. Just Google Crash J.P. Morgan Buy Silver.
Furthermore, it appears that significant physical silver shortages are developing in the marketplace and the metal is being sold well over spot where it is available.
Shortly after popular financial blog ZeroHedge posted the “Crash The JP Morgue” video, the website which created the video, goldsilvergold.com, reported that it was sold out of inventory and will not be taking new orders until December 6.
Another recent report suggests that JPM may truly be on the ropes with their short silver position and are attempting to hedge themselves by buying $1.5 billion worth of copper. According to the Telegraph, the bank has bought “between 50% and 80%” of the 350,000 tonnes in reserve at the London Metal Exchange. The idea being that if metals prices continue to rise, JPM’s profits on its long copper position will help offset continued losses on its silver shorts.
ZeroHedge opines that “JP Morgan is now intent on cornering the copper market, as the monopolist firm stretches its FRBNY-facilitated muscles in an attempt to stem the massive losses incurred via its silver short.”
Readers who are interested in learning more about this story are encouraged to do follow up research and post comments. Those who wish to participate in squeezing the living daylights out of JPM, may want to consider buying physical silver, silver futures and SLV.
Keep a close eye on this market during the coming week…
For the video. Click here.
More doom and gloom on housing. The charts show housing prices taking another dip. My friends in Florida tell me sellers are pulling their houses off the market because there are no buyers. And now Nouriel Roubini is predicting major doom and gloom in housing — see below.
The story of my friend’s New Jersey townhouse is interesting, if sad. From Zippy this morning, “The previous owner bought it in 2005 for $157K and some work was done on it, supposedly improving its value. I bought it for $130K when things began to slide, and I still owe $120K. I stopped paying the mortgage in March, 2010 and am about $15K behind.”
Zippy has an offer to buy the place at $53K. But the guy needs a VA loan. Says Zippy, “It can take the bank from 25 days to six months to approve the loan.”
Keep away from banks, especially the big ones:
Dr. Doom Predicts Another $1 Trillion in Housing Losses, from Bloomberg News and the New York Times DealBook.
As Nouriel Roubini heads to Athens to meet with investors and policymakers potentially about the debt crisis in Europe, the economist says he’s increasingly worried about a problem closer to home: America’s real estate mess.
The country’s real estate problems are “underappreciated,” and banks could face another $1 trillion in housing-related losses, Mr. Roubini said in a phone interview with DealBook on Monday. At the same time, he played down the issues in Ireland, Greece, Portugal and Spain, calling the matter “contained” for now.
Dr. Doom is putting on weight. Doom and gloom is very profitable.
The United States “real estate market, for sure, is double dipping,” Mr. Roubini said. “The apparent increase in prices has been fully reversed, demand is falling, and supply is going to increase.”
The drumbeat of bad news grows louder. Sales of existing homes fell more than expected in October, down 2.2 percent to an annual rate of 4.43 million, the lowest level in more than a decade, according to the National Association of Realtors. After rising in the second quarter, Standard & Poor’s Case-Schiller home price index fell 2 percent in the third quarter.
Meanwhile the trouble is spreading across all types of borrowers, as even the most creditworthy show increasing weakness. The Mortgage Bankers Association recently announced that foreclosure starts for prime fixed-rate mortgages rose to a record high of 0.93 percent in the third quarter.
Mr. Roubini said he was particularly focused on a recent study by Laurie Goodman, a senior managing director of Amherst Securities and a former co-head of fixed income research for UBS. In her October report, “The Housing Crisis — Sizing the Problem, Proposing Solutions,” Ms. Goodman comes to the dark conclusion that more than 11 million borrowers are in danger of losing their homes, or roughly one out of five borrowers.
“That’s a scary number because the previous estimates I saw were in the three to four million range for the next four years” Mr. Roubini said. “Some say these numbers are too pessimistic, but I’ve spoken to experts in the mortgage industry who say these numbers are quite realistic.”
According to Ms. Goodman, loan modification programs have somewhat masked the problems. After a bank modifies a troubled mortgage, the loan is then reclassified as “current” on the books — even if the homeowner still hasn’t made a payment.
Scores of mortgages, she wrote, will go bad, adding to the wave of foreclosures and short sales. For example, Goodman estimates some 70% of borrowers—those who previously defaulted on their loans but are now current—will run into trouble, again.
“The moral of the story is that there is a lot of work to be done,” Ms. Goodman told DealBook
Given the severity of the mortgage problems, Mr. Roubini said investors should brace for another wave of housing-related losses. Building off estimates that 11 million borrowers will lose their homes, Mr. Roubini thinks the financial industry faces $1 trillion in additional losses, assuming firms can recover 50 cents on the dollar and the average cost of a home loan is $200,000.
He added, however, that the losses will likely be spread out across the industry, and some will be absorbed without the need for additional capital.
“Losses [will be] divided between banks, investors [in residential mortgage-back securities and collateralized debt obligations] and Fannie and Freddie,” Mr. Roubini said. “Some [are] already realized in the market price of RMBS.”
There is another silver lining, albeit a thin one. Mr. Roubini said the mortgage mess may not necessarily derail the anemic recovery in the economy, which he thinks is still on track to grow 2.3 percent next year.
For a country where unemployment just ticked higher, that’s not-so-gloomy news from Dr. Doom.
If it works, don’t mess with it. Read that again: If it works, don’t mess with it. This philosophy relates to everything from computers to cars. Extensions to this philosophy include:
+ Just because it’s new doesn’t mean it will work better.
+ Just because it costs more doesn’t mean it will make you happier.
200 years of improving health. Neat video. Click here.
So you thought we were having a recession? Remember the new Nikon D700 that I raved about recently?
Well, you can’t get one for love nor money. They’re backordered until February.
If you’re totally desperate, you can go on eBay. There’s a handful — all being sold at way above retail. And you always thought eBay was for bargains.
Microsoft will never go anywhere under the present miserable regime.Steve Ballmer is a visionless klutz.
I have two measures: I can’t get personally excited about a single Microsoft product. That includes Windows 7 and Office 2010, both of which I thoroughly dislike.
Second: I wrote Ballmer a detailed letter that — if only out of politeness to a customer — deserved a reply. Nothing. Niente. The height of rudeness and arrogance. In contrast, I have a close relationship with Apple that actually cares about what the world thinks of it. And it shows in its stock:
Favorite recent New Yorker cartoons.
The world’s worst pun.
A guy is out for Christmas brunch. He looks at the menu. “I’ll have the eggs benedict.”
His order comes. It’s served on a shiny hubcap.
He asks the waiter, “What’s with the hubcap?”
The waiter sings, “There’s no plate like chrome for the hollandaise!”
Harry Newton who wonders why his fat friends don’t lose weight and do some exercise. And then they wonder why they get sick.
Anyone who uses “Microsoft” and “a pioneer in software and technology” in the same sentence must be on the Redmond payroll. Microsoft has no credibility in the software development world. One example: Microsoft Word is the industry standard not because it was better than WordPerfect – which it never was – but because a supine Justice Department allowed Microsoft to give it away for free. Microsoft has a long history of underhanded and deceitful dealings toward the software development community. From http://www.aaxnet.com/topics/m…:
“Microsoft's first product was a BASIC programming language interpreter for the 8080 based Altair computer. The way this product was developed set the tone for the Microsoft of today.
Someone else's intellectual property was used without compensation (Dartmouth BASIC, donated to the public domain).
Development was done by “borrowing” time on an expensive timeshare system – time that was being paid for by someone else.
The product was announced and advertised before real work was even begun (to discourage competition).
The product missed promised delivery after promised delivery and delivered versions were riddled with bugs.
This product, based on the ideas of others and developed on equipment not owned by [Bill] Gates or [Paul] Allen, was declared Microsoft's property to be sold at the highest price the traffic would bear.
At least as much effort was put into promoting the product and disparaging other people's products as was put into development.
When people passed around his product (largely appropriated by him from the public domain), Bill Gates screamed 'Piracy!. This use of the term 'Software Piracy' may be Gates' only true innovation. ”
Darth Vader lives.
To me the main issue is should Harry get a response from Microsoft. When anyone writes to the CEO of a company, the company should be professional enough to respond. If Balmer does not have the time, he should delegate that responsibility.
Good articles about silver today. Video is a thinly veiled advertising campaign though. The video also says some things that are downright lies such as the gold/silver ratio being 16/1. It was only set at that from 1834-1873 and has only been there for a brief period once since then. Bad advertisement. Love your blog though.
http://seekingalpha.com/articl…
Harry,
Even a visionless klutz can do good in other areas. Like being a customer advocate. Or being a value leader. Or by supporting his company stock…. come to think of it, what value does he add?
Harry- Thank you for sharing your “opinion” about Microsoft and CEO Balmer. Let's be clear- it is your opinion. I use MSFT products both at home and for my dtat processing business. I employ 30 people all of whom use MSFT software. The company has been highly responsive (tech support) when I have qustions and they have been tremendously helpful with upgrades and patches. It is laughable that you are insulted that Steve Balmer did not respond to your letter. Who do you think you are that the CEO of one of the biggest companies in the world and a pioneer of software and technology doesnt have time to respond to Harry Newton. Get a hold of yourself Harry – you just arent that important! So you are a customer- so you wrote him a detailed letter- and for that you expect a man that runs a multi-billion dollar company with offices and tens of thousands of employees worldwide to stop everything and write Haryy Newton a letter. Heres a newsflash Harry – Microsoft and Steve Balmer have miliions of customers. He/MSFT probably get thousands of letters every year – some praise and some complain. You expect him to reply to everyone – or just you – the important Harry Newton.
I expect a reply from someone at the company. I expect Ballmer to care about his customers and set up a department to answer letters from customers. That's what companies of size do.
If I were Microsoft, I think I'd care about what bloggers thought about their company. Apple certainly does.
By the way, I've had 40 years in the technology business. Microsoft has been a big customer of my companies. We even wrote an 8-page cover story interview with Bill Gates, which Microsoft and Bill loved. Want a copy?
Want more? I believe I know as much if not more than you do about Microsoft.
I am not challenging you on your knowledge and experience. I am , however, stating that millions of customers are satisfied and you do not command such importance on the blogesphere as you think. In fact, it may be prudent for high profile CEO,s such as Ballmer not to engage in “discussions” wioth bloggers because his words,letters, and responses may show up on blogs. As we know anybody can change or alter words and send the edited version out. You may be a good guy but there are bloggers out there intent on spreading rumors, launching bear raids, and stirring it up. You cant expect Ballmer to respond. Call customer service or write customer service and I bet you get a response.
I've made my readers serious money by keeping out of Microsoft and into Apple.
Enough said.
And frankly, I do expect Ballmer to have people responding to letters from customers.
Thanks harry – you mkade my point. You really do think you are sooo important. You “made your readers serious money keeping out of Microsoft and into Apple”. So you have been negative on Microsoft – trashing the company and trashing its products. You have been telling your readers to avoid the stock. AND now you expect a response from the CEO of the very company you are trashing? Harry – you dont write for the Wall St Journal, The Economist, Huffington Post, etc. If Ballmer and his people did their homework and researched you they would see that you do not present yourself as a customer – you tell people to avoid their products and their stock. Not sure that qualifies as a “customer” worthy of a response. And BTW you probably lost some of your readers “serious money” in some other names. Cant pound your chest on the winners and ignore the losers!