"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Wednesday, May 4, 2011

A Measure of the RISK TRADE

Chatter is surfacing that some guys are looking for a sharp reversal in the Dollar and some, in anticipation of that, are lifting risk trades. This might help explain the loss of money flows into the overall commodity sector.

Note the sharp fall in the ratio as evidence that money is rushing out of silver and into the bond market.

I suspect that the monetary authorities are strongly welcoming this especially in light of their announcement of an end to QE2 in June. I am of the opinion that once the bond buying program does end (assuming it does and that is an open question if the stock market drops sharply), I find it difficult to believe that there is going to be substantial buying below the bonds, especially at their current elevated levels.

The elevated margin requirements for silver have basically destroyed the entire commodity complex rally as funds and other long side specs are being destroyed by the deep losses in their silver positions and are now rushing to blindly sell positions in the rest of the complex to stem the bleeding.


  1. great points Dan. Following through with that logic, it seems to me that once the dollar really does start to rally, the metals will stabilize and start advancing again in anticipation of that dollar rally fading. The market is always looking one step ahead it seems. What do you think?

  2. I saw this drop in silver coming, but I was predicting $36-$37 sometime in the summer. This move from $49 to $39 in the span of days is just incredible.
    Doesn't matter, this move is not organic where in we had 3 margin hikes in 7 days which forced people out and created this snowball effect.
    I think we will trend around this level for a few weeks.
    Great time to accumulate.

  3. hot money chasing hot stuff

    thanks again Trader Dan

  4. Dan, What is the chance that this is a sniff out of some problems that will come out soon in the euro...


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