"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


Thursday, November 29, 2012

Silver and the Risk Trade

I have posted the following composite chart without any easily discernible labels to illustrate why I analyze the silver market in the manner that I have been doing for some time now.

Both charts use last November 2011 as the starting point and carry on through the present trading session. See if you can pick out which one is the Continuous Commodity Index and which one is the Silver price.

Surprised? You should not be. As I have stated repeatedly, silver is moving in near perfect tandem with the RISK TRADE. When risk assets are in vogue, silver will move higher; when risk aversion is the play, silver will move lower along with the rest of the commodity complex.

There are occasional deviations from this pattern but as the chart clearly demonstrates, the connection between the two is undeniable.

The Fed is basically doing everything within its power to keep Wall Street happy and the hedge fund crowd pouring loads of hot money into risk assets (equities and commodities) to drive a stake through any sort of deflationary expectations. Heaven help us all if the VELOCITY OF MONEY ever begins to seriously uptick.

But what they are also attempting to do at the same time is to prevent the bond markets from signalling the least bit of inflationary pressures. So far they have been able to pull off this stunt. One wonders how long the game will continue without any measurable ramifications.

What you can definitely say that they have done however is to destroy the ability of seniors to live off their life's savings seeing that they have killed any hope of them getting a decent rate of interest for the next 3 years on savings accounts. Simultaneously, they are also setting up the commodity markets for another surge higher should the hedge fund crowd become completely convinced that the Fed has killed any deflation fears.

If we see silver break out into a strong uptrend move, watch the buying power of the middle class drop into the toilet as the cost of the essentials of life will be rising right along with it.


  1. Sadly, the 12 days of Christmas are up 5%, but I can say, that in the grocery aisle, its up 10% to 15%, so I'd hate to see what is next, but here is my longer term view on it, take a look:


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