SILVER AND WALL STREET

George Offerman

The silver market my very well be at a critical juncture. Over the past four weeks, the silver price has jumped nearly four dollars, and hit a 30 year high. At the same time, there are large numbers of futures contracts that are being submitted for delivery on the CRIMEX err… COMEX for later this week. The COT report is also reflecting an increase in short contracts, courtesy of JPM, which is no longer a secret, but blatant move to manipulate the prices lower. The cartel continues to manipulate the prices lower, which only gives those wanting physical metal, the ability to buy cheaper. However, this will empty the CRIMEX much faster, and this is only good news for those who are holding physical.

This battle will be over, sooner or later, and the cartel is going to lose big time. Now, more than a few have asked recently “is silver oversold?” NO, NO and NO! Most want to look at technical charts, and seeing the ‘steep move’ in the past 4 weeks, believes the prices need to go down. What they are not considering is the fundamental piece of this equation. Silver is in greater demand than ever, while in the shortest above ground supplies ever. The metal exchanges have been slow in filling the physical orders, and the demand for physical has been very strong, and becoming stronger. The depressed price for silver over the past 2 decades has virtually shut down exploration and opening of new mines and the supply cannot be increased by mines for at least 5-7 years (at best).

There is no question silver will be going up a lot, the only question is, whether it will be a gradual or explosive increase. Gold hit it’s nominal high of $850 some time ago, yet silver has not come even close to its $50 nominal high of 1980. If one uses John Williams shadow stats for the true rate of inflation, the inflation adjusted level for silver would be $178 per ounce. No, we are nowhere near ‘oversold’ conditions; we are still in the ‘give away’ phase of this baby bull market. When the price finally takes off (when the power of the cartel is broken) we will not be looking at cents, but dollars per day and those who got on this train will be very glad they did.

Wall Street: Money never sleeps

I have been anticipating seeing this sequel since I first heard it was being made. Regardless of one may think of Oliver Stone, this movie seemed to cover the current financial time in history so well, I wouldn’t even consider it to be fiction. For those of you who want to see it, I will not ruin it by giving much in detail, but it is a very accurate portrayal of the Bear Sterns fiasco and the fallout, and shenanigans behind the scenes. What I found most intriguing were the very subtle messages within much of the dialogue, which could easily be missed if one did not keep up with the news, as well as the major banks and Federal Reserve generating fears of a financial Armageddon if they don’t get what they want.

I do have to make a few observations about the protagonist Gordon Gekko. Stone has Gekko take on more of a prophetic role in this sequel, which is a very good blend with this man’s known ruthlessness from the first Wall Street movie. Gekko explains to his young protégé (also engaged to his estranged daughter) in everyday language, what is going on between the forces of Wall Street, the Federal Reserve, and government and how these crimes are so severe, that his 8 years in prison for insider trading is mere fodder for the beast. Despite the fact that Gekko is still Gekko, he looks almost ‘saintly’ in comparison to those who are committing heinous crimes, and appear to have the means of remaining above the law, and have no fear of being stopped. (Best line in the movie, Gordon Gekko to Bretton James, played by Josh Brolin: “If you stop telling lies about me, I’ll stop telling the truth about you”)

While many have focused on how Stone seems to ‘rehash’ a story that is two years old, Stone has Gekko make one very cryptic and possibly prophetic line that seemed to go unnoticed by most moviegoers: “This is in preparation for the ultimate bubble”. This line was delivered in the midst of Gekko discussing derivatives, and it would definitely link the taxpayer bailout to the sale of U.S. Treasuries and the bursting of that bubble, an event still off in the future. If I were to go into a conspiratorial mindset for a moment, I would bet the whole movie was a set up for this whole premise; the biggest financial fireworks are still ahead. We shall see.