UP 22% IN SEP

 by Howard S. Katz

 10-4-10

THE BUBBLE IN SILVER

 Silver is a friend of mine.

I can play him anytime.

 He is outperforming gold.

 Exciting story does unfold.

 And when the time comes round to sell,

 Silver will be doing well.

 I’ll call my broker with great ease

 And tell him “sell now if you please.”

 The broker, he to me will say,

 “Is this an order for the day?

 Is there a limit on the price?

 Cause that would not be very nice.”

 Now 30 years ago a raid,

 Old Bunker Hunt a corner made.

 He said, “My flag is now unfurled.

 I’ll buy all silver in the world.’

 He bought the whole world’s silverware.

 He was a bull and not a bear.

 Yes, knives and forks and silver plate,

 With destiny he had a date.

 Then Bunker Hunt, he tried to squeeze

 The shorts. He had them on their knees.

 But then the shorts struck back you know,

 And Bunker Hunt lost all his dough.

 from the One-handed Economist, 10-1-10.

 Ah, yes, the silver bubble of 1978-80 was a time to remember in financial history. Bunker Hunt, heir to the H.L. Hunt fortune, became an aggressive bull on silver and tried to engineer a silver corner. But no one has ever engineered a corner on a free market, and Bunker Hunt did not become the first. He stayed too long. He overplayed his hand. And when the bubble collapsed, he lost his daddy’s fortune.

 WHAT IS A SPECULATOR?

This article is dedicated to those who are, or would become, successful speculators. So we begin, as usual, by asking what is a speculator?

 A speculator is a person who tries to make money on his capital by buying low and selling high. This is as distinct from an investor, who tries to make money on his capital by using it to make real interest (or return on capital). The speculator lives and dies by price fluctuations. The investor is unconcerned about them. If he is in bonds, he wants the yield. If he is in stocks, he wants the earnings. If he is in real estate, he wants the rent.

Now here is the secret to successful speculation. All markets hit their lows when traders are most bearish. (A trader is either a speculator or an investor.) They hit their highs when traders are most bullish. A case of the first is the 1999 low in gold when even the gold mines were selling short on their own product. A case of the second is the Jan. 21, 1980 spike top, when gold hit $875/oz. (interday on the Comex).

 The difficulty here is that man is a social animal. He is influenced in his beliefs by the people around him. But the person who allows himself to be so influenced in the markets is a loser. He sells at the low and buys at the high.

 So the first virtue needed to be a successful speculator is an independent mind.

 The job of the speculator is to figure out when there are either over valuations or under valuations in a market, and to do this, as noted, he must go against the people around him. That is, he must figure out when the people around him are wrong.

 Here we must take a new tack. It is often stated that the man who is most successful in life is the one who has the best information. This is, unfortunately, a bad mistake. It ignores the fact that “information” comes in two types. There is concrete information, which is information about specific things, and abstract information, which is information true of things in general. For example, “The Allies defeated the Axis in World War II” is concrete information. “Man is the rational animal” is abstract information. It applies to all men and says that they have the capacity to reason.

 The difference between abstract information and concrete information is crucial. Concrete information tells us about one (or a few) specific thing(s). Abstract information tells us about all of a certain type of entity. For example, Newton’s Law says:

 Every object in a state of uniform motion tends to remain in that state of motion unless an external force is applied to it.

This is true for any object in motion. It is true for all the objects now in motion. It is true for all the objects which have been in motion. And it is true for all the objects which will be in motion in the future.

 While someone might tell you, “The car came down the road very rapidly,” this is true for only one car in a specific time and place. But Newton’s Law is true for all moving objects in all times. So abstract information is far more powerful than concrete information. Thus we have to correct the above statement. The man who is most successful in life is the one who holds his information in the most abstract form. And since the widest abstractions are those discussed in philosophy, it is to philosophy we must turn for the solution of our most important problems. read more

 Editor/Publisher Comments:

Over the past six months I have written over 100 articles about the gold and silver sector, about Rare Earths, about the geopolitical situation as it unfolds within and without the US and about dealing with the psychology of life and the markets. The only problem is that I haven’t posted them. There you have it. We’ll see if my reluctance to post continues.

I am writing the 2010 Gift to the Gold Community and the list has doubled. No one has to tell experienced investors, or people wise in the way of the world, where to put their money. One wise man said, don’t tell me what to buy–tell me when to buy it!

With that, I’d like to introduce you to a very good friend and seasoned junior gold market analyst.He has been tremendously helpful to me and I am hoping we might tap into his insights on a more regular basis

These are his recent comments as posted on Bill Murphy’s  www.lemetropolecafe.com.  Even though they were posted a few days ago, these comments are as timely as ever:

 Still Waiting Patiently by Chuck Cohen

Posted on September 20, 2010 (Today September 27, 2010, gold is at $1296.00 and silver is at $21.46

Even though we now see gold at a new high and silver has exceeded $21, we have still lacked the explosive part that we might expect. But, I see this coming almost imminently. These are some of my reasons.

1) The dollar is breaking down sharply. This will put rocket fuel in the commodities and especially the precious metals.

2) Even though gold has been moving up steadily, it really hasn’t had any spectacular days. This pattern keeps the deflationists and gold bears’ hopes going. But the persistence of the recent action especially in the listed shares is different from what we have seen over the bull market.

3) After about noon NYC time, for the past few weeks, the buying in gold suddenly quiets down. This is also unusual, and I believe very bullish.

4) It appears that the HUI 500 level has been pierced. It has remained a stubborn foe for several years but it looks like it will be next support not resistance. Today Newmont and Randgold made new highs. Again very bullish.

5) The volume in the shares both small and large have been definitely picking up. I believe we will see volume almost double or triple what they have been trading to propel the gold shares in the very near future.

6) We have not had a really strong close in the HUI for months, again very unusual behavior. I am a believer in watching how stocks open and close for clues as to what is happening.

7) I expect that the next move in the shares will be similar to the way the Dow finally broke out in August 1982 when the Dow went up 10% in a few days, and over 40% in 2 months. This should mean breakaway gaps for many of the gold shares. Breakaway gaps is a technical term that has been lost in our vocabulary because they are very rare, normally occurring only when a market finally launches up from a long basing pattern.

Put all of these together and we finally have the recipe for something that is going to catch most investors and even gold bulls by surprise, because we have been so conditioned to disappointment. This is also the time when the call for patience will be richly rewarded. Get ready for some real fun.

Chuck

There you have it in a nutshell. As pertains to gold and silver ahd their corresponding shares, it is not a question of “if”, it is simply a question of when they will really begin to put on a show. As I listen to all of these seasoned professionals talk about the real nature of the economy and where the US is headed financially, I can’t help but wonder how we get through it and have our country in one piece at the end of the day.

Incidentally, Chuck is available for private consultations and we are starting a series called Seacoast Publishing One on One.

If you are interested, please send me an email and I’ll send you the guidelines. In Chuck’s case, he will spend an hour with you and help you with whatever it is you need the help with! Contact me at www.seacoastconsulting.com.

Thank you Chuck!

Until Next time,

D. Stewart Armstrong

D. Stewart Armstrong

August 12, 2010

I’m up on the tight wire, one side’s ice and the others fire; it’s a crazy world for you and me…..  (Song by Leon Russell circa 1972)

Introduction

It is August 12, 2010 and as I’ve endeavored to create some meaningful narrative during this past month, I’ve isolated a few of the major financial and geopolitical issues that both unite and divide our country. Many would appear self-evident but we are dealing with so many cross currents that the moving parts become difficult to understand and isolate. Add to that the concept that traditional financial and geopolitical analysis appears to be an anachronism and we’re left with a shaky foundation upon which to construct even a simple premise. Confusion reigns in all aspects of our society—from financial to social to political to geopolitical; from personal to interpersonal to international. As we try to untangle the mass of media fake-outs and sputtering “spin-sters”, we are left to our own devices to acquire the truth or even a small part of the “big picture”. Hence, we do indeed find ourselves on a tight wire.

So why go through this Exercise?

• First, you’ve heard the term, “not on our watch!” Well folks, this is our watch; and it’s hitting the fan on our watch. This exercise is about defining reality and the truth for without either, you have a rudderless ship that is at the mercy of pirates.

• Secondly, this is our Country, and we must fully comprehend these four words: “United We Will Stand” plus “This is our Country”. Two sets of four words each.

• Thirdly, we stand at the cross roads of history in the cross hairs of truth.

• And finally, we must fully comprehend that Main Street with all that it entails, has always been infinitely more important to America than the government, the Fed, or Wall Street. The Founding Fathers went out of their way to make certain this one point was established and re-established. America is about the rights of its citizens, not the careers of its politicians. They also made it abundantly clear that precious metals were to be the foundation for our monetary system.

We must get from one side of the truth to the other and perhaps back again. Only then will we discover that in between those shades of misrepresentations will be chicanery of every type and description employed by those who would secure their money and power at the expense of the American citizen who is footing the bills. That would be us!

read more

by Jim Willie CB September 1, 2010

Jim Willie CB, editor of the “HAT TRICK LETTER”

Many observers to the wild gyrations, deep contortions, extreme measures, and other bizarre activity in the government and banking arenas are suffering from severe confusion. The public is alarmed, even frightened, by the sequence of events, without much benefit of comprehension of what is happening or which clans are in control. The degree of deception hit a peak during the TARP Fund creation and disbursement, done behind private closed doors for the replenishment of sacred preferred stock, that bridge between corporate bonds and stock equity.

The deception hit a very high pitch with the financial titan failures, the entire string of them. It has never stopped since. The economic data and promising forecasts (mere marketing group propaganda) featured Green Shoots, Jobless Recovery, and the totally vacant Second Half Recovery that is useful every six months to sway the ignorant masses.

Just what is happening is difficult to describe succinctly. But the main description reads like an obituary. The most recent and visible distortion is not of price inflation, which has zoomed at 7% annually for a couple years, but rather the Institute of Supply Mgmt. The ISM index has somehow registered a slight increase from July to August, despite almost every single regional index faltering badly. See the careening Philly Fed, from plus 5.1 to minus 7.7 in the latest month. They ignore the weak components and present a distorted aggregate, much like retail sales.

read more

by Jim Willie CB September 1, 2010

Jim Willie CB, editor of the “HAT TRICK LETTER”

History is being made. The American public has never been more nervous, perhaps fearful of some unknown dreadful and imminent event.

To wit, the global monetary system is crumbling. The enormous stimulus has failed to jumpstart the US economy. The 20 months of near 0% short-term official interest rate has failed to revive the moribund US housing market. The phony FASB accounting rules have failed to accomplish anything except a stay of execution for the big US banks, which are currently not lending as per their mandate.

In fact, the US banks are mainly dead entities demonstrating just enough life in order to receive US Government largesse and aid.

read more