“Risk rally” to End by July, says Forex Guru

In a Bloomberg exclusive, the world’s largest currency hedge fund manager John Taylor of FX Concepts LLC said the risk rally in emerging market currencies, equities and commodities that began in March 2009 is coming to an end.

“This is the end of the nice slow moving risk rally that has lulled us pleasantly to sleep since the first half of 2009,” Taylor, chairman of $8.5 billion New York-based FX Concepts LLC, told Bloomberg. “This warning is worthy of a brass band and bright lights as the other side of this low volatility rally will most likely be a scary descent that will have a very negative impact on markets. Our statistical models say we are about at the end of the road for risk.”

Taylor, dubbed the new ‘Doctor Doom’ for his dire assessment for the possibility of today’s global monetary system surviving anywhere near its present construct, carries significant weight among professions within a tight circle of institutional Forex management firms.

Maxime Tessier, vice president of French investment firm Caisse de Depot et Placement du Quebec, told Bloomberg in August 2008 following the collapse of Bear Stearns in March 2008, “Taylor is up there with George Soros.  He’s a beautiful example of how someone can be a successful investor in the foreign exchange market.”

Not unlike George Soros, Jim Rogers and, more recently, GMO’s Jeremy Grantham, Taylor believes the U.S. dollar and the EU euro are destined to failure.  But in the shorter term, Taylor expects a reversal of the relatively strong euro against the dollar as the eurozone enters phase II of the financial crisis.  Ditto for equities, he said, though Taylor expertise lies in currencies and not equities markets—which have been supported by multi-billion dollar injections of fresh capital through the U.S. Fed’s Permanent Open Market Operations (POMO).

“Higher-risk assets, such as equities, the euro and emerging market currencies, have either peaked or will do so by end of July,” Taylor told Bloomberg.

“There is absolutely statistically no way that Greece can survive,” Taylor added. “There is a one in 10,000 chance; if the Germans give Greece their money to pay back their debt then they’ll be fine. But there is no way Germany will do that.”

That, he said, will trigger the next leg in the three-year long financial crisis.

Investors appear to agree with Taylor, too, as the market appetite for the poster child of risk, Greek sovereign debt, presently shows two-year’s notes yielding a record 26.77%, according to Bloomberg.

“As the spread of Greek two-year debt goes absolutely crazy over German, it means that at some point we are going to have to have a crisis,” said Taylor, whose 2%-and-20% hedge fund gained more than 3.3% last month. “And I think it’s very soon.”

Jim Rogers says to Expect Currency Crises

Jim Rogers, Quantum Fund founder and former partner with George Soros, told Russia Today he forecasts turmoil in the currency market within two years.

“Well, I would expect to see more crises in the currency market, maybe as soon as this fall, or certainly by the fall 2012-13,” Rogers said.  “And you’re going to see serious turmoil in the currency market, which is going to force the world and force America to do something about it.”

The legendary 68-year-old commodities trader doesn’t foresee a smooth end to the U.S. dollar as the premiere reserve currency, noting in previous interviews that Congress’ inaction to cut spending or raise taxes to stem the tide of $1.6 trillion annual budget deficits is evidence of the policy of kicking the fiscal can down the road.

“But that’s the way it’s going to wind up,” Rogers said of the disastrous course charted for the U.S. dollar, “because nobody is taking any serious action except talking about it.”

When asked why he thinks no meaningful action has been taken to reign in federal spending, especially this fiscal year, Rogers began to lay blame on the American press as a contributing factor.

“I am stunned by how little there seems to be in the American press about it,” Rogers opined.  “The American press seems to be more worried about wish TV star is divorcing which TV star more than anything else.”

Moving onto one of the root causes of runaway federal spending, the Pentagon, the American turned Singaporean resident faults U.S. wars in three foreign countries—presumably to mean the wars in Iraq, Afghanistan and Libya—as an example of America’s lack of resolve on the fiscal front.

“We have wars going on in three different countries right now. We’d like to have wars in four or five more if we could figure out a way to do it,” Rogers said.  “We’ve got troops stationed in 120 countries around the world that aren’t doing anything except making enemies for us and costing us a staggering amount of money.  This is all going to come to an end.”

Monetary history is replete with counts of superpowers falling from power through a steady debauching of their nations’ currencies, with France’s franc and Great Britain’s sterling during the 18th and 19th centuries, respectively, as the most recent past examples of what happens to countries that engage in overreaching foreign entanglements.

“Unfortunately, no country that’s gotten itself into this kind of situation gets out of the problem without a crisis or a semi-crisis.  We’re rapidly, more and more rapidly approaching a crisis that’s going to be bad for all of us,” he said.

“2008 was bad,” Rogers concluded.  “But wait until the next time around, it’s going to be even worse.”

 

 

 

 

Is Yamana Gold (AUY) a buy?

Shares of Yamana Gold Inc. (NYSE: AUY) traded above $12 per share during the first half-hour of trading Wednesday after nearing its 200-day moving average support by a quarter on Tuesday.

Traders following intermediate gold producers will be watching AUY for entry points while spot gold holds steady above $1,500 on the COMEX.

“Traders wanting to establish a position on Yamana Gold will be looking at the price action for evidence of buying near the 200-day moving average,” stated Traders Huddle, “and opening a position as close as possible to this important level.”

In addition to an expected successful test of the 200-day moving average, Yamana board of directors had further enticed traders to take a look at AUY’s value following Tuesday’s company announcement that it had approved a 50 percent increase in the stock’s dividend to $0.18 from $0.12.  The dividend increase will be effective in the third quarter of 2011, according to the company.

“If we were to compare the level of the dividend from the beginning of 2010 to current levels, we would show over a four-fold increase from $0.01 to $0.045 per share per quarter,” commented Peter Marrone, chairman and CEO.  “This is a reflection of our earnings generation capability, driven partially by our industry low cost structure and our robust and growing cash flows and cash balances.”

Yamana is a Canadian-based gold producer with gold production, gold development stage properties, exploration properties, and land positions in Brazil, Argentina, Chile, Mexico and Colombia.

With gold’s rebound above $1,500 on Monday, a further rally past the yellow metal’s all-time high of $1,575.10 achieved on May 2 could spark another rally in AUY, possibly testing $12.92—a price target, according to Traders Hurdle, which has been past resistance for the stock.

The AUY chart suggests that a breakout above $12.92 could send the stock to test $13.40, if gold’s wild bull wakes up again after last week’s sell off.

Fundamentally, AUY’s gross, operating and net margins have averaged 56.9, 19.3 and 14.4 percent, respectively, according to analysis conducted by The Motley Fool.

And the trend in all margin metrics is up, too.  The Motley Fool reported that AUY’s trailing 12-month (TTM) gross margin is 64.6%, up 770 basis points from the five-year average.  TTM operating margin is 37.1%, up a wide 1,780 basis points, and net margin is 25.8%, up another impressive 1,140 basis points from the five-year average.

 

 

 

 

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Jim Rogers on the Latest Commodities Plunge

Speaking with Alix Steel of TheStreet, yesterday, legendary commodities trader Jim Rogers said he isn’t buying into Wall Street’s popping commodities bubble thesis following the sharp sell-off in all commodities last week, especially those two commodities most widely watched recently—silver and oil.

Instead, Rogers said he’s “delighted” to see the massive sell-off in commodities prices—and in the case of the silver price, “was hoping it would go down” so he could buy some more of the white metal—a precious and monetary metal, whose price has still not achieved an all-time high to match gold’s multiple all-time highs first achieved in January 2008 with a $857 per Troy ounce closing print.

In all, the 68-year-old commodities market version of Warren Buffett has routinely stated that swooning corrections are normal occurrences during commodities bull runs—runs that grossly outperform stocks to the upside, downside and volatility.

And what does Rogers think of the latest across-the-board price plunge?

“Well, not much if you ask me. Markets correct all the time,” Rogers told The Street. “Silver went down a great deal but if you raise margin requirements 150%-200% you would expect there’s something to collapse. It’s good for the market as far as I’m concerned. Silver especially needed a set back and a consolidation. I’m delighted to see everything.”

Buyers who consume every day commodities, such as food and energy, don’t cheer during bull market rallies in “things,” so it’s natural for Wall Street to play down, or even attack the complex with negative comments and impromptu regulation changes, as witnessed by the Chicago Mercantile Exchange’s five margin requirement hikes within eight trading days in the silver market.

The prevailing view of financial commentators and their guests is that the sharp drop off in commodities is good for the world economy and, therefore, good for stocks.

Moreover, calls for bubbles in silver and oil prior to the CME’s coordinated attack on the silver market (and now, the oil market) created a scenario that can easily be spun as evidence of a finally-pricked bubble. Therefore, the crowd should move back into stocks now that the menace of escalating input costs, rising consumer goods prices as well as weaker consumer spending thereafter have now been dispensed with quickly, so goes the logic.

Rogers sees it differently, however.

“I hardly see how silver could be a bubble when, even at its top, it’s still below it’s all-time high,” Rogers explains. “That’s not much of a bubble. A bubble is when things are screaming up every day and they go to new highs, two to three times their old highs. We’ll have a bubble, we’ll have a bubble in commodities, we’re not there yet.”

In fact, when asked about any sales he’s made within his vast commodities holdings, Rogers said, “No, no, no I have not sold any commodities.”

Silver to make New Highs within “only several weeks,” says James Turk

In an exclusive interview with King World News, James Turk told KWN’s Eric King that he expects the silver price to breakout to new highs, maybe by the end of the month of May.

Turk, the founder and CEO of Goldmoney, is out again with his latest bold call on the outlook for the price of the white metal.  While traders of precious metals recover from the shock-and-awe of silver’s +30% cliff-dive plunge last week, Turk, instead, takes the roller-coaster ride in stride.

“We’ve been here before,” he said, noting similar dramatic price declines in 2004, 2006 and 2008.

But the two questions traders have today are: How long before silver makes an assault on $50?  And will traders have to wait until after the seasonally slow summer months in precious metals before silver continues its winning ways?

This time, price patterns of 2004, 2006 and 2008 won’t be much of a guide, according to Turk.

“So what is ahead for this current correction? Repeats of 2004 and 2006, or another 2008?” he asked rhetorically.  “My guess is none of the above. It took several months after these three previous corrections before silver climbed above the high price that preceded the correction. This time I expect silver will take only several weeks before exceeding $49.78, the 31-year high reached on April 25th.”

Turk’s understanding of the gold and silver market is deep and studied, taking fundamentals, market conditions and feedback from his network of old hands in the bullion business before taking a stand on the likelihood of next meaningful moves for the precious metals prices.

One conspicuous hint of silver’s more-likely move can be gleaned in the futures market.  According to Turk, the continuing shift of commercial traders covering nearer-term contract sales while simultaneously selling contracts far into the future (contributing to a backwardation condition in the futures chain) indicate that the recent sell-off in silver hasn’t materially killed overall demand.

Just as demand from those weak-handed speculators who couldn’t maintain margin requirements following five CME’s margin increase notices within the past two weeks, strong hands wanting physical metal for delivery have come back in to pick up the buying slack, but at relatively bargain prices, Turk suggested.

“As evidenced by silver’s backwardation, which began in January and continues to this day, the demand for physical silver has really accelerated,” he explained.  “As a result of last week’s price decline, backwardation has roughly doubled in size. This is clearly a signal of strong demand for physical silver, and further evidence of a point I have been making for some time, that the paper silver market is losing its significance as a price discovery mechanism.”

Top Active Silver Stocks

Pan American Silver Corp. (Nasdaq: PAAS)

Silvercorp Metals inc. (NYSE: SVM)

Silver Wheaton Corp. (NYSE: SLW)

Marc Faber again Calls for a Drop in Dow

Marc Faber told American news outlet Newsmax he expects stocks to tumble in May.

Following his call for a 10% decline in stocks—first, on Oct. 26, then, reiterated on Jan. 25, the Dow has refused to succumb to countless clues of an ailing U.S. economy failing to respond to herculean monetary stimulus from the Bernanke Fed.

The rally in the DJIA, following the post-crash March 9, 2009, low of 6,440.08, has since  taken the 30-stocks average to 12,928.45—or, a double—set on May 5.  Faber, the publisher and editor of Gloom Doom Boom Report, told Newsmax that the long-awaited 10% correction in the Dow is upon us.

Today, Faber said he’s troubled by several symptoms of fatigue appearing in the “internals” of the broader market, including a decline in the number of stocks reaching new 52-week highs, according to Wall Street Pit.

Another warning sign comes from metals prices, which have dramatically plunged in recent days, among them copper, also referred to as Dr. Copper for its highly correlated price pattern to equities.

While the Dow reached new intermediate highs earlier in the week, the price of copper failed to confirm the rally in stocks, lagging the Dow noticeably prior to Monday’s kick off to a commodities complex sharp reversal lower during the remainder of the week, further buttressing Faber’s case for an imminent continuation of the decline in stocks.

Confirming evidence of a reversal of global risk-on trades can be traced to both sharp declines in the U.S. Treasury 10-year note yield as well as a meaningful one-day 100+ pip rise in the USDX.

However, Faber’s recent call for a correction in stocks doesn’t make him a devout bear on the major indexes in the long run. With his overall underpinning thesis that a weak dollar encourages risk-capital flight into equities and commodities, Faber sees the Fed’s zero interest rate policy (ZIRP) lifting equities in nominal terms as long as real interest rates after inflation remain below zero.

In a Bloomberg interview on April 27, 2009, at a time of heightened fear in global equities markets, Faber cautioned, “Don’t underestimate the power of printing money,” arguing that a Fed in want of higher asset prices can achieve its objective through the proverbial printing press.

“The more things will go bad, the worse things become, the more the money printer at the Fed, Mr. Bernanke, will print,” added Faber. “He will print endlessly. Even if things go bad economically, you could have no revenues at companies and no earnings and stocks will go up because of money printing.”

Silver has to “Come Down,” says Jim Rogers

As the seemingly relentless climb in the price of silver neared the all-time Hunt Brothers high of $50.35, traders began to talk $100 as the next stop for gold’s kissing cousin.

The 68-year-old commodities trading legend Jim Rogers told CNBC on Thursday that he has no idea if rumors that his former partner at the Quantum Fund in the 1970s, George Soros, is selling gold, are, in fact, truth.  The implication of Soros, a noted “strong hand,” selling a closely price-correlated metal to the silver price would most likely impact sentiment among “weak hands” of the white metal.

“I have no idea, that was 31 years ago, you might as well ask me about my first wife, I haven’t seen her either,” said Rogers.

Rogers, who said last week on India television program, ET Now, he wants to accumulate more silver after the market “calms down,” now has an opportunity to add to his silver holdings during a market sell-off of silver.  After reaching a high of $49.79 in Asia on March 25, silver’s price has plunged 24.4% to $37.62, as of 06:52 ET Thursday in overseas trading.

“I hope we have a pull-back, I hope it goes down for a while, it’ll be good for the market,” Rogers said. “In 1987 stocks went down 30% to 40%, smart people went in and bought more. If it goes down I hope I’m smart enough to buy move silver.”

As the predominate currency of the USDX basket of other reserve countries, the euro’s outlook remains a strong factor in the dollar’s relative worth against other major FOREX cross pairings in addition to precious metals.

Though some European Community countries are “just bankrupt,” as he said, Rogers owns the euro as he sees the European Central Bank more vigilant in the fight against rising food and energy prices within the 23 countries collectively comprising the eurozone.

“I own the euro, I’m not thinking about selling the euro for fundamentally good reasons the ECB is doing a much better job than the U.S. central bank,” said Rogers.

“Nobody has ever been better off for debasing your currency and America is doing a terribly wrong thing. Britain debased its currency for decades and it didn’t help,” he added. “I as an investor would be even more bullish on the euro if the central bank takes action.”

Active silver stocks:

Coeur d’ Alene Mines Corp. (NYSE: CDE)

Pan American Silver Corp. (Nasdaq: PAAS)

Hecla Mining Co. (NYSE: HL)

Silver waits for Gold to reach $1,800 by June, says James Turk

In his latest observation of the silver price action, author as well as Goldmoney founder and Chairman James Turk said he expects silver to consolidate at present levels as gold plays catch-up to silver’s dramatic rally.

After climbing 27.1% ($47.87) for the month of April, 55.2% ($30.84) since the beginning of 2011, and 156.6% ($18.65) since the close of April 2010, the metal price could most likely consolidate in a “bullish flag” price pattern for a period of time, as it did earlier this year in March, Turk told Eric King of King World News yesterday.  Moreover, he warns of increased price volatility for silver as the bull market for the white metal attracts a wider investor following in the coming months and years.

“I believe if you look at the chart, silver is in the early stages of a bullish flag formation,” said Turk. “The size of this flag pattern is much broader in terms of size than the previous flag, but this should be expected because volatility increases as bull markets continue.  If this pattern holds, silver will continue its consolidation for some time before climbing to higher levels.”

If anyone needs a guide to the potential perils of the most volatile of “commodities” markets—the silver market, the lesser-known of the cadre of “real money” advocates, Turk, has navigated for investors turbulent waters of both precious for many years.

But more recently, Turk’s calls on the direction and timing for the precious metals as told to Eric King during his many appearances on King World News during the past six months have been notable, outpacing less bullion-centric investors Jim Rogers, Marc Faber and Richard Russell who all brilliantly comment upon multiple markets.

On January 20, while silver traders fretted about whether to lock in gains after a 7.8% pullback from an 81.2%, 6-month-run to the $31.21 high, set on January 3, Turk went on the record to suggest the risk he saw at that time was NOT holding silver and that the sell off from the January 3 high was most likely a head fake.

“The last time we spoke Eric, the two key overhead resistance levels I mentioned were $1,400 for gold and $30 for silver,” Turk told Eric King in a January 20, 2011 interview.  “I expect that we will be probing those resistance levels in the near future.  The real question in my mind is whether we can take out these resistance levels on the first attempt, or whether the market needs to trade sideways longer in order to build more of a base.”

“Regardless, the risk here is not being in the market,” added Turk, “because once these resistance levels are taken out, both metals are ready to explode to the upside.”

As history has it, the silver price rose and broke through $30 once again, decisively, on February 14. And as Turk suggested the price of silver did, indeed, explode to the upside as we witnessed from mid-February through to the end of the month of April—when the silver price nearly surpassed $50, a potential return of a near-double from the January 20 low of $27.40.

No one can accurately predict the movements of the most volatile and, arguably, the most “manipulated” market of any “commodity,” but investors may want to follow James Turk for his latest musings.

Today, he expects a side-way, range-bound action in the silver price for a spell until gold catches up to his $1,800 target for gold by the end of June—which, by the way, appeared to many long-term bullion holders at the beginning of January 2011 as an absurdly bullish call.

“You know my longstanding price projections have been $1800 gold and $50 silver by the end of June,” Turk told Eric King yesterday.  “Silver essentially reached my target already, so it would not be surprising for it to move sideways in a large trading range waiting for gold to catch up. But regardless of when those price targets are reached, KWN readers need to focus on the fact that the U.S. dollar remains in a long-term bear market.”

So, as many market participants expect a 2008-like swan dive in all risk-on assets due to the Fed’s telegraphed end of QE2 in June, Turk believes the risk until that time is for a “waterfall” decline, as he puts it, in the U.S. dollar, not in gold.  Gold, he said, could reach $1,800 by the end of the Fed’s controversial QE2 program.

Bin Laden’s Death Effect on World Markets; Silver shrugs off Avalanche of “bad” News

Following the news of Bin Laden’s death, the price of silver dropped to a low of $42.21 in the spot market while the dollar rose as high as 73.257 on the USDX in early trading in Tokyo.

News of the demise of U.S.’s enemy No. 1 comes off the heels of last week’s two margin hikes for traders of the silver 5,000-ounce contract—the latest 13.2% hike announced by the CME Group on Thursday—as well as news reported Sunday by the Wall Street Journal of Bolivian president Evo Morales plans to take steps toward state control of the country’s mines have been either suspended or stopped.

Markets throughout Asia and much of Europe were closed Monday in observance of May Day and Labor Day holidays, allowing for thinly traded and more than usual volatile market conditions for an already volatile commodity.

“Front-month silver futures typically see volumes of around 1,000-2,000 contracts exchanged per hour at the start of Asian trade, but 11,492 lots were traded in an hour Monday—still well below the market’s daily peak early in the European afternoon, when 15,000-30,000 contracts are traded on a typical day,” according to the WSJ Asia.

With the streak of what would seem very negative for the price of silver has amounted to a mere hiccup decline when compared with silver’s relentless daily multiple-percent price gains to the upside in April, including a more than 6% move higher on Wednesday at the peak of the bullish run last month.

In fact, past counter-bull market declines in the silver market during the periods of April 2004, April – May 2006, March – Oct. 2008, calculate to 35%, 37% and 23% corrections, respectively, have run far ahead of silver’s back-to-back flash corrections of 10% within the past week, with the first correction between April 25 & 26, sharply reversing the silver trade back to near all-time highs on Thursday before a second announcement by the CME Group of another raise in the margin requirement for the silver contract.

Since April 2004, the average counter trend declines for the silver price is 31.5%, which equates to nearly $16 off silver’s high of $49.83 set last Monday, or a price of $34.  That historical prospective, taken together with the recent slew of silver-negative news within the past three days, suggest today’s 10% decline (and subsequent $3 rebound during the European trading session on Monday) doesn’t point to evidence of a bona fide correction in progress, never mind an end to the decade-long bull market in gold’s kissing cousin.

Demand for silver as an investment along with lack of scrap sales in the physical market suggest instead that investors anticipate higher prices, not lower prices. So far in 2011, silver soared 60%, up 27.2% alone in the month of April.

Moreover, the silver futures chain continues pointing in the direction of strong immediate demand for the metal, with spot prices routinely trading above prices for future delivery since January.

“There is nothing from a fundamental perspective to cause a fall this large. Silver has been the most rapidly appreciating of the metals in the past months and if there was one that looked a bit frothy it was silver,” Ben Westmore, commodities economist at National Australia Bank, told Reuters. “This is mostly technical. We expect silver to be in relatively close step with gold and while both have risen strongly, silver may have moved a bit too far ahead.”

One trader told Reuters, “Although that was a brutal wash out of some length, silver is now back into the original bullish trend channel, so while $41 holds, the trend is still intact.”

At 08:28 EST, silver trades at $45.14 and the USDX stands at 73.01.