$100 Silver in 6 Months, says $9B Sprott Asset Management

Here we go again.  Silver is on the move in chunks of up to 7% moves to the upside, yesterday, and as high as another 3.4% in European trading this morning.  Silver reached a peak of $39.36 before JP Morgan’s earnings report brought in some sellers at 8 a.m.

Sprott Asset Management’s John Embry told King World News he believes that when the investing public comes into the precious metals market, in earnest, the price of silver could go hyperbolic.  While the silver market is razor thin to begin with, adding the effect of the largest concentrated short positions in history will explode the price of silver, according to Embry.

“I totally agree with James Turk.  I think the thing (silver) has been abused on the downside and it’s just like a coiled spring ready to explode,” he said.  “I think silver will go back to those highs we saw before that May raid faster than most people can imagine.”

Unlike other beloved hard-money advocates Jim Rogers and Marc Faber, Embry is as fearless as James Turk and Jim Sinclair when he’s asked to put a price tag on the mercurial gray metal.

“We haven’t even really seen money start to significantly flow into hard assets, when that occurs and it will occur, it’s going to have an outsized impact on the price of these things,” explained Embry.  “The gold price should be $2,000 within the next six months and I believe the gold/silver ratio will decline tremendously in that environment.  I have no problem with $100 silver, none, and that might just be jacks for openers.”

The implications of Embry’s suggestion of a 20 to 1 ratio between the prices of gold and silver appear, on its face, extraordinary or apocalyptic.  A move of 25% in gold that sparks a 150% in silver may be hard to take in for newcomers to the bullion market.  But let’s consider the last gold and silver rally.

In August 2010, gold and silver traded at approximately $1,150 and $18, respectively.  Eight months later, in late April 2011, gold reached $1,575 and silver spiked to nearly $50—a 37% and 175% moonshot, respectively, in the price moves of gold and silver.

As gold knocks on the door at $1,600, and for silver, at $40, a move of 25% in gold to $2,000 and another blast of 150% to $100 for the price of silver isn’t that crazy—it’s an aggressive call, but not a crazy one at all!

Embry cites an important point of leverage as an explanation for his enthusiasm  for silver.  Several competent analysts have worked the numbers (including Bill Murphy and Chris Powell of GATA), and have come to the conclusion that for every ounce of silver in known inventories there are approximately 100 paper contracts trading (a fractional bullion system, if you will) on various exchanges across the globe.

To put the ratio between the paper and physical silver market in better prospective, a 1 percent silver “reserve” betters Lehman Brothers’ ridiculously low (criminally low, some say) reserve of 1.6% just prior to its implosion.  It just took one hint of a breakdown in confidence in Lehman that took it down so quickly—through its use of the over-the-counter derivatives market.  The same scenario could play out at the Comex, according to Embry.

“What’s been fascinating, and what was unappreciated by me in the early stages, was the enormous number of derivatives that have been created in the financial system,” said Embry.  “Because of the derivatives they’ve been able to keep this thing going for infinitely longer than any rational mind would have thought possible.

“Because the balloon was blown up so much, I just think the aftermath in its finale is going to be extraordinarily unpleasant.”

James Turk: just “several more days of silver in the 30s”

With silver and gold rallying strongly against the tide of the risk-off trade, bullion expert James Turk forecasts that silver is about to launch into the 40s, as more nervous investors come to terms with the inevitability of further devaluations and/or sovereign defaults, forced upon the world’s central banks by investors and weak politicians.

“One never knows exactly how the markets will unfold, but my sense is that we only have several more days of silver in the 30s,” Turk told King World News. “Once silver clears $38 on a closing basis, you are going to get back into the mid 40s in a heartbeat.”

Turk, the founder and president of overseas precious metals storage firm Goldmoney.com has warned long ago of the events playing out in Europe today, so his words carry significant weight among the bullion community.  The timing of his call back in January for silver to reach $50 by June 30 was considered reckless and daring at the time.  But history has proved him correct.  Silver reached an intraday high of $49.70 on May 2, just pennies shy of $50 and a month sooner than he expected.

Recently, Turk (along with another PM giant, Jim Sinclair) has differed with another hard-money advocate, Marc Faber, on the direction of precious metals prices during the months of July and August.  Faber expects the precious metals to meander in the hot summer months, which is a bet that the long-standing historical record of weakness during that time is most likely.  On the other hand, Turk anticipates a repeat of 1982, the year of the Mexican peso devaluations.

“The action in gold and silver so far this summer indicates to me that this is in fact poised to be explosive on the upside,” Turk explaind.  “Nobody is talking about this, but it could be a reality in short order.  Here it is nearly 30 years after the breathtaking summer of 1982, and history is about to repeat all over again.”

Turk’s battle with Marc Faber in the fight to be right on the outcome of precious metals during the summer months favors Turk, at the moment.

Gold and silver took center stage during the flurry of bullion-friendly news coming from both sides of the Atlantic, yesterday.  The timing of the news releases from both sides of the Atlantic seemed contrived, timed and salvo-like, as the dollar and euro battle it out in the race to cut sovereign debt loads through currency devaluations.  Gold reached new highs in the euro and new closing high in dollars.  Overall, gold was the winner in the scramble out of euros.

Tuesday’s news of widening spreads between the German and Italian 10-year notes, as well as soaring CDS pricing of Italian debt; an IMF warning launched by the new French (but Ameri-centric) chief, Christine Lagarde, at Italy, chiding the Italians for dragging its feet on implementing its own austerity plan; Moody’s downgrading Ireland to junk; FOMC minutes release, which strongly hints at the possibility of further stimulus from the Fed is coming; the posturing war that’s broken out between Democrats and Republicans over the U.S. federal budget; and the timely strengthening of the Japanese yen to save the day from a dollar breakout of 76 on the USDX have demonstrated the desperation among the officialdom and the equally fearful investor who searches for a truly safe haven.

“Eric this is the start of the next big leg higher in the precious metals,” suggested Turk.  “We’re at a new record closing high in gold today, that is extraordinary considering it is happening against the headwind of a stronger dollar.  There is an important message here, Eric, money fleeing the Euro is not just going to the dollar, it’s flowing into the metal of kings.”

As the public enjoys summertime vacations and respite from the daily slew of bad economic and political news, Turk sees the investor public mostly unaware of the theft of purchasing power currently in progress.  But for the precious metals stalwarts and recent converts, this summer could be a very profitable one.

“People are recognizing that the only true safe haven is the precious metals,” said Turk.  “There are still so few people talking about gold and silver having an explosive summer.  The only place I’ve heard it is on KWN.  The fact that there is still so little bullish sentiment just reconfirms my view that gold and silver are ready to rocket higher.”

It will be mighty interesting to see if silver does indeed exceed $38, and if an assault on the May 2 high is in store for the silver faithfuls.

3 Gold Stocks to Watch: AngloGold Ashanti (NYSE: AU), Goldcorp Inc. (NYSE: GG), Kinross Gold Corp. (NYSE: KGC)

3 Silver Stocks to Watch: Silver Wheaton (NYSE: SLW), Coeur d’Alene (NYSE: CDE), Helca Mining (NYSE: HL)

Gold market: Pan-Asia Gold Exchange IS a Game-changer

Andrew Maguire’s assertion that China’s Pan-Asia Gold Exchange will wrest power away from the JP Morgan bullion market suppression scheme is already under attack.

Maguire, the so-called “whistleblower” who alerted U.S. authorities of JP Morgan’s  bullion market price manipulation scheme and went public in March 2010 with his complaint, told King World News he expects the illegal naked shorts in the gold and silver market will be destroyed and that a true price discovery environment will result of China’s 1.3 billion population becoming empowered to buy the precious metals.

The primary argument against Maguire’s analysis is that markets don’t move price with the addition of the Pan-Asia gold Exchange.

It’s true, markets don’t move price – participants do.  But the point Maguire makes has everything to do with the participants having access to the marketplace—hundreds of millions of anxious Chinese, who have so far driven up the price of everything that doesn’t have a dead president stamped it, such as copper, oil, lumber, food and every other commodity.

For 50+ years, starting with Mao Tse Tung, the Chinese were precluded from owning gold.  In 2005, that all changed.  Beijing understands the importance of the gold market in its efforts to establish the RMB as major reserve currency and the privileges that come with that status.

In the first quarter of 2011, Chinese investors bought 93.5 tons of gold coins and bars.  After considering that China’s gold production reached only 340 tons of gold last year, with a consumption rate of 700 tons along with investor demand expected to top 20% per year, the expanded access through the Pan-Asia Gold Exchange to an expanded market will supercharge the public’s participation in the gold market.

Through the Pan-Asia gold Exchange distribution network and introduction of innovative gold products for the Chinese masses—a quite different model from the Shanghai Gold Exchange—the ease of access to market for the most populated country of the globe is Maguire’s point.

Consider the effect on the gold price of 320 million retail customers and 27 million corporate customers who conduct business through a network of 24,000 branches, and who now are able to buy gold through the Internet with a click of a mouse.  That’s the network established between the Pan-Asian Exchange and The Agricultural Bank of China.   Minimum contracts of only 10 ounces may be purchased, as opposed to the 100-ounce minimum required in Shanghai and Hong Kong.

And the Pan-Asian Gold Exchange goes live this month!

During the CFTC hearings earlier this year, Jeffrey Christian of the CPM Group said he estimates that the London Bullion Management Association (LBMA) has on deposit $153,000 worth of claims for each ounce of physical gold—which calculates to approximately 100 to 1 leverage to actual gold available for delivery.

What if there’s a sudden demand for physical gold, say, from China?  Who will deliver it?

Maguire’s conclusion that the shorts operating under protection of the CME should be frightened is entirely appropriate.

Jim Rogers: Silver is going to go much, much higher

Speaking with CNBC’s Geoff Cutmore on Squawk Box in London on Monday, Jim Rogers said the silver price “is going to go much, much higher—much higher, over the next decade.”

The 68-year-old chairman of Rogers Holdings is betting big that central bankers across the globe will continue to debase currencies.  Moreover, global industrial and commercial demand for silver will remain robust throughout the remainder of this decade as the purchasing power among the growing middle class in Asia increases.

When asked for a six-month prediction, the cagey Rogers, as usual, quipped, “Over the next six months, I don’t have a clue.  You should watch CNBC.

“But I own silver; and if silver goes down, I hope I’m smart enough to buy more silver.  Silver is going to go much, much higher—much higher, over the next decade.”

So who’s the big buyer of silver, driving its price to nearly an all-time record?

This time, Roger’s didn’t mention his favorite go-to response by name: China.  But, instead, he pointed to individual investors, collectively, as the cause, as the catalyst for strong demand for gold’s kissing cousin (in addition to gold) in response to central bankers inflating global money supplies.

“Well silver actually has more industrial and commercial uses than gold does, and they’re finding more all the time for silver,” said Rogers.  “So that’s one buyer; but also more and more people are worried about the debasement of currencies.  Currencies all over the world, Geoff, are being debased by politicians.  There are no sound currencies anymore.  And I’m not the only person figuring that out.”

When asked if he’s worried about news reports of gold vending machines popping up around the world, Rogers didn’t miss a beat.

“Gold will end in a huge bubble someday—someday; but that years away right now,” he said, noting little signs of telltale characteristics of a gold bubble entering the mainstream investor community. “Most people still have not owned gold; if you go to the U.S., there are shops everywhere that says we buy gold.  And the public is lining up to sell their bracelets and necklaces and their old gold.”

When any investment moves into bubble territory, the public will tell us by their actions at the retail counters, as was the case during the gold fever of late-1979 and early-1980.  Back then, bullion dealers across the U.S. were swamped with customers waiting in line for the opening of business, much like what takes place today as soon as new Apple product becomes available.

“Someday you’re going to see people queued up outside those shops buying gold,” Rogers predicted.  “Then you start worrying.  But most people still don’t own gold and never have.”

And how far will the gold price go?  Rogers wouldn’t bite.

“Oh gosh, you gotta watch CNBC.  You can’t ask me a question like that.  Two-thousand, 5,000, 10,000.  It depends what happens with the currencies.”

Silver and gold stock highlight: Yamana Gold (NYSE: AUY), Silver Wheaton Corp. (NYSE: SLW)

SHOCK Jobs Report; Brzezinski warns of Collapse, U.S. Civil Unrest—got Gold?

“June Jobs Report: The Ugly, the Ugly, and the Ugly”

—Yahoo headline

Another shock from the Labor Department on top of last month’s disaster delivers a severe and final body shot to any hope for recovery.  If last month’s jobs data catastrophe didn’t convince those betting on a U.S. recovery that they’re blowin’ Dixie, not much will.

The headline jobs number came in at more than 18,000, with a consensus expectation of 105,000 from the usual economists.  Looking beyond the headline, however, the bogus Birth-Death adjustment of more than 131,000 only serves as an insult to the intelligence of anyone tracking these data.  It’s just another Orwellian thing.

So, after backing out the phantom job creation from the Birth-Death model, the June loss of more than 100,000 jobs can be added to May’s roughly 100,000 job loss.  That’s a contraction of more than 200,000 for a U.S. economy that needs to show job growth of at least 125,000 per month to break even, after considering population growth.

With the U.S. economy clearly sinking into deeper recession (some say a depression), it appears the social unrest in Europe is coming to a neighborhood near you.  No help from Washington this time.  If federal spending increases to mitigate the plunge, the already ridiculous budget deficit blows up into an Argentina-like collapse.  If taxes are raised, the economy moves into rapid implosion, lowering tax receipts even further and accelerating the debt to GDP ratio beyond any hope of a turnaround.

The U.S. has entered a Kondratiev Winter, a time during the debt super cycle that Russian (Soviet Union) economist Nikolai Kondratiev (1892-1938) warned befalls all economies reliant on ever increasing debt for economic growth.  Kondratiev proposed the theory that Western capitalism moves through a 60-year debt-generated economic cycles of boom to bust.  The Spring of the present super cycle began following the end of WWII in 1945.

It’s a Minsky Moment—a phrase used to reference Hyman Minsky’s (1919-1996) work on the relationship between debt and economic cycles—called the financial instability hypothesis. The Soviet Union-born Minsky, like Kondratiev before him, suggested that the end of the debt super cycle cannot be averted, but instead ultimately leads to one of two alternatives: an outright default, or default through currency debasement, a la QE1 and QE2.

Yet, another Soviet Union-born (Poland), Zbigniew Brzezinski, told MSNBS on Thursday he expects the civil unrest in Europe will come to America as a result of of a U.S. economy no longer able to service its debt.

The former National Security Advisor under President Jimmy Carter predicted “really serious international turmoil” as a result of the United States, Europe and Japan simultaneously drowning in excessive debt. In the past, slowdowns in any one region were made up by at least one of the others.  Today, all three are mired in insurmountable debt burdens, says Brzezinski.

The three regions, comprising 55% of the world’s GDP, yet, represent only 10% of the world’s population, are on their own.  Asking the rest of the world—which, when calculated on a per capita purchasing power parity basis equates to one-eleventh of his Western counterpart’s PPP—to bail out the West isn’t a solution, even if it was mathematically feasible.  Even China, with its nearly $3 trillion, cannot handle the bill.

Therefore, Americans are about to experience the same pain as the Greeks.

“I don’t want to be a prophet of doom — and I don’t think we are approaching doom — but I think we’re going to slide into intensified social conflicts, social hostility, some forms of radicalism, there is just going to be a sense that this is not a just society,” Brzezinski said, adding that a decimated lower middle class is most likely going to be the catalyst for Greece-like civil unrest.

How China Intends to take Down the Comex

Andrew Maguire, the man who in Nov. 2009 told U.S. authorities of a silver manipulation scheme in progress led by the Fed through its primary dealers JP Morgan and HSBC, said China’s new Pan Asia Gold Exchange will overwhelm the manipulators in the gold and silver market and create a historic short squeeze in those markets.

In an interview with King World News, Maguire said he believes the rapid rise of China’s middle class will force the pricing mechanism in the precious metals markets to shift to the PAGE, and away from the Comex, where the manipulation continues.

“The launch of this new gold and silver exchange has flown under the radar, but certainly has my attention,” said Maguire.  “I firmly believe we are marking a pivotal point that will in very short order affect current precious metals price discovery dynamics.”

And those dynamics “will ultimately destroy the remaining short positions in both gold and silver,” leaving the scheme exposed to the world as another example of a broken, desperate and corrupt U.S.-led global financial system.  China poses as the largest threat to dollar hegemony, which now includes the Achilles heal of that privilege—the bullion market.

For decades, the Comex and its cohorts at the LBMA have controlled the precious metals market, and was a regret of former Fed chairman Paul Volker that he didn’t control the gold price more during his inflation battle during the 1979-82 period of runaway consumer prices.

But that control is about to collapse, said Maguire.  He expects the 1.3 billion Chinese, who, until 2009 have been banned from owning gold and silver in the People’s Republic of China, will overwhelm the global bullion market now that the Chinese people can buy gold as easily through their local bank.

Because of the difficulty of unloading $2 trillion of debt assets in time before a dollar collapse, Beijing has decided to take a page out of Mao’s playbook instead.

“China is keen to diversify their cash holdings and is also encouraging citizens to make investments in gold and silver,” Maguire continued.  “The Pan Asia Gold Exchange is another step in this direction by opening up ease of access to physical gold and silver to their bank customers. This physical backed exchange is going to be a big game-changer.

“Just look at the scale of this to get an idea of how massive this game-changer will be.  The Agricultural Bank of China has over 320 million retail customers and 2.7 million corporate customers and has integrated its customer account information system with this platform.”

Maguire suspects that bullion analysts have not factored in the China effect slated to hit the market in the coming years, a variable that could push the Comex to  resort to cash settlement in a similar manner to the London Gold Pool in March of 1968, when it collapsed.

“I believe the leveraged and naked existing short side concentration in silver will be blind-sided by this,” added Magurie.  “In my opinion it will create a massive short squeeze.

“None of this potential new physical demand has been factored in by analysts and I expect a large and unanticipated draw down of physical gold and silver over the next few months, ahead of the international contracts going ‘live.’”

Warren Buffett Moves on Citigroup

Citigroup (NYSE:C) is back in the spotlight once again. After plummeting to near penny-stock status, then rebounding, this banking stock became the darling of the hyper active high frequency trading brigade. The robot traders had a ball with Citi’s deep liquidity and ultra tight spreads. However, this algorithmic army quickly lost interest in the stock when Citi instituted a 10-for-1 reverse split pushing the share price above $40 per share.  This strategic move knocked the high frequency trading boys out of the game, but may create more long term institutional interest in the financial stalwart.

Now, perhaps the most interesting Citigroup rumor of all, has hit the underground secrets media network.  The Oracle of Omaha Warren Buffett’s juggernaut acquisition machine Berkshire Hathaway (NYSE:BRK) may be part of a consortium to purchase Citi’s troubled consumer finance division, One Main Financial. Pre-financial bust, this unit was known as Citi Financial.

Center Bridge Partners and Leucadia National Corp. (NYSE: LUK) are also rumored to be part of the buyout group.  Interestingly, One Main only has a book value of $2 billion but may obtain a bid in the $8 billion range due to its extensive asset base.  Citi has been in talks for the last several months about spinning off this division, but this is the first time that Buffett has been involved.  The star power of the Oracle combined with his mountain moving resources may just be the impetus Citi needs to actually flip this troubled unit away from itself.  Time will tell, watch this one closely!

Get ready for explosion in gold and silver, says James Turk

James Turk again asserts that gold and silver will soar this summer, citing his conviction that at least a hint of a QE3 announcement is just around the corner.  The last time a hint of a Fed policy move in the direction of monetizing debt was uttered, the risk-on trade to dollar weakness that had ignited the precious metals sector last summer will return with a vengeance this summer.

“When they [Fed] start QE3, the U.S. dollar index will plunge to new lows,” Turk told Eric King of King World News.

In agreement with PIMCO’s Bill Gross, who said Bernanke is likely to at least hint of a QE3 at next month’s Jackson Hole meeting, Turk expects the Fed will make some kind of overture to the markets before the summer is out.

Jackson Hole is an annual central banking conference where central banking policymakers meet to discuss the global banking system.  Last year, Fed chairman Ben Bernanke said U.S. policymakers were contemplating an expansive debt purchasing scheme if the U.S. economy and asset markets warranted further stimulus, which is Fed parlance for preparing the market for the official announcement in the near future.

Following Bernanke’s speech in August 2010, gold rallied $400 and silver skyrocketed more than $30 before settling back off the highs set on May 2.

Curiously, the dollar hasn’t rallied to hold above the 76 level (a critical juncture, according to the Richard Russell of the Dow Theory Letters) during all the turmoil in Europe and the euro, according to Turk.  He thinks that ominous sign of profound underlying dollar weakness will become more apparent to all now that much of the euro’s weakness has been discounted throughout the latest crisis in Greece and its implications for Portugal, Ireland and Spain.

Another sign that the market is calling Bernanke’s bluff can be gleaned from last week’s powerful equities market, Turk suggested.

“I think the dollar chart basically confirms my point that quantitative easing will be started again soon,” he said.  “Last week’s big jump in the major stock market indices is basically saying the same thing.  All we need now is an indication from policy makers that QE3 is imminent.  The effect this will have on gold and silver will be nothing short of spectacular given how sold out both of the metals have become during their correction over the past two months.”

Moreover, the budget battle regarding the U.S. debt ceiling won’t be won by the Tea Party, according to Turk.  The stakes are truly too high.  Many prominent economists claim that the effects on the global banking system and the world economy would be catastrophic and most assuredly usher in a deeper Great Depression than the one during the 1930s.

Instead, the democratic system will be subverted to prevent a U.S. treasury default, according to sources in Washington close to Turk.

“The scary thing is they are going to shove through this debt limit increase one way or another,” concluded Turk.  “If there is an impasse in Congress with Tea Party Republicans holding the line, word has come from Washington that President Obama will use the 14th amendment to declare the debt limit as unconstitutional.  By removing this last piece of discipline, that will open the floodgates and will be the tipping point to send the dollar into oblivion and gold and silver into the stratosphere.”

Advice from 60-year Market Veteran Richard Russell

What is the man who publishes the longest running investment newsletter thinking right now?  In his June 30 missive, Richard Russell of Dow Theory Letters offered his overview of the equities markets, and isn’t too sanguine on the idea of jumping aboard.

At this time, the stock market has been giving clues about the dollar’s next move, while the dollar has been giving clues about the next likely move in stocks, recons Russell.

The La Jolla, Calif-based octogenarian is no fan of the U.S. dollar in the long run, and has repeatedly opined of its progressive failure as the world’s reserve currency.

Russell watches stocks for a heads up to any impending doom for the dollar.  We can surmise from Russell’s latest letter that he’s bullish on stocks as the dollar devalues, but is bearish on equities if the dollar is expected to fall too far, too fast.  So far, nothing he sees in stocks has him concerned about the dollar.

“Currently, the Averages had every opportunity to break below their last secondary lows,” wrote Russell.  “The Averages refused to break down — instead both Industrials and Transports rallied above their preceding June highs. I took this action to be bullish, and with a bow to the advertisers of ‘The dollar crash’  I can say that a dollar crash is not going to occur any time in the near future. If the crash was near, the D-J Averages, in their uncanny wisdom, would have sensed it and given us the news by breaking below their June lows.”

According to Dow Theory, Russell believes stocks are in a bull market, but he doesn’t want to buy any for reasons of valuation.  Analysts citing historically cheap stock valuations relative to bond prices (going back to 1958) don’t fool Russell.  He was busy writing his first newsletters in 1958, but doesn’t remember a Fed buying 70% of newly issued Treasuries to artificially lower interest rates during Ike’s second term.

Instead, Russell looks to the dividend yield of the markets 30 bellwethers.  The current dividend rate of under 3% in the Dow “is far away from the bargain counter” in his assessment.

“So is it really a bull market? I think it is,” added Russell.  “Then shouldn’t we be up to our necks in stocks? I choose not to be, mainly because I don’t like the values. Dividend yields are low in my estimate, and I’m in no hurry to rush into the arms of an anxious and waiting Wall Street.”

Like a salesman who senses a deal is closing too easily to be true, Russell smells something foul from Bernanke’s scripted economic outlook for the remainder of the year.  The WWII veteran has seen too much to be lulled into “some believable fairy tale” told by the Fed and the perma-bulls on Wall Street.

“It bothers me that it’s all so pat and so widely accepted. So far, the Treasuries are acting according to script and so is gold,” mused Russell.  “The stock market is acting as if something better is riding on the winds of the future. Could something be amiss with the accepted scenario? Could Bennie Bernanke have it right? And why is Treasury Secretary Geithner ready to say ‘bye’ to the administration? What can he see ahead that he doesn’t like? Geithner’s been Obama’s leading economic confidant. Certainly, an unusual time to exit.”

When Russell is convinced of a low-risk/high return trade, he states it flat out.  But today’s market prevents him from giving the green light on stocks.  Instead, he’s on the sidelines with his gold and cash until the stock market true fundamentals match the technicals.

With debt levels in the West remaining at record levels as percent of GDPs, Europe still in a quandary with the PIIGS, and a deadline for raising of the U.S. debt ceiling still a month away, a game-changing event could be just around the corner.

“June went out like a lion and today another powerful 90% up day,” wrote Russell. “As the old song goes, ‘Who could ask for anything more.’ Hopefully, today’s [June 30] verdict of the Averages are a forecast of better times ahead. But in this business, it’s always wise to stay alert. With the planet staggering under the greatest load of debt ever seen in human history, anything can happen and probably will.”

Mr. Big dumps Bank of America

After making headlines last year for his brilliance in foreseeing a rebound in bank stocks following the March 2009 stock market crash, hedge fund manager John Paulson has made headlines again, but not for his record fee take down, but for his recent timing blunder from his substantial sale of his fund’s stake in Bank of America (NYSE: BAC).

According to a CNBC news report, the $38 billion Paulson & Co. founder sold shares in BAC through to the announcement made by the bank that it had settled for $8.5 billion with angry investors who bought misrepresented mortgage-backed securities related to the bank’s Countrywide subsidiary.

CNBC’s Kate Kelly reported Thursday that Paulson had sold a “substantial portion” of his stake in BAC in April and May, citing persons close to the transactions.  According to SEC form 13-F, Paulson & Co. held 123.6 million shares of BAC with a market value of $1.65 billion.

Paulson’s dumping of BAC during the second quarter comes off the heals of his fund’s liquidation of 80,000 shares of Citigroup (NYSE: C) and 2 million shares of CIT Group (NYSE: CIT) during the first quarter, which strongly suggests that he has become less optimistic about the future of the banking industry, maybe even less sanguine on the outlook for the U.S. economy—as the banking sector traditionally leads out of economic recession.

However, Paulson’s positions within the banking sector, specifically in BAC, have taken a backseat to the rest of the story behind the man who charged his investors $5 billion in fees last year for his stellar market performance.

Paulson’s “brilliance” last year may have been a fluke (or the result of collusion with Goldman Sachs on some MBS deals), speculate analysts.

In the case of BAC, since the beginning of 2011, shares of BAC have dropped approximately 20%, leaving Paulson & Co. investors with an estimated $200 million – $300 million haircut to the funds NAV.  And now, CNBC reported that its sources told the financial news outlet that Paulson may be considering buying BAC back, now that the bank has decided to settle the Countrywide MBS class action suit.

Following BAC’s late-afternoon announcement on Wednesday, shares of BAC soared 3% to more than $11.  Some stock technicians suggest that Paulson was fell for an amateur-like whipsaw.

His recent substantial loss in BAC follows another large loss, an embarrassing one, on Sino-Forest (TRE.TO), a Chinese tree plantation.  After research firm Muddy Waters released a report in early June that asserted Sino-Forest overstated its timber holdings, shares of TRE plunged 71% on the Toronto Stock Exchange (TSX).

For the year, TRE has dropped 85%.  Paulson & Co. took a $750 million loss on TRE in June, according to the Wall Street Journal.

Overall, in stark contrast to last year, 2011 has so far been a tough year for Paulson & Co.  Through June 10, Paulson’s flagship Advantage Fund Plus has shed approximately 20% off its NAV, according to two WSJ sources.