Silver price: Hey Silver Bugs, You Cryin’ Yet?

The more silver bugs cry as they watch the latest breakdown in the silver price the better it is for the rest who will make it through to the other side of the biggest financial crisis since the Civil War.  Sign-up for my 100% FREE Alerts

Take in the economic scenario the Fed faces, then ask yourself what the Fed will do about it and which planet will the silver price orbit after the dust settles.  Here are the facts that should calm investor fears:

“Let us be honest. The U.S. is still trapped in a depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP,” The Telegraph’s Ambrose Evans-Pritchard penned in a Jul. 4, 2010 article.

Now look at Shadowstats economist John Williams’ chart, below.  GDP is again dropping, 18 more months later, from Evan-Pritchard’s last year’s Independence Day article. (The real GDP is calculated by Williams, shown by the blue line.)

Now, take a look at the number of U.S. food stamps recipients?  Does the graph, below, square with an employment rebound?

If the economy has been on the mend, slowly creating jobs for nearly a year now, why have there been 4 million more food stamps recipients in the U.S. since July 4, 2010?

Note the blue line in John Williams’ graph, below.  That’s the real unemployment rate (approximately 22.5 percent)—the rate that would have been reported by the BLS during President Ronald Reagan’s first term (1981-85).

And the jobs created which blunted a crashing jobs market have been the throwaway kind.  See BER article, Gerald Celente:  Brace for Economic 9/11.  The trends forecaster describes the type of jobs created, mostly the type of local jobs that you would find on the tropical island of Fiji, not the high quality jobs found in Germany or Switzerland.

And it’s about to get worse, as Celente predicts.

The U.S. is “tipping into a new recession,” ECRI’s Lakshman Achuthan told Bloomberg Radio on Sept. 30  “We don’t make these calls lightly. When we make them, it’s because there’s an overwhelming objective message coming out of our forward-looking indicators. What is going on with the leading indicators is wildfire; it’s not reversible.”

Since Sept. 30, Achuthan hasn’t budged from his dire forecast.  (See Economic Cycle Research Institute—ECRI, here and, of Dec. 9, here.)

Okay, the Fed faces a U.S. economy that’s rolling over—again—from an already negative GDP, according to John Williams.

So, what will the Fed print to prevent an economic collapse?

Watch it; it’s a trick question!  Jim Rogers explains in a Dec. 14 interview with TheStreet:

TheStreet Reporter: What should the Fed do at their upcoming meeting, aside from QE3?  We’ve seen more Fed presidents come out and call for more monetary easing.  What should they really do?

Jim Rogers: They’re already, Alex, they’re already . . . QE3 is already here, Alex.  Get out the numbers for non-seasonally adjusted M2, and you will see that Mr. Bernanke said, in the summer, we’re going to keep rates artificially low. You can’t just say the words, you got to do something.

Rogers goes on to say that the Fed hasn’t stopped printing money since QE2; it just wants people to think it has.  And thanks to a complicit media, whose been told to repeat the con over and over in an effort to prevent a bona fide run on currencies, some investors still believe the Fed has stopped printing.

Look at the chart, below.  A couple of months ago, the Fed was expanding M2 money supply by 20 percent!  That’s a rate that even former Fed Chairman under President Nixon, Arthur Burns, would blush at, as the maestro of the 60s and 70s presided over the highest U.S. inflation rate since the Civil War.

The Fed never stopped printing!

Silver investors now wait for Bernanke to announce even more printing! That’s when the top blows off the gold and silver market, according to Jim Rogers, Peter Schiff, Jim Rickards, Marc Faber, James Turk, James Sinclair and FX Concepts John Taylor.

That signal could come in late January, maybe tomorrow, or next week, but it’s coming.  Let’s see what more Fed money printing will be called this time.

Back to the Rogers interview.  Notice how the scripted question by TheStreet reporter was written in a way to fool the public into thinking that the Fed hasn’t been printing money since so-called QE2 ended on June 30?

It’s the ol’ leading the witness trick, with a false premise to plant a lie in the minds of the observers, to throw them off the track to the truth.   At least TheStreet reporter didn’t stoop to the, “Well, of course you’re going to say that, Jim, you sell your Rogers Commodity Fund” line, or something along those lines.

Here’s another example of the vicious propaganda thrown at some pretty smart guys who warn of a coming tsunami of commodities price inflation in 2012:  Witness the Marc Faber interview on CNBC, last week.

In his interview with CNBC’s ‘working girl’, Maria Bartiromo, Marc Faber got the better of the dullard Bartiromo, working her over pretty well (if she noticed).  Faber’s had 20+ years experience dealing with such nonsense during his time living in Thailand.

Do a Google Images search on the term, “Maria Bartiromo.”  You’ll see endless poses in the search results.  That’s what CNBC thinks of you—a 20-year-old drunk on a Thai vacation.

Bartiromo, after hearing Faber’s gruesome assessment of the world economy, said, “Okay, you think the world is ending, so which five stocks would you buy?”

By the way, if you didn’t listen to the Bartiromo interview, Faber outdid himself with yet another one his great Faberism.  He retorted, “I Have A Very Special Stock Tip For You. The Symbol Is G-O-L-D.”  Now, that’s a great Faberism!

And finally, and more dramatically, The Hat Trick Letter’s Jim Willie explains the Fed con in a really classic Jim Willie style—his style is the rambling and information-packed rant!  See BER article and link to audio interview here.  Willie covers almost everything in this interview that silver investors should know.

So we see sub-$30 silver.

Now for the question that’s on everyone’s mind . . . drum roll please. . . how far will the silver fall?

And the answer is the same as it has been since the bull market began in 2002: When every last ripe apple falls from the shaken tree.  That’s when the price will stop falling.

And right now, the tree needs to be shaken as hard as the Fed can shake it, because the next move up in silver will most likely be akin to the last one.

You remember, the move from $17.50 to $49.94, from August 2010 to April 2011, a 177 percent price explosion higher within 8 months?!

The Fed would just prefer the base of the next move for silver (gold, too, as well as oil and other commodities) is lower before the massive catapult higher.  Also, remember, north of $50 in the price of silver unleashes the metal; there is no resistance levels above that price.  This is the last stand for the Fed, and it will make the best of it.

Jim Rogers, “You Should Own Silver”

Fence sitters of the silver market are forewarned: buy more silver.   That advice, according to Jim Rogers of Rogers Holdings, is the heads-you-win-tails-you-win investment proposition in the years ahead.

In a Nov. 23 CNBC interview, Rogers has little doubt of more central bank intervention planned in the wake of a global economic slowdown, but if he’s off the mark, silver (and commodities, generally) investors will win anyway, as Asia’s production-export model gears to supply what the world needs—including lots of existing and new products containing silver. Sign-up for my 100% FREE Alerts

“I’m long commodities and currencies, because if the world gets better, the shortages in commodities will make sure I make money,” the 69-year-old Rogers told CNBC.  “If the world economy doesn’t get better, I’d rather own commodities because they’re [central banks] going to print money.”

It’s interesting to note that of all commodities investors of which investors can buy, Rogers singles out the ‘commodities’ silver and rice, with the latter, a staple of the Asian diet, and the former, a critical metal used in the manufacturing of alternative energy products—a sector, in which, China has taken an enormous interest and investment due to long-term strategic reasons, according to researcher and author of Red Alert: How China’s Growing Prosperity Threatens the American Way of Life, Dr. Steven Leeb.

Leeb points out in his book that China has invested more $500 billion per year in windmills, solar and other forms of clean energy, not because Beijing is necessarily concerned about the environment as a principal objective use of its $3 trillion reserves, but because it seeks to ween the Peoples Republic off rapidly rising fossil fuels prices while at the same time reducing the odds of a military confrontation with the West over remaining accessible global oil reserves.

“I mean, once the Chinese build out their solar energy, and they haven’t up to this point, but they will, they’ll start accumulating silver,” Leeb said in a September interview with Goldseek Radio. “In fact, I wouldn’t be surprised right now if they weren’t accumulating a lot of silver.”

“And my prediction is that silver will go high enough, and if we recognize it’s so critical, that the government may even ban public ownership of it, like the government banned public ownership of gold during the Depression,” Leeb continued.  “I think, well, silver over $100 per ounce—I almost think it’s inevitable, that silver hits three digits to be honest with you.”

Apparently, agreeing wholeheartedly with the Leeb thesis about the future value of silver as a vital metal to alternative energies, Rogers said at a RBS conference on Nov. 22 that he expects wind and solar to be among the leading forms of alternative energy in the 21st century and recommends investing in the sector for its long-term potential.

Given the assumption of China’s planned strategic initiatives in the area of alternative energies, the demand for silver to achieve a China-wide roll out of alternative energy is projected to surpass available silver mine production by as late as 2020, according to Leeb.  Rogers sees a similar potential of China’s demand for critical metals.

“I am very optimistic about energy sources, yes wind power, solar power and all alternative energy sources have a good future.” Rogers told the RBS conference attendees.  “ . . . the politicians love wind power, they love solar power for many reasons so they would subsidize it.”

And if the global economy takes a turn for the worse, which Rogers said, recently, is inevitable in 2012, central banks will print money to prevent a collapse of the global financial system—a system much too leveraged to weather another slowdown so soon following the Lehman crisis.

In that case, silver’s role as hard money could get another big boost, as previous so-called QEs from the Fed, and now from a Draghi-led ECB, may cause another flee out of paper currencies and into the tiny market of the white monetary metal.

“Throughout history, when things have gone wrong, they print money…when they print money, you should own silver, you should own rice, you should own real assets,” Rogers said, noting previously in the interview that the collapse in MF Global has created some forced selling in all commodities and precious metals.

While the MF Global liquidation plays itself out, how much lower silver and gold will continue to drop in prices is unclear, according to Rogers, but he will be ready with his checkbook if the metals fall further from here.  He said the liquidations of gold and silver contracts provide an opportunity for accumulators of the metals to catch better prices.

Roger concluded, “Gold could go down a fair bit more…but I’m certainly going to buy more gold if it goes down and silver.”

 

James Turk: Lehman type Collapse in Weeks

Brace for impact and volatile trading, because Europe teeters to the brink, this time for real, according to James Turk.

Turk, the chairman of Goldmoney, told King World News he sees the signs of a rapidly approaching collapse in Europe’s debt markets, and the ramification will rival the collapse of the U.S. banking system in 2008 following the fall of Lehman Brothers. Sign-up for my 100% FREE Alerts!

Initially, what was a tiny Greek problem (2 percent of EU GDP), has moved to the heart of the eurozone through Italy (GDP of 2.1 trillion, or 13 percent of EU GDP), Though not a surprise, the attack on Italian debt this week has sped up the timetable for the needed chain of events to occur for a final resolution to the euro.

As Italian 10-year bonds trade above 7 percent, the line in the sand that Morgan Stanley said is where traders say Italy won’t recover, the crisis has moved definitively to the next step to resolution, one way or the other—monetize debt, break the euro, or allow the system to collapse.

If Italy won’t recover, the euro cannot recover—though “illegal intervention,” according to zerohedge in yesterday’s Italian 1-year bill by new ECB chief and former Goldman Sachs operative Mario Draghi served to grant more time for the euro—again, though not a surprise.  But an extended period of Fed-like shenanigans in European debt markets by the ECB is highly unlikely.  The Germans would recoil violently at the idea of a re-run to Weimar, taken behind closed doors, of course.

“Clearly the two percent plus drop today by the euro against the U.S. dollar is a warning sign that a major crisis is brewing,” Turk told KWN on Wednesday.  “I mentioned before that the Dexia and MF Global collapses are not the Lehman event I’ve been expecting before year end. But the markets are telling us that a major crisis is now brewing.  So be prepared for another Lehman type of collapse which will bring the financial structure to its knees.”

Turk’s grave assessment of Europe’s of the situation echoes countless among the media (not counting rumor mill central, The Financial Times of London), where the dialogue between the markets and the endless closed-door meetings of European leaders has been fancied.

French President Sarkozy and German Chancellor Merkel have already released some trial balloons to the effect of a euro breakup, a suggestion floated around by Wall Street and Main St. analysts for months.  Reuters served the European leaders their outlet to the markets yesterday regarding the latest solution.

“German and French officials have discussed plans for a radical overhaul of the European Union that would involve establishing a more integrated and potentially smaller euro zone, EU sources say. French President Nicolas Sarkozy gave some flavour of his thinking during an address to students in the eastern French city of Strasbourg on Tuesday, when he said a two-speed Europe — the euro zone moving ahead more rapidly than all 27 countries in the EU — was the only model for the future.”

While the foundation for a breakup of the euro is laid, the toothless apparatchiks of Europe will bark and humiliate Italy until it’s finally released along with the other Club Med fiscal basket cases to a second tier euro, knowing full well what Morgan Stanley had rightfully stated is a “mathematically impossible” future of Italy’s ability to service its public debt.

“The EU and the IMF telling Italy that it must adopt austerity measures is advice that comes about five years too late,” Turk explained.  “The Italian government cannot cut enough or fast enough to improve their financial picture.  The bottom line is the fallout from Italy is going to get very bad very quickly.”

He added, “ . . the wheels are finally coming off the cart and they [KWN readers] need to be prepared for some volatile and cataclysmic events over the next several weeks.”

Turk suggests holding gold, physical gold, that is, while the banks attempt to seize Italy’s 2,450 tons of the yellow metal.

Marc Faber: Bear Market is Starting

Here comes the bear market, Marc Faber, the editor and publisher of The Gloom Boom and Doom Report, told CNBC Europe Tuesday.

“The bear market is starting. When you compare equities to bonds and cash I don’t think equities are very positive,” said Faber.

Faber, who last month said the Dow had already reached its high for the year, cites the rallying bond market for his outlook for equities.

At the close of Tuesday’s trading, the 10-year Treasury reached 2.6%, and the 30-year cracked below 4% for the first time since the 700-point decline in the Dow of December 2008.

“The Treasury market is telling you that the economy is in recession,” said Faber. “So if the bond market is telling you that the economies of the Western world are weakening, but at the same time the stock market is still relatively high, I think the stock market is vulnerable.”

Faber’s usual castigation of politicians for the handling of the crisis also included a few mild snipes at analysts who predict a surprise rebound in the U.S. economy slated for the second half.

“The politicians are all useless individuals. Nobody is reducing the problems in the US or Europe, just putting on a band aid and postponing the problems endlessly,” he said.

“Some analysts think that there’s a chance economic data will surprise on the upside but I think, if anything, it will be on the downside,” Faber added.

He also expects corporate earnings and guidance will disappoint the Street.

But topping his list of lurking problems for the U.S. and Europe is not sovereign debt issues or corporate profits; it’s China.  Faber believes China is vulnerable to a slowdown from the nation’s largest buyers of its goods, which, he said, “is a much bigger risk for the global economy than the U.S. because the U.S. is no longer a major commodities buyer.”

If China’s industrial production slows, the bright spots in the global economy coming from resources-rich Australia and Canada as well as oil producers of the Middle East will fade as well, according to Faber.

“If commodity prices are falling, then commodity producers will buy fewer goods from China,” he pointed out. “This is something that the world central bankers can’t deal with.”

As far as the outlook for the euro, Faber didn’t expect the euro to survive, let alone to trade above 1.40 to the dollar.

“What surprises me more is actually the strength of the euro and that it has not collapsed yet,” he said, but believes that the PIIGS will eventually by “chucked out” if the euro is to maintain its present secondary reserve status to the dollar.

“I would have chucked out Greece three years ago, straight away, and it would have been much cheaper,” Faber said.

Faber has turned very bearish on equities, bonds, and currencies—in real terms—and recommends accumulating gold to weather the storm.  Personally, he will add to his own gold position if the price drops $150.