Germany Abandons Nuclear Power---Market Yawns

Another sagacious decision by the Germans--a people known for wise decisions (LOL). Today it was announced that Germany will completely phase-out their nuclear reactors by 2022. The negative news had little impact on uranium stocks. This is not surprising as they are currently trading below liquidation value, despite uranium's positive fundamentals. Uranium One's Anton Jivov noted that:

Germany's plans to shut all of its nuclear power reactors by 2022 won't change the fundamentals of the uranium market, Anton Jivov, Uranium One's (UUU.T) manager of corporate development, says in an interview.

The company has reduced its forecast for uranium demand to 2020 to decrease by 5%, but this will likely be offset by growing demand from China, India and other emerging markets, Jivov says.
The bottom line: it does not matter what Western countries do regarding nuclear power. The future of the nuclear industry is in China, Russia, and India. These countries are the ones who need more power and have chosen nuclear power to provide clean, reliable, and domestic energy. Furthermore, most analysts do not expect other countries to follow Germany in exiting nuclear power. Energy consulting firm Lightbridge noted:

Germany's decision to shut all of its nuclear reactors by 2022 is an "emotional" response that will unlikely be matched by other countries, says Jim Malone, chief nuclear fuel development officer at nuclear-energy consultants Lightbridge. Shutting these plants will have a modest affect on the uranium market because there are currently 440 reactors and there could be more than 500 by 2022, he added. But there will likely be delays in building new nuclear in places like the US, Spain and Switzerland.
More importantly, the uranium market has already priced in a uranium depression, sending most uranium stocks down 60-85% since the Fukushima disaster. Outside of another nuclear meltdown, it is hard to see these stocks trade lower over the next 1-3 years. Remember, by 2013 the uranium market will be in a structural deficit as Russia's Megatons to Megawatts Program ends. The program currently supplies 40% of the global uranium market. Without a significantly higher uranium price, there is no way supply will be able to match demand longer-term.

Black Swan Insights 


Here Comes The Great Greek Debt Restructuring...errr..Reprofiling

It was not if, but when Greece would be forced to restructure its debts. Dow Jones is reporting that the first victims of the dubiously named "voluntary re-profiling" will be the major Greek banks, including The National Bank of Greece S.A.(ETE.AT), Alpha Bank A.E.(ALPHA.AT) and EFG Eurobank Ergasias S.A. (EGFEY). The current scheme being presented requires the Greek banks to extend the maturities of their debt holdings. In return for agreeing to the plan, the EU authorities would not require the Greek banks to raise any more capital or write down the value of their Greek government bond holdings. After all, the FASB proved that accounting methods are meaningless and can be changed whenever they become an inconvenience to the financial system.

And if the Greek banks refuse to go along with this ponzi scheme?

The ECB will simply stop funding the Greek banking system, which is currently on ECB life support. This is where government coercion comes in. If the Greek banks balk at the deal, the ECB pulls all financing, leaving the Greek banks insolvent, as no one in their right mind will accept Greek debt as collateral for new loans. Once the Greek banks are unable to rollover their debts, with near zero interest loans from the ECB, the great Greek tragedy will come to a crashing end and the world will have another banking crisis.

If this plan comes to fruition, it could help Greece limp along for a while longer because domestic creditors currently own about 38% of Greek government debt, according to the IMF. This scheme would also benefit the major French and European banks who have hundreds of billions of dollars of exposure to the PIIGS. It also shows that as the EU debt crisis worsens, the major banks are beginning to throw each other in front of the proverbial bus to save themselves--cannibalization by the banking elite at its finest. Next up, Spanish, Portugal, and Irish banks.

Black Swan Insights


Hedge Fund Ideas from the Ira Sohn Investment Conference

See what the hedge fund kingpins are doing with their money.

Jim Chaos--Kynikos Associates

The fund manager, best known for his famous short of Enron is bearish on alternative energy. In a presentation titled "Solar + Wind=Hot Air," Mr. Chaos revealed that his firm was short Vestas Wind Systems and  First Solar (FSLR)

Phil Falcone---Harbinger Capital

Mr. Falcone likes natural gas companies, believing that they are attractive from a valuation standpoint. In particular, his firm is long Crosstex Energy (XTXI) and thinks the stock could roughly double from $9 to $18.

Jeff Aronson---Centerbridge Partners

Recommends CIT Group, saying the financial company could rise to $65, up from its current price of $41. Says the firm may be a takeover target for a larger bank.

Steve Eisman---FrontPoint Partners

Long property and casualty insurers. Thinks the recent bear market for these stocks is over and that pricing will improve over the next 12 months. With a turn in the pricing cycle, Mr. Eisman believes these stocks could rise dramatically. His favorite companies are March & McLennan (MMC) and Aon Corp (AON).

David Einhorn--Greenlight

Likes Mircosoft (MSFT). Says that CEO Steve Ballmer should leave and be replaced by someone who better understands mobile computing, tablets, and social networking. Ballmer's strategies have not worked and his presence is one of the largest overhangs for the stock. His departure would immediately help the company.

Black Swan Insights


If Stock Pumper Jim Cramer is Buying, Should You Be Selling?

Self-confessed stock manipulator Jim "Mad Man" Cramer was out today desperately trying to convince his beloved home-gamers to stay tough despite the brutal sell-off in commodities and other Cramer favorite stocks (after all Jim and his hedge fund friends need gullible buyers in order to unload their shares). Cramer goes on to tell the sheep that while the decline in his favorite stocks has been severe, it is almost over and you should not be shaken out. He is referring to stocks like Freeport, Conoco, and other momentum commodity plays.

If you are thinking about buying into the commodity/energy decline, you might want to reconsider this considering that Jim Cramer is the ultimate contrarian indicator. No one else better personifies the cartoonish Mr. Market better than Mad Jim. You know it will be time to buy when good old Jim is passed-out drunk on his famous linoleum floor. As long as Cramer is still up-right and sober, his buy, buy, buy stocks remain in sell mode.

Below is a list of Jim Cramer's most famous stock market calls. If you are wondering why someone who claims to have returned 20% after fees during his hedge fund tenure can be so wrong so often, you are not alone. There may be a reason why Mr. Cramer has never shown audited returns for his hedge fund.

Cramer on Imminent Sub-Prime Collapse--Don't worry its meaningless, buy stocks say Jim. July 2007

Before Bear Stearns Failed---Jim tells the home-gamers all is well--even Bear is okay--buy stocks. March 2008

Cramer Flip-Flopping on various stock calls---showing signs of being bi-polar. Aug 2007

Cramer Pumps Lenny Dykstra as a Great Stock Picking Guru--Mr. Dykstra has since been exposed as a fraud and criminal.

Buy, Buy, Buy Florida Real Estate--Jim Cramer tells Regis and Kelly to bet the farm on Florida Real estate--in July 2008--also buy stocks. Best Quote "I want to buy 2 homes."

With a track record like this, it is almost surreal that he still has his highly-rated television show. It just goes to show that there really is a fool born every minute. It reminds me of a story told by the great Jesse Livermore about two guys who get an "inside tip" from a friend who happens to be on the board of directors of a company. The insider tell the two men to buy all they can of ABC stock. They do. The stock plummets. One of the men gets mad and decides to send an angry expletitve laced telegram to the insider, chastising him for misleading them on the stock. The other friend interrupts and says this is not a smart thing to do because if they make the insider mad he won't give them anymore stock tips!

Now that we have gone threw Cramer's questionable stock picking record are you willing to follow him down the rathole? Not me. I would rather listen to someone like Marc Faber who told investors to sell stocks in Nov 2007 and buy them back in March 2009 (Marc Faber's May Outlook: Beware the False Breakout in Stocks).

Black Swan Insights


The World's Largest Currency Hedge Fund--FX Concepts--is Now Long the Dollar

It seems we are not the only ones expecting a prolonged rally for the friendless US dollar. Today, it was announced that FX Concepts, run by John Taylor, it cutting its short dollar positions and preparing for continued strength in the dollar.

We noted last week of the major reversal in EUR/USD accompanied by unusually large volume (The Much Maligned Dollar is About to Turn Higher).

This move by FX Concepts comes on the back of larges losses for the hedge fund in May--down around 5%--because of their short dollar positions.

From Dow Jones:

Scott Ainsbury, a senior portfolio manager at the fund, said any potential lasting dollar rally seemed unlikely before last week. But now, he said the firm is rethinking that position and adjusting the fund accordingly.

"We've cut our dollar shorts position substantially," Ainsbury said, adding "there are maybe some indications that [this rally is] going to be a little bit longer lasting."

He noted many scenarios under which the U.S. currency could rally, perhaps well into this summer.

Last week's sharp selloff in commodities could point to a growing investor concern that global growth may be slowing, said Ainsbury. That could potentially lift the dollar versus growth-based currencies. A recent round of soft U.S. data also may ironically help the U.S. currency as well: less U.S. growth, less global growth and less for growth-centric currencies.

Ainsbury also said FX Concepts recently decided to short the euro, betting against the single currency's prospects, versus the yen specifically. The negative euro sentiment is broader than just concerns over a possible Greece debt restructuring, he said.

In addition to shorting the euro, FX Concepts is positioning itself for a stronger yen.

Black Swan Insights


Uranium Holding Up Well Despite Commodity Massacre

It has been a tough time for commodities across the board over the last few weeks, but uranium has been holding its own in the aftermath of the Fukushima meltdown. It appears that the worst case scenario in uranium has already been priced in, meaning that it is hard for uranium stocks to go much lower.

All of the hot money, hedge funds, and other speculators who were all in the uranium trade, got shaken out and have liquidated their positions. This means the weak hands are gone and the only people left in uranium stocks are strong value investors like Rick Rule (of Global Resource Investments). These sophisticated investors see the opportunity in uranium stocks and are currently accumulating shares. (See Here and Here for Rule's view on Uranium)

The thesis for uranium value investors at this point is that despite the nuclear meltdown in Japan, uranium demand will far exceed available supply in the coming years. China, India, Russia and other countries have signaled that they will still build new nuclear power plants because it is clean, efficient, and provides reliable power. No doubt these countries will increase their safety requirements regarding the construction, operation, and maintenance of new plants. But, the main point is that they are still committed to nuclear power.

Below is a chart that shows the price of uranium. You can see that uranium has just made a higher low, important in technical charting because it shows increasing buying pressure at higher price points. After hitting a post-Fukushima meltdown of $50, uranium has rebounded back to $58, even with commodities getting hit across the board.

Regarding the uranium stocks, they have not been as fortunate as uranium itself. Most of them are trading slightly below their post-Fukushima capitulation lows as uncertainty clouds their outlook. The concern being that it will be much harder for these companies to bring new mines to life. That is why it is probably best to focus on current producers and explorers with advanced stage projects as there is somewhat less risk.

With uranium recovering, uranium stocks should start to perk up soon.

I still own shares in Strathmore Minerals, Dension Mines, Tigris Uranium, Mawson Resources, Bannerman, and Strateco.

Black Swan Insights 


Another Member of the Ruling Elite Caught in a Sex Assault Scandal--This Time It's the IMF Chief

Warning: Viewer Discretion is Advised----

Like all oligarchs, IMF boss Dominique Strauss- Kahn thought he was above the law (and after witnessing the financial crisis of 2008 who could blame him). After all the IMF has financially raped numerous third world countries and has gotten away with it so the concept is fully ingrained into the organization's culture. This incident raises questions of whether American taxpayers can trust the IMF to manage such a powerful supranational organization, which relies on the US for a large part of its funding. It also puts the IMF's plans of establishing itself as a global central bank and issuing its own currency (the Bancor) on the bank burner for now.

According to news reports, the incident occurred yesterday at the Sofitel hotel in New York ( a $3,000 dollar a night suite--US taxpayer funded of course). Apparently, a maid came into the suite to clean it when Mr. Strauss-Kahn allegedly forced himself on her, and tried to coerce her into giving him oral sex. The maid resisted and was able to escape the clutches of her attacker and reported the incident to hotel staff. Mr. Strauss-Kahn realizing that he was in major trouble, immediately fled the scene. His destination was the airport to get the hell out of the country as soon as possible. The perp bolted from the hotel so quickly that he forgot his cellphone.
Unfortunately, for Mr. Strauss-Kahn NYPD detectives tracked him down and pulled him off his get-away plane (headed for France) minutes before departure. He was of course, travelling first class--at US taxpayer expense.

With such damning evidence against him, Mr. Strauss-Kahn will no doubt employ the Bill Clinton defense. He will argue that oral sex is not really sex and that the "incident in question" was consensual. It may be hard to convince a jury that the maid forced herself on the 62 year old IMF boss, but it worth a shot.

IMF Has Lost All Credibility

It is about time the US ceased funding for the IMF after this shocking scandal. It just goes to show you the character of those running global institutions like the IMF, UN, and World Bank.

Republican Presidential hopeful Ron Paul agrees. Noting that "These are the kind of people that are running the IMF and we want to turn the world finances and the control of the money supply to them." Paul continued, "That should awaken everybody to the fact that they ought to look into the IMF and find out why we shouldn't be sacrificing more sovereignty to an organization like that and an individual like he was."

For those of those who dismiss the idea of the IMF becoming the central bank of central banks and issuing its own currency please see IMF Calls for A New Global Currency. Now ask yourself, do you really want a sexual predator controlling the global economy? It would be like appointing OJ Simpson director of a organization for abused women. It's just something that should not happen.

Why Strauss-Kahn wanted to get to France

One last question remains: why was Strauss-Kahn trying to flee to France. The reason it because France has a long history of providing refugee to sexual predators. This includes people like movie producer Roman Polanski, who raped a under-age girl and Frederic Mitterrand, current French Minister of Culture, who admitted in his autobiography that he enjoyed raping young boys in Bangkok. Despite this confession, Mr. Mitterrand is still a member of the French government. As you can see, the Parisian elite have a soft spot for sexual criminals so it makes sense that Mr. Strauss-Kahn was trying to get to Paris. If Mr. Strauss-Kahn could have made it to France he would have likely gotten away with his crime. Good work NYPD.

Black Swan Insights



Retirement Lost: Social Security Will Be Bankrupt by 2036, Medicare by 2024

The really bad news: Your promised benefits are in jeopardy, thanks to corrupt Washington politicians. Today it was announced that the two government programs will run out of funds sooner than previously thought as a result of the poor economy.

This does not come as a surprise to anyone paying attention, but will certainly impact future retirees who will get screwed when they try to collect their benefits.

I am not going to repeat how much I despise Social Security and Medicare and how they are both illegal under the Constitution. These are communist programs designed to enslave the middle class and rob them of their wealth by preventing people from saving and investing their own money.

But I wanted to clear a few misconceptions regarding Social Security:

1. Social Security is NOT a benefit; it is a tax--That right, just ask the IRS. and they will tell you that Social Security is indeed a tax. Furthermore, the courts have declared the only way Social Security can be interpreted as constitutional is if it is a tax.

2. Your Social Security payments are not guaranteed-- There is no requirement that the government pay you your social security check. Congress can cancel, abridge, or alter the social security system anytime it wishes. This was summed up nicely by the courts in Flemming v. Nestor which said "entitlement to Social Security benefits is not a contractual right." Theoretically, you could pay your social security taxes all of your working life and then be denied the monthly checks. While this is unlikely, you notice that the government is always increasing the retirement age. Eventually you will only be able to retire at 85 and get 50% fewer benefits.

3. There is no Social Security Trust Fund--Contrary to what you hear from the media and politicians, no trust fund exists (it is only an accounting entry). All Social Security taxes are sent directly to the government's General Revenue Fund and is spent by Congress on anything they want to. Even if there is a surplus (more collected than paid out in benefits), Congress can spend it and write an IOU to Social Security. Congress (Republicans and Democrats) have looted the surpluses from Social Security over the last 75 years, and all that is left are useless IOUs.

4. Social Security "benefits" are taxable--One of the more hilarious aspects of Social Security is that if you work after you retire (say part-time) and earn depending on your filing status more than $25,000-32,00, your social security payments will be taxed. LOL!!! And you thought this was a generous benefit from your government. Instead, it is really a system to keep you in poverty.

5. Social Security is a Ponzi-Scheme--According to Wikipedia, "a ponzi scheme operation pays returns to separate people from their own money or money paid by subsequent people, rather than from any actual profit earned." That pretty much sums up Social Security, which pays current recipients with money from taxes collected by current workers. Social Security is a ponzi scheme that Bernard Madoff would envy. Is it all right that the government is operating the largest ponzi scheme in US history?

Now that we have discussed various misunderstandings concerning Social Security, allow me to show why it is such a bad deal for Americans and keeps them poor. First off, the rate of return on your Social Security contributions is incredibly low (estimated at 1-2% nominal return) as compared to the investments. There was a famous example of county employees in Galveston, Texas, who were fortunate enough to get out of paying social security taxes. Instead, the county set up an alternative plan and invested their monthly contributions in safe low risk investments. The results were startling and are reported in a GAO report. Assuming a worker made $50,000 and paid into Social Security, his or her monthly check was $1,302. Under the private alternative plan set up by Galveston County, that same employee received $6,843. Now which plan would you like to participate in? So you rely on Social Security-- you will be able to afford dog food (perpetual poverty), but if you have a private plan and would be able to afford fillet mignon (comfortable and dignified retirement).

Another major negative of Social Security is that when you die, you cannot leave your children any inheritance, which prevents families from building generational wealth. Social Security will only pay $255 as a one time death benefit. If you had a private plan, you could leave your children at least something, but the government can't allow this. This is especially true for groups which have a lower life expectancy (e.g. obese individuals, etc.). Why would our government deny people this opportunity? Because if the overwhelming majority of the population were financially independent, they would not be welfare slaves to the government. Instead, the Social Security system has created a generation of welfare dependents who are no longer free and independent. They no longer care about the Constitution and Bill of Rights. All they want is their monthly checks. And you wonder why America is gradually becoming a welfare police state?

So after hearing all of the above facts, you may ask why people defend Social Security and resist any change to the system? After all, they don't benefit from this system. In fact, the only entity which profits from this illegal system is the government which uses the surpluses as slush funds and keeps people in poverty. To me the answer is relatively simple: People have been so dumbed down by public education and the media that they are very susceptible to government propaganda. The public has been indoctrinated into believing that Social Security is a benefit and protects people from poverty. And as Joesph Goebbels noted, all you have to do is repeat the same propaganda over and over, and gradually people will believe it. The situation is so dire in the US that people will fight for the current Social Security system that even when it is the instrument of their own enslavement. Now that's good propaganda--convincing slaves to demand their chains!

In the end, the collapse of social security and medicare is probably for the best. It will force Americans to be self-sufficient and more prudent regarding their spending habits. Saving will once again be a virtue, while blowing all of your money on some iphone or flat screen TV will be a sin.

The Bottom Line: Don't rely solely on Social Security and other government programs to ensure your retirement. That means saving more money and spending less on Chinese slave made imports. The majority of Americans have less than $50,000 saved for retirement. What the hell are these people going to do? They are going to pressure politicans to raise your payroll taxes to finance their fragile retirement. Democracy at its best--51% of the population enslaving the other 49%. Politicians then get re-elected and proclaim that they "saved Social Security and Medicare." Wash. Rinse. Repeat. America is so doomed!

Black Swan Insights


Don't Sweat Gold's Seasonal Weakness--Just Wait Until September

It is surprising how a few margin hikes by the boys at the CME Group can derail the whole commodity sector. First, the silver longs were squeezed out of their positions, which in turn caused major selling in other commodities like gold and oil, as commodity funds sold everything and anything to raise cash to meet margin  calls. As leveraged long positions are liquidated it has a knock on effect, forcing more players out of the market and creating a cascading downward break in the whole commodity complex.

While this may be just a correction, the coordinated action by the CME and other exchanges, along with media coverage is suspicious. The anti-gold/pro-dollar establishment pundits have come out of the woodwork declaring that the inflation threat was gone, kaput, and nothing more than "transitory," just as the great Chairman Bernanke proclaimed. This is of course, ludicrous considering that these same so-called experts never officially acknowledged the inflation threat in the first place. According to these fools, the "non-existant inflation threat" no longer exists. Whew, glad they cleared that up! This proclamation from the Ministry of Truth should provide some comfort when Americans bend over and pay $4.30 a gallon for gas.

However, the important thing to remember is that gold bull market remains intact. In fact, gold is simply following its typical seasonal pattern. You can see from the chart below, that gold always  has a tough time from May to September, before rebounding strongly towards the end of the year. So far this year we have been right on track. As we reported earlier (Beware the False Breakout in Stocks) Marc Faber had turned somewhat cautious regarding the precious metals as they were overbought and facing the upcoming weak seasonal pattern.

The Bottom Line: If gold continues to follow its usual pattern, it would lead to gold entering a slightly downward consolidation pattern between $1350-1550 for the next few months, depending on the action of the general market. Then in September we should start to see gold creep higher to new all-time highs above $1570.

Related Articles:
As Inflation Soars, Take the Gold Pill
The Only Catalyst That Could Derail The Gold Bull Market
The Federal Reserve's Plan To Destroy the Dollar

Black Swan Insights


The Much Maligned Dollar is About to Turn Higher

Don't look now, but the dollar is making a turn which could have a serious effect on the markets and commodities. Since the algorithms control financial markets, a rising dollar will inevitability lead to a decline in stocks and other risk assets.

It all occurred on 5/5/11 when for no good reason the dollar started to surge. While this move has been dismissed by the experts as nothing more than a dead cat bounce, they fail to take a look at the volume accompanying the move. This upward reversal for the dollar came on heavy volume which usually correlates to a change in market direction.

The chart above is the EUR/USD pair which is the most traded and followed of all of the dollar pairs. It also makes up the majority of the dollar index. See the constant volume for the past few months. All seems well. Fed money printing has allowed the Euro to steadily rise against the dollar, despite the fact that the EURO itself is on the verge of collapse. Then, beginning on May 5th, their is a massive volume spike which coincides with a massive 300+ pip plunge in the EUR/USD pair. As most market observers know--volume equals conviction even our algo controlled/manipulated market. It appears tha the big boys are buying the dollar and covering their very profitable shorts.

The Bottom Line: This reversal in the dollar has the potential of catching most of the world off guard as everyone and their aunt is now short the dollar with 30-1 leverage. After all, the fundamentals point to a decisively lower dollar, thanks to the Fed's ZIRP and non-stop money printing (back door bailout to the banks).

Below is a chart of the UUP--a ETF which tracks the dollar index. You can see that there has been huge volume spikes accompanying the price reversal. After the initial move, the dollar is now taking a brief pause for another move higher. First target is clearing the 50 day moving average. This will help get the technically inclined algos to get on board. With the price above the 50 day, the dollar shorts will start to cover and in the process encourage some predator HFT algos into lifting the price as they front run larger orders and presto: a dollar reversal. Fundamentals be damned!

Black Swan Insights



April Home Prices Get Seasonal Boost But Double-Dip Still In Progress

April home prices up?But don't get too excited--the boost is only temporary. Your regularly scheduled housing double dip will continue shortly.

Today, we finally got the numbers from Altos Research's May Housing Report, which is one of the most real-time indicators we have when it comes to the housing market. I use this as a way of predicting the over-hyped Case-Shiller report which Wall Street pays so much attention to.

The Numbers

The report states "The housing market in April showed a modest increase in home prices of 1.82%. The winner for the biggest price increase is the San Francisco Bay Area. San Francisco posted a 4.87% increase, and San Jose posted a 4.32% increase month-over-month."

Highlights of the report include:

 The Altos national index median price was $440,194 in April, up 1.82% from $432,307 in March.

● Austin, Boston, Philadelphia, San Francisco, and Washington D.C. all showed double-digit inventory increases.

● Boston posted the biggest inventory increase at 19.18%.

● The leaders in the price increase category were in "Sunshine States" - San Francisco (4.87%), San Jose (4.32%), Phoenix (3.30%), Denver (3.23%), and DC (3.04%).

● The 7-day and 90-day averages are both trending upwards for median prices and inventory. The 7-day trends are always the first indication of a shifting market and should be watched closely.

● Prices were flat in New York, Philadelphia, Portland, Salt Lake City, Seattle, and Tampa.

● Las Vegas and New York were the only markets showing a decrease in inventory, and the decreases were modest (-1.05% and -0.26%, respectively)
The Bad News
While on the surface, this report seems to be positive for the housing market. Prices have ticked up during the spring selling season. However, to the more astute observer, this is only a temporary phenomenon. The housing market remains in a dire situation as high levels of supply, combined with a high unemployment make lower prices an inevitability, despite Federal Reserve money printing.
The real issue is supply which Altos notes is more than happy to accommodate the seasonal bounce in housing demand. From the report:
The housing market in April showed a substantial increase in inventory (11.45%). The top five markets for monthly inventory increases are Boston (19.18%), San Francisco (12.06%), Austin (11.46%), Washington DC (11.00%), and Philadelphia (10.29%). Notably, two of those markets rank in the top five for increases in median prices as well (San Francisco and Washington DC).

Sellers are entering the market at lightning speed to take advantage of the spring buying activity. The only markets showing a decrease in inventory were Phoenix (-7.40%), Miami (-5.55%), and Salt Lake City (a nominal -0.02%).
Even though lower prices are expected, major investment figures like Marc Faber think real estate is still attractive from a valuation perspective (See Marc Faber's view HERE).    
Bottom Line--The US housing market is still fragile and likely to see lower prices later this year as supply easily outweighs demand. No doubt this will not be welcome to members of the Federal Reserve. QE 3 anyone?

Black Swan Insights


Silver in Crash Mode--Time To Get Out?

Silver, the poor man's gold, is looking more like a car wreck than a precious metal as it has fallen over 20% during the last 3 days. The reason for the spectacular crash?Nothing! It is simply the fact that there are more sellers than buyers, which has resulted in a lower price. Silver's chart had been long flashing danger signals as the price has gone parabolic. Over the last few months, silver has rocketed from around $20 to just under $50 at the top on no real news. Yes, we all know about the Fed printing money, so it is difficult to use it as the catalyst for silver's rise. Instead, the rise has been driven by pure investment speculation on the part of hedge funds, retail investors, etc. The general thesis is that compared to gold at $1300 silver looked mighty cheap and was seen as a leveraged way of playing the inflation trade. The play worked well until May 1 2011. It was during the Asian session when unexpected large sell orders stated to hit the silver market, causing many marginal speculators to flee their long positions and embolden would be shorts. This massive selling seemed to come out of nowhere

The Really Bad News--The WSJ is reporting that funds associated with George Soros is selling their gold and silver positions. So far, there is no real proof to substantiate this rumor (and there won't be until Soros files his 13F with the SEC), but it has certainly not helped silver's outlook. There are very few courageous souls willing to take the other side of Soros because of his sterling track record. Further bad news for silver bulls is news that Carlos Slim, the world's wealthiest man is also selling silver.

Chart--The chart of silver is nothing short of terrifying for the bulls. It has all the hallmarks of a parabolic blow-off top which quickly crashes, leaving unsuspecting longs in a world of pain. You can see from the chart below how lonely buyers of silver are. The last time silver got this high (during the Hunt Brothers' episode) it promptly crashed and took over 30 years to recover. Not pleasant.

Silver Outlook--The current direction of silver is decisively down, especially with the recent margin hikes by the CME (and others) tempering investment demand for the metal. Expect gold to outperform silver as the yellow metal did not reach a parabola stage, meaning there is much more price support for gold than silver. That being said, silver is definitely in an over-sold technical condition, which allows for the possibility for a brief bounce. That bounce should be sold. The key levels to look for regarding silver is $36 and $32 which should provide some kind of support.

Black Swan Insights 


Marc Faber's May Outlook: Beware the False Breakout in Stocks

Swiss investor Marc Faber has just released his latest issue of the Gloom, Boom, and Doom Report where he discussed his outlook for the stock market, gold, emerging markets, and other financial topics. Here are a few highlights from the report:

1. Equity Markets--The markets may be giddy about stocks hitting new highs, but contrarian investor Marc Faber is having nothing of this. He is concerned that stocks will fall sharply in May and that the recent breakout in stocks will prove to be trap for the bulls. The markets are due for a correction and the technicals point to a weak market. In particular, Faber points to the decline in new 52 week highs as evidence of an unhealthy internal market. Right now, Faber would stay away from cyclicals, tech stocks, and banks. If you have to own stocks make sure it is something safe like consumer staples (MO, JNJ, PEP, KO, etc). 

2. Gold & Silver---Still likes gold as a long-term investment and recommends dollar cost averaging every month regardless of the price. However, when it comes to silver, Faber is more cautious, noting the recent run-up in the price. He expects a 20%+ correction in the metals complex because the inflation trade has become too crowded.

3. Commodities--Dr Copper is issuing a warning to investors. While the S&P 500 has made a new high, copper failed to do so (non-confirmation). This is a significant development because Dr Copper and the SP 500 have a very high correlation. This signal, along with the large declines in other commodities such as sugar and cotton, leads Faber to believe that stocks could follow commodities lower (in the short-term) 

4. Buy Housing--While Faber thinks the US housing market has another 10% to fall, he would be a buyer because of attractive valuations. Faber compares the price of US housing to gold and concludes that housing has not been this cheap since the early 1980's. But do not think there will be a quick recovery--there won't be. The main point about housing is that it is a good inflation hedge and will likely keep its purchasing power of the next 10 years. In a serious inflation environment, Faber would rather own housing than paper dollars.    

5. More QE Guaranteed--In Faber's opinion, QE 3 is a near certainty. The US will be running trillion dollar budget deficits for the next 10 years. There is no way they can finance all of this through bond issuance. The Fed will have to at least partially monetize this to keep interest rates low.  



Coincidence? Bin Laden Killed Just In Time to Save Obama's Falling Approval Ratings

With his approval ratings at all time lows, Obama pulls an ace from his hat. The President announced tonight that the US has killed #1 terrorist Osama bin laden, mastermind of the 9/11 attacks. UPDATE: Bin Laden killed during gunfight in Pakistan. Obama personally ordered attack on Bin Laden.

My question. This seems like perfect timing for Obama, who needed something big to restore credibility to his blemished administration. Well he got it. Obama will now be forgiven for starting illegal wars in Libya, continuing the wars in Iraq and Afghanistan, violating the Constitution with his health care law, keeping Guantanamo Bay open despite promising to close it, and other policy failures. His 2012 re-election prospects suddenly look much better.

All of this seems awfully suspicious, especially the part about the US having Bin Laden's body. Give me a break.

One more thing. Don't think the war on terror will be ending anytime soon. The government will keep using the threat of Al-Queda to destroy the Constitution and Bill of Rights. That means more groping of your children by TSA thugs in the airports and more police state measures to keep you safe. Perpetual war for perpetual peace!

Update: Obama have trouble reading from teleprompter during speech. Calls for national unity similar to what happened after 9/11.

Crowds gather around White House. Fools think war on terror is over.

Terror alert to be increased after Bin Laden death.

2nd Update: Obama's re-election odds increase after Bin Laden death according to Intrade. Now at 70%

Black Swan Insights  


C'mon, Zimbabwe Ben, Why Not Short Some Oil?

I am just thinking out loud here. If the Fed can openly manipulate interest rates, bond prices, and equity markets, then why is it unable or unwilling to manipulate oil prices lower? After all, a decline in energy prices would significantly help the US economy in effect by creating a tax cut for consumers. Imagine if you only had to pay $2.00 a gallon for gas instead of today's egregious $4.00 a gallon. You would have more money to buy all of those vital American necessities like IPads, flat screen TV's, and other Chinese slave labor made products. All kidding there are many benefits to lower oil prices, including:

1. Increase GDP Growth---According to most analysts, a $10 rise in the price of oil lowers GDP growth 0.2-0.3%. This makes sense because higher oil prices act as a tax on the economy, lowering consumer spending and hurting corporate profits. Q1 2011, US GDP came in at an anemic 1.8%, which is far below potential and will do little to solve the unemployment situation. The main reason for such low growth is the rise in energy prices. Since September of 2010, oil prices have risen from around $75 to $113 a barrel. This has reduced GDP growth by over 1%, which is significant and costs will likely increase over time. However, if oil prices fell from $113 to a more reasonable $50 a barrel, the economy would could easily start to grow at a more healthy 3-3.5%. An economy growing at this rate would reduce unemployment much faster than current Fed projections.

Below is a chart showing the negative impact of high oil prices on GDP growth

2. Lower Inflation--While the Fed ignores food and energy from its inflation measures, there is no doubt that inflation is here and is negatively impacting the economy. Companies are forced to either absorb higher raw material costs (hurting profits) or increasing prices (hurting consumers). Inflation is also a sticky thing. Once it becomes embedded into an economy, it is very hard to reign it in. Just take a look at what Paul Volcker had to do to bring an end to the 1970's stagflation. He had to jack up interest rates to 20% and cause a serious and deep recession. The point is that once inflation is out of the bottle, it is very hard to stop it from continuing. If the Fed simply brought oil prices back down to $50, it would significantly lower inflation expectations which pose a major risk to the US bond market.

3. Help Real People and the American Economy--lowering oil prices would benefit everyone, especially the poor and middle class who are struggling to survive record high commodity prices and high unemployment. By lowering the price of oil, it would make life a little easier for the Americans and increase consumer spending. The only problem is that the Federal Reserve has never given a damn about helping the American people. The reason is because the Fed is owned and operated by the major Wall Street and European banks which have diametrically opposing interests to the American people. The Fed was created by the banks to provide funding to them during financial crises. In effect, the Fed is nothing more than a taxpayer-backed piggy bank for the banks to suck dry. And best of all, there is no Congressional oversight of the Fed's operations because it is a independent agency.

4. Decrease Speculation in Energy Markets--Over the last 5-10 years commodity markets have become dominated by speculators (mainly long only speculators). These speculators have caused massive market dislocations as can be seen by the price of oil from 2008-2011. Prices have gyrated from a high of $147 in July 2008 to as low as $35 in Feb 2009, all the way back to $113 in April 2011. There is no fundamental reason for these wild moves. It is simply a matter of speculators flooding the market and taking control of the price. If the Fed shorted oil prices, it would ruin many speculators who are betting on continuously rising oil prices. They would be forced to liquidate their long only positions.

5. For the Fed, Manipulation is Easy--The Fed can literally print money out of thin air (or at least electronically). This makes manipulation or targeting (the more politically correct term for manipulation) a simple task. All the Fed has to do is short oil futures until the price falls back down to a reasonable level (say $50). The oil market is much smaller than the US bond market, making the task of asset targeting much easier. The Fed would only have to short prices enough to force major speculators like hedge funds to liquidate their positions. This margin selling by long speculators would create a cascading effect as lower prices lead to more selling. The idea is that the speculators would do most of the work to bring oil prices down. The Fed would just have to provide the catalyst by starting the process. Whenever the dip buyers in oil come back to the market (boosting prices higher), the Fed will be there to ruin them and knock the price down again. The whole operation could be done for just a few hundred billion, a trifle compared to the over $2 trillion the Fed has already printed.

So the question is why has the Federal Reserve not simply shorted $50-100 billion worth of oil futures? Some may say that manipulating prices is wrong in our supposedly free market. But why is it all right for the Fed to control the bond market and interest rates? You can't have both a free market and a central bank controlling the price of money. Since we obviously do not have anything nearing a free market, let's just admit it and lower the oil price because it is harming the economy. One other argument is that the Fed does not have the authority to short oil futures. This is, in my opinion, an asinine point. Look back at the 2008-2009 financial crisis. Pretty much everything the Fed did during this period was illegal. From bailing out insolvent banks to lending money to foreign institutions (including the central bank of Libya) the Fed has shown that it is above the law in all respects. So let's be reasonable and agree that the Federal Reserve is not bound by any law. All that is required by the Fed, is a meeting where they declare a crisis or emergency and they can pretty much exercise and powers they wish.

Of course, the Fed would have to keep the price manipulation a secret because it would upset major oil producing countries like Saudi Arabia and Russia. The good news is that the Fed is highly capable of keeping secrets from the public so they should not have any problems in this respect.

So come on, Zimbabwe Ben, you have illegally spent trillions bailing out your bankster overlords, so why not help out the average Joe by shorting a few hundred billion worth of oil contracts?

Black Swan Insights

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