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Long(er) Silver – Bought AGQ

Okay, I had to step in to the silver market today, taking a leveraged ETF play with AGQ.

I’ve owned silver, more or less continuously, since 2009 – in the physical form.

But every now and again I also leverage up the play with moves in the financial products. Now is just one such time.

Silver is a component of my 9th floor. I’ve used it in the limestone stucca that adorns my walls. I used it in the mortar to build the very foundation of the room itself. It’s a staple, because it is so undervalued, I can off the back of my hand say “silver is undervalued” at any time of the day, and probably be right.

I got into AGQ for $41.77. This is just for a trade.

The Fed is printing another trillion dollars, and the debt crises of the world are nowhere near the halfway mark yet.

Mull that over, why don’t you…

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EURUSD Shall Send EU Into Cardiac Arrest

At almost 1.36, purchasers of EURUSD have completely lost grip with reality. Between US monetary policy and Japanese central bank response, carry trades have been caught in a torrential storm. If you were on the wrong side of those moves, your screams were lost to the cheers of equity bulls. However, the move is overextended, largely built on your back.

The problem is that there really is no economy, globally, that can afford to be the leaning post for the rest of the world. The assumption of global macro economics was always that the likelihood of all economies being in the same desperate condition at the same time was negligible. Unfortunately, as the economies became co-dependent, the assumptions of i.i.d. that made those statistical declarations possible withered away.

None of the economists noticed.

So now, here we are, and monetary policy can only be used to grab a quick upper hand. Ultimately, the brunt of utilizing the printing press ends right back on your country’s inhabitants. There’s no “superiorly positioned” exporter that can afford to give up a few points of growth.

So, as you watch the EURUSD climb, remember that each step of the move is unhinging the stability of the largest social wellfare state on the planet. With Germany, the keystone of Europe, flirting with recession, and Spanish and Italian debt barely under control (largely thanks to a renewed Japanese/US carry trade), the wellbeing of EU states is imperative.

But as I said, all countries have become interdependent. The same monetary response that has lowered Spanish/Italian bonds is also making EU exports uncompetitive. Any previously witnessed ECB policy response to this problem simultaneously makes debt yields increase. The only way to avoid the complimentary variance here is for the ECB to purchase EU debt directly.

Throughout the entire debate, this activity has been staunchly opposed by Germany, Finland and Austria. Will those countries cave? Or will they finally succumb to their ethnic roots, and become completely disaffected with EU authority?

Regardless, the euro disaster has not finished rolling yet.

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Shorting Euro – Bought EUO For $18.25

I opened a position in EUO for $18.25. This is a starter position, which I will add to every few weeks/months.

Remember, every time thus far that European authorities have put claim on “the end of the crisis being just in sight”, it has come back to haunt them.

They are playing a confidence game. The realities of the situation are different. Just below the surface, trouble is brewing.

Remember that.

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Damage Erased Into The Close

Sticking with the larger theme over the past two weeks, my portfolio is melting higher into the close. AEC, CLP, CCJ, BAS, and RGR are all rushing up, either for profits or, in the case of Ruger, to close the day flat. Which, given Ruger’s last month, is really not a problem at all.

Physical silver has largely recovered from the Fed scare. The euro has also rebounded after Junker tried to talk it down.

My expectation is for higher prices. We are running, and only confirmation that the recovery is not happening will stop us. If you are betting against the indices, or are out of the market, I have bad news for you – that is months away.

You are stuck exactly where I was last year; having the right answers, but getting whipped anyway. It will come through for you in the end. But unlike 2011 and early 2012, this time I will be mocking you, sipping straight whiskey, and the pain will only end after I’ve locked in profits and position myself against the market.

So I am afraid you will be on the receiving end of jokes until at least March…

Expect treasuries to sell off as short sellers start trying to edge into that trade. The rising yield will only add to confirmation bias, bouying the stock markets higher. Both trades will fail in the Spring with bad prints going into summer.

The treasury bears will be killed at least this one last time. The markets will sell off again. I personally will be interested in building a short euro and short oil position sometime in the next two months.

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EU Preparing To Crush Their Own Bonds Again

Good evening. You find me tonight enjoying a small dinner of mostaccioli with a side of bread for taking up a delicious red sauce prepared with a mild citrus flavor and a nice red wine pairing.

I spent the day in retreat, as the market was closed and I had very little to preoccupy myself with.

I did want to address the November 1 effect of all “speculative” naked credit default swap positions being banned in Europe. How, precisely, one can ban all speculative positions in a counterparty relationship is beyond me. Logic dictates that there always has to be at least one “speculative” position set to make money without a covered stake (we all know the European banks don’t have the money to cover their liabilities because that’s not how fractional reserve banking works).

I suppose I understand that what the EU really means is “no buying CDS coverage unless you’re one of our ‘preferred citizen’ lenders”. That’s fine.

It won’t work.

The EU is only delaying the inevitable. Besides, the CDS market had largely collapsed before now anyway; not from the potential restriction, but from fear that any bond bet could be destroyed in seconds by ECB intervention or EU government bail outs. Or from a Greece like event where the core government ends up strong arming the CDS committee from declaring a technical default while still subjecting unwilling bondholders to a haircut.

For the moment, distressed debt of EU nations is subdued. That’s a large part of the reason I am long.

In a few months though, I could see myself getting very bearish on Europe and global growth again.

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Strong Dollar The Theme Of The Day

In case you’re living in a dive bar, I thought I’d point out that today is all about the dollar not sucking as bad as everywhere else.

Silver is getting dismantled, and foreign companies are being carved open. Bond yields continue to compress. And I hope you didn’t take Cramer seriously when he told you to start buying up companies like McDonald’s – because that’s basically the archtype of “things that are about to get their faces smashed in.”

There is, however, hope.

Well, hope for me…

AEC and CLP are holding up pretty well. That won’t last, if we should go full on liquidation. But for now, at least, they are toying with my emotions, making me think “hey maybe I’ll avoid this shit bomb.”

Probably not.

Remember folks, cash. Just look at the DXY. Let that be your guide. Until we get absurd dollar strength and some serious blood flows from the commodity guys, there isn’t going to be any chance that Ben makes it rain.

In the meantime, I’ll just be hanging out here, counting my dollars, thinking about what I will buy for the 50% off “Going out of Business” sale.

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