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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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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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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You think this makes sense do you? US markets are ramping to levels not seen since the last, great bull market. The debt of countries like Italy (where ex-president and child rapist Berlusconi is threatening to splinter the votes to ungovernable ends) and Spain (where a quarter of the youth are disaffected, unable to start their lives and about one tenth of the land mass is preparing for secession) are trading for yields that are really, reasonable. Oil is spiking towards the $100 mark – meanwhile Europe remains marred in recession and Germany just joined them. Oil stockpiles are increasing.

Precious metals are collapsing in price and the Fed is printing $80 billion a month.

In short, my dear reader, you are out of your minds.

But that is all right. You see, I foresaw your absurdity – your complete mental breakdown – months ago. I prepared for this. I realized, “this makes no sense”, and because it made no sense, I knew you would act this way. How else would the crazy behave in a crazy world?

So I did the opposite of what makes sense. And I did it first, before you.

Now, let’s chat about the euro. The $EURUSD is completely deranged. If it were a person, it would be a homeless man who found a tattered tuxedo, and is presently running around, hiding in steam vents in the middle of the street in Detroit. But, by some divine joke, this homeless man has been mistaken for a titan of industry, and is currently invited to all the high social class dinners.

“Aaaaahahghgh”, he gurgles in reply to requests for his opinion on gun control.

“EEEEAAAA”, he says when asked for advice on pre-tax 401K versus Roth.

And then he proceeds to eat his napkin with an olive fork.

Now let’s chat about oil. Oil is going way lower. The US economic numbers and forecasts are, again, way off, again. This is really not very funny anymore. How ten thousand economists can blow this year after year, never bothering to even pretend to learn from their mistakes the year prior…they should all be fired and stripped of their degrees. Pathetic…

Plus, Europe remains in a spiral. Germany, the heart of the EU, has finally entered recession this year. Question: knowing German culture, do you think that will make them more or less willing to work with their fellow member states?

Wait, don’t answer that. I’ll answer it for you. “It will make them less likely to work with their peers.”

Very good me, have a reward.

Why thank you.

German’s are going to increasingly view the rest of Europe as a useless bundle. If German wellbeing takes a hit, they’re culturally predisposed to blaming Italy or Spain or France for dragging them down with their wild schemes and self-centered demands. If Germany was reluctant to sit by and watch Draghi open the ECB doors to distressed banks before, wait until their worst prejudices are confirmed. Free money was supposed to help Europe, remember? Germany goes into recession and they’ll make sure the Bundesbank does everything within its power to hamper the rest of the EU at every turn.

Now let’s chat about housing. Housing prices are going higher, but that’s not going to help you sell that third, four bedroom house you’ve been desperately clinging to, praying for a buyer. Your retirement plans are shot, pal. Prices are going higher, but sales volumes are staying depressed. The housing recovery, like most luxuries, is reserved for the rich.

Now let’s chat about bonds. Safe haven bonds have got one major push left in them. I don’t expect the US 10 year to clear 2%. Meanwhile, bonds of Italy, Spain, Greece, etc are WAY too high. They are going to be taken out back to the woodshed before summer.

After that, I’m going to reinvestigate building a short position in American treasuries. We’re one major push in commodity prices from the Fed being strung up without any options for recourse. Because they’ve decided to load up on assets yielding 2%, they really don’t have much in the way of choices for controlling the money supply, unless they want to jack up the discount rate and watch the banks crash screaming back into bankruptcy. The economy is going to become increasingly wild, like a Stallion that got away from the Spanish.

For the moment, bet on the Fed and bet on higher prices. But always remember, in the back of your mind, that trouble cannot be vanished with the wave of a wand. Problems will always materialize in some way, and if not addressed, the consequences of those deviations can build to tremendous proportions.

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I have not banged on this pot in a while, yet its presence should have been taken as a foregone conclusion.

Still, for a moment, I’ll hang it on a shelf.

Earlier this year, I didn’t believe we’d go over the fiscal cliff, mostly because I thought “that would be stupid”.

And stupid it will be.

At the end of the day, I blame the Freshmen Tea Party Republicans for this, because they willingly surrendered a voting majority, tied their hands behind their backs, and jumped into the water – Javert style. What the hell is this, the finale of Les Miserables (that looks incredible, by the way)?

Now the ramifications of this will be dollar weakness. Also, we’re already getting calls for more Fed easing? I think that’s premature, just like the calls for QE3 were initially way premature.

But no matter what, I’m seeing a few months of intense dollar pressure, which will likely translate into EURUSD support near this 1.3 mark.

But make no mistake – over the next several years, the EURUSD will enter sudden periods of cascading, which together will lead the dollar and euro to parity. The resumption of this inevitability will probably recommence this spring.

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What has been apparent to anyone with a $5 calculator purchased from a gas station is now official in the grand eyes of professional statistics keepers. Europe is back in recession.

For those of you who’ve been following along, this is no shock. Many many many people have laid out the situation and explained that this was unavoidable – myself being just one of them.

Sadly, for the EU citizenry, the pain will not stop anytime soon. The persistent problem the whole of Europe faces remains unfixable; which is a mountain of short term financial claims for redemption. What’s more, because of the means that these bonds and entitlements have been structured, the ECB cannot intervene.

The ECB’s intervention would be a moot point. They cannot roll the claims over into long term debt, as we have here, because so many of them are maturing in the front months that to do so would put the continent so awash in currency, hyperinflation would drown the populace.

There are only two ends to the Europe game that would avoid this death by prices:
1) Vast segments of the population agree to rollover their debts into long dated maturities, helping create order and price stability
2) Defaults are used to create selective order through attrition

Soon, expect another trillion euro injection to try and bridge the problems. It won’t work, like the last massive maneuver did not work. But they have to try. And upon attempting this prices will spike, confidence in the EU will collapse, and the EU members will find the recession deepens.

The $EURUSD is ready to make the next leg lower, I believe. Soon.

And Mario Monti’s exasperated insistence that the euro is irreversible will fall on deaf ears.

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