January 2012 Market

[68Camaro]

First (placeholder) post for January 2012, content to follow

(Dec 2011 thread is here) viewtopic.php?f=17&t=10063
Post on pro/cons/procedure for taking possession of physical stock certificates
- viewtopic.php?f=17&t=10063&p=104059#p104013

(Nov 2011 thread is here) viewtopic.php?f=17&t=9307
(Oct 2011 thread is here) viewtopic.php?f=17&t=8831

[68Camaro]

First post in over a week, as despite having time off at the holidays, nothing truly notable has been going on in the markets. Yes, there was a bit of a dramatic continuation of the PM dip during last week, but that almost seems inevitable given the psychology of the market.

To repeat some well-known background, some of the practioners of Elliot Wave theory (don't get hung up on the mysticism over this, it's "just" a pattern) - especially Jim Sinclair - have noted that PMs have been following the Elliot Wave for the entire gold bull market. According to that pattern (let's not call it a theory) gold was due for a dip into the low 1500s (and possibly even into the 1400s - the pattern has tolerances on it), before recommencing into the next big wave up. While there are many calling for the end to the great bull market, this is all part and parcel of the repeating pattern. When the bullish sentiment dies and people are calling for new lows, and when this is also consistent with a EW pattern low, then there is great expectation for the bottom to be here or near, and the next great pull up ready to start.

[68Camaro]

More on EW theory related to the current gold market, and predictions from 6 weeks ago on trending:

http://www.jsmineset.com/2011/11/14/keynote-speech-at-sydney-gold-symposium-14-15-november-2011-by-alf-field/

[68Camaro]

In my opinion, we're still in slow news mode. I'm positive there is "stuff" going on behind the scenes, but very little MSM reporting of it.

Before I get to what notable events I have, I have to say that this morning just as I was starting my work commute, 1 minute after pulling onto the interstate, I topped a small ridge, looked to the East, and saw the absolutely most amazing sunrise I have ever seen in my life. This without regard to date or location. I've seen some beauties out west, typicallly a more consistent source. I've seen some amazing sunrises on the beach. I've seen some great ones in the mountains. And Florida, especially interior Florida, is not the place I would recommend people to go to for spectacular sunrises or sunsets - which made this one even more of a surprise. Swirling clouds filtering the early sun into a spectacular red-orange mass that spread across the low horizon, bounded by other layers of clouds that put a frame on it. It was a breath-taking show, created and offered by the Author of beauty. I called my wife to have her look, but the house is too low in the trees - so she saw the glow, but missed most of the show. And a minute later, it was gone. Wow, I wish I could have stopped to take a picture, but the traffic prevented it.

So, to news. After a difficult December, PMs are clawing their way back up a bit. Gold back into the mid 1600s, and silver above 30, and both trying to stay there for the moment. A lot of technical analysis as well as overwhelming bearish sentiment that suggests that we've seen a bottom. Many pundits predicting solid 2012 performance for PMs, with several anticipating quick rises by April. We'll see. At any rate, silver still seems like an excellent buy at $30-ish. I believe we've been more or less at a bottom, and have continued to buy both gold and silver over these several months.

US jobs up slightly. Hardly enough to do more than take a slight edge off the desparation. We would need to see that level of growth or better for a decade before we actually felt like we had a better economy. But, its something, and better than where Europe is.

Germany reported negative growth in 4th quarter and likelihood of that continuing into first quarter of 2012, so that satisfies one definition of recession and suggests that Europe overall is already in recession. Nothing really surprising - the surprise would have been if that were NOT in recession.

Price of Italian bonds reportedly spiking again.

China was reported as continuing to escalate buying of Gold - but that was November data, so a two month lag, and nothing really surprising there. It's clear that China is moving its foreign reserves out of USD and into gold, over time.

The premium on Sprott's PSLV closed-end trust of 22M oz of silver hit an all-time high of 34% on Tuesday morning. Why? No one knows. Many scoffers say that absolutely does not correctly reflect the price of silver. And, at small numbers of ounces, they have a point. 10s, 100s, 1000s of ounces can still be bought at COMEX spot plus a small premium. But some others suggest that the premium for PSLV reflects a different reality for truly large buyers - those wanting 100,000 oz, or 1,000,000 oz, combined with assurances that those physical amounts actually exist and can be obtained. Time will tell.

[68Camaro]

Spanish and Italian bond yields drop. Hmmm. Wonder who is buying? Surely no sane person, or private equity fund. Perhaps only the central banks, using (indirectly) US Fed money? In effect, using newly printed money? Yep - that's what I think.

I think an anonymous poster on yahoo finance, in response, captures the feelings/beliefs of many...

The stock market is acting now just like it did in the fall of 2007 when everything was being ignored and people were being told how great things were out there, about 9 months before it all collapsed into a smoldering heap. Back then, Bernanke, Congress, Paulson, the filthy banks were all lying about the state of the economy and the financial system. People think the 2008 financial crisis is 'over' now when actually, 2008 was just the beginning of it. Europe will collapse this year and take the world down with it. Mark this post - it's coming... but it won't happen until all the insiders and big boys are given time to exit their equity positions - just like the last time.

[68Camaro]

From Yahoo Finance: "Nine of the 17 members of the euro area had their credit ratings cut, with Austria joining France in losing its AAA status. Those two, along with Malta, Slovakia and Slovenia had their ratings cut by one notch, while Italy, Portugal, Spain and Cyprus suffered two-notch downgrades."

Also, all 17, except Germany and Slovenia, remain on negative outlook list, meaning they are liable for further downgrades in the near-term future.

Euro dropped back below 1.27 again to the 1.26s, suddenly, on the news, flirting with the 1.25s. This helped shock Gold and Silver a bit, though PMs recovered somewhat late in the day to near 1640 and 30. From the recent lows both have come back well in a short time, but there is significant resistance to the 1750/34 levels to be overcome before we have a clear road again.

PSLV premium has dropped back to a still high, but at the high side of normal, 24%.

[theo]

I don't just don't see how various economist can credibly predict a strengthening U.S. economy in 2012. The Eurozone is collapsing, albeit in slow motion. I don't know if the downgrades will make that much of a difference. They just confirm what the market already knows; that most soveriegn debt in Europe is basically at junk status. Back in the U.S. we have an economy that hasn't been this centrally managed since WWII.

I think the situation in Europe will put a significant drag on PM prices through the first quarter. However, I think that more QE due to a sagging economy will have silver and gold testing old highs by late Summer/early Fall.

Just my two cents.

[68Camaro]

re:

http://finance.yahoo.com/news/spain-sells-4-88-billion-101819950.html

Message I take from this is that the flood of "liquidity" (newly printed money) is allowing ECB (or indirectly the CB) to buy the PIIGS bonds, and they are "selling" for less because there is no competition for them - they are the only ones buying. I take this as there is no longer a real market for these bonds, it has ceased to be a true auction, so following interest rates on some of this sovereign debt will no longer be a marker for measuring success or failure of these governments.

[68Camaro]

We now know at least part of the reason for the high recent PSLV premium. An expectation that the next silver offering was due to be released. And it fits the previous patterns for PSLV, especially the temporary rise and then drop in premiums last Oct/Nov when the plan to expand the fund was announced. That offering was released today at $13.20 per unit, at a time when the going price had increased to 14.56, so the value immediately dropped to the $13.20 offer price, down to a 9% premium. The value will stay more or less there until the offering is fully subscribed to, though there is already a slow rise in price to 13.29 as I write this.

They will be adding to their current 22 M oz with another influx of capital that - in this phase - would amount to about 10 M oz at current prices.

[68Camaro]

PSLV offering completed, and with it >10,000,000 oz bought.

TORONTO, Jan. 23, 2012 /PRNewswire/ - Sprott Physical Silver Trust (the "Trust") (NYSE: PSLV / TSX: PHS.U), a trust created to invest and hold substantially all of its assets in physical silver bullion and managed by Sprott Asset Management LP (the "Manager"), today announced that it has completed its follow-on offering of 26,450,000 units of the Trust ("Units") at US$13.20 per Unit for gross proceeds of US$349,140,000 (the "Offering"). This includes the exercise in full by the underwriters of their over-allotment option. Purchasers in the Offering included Sprott Inc. and the Sprott Foundation, which are affiliates of the Manager.

The Trust will use the net proceeds of the Offering to acquire physical silver bullion in accordance with the Trust's objective and subject to the Trust's investment and operating restrictions described in the prospectus related to the Offering, and as of January 23, 2012 has contracted to purchase a total of approximately 10.57 million troy ounces of physical silver bullion. Once the Trust has taken delivery of all the silver bullion, it will publish the serial numbers of all bars held by the Trust on its website. The net proceeds of the Offering per Unit were greater than 100% of the most recently calculated net asset value per Unit of the Trust prior to, or upon determination of, pricing of the Offering, as required under the trust agreement governing the Trust.

[68Camaro]

It's been a rather dull market lately, at least in the MSM. But things are clearly simmering underneath. Meanwhile the market has it's see no evil, hear no evil blinders on, and is marching forward - even in Europe - as though there are no debt crises. And in fact TPTB, not surprisingly - have succeeded for the most part in kicking the can down the road a few months.

As I'm sure I've said before (probably several times, but if I only thought it then here it is) because of TPTB success in controlling the surface of the markets, when the big crash comes it will happen suddenly, with almost no specific notice in advance, and the bulk of the immediate damage will be over and done with in a matter of a handful of hours. The longer term consequences will ripple out like a tsunami and will not crash onto some shores for days, weeks, months, or even years. The warning bell has been sounded about the earthquake probabilities reaching certainty over a given span of time.

Unsurprisingly, PMs have rebounded off their December lows and are marching back up toward Gold 1750 and Silver 34. Soon (though not without more resistance) to hit Gold 1900 and Silver 40 again on their way up to new record levels (as measured in USD). The physical market is inevitably starting to crush the paper market. It is only a matter of time.

I hope you are mostly out of all but the most hardy securities. It is a bear trap market - it is lulling people into re-investing, only to crush them when the USD collapses or the standard of exchange converts to a new reserve currency.

[68Camaro]

More than two weeks since I felt like last posting. A few things to talk about, so will prepare the Feb thread...