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Might Silver’s Current Chart Similarity with 2008 Be Implying What’s About to Happen to Rest of Market?

Editor — Tue, 18 Oct 2011 07:57:46 +0000

A look at the chart for SLV from September 2007 to August 2008 (11 months) and from November 2010 to October 2011 (11 months) is remarkably similar – almost identical in fact. Therefore, if silver continues to trace out a similar path to what transpired in 2008, what are the possible implications for stocks, bonds, currencies, commodities, and precious metals? Take a look at the following 19 charts for some possible outcomes. Words: 731

So says Chris Ciovacco (www.ciovaccocapital.com) in an article* which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.

Ciovacco goes on to say:

You don’t need to know anything about technical analysis to conclude the two charts below of the silver ETF (SLV) look similar in many ways. The first chart is from August 2008 and the second from 2011 (compare points A through H).

How can these charts help us with stocks, commodities, and precious metals? Silver tends to be in greater demand when (a) the economy is expected to grow, and (b) when inflation expectations are high…When silver is weak it is logical to question (a) the expectations for future economic growth, and (b) if investors are concerned about future inflation. If inflation is not a concern, then deflation fears are most likely increasing.

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The charts below show asset class performance from August 29, 2008 through November 21, 2008, allowing us to answer the question, “What happened next in the 2008 deflationary period?”

The key for the charts below: (SPY) S&P 500, (EEM) emerging markets, (FXA) Australian dollar, (UUP) U.S. Dollar Index, (DIA) Dow, (DVY) dividend stocks, (TLT) Treasuries, (SH) short S&P 500, (GDX) gold stocks, (GLD) gold, (SLV) silver, (DBC) commodities, (DBA) agriculture, (EWG) Germany, (PFF) preferred stocks, (XLU) utilities, (XLP) consumer staples, (XLY) consumer descretionary, and (JJC) copper. Symbols and descriptions are shown in the upper-left corner of each chart below.

What happened next in 2008?

If the silver ETF can fill the gap…between 32.54 and 34.51, it increases the odds of bullish outcomes for stocks and commodities. The longer SLV can hold above 32.54 the better for the bulls. If SLV fails to clear 32.54, the odds increase of an August 2008 scenario occurring again, similar to the outcomes shown in the charts above. An intraday move in SLV below 27.41, and more importantly, a weekly close below 27.41, increases the odds the deflationary trio of shorts (SH), the dollar (UUP), and bonds (TLT) will perform well.

Conclusion

As of this writing, we continue to give the bearish/deflationary case the benefit of the doubt, understanding strong and gut-wrenching countertrend rallies are part of any bear market. Our portfolios continue to contain a mix of cash, shorts (SH), bonds (TLT), and the dollar (UUP). The deflationary/bearish case will take a hit if the S&P 500 trades between 1,250 and 1,260 for more than three or four days.

*http://www.safehaven.com/article/22924/silvers-signals-lean-bearish-for-stocks-and-commodities

Your Savings and Investments Will Be in Dire Jeopardy Going Into 2012 Unless…..

Editor — Mon, 22 Aug 2011 07:59:51 +0000

The United States is now so far in debt, it will never be able to pay it off, that is, without hyper-inflation. That subject alone will require many more articles than this. The sky is not falling (yet) but your savings and investments are in dire jeopardy going into 2012. You might wish to now do something to protect yourself. [May I offer the following investment ideas.] Words: 1648

So says H. Pelham (www.retirefund.com) in an article* posted on Seeking Alpha which Lorimer Wilson, editor of www.munKNEE.com (It’s all about Money!), has further edited ([ ]), abridged (…) and reformatted below for the sake of clarity and brevity to ensure a fast and easy read. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement. Pelham goes on to say:

Today, as the massive infusion of liquidity into the U.S. economy comes to a head, it is time to consider that the U.S. dollar is skidding down a very slippery slope. No, it won’t be like the Weimar Republic, but if it loses even 50% of its value (in my view, the low end of probability) then your retirement fund is in jeopardy. Across the pond, the Euro may not survive at all.

You already are aware of the destructive government policies that emanated after the vultures of Wall Street picked over a self destructive, over-leveraged real estate market. It was a shady, over leveraged, derivative market and a banking system shot so full of holes, it resembles the pock marked buildings of Europe during the worst of the fighting. You have been hammered with the details for three years now. The question is, and has to be: What are you doing about it?

Have you bought some physical gold, silver or platinum as a hedge?
Do you own land that can grow food?
Do you own land rich in minerals or precious metals?
Do you own those mineral rights?
Do you own property you can rent?
Do you own oil?
How about a piece of the future of energy; natural gas, lithium, wind solar and fuel cell technology?
Do you own a small piece of the burgeoning mobile web business?
Or, do you have a mattress full of cash?

If it is cash you are sitting on, in any form, but especially U.S. treasuries, European bonds, or muni bonds, then maybe you should consider something more solid, with an actual future.

Here are my favorites in the areas mentioned:

Oil:

Suncor (SU) has a portfolio of oil reserves from Canada to the Middle East, however it is in Canada, and in particular the Canadian Oil Sands that Suncor is a true heavy weight. There is a growing consensus that the oil sands will help power North America for the next 100 years. Cenovus (CVE) also has key holdings in the oil sands and is moving ahead with state of the art technology. Exxon Mobile (XOM) is, well, Exxon Mobile! It is the big kahuna. Nuf said!

Gold:

As the major fiat currencies of the world begin to flutter and fall over the next year, there will be a rush to own precious metals like physical gold, silver and platinum. Some will tell you these are in a bubble. I think they are currently half priced, if that.

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I have a preference to hold physical gold instead of ETFs like the GLD. Governments around the world are, at this writing, amassing more physical gold holdings for their foreign reserves. Recent moves in countries as diverse as China and Argentina keep gold firmly in the bull category. I also like gold miners in this environment, especially miners with lots of gold in the ground, little or no hedge book, increasing production and more than one mine.

[Incidentally,] fall is the traditional marriage season in India, where gold in a dowry is considered an absolute must. India buys tons of gold every fall.

Heavy weights in gold production Barrick (ABX) ,Gold Corp (GG) and Kinross Gold (KGC) are three of the big fish in this small pond. (Small pond if you consider that all of the gold, currently above ground, if melted down, would barely fill two Olympic sized swimming pools – and that is after 6,000 years of digging.) These three all have good, low cost production, lots of gold in the ground, and good management.

Smaller players with great upside, good production and huge deposits include Sangold (SGRCF.PK) and Brigus Gold (BRD) They are well positioned with lowering costs, good management and great properties holding millions of oz of proven reserves that may lay in the sites of some of the bigger fish. Their shares can still be had for only a few bucks (for now).

Nautilus Minerals (NUSMF.Pk) is a growning company in a brand new gold mining area, seabed mining, and has recently been granted huge swaths of undersea mineral deposits by several South Pacific governments. They are years ahead of the nearest competition in developing undersea mining equipment. They have some serious mining heavyweights as investors and the gold, silver, copper and cobalt reserves they are amassing is staggering. (This is a speculative stock but with immense upside potential.)

Silver:

Eric Sprott of Sprott Asset Management unequivocally sees silver as this decade’s play in the commodity sector, for a number of reasons, not the least of which is silvers traditional trading range of 1-16 gold to silver. Today it is trading in the range of 1-46. Sprott, like me, favors physical silver over ETFs such as the SLV however he recently started his own company’s silver ETF while holding the physical silver for it at the Bank of Canada.

Green Energy

Lithium:

Talison Lithium (TLTHF.PK) of Australia is the largest “pure” lithium producer in the world with the largest and richest spodomen deposit in the world (Greenbushes Australia) and huge new brine properties in Chile (acquired when it swallowed junior Salares Lithium last year). It is the largest supplier of lithium carbonate into the lucrative Chinese market. It is ramping up production by 100% at this writing and has all production pre-sold to its 300 current customers. If Talison seeks a listing in New York over the next year, it could be a grand slam. More speculative plays in the space (with huge resources but no current production) include Western Lithium (WLCDF.PK) and Rodinia Lithium (RDNAF.PK). Both are currently penny stocks with huge upside.

Larger players like Sociedad Quimica y Minera S.A (SQM) of Chile produce lithium as a by product of their larger potash operations and help supply the burgeoning mobile web device industry. However, their preference for selling on the spot market instead of signing contracts is a real turn off for the electric and hybrid vehicle markets who need a constant supply for their industry.

Fuel Cells:

Ballard Power Systems (BLDP) is my pick here. Ballard is the market leader, with 20 years in the industry. Competitors (such as Plug Power) are often called baby Ballards as a number were spun off of this company which holds hundreds of original patents in the development of PEM fuel cells. They currently power buses in cities in North America and Europe, they are supplying 10,000 mobile units to the burgeoning mobile web industry of India, as well as several countries in Europe. They make fuel cell powered fork lifts, recently signed an agreement with Daimler of Germany in the development of FC vehicles and have a working fuel cell stack power plant currently powering a small town in Ohio as a pilot project. That stacking technology will one day allow Ballard to replace entire power plants, from small buildings up to and including large cities, that currently use much dirtier forms of energy. Their fuel cells can operate on pure hydrogen (no pollution at all) or Natural gas, which is now known to exist in vast pools under the United States.

Solar:

Although, like other stocks, First Solar (FSLR) has suffered pullbacks over the past year, this stock is a market leader with first mover advantage (in the larger scale solar field).

Cash:

Canadian dollar, Australian dollar, and New Zealand dollar, are all considered resource currencies, which should do well in a hyper inflationary environment. Canada, in particular, is in good shape. The Swiss franc is up over 14% this year against major currencies. Each of these countries is a small market by comparison to the major fiat currencies, however, taken as a whole, with cash spread around through all four, (and maybe even some Chinese RMB) the risk is laid off substantially.

The Eurozone and the United States will not fall as far as the Weimar Republic’s D-mark did. That is not what I am saying here. What I am saying is that they will fall, and no one knows just how far. As these fiat currencies begin to slide further into the abyss, no one will be able to put a bottom on their value.

If the Germans, who own the strongest economy in the Eurozone, and the third largest economy in the world, suddenly tire of propping up deadbeat countries looking for hand outs and decide to abandon the Euro (a distinct possibility) then the Euro, as we know it, will slip into the trash bin of history as countries like Greece, Spain, Portugal and maybe Italy, revert to their original currencies and default on their debts. French banks as well as other European banks and by proxy, U.S. banks, will suffer huge losses. Many will not be left standing.

*http://seekingalpha.com/article/289156-are-the-euro-and-u-s-dollar-sliding-into-an-abyss?source=email_portfolio

Editor’s Note:

The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.

Permission to reprint in whole or in part is gladly granted, provided full credit is given as per paragraph 2 above.

What are the Alternatives to the U.S. Dollar?

Editor — Tue, 02 Mar 2010 01:46:26 +0000

The Japanese yen, the British pound and the euro don’t offer any appeal over the dollar because the currency market is a beauty contest where the least ugly wins and not only is the dollar the least ugly, but it offers refuge when fear and uncertainty grip the markets. Words: 1006

In further edited excerpts from his original article* Bryan Rich (www.moneyandmarkets.com) goes on to say:

Other world currencies may not offer the liquidity to emerge as a primary reserve currency. Nonetheless, I’m frequently asked how they stack up against the dollar. Do they offer opportunities to preserve the purchasing power of your wealth … or at least make for a good trade? Let’s take a look at:

Dollar Alternative #4 — The Swiss Franc
The safety and secrecy of the Swiss banking system has come into question. The historical safe-haven feature of holding the currency of the neutral Swiss should be an extra benefit these days but the global nature of the financial crisis deteriorated the safe-haven quality of Swiss francs and its preferred status has transferred to the U.S. dollar.

Switzerland’s banking system was (and remains) highly exposed to the financial crisis. Even worse, the global crack-down on tax havens puts the Swiss private banking model in jeopardy.

In addition, the Swiss are printing money at a faster clip than the U.S. and have been intervening in the currency markets to weaken the franc and to attempt to curtail deflationary forces.

The Swiss economy is expected to underperform the U.S. in 2010 and 2011 and interest rates in Switzerland are as low as they are in the U.S. and are projected to follow U.S. rates higher in the coming years, but at a slower rate. Again, the advantage goes to the dollar.

Dollar Alternatives #5 – The Canadian dollar
Canada’s banking system has held up better than its G-7 counterparts and the Canadian economy has tracked the U.S. economy closely through the recession. Although Canada has a strong performance linkage to the price of oil, the economy has an even stronger link to the general health of the U.S. economy.

That’s why the Canadian dollar has tracked the U.S. stock market in lock-step since the crisis broke out. And I expect that trend to continue. So, if you think our stock market will go higher from here, the Canadian dollar offers a dollar alternative.

Dollar Alternatives #6 -The Australian dollar and #7 – The New Zealand dollar
The other two commodity-centric currencies … the Australian and New Zealand dollars … there’s only one story worth telling here. It’s Australia. Australia is the bright spot in global currencies. Its economy weathered the global recession the best, and its central bank was the first in the world to raise interest rates … twice.

Australia also happens to be in the sweet spot to take advantage of growth in China and higher commodity prices. So Australia offers an alternative to the dollar, but only after it pulls back from its aggressive 60 percent surge of recent months and only with an appreciation for the risks … as described below.

Dollar Alternatives #8, #9, #10 and #11 — The BRIC currencies …
Brazil, Russia, India and China are still emerging economies and these developing economies tend to come with imbalances and shortcomings that leave them exposed to excessive volatility. Therefore, they should be off-limits as passive, unmonitored currency investments.

In short, the currencies of these countries are high-beta. So when the risk environment is good, these currencies will do better than major currencies. When it’s not, look out.

Just eight months ago Russia was intervening to support the value of the ruble. For example, just last year Russia spent over a third of its $600 billion in currency reserves trying to defend the value of the plummeting ruble as global capital fled Russia in search for safety and now, the Russians are talking about capital controls, like Brazil has done, to restrict speculative flows into their financial markets.

What a difference eight months makes and that’s indicative of the volatile nature of these emerging market countries and with protectionism picking up globally, the uncertainty surrounding these currencies is even greater.

China’s a different ball game. The managed currency policy in China prohibits the Chinese currency from playing a role globally, anytime soon. The Chinese will continue to do what’s in their best interest and keeping the yuan artificially cheap creates plenty of advantages for the Chinese — and disadvantages for the rest of the world.

You Must Respect Risk
We are in highly uncertain times, and, in my opinion, the markets are far too complacent in assessing risk. Rising stock prices have a way of making people feel good but keep this in mind when considering alternatives to the dollar for the sole purpose of preserving purchasing power of your wealth: there is always the risk of a decline in these currencies, even when a fundamental indicator may seem positive because all of the currencies I’ve mentioned today are intimately tied to the performance of the global economy and with that linkage, comes risk.

In this investment climate, investor perception trumps fundamentals. When investors feel confident, we see strong surges in global currencies but when fear sets in, it’s just the opposite … investors look to the U.S. dollar.

*http://www.moneyandmarkets.com/weighing-the-dollar-alternatives-part-ii-5-36616 (Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil.)

Editor’s Note:
- The above article consists of reformatted edited excerpts from the original for the sake of brevity, clarity and to ensure a fast and easy read. The author’s views and conclusions are unaltered.
- Permission to reprint in whole or in part is gladly granted, provided full credit is given.
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