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Thursday, March 31, 2011

Wal-Mart US CEO To America: "Prepare For Serious Inflation"

Faithful readers know that beginning last September I started harping on cost push inflation. At the time I said,
  • [It's] inflation that isn't (because government doesn't count it anymore).

    The quantitative easing and stimulus money are working their way into the commodity sector which is allowing the dogs of inflation to slip their leashes and work their havoc.

    Take a look at the way food prices are being driven to unseemly high levels once again just as they were in 2008.

    Corn is coming up on $5.00, wheat is more than $7.00, soybeans are over $10, sugar is over $0.24/pound, cotton is closing in on $1.00, coffee is up near $2.00 pound wholesale (which is a 13 year high), cattle are just shy of $1.00/pound, bellies are trading over $1.50/pound for fresh product.

    What does it all mean?

    It means the consumer is on the verge of watching his disposal income be decimated by high food prices.

    In Canada this comes at a time when most Canadians are living paycheque to paycheque and are saddled with the highest levels of household/mortgage debt ever. Disposable income is at an all time low. In the USA, a record number of Americans are on food stamps and are either unemployed or underemployed.

    The only saving grace is that energy prices have not YET begun moving up alongside the rest of the commodity complex. But it's only a matter of time. When the crude complex gets involved you will see home heating bills, home cooling bills, industrial energy costs and gasoline prices join the list of soaring costs nationwide.

Well 7 months down the road and we see that the CEO of Walmart has this warning Americans that U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products.

Walmart says that "every single retailer has and is paying more for the items they sell, and retailers will be passing some of these costs along. Except for fuel costs, U.S. consumers haven't seen much in the way of inflation for almost a decade, so a broad-based increase in prices will be unprecedented in recent memory."

Read that again... inflation will be unprecedented in recent memory.

But since governments in both American and Canada changed the way they calculate inflation starting in 2000, 'official' statistics will claim there is no inflation. Which means that as workers try to negotiate wage increases to offset the ravaging effects of higher costs in just about everything important, they will be denied as employers hide behind the government sham that is the Consumer Price Index.

You may have already noticed the rising cost of things on your pocketbook. But the reality is that you haven't seen anything yet.

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Wednesday, March 30, 2011

Change...


A five minute presentation made at Sony's annual shareholders meeting about change.

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Monday, March 28, 2011

Bank of Canada says many are underestimating what's happening

On Saturday Bank of Canada Governor Mark Carney was giving a speech to the annual meeting of the Inter-American Development Bank in Calgary.

He noted that commodity prices could continue to increase for decades (hello Gold and Silver) and encouraged central banks in emerging markets not to delay raising interest rates because inflation pressures will only worsen.

And you know what that means for interest rates, right?

"Everything else being equal, higher commodity prices usually necessitate higher policy rates. Even though history teaches us that all booms are finite, this one could go on for a long time," Carney said.

More warnings, but many want to know WHEN!

"Bringing that message back to Canada — even if the US Federal Reserve stays on hold through 2011, look for the Bank to start responding to rising commodity price pressures before long." BMO economist Douglas Porter said in a commentary.

Many figure it will come after the Federal electiion on May 2nd.

But by far the most significant comment came when Carney said, "some economies are postponing monetary tightening in the hope that old relationships will reassert. Others are resisting capital inflows. And all appear to be underestimating the scale of what's happening."

There are those who will pooh-pooh Carney's comments as more empty warnings.

They ignore at their own peril.

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Sunday, March 27, 2011

The fickle winds of change.

Along with the west side of the City of Vancouver, the City of Richmond has experienced a surge in house prices as well. And like Vancouver, hot asian money is said to be the reason.

According CBC, home prices in Richmond are skyrocketing.

The Real Estate Board of Greater Vancouver reports that, over the past year, the price for detached homes in the Vancouver suburb has climbed 20% (about $215,000). The median price for a detached home in the Garden City is now hovering just above the $1-million mark, up from $885,000 just six months ago and $879,000 one year ago.

Giddy up.

And according to Patsy Hui, a Richmond real estate agent, it's not the inherent beauty of Richmond that's driving prices: It's the investors. "All kinds of people, but mostly people originated from mainland China," Hui said. The prices may seem high to us, she added, but present a "real deal from a world point of view." One home that sold last year for $1.2 million brought $1.73 million this year, Hui said.

Buy now or be priced out forever, right?

Well... not so fast. In what may become a colossal paradigm shift (although you know damn well the shepple have short memories), Richmond may be about to see an abrupt reversal to that trend.

Remember that little 'shake and slosh' that hit the land of the rising sun two weeks ago?

Seems the images of that stunning 9.0 earthquake and resulting Tsumanmi have struck a chord. As the images of waves sweeping across the flat Japanese countryside, wiping out houses, buildings and airports with relative ease, a realization appears to be taking hold.

And that realization is that the images seen in Japan are not all that far removed from images that we would see in Richmond when the Cascadia subduction zone triggers it's own, long anticipated, 9.0 earthquake and Tsunami down the inside passage and onto our shores.
People aren't stupid. After watching the devestating images from Japan, nervous eyes are glancing at Richmond, which sits below sea level with only a rinky dink little two foot dyke as protection. The predicted 30 metre Tsunami triggered by a 9.0 earthquake would wipe Richmond houses off the face of the earth. As the City of Richmond website notes,
  • "Richmond is located on a floodplain. A ‘floodplain’ is: 'land adjacent to a watercourse that is susceptible to flooding', such as from periods of high tide. In addition, isolated instances of flooding can occur in any community as a result of unanticipated weather events. To protect Richmond from the possibility of flooding due to high tides or river floods, the City has constructed a comprehensive system of dykes on Lulu Island. These dykes are over 49 km in length and protect an area of 12,805 ha."
As always our local anecdote archive, VREAA, captures the emerging reprecussions of world events on our little hamlet on the Edge of the Rainforest. Only two months ago, a local realtor was boasting that:
  • “One of the owners of a large west side Real Estate company has a friend in Hong Kong who’s been living there 20 yrs. He says that Vancouver's ‘official travel destination’ status from the Chinese government, combined with a restriction on investing in China real estate, has opened the flood gates to dumping money into Vancouver real estate. He says ‘it’s only the beginning’.”
And since all beginings have an end, it appears the... ummm.... tide has turned. The same realtor notes a stunning reversal of fortune barely two months later, and only about 14 days after the Japan earthquake.
  • “Funny enough, my buddy is a firefighter and lives in Richmond. He said the same thing. Many ‘For Sale’ signs and no buyers, unlike a month ago. If true, this should be a lesson to all of Vancouver East and West about how fickle the market can be, even with the ‘Asian invasion’ as it is often described.”
Oh my. If the trend plays out, it is a stark example of just how fast things can change.
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Saturday, March 26, 2011

More commentary on the problems at the Silver COMEX

If you have been following the Silver COMEX story you might be interested in this.

Dave Kranzler of the Golden Truth gives his thoughts on the JP Morgan controversy about the establishment of it's own vault. Kranzler had 3 contracts (15,000 ounces) standing for delivery in March. He offered these thoughts on Friday.

  • The COMEX goes "Extend And Pretend" On JP Morgan's paper silver short. And in the process has likely perpetrated and enabled the continuation of the biggest fraud in the financial markets.

    By now everyone knows about the absurd imbalance between JPM's short position in the silver futures market and the availability of physical silver at the COMEX and in their ETF fund:SLV.

    To review, JPM's short position is several multiples of the amount of reported physical silver that is available for delivery at the Comex. For purposes of this commentary, I will set aside any discussion about whether or not the reported inventory is actually there or not. Of course, you would have to be either ignorant of the facts or an idiot to believe that it is.

    It was announced 10 days ago that JPM was approved by the CME to operate a COMEX metals storage vault. While on the surface this is no big deal, the manner in which JPM managed to get around the full review process has raised a lot of knowledgeable eyebrows in the precious metals market, especially in the context that JPM - by far - has the largest short position in paper silver in the universe, in addition to also having the largest proprietary position in OTC gold and silver derivatives.

    Again, both states of existence would be no big deal as long as the world could verify with its own eyes that JPM actually has the ability to deliver the underlying physical metal represented by the firm's absurdly massive short position.

    That is the crux of the problem.

    Show me the metal you can deliver and feel free to make markets and short away.

    Otherwise there needs to legally enforced scrutiny. The CME, with its hastened approval of JPM as a vault operator has demonstrated that it is unwilling to enforce legal scrutiny. Furthermore, The JPM COMEX vault news tells us all we need to know about the extent to which the bullion banks... will go to fight their problem with precious metals.

    Operating a gold and silver vault will now enable JPM to exploit the fact that most metals players who take delivery of their metal typically let it remain at COMEX vaults for safekeeping. Again no big deal, because it is convenient and saves delivery fees, as long as the owners of the metal hold the vault operators accountable.

    In other words, if more players stand for delivery than JPM has available to actually physically deliver, JPM can just notify the owner that delivery has been made to its vault without ever having to make the actual delivery unless the owner asks for delivery into a private depository off the COMEX. It has long been suspected that all of the current vault operators, especially HSBC and Scotia, engage in this "fractional" bullion banking scheme, but now that JPM has entered the vault storage game, there is no doubt in my mind that the COMEX is running low on deliverable metal.

    And by extension, it also serves to reason that SLV is running low on metal (JPM is the vault custodian for SLV - hmmm...), although I do not, like many, believe that SLV is empty. Again, a lot of commentators out there squawk about SLV being empty without ever having bona fide actual proof. I think from the standpoint of probability analysis, SLV is at least 1/3 covered (at any given time a large holder can exchange his SLV shares for delivery of metal - my bet is that SLV has enough to cover this present value of this possibility). I believe the COMEX is less than 1/3 covered and this is why JPM had to rush into the vaulting business and jammed thru its approval by skirting the standard rules.

    Everyone who trades this stuff knows that there is a massively inordinately large amount of outstanding silver contracts still open with last delivery day being next Thursday March 31st.

    As of today there were still 632 open contracts representing 3.16 million ounces of silver. I have never seen this large amount of open contracts so late in the delivery process. And given that the COMEX is reporting as of yesterday that over 41 million ounces of silver are available for delivery, it tends to raise a lot of skepticism about the amount of silver that is actually physically there to be delivered.

    Historically, most open contracts in a delivery month get filled within the first two weeks of that month. If this view is correct, it would make sense then that JPM wanted to rush through the approval of a licensed vault that it make phantom deliveries into and no one would know the difference unless they ask for delivery out of the vault.

    Again, probability analysis would say that very little of that silver will be called upon like that (by the way, anyone can track the reported flows of silver in and out of COMEX vaults at the CME website: you can also track daily changes in open interest, etc on that site, that's how I know that very little metal that is delivered actually is demanded from the COMEX vaults).

    Essentially JPM is playing a game of chicken.

    Since JPM likely does not have the resources to make good on the actual physical delivery of all of the silver that is standing for delivery, the next best alternative is to play the odds and deliver electronic silver into a surreptitiously approved vault and anticipate that most, if not all, of the deliverees (the "stoppers") will never ask for private delivery.

    Our fund stood for delivery of 3 contracts this month. We were given notice on one of them right after first notice day and that silver was made available by HSBC to be picked up by our carrier and delivered to our private depository within the appropriate time frame.

    HSBC, however, changed the rules on the other 2 contracts.

    We were notified that the silver for the other two contracts was being delivered last week. Why they waited 3 weeks to notify us on the other two is open for conjecture. HOWEVER, this time HSBC informed my partner that in order for us to send a carrier to pick up the bars he had to fill out a bunch of paperwork and send a copy of his driver's license and that it would take HSBC five days to process everything. Today being the 5th day, we called for a status update. They informed him that he had to send them a copy of his passport because his driver's license had expired. I'm not sure how long it would have been before they notified us of that fact if we had not called.

    The point here is that we are now seeing all kinds of tactics being legally - and illegally - employed in order to make the process of taking delivery of metal from the COMEX more burdensome and further enabling the big ponzi scheme to keep going on there.

    The fact of the matter stands that events like the JPM vault and the sudden new delivery requirements of HSBC serve to further amplify the fact that the COMEX and SLV are running out of actual physical silver and the desperation to hide this fact is growing stronger.

    While I still don't expect that a COMEX delivery default will occur this month, or even this year, the cracks in the system are growing wider and one of these days we will wake up in the morning to find gold and silver prices that are several multiples higher than the day before and the bid/ask spread in the markets for these products will be a country mile wide. THAT is a day that will fun watch.

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Friday, March 25, 2011

Two interesting days...

Two interesting attempts to drive the Silver/Gold markets down yesterday and today. I hope to have time on the weekend to discuss both of them and what could happen next week.

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Wednesday, March 23, 2011

Will Silver hit $40 by March 31st?

Yesterday we talked about Seeking Alpha'a speculation that the sudden, unusual and expedited move to make JP MorganChase a self-licensed vault/weighmaster/assayer for the COMEX was nothing more than an attempt to create breathing room on a massive short squeeze looming with the March 31st deadline for delivery on the March COMEX contracts.

It's speculated that this sleight on hand will allow JP MorganChase to move paper silver into it's own vault from it's SLV fund and issue notices of delivery to the contract holders.

Since most 'deliveries' never leave COMEX vaults, it's a quick fix for the short squeeze. And if anyone wants to withdraw from their account, paperwork can delay the process.

It doesn't solve JPM's problem... but it creates some additional breathing room. The fact remains, however, the physical silver must still be procured.

Which brings us to this next item.

On Monday the blog 'Along the Watchtower' (penned by a blogger who goes by the acronym of 'Turd Ferguson') made an astute observation.

As the crunch loomed for the last delivery month (December, 2010), a similar situation to the March predicament loomed. While not as severe, by December 19th the COMEX still faced having to deliver on 401 contracts (about 2 million ounces of silver). Some suggested the COMEX wouldn't be able to pull it off.

By the end of the month, the silver was delivered and the contracts filled. But what happened to silver in those final days is worth noting.

On December 21st, silver closed at $29.44. With the Christmas break looming, trading is always slow with no movement of note occurring.

But silver went on a surprising, post-holiday rally that took most observers by complete surprise. Silver then peaked on the first trading day of 2011 at $31.75.

Some speculated the dramatic rise after having been shorted and hammered down since December 7th was a direct result of JP Morgan having to enter the market and purchase physical bullion to meet it's delivery requirements. They shorted the market for most of December to drive the price down and then entered the market to buy up the silver they needed to settle the contracts.

Once the silver was procured, JP Morgan resumed it's shorting practices and drove the price down over $4 an ounce in January.

Fast forward to this week.

After battling the $36 level and being mercilessly shorted every day for the past two weeks in a effort to pound it down to $33, silver keeps rebounding.

Each time it has dipped, silver has remained resilient and has bumped back against that $36 beachhead. This resistance even prompted the blog 'SilverGoldSilver' to draft the cartoon with JP Morgan's Blythe Master's drawing the line in the sand at $36 (which you see above).

Today it surged past and as this is written sits at a post 1980 high of $37.31.

Why no massive shorting today?

On Monday, Ferguson wondered aloud if we are on the cusp of another 10-day significant upswing like we saw in late December?

The late month rise in December was slightly more than 5%. A similar move now would take silver from $36 to $38. Ferguson also makes the case that since the number of contracts remaining to be settled for March is twice as high as it was on December 20th, 2010, than this corresponding late month move could be twice as large.

If that is the case, he speculates we could see $40 silver by the end of this month!

If today was any indication, he may be on to something.

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Dollar Collapse: Controlled Demolition - What Do You Think?

Came across the youtube clip curtosy of one of Jim Sinclair's sites.

The author asks, "is it possible that the United States stepped up to generate trillions of dollars to cover up derivative gambling losses with the full knowledge that it would collapse the dollar? Are the Obama administration, the Federal Reserve, and the banking cartel complicit in the collapse?"

Video is about 10 mins long.

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Tuesday, March 22, 2011

The Silver shell game gets bigger

I was in the process of writing a post to answer some silver questions from the past few days when I came across this. I will try and answer those questions later.

If you have been following the silver story on the COMEX, you know that the short squeeze in silver is heating up and with 8 days left in the delivery month of March the situation is getting intense.

As of Monday there remained 896 contracts representing 4,480,000 oz of silver which were left to be serviced (delivered). This represents a full 50% of the March contracts which still have to be delivered.

Various analyst's have commented that never in silver COMEX history has an amount still standing for delivery been equal to the amount already served this late in the month.

With 8 days left, an average of 560,000 oz must be serviced on each and every trading day until the end of this month. To our analyst's it is quite obvious that the COMEX does not have the silver available to service the patiently waiting contract holders.

This past weekend, however, there has been a curious development that is setting off alarm bells.

JP Morgan Chase was just granted a silver vault licence on the COMEX. And the licence was granted lightening speed compared to other licence's.

The respected online site Seeking Alpha asks:

  • Why was JPM awarded a vault license almost overnight, avoiding the lengthy vetting process others must undergo? Why did it happen in the middle of a major COMEX silver delivery month, during a massive worldwide silver short squeeze, at a time when physical silver is in severe shortage?

Alpha then connects the dots.

When silver is 'delivered' on these COMEX contracts, it is often a simple computer transaction. The vast amount of physical bars 'delivered' in a settlement never actually leave the warehouse. They are simply 'credited' to the new owner and left in the warehouse (with the appropriate storage fees charged). Taking actual delivery of thousands of ounces of physical silver and moving it to your own storage location can be a costly process.

In the past, JP Morgan had to 'send' silver to HSBC, Brinks, Scotia Mocatta and/or the Delaware Depository in order to "deliver" it on COMEX. JP Morgan would have this silver already on deposit there and title ownership would be transferred to the contract holders upon settlement. HSBC, Brinks, Scotia Mocatta and/or the Delaware Depository would then confirm this with the contract holder.

But overnight JP Morgan has been granted it's own vault licence.

As Alpha notes:

  • If a short seller must deliver a commodity, and the commodity is not readily available, there is no better way to buy extra time than to be able to deliver into its own vault. Most of the metal will never leave the vault, and most delivered metal that will leave the vault won't leave right away. Indeed, paperwork tasks of transferring title can consume a few days. Thus, a late delivery may not be noticed if it is to the short seller's own vault if the vault operation staff chooses to remain silent.

In other words JP Morgan can claim they have the silver and it has been transferred to the new owner (when in fact there is no silver to be had) and the vault won't dispute this claim.

Therefore if JP Morgan doesn't have the necessary 4,480,000 oz of silver they have short sold by March 31st, they can 'deliver' fictitious silver and advise the contract holders their fictitious silver is 'waiting' for them in the JP Morgan vault.

Unless a customer demands immediate pickup and transportation of the physical silver, how does a customer know the silver is actually there? And even if pickup is demanded, paperwork and arrangements can delay the process of actual delivery up to a month.

Now that the third parties of HSBC, Brinks, Scotia Mocatta and/or the Delaware Depository have been eliminated, all customer's have is JP Morgan's guarantee/promise that the silver is there.

It's a shrewd, clever move. And it buys JP Morgan precious time to locate physical silver to deliver for the March contracts.

Seeking Alpha is already asking readers to pass on if anyone has any positive or negative experiences with the newly licensed J.P. Morgan vault.

Meanwhile JP Morgan has just tossed another ball in the air in it's ponzi juggling act.

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Saturday, March 19, 2011

"I ran so far away..."

Been out most of the day but just came home to an email alerting me to the next event in the Flock of Black Swan events that will guarantee QE3 and QE to infinity (QEX).

As if earthquakes, tsunamis, nuclear meltdowns and war in Libya was not enough, according to Zero Hedge there is a replay of the BP oil spill in the making in the Gulf of Mexico.

Multiple reports have come in of a giant oil sheen nearly 100 miles long and 10 miles wide originating about 20 miles away from the site of the Deepwater Horizon oil rig explosion last April (see pic above).

The site of the sheen, near Mississippi Canyon 243, lies 30 miles from the Louisiana coastline. This is where the Matterhorn oilfield sits. According to W&T, the field has produced an average rate of 5,200 barrels of oil per day, and has production capacities of 35,000 barrels of oil per day.

Whether the leak is coming from the Matterhorn SeaStar drilling rig or is emanating from a second leak at the Deepwater Horizon (which many predicted last year might occur) remains to be seen.

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These are the good old days

With all the news about Japan and Libya this past week, you are probably unaware that on Thursday, March 17, the US Domestic Monetary Policy and Technology Subcommittee held hearings to examine the relationship between monetary policy and rising prices.

Chaired by staunch US Federal Reserve critic Ron Paul, the subcommittee heard testimony from witnesses Joseph T. Salerno (Professor, Pace University), James Grant (Editor, Grant’s Interest Rate Observer) and Lewis E. Lehrman (Senior Partner, L.E. Lehrman & Co).

And although the hearings were boycotted by House Democrats, there was some important testimony by James Grant that's worth noting.

The bespectacled and bow tied editor of Grant’s Interest Rate Observer had a sobering message for Washington lawmakers:

“These are the good old days with respect to interest costs.”

It's a theme this blog has harped on for the last 18 months. And Grant laid it out very clearly.

For every $1 that the US Government spends today, they currently borrow 43 cents.

What happens when bond traders start to get spooked about America's ability to pay it back?

Interest rates will rise. Plain and simple.

And bond traders today don't even have to get spooked to a fraction of the level that they were in the early 1980s when then-Federal Reserve chairman Paul Volcker had to raise interest rates all the way up to 18%.

If interest rates merely regress to the historic mean, "debt service nearly doubles," chimed in investment banker Lewis Lehrman.

Using projections released by the Treasury Borrowing Advisory Committee on Feb. 1, 2011, rates on the 10-year Treasury note need only rise from today's 3.27% to 5.3% before the debt service figure jumps from today's $413 billion to $800 billion by 2020.

"All of the talk about cutting a hundred billion" this spring would be for naught, says Lehrman. That $100 billion would be consumed four times over just to pay off interest on the debt. (For the record, the $100 billion in question was already debated down to $67 billion on the House floor.)

But where to cut?

With tax revenue running at roughly $2 trillion a year, 40% of the budget would be going to debt service. A rise of 2% in interest rates and America would be even broker than it already is... instantly.

When you look at the numbers there is an inescapable crisis looming on the immediate horizon. A crisis which is going to lead to a dramatic loss of confidence in the US dollar, a crisis which will cause bond traders to force interest rates much higher.

The warning signs are there for anyone who wants to see them.

Get out of debt NOW and position yourself to take advantage of investments that will soar as this plays out.

It really is a no-brainer.

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Friday, March 18, 2011

So what's happening over at the COMEX with Silver?

Thought we would take a moment and take a look at silver again today.

According to analyst Harvey Organ, there remain 923 notices (or contracts) to be filled for the March Delivery period. Each contract is for 5,000 oz's so this represents 4,615,000 oz's still waiting to be delivered.

We are now equally balanced between the number of oz's that have been delivered by the COMEX this month with the number of oz's waiting to be delivered.

And while the COMEX has until the end of the month to deliver this silver, observers note that there has NEVER been a month where we have reached the halfway point and there remains 50% of the outstanding silver undelivered.

This is your greatest bit of evidence that silver is in short supply.

COMEX inventories are divided into registered and eligible categories. It would be most useful to think of these two categories as dealer and investor inventories, respectively. Registered inventories are committed to be delivered to fulfill maturing contracts. Eligible inventories are often stored in COMEX bonded warehouses to allow the owner the option to make the metal available to fulfill COMEX contracts, but there is no obligation for the owner to make the commodity available for the purpose.

The inventories that do exist may also be subject to the claims of other creditors.

Clearly the COMEX vaults (on the dealer side), which supposedly have 53 million oz's in reserve, are probably empty (the silver having been leased out to other entities in the giant silver ponzi and not available at this time).

Oh my!

So what does that mean for the 923 contracts which are currently standing for delivery?

Well... there's an interesting thread playing out on a yahoo chatboard right now.

The poster claims that he has bought 3 of those COMEX contracts (150,000 oz of silver) and wanting physical delivery. He states the COMEX has advised he may not be getting his silver delivery, but they have offered him shares of the exchange traded fund SLV plus a premium of 70%.

The key element of this story, of course, is that the COMEX is supposed to be THE key pricing mechanism for the price discovery of the true value of silver.

If this, and similar stories, are true than the COMEX is now an extremely broken pricing mechanism since it cannot gauge real supply and demand. There is a demand for silver, the silver isn't available, so the price should be moving higher in order to make the silver available to those who want it NOW.

More importantly, if there's a shortage of a specific commodity you can't have a certain party (hello JP Morgan Chase) naked shorting in order to manipulate the price down. You can short a contract if you have a supply of the commodity to back it up, it's illegal to short if you can't.

You will hear the argument that COMEX commodity contracts are mostly traded by investors who never intend to take physical delivery. Instead, they normally exit their contract before maturity or replace it with another contract with a maturity further in the future. As a result of this practice, the available inventories held to make contract deliveries only cover a small fraction of outstanding contracts.

The fact that so many want physical delivery right now, the COMEX defenders will claim, is an anomaly.

But as demand for silver increases, the reality is that this situation is not an anomaly.

And the reality is that JP Morgan and HSBC are probably naked shorting huge amounts of silver that they can't even supply to the market.

If the short squeeze continues, the dam will have to burst and the spot price of silver will have to rise dramatically to reflect the current supply/demand situation.

We continue to watch the COMEX situation with keen interest.

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Zero Hedge targets the Canadian Housing Bubble

One of the best sources for information for non-diluted non-mainstream media right now is the internet blog Zero Hedge.

For online news junkies, ZH is a daily must read - and almost mandatory you check in numerous times a day. And the site gets a lot of attention as a result.

ZH is much like the activist group Anonymous... contributions come from all over. Some stories get credited, some do not. You dutiful scribe has even had a contribution on the site.

So when ZH turns it's attention to the Canadian Housing Bubble, you know it's going to get exposure.

And in the wee hours of the morning (late last night for us West Coasters), Zero Hedge made this post titled 'The Canada Bubble?'.

The article is a reprint from the blog of Pension Pulse and is a lengthy breakdown of the Canadian Housing Bubble.

Check out both sites if the topic interests you.

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Thursday, March 17, 2011

The Chinese Bubble

Is there any doubt China is in a bubble? (click on all images to enlarge)

As we have mentioned in the past China has pumped more money into their economy, on a per capita basis, than has the United States. To anyone who lives in the Village on the Edge of the Rainforest, the physical manifestation plays out in outlandish real estate purchases on the West Side of Vancouver and in the suburb community of Richmond as homes sell, in some cases, for more than $500,000 over asking price.

How crazy is this liquidity?

Check out this MSNBC story about a Lamborghini owner in China who hired a crew on World Consumer Rights Day to smash his $289,000 Lamborghini Gallardo L140 in protest after allegedly having a dispute with the company over maintenance and engine issues.

The protest was made to provoke public support and goad the manufacturer to respect his 'consumer rights'.

Such is the extent of liquidty pumping in China that a credit billionaire could care less about a $289,000 Lamborghini Gallardo in the pursuit of making a point.

Is there any doubt that this is not going to end well?

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Wednesday, March 16, 2011

For those who live on the North American West Coast we are entering a 'top seismic window' period (Updated)...

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You should already be prepared for such a major earthquake here... but if you need an little incentive, watch this clip.

The premise is that recently there have been a series of strong earthquakes on the compression side of the pacific plate. We had the 6.3 in Christchurch, New Zealand last month, the huge 9.0 quake off the coast of north eastern Japan last week, the 8.8 quake in Chile on Feb 27 2010 (Nazca plate which contacts the pacific plate), the 8.1 Samoa earthquake on September 29, 2009.

I am no expert on earthquakes but it makes sense that when we get a series of major quakes around the edges of a major plate, it's likely that those quakes will alter the stresses at other regions of the plate.

Here's a map of the major plates with arrows indicating compression, slippage and expansion zones. (click on image to enlarge)

The Cascadia subduction zone can produce very large earthquakes ("megathrust earthquakes"), magnitude 9.0 or greater, if rupture occurs over its whole area. When the "locked" zone stores up energy for an earthquake, the "transition" zone, although somewhat plastic, can rupture.

Great Subduction Zone earthquakes are the largest earthquakes in the world, and can exceed magnitude 9.0.

Earthquake size is proportional to fault area, and the Cascadia Subduction Zone is a very long sloping fault that stretches from mid-Vancouver Island to Northern California. It separates the Juan de Fuca and North America plates. Because of the very large fault area, the Cascadia Subduction Zone could produce a very large earthquake.

Adding to all this is the fact that the last known great earthquake in the northwest was in January 1700, the Cascadia Earthquake.

Geological evidence indicates that great earthquakes may have occurred in the Cascadia region at least seven times in the last 3,500 years, suggesting a return time of 300 to 600 years.

In other words... it's been over 300 years and we can reasonably expect one anytime between now and 2300.

However, as noted on Wikipedia (See: Prediction of the next major earthquake), recent findings concluded the Cascadia subduction zone was more hazardous than previously suggested. The feared next major earthquake has some geologists predicting a 10% to 14% probability that the Cascadia Subduction Zone will produce an event of magnitude 9 or higher in the next 50 years, with the most recent studies suggest that this risk could be as high as 37%.

Geologists have also determined the Pacific Northwest is not prepared for such a colossal earthquake. The tsunami produced may reach heights of approximately 30 meters (100 ft), creating the same sort of devestation that has hit Japan.

[And just as scary, the Hanford Nuclear Plant in Washington State was built to withstand a 7.9 level earthquake... not a 9.0 quake]

If this wasn't enough, Geologist Jim Berkland outlines in the clip above that the months of October, March and April are the worst months for devestating earthquake damage.

On the 19th of March not only will we have the full moon, but within an hour of that we will have the closest approach of the Moon until the year 2016.

And the next day is the equinoctial tides.

So... (1) we are in the March/April period, (2) we have a full moon and (3) we have the closest approach of the Moon until the year 2016. This brings together three of the maximum tide raising forces.

In addition to this, when you combine the ocean tides with the earth tides and the tides in the ground water, all of these factors help to release sudden, built up strain and cause earthquakes.

Berkland calls this is a "top seismic window" which will develop between the week of March 19th to 26th.

Berkland also outlines a number of odd events with ocean wildlife that occured before previous earthquakes. Similar odd ocean wildlife events have occured on the West Coast recently.

It may be nothing, but it can't hurt to be prepared.

Pass the link to this post on to as many people as you know who live on the West Coast.

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More bad news for the Olympic Village?

CBC news has quite the story tonight with stunning visuals of Olympic Village condo owners who have leaks and shoddy construction throughout their units. CBC online covered it this way.

A total of 62 condominium owners at five different buildings in the former Vancouver Olympic Village are suing the City of Vancouver, claiming their units are poorly built and badly designed.

According to CBC-TV, "Lawyers say so many people wanting out of so many buildings all at the same time is a first for Vancouver Real Estate."

Lawyer George MacIntosh, representing Village on False Creek (new name for the Olympic Village) marketer Bob Rennie, countered by sayinig he just received the legal documents Wednesday and has yet to study the case. But MacIntosh said he suspects the recent price reductions on unsold condos may have something to do with the civil suit.

On average, 30% discounts were offered in a new marketing campaign that was launched last month and the assertion is that the wave of complaints are simply disgruntled owners who bought earlier and who want the discounts too.

However if you saw the visuals on the news tonight... we'll... let's just say no prospective buyer would be interested based on what they saw tonight.

Leaking ceilings with water pouring from light fixtures into toilets, leaking windows absolutely hemorrhaging water, kitchen ceilings ripped apart from water damage, tiny bedrooms unable to accomodate Queen size beds, closet doors unable to open because of the cramped conditions... the list goes on.

If ever there were a marketing nightmare... this was it.

Hopefully we can get a link to the CBC-TV story for you shortly.

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Kits vs Kutcher

This comparison has been making the rounds on other local blogs and worthwhile to repost for those who may not have seen it.

Vancouver's housing bubble is reaching obscene proportions. And local bear bloggers are reveling in some of the stupidity currently playing itself out.

Above is the exterior of a house in the Kitsilano neighbourhood on the west side of the City of Vancouver.

The address is 2165 West 8th Avenue and I think you will agree... it's a big, old, dumpy house. You can find the internet sales listing for this house here.

With 8 bedrooms, 4 bathrooms, 3,962 square feet and sitting on a 50 x 120 lot; it's marketed as a revenue property which could possibly fetch $70,000 per annum in rent.

The asking price... a paltry $2,250,000!!

Yikes!

Here are some more pictures of the interior. Note: you can click on all these images to enlarge them.

Now... it just so happens famous actor Ashton Kutcher is selling his exclusive Los Angeles area home at 2556 Greenvalley Rd right now.

The 4 bedroom, 4.5 bathroom, 3,235 square foot home sits on 0.9 of a acre of land. You can see the internet listing here.

The asking price - $2,600,000 (that's $2,524,271 in Canadian dollars). Check out what you get in Los Angeles for that price...

All you can do is laugh at the current situation here in the delusional Village on the Edge of the Rainforest.

We will be ground zero for a massive collapse of Real Estate in Canada.

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