Guest Post: Short Squeeze! Here Comes 50-dollar Silver

Submitted by Tyler Durden on 03/07/2011 16:09 -0500

Silver is blasting through all barriers, topping $36.5 this morning! The white bullion market is tight, and the short squeeze in the futures market is exerting a constant upward pressure on the price. If current trends persist, the all-time high of $49.45/ounce will be reached in the near future...Given the still gigantic short positions on the silver futures market, this short squeeze could persist for some time. Increasing price volatility as the squeeze continues is likely. But the all-time high of just under $50 per ounce could, if the current pace of appreciation persists, be broken this year. 

 

 

 

Inflationary Update: The Precious Metals Breakout

 

 

Gold/Copper Ratio Surges By Most Since June 29

Submitted by Tyler Durden on 03/07/2011 14:15 -0500

As Credit Suisse points out, today the Gold/Copper ratio is up by over 4% to 3.32, which happens to be the biggest one day move since June 29, and confirms that not only the copper run may be over, but that derisking and the flight to safety trade is truly back on. Although one hardly needed to see this chart to come to that conclusion: even as the market continues to expect an announcement from Bernanke that CTRL-P Central (f/k/a the Marriner Eccles building) will start printing crude any minute, the wait may end up being quite protracted. And while gold has not been touched yet, and in fact continues to trade at all time highs, we wish to repeat our warning that should the crunch in the S&P continue (even if it is modest by historic amounts), it is very likely we may see liquidations in HF precious metals holdings considering the HF margin debt position is at virtually all time highs, meaning the toxic spiral of plunging prices and broad deleveraging in advance of margin calls, will lead to a sell off in anything and everything that is not nailed down. 

 

 

 

February $223 Billion Budget Deficit Largest Ever

Submitted by Tyler Durden on 03/07/2011 13:04 -0500

Well, it's one way to start a deficit cutting scramble. Washington Times reports that the preliminary number for the February deficit, which will formally be released by the FMS shortly, is $223 billion: this is the largest single month deficit in history! So much for prudent budgets and all that. At least the number can only get better from here. Unless, of course, it gets much, much worse, and rates continue creeping higher, resulting in 30% of total revenues being dedicated to paying gross interest, as was previously discussed on Zero Hedge. Then 40%. Then 50%... One gets the picture.

Shares Of Bailout Motors Plunge To Lowest Post IPO Price

Submitted by Tyler Durden on 03/07/2011 13:33 -0500

All the Koolaid drinkers who bought the government propaganda and Phil Lebeau's breathless praises of the world's worst automaker (and best channel stuffer) are certainly watching today's inexplicable plunge in GM shares with horror and pure terror. Now that GETCO is out of the picture, having failed to churn the crap out of the $33 IPO price, and keep it at support, ongoing realistic price discovery will soon send shares far, far lower, on both plunging Chinese car demand and dealer "channel stuffing." 

 

 

 

Stocks-Crude Inverse Correlation Passes 2008 Levels, Just Off All Time Highs: Major Correction Ahead?

Submitted by Tyler Durden on 03/07/2011 15:36 -0500

A week ago we presented the suddenly surprising inverse correlation between stocks and crude, commenting that: "the last time WTI to Stocks hit a correlation of -0.5 is just after the market peaked in late 2007, early 2008, as the market had started its decline which culminated with the global sell off of everything not nailed down, bringing the S&P to 666. The correlation between the two assets is again -0.5. If Brent confirms the WTI correlation, it may be time to run." Subsequently every chartist jumped on this observation, yet it is today's update that is material significance: as of a few hours ago, the inverse correlation between the Brent front month has just passed the lows recorded in 2008, just before the market tumbled, when increases in oil prices no longer produced increasing stock prices (i.e., market topping). In other words, "it is now time to run" as we have just surpassed that level. And in fact, a longer term chart shows that we are just off the all time lows in the MSCI-Brent correlation. If this series continues dropping a correction is virtually assured.