August 18, 2009

Global Market Comments
August 18, 2009

Featured Trades: (SPX), (T), (SILVER)

1) Wow! One triple digit move down in the Dow, and all of a sudden, everyone is bearish.  Once invisible falling home prices, soaring deficits, bogus corporate earnings, catatonic consumers, a crashing Shanghai market, and a suicidal Baltic Dry Shipping Index  are now staring nervous stock owners in the face, eyeball to eyeball, and the picture is not pretty. Expect a run at Walmart on the Imodium and Kaopectate supplies. Even Robert Prector, of Elliot Wave fame, was on the tube proclaiming an end to a bear market rally. Did all the BSD bears just come back from family vacations to find the short selling opportunity of the year? Technical analysts think so.

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2) Now that the stock market is rolling over like a cheap date, use the weakness, not to buy stocks, but silver. The US Treasury is relentlessly soaking the bond markets with ever rising amounts of borrowing, and loading up on inflation hedges during periods of weakness has to be a great idea. The American silver eagle $1 coin offers investors one ounce of .999 fine silver with a walking liberty design for $15, or 7% over the spot price. The premium on these coins has varied from $1-$4.50 over the past year, depending on the Treasury's production rate, which is running at near double 2008 levels. Interestingly, an ever present flight to safety bid made sure that the premium never got below a dollar during last year's liquidity driven crash in prices. If you had to pick a precious metal to buy on decline it would be this one, since it is already 34% off its year ago high, compared to only 9% for gold. If you need the size, liquidity, and low fees silver futures contracts offer, email me at, and I'll tell you how to get set up. If you want to take physical delivery to hold it in your hot little hand, will it to your grandkids, hide it from a predatory ex-spouse, or bury it in your backyard, go to Millennium Metals at for excellent quality, prices  and personal service. See my earlier call to buy this investment grade white metal by clicking here

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3) Great analysis by my alma mater, The Economist (visit their website), over the weekend about the implications of the rapid demise of land line telephones. Some 700,000 of these are being cut each month, with cost conscious mobile only customers jumping from 7.3% of users in 2005 to 20.2% by the end of 2008. Businesses depending on large switchboards are stuck with land lines, so they can expect their bills to go ballistic. You can kiss the telemarketing industry goodbye in a mobile only world, where owners have to pay for incoming calls. No loss there. But first responders like firemen, police, and hospitals are also land line based. Pollsters who only call land lines can also expect greater error rates, and greatly underestimated Obama's lead for most of the 2008 election. The 50 million cell phone only users they missed tend to be single, in their early thirties, earning under $50,000 a year, and yes, liberal. The trend has been so dramatic, that Hawaiian Telecom, where these trends are moving in extremes, filed for bankruptcy in December. Not good for cable companies, which have been fighting tooth and nail to wrest 20% of the land line market away from traditional, once protected providers like AT&T (T).

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'The worse the economy is, the more stock markets might go up, because the central bankers are printing more money, trying to create another bubble,' said Marc Faber, publisher of the Gloom, Doom & Boom Report.

faber.jpg picture by madhedge