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Wednesday afternoon, and how to characterize today’s action?  Two words – LOCKDOWN and SPROTT! 

“LOCKDOWN,” of course, refers to the stock market, as the Dow has been officially mandated to never decline, or, for that matter, even have material intraday dips.  Unlike PMs, which are relentlessly attacked and forced through the same suppressive antic, the Dow rises every day, with no volatility and dramatically lower volume than ever before, when non-PPT, non-HFT market participants existed.

From 20 years of education and experience in this business, including seven as a top-ranked sell-side analyst, I learned that EARNINGS were supposed to impact stock prices, as well as inflation, the overall economic outlook, and political risk.  Each of these items are currently waving HUGE red flags, but nothing is allowed to negatively impact the Dow in today’s “communist market environment.”  For example, per the chart in the article below, the current earnings period (4Q 2011) has thus far been the worst in at least four years, worse than even the BOTTOM of Global Meltdown I in late 2008, with more than half of ALL reporting companies missing estimates compared to the typical average of just one-third of all companies.
Bloomberg On The Worst Start In Years For Earnings

Moreover, the European financial crisis continues to worsen, now centered on the acronym du jour, the so called “PSI” deal to write off Greek assets and avoid default.  Despite media attempts to say otherwise, the negotiations have gone nowhere, resulting in S&P warning of an imminent default in March, and Greek bonds to continue plummeting (one-year notes now trade at yields of 420%!).

If Greek PSI Deal Was ‘In The Bag’, Greek Bonds Would Be Rallying, Not Dumping

Worse yet, the few rating agencies not beholden to TPTB, such as Egan-Jones, continue to downgrade even the so-called “best credits,” such as Germany today from AA to AA-.  Of course, during today’s stock (and bond, via QE) “LOCKDOWN,” no news whatsoever is allowed to penetrate the government’s controlling HFT algorithms (at least not yet). 

Egan Jones Downgrades Germany From AA To AA-

As for “SPROTT,” I’m referring to the $303.6 million equity offering by the Sprott Physical Silver Trust (PSLV), soon to be $349.1 million when the greenshoe is exercised.  Per yesterday’s RANT, the last time PSLV did an offering – for $575 million in November 2010 – silver commenced a six-month run from $25/oz to $50/oz, before the Cartel, in Hunt Brothers fashion, attacked the PAPER market with six margin increases, countless naked shorted contracts, and even a fake “bin Laden killed” rumor.

Assuming the institutional PHYSICAL market is as tight as it appears, I would not be surprised if Sprott’s attempt to obtain delivery of these ten million ounces causes another material run-up.  If that occurs, the Cartel will NOT be as lucky as a year ago, so please consider whether you have a full position in PHYSICAL silver before we find out.  I cannot guarantee anything, but I do feel the tea kettle vibrating – or perhaps that’s just financial tremors reverberating around the world.

Sprott Physical Silver Trust Prices Follow-on Offering of Trust Units In An Aggregate Amount of US$303,600,000

As for PAPER Precious Metals, congratulations Cartel as you have now provided two straight 4-for-4 performances, attacking at EXACTLY 3:00 AM, the COMEX opening at EXACTLY 8:20 AM EST, the PM Fix at EXACTLY 10:00 AM EST, and the “cap of last resort” at EXACTLY 12:00 PM EST.  Below is a chart showing both yesterday (Tuesday) and today (Wednesday), so you can see for yourself.

Due to the “SPROTT” offering, the Cartel was especially vigilant in slowing the pace of gold and silver’s rises, well aware of what I wrote above regarding PSLV’s November 2010 offering.  Unfortunately for the bad guys, what I wrote yesterday about the KEY ROUND NUMBER of $1,650/oz starting to look more like support than resistance is appearing more and more true…

…as is my thesis that the very KEY ROUND NUMBER of $30.00 is changing from resistance to support.  Given the maniacal, exponentially growing pace of worldwide MONEY PRINTING, silver’s still heavily oversold position (15% below its 200 DMA of $36/oz), and the enormous PHYSICAL demand of the PSLV order, it is hard for me to envision a significant move below $30/oz in the coming weeks.  We’ll see, but I call it as I see it.

As for the mining stocks, the HUI barely turned positive at the close, as sentiment following the recent weeks’ drubbing of key stocks such as HL, NEM, and KGC has more and more investors terrified of the sector.  Remember, the goal is to PROTECT YOURSELF from the coming hyperinflationary depression, and thus far mining stocks have not only failed to do so, but conversely, caused significant financial damage.  PHYSICAL gold and silver will rise more than 99% of all investments in history, and will do so with essentially NONE of the risks inherent in mining stocks.

Today I read that BHP, short for Broken Hill Proprietary, announced a 15% decline in silver production in the fiscal first half of 2012 (i.e. the second calendar half of 2011).  BHP, headquartered in Australia, is one of the world’s largest mining companies, if not the largest.  They are so large, and diversified, that despite owning the world’s largest silver mine – Australia’s Cannington Mine – silver does not materially impact its earnings.

BHP H1 production up 23%

However, for the rest of the world, particularly Precious Metal owners, this is a HUGE DEAL.  BHP produces more than 6% of the world’s silver, of which more than 80% emanates from Cannington, which clearly is experiencing major depletion issues.  Given that Cannington is not a major contributor to this monstrous company’s earnings, management only wrote a single blurb to describe the decline; “Production at Cannington decreased in the December 2011 half year reflecting lower average ore grades.”
From where I stand, this is DIRE news from the silver supply side, which could cause seismic shifts in PHYSICAL pricing in the next year or two if not rapidly reversed, which something tells me is not in the cards.  If Cannington’s 38 million ounces of production declines by 10% annually, it will only produce 22 million ounces five years from now, and don’t think EVERY major industrial user on Earth is not aware of Cannington’s issues.

Top World Silver Producers – NMA

10 Biggest Silver Mines in the World [PHOTOS]

Cannington Silver and Lead Mine, Australia

While still on the topic of PMs, I wanted to include today’s KWN interview with my good friend John Embry, the top Precious Metals portfolio manager in Canada.  He has been on board the PM train for as long as it’s been running, with a keen sense of market forces lurking beneath the surface.  Last January, he called the year’s gold bottom, and in recent weeks claimed gold would likely NEVER trade below $1,500/ounce again, an assertion I cannot find fault with.  He is expecting the imminent Cartel breakdown this year, and if he is even half-right you will wish you had prepared for such an event.
John Embry – Gold to Rapidly Triple in Price on This Move

Additionally, I want to call your attention to two articles published by the great Bill Holter, the first giving added commentary on the PSLV offering, and the second the recent COLLAPSE of the Baltic Dry Index, which I have documented over the past two days.  No one communicates so much with so few words, and I believe these two pieces will be highly incremental to your understanding of these respective topics.
To all;  PSLV announced what with overallotment will amount to a $349 Million add on offering!  Notice the “exclamation point”?  Yes I for one am excited for several reasons.  One being that the physical market will be “tested” as to real supply.  How long will it take this time for Mr. Sprott to receive his metal?  Will it take 4 months like last year?  Surely it should take less time now because supply (you know, the actual real metal) should be in abundance since the price is down nearly 40% from the May 2011 peak?  Surely mining companies came in with massive new supply because the price was so high?  Surely investors ran down to their local dealers with heavy bags full of Silver to “cash in” on their gains and “flushed” the physical markets?  Right? 
Well… this is not what happened.  Actually mining supply moved up less than 5% and it was physical demand that skyrocketed, NOT supply!  Yet the price is down 30-40%?  The only new supply that hit the market were new and freshly (printed) offered paper contracts with even less backing than the existing fraudulent contracts.  THESE hit the market like a sledge hammer!  Please keep in mind that this offering is only about 10 million ounces and with what Jeff Christian and Jon Nadler tell us should be less of a problem than a pimple on an elephant’s ass.  My next thought is this, what if it doesn’t take less time to fill the order?  What if it takes even more than 4 months for the metal to be delivered? 
Please remember that Mr. Sprott “filed” for a total of $1.5 Billion which I for one believe is not even doable in todays physical market.  Is he just “testing” the market?  Does he not want to be “the one” who craters the whole system by unmasking just how TIGHT this market really is?  Another question (comical as it may be) is “where” will this order be placed?  The COMEX?  This size order would deplete their deliverable inventory (if it really exists) by 25-30% and still not make much of a dent in the total $1.5 Billion filing.  If the total filing were used and placed as an order on the COMEX, it could not be filled…hmmm?

I applaud Mr. Sprott’s “guts” here, I know he is only doing a small (VERY small order in the scheme of “paper” things) order but risks exposing the whole “fractional metal” scheme.  This should in a “perfect world” not even be a topic to write about or discuss but the truth is…we haven’t been told the truth for a long time and this is a perfectly legal and logical way to get at it.  We will find out just “how tight” the Silver market really is and very soon would be my guess.  As a side note and I usually don’t discuss much in the way of politics, I really question just how well Ron Paul’s heart would hold out were he to actually take an obvious lead in even the most crooked polls?  Do you see where I’m going with this…?  Hopefully the guardian angel union up there in Canada doesn’t offer vacation days to its employees!   Regards,  Bill H.

To all;  this link is to a chart of the “Baltic Dry Index”
in a nutshell it is a chart of rates charged to ship raw goods.  This index topped out in 2007 and again in 2008, only to crash 90+%.  It rallied and echo peaked in Nov. 2009 and has been basically downhill ever since.  As it stands now, shipping rates are about to make another new low and have dropped 50% in just 19 days!  Using plain old common sense, does it make any sense at all that shipping rates (which are definitely supply demand generated) are making new lows while equities are back pushing highs?  While we are being “told” that all is well and “under control”? 
First off, this index cannot be manipulated because the rates are the rates and shippers would know firsthand if the index did not match what they are charging or paying to ship.  There is no feasible way for this index to be altered as the market is so large, so diverse and most importantly “globally transparent”.  So while we are being told that “everything is under control”, this index and these rates are not.  I am sure that this index IS something that TPTB wish that they had “under control” but it is not.  This is just one little loose end that is nowhere near consistent with what we are being told and what “they” would like us to believe!
If you gaze at the chart, you will see the 2009 “green shoots” that withered and died.  This is a picture of global commerce slowing and demand waning.  This is not a picture of a new technology where cargo ships are so much more efficient or using a new cheaper fuel with slaves aboard for cheap labor.  Yes, there are more ships available for transport but it does not explain a 90%+ drop.  No, the crash in rates is a function of the market place where ship owners are competitively lowering rates to keep usage up. 
I show you this because as you know, I believe ALL paper markets are manipulated to “show us” how good everything is.  It is all about perception!  Were the Dow Jones trading at 1,000 or interest rates at 10%+ on Treasury paper, what would people (investors) think?  Would CNBC be able to produce their clown parade of rosy scenario shills?  Would ANY politicians have been re elected in the 2010 races?  Would Merrill Lynch have been able to proclaim they were “bullish on America”?  No, no and more NO!  Please understand that I only pass this along to show you “truth” which in today’s society is rarer than both Gold and Silver, for that matter it is rarer than “hen’s teeth”.  Regards,  Bill H.