JP Morgan`s Blythe Masters enters defense mode

Blythe Masters, the famous and infamous, depending on who you`re talking to, head of commodity trading desk at J.P. Morgan, made a rare appearance on CNBC today.

She denied blogosphere rumors about J.P. Morgan being involved in silver manipulation, saying "it would be wrong and we don`t do it". She made the case that it might appear so from the outside due to hedging of client positions by having short positions to offset price volatility.

However, it would be most interesting to know who exactly are all those clients she`s talking about. One of the accusations brought about against J.P. Morgan is that the FED is using JP as a proxy to manipulate the silver price. If this is true, J.P. Morgan doesn`t do anything by itself but rather representing a client(the FED), acting as a tool. It`s a well known fact that J.P. Morgan is part of all those closed door FED meetings as you can see in this article written by Lynn Forester de Rothschild and in the picture below. Take note that not only that J.P Morgan shows up among the banks that held closed door FED meetings but it outmatches the other banks by far when it comes to the sheer number of held meetings. 

Blythe concludes the interview on an interesting note, dismissing the need for certain transparency after pandering to the politically correct crowd:

"..the key is to ensure that that regulation is good regulation and with this type of topic the devil is almost always in the details. So in the interest of greater transparency, less systemic risk in the system, less connectivity between major players...on all of those things we feel great strides have been made in advancing regulation to promote those objectives. Having said that, we have to aware of unintended consequences and there`s a real risk of those unintended consequences. For example: if you make it difficult for institution to transact in commodity markets by excessively exposing their actions to the public domain too quickly, it would actually drain liquidity and make it harder for those institutions to hedge."

Of course, if the rumor claiming J.P. Morgan is acting as FED`s proxy in manipulating silver and gold prices is true, "exposing their actions" would severely hamper their ability to play the market.

Gold and silver action yesterday - artificial action of margin calls

What we`ve seen yesterday in gold and silver was artificial action of margin calls in other asset classes, not much justification any other way.

Today we`ve seen gold&silver resume their natural upward trend which perfectly fits current environment.

Sharon calls it like it is. Perhaps one of the few voices on CNBC who do that.

Obama`s 447 billion job plan - great news for gold and silver

President Obama announced a plan to create jobs by putting people to work in infrastructure projects.

While idea has potential to achieve some economic growth(similar measure was taken by Germany back in the 30s with some success), it doesn`t address the core issue. Same issue that made Solyndra solar company, backed by Obama with state funds, go into bankruptcy.

Core issue is lack of cheap labor of course. US should have drastically lowered the minium wage or have it removed altogether. No company will be tempted to hire US workers, when they can do it elsewhere for less than 1/4 the cost. In many places in China such as assembly lines, similar to ones creating Ipads and Ipods, workers get paid 0.5$/hour. Not to mention these people have no holidays and often work the weekends. Dark side some don`t even want to mention is that many such workers get on demand injections to sleep through the holiday, so that they can save money.
Most if not all US citizens will rather go on food stamps than endure such working conditions.

The only reason some companies still hire in the US, is that they`re forced to do so. They`re forced to hire locals in the service industries, such as hotels, fast food chains and retail outlets. However, in the heavy industrial sector(where the real money is) things are much different. Here no company is tempted to hire locally and government so far has totally failed to change that.

Currently China is appreciating its currency, the renminbi, but it`s not nearly enough to make US competitive in the international labor market. EU countries face similar problems which will only get worse.

While President wasn`t very specific on how he`ll be providing the financing for this 447 billion job plan, one thing is pretty sure given the previous track record.
This money will be created out of thin air one way or another. Plan includes Obama`s campaign promise from years ago to cut taxes on low income individuals and small business but increase taxes on the rich and big corporations.

Even if this tax plan is put to work, there`s no way in hell it could cover for 447 billion spending package. It will most likely be the result of money printing. Don`t expect US gov to sell military bases, planes and cruisers or anything like that.

Needless to say that any printing of such huge amounts of money is extremely bullish for gold and silver.

This is why I`m long: AGQ, UGL, DGP

Swiss franc peg - II

More on previous topic...

Swiss franc pegged to euro - More reason to buy gold and silver

Switzerland is becoming less "Switzerland" with each passing day. Following the banking secrecy scandals, which dimmed image of safe haven country, now even more shocking news emerge.

In a desperate bid to stop currency appreciation and protect exports, Switzerland took a drastic measure. They`ve announced pegging their currency to the euro at a minium rate of 1.2 francs per 1 euro.

Investors and some banks preferred to keep their investments in Swiss francs as it used to be one of the last currencies with big gold exposure, Switzerland having an annual inflation rate of just 1%.
Now that the major safe haven currency has gone bye bye, very few alternatives remain. Some say the Singapore Dollar, Norwegian Krona, Canadian or Aussie Dollar might present such safe havens.
However, all countries associated with these currencies run the risk of doing same thing as Switzerland. If their currencies will start to be seriously hunted by safe haven speculators, they`ll just try to devalue in a bid to protect their exports

Now what are the alternatives? There`s only the obvious choice of gold and silver and probably some mining stocks. The latter will be subject to a future piece, as it might present interesting alternative with much upside.

Suggested plays, silver and gold leveraged 2x etf/etns: $DGP, $UGL and $AGQ.