Friday, February 18, 2011

Silver, 10-Year Note Are New Safety Plays

Let's dispense with the general recap right away:

The first thing that jumps out is how absurdly out of step the major indices are, with the Dow plowing ahead by nearly 6/10 of 1% and the other indices flat. This is as it has been for many months. There are extreme inequities in equities, to coin a phrase and it is a certain sign of manipulation and flights of both fancy and safety.

Dow 12,391.25, +73.11 (0.59%)
NASDAQ 2,833.95, +2.37 (0.08%)
S&P 500 1,343.01, +2.58 (0.19%)
NYSE Composite 8,507.90, +10.49 (0.12%)

Advancers finished ahead of decliners, 3600-2902. On the NASDAQ there were 248 new highs, 14 new lows. On the NYSE, new highs led new lows, 350-8. Volume was well short of being exciting.

NASDAQ Volume 2,123,685,000
NYSE Volume 4,421,542,500

As the Middle East becomes ever more the hotbed of revolution, with uprisings in nearly every country across North Africa and the Persian Gulf, investors are seeking safety and finding a comfortable place to park their money in commodities in general, but silver in particular.

Silver rocketed again today in price as buyers piled in prior to the three-day weekend, pushing the price up to $32.30, a gain of 73 cents, and even higher after the close in New York. By the time markets open in the US on Tuesday, silver could be selling for $35/ounce, so powerful is the short-covering move and subsequent break-out. Gold is closing in on all-time highs again, gaining $3.50 today, to finish at $1,388.60 in NY. Oddly enough, oil futures were down on the day, losing 16 cents, to $86.20, seemingly wanting to settle somewhere between $80 and $85 per barrel, a price with which most - both suppliers and buyers - can live.

The other area receiving an inordinate amount of attention, as Chairman Bernanke nukes the dollar, is the 10-year note, which continued to rally today, pushing yields down to 3.58% at the close. The price of the 10-year is still 100 basis points higher than it was during the summer, thanks to the inflationary effect of the Fed's ZIRP and QE2. Still, money has to go somewhere and the smart money is peeling out of overpriced stocks and into the relative safety of bonds.

For our money, silver still looks like the very best raw investment, bar none. One should be looking for deals on autos and machinery these days, before inflation gets out of control.

A three-day weekend means not having to listen to the talking heads on CNBC for an entire 72 hours. Bliss!

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