Has The Price of Silver Been Manipulated?
We asked ourselves: What could account for the wild price swings in silver? How can it dip 29% in 6 trading days - when demand is at historic highs? Who's getting rich on these swings? And how? Does it stem from a massive scheme that appears to involve traders...investment banks...and, as some suggest, even the federal government itself? What do you think? We want to know...Take this poll. You'll get the results as well as our unvarnished research on this situation. YES / NO
One Reason Obama's Refi Program Won't Work: The FHA is Insolvent
By Shah Gilani, Capital Waves Strategist
In his State of the Union address last month, President Barack Obama outlined a plan to let homeowners, especially those underwater, refinance older mortgages to take advantage of today's low rates.
While serious political impediments stand in the way of the Obama refi plan, one reason it won't work is that it relies 100% on the Federal Housing Administration (FHA).
The problem is that the FHA is technically insolvent.
That "minor" issue could make the president's plan a non-starter.
The FHA doesn't originate mortgages. It is a government agency that insures 100% of the principal and interest on residential mortgages to the benefit of mortgage lenders.
The president's plan is to have the FHA insure all "eligible" borrowers' loans so lenders have a guarantee that refinanced mortgages will be paid back.
That incentivizes lenders to make loans they otherwise wouldn't make.
We asked ourselves: What could account for the wild price swings in silver? How can it dip 29% in 6 trading days - when demand is at historic highs? Who's getting rich on these swings? And how? Does it stem from a massive scheme that appears to involve traders...investment banks...and, as some suggest, even the federal government itself? What do you think? We want to know...Take this poll. You'll get the results as well as our unvarnished research on this situation. YES / NO
One Reason Obama's Refi Program Won't Work: The FHA is Insolvent By Shah Gilani, Capital Waves Strategist
In his State of the Union address last month, President Barack Obama outlined a plan to let homeowners, especially those underwater, refinance older mortgages to take advantage of today's low rates.
While serious political impediments stand in the way of the Obama refi plan, one reason it won't work is that it relies 100% on the Federal Housing Administration (FHA).
The problem is that the FHA is technically insolvent.
That "minor" issue could make the president's plan a non-starter.
The FHA doesn't originate mortgages. It is a government agency that insures 100% of the principal and interest on residential mortgages to the benefit of mortgage lenders.
The president's plan is to have the FHA insure all "eligible" borrowers' loans so lenders have a guarantee that refinanced mortgages will be paid back.
That incentivizes lenders to make loans they otherwise wouldn't make.
Why the FHA is Insolvent
Borrowers pay an upfront mortgage insurance premium (MIP) of 1% and modest monthly fees into the FHA's insurance fund. That's the FHA's only source of income and capital.The fund has to maintain certain reserves and a cushion against the total obligations it has amassed based on the insurance it has in force, which currently exceeds $1 trillion.
The FHA is technically insolvent because it is already below the minimum 2% "economic value," or capital ratio it's required to maintain by law.
In fact, according to an American Enterprise Institute "Outlook" report, the FHA has only $1.2 billion in "economic value" supporting over $1 trillion on loan guarantees.
In other words the FHA's leverage ratio is close to 1,000 to 1 and its capital ratio is 0.12% -- nowhere close to 2%.
For some perspective on how far the FHA has slid in reverse, in 2006 its capital ratio was 7.38%.
Things aren't getting any better for the FHA either, they're getting worse.
To continue reading, please click here...
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EXPOSED: Mainstream medicine's deadliest conspiracy
Can you believe this video? It's a phenomenon. But you might not see it at all. Why? Because, for the first time, mainstream medicine's deadliest conspiracy has been EXPOSED. Finally, this video is the "shot heard around the world" the establishment prayed would never come. To be honest, I'm not sure how long this video will be available. There are powerful interests hell-bent on minimizing the damage it is doing to corporate medicine's profit machine.Before it's banned, watch it here.
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Trading Silver with Options: How to Earn 127% in Four Months
By Larry D. Spears, Contributing Writer
If you listened to Money Morning's recent special report from global resources expert Peter Krauth, you know the long-term outlook for silver is decidedly positive.
Soaring investment demand, continued industrial use, a growing supply shortage, and falling ore quality all signal a sharply bullish outlook for the "poor man's precious metal."
So, how can you position yourself to profit from silver's coming advance without exposing yourself to the excessive risk?
One way is to use options - either on silver futures contracts or shares of silver-related stocks and exchange-traded funds (ETFs) - in a strategy that strictly defines and limits your risk while still offering short-term returns of 100% or more.
Silver Options: How to Create a Bull
Call Spread
Known as a "bull call spread," this technique involves simultaneously buying and selling two call options with the same underlying security and expiration date, but with differing strike prices.Typically, a bull call spread involves buying an at- or slightly in-the-money call option - one with a strike price very near the current price of the underlying asset - and simultaneously selling an out-of-the-money call option with a strike price several increments above the current security price.
The difference between the two strike prices is referred to as the "spread."
To illustrate, let's look at an example using options on silver futures, which are traded in the CME Group's Comex division. In this case, one futures options contract represents 5,000 ounces of silver.
To create your bull call spread, you would purchase the slightly in-the-money July $33.00 call, quoted at $3.451 an ounce ($17,255), and simultaneously sell the out-of-the-money July $35.00 call at a price of $2.572 an ounce ($12,860).
The net cost of this spread is 87.9 cents an ounce ($3.451 - $2.572 = $0.879), or $4,395. That is also your maximum possible loss on the trade should the July silver future stand below $33.00 when the options expire on June 26, 2012.
What's more, the spread trade breaks even at a July silver futures price of just $33.879 as opposed to the break-even price of $36.451 had you merely purchased the $33.00 call alone.
So, what's the catch?
To continue reading please click here...
| 90% in One Year, 32% in 16 Days Our Chief Investment Strategist Keith Fitz-Gerald told Private Briefing subscribers last month about a biotech stock that could gain 90% in one year. Keith said this company has three key ingredients for a skyrocketing share price: it's a multinational company, selling in a growing market, to a large-and-growing population. As of Feb. 7 this investment was up 32% from when we recommended it, and 46% year-to-date. In fact, this stock could surpass the 90% price target and join Keith's long list of triple-digit gainers. It's already a hit with Private Briefing subscribers. "I am really pleased with your recommendations. All six of my investments are up, especially [Keith's biotech stock]. Your e-mail is the first I go to every morning for your sage advice." - Reader B.Q. Click here to get the scoop on this biotech stock, detailed Jan 13 in our Private Briefing investment service. You'll also gain access to all our past Private Briefing columns and receive new ones in your inbox every day. |
The Heart of a China Bull Still
Beats Strong
By Frank Holmes, Guest Writer
My debate with Gordon Chang on China's future at the Vancouver Resource Investment Conference was a stimulating, intellectual exercise.
A healthy market needs a compromise between the bid and ask, and discussions between people who strongly disagree is a great way to promote critical thinking.
Critical thinking is vital to our investment process as a means to ensure that we question assumptions.
A lack of critical thinking sometimes leads to bubbles, such as the one taking place in the parabolic rise in the number of articles foretelling China will experience a "hard landing."
Last fall, more than 1,000 articles questioned the possibility of a "China crash," according to data from BCA Research. This is twice as high as the number in 2004, when fear articles reached 500.
Gordon's bearish pronouncements only added to the extremely negative groupthink surrounding China's economy.
Money Morning Chief Investment Strategist Keith Fitz-Gerald, a long-time friend of mine, wrote an excellent article comparing today's doomsday sentiment of China to the naysayers who forecast the demise of the U.S. during the market bottom of March 2009.
Throughout the past century, U.S. stocks went through many secular bear markets.
Keith points to the 1929-1932 period when the Dow Jones Industrial Average declined by nearly 90%, along with pointing out the Dow's loss of more than 52% from 1937 to 1942.
Also, in 1901, 1906, 1916 and 1973, there were four "40-plus% declines," says Keith.
Americans have also endured two world wars, the Great Depression, presidential assassinations and the deadliest terrorist attack ever seen on U.S. soil. What's important for investors to remember was that each significant market decline presented a "great buying opportunity" with U.S. stocks rising double-, or in some cases, triple-digits, writes Keith.
And, over the past 100 years, the Dow gained an outstanding 24,000%.
To continue reading, please click here...
Beats Strong
By Frank Holmes, Guest Writer
My debate with Gordon Chang on China's future at the Vancouver Resource Investment Conference was a stimulating, intellectual exercise.
A healthy market needs a compromise between the bid and ask, and discussions between people who strongly disagree is a great way to promote critical thinking.
Critical thinking is vital to our investment process as a means to ensure that we question assumptions.
A lack of critical thinking sometimes leads to bubbles, such as the one taking place in the parabolic rise in the number of articles foretelling China will experience a "hard landing."
Last fall, more than 1,000 articles questioned the possibility of a "China crash," according to data from BCA Research. This is twice as high as the number in 2004, when fear articles reached 500.
Gordon's bearish pronouncements only added to the extremely negative groupthink surrounding China's economy.
Money Morning Chief Investment Strategist Keith Fitz-Gerald, a long-time friend of mine, wrote an excellent article comparing today's doomsday sentiment of China to the naysayers who forecast the demise of the U.S. during the market bottom of March 2009.
Throughout the past century, U.S. stocks went through many secular bear markets.
Keith points to the 1929-1932 period when the Dow Jones Industrial Average declined by nearly 90%, along with pointing out the Dow's loss of more than 52% from 1937 to 1942.
Also, in 1901, 1906, 1916 and 1973, there were four "40-plus% declines," says Keith.
Americans have also endured two world wars, the Great Depression, presidential assassinations and the deadliest terrorist attack ever seen on U.S. soil. What's important for investors to remember was that each significant market decline presented a "great buying opportunity" with U.S. stocks rising double-, or in some cases, triple-digits, writes Keith.
And, over the past 100 years, the Dow gained an outstanding 24,000%.
To continue reading, please click here...
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