Bin Laden vs Equity Markets

There is one thing that could derail Obama's re-election in light of Osama Bin Laden news.  And that is if the the price action of commodity markets spread to equities.  If we suffer from another bubble collapse going into next year trigger by the pop in Silver it could be a ugly 2012.  Lets hope not though.

The CME raised margin requirements on Silver much like the Federal Reserve crushing the margins of the banks.  Basically calling all loans used for purchase.  De-leveraging the market much in the same way.  This has called the margins of many other asset classes and created a ripple effect across the commodity complex.

If it continues through the hedge fund sphere it could de-leverage equity position being held on margin to capitalize on the our super low interest rate structure.

Boy if someone had a buddy in the CME that could have slipped them a tip I bet that person would have transferred all those billions of dollars seemingly lost by investors in the silver market through a derivate like say a put!!! But lets hope no one is that dishonest and we were not screwed again in another contrived market collapse;) Deflationary pressure from this still has to work its way through the system and related markets.

A look at Silver $SLV

Silver is definitely lagging Gold on this break out.  One of them is giving a false signal.  In light of the Fed raising the discount rate and China reducing its demand for our debt.  We have an ugly 2nd half of 2010 setting up.  Fed anticipates withdrawing all of its stimulus by October 3rd 2010.  All of these things will reduce paper currency in the system and reintroduce deflationary forces.

If Silver can take out the high  it will probably run for miles...and to me that would signal the end of our currency.