From Gold Core
Comex Silver Default Due To Secret Buing By Russian Billionaire, Chinese Traders and People's Bank Of China?
Gold rose to new record nominal highs at $1,540.85/oz in early Asian trading last night. Silver and gold remain very close to nominal highs today as the beleaguered U.S. dollar remains under pressure due to ultra loose U.S. monetary policies, deepening inflationary price pressures and concerns about the feeble economic recovery.
Gold has risen 8% this month and silver 28% due to the very poor U.S. monetary and fiscal position, the Eurozone debt crisis and in the background the Japanese nuclear crisis and geopolitical instability in the Africa and the Middle East. This is continuing to lead to diversification into the precious metals.
COMEX Silver Default?
A number of readers contacted us yesterday to comment critically on our advice to “as ever” . . . “ignore the daily noise and focus on the long term and the fundamentals driving these markets.”
They felt that it was linked to the paragraph above regarding a possible COMEX default and was suggesting that rumours of a run on COMEX depositories was “noise”.
We were not suggesting that and with hindsight the juxtaposition of this sentence in the immediate aftermath of the paragraph regarding the COMEX was unfortunate and ripe for misinterpretation.
Let us reiterate a COMEX default on delivery of precious metals and specifically of silver bullion bars is far from “noise”. It is of significant importance and that is why we have covered its possibility for some months. A COMEX default would have massive ramifications for precious metals markets, for the wider commodity markets, for the dollar, for fiat currencies and for our modern financial system.
Silver surged 3.4% yesterday to settle at a 31 year nominal high and rose by $1.55 on the day. Silver is up some 28% in April alone. The last time this happened is when Warren Buffett took a large stake in silver in 1987 and there were rumours of Buffett “cornering the market”.
Silver remains in backwardation and the possibility of a COMEX default cannot be ruled out – especially as silver bullion inventories are very small vis-à-vis possible capital allocations to silver in the coming weeks and months.
The possibility of an attempted cornering of the silver market through buying and taking delivery of physical bullion remains real and would likely lead to a massive short squeeze which could see silver surge to well over its inflation adjusted high of $140/oz.
Indeed, a recent article in the Financial Times suggested that private or state interests with very deep pockets are attempting to corner the silver market. Bizarrely, this massive story which mooted the possibility of Russian billionaires, Chinese traders and even the People’s Bank of China and other central banks secretly buying silver, has subsequently been barely reported or commented on.
There are now two “conspiracy theories”. One is the long side conspiracy theory which claims, a la the FT, that there are foreign private and state actors attempting to corner the silver market through secret buying.
The other is the more long standing short side conspiracy theory which has gained credence in recent months due to the CFTC’s investigation into silver manipulation by Wall Street banks, such as JP Morgan, who have massive concentrated positions. This theory has been backed up by some circumstantial evidence by GATA and has recently gone “viral” through the campaign of financial journalist Max Keiser.
The theories are not mutually exclusive and may be true. Indeed, Chinese, Russian and other private interests may be cornering the physical market in an effort to end manipulation of the silver market by Wall Street banks in order to ensure the silver price rises very sharply and creates significant profits on their silver bullion holdings.
Indeed, if the People’s Bank of China is involved – profit may not be the end game rather the positioning of the Chinese yuan as the new reserve currency through use of gold and silver bullion reserves.
Bloomberg Link Precious Metals Conference
The Bloomberg Link Precious Metals Conference heard a wide range of opinions from precious metal experts and mining executives. The vast majority believed that gold and silver’s strong fundamentals (especially due to anaemic supply and strong demand) should result in prices continuing to rise in the coming years.
The knowledge amongst the participants regarding the fundamentals is in stark contrast to many so called financial or market experts in the press who continue to be misinformed regarding the gold and silver markets (see news).
The knowledge amongst the participants is also in stark contrast to much of the western public (particularly in European countries), many of whom continue to believe that “cash is king” and remain unaware that they are very exposed to sovereign debt default risk, currency debasement and inflation.
The one participant who was bearish on silver was William Hamelin, the president of Ames Goldsmith Corp., who forecast a drop to $35.85 by year-end. Hamelin’s company processes silver for use in a number of consumer products, such as electronic components, batteries and photography.
Gold in Euros to Play Catch Up?
Gold’s recent rise has not been solely US dollar related as gold has risen to new record nominal highs in British pounds and yen. Gold has underperformed in euros recently and yet remains only 3.7% below the record nominal high of €1,072/oz seen four months ago in December 2010.
The euro’s strength is not due to German economic strength or due to positive fundamentals rather it is purely due to the fundamentals of the dollar, the pound, the yen and other fiat currencies being very poor. It also may be due to short covering as those short the euro are forced to buy back positions.
Gold’s continuing strength in euros suggests that the recent bout of euro strength versus the dollar and other fiat currencies will be short lived and the euro will come under pressure again in the coming months.
Gold in euros has risen 2% in April. It will be interesting to see if euro gold replicates the performance of April and May last year when Eurozone sovereign debt concerns saw gold rise to €825/oz to over €1,000/oz prior to a correction. Previous resistance at €1,000/oz gold looks to be strong support for gold.
NEWS
(Bloomberg) -- Silver May Jump to $62 an Ounce by Yearend, McGhee Says
Silver prices may climb to $62 an ounce by yearend, Frank McGhee, the head dealer at Integrated Brokerage Services, said today at the Bloomberg Link Precious Metals Conference in New York.
The current rally is “very different” from the jump in prices in the 1970s, and there is “no manipulation” in the market, he said.
(Bloomberg) -- Silver May Rise to $55 an Ounce by Yearend, Coeur’s Wheeler Says
Silver may rise to $55 an ounce by the end of year, Dennis Wheeler, the chief executive offer of Coeur d’Alene Mines Corp., the largest U.S. silver producer, said today at the Bloomberg Link Precious Metals Conference in New York.
“Silver has clearly become money,” Wheeler said. Industrial demand for the metal “continues to grow,” he said.
(Bloomberg) -- Silver Rally No Bubble as Price Will Top Record, Coeur Says
The rally in silver to a 31-year high in New York shows no sign of ending because tight supply and robust demand will send the metal to a record, according to Coeur d’Alene Mines Corp., the largest U.S. producer.
“We’re in a legitimate market driven by financial interest in silver and strong industrial demand,” Chief Executive Officer Dennis Wheeler said today at the Bloomberg Link Precious Metals Conference in New York. “Supplies are relatively inelastic.”
Silver has surged 162 percent in the past year, outpacing the 31 percent gain in gold. Investment demand for silver jumped 40 percent in 2010 as inflation rose, currencies lost value and Europe’s debt crisis escalated, said researcher GFMS Ltd. Industrial use gained 21 percent last year and may climb to a record this year, London-based GFMS said.
The rally is “very different” from the surge in the late 1970s, when the Hunt brothers tried to corner the market, and in 1980, when prices touched a record $50.35 an ounce, Frank McGhee, the head dealer at Integrated Brokerage Services, said at the conference.
“There is no manipulation going on in this market,” McGhee said. “It does not take a lot to stop the market until this market decides to go. I’d like to categorize silver as a freight train.”
Silver futures for July delivery rose $1.554, or 3.4 percent, to close at $47.541 on the Comex in New York. Silver reached $49.845 on April 25.
Older Mines
Discovering new deposits has become more difficult, while “older mines cease production at a time when demand continues to grow,” said Wheeler, whose company is based in Coeur d’Alene, Idaho. High prices are not “a short-term phenomenon,” and the metal may jump to $55 by the end of 2011, he said. Integrated Brokerage’s McGhee predicted $62.
Not everyone is bullish on silver. William Hamelin, the president of Ames Goldsmith Corp., forecast a drop to $35.85 by year-end. Some manufacturers are “leaning” toward using more substitutes, including copper and nickel, after prices surged, he said.
Coeur d’Alene, which is based in the Idaho city of the same name, fell 51 cents, or 1.6 percent, to settle at $31.70 in New York Stock Exchange composite trading. The shares have jumped 84 percent in the past year, compared with a 19 percent gain for the Russell 2000 Index.
(Bloomberg) -- Emerging Market Nations to Buy Gold, World Gold Council Says
Emerging market nations will be major purchasers of gold in the coming years, George Milling- Stanley, managing director for government affairs at the World Gold Council, said today at the Bloomberg Link Precious Metals conference in New York.
“China and the BRICs in general” are “the kind of countries we expect to see as gold buyers going forward,” Milling-Stanley said. China’s imports have risen “dramatically” in the last 12 months, he said.
(Bloomberg) -- Central Banks, IMF Gold Sales at 53.1 Tons in Current Accord
European central banks and the International Monetary Fund sold 53.1 metric tons of gold so far in the current central bank gold agreement which began September, the World Gold Council said.
Euro zone banks sold 0.9 ton of the metal in the period, the council said today in an e-mailed report.
(Bloomberg) -- Money Creation Will Boost Gold Prices, Cuggino Says
Money creation, increasing liquidity and the global macroeconomic environment will continue to boost gold prices, Michael Cuggino, the president and portfolio manager of Permanent Portfolio Family of Funds, said today at the Bloomberg Link Precious Metals Conference in New York.
(Bloomberg) -- Gold Will Climb to $1,650 an Ounce by Yearend, Rhind Says
Gold prices will climb to $1,650 an ounce by yearend, William Rhind, the head of sales and marketing at ETFS Marketing LLC, said today at the Bloomberg Link Precious Metals Conference in New York.
Most retail investors are still “not participating” in the gold market, and more buying would be “bullish” for the market, Rhind said.
(Bloomberg) -- Gold Will Climb to $1,575 an Ounce by Yearend, Anderson Says
Gold prices will climb to $1,575 an ounce by yearend, Thomas Anderson, the vice president and global head of ETF strategy and research at State Street Global Advisors, said today at the Bloomberg Link Precious Metals Conference in New York.
Investors are purchasing the metal for “wealth preservation” and to take “risk out of” their overall portfolios, Anderson said.
(Bloomberg) -- Lots of ‘Bullish’ Fundamentals for Gold, Arrowhawk’s Fan Says
There are lots of “bullish” fundamentals that will continue to support gold prices, and negative real interest rates make the metal “attractive,” Jennifer Fan, a partner and senior portfolio manager at Arrowhawk Capital Partners, said today at the Bloomberg Link Precious Metals Conference in New York.
(Bloomberg) -- Casimir Capital’s Sands ‘Very Bullish’ on ‘Going Higher’ Gold
Richard Sands, president and chief executive officer at Casimir Capital LP, said he is “very bullish” on gold. “We think it’s going higher,” Sands said during the Bloomberg Link Precious Metals conference in New York.
Earlier, George Gero, vice president-global futures at RBC Capital Markets, said the precious metal’s recent purchasers were “weak buyers” who bought the commodity for “momentum reasons.” The metal functions as an “additional, alternate currency,” Gero said.
(Bloomberg) -- Platinum May Climb to $3,000/Oz, Stillwater’s Mcallister Says
The price of platinum may climb to $3,000 an ounce and palladium prices to between $1,500 and $2,000 an ounce over the next five years, Francis McAllister, chairman and chief executive officer at the Stillwater Mining Company, said today at the Bloomberg Link Precious Metals conference in New York.
While platinum will remain the more expensive of the two metals, the gap between their prices will narrow, he said. Demand for the metals from the auto industry, particularly in China, will drive prices, he said.
(Bloomberg) -- PGM Supply Can’t Keep Up With Demand, CPM Group’s Rannestad Says
Platinum group metals supply can’t keep up with demand, Erica Rannestad, commodities analyst at CPM
Group, said today at the Bloomberg Link Precious Metals conference in New York. “The fundamentals are really tight,” she told the audience.
(Bloomberg) -- PGM Demand to Outstrip Supply on Auto Demand, TMR’s Lifton Says
Demand for platinum group metals will continue to outstrip supplies as long as the auto industry uses catalytic converters, Jack Lifton, founding principal of Technology Metals Research LLC, said today at the Bloomberg Link Precious Metals conference in New York.
(Bloomberg) -- Gold Luring Central-Bank Buyers May Extend Record Rally in Price
Central banks that were net sellers of gold a decade ago are buying the precious metal to reduce their reliance on the dollar as a reserve currency, signaling demand that may extend a record rally in prices.
As developing countries accelerate purchases, gold may reach $2,000 an ounce this year, compared with a record of $1,538.80 yesterday in New York, said Robert McEwen, the chief executive officer of producer U.S. Gold Corp. Euro Pacific Capital’s Michael Pento, who correctly predicted gold’s highs for the past two years, forecast a 2011 high of $1,600.
Prices reached a record 14 times this month on demand from investors seeking an alternative to the dollar after the currency slumped to the lowest since 2009, U.S. debt widened, and the Federal Reserve signaled April 27 that borrowing costs will remain near zero percent for an extended period. The economy in China, the biggest foreign holder of U.S. Treasuries, grew 9.7 percent in the first quarter.
“China is out to have more gold than America, and Russia is aspiring to the same,” McEwen said yesterday in an interview in New York. “When you have debt, you don’t have a lot of flexibility. China wants to show its currency has more backing than the U.S.”
In 2010, central banks became net buyers for the first time in two decades, adding 87 metric tons in official-sector purchases by countries including Bolivia, Sri Lanka and Mauritius, according to World Gold Council data. China, with more than $3 trillion in foreign-currency reserves, plans to set up new funds to invest in precious metals, Century Weekly reported this week. Russia purchased 8 tons of gold in the first quarter.
China’s Gold Reserves
China, which has just 1.6 percent of its reserves in gold, may invest more than $1 trillion in bullion, Pento said. “China wants to be an international player, and they need to own more gold than they currently have.”
The U.S. Treasury Department projects the government could reach its debt ceiling of $14.3 trillion as soon as mid-May and run out of options for avoiding default by early July. The Fed has kept its benchmark rate between zero percent and 0.25 percent since December 2008 to help stimulate the economy, driving the dollar down 11 percent against a basket of six major currencies during the past year.
“Until monetary policy changes, you’re going to continue to see gold go up,” said Michael Cuggino, who helps manage $12 billion at Permanent Portfolio Funds in San Francisco.
“Ultimately the best thing we can do to create strong fundamentals for the dollar in the medium term is first, keep inflation low, which maintains the buying power of the dollar, and second, create a stronger economy,” Fed Chairman Ben S. Bernanke said on April 27.
U.S. Reserves
As of April, China was the sixth-largest official holder of gold, with 1,054.1 tons, according to World Gold Council estimates. The U.S. has the most, with 8,133.5 tons, or 74.8 percent of the nation’s currency reserves, council data show.
Central-bank buying may have the same impact on gold as the introduction of exchange-traded funds, Cuggino said. Prices have more than tripled since the SPDR Gold Trust, the biggest ETF backed by bullion, was introduced in November 2004.
Central banks in emerging markets may aim to hold 2 percent to 8 percent of their foreign-currency reserves in gold, Francisco Blanch, the head of commodities research at Bank of America Merrill Lynch in New York, said in an interview.
Gold is “close to” its cyclical high, said Blanch, who expects the metal to average $1,500 this year.
Gold’s Enemies
“The enemies of gold are rising interest rates and a balanced budget,” said Pento of Euro Pacific Capital in New York. “I look for a summer swoon once Bernanke exits the bond market. You’re going to have a temporary rise in real interest rates.”
The Fed said it would buy $600 billion in U.S. Treasuries through June.
The Federal Funds rate would have to rise to “Volcker” levels before gold enters a bear market, said Gold Corp.’s McEwen, who expects the metal to rise to $5,000 over three to four years.
Prices have advanced 7.7 percent this year, extending a decade of gains in which gold jumped sixfold from a low in 1999. The all-time inflation adjusted record is $2,338.92, based on the value on Jan. 21, 1980, according to a calculator on the Web site of the Federal Reserve Bank of Minneapolis.
Former Fed Chairman Paul Volcker ended gold’s rally to a then-record $873 by raising borrowing costs to 20 percent in March 1980.
Silver Adjusted for Inflation – (U.S. Urban consumers price index) – April 1971 to April 2011
(Irish Times)-- Stock Take - Proinsias O'Mahony: Silver Linings
A fortnight ago, this column warned that silver, trading at $40, had “seldom looked so expensive”. It almost touched $50 on Monday.
Mea culpa? No. Such parabolic moves are typical of bubbles, which tend to unwind just as rapidly. Having traded more than 26 per cent above its 50-day moving average – no other commodity was remotely as overbought – the metal finally sold off, quickly falling below $45 on Tuesday. Silver has risen by almost 150 per cent over the last year and by 50 per cent since January. The gold:silver ratio, having this month fallen below 40:1 for the first time since 1983, fell to 32:1 on Monday.
Trading volumes, which hit record levels this week, have tripled over the same period. Leveraged exchange-traded funds, which allow traders to bet against silver, are also seeing record trading volumes. The huge volatility has resulted in a rise in margin requirements for speculators. Silver trading, it appears, is best left to those with strong stomachs.
(Editors Note: A little knowledge is a dangerous thing. This superficial analysis of silver purports to analyse the silver market and yet completely ignores the fundamental driver of prices in the silver market and other markets – supply and demand. It also completely ignores the fact that silver is near record nominal highs and well below real inflation adjusted highs of $140/oz (see chart above). It talks about “silver trading” being best left to “strong stomachs”. This is true however trading and speculation is in large part why wealth has been decimated in recent years and passive allocation and diversification into safer assets would be more prudent advice then superficial analysis regarding trading silver. The article is indicative of the lack of understanding about gold and silver as safe haven diversifications. As the old expression goes some “know the price of everything but the value of nothing”.)
(Miningweekly.com) – Old gold fundamentals are 'passe' – Peter Munk
The traditional supply and demand fundamentals that have determined the gold price in previous decades no longer apply, Barrick Gold chairperson and founder Peter Munk asserted on Wednesday.
Gold prices, which reached record highs above $1 520/oz on Wednesday, are being driven by investors looking for security, and looking to protect wealth, he said at the annual shareholders meeting of the world's biggest gold company.
Investment demand exceeded jewellery demand for gold in 2010 for the first time, and some analysts have suggested this puts the market in a precarious position, as prices could fall sharply if investor demand growth slowed or reversed.
But Munk insisted that the old dynamics of physical demand have lost their importance.
“Gold today is no longer related to a normal economic cycle of supply and demand, jewellery and Indian wedding seasons...” he said.
“All those things are passe, forget about them.”
Gold is being driven by “a fundamental, global and growing insecurity, a fundamental, global and growing lack of confidence of the world in everything they were brought up to believe in”.
All this means that “gold's future is assured”, Munk said.
“Because ultimately more and more people every day looking for security and looking to protect wealth are driven to gold.”
Speaking earlier, CEO Aaron Regent said Barrick remains very positive on the outlook for gold, which is proving to be the “currency of choice as the ultimate store of value”.
Barrick reported a 22% increase in first-quarter net profit on Wednesday, thanks mainly to higher bullion prices
Friday, April 29, 2011
Thursday, April 28, 2011
Wal Mart CEO: "Shoppers Are Running Out Of Money"; There Is "No Sign Of A Recovery"
Submitted by Tyler Durden on 04/28/2011 11:12 -0400
When a month ago the CEO of Wal Mart Americas told the world to "prepare for serious inflation", the Chairman laughed in his face, saying it was nothing a 15 minutes Treasury Call sell order can't fix (granted net of a few billions in commissions for JPM). 4 weeks later the Chairman is no longer laughing, having been forced to hike up his inflation expectations while trimming (not for the last time) his economic outlook. "U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday talking to USA Today. And if Wal-Mart which is at the very bottom of commoditized consumer retail, and at the very peak of avoiding reexporting of US inflation by way of China is concerned, it may be time to panic, or at least cancel those plane tickets to Zimbabwe, which is soon coming to us." In light of that perhaps today's words of caution from Wal Mart CEO Mike Duke will be taken a tad more seriously (yes, even with the $50 billion in "squatters rent" that the deadbeats spend on iPads instead of paying their mortgage: that money is rapidly ending). Warning is as follows: "Wal-Mart's core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried. "We're seeing core consumers under a lot of pressure," Duke said at an event in New York. "There's no doubt that rising fuel prices are having an impact." Tell that to Printocchio please.
From Money:
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.
Lately, they're "running out of money" at a faster clip, he said.
"Purchases are really dropping off by the end of the month even more than last year," Duke said. "This end-of-month [purchases] cycle is growing to be a concern.
Also remember that long-running joke from the NBER short bus that the recession ended in late 2009? Turns out they were just kidding, as well as blatantly lying.
Wal-Mart which averages 140 million shoppers weekly to its stores in the United States, is considered a barometer of the health of the consumer and the economy.
To that end, Duke said he's not seeing signs of a recovery yet.
With food prices rising, Duke said Wal-Mart is charging customers more for some fresh groceries while reducing prices on other merchandise such as electronics.
Wal-Mart has struggled with seven straight quarters of sales declines in its stores.
Here's an idea: how about we let someone with actual business experience, who runs the one company employing more people than even the Federal Reserve, Mike Duke, control US monetary policy for a few months and see what happens? Surely it can't get worse than what that other insane sociopath is doing, as with each passing day we are now moving closer and closer to a hyperstaglfationary conclusion, and even the collective cheerleading crew of Cottonelle bearing monkeys, half of whom were reading "Monetary Policy for TV Reporters" (just two steps down below idiots), from yesterday's FOMC conference are finally starting to realize this.
When a month ago the CEO of Wal Mart Americas told the world to "prepare for serious inflation", the Chairman laughed in his face, saying it was nothing a 15 minutes Treasury Call sell order can't fix (granted net of a few billions in commissions for JPM). 4 weeks later the Chairman is no longer laughing, having been forced to hike up his inflation expectations while trimming (not for the last time) his economic outlook. "U.S. consumers face "serious" inflation in the months ahead for clothing, food and other products, the head of Wal-Mart's U.S. operations warned Wednesday talking to USA Today. And if Wal-Mart which is at the very bottom of commoditized consumer retail, and at the very peak of avoiding reexporting of US inflation by way of China is concerned, it may be time to panic, or at least cancel those plane tickets to Zimbabwe, which is soon coming to us." In light of that perhaps today's words of caution from Wal Mart CEO Mike Duke will be taken a tad more seriously (yes, even with the $50 billion in "squatters rent" that the deadbeats spend on iPads instead of paying their mortgage: that money is rapidly ending). Warning is as follows: "Wal-Mart's core shoppers are running out of money much faster than a year ago due to rising gasoline prices, and the retail giant is worried. "We're seeing core consumers under a lot of pressure," Duke said at an event in New York. "There's no doubt that rising fuel prices are having an impact." Tell that to Printocchio please.
From Money:
Wal-Mart shoppers, many of whom live paycheck to paycheck, typically shop in bulk at the beginning of the month when their paychecks come in.
Lately, they're "running out of money" at a faster clip, he said.
"Purchases are really dropping off by the end of the month even more than last year," Duke said. "This end-of-month [purchases] cycle is growing to be a concern.
Also remember that long-running joke from the NBER short bus that the recession ended in late 2009? Turns out they were just kidding, as well as blatantly lying.
Wal-Mart which averages 140 million shoppers weekly to its stores in the United States, is considered a barometer of the health of the consumer and the economy.
To that end, Duke said he's not seeing signs of a recovery yet.
With food prices rising, Duke said Wal-Mart is charging customers more for some fresh groceries while reducing prices on other merchandise such as electronics.
Wal-Mart has struggled with seven straight quarters of sales declines in its stores.
Here's an idea: how about we let someone with actual business experience, who runs the one company employing more people than even the Federal Reserve, Mike Duke, control US monetary policy for a few months and see what happens? Surely it can't get worse than what that other insane sociopath is doing, as with each passing day we are now moving closer and closer to a hyperstaglfationary conclusion, and even the collective cheerleading crew of Cottonelle bearing monkeys, half of whom were reading "Monetary Policy for TV Reporters" (just two steps down below idiots), from yesterday's FOMC conference are finally starting to realize this.
Hedge Fund Insider Trading Cases Claim 21st Guilty Plea
The good news is that it appears the case with Galleon is coming to an end. The mass media has beat this story like a dead horse to showcase what regulators are doing to clean up Wall Street. The bad news is that Galleon is a small fish and in the larger picture what we have in our global markets is nothing short of criminal cabal of governmental officials, bankers and oil tycoons that commit murder and outright treason on a daily basis.
The SEC's (MO) is to conduct meaningless enforcement actions against small fry defendants and then claim victory. For their efforts I offer a paper bag of dog shit as a thank you. I have spare time....
Silver update 4/28/11 SLV /PSLV
Submitted by: Francis Soyer 4/28/11
Well... That didnt last long did it? As a follow up to yesterdays post on using this pullback to buy more silver lets review what happened. On Tuesday PSLV / SLV came into us roughly 5 to 6%. This was an opportunity to leg into silver and add. Why? If you look at silver from a 6 month point of view notice that pullbacks of this nature are few and far between. Why are these pullbacks few and far between? Because silver, unlike paper money can not be printed on a printing press, is considered to be money like gold and has been since humans began trading with eachother using something other than teeth for toolmaking, will be the new currency reserve after fiat money blows up the global economy, is a real hard asset that has industrial use other than being considered money, is what foreign governments are scrambling to acquire along with gold and is a safer heaven than paper backed assets. Remember, gold and silver are what humans buy when they lose confidence in governmental systems. I think at this point to restate the obvious that confidence is governement systems or lack thereof is still in the early innings maybe first or second if we were to scale it to a baseball game. I think most would agree that the governmental systems around the world are broken and badly so.
Back to the tactical issue: Looking at the 6 mth also take note of volume. Notice strong volume on the upside followed by a slowdown / cool off and then resumption of the trend. This is a classic supply demand scenario where demand is stronger than supply for bull moves. Strong volume on upside means bears are on the defensive and the opposite applies for bear markets.
Now look at the three day, notice how quickly shares were snapped back to the upside. Leaving barely more than one trading session to react and add to the position. We may still get lucky and hopefully see some fear creap in for newer investors who do not understand the fundementals and are simply looking for the quick trade from a technical point of view. One of the reasons for failing trades in that your short term view should agree with your long term view.
From the three day point of view the pull back on tuesday which went below VWAP volume weighted average price was our signal and will continue to be our signal to add. I do not see silver fundementals changing any time within the next 15 to 18 months so as the days pass by we can keep vigil and be ready to react.
Cheers
Francis Soyer
P.S. New investors to silver should really watch the video posted the other day from the silver producers point of view and the other videos on the blog from Eric Sprott and Max Keiser to get up to speed.
Wednesday, April 27, 2011
Update on Silver PSLV / SLV 4/27/11
Submitted by Francis Soyer 4/27/11
Yesterday SLV and PSLV dipped by roughly 5%. My thoughts on this are the following.
1. I agree with a statement and do believe that 95% or more of the new investors in Silver have not one iota of knowledge regarding the fundementals of this metal.
2. Nothing moves in a straight line ever. It is a simple fact of the universe that there will be randomness in anything and everything.
3. JPM as a heavy short seller of Silver at this point has nothing to lose by shorting Silver naked in a suicide mission. After all the Fed, nor the CFTC places any Margin requirements on them only on every other investor so they can tip the favor of the game into the Banks hands as a loyal puppet of the Fed Reserve. JPM has already lost this battle against every one else and as a company is a zero. Like Enron we will see JPM's 180+ Billion market cap go to zero in one day. When that day will be will depend on how long they can maintain the lie that they are financially sound. With the mainstream media in their pockets it could be a while so its not worth it rite now to pick a top to short JPM. What is worth it is:
4. Buy the dip, looking over the past six months of trading Silver has not presented an opportunity to add like yesterday / today. These opportunities are far and few between so alot of people and even a friend or two who have been waiting for a pull back to leg in here is your opportunity. Remember this is not a sprint, it is a marathon that only ends one way. That way is Silver on top currencies and paper money at the bottom.
5. For those who are clueless as to the fundementals of Silver, lets review and this time from the producers point of view.
Monday, April 25, 2011
BOSTON (MarketWatch) — The International Monetary Fund has just dropped a bombshell, and nobody noticed.
For the first time, the international organization has set a date for the moment when the “Age of America” will end and the U.S. economy will be overtaken by that of China.
And it’s a lot closer than you may think.
According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.
That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.
The comparison that really matters
The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.
This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”
We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.
And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.
Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”
The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.
This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.
“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”
The next chapter of the story is just beginning.
U.S. spending spree won’t work
What the rise of China means for defense, and international affairs, has barely been touched on. The U.S. is now spending gigantic sums — from a beleaguered economy — to try to maintain its place in the sun. See: Pentagon spending is budget blind spot .
It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.
Equally to the point, here is what this means economically, and for investors.
Some years ago I was having lunch with the smartest investor I know, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts — whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.
The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.
No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag ... not so much.
The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.
And it’s a lot closer than you may think.
According to the latest IMF official forecasts, China’s economy will surpass that of America in real terms in 2016 — just five years from now.
Put that in your calendar.
It provides a painful context for the budget wrangling taking place in Washington, D.C., right now. It raises enormous questions about what the international security system is going to look like in just a handful of years. And it casts a deepening cloud over both the U.S. dollar and the giant Treasury market, which have been propped up for decades by their privileged status as the liabilities of the world’s hegemonic power.
According to the IMF forecast, whomever is elected U.S. president next year — Obama? Mitt Romney? Donald Trump? — will be the last to preside over the world’s largest economy.
Most people aren’t prepared for this. They aren’t even aware it’s that close. Listen to experts of various stripes, and they will tell you this moment is decades away. The most bearish will put the figure in the mid-2020s.
But they’re miscounting. They’re only comparing the gross domestic products of the two countries using current exchange rates.
That’s a largely meaningless comparison in real terms. Exchange rates change quickly. And China’s exchange rates are phony. China artificially undervalues its currency, the renminbi, through massive intervention in the markets.
The comparison that really matters
The IMF in its analysis looks beyond exchange rates to the true, real terms picture of the economies using “purchasing power parities.” That compares what people earn and spend in real terms in their domestic economies.
Under PPP, the Chinese economy will expand from $11.2 trillion this year to $19 trillion in 2016. Meanwhile the size of the U.S. economy will rise from $15.2 trillion to $18.8 trillion. That would take America’s share of the world output down to 17.7%, the lowest in modern times. China’s would reach 18%, and rising.
Just 10 years ago, the U.S. economy was three times the size of China’s.
Naturally, all forecasts are fallible. Time and chance happen to them all. The actual date when China surpasses the U.S. might come even earlier than the IMF predicts, or somewhat later. If the great Chinese juggernaut blows a tire, as a growing number fear it might, it could even delay things by several years. But the outcome is scarcely in doubt.
This is more than a statistical story. It is the end of the Age of America. As a bond strategist in Europe told me two weeks ago, “We are witnessing the end of America’s economic hegemony.”
We have lived in a world dominated by the U.S. for so long that there is no longer anyone alive who remembers anything else. America overtook Great Britain as the world’s leading economic power in the 1890s and never looked back.
And both those countries live under very similar rules of constitutional government, respect for civil liberties and the rights of property. China has none of those. The Age of China will feel very different.
Victor Cha, senior adviser on Asian affairs at Washington’s Center for Strategic and International Studies, told me China’s neighbors in Asia are already waking up to the dangers. “The region is overwhelmingly looking to the U.S. in a way that it hasn’t done in the past,” he said. “They see the U.S. as a counterweight to China. They also see American hegemony over the last half-century as fairly benign. In China they see the rise of an economic power that is not benevolent, that can be predatory. They don’t see it as a benign hegemony.”
The rise of China, and the relative decline of America, is the biggest story of our time. You can see its implications everywhere, from shuttered factories in the Midwest to soaring costs of oil and other commodities. Last fall, when I attended a conference in London about agricultural investment, I was struck by the number of people there who told stories about Chinese interests snapping up farmland and foodstuff supplies — from South America to China and elsewhere.
This is the result of decades during which China has successfully pursued economic policies aimed at national expansion and power, while the U.S. has embraced either free trade or, for want of a better term, economic appeasement.
“There are two systems in collision,” said Ralph Gomory, research professor at NYU’s Stern business school. “They have a state-guided form of capitalism, and we have a much freer former of capitalism.” What we have seen, he said, is “a massive shift in capability from the U.S. to China. What we have done is traded jobs for profit. The jobs have moved to China. The capability erodes in the U.S. and grows in China. That’s very destructive. That is a big reason why the U.S. is becoming more and more polarized between a small, very rich class and an eroding middle class. The people who get the profits are very different from the people who lost the wages.”
The next chapter of the story is just beginning.
U.S. spending spree won’t work
What the rise of China means for defense, and international affairs, has barely been touched on. The U.S. is now spending gigantic sums — from a beleaguered economy — to try to maintain its place in the sun. See: Pentagon spending is budget blind spot .
It’s a lesson we could learn more cheaply from the sad story of the British, Spanish and other empires. It doesn’t work. You can’t stay on top if your economy doesn’t.
Equally to the point, here is what this means economically, and for investors.
Some years ago I was having lunch with the smartest investor I know, London-based hedge-fund manager Crispin Odey. He made the argument that markets are reasonably efficient, most of the time, at setting prices. Where they are most likely to fail, though, is in correctly anticipating and pricing big, revolutionary, “paradigm” shifts — whether a rise of disruptive technologies or revolutionary changes in geopolitics. We are living through one now.
The U.S. Treasury market continues to operate on the assumption that it will always remain the global benchmark of money. Business schools still teach students, for example, that the interest rate on the 10-year Treasury bond is the “risk-free rate” on money. And so it has been for more than a century. But that’s all based on the Age of America.
No wonder so many have been buying gold. If the U.S. dollar ceases to be the world’s sole reserve currency, what will be? The euro would be fine if it acts like the old deutschemark. If it’s just the Greek drachma in drag ... not so much.
The last time the world’s dominant hegemon lost its ability to run things singlehandedly was early in the past century. That’s when the U.S. and Germany surpassed Great Britain. It didn’t turn out well.
Brett Arends is a senior columnist for MarketWatch and a personal-finance columnist for The Wall Street Journal.
Market Manipulation: A Recipe in Three Parts
Market Manipulation: A Recipe in Three Parts
Price Manipulation and its cousin “mismarked books” are as much a product of systemic
dysfunction as they are of unethical individual behavior. The 3 part series we have planned is educational in nature and aims to outline those system-wide imperfections at the highest level.
For today we must focus on what is shaping up to be a rare opportunity to watch a pitched battle between major players in Gold. In short, we are interrupting your regularly scheduled program.
Current Events: The Potential Pin in Gold Options Tomorrow
Right now there is a war in Gold options. It is between the May 1520 longs, who mostlikely are unhedged, and their short option counterparts, who most likely are hedged.One would think the longs intend to sell futures at some point, perhaps 1520, perhaps1540 we do not know. It is also possible that they intend to take delivery, but that isunknowable for the moment. The shorts are probably delta hedgers and have no desireto see this market go above 1520, much less move at all.
The Players
The Longs- have accumulated over 5,000 lots in a two week period and wewould assume they are bullish. They are patient dip buyers and seem to havelittle fear of the Bullion Banks that are often accused of manipulating PM priceslower or keeping prices range bound at expiration.The Shorts- are Bullion Banks, market-making firms, locals and possibly somehedge funds. There is no collusion implied here. In fact, these firms are usually atodds with each other in terms of option open interest. The majority of the shortstrade options from a non-directional point of view. That is, they are professionalswho, when short an option do not want the market to move either way.Conversely, when they are long an option, they want the market to move quicklythrough or away from the strike they own.
The Play
We feel the Longs were betting that once the gravitational pull of the $1500 strike wasbroken, that the market would move quite easily to the strike with the next largest openinterest, the $1520 strike. They may be privy to large order flow in futures, they mayhave large futures order flow, or they may simply be speculating with nothing other thantheir wallets and the ability to read market behavior through price action. They can spota market that is lopsided in one direction when they see it.
Gold Opens $1,520, Silver Over $50 Everywhere But Comex (For At Least A Few More Minutes)
While markets are relatively quiet everywhere, precious metals have just gone apeshit. Gold opens at $1,520 while silver hits $49.70 on the Comex, drops, and is backing up again last treading at $49.22, as the world is pricing in the end of the US reserve currency. The parabolic melt up is in full force and we expect the nominal Hunt high to be taken out today, after which the resistance is the real Hunt high somewhere around $140, courtesy of the Federal Reserve confetti.
Thursday, April 21, 2011
The Debt Ceiling Fight Is Over and The Democrats Lost
The U.S. debt ceiling is definitely going to get raised, but the Democrats have lost any hope of getting a "clean" no-strings-attached hike.
As HuffPo's Sam Stein reports, a number of Democrats have already basically agreed to some kind of discretionary spending cap as a condition for passage.
FireDogLake says similar stuff, that a cap on future spending is likely going to be part of any agreement, but that the debt ceiling hike will get passed.
So that's that. Just pray the economy holds on, and no more fiscal stimulus is needed. It doesn't sound like it's coming.
Read more: http://www.businessinsider.com/the-democrats-lose-the-debt-ceiling-fight-2011-4#ixzz1KBjQ7sCd
As HuffPo's Sam Stein reports, a number of Democrats have already basically agreed to some kind of discretionary spending cap as a condition for passage.
FireDogLake says similar stuff, that a cap on future spending is likely going to be part of any agreement, but that the debt ceiling hike will get passed.
So that's that. Just pray the economy holds on, and no more fiscal stimulus is needed. It doesn't sound like it's coming.
Read more: http://www.businessinsider.com/the-democrats-lose-the-debt-ceiling-fight-2011-4#ixzz1KBjQ7sCd
50 FACTORS POWERING THE GOLD BULL
50 FACTORS POWERING THE GOLD BULL
1) USFed is stuck at 0% for over two years and printing $1.7 trillion in Quantitative Easing, otherwise called monetary hyper inflation. They are not finished destroying both money and capital.
2) USFed tripled its balance sheet, with over half of it bonds of exaggerated value, while it gobbled up toxic mortgage bonds as buyer of last resort. The mortgage bonds have turned worthless. The USFed waits for a housing revival to bail itself out, but it will not arrive.
3) Debt monetization has gone haywire, as over 70% of USTBond sales from the USFed printing press. The QE was urgently needed, since legitimate buyers vanished. Even the primary dealers have been reimbursed in open market operations within a few weeks.
4) PIMCO has shed its entire USTreasury Bond holdings, seeing no value. They joined many foreign creditors in an unannounced buyer boycott in disgusted reaction to QE which is essentially a compulsory unilateral debt writedown.
5) Growing USGovt deficits have run over $1.5 trillion annually, with absent cuts, obscene entitlements, endless war. The prevailing short-term 0% interest rates are out of synch with exploding debt supply and rising price inflation.
6) Unfunded USGovt liabilities total nearly $100 trillion for medicare, social security, pensions, and more. The obligations are never included in the official debt. It represents insult to injury within insolvency.
7) Standard & Poors warned that USGovt could lose AAA rating in lousy credit outlook, one chance in three within the next two years. Ironically, the announcement came on the day when the USGovt exceeded its debt limit. The network news missed it.
8) State & Municipal debt have collapsed, as 41 states have huge shortfalls, and four large states are broken. They might receive a federal bailout. It could be called QE3, maybe QE4.
9) Coordinated USTBond purchases from Japanese sales have relieved the USFed, as other major central banks act as global monetarist agents. The sales by Japan are vast and growing. Witness the last phase in unwind of Yen Carry Trade, where 0% borrowed Japanese money funded the USTreasury Bonds and US Stocks.
10) Quantitative Easing, a catch word for extreme monetary inflation and debt monetization, has become engrained into global central bank policy, soon hidden. It is so controversial and deadly to the global financial structures that it will go hidden, and attempt to avoid the furious anger in feedback by global leaders. This is the most important and powerful of all 50 factors in my view.
11) The FedFunds Rate is stuck near 0%, yet the actual CPI is near 10%, for a real rate of interest of minus 9%. Historically a negative real rate of interest has been the primary fuel for a Gold bull. This time the fuel has been applied for a longer period of time, and a bigger negative real rate than ever.
12) The USGovt claims to have 8000 tons of Gold in reserve, but it is all in Deep Storage, as in unmined ore bodies. The collateral for the USDollar and USTreasury debt is vacant. It is in raw form like in the Rocky Mountain range or Sierra Nevada range.
13) Fast rising food prices, fast rising gasoline prices, and fast rising metals, coffee, sugar, and cotton serve as testament to broad price inflation. So far it has shown up on the cost structure. Either the business sector will vanish from a cost squeeze or pass on higher costs as end product and service price increases.
14) The entire world seeks to protect wealth from the ravages of inflation & the American sponsored QE by buying Gold & Silver. The rest of the world can spot price inflation more effectively than the US population. The United States is subjected to the world's broadest and most pervasive propaganda in the industrialized world.
15) The European sovereign debt breakdown with high bond yields in PIIGS nations points out the broken debt foundation to the monetary system. The solutions like with Greece in May 2010 were a sham, nothing but a bandaid and cup of elixir. Spain is next to experience major shocks that destabilize all of Europe again, this time much bigger than Greece. The Portuguese Govt debt rises toward 10% on the 10-year yield, while the Greek Govt debt has risen to reach 20% on the 2-year yield.
16) Germany is pushing for Southern Europe bank climax in their Euro Central Bank rate hike. Europe will be pushed to crisis this year, orchestrated by the impatient and angry Germans. They have no more appetitive for $300 to $400 billion in annual welfare to the broken nations in Southern Europe.
17) Isolation of the USFed and Bank of England and Bank of Japan has come. The small rate hike by the European Central Bank separated them finally. The Anglos with their Japanese lackeys are the only central banks not raising rates. With isolation comes all the earmarks on the path to the Third World.
18) The shortage of gold is acute, as 51 million gold bars have been sold forward versus the 11 million held by the COMEX in inventory. Be sure that hundreds of millions of nonexistent fractionalized gold ounces are polluting the system. Word is getting out that the COMEX is empty of precious metals.
19) Such extreme Silver shortage has befallen the COMEX that the corrupted metals exchange routinely offers cash settlement in silver with a 25% bonus if a non-disclosure agreement is signed. The practice cannot be kept under wraps, as some hedge funds push for fat returns in under two months holding positions with delivery demanded.
20) China has begun grand initiatives to replace its precious metal stockpiles. They are pursuing the Yuan currency to become a global reserve currency. As they build collateral for the Yuan, they are also elevating Silver as reserves asset.
21) A global shortage of Gold & Silver has been realized in national mint production. From the United States to Canada to Australia to Germany, shortages exist. Many interruptions will continue amidst the shortages, which feed the publicity.
22) The Teddy Roosevelt stockpile of 6 billion Silver ounces was depleted in 2003. He saw the strategic importance of Silver for industrial and military applications. The USEconomy and USMilitary will turn into importers on the global market.
23) betrayal of China by USGovt in Gold & Silver leases is a story coming out slowly. The deal was cut in 1999, associated with Most Favored Nation granted to China. But the Wall Street firms broke the deal, betrayed the Chinese, and angered them into highly motivated action. No longer are the Chinese big steady USTBond buyers, part of the deal also.
24) Every single US financial market has been undermined and corrupted from grotesque intervention, constant props, and fraudulent activity. The degradation has occurred under the watchful eyes of compromised regulators. Fraud like the Flash Crash and NYSE front running by Goldman Sachs is protected by the FBI henchmen.
25) The USEconomy operates on a global credit card, enabling it to live beyond its means. The USGovt exploits the compulsory foreign extension of credit in USTBonds, by virtue of the USDollar acting as global reserve currency. Foreign nations are compelled to participate but that is changing.
26) The USMilitary conducts endless war adventures for syndicate profits. They use the USTreasury Bond as a credit card. The wars cost of $1 billion per day is considered so sacred, that it is off the table in USGovt budget call negotiations, debates, and agreements.
27) Narcotics funds have proliferated under the USMilitary aegis. The vertically integrated narcotics industry is the primary plank of nation building in Afghanistan. The funds keep the big US banks alive from vast money laundering.
28) No big US bank liquidations have occurred, despite their deep insolvency. Any restructure toward recovery would have the liquidations are the first step. The USEconomy is stuck in a deteriorating swamp since the Too Big To Fail mantra prevents the urgent but missing step.
29) The unprosecuted multi-$trillion bond fraud over the last decade has harmed the US image, prestige, and leadership. The main perpetrators are the Wall Street bankers and their lieutenants appointed at Fannie Mae and elsewhere. They bankers most culpable remain in charge at the USDept Treasury and other key supporting posts like the FDIC, SEC, and CFTC.
30) The ugly daughters Fannie Mae and AIG are forever entombed in the USGovt. They operate as black hole expenses whose fraud must be contained. The costs involved are in the $trillions, all hidden from view like the fraud. Fannie Mae remains the main clearinghouse for several $trillion fraud programs still in operation.
31) The US banking system cannot serve as an effective credit engine dispenser, an important function within any modern economy. It is deeply insolvent, and growing more insolvent as the property market sinks lower in valuation. The banks lack reserves, and hide their condition by means of the FASB permission to use fraudulent accounting.
32) The big US banks are beneficiary of continuous secret slush fund support from the USGovt and USFed. Their sources and replenishments have been gradually revealed. The TARP Fund event will go down in modern history as the greatest theft the world has ever seen, easily eclipsing the biggest mortgage bond fraud in history.
33) The insolvent big US banks continue to sit at the USGovt teat. The vast umbilical cord of banker welfare has not gone away. Goldman Sachs still is in control of the funding machinery.
34) The shadow banking system based upon credit derivatives keeps interest rates near 0%. The usury cost of money is artificially low near nothing. As money costs nothing, capital is actively and rapidly destroyed.
35) A vast crime syndicate has taken control of the USGovt. A vast crime syndicate has taken control of the USMilitary. A vast crime syndicate has taken control of the USCongress. A vast crime syndicate has taken control of the US press networks.
36) A chronic decline of the US housing sector keeps the USEconomy in a grand decline with constant deterioration. With one million bank owned homes in inventory, a huge unsold overhang of supply prevents any recovery of housing prices. Home equity continues to drain, and bank balance sheets continue to erode.
37) Over 11 million US homes stand in negative equity. The sum equals to 23.1% of households. They will not participate much in the USEconomy, except when given handouts. They have become downtrodden.
38) The USEconomy will not benefit from a export surge. The US industrial base has no critical mass after 30 years of dispatch to the Pacific Rim & China. The industry must contend with rising costs in offset to the falling USDollar, which is cited as providing the mythical benefit. Then can export in droves if they do so at a loss.
39) A global revolt against the USDollar is in its third years. The global players work to avoid the US$ usage in trade settlement. Several bilateral swap facilities flourish, mostly with China. If China supplies products, then the Yuan currency will be elevated to global reserve currency.
40) Global anger and resentment over three decades has spilled over. The World Bank and IMF have been routinely used by the US bankers to safeguard the USDollar and Anglo banker hegemony. Neither financial agency commands the respect of yesteryear.
41) A middle phase has begun in a powerful Global Paradigm Shift. The transfer moves power East where the wealth engines of industry lie, far from the fraudulent banking centers. The next decade will feature the Chinese as bankers, since their war chest contains over $3 trillion.
42) The crumbling global monetary system was built on toxic sovereign debt. Legal tender has been nothing more than denominated debt posing as legitimate by legal decree. That is what word FIAT means. The system is gradually breaking in an irreversible manner.
43) The global central bank franchise system has been discredited. It is a failure, which is not recognized by the bank leaders still in charge. The stepwise process of ruin continues with a new sector falling every few months. Next might be municipal bonds.
44) Witness the final phase of a systemic cycle, as the monetary system has run its course. It is saturated with debt from faulty design. The deception cited in the mainstream media focuses upon the credit cycle which will renew. It will not. It will break of its own weight and lost confidence.
45) The recognition has grown substantially that suppression of the Gold price has been the anchor holding fiat system together. The Chinese realize that Gold, when removed, leads to the collapse of the US financial system. They realize it more than the US public. But the syndicate in control of the USGovt understands the concept very well, as they designed the system.
46) The institution of a high level global barter system might soon take root. Gold will sit at its central core, providing stability. No deadbeat nations will participate. That includes the United States and several European nations. The barter system will be as effective as elegant.
47) The movements spread like wildfire in several US states to reinstitute gold as money. In a few states, led by Utah and Virginia, progress has been made for Gold to satisfy debts, public & private. Consider the movement to be in parallel to the Tenth Amendment movements.
48) Anglo bankers have lost control in global banking politics. The phased out G-7 Meeting is evidence. China has wrested control of G-20 Meeting, and has dictated much of its agenda in the last few meetings. The US has been reduced to a diminutive Bernanke and Geithner being ignored in the corner.
49) New loud stirrings by Saudi Arabia seek a new security protector. If security is no longer provided by the USMilitary, then the entire defacto Petro-Dollar standard is put at risk. Remove the crude oil sales in USDollars exclusively, and the US sinks into the Third World with a USDollar currency that cannot stand on its own wretched wrecked fundamentals.
50) The IMF solution to use SDR basket as global reserve is a final desperate ploy. By fashioning a basket of major currencies in a basket, they attempt to enforce a price fixing regime. It is a hidden FOREX currency exchange rate price fixing gambit that will invite a Gold price advance in uniform manner across the currencies bound together. This ploy is being planned in order to prevent the USDollar from dying a horrible death at the expense of the other major currencies. By that is meant at the expense of the other major economies which would otherwise have to operate at very high exchange rates.
1) USFed is stuck at 0% for over two years and printing $1.7 trillion in Quantitative Easing, otherwise called monetary hyper inflation. They are not finished destroying both money and capital.
2) USFed tripled its balance sheet, with over half of it bonds of exaggerated value, while it gobbled up toxic mortgage bonds as buyer of last resort. The mortgage bonds have turned worthless. The USFed waits for a housing revival to bail itself out, but it will not arrive.
3) Debt monetization has gone haywire, as over 70% of USTBond sales from the USFed printing press. The QE was urgently needed, since legitimate buyers vanished. Even the primary dealers have been reimbursed in open market operations within a few weeks.
4) PIMCO has shed its entire USTreasury Bond holdings, seeing no value. They joined many foreign creditors in an unannounced buyer boycott in disgusted reaction to QE which is essentially a compulsory unilateral debt writedown.
5) Growing USGovt deficits have run over $1.5 trillion annually, with absent cuts, obscene entitlements, endless war. The prevailing short-term 0% interest rates are out of synch with exploding debt supply and rising price inflation.
6) Unfunded USGovt liabilities total nearly $100 trillion for medicare, social security, pensions, and more. The obligations are never included in the official debt. It represents insult to injury within insolvency.
7) Standard & Poors warned that USGovt could lose AAA rating in lousy credit outlook, one chance in three within the next two years. Ironically, the announcement came on the day when the USGovt exceeded its debt limit. The network news missed it.
8) State & Municipal debt have collapsed, as 41 states have huge shortfalls, and four large states are broken. They might receive a federal bailout. It could be called QE3, maybe QE4.
9) Coordinated USTBond purchases from Japanese sales have relieved the USFed, as other major central banks act as global monetarist agents. The sales by Japan are vast and growing. Witness the last phase in unwind of Yen Carry Trade, where 0% borrowed Japanese money funded the USTreasury Bonds and US Stocks.
10) Quantitative Easing, a catch word for extreme monetary inflation and debt monetization, has become engrained into global central bank policy, soon hidden. It is so controversial and deadly to the global financial structures that it will go hidden, and attempt to avoid the furious anger in feedback by global leaders. This is the most important and powerful of all 50 factors in my view.
11) The FedFunds Rate is stuck near 0%, yet the actual CPI is near 10%, for a real rate of interest of minus 9%. Historically a negative real rate of interest has been the primary fuel for a Gold bull. This time the fuel has been applied for a longer period of time, and a bigger negative real rate than ever.
12) The USGovt claims to have 8000 tons of Gold in reserve, but it is all in Deep Storage, as in unmined ore bodies. The collateral for the USDollar and USTreasury debt is vacant. It is in raw form like in the Rocky Mountain range or Sierra Nevada range.
13) Fast rising food prices, fast rising gasoline prices, and fast rising metals, coffee, sugar, and cotton serve as testament to broad price inflation. So far it has shown up on the cost structure. Either the business sector will vanish from a cost squeeze or pass on higher costs as end product and service price increases.
14) The entire world seeks to protect wealth from the ravages of inflation & the American sponsored QE by buying Gold & Silver. The rest of the world can spot price inflation more effectively than the US population. The United States is subjected to the world's broadest and most pervasive propaganda in the industrialized world.
15) The European sovereign debt breakdown with high bond yields in PIIGS nations points out the broken debt foundation to the monetary system. The solutions like with Greece in May 2010 were a sham, nothing but a bandaid and cup of elixir. Spain is next to experience major shocks that destabilize all of Europe again, this time much bigger than Greece. The Portuguese Govt debt rises toward 10% on the 10-year yield, while the Greek Govt debt has risen to reach 20% on the 2-year yield.
16) Germany is pushing for Southern Europe bank climax in their Euro Central Bank rate hike. Europe will be pushed to crisis this year, orchestrated by the impatient and angry Germans. They have no more appetitive for $300 to $400 billion in annual welfare to the broken nations in Southern Europe.
17) Isolation of the USFed and Bank of England and Bank of Japan has come. The small rate hike by the European Central Bank separated them finally. The Anglos with their Japanese lackeys are the only central banks not raising rates. With isolation comes all the earmarks on the path to the Third World.
18) The shortage of gold is acute, as 51 million gold bars have been sold forward versus the 11 million held by the COMEX in inventory. Be sure that hundreds of millions of nonexistent fractionalized gold ounces are polluting the system. Word is getting out that the COMEX is empty of precious metals.
19) Such extreme Silver shortage has befallen the COMEX that the corrupted metals exchange routinely offers cash settlement in silver with a 25% bonus if a non-disclosure agreement is signed. The practice cannot be kept under wraps, as some hedge funds push for fat returns in under two months holding positions with delivery demanded.
20) China has begun grand initiatives to replace its precious metal stockpiles. They are pursuing the Yuan currency to become a global reserve currency. As they build collateral for the Yuan, they are also elevating Silver as reserves asset.
21) A global shortage of Gold & Silver has been realized in national mint production. From the United States to Canada to Australia to Germany, shortages exist. Many interruptions will continue amidst the shortages, which feed the publicity.
22) The Teddy Roosevelt stockpile of 6 billion Silver ounces was depleted in 2003. He saw the strategic importance of Silver for industrial and military applications. The USEconomy and USMilitary will turn into importers on the global market.
23) betrayal of China by USGovt in Gold & Silver leases is a story coming out slowly. The deal was cut in 1999, associated with Most Favored Nation granted to China. But the Wall Street firms broke the deal, betrayed the Chinese, and angered them into highly motivated action. No longer are the Chinese big steady USTBond buyers, part of the deal also.
24) Every single US financial market has been undermined and corrupted from grotesque intervention, constant props, and fraudulent activity. The degradation has occurred under the watchful eyes of compromised regulators. Fraud like the Flash Crash and NYSE front running by Goldman Sachs is protected by the FBI henchmen.
25) The USEconomy operates on a global credit card, enabling it to live beyond its means. The USGovt exploits the compulsory foreign extension of credit in USTBonds, by virtue of the USDollar acting as global reserve currency. Foreign nations are compelled to participate but that is changing.
26) The USMilitary conducts endless war adventures for syndicate profits. They use the USTreasury Bond as a credit card. The wars cost of $1 billion per day is considered so sacred, that it is off the table in USGovt budget call negotiations, debates, and agreements.
27) Narcotics funds have proliferated under the USMilitary aegis. The vertically integrated narcotics industry is the primary plank of nation building in Afghanistan. The funds keep the big US banks alive from vast money laundering.
28) No big US bank liquidations have occurred, despite their deep insolvency. Any restructure toward recovery would have the liquidations are the first step. The USEconomy is stuck in a deteriorating swamp since the Too Big To Fail mantra prevents the urgent but missing step.
29) The unprosecuted multi-$trillion bond fraud over the last decade has harmed the US image, prestige, and leadership. The main perpetrators are the Wall Street bankers and their lieutenants appointed at Fannie Mae and elsewhere. They bankers most culpable remain in charge at the USDept Treasury and other key supporting posts like the FDIC, SEC, and CFTC.
30) The ugly daughters Fannie Mae and AIG are forever entombed in the USGovt. They operate as black hole expenses whose fraud must be contained. The costs involved are in the $trillions, all hidden from view like the fraud. Fannie Mae remains the main clearinghouse for several $trillion fraud programs still in operation.
31) The US banking system cannot serve as an effective credit engine dispenser, an important function within any modern economy. It is deeply insolvent, and growing more insolvent as the property market sinks lower in valuation. The banks lack reserves, and hide their condition by means of the FASB permission to use fraudulent accounting.
32) The big US banks are beneficiary of continuous secret slush fund support from the USGovt and USFed. Their sources and replenishments have been gradually revealed. The TARP Fund event will go down in modern history as the greatest theft the world has ever seen, easily eclipsing the biggest mortgage bond fraud in history.
33) The insolvent big US banks continue to sit at the USGovt teat. The vast umbilical cord of banker welfare has not gone away. Goldman Sachs still is in control of the funding machinery.
34) The shadow banking system based upon credit derivatives keeps interest rates near 0%. The usury cost of money is artificially low near nothing. As money costs nothing, capital is actively and rapidly destroyed.
35) A vast crime syndicate has taken control of the USGovt. A vast crime syndicate has taken control of the USMilitary. A vast crime syndicate has taken control of the USCongress. A vast crime syndicate has taken control of the US press networks.
36) A chronic decline of the US housing sector keeps the USEconomy in a grand decline with constant deterioration. With one million bank owned homes in inventory, a huge unsold overhang of supply prevents any recovery of housing prices. Home equity continues to drain, and bank balance sheets continue to erode.
37) Over 11 million US homes stand in negative equity. The sum equals to 23.1% of households. They will not participate much in the USEconomy, except when given handouts. They have become downtrodden.
38) The USEconomy will not benefit from a export surge. The US industrial base has no critical mass after 30 years of dispatch to the Pacific Rim & China. The industry must contend with rising costs in offset to the falling USDollar, which is cited as providing the mythical benefit. Then can export in droves if they do so at a loss.
39) A global revolt against the USDollar is in its third years. The global players work to avoid the US$ usage in trade settlement. Several bilateral swap facilities flourish, mostly with China. If China supplies products, then the Yuan currency will be elevated to global reserve currency.
40) Global anger and resentment over three decades has spilled over. The World Bank and IMF have been routinely used by the US bankers to safeguard the USDollar and Anglo banker hegemony. Neither financial agency commands the respect of yesteryear.
41) A middle phase has begun in a powerful Global Paradigm Shift. The transfer moves power East where the wealth engines of industry lie, far from the fraudulent banking centers. The next decade will feature the Chinese as bankers, since their war chest contains over $3 trillion.
42) The crumbling global monetary system was built on toxic sovereign debt. Legal tender has been nothing more than denominated debt posing as legitimate by legal decree. That is what word FIAT means. The system is gradually breaking in an irreversible manner.
43) The global central bank franchise system has been discredited. It is a failure, which is not recognized by the bank leaders still in charge. The stepwise process of ruin continues with a new sector falling every few months. Next might be municipal bonds.
44) Witness the final phase of a systemic cycle, as the monetary system has run its course. It is saturated with debt from faulty design. The deception cited in the mainstream media focuses upon the credit cycle which will renew. It will not. It will break of its own weight and lost confidence.
45) The recognition has grown substantially that suppression of the Gold price has been the anchor holding fiat system together. The Chinese realize that Gold, when removed, leads to the collapse of the US financial system. They realize it more than the US public. But the syndicate in control of the USGovt understands the concept very well, as they designed the system.
46) The institution of a high level global barter system might soon take root. Gold will sit at its central core, providing stability. No deadbeat nations will participate. That includes the United States and several European nations. The barter system will be as effective as elegant.
47) The movements spread like wildfire in several US states to reinstitute gold as money. In a few states, led by Utah and Virginia, progress has been made for Gold to satisfy debts, public & private. Consider the movement to be in parallel to the Tenth Amendment movements.
48) Anglo bankers have lost control in global banking politics. The phased out G-7 Meeting is evidence. China has wrested control of G-20 Meeting, and has dictated much of its agenda in the last few meetings. The US has been reduced to a diminutive Bernanke and Geithner being ignored in the corner.
49) New loud stirrings by Saudi Arabia seek a new security protector. If security is no longer provided by the USMilitary, then the entire defacto Petro-Dollar standard is put at risk. Remove the crude oil sales in USDollars exclusively, and the US sinks into the Third World with a USDollar currency that cannot stand on its own wretched wrecked fundamentals.
50) The IMF solution to use SDR basket as global reserve is a final desperate ploy. By fashioning a basket of major currencies in a basket, they attempt to enforce a price fixing regime. It is a hidden FOREX currency exchange rate price fixing gambit that will invite a Gold price advance in uniform manner across the currencies bound together. This ploy is being planned in order to prevent the USDollar from dying a horrible death at the expense of the other major currencies. By that is meant at the expense of the other major economies which would otherwise have to operate at very high exchange rates.
Wednesday, April 20, 2011
It’s Official: China Will Be Dumping US Dollars
Submitted by Phoenix Capital Research on 04/20/2011 09:59 -0400
In case you missed it, earlier this week China announced that its foreign currency reserves are excessive and that they need to return to “reasonable” levels.
In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
What does this mean? We’re on out own in terms of preparing for what’s coming. The US Dollar has already taken out its 2009 low in the overnight futures session. We now have only one line of support before the US Dollar breaks into the abyss (all time lows).
So if you’re not preparing for mega-inflation already, you need to start doing so NOW. The Fed WILL continue to pump money into the system 24/7 and it’s going to result in the death of the US Dollar.
If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.
In case you missed it, earlier this week China announced that its foreign currency reserves are excessive and that they need to return to “reasonable” levels.
In politician speak, this is a clear, “we are sick of the US Dollar and will be taking steps to lower our holdings.” Remember, the US Dollar is China’s largest single holding. And China has already begun dumping Treasuries (US Debt).
This comes on the heels of China deciding (along with Russia) to trade in their own currencies, NOT the US Dollar. Not to mention the numerous warnings Chinese politicians have been issuing to the US over the last 24 months.
In simple terms, China is done playing nice and is now actively moving out of US Dollar denominated assets. This is the beginning of the US Dollar’s end as world reserve currency.
The dimwits in Washington don’t understand this because their advisors are all Wall Street stooges who don’t think debt or deficits matter. After all, why would they? Their entire business model is now based on endless cheap debt from the US Fed. So it’s only logically (in their minds) that the US as a sovereign state engage in the same strategies.
What does this mean? We’re on out own in terms of preparing for what’s coming. The US Dollar has already taken out its 2009 low in the overnight futures session. We now have only one line of support before the US Dollar breaks into the abyss (all time lows).
So if you’re not preparing for mega-inflation already, you need to start doing so NOW. The Fed WILL continue to pump money into the system 24/7 and it’s going to result in the death of the US Dollar.
If you’ve yet to take steps to prepare your portfolio for the coming inflationary disaster, our FREE Special Report, The Inflationary Disaster explains not only why inflation is here now, why the Fed is powerless to stop it, and three investments that absolutely EXPLODE as a result of this.
Options Risk, Manipulation, And The May Silver $40 Calls: An FMX Connect Special - Parts 1 And 2
Francis Soyer: 04/20/11
This is a short but very good article posted on Zero Hedge explaining the market mechanics of options and their impact on underlying securities. In this example they are using silver as the underlying security. In principal the mechanics discussed apply to all securities that have derivatives like stocks and bonds. Definately worth a read over twice for the concepts to gel.
From Vince Lanci of FMX Connect
Options Risk, Manipulation, and the May Silver $40 Calls
The purpose of this series is to help the reader better understand the risks and pitfalls of trading options and having a position at expiration. We will try to describe exactly what happens at expiration. The concepts here apply to all options markets, but we chose to focus on Silver because an interesting expiration is setting up presently. The upcoming expiry gives us an opportunity to discuss all the pieces of the option puzzle: the Greeks, market manipulation, Pin risk, and other factors.
Lesson #1
In futures markets where major participants are absent, options players dictate market movement for short periods of time. During this time the market may flat line, or it may have large, impulsive moves in either direction. What happens is determined by the strong-handed player, and sometimes his inclination to “game” the market.
The Easter Egg
Observe if you will, the 6 days prior to expiration of Comex May Silver options.
April 21st, Holy Thursday: day before a holiday
April 22nd: Good Friday: CME Closed
April 23rd,Easter Saturday: Markets Closed
April 24th,Easter Sunday: Markets Closed
April 26th, Tuesday: May Options Expiration CME
One may ask, what does the above imply? The above implies that normal liquidity will not be present for the last 5 days before expiration. Sunday Evening US time is usually quite liquid during London hours, but will not be this week. Monday will also be a liquidity ghost town, as LME players will be out. It is doubtful that many US futures liquidity providers will be in the day after Easter either. This is a market ripe for an event.
Throughout this week and next, we will attempt to break down the factors influencing the outcome of this expiration as a proxy for understanding commodity options risk in general. It will include:
· The players and their biases
· Option Greeks demystified
How to spot when a market is ripe for “management”, like above.
Part 2: A Zero-Sum Game
In any single trade, the option buyer and seller are fundamentally at odds. Both types of player (referred to as options long and options short) make their money in opposite ways, and at the expense of the other. The long players expect to make more money scalping Gamma than they lose in Theta over the option’s life. The Short players bet that the Theta they collect will outweigh the market movement and the negative Gamma they incur, most poetically described as “wishing for death”.
To understand how and why markets sometimes get “managed” at expiration it would make sense to first understand the Option Greeks. This combined with who the players actually are, and understanding the regulatory inconsistencies will tell the full tale on why markets are ripe for manipulation near options expiration.
Keeping Score
Managing Options risk is a complex task. We are going to focus here on only three of the “Greeks” used to quantify and manage risk, Delta, Gamma, and Theta. These are the most important ones affecting an option trader’s behavior as expiration approaches and the market is hovering near a strike. We’ll attempt to explain them plainly and simply through examples. For these explanations we must assume that all other Greek parameters: like volatility, rho, etc remain static to better isolate the effects of delta, gamma, and theta on risk.
Delta
In physics Delta means rate of change. In calculus Delta is the tangent of the trajectory. But Delta actually has 3 definitions in the practical trading world. These definitions largely overlap but are not necessarily the same for the whole life of the option.
1. Correlation with the underlying: a Call has a 20 delta. The model generating that delta assumes the Call’s value will change by 20% of what the underlying changes. E.g. Crude Oil goes up by $1.00. The Call will go up by $0.20 assuming other Greeks remain the same.
2. Hedge Ratio: The long 20 delta call would be directionally neutralized if it had a hedge of short 0.20 futures per long options contract. E.g. I am long 100 Crude Oil calls with a 20 delta. I will sell 20 futures to hedge myself directionally. Therefore I will (theoretically) neither make nor lose money in either direction due to underlying movement. I am directionally “flat”
3. Probability of Expiring in-the-money: according to the model, said 20 delta call has a 20% chance of expiring in-the-money. e.g. an option with 30 days to expiry at this volatility has an implied probability of a 20% chance of expiring in-the-money.[1]
Gamma:
Gamma is the second derivative of the option. In physics, it is the rate-of-change of the rate-of-change. In calc it is the tangent of the velocity. For our purposes it is simply how much a delta itself will change (Correlation, Hedge ratio, or Probability), given a change in the underlying price.
Using our Crude Oil 20 delta call option again: Crude rallies from $90.00 to $91.00. In our example, the option has a 20 delta and its correlation/hedge ratio/probability all point to a change in the option’s value of $0.20. But that cannot be entirely correct if one measures the option’s value at the end of the $1.00 move in crude.
Because the market has moved higher, the option has an increased probability of going in the money. Therefore its Correlation, Hedge Ratio and In-The-Money Expiration Probability must increase. In our example, we use our model to re-calculate the delta of the call and find that its delta has gone from 20 to 25. This difference of 5 deltas over a $1.00 move is its Gamma.
Therefore we now have the ability to sell 5 more futures against our 100 calls if we wish to rebalance our directional risk. We get to “Sell High”. And if the market drops back down to $90.00, the option’s delta will once again become 20. We will get to “Buy Low”. Such is the virtue of being long Gamma. The ability to sell when something goes up, and buy it back when it comes down. Provided of course your model is right, and as we’ve said multiple times other Greeks don’t change. Gamma however comes with a cost called Theta.
Theta
The rate at which an out-of-the-money option loses its value over time is Theta. In short, it is the rate at which your long lottery ticket wastes away. As time goes to zero, your out-of-the-money option’s chances of expiring in the money go to zero as well. It is not unlike having tickets to an event that you wish to sell. If interest is tepid in the event (Jethro Tull : Bore ‘em at the Forum) and you can’t get face value for them from someone, you are said to be out-of-the-money. You will lower your price as we get closer to the event itself in the hopes of unloading them. That is an imperfect example of Theta.
Using our 20 delta call again: if it has a Theta of .05. That means it will lose 5 cents of value per day from the march of time, again assuming all those other Greeks we are not talking about remain the same. So as a holder of that Crude Oil call with a 20 delta, you are in a race against time. If you cannot make more than 5 cents per day from delta readjustments (aka Gamma) after the underlying moves, you will be a net loser of money. Put another way, you must “scalp your Gamma” to profit by 5 cents daily just to break even on your option investment. More than 5 cents and you profit, less than that and you lose.
Options Yin and Yang
Gamma and Theta are opposite sides of the same coin. These risks and how they are managed by opposing counterparties, combined with the asymmetric setup in the system are the key to the reasons for why so many option expirations get “pinned” at a strike with large open interest. And also why rarely but more sensationally, markets blow through strikes with big open interest.
Tuesday, April 19, 2011
Guest Post: Getting Off The Globalist Chessboard: An Introduction
By Stewart Rhodes of Oath Keepers and Brandon Smith of the Alternative Market Project
Getting Off The Globalist Chessboard: An Introduction
To put it simply, America is nearing a checkmate scenario. Like the final torrid maneuvers of a rigged chess match, we have been pressed, manipulated, and attacked into the last remaining corner of the “grand global chessboard” left to us; centralized control of all social and economic power into the hands of an unworthy elite. If we continue playing the game by their rules, we will lose. There is no doubt. There have been many solutions presented to us in the past to combat this development, but nearly all of them function within the constraints of Federal politics. Working within the system has earned us no quarter, and frankly, no results. Our only recourse (and, frankly, the best recourse all along) is to STOP relying on the rules of their game, and to walk away from the chess board completely.
Globalization is essentially just another word for centralization, and the key to centralizing any system is to remove all options until the masses are completely and utterly dependent upon a single dominant paradigm. Globalists have deceived many Americans into believing that centralization is a “natural” process - that their game is indeed the only one in town. The widespread acceptance of the fiat monetary system is a perfect example of the average person’s unfortunate lack of economic flexibility. Only recently, in the face of dollar devaluation and complete financial collapse have many finally begun to question the legitimacy of a single brittle and corrupt economic structure. American politics are no different.
The elites have conned us into thinking that the only possible “solution” to where we are is federal elections, which only vote in new puppets for the puppet masters to manipulate in an illusory shell game. We have been tricked into thinking we are free because we come together from time to time to select our rulers.
But of course, this country was not founded as a democracy, but as a Constitutional Republic, and in such a Republic as ours, liberty is not just about “kicking the bums out” every few years only to vote a new set of bums into Congress, as the globalists would have us think. Federal elections are just one small part of it. The Founders intended us to be active, sovereign citizens, in strong communities and strong, sovereign states, and that is about far, far more than merely voting.
But because the globalists – with the aid of complicit domestic counterparts - have been able to capture our education system, our media, our political system, and our legal system, they have succeeded in dumbing us down and duping us into thinking that all other mechanisms for constraining power have been removed from the table. In fact, we have been convinced that all of the other fundamental institutions of our republic– aside from voting - are illegitimate, or even criminal.
The Founders gave us a dual sovereignty republic. That means states are as much sovereign within their sphere as the national government is within its sphere, with a national government of limited, enumerated, and divided powers. As our Tenth Amendment makes clear, “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In Federalist 45, James Madison (widely considered the ‘father of the Constitution”) promised the American people that:
The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.
Clearly the design of the Founders’ has been turned on its head. With the aid of complicit judges – which Thomas Jefferson called a “corps of sappers and miners” – who willfully misinterpret the Commerce Clause to grant Congress the power to regulate literally anything, we now have a ruling class who will admit of no restraints on national power with a national government of nearly unlimited de facto powers, grown like a metastasizing cancer far beyond the bounds of anything foreseen by even the most skeptical of Anti-Federalists from the Founding era. All actual, physical and structural powers of any real meaning – legislative, military, legal, law enforcement, and economic – are consolidated in the hands of the federal government. On top of this, they have grafted a hydra-like overlay of international law and international unelected agencies and untouchable international “officials” that are also being imposed up us by means of treaties, executive partnerships (such as the supposedly now defunct Security and Prosperity Partnership of North America, now being revitalized by the Obama Administration) and other constitutionally dubious mechanisms.
While we are distracted with elections, they are planning the destruction of the dollar, the collapse of our economy, the final destruction of our sovereignty, and the total absorption of our entire system into the vapid body of an unaccountable global government.
This is why we must stop playing by their “rules,” must get off of their artificial chess board, and instead play by the rules of our Constitution. This means taking power into our own hands as individuals, communities, counties, and states.
To do this, Neithercorp Press, the Alternative Market Project, and Oath Keepers are working together to focus on concrete solutions that can be applied by the average American in their day-to-day lives, in both the private and public spheres. In the limited time we have left, we urge Americans to focus on the following four key strategies (arranged in order of priority of needs):
1. Food and fuel independence and security – and other essential infrastructure (general preparedness) - as individuals, within local veterans organization chapters, neighborhood mutual aid societies, churches, co-ops, farmers markets, and at the town, county and state levels). In the aftermath of an economic collapse, food is the hardest necessity to improvise, and food scarcity is a serious achiles heel, exploited by oppressive regimes throughout history. To get started on food storage and independence, follow the advice on providentliving.org (you don’t need to be LDS to learn from their experience in food storage and preparedness, or to use their canneries). Likewise, we will need fuel, emergency medical, and resilient communication that can function in a grid-down crisis, devoid of internet communication (or with the internet shut down intentionally by means of a kill-switch).
2. Physical security and Independence - again as individuals, neighborhoods, towns, counties and states, to include forming neighborhood watches, mutual aid associations, a volunteer sheriff’s posse (staffed by volunteers under direct command of the sheriff), and county militias established by county ordinances but staffed by self-supplied and self-funded volunteers (as is done in volunteer fire departments all over this nation), and ultimately, a true state militia capable of “repelling invasions” (using the research and model bills of Dr. Edwin Vieira). Americans have plenty of guns, but not enough organization. See operationsleepinggiant.org for details.
3. Economic security and independence - as individuals and communities, including barter networks, use of silver and gold as real money, the development of valuable trade skills, and sound money bills at the county and state levels (as Utah just passed into law). The localization of community commerce is the only sure way to counter globalization. The more independent and insulated cities and states are from the corrupt and dysfunctional mainstream economy, the more safe and secure they will find themselves when that economy implodes. We must have an alternative to the fiat money system in place to preempt such an event. See alt-market.com for details.
4. State sovereignty and nullification of unconstitutional federal laws and actions. Veterans must support only sheriffs, state legislators and governors who have the guts and integrity to keep their oaths. To vote for an oath breaker, is to become an oath breaker. We must defend the powers reserved to the states and to the people by supporting state sovereignty resolutions and nullification of unconstitutional laws. See tenthamendmentcenter.com. And eventually we must kick the bums out, as GOOOH recommends. See goooh.com.
We will soon be publishing an upcoming series of articles that will provide in-depth details on each of the above four key pillars of action. While we should not turn our backs on the tactics of educating the public, supporting constitutional legislation, voting for honest and principled representatives, or nullifying unconstitutional laws (we should certainly make full use of the soap box, the ballot box, and the jury box) it is now time to dedicate ourselves to much more. The very future of our country, our liberties, and the prosperity of the next generation depends upon this.
Getting Off The Globalist Chessboard: An Introduction
To put it simply, America is nearing a checkmate scenario. Like the final torrid maneuvers of a rigged chess match, we have been pressed, manipulated, and attacked into the last remaining corner of the “grand global chessboard” left to us; centralized control of all social and economic power into the hands of an unworthy elite. If we continue playing the game by their rules, we will lose. There is no doubt. There have been many solutions presented to us in the past to combat this development, but nearly all of them function within the constraints of Federal politics. Working within the system has earned us no quarter, and frankly, no results. Our only recourse (and, frankly, the best recourse all along) is to STOP relying on the rules of their game, and to walk away from the chess board completely.
Globalization is essentially just another word for centralization, and the key to centralizing any system is to remove all options until the masses are completely and utterly dependent upon a single dominant paradigm. Globalists have deceived many Americans into believing that centralization is a “natural” process - that their game is indeed the only one in town. The widespread acceptance of the fiat monetary system is a perfect example of the average person’s unfortunate lack of economic flexibility. Only recently, in the face of dollar devaluation and complete financial collapse have many finally begun to question the legitimacy of a single brittle and corrupt economic structure. American politics are no different.
The elites have conned us into thinking that the only possible “solution” to where we are is federal elections, which only vote in new puppets for the puppet masters to manipulate in an illusory shell game. We have been tricked into thinking we are free because we come together from time to time to select our rulers.
But of course, this country was not founded as a democracy, but as a Constitutional Republic, and in such a Republic as ours, liberty is not just about “kicking the bums out” every few years only to vote a new set of bums into Congress, as the globalists would have us think. Federal elections are just one small part of it. The Founders intended us to be active, sovereign citizens, in strong communities and strong, sovereign states, and that is about far, far more than merely voting.
But because the globalists – with the aid of complicit domestic counterparts - have been able to capture our education system, our media, our political system, and our legal system, they have succeeded in dumbing us down and duping us into thinking that all other mechanisms for constraining power have been removed from the table. In fact, we have been convinced that all of the other fundamental institutions of our republic– aside from voting - are illegitimate, or even criminal.
The Founders gave us a dual sovereignty republic. That means states are as much sovereign within their sphere as the national government is within its sphere, with a national government of limited, enumerated, and divided powers. As our Tenth Amendment makes clear, “[t]he powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”
In Federalist 45, James Madison (widely considered the ‘father of the Constitution”) promised the American people that:
The powers delegated by the proposed Constitution to the federal government, are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce; with which last the power of taxation will, for the most part, be connected. The powers reserved to the several States will extend to all the objects which, in the ordinary course of affairs, concern the lives, liberties, and properties of the people, and the internal order, improvement, and prosperity of the State.
Clearly the design of the Founders’ has been turned on its head. With the aid of complicit judges – which Thomas Jefferson called a “corps of sappers and miners” – who willfully misinterpret the Commerce Clause to grant Congress the power to regulate literally anything, we now have a ruling class who will admit of no restraints on national power with a national government of nearly unlimited de facto powers, grown like a metastasizing cancer far beyond the bounds of anything foreseen by even the most skeptical of Anti-Federalists from the Founding era. All actual, physical and structural powers of any real meaning – legislative, military, legal, law enforcement, and economic – are consolidated in the hands of the federal government. On top of this, they have grafted a hydra-like overlay of international law and international unelected agencies and untouchable international “officials” that are also being imposed up us by means of treaties, executive partnerships (such as the supposedly now defunct Security and Prosperity Partnership of North America, now being revitalized by the Obama Administration) and other constitutionally dubious mechanisms.
While we are distracted with elections, they are planning the destruction of the dollar, the collapse of our economy, the final destruction of our sovereignty, and the total absorption of our entire system into the vapid body of an unaccountable global government.
This is why we must stop playing by their “rules,” must get off of their artificial chess board, and instead play by the rules of our Constitution. This means taking power into our own hands as individuals, communities, counties, and states.
To do this, Neithercorp Press, the Alternative Market Project, and Oath Keepers are working together to focus on concrete solutions that can be applied by the average American in their day-to-day lives, in both the private and public spheres. In the limited time we have left, we urge Americans to focus on the following four key strategies (arranged in order of priority of needs):
1. Food and fuel independence and security – and other essential infrastructure (general preparedness) - as individuals, within local veterans organization chapters, neighborhood mutual aid societies, churches, co-ops, farmers markets, and at the town, county and state levels). In the aftermath of an economic collapse, food is the hardest necessity to improvise, and food scarcity is a serious achiles heel, exploited by oppressive regimes throughout history. To get started on food storage and independence, follow the advice on providentliving.org (you don’t need to be LDS to learn from their experience in food storage and preparedness, or to use their canneries). Likewise, we will need fuel, emergency medical, and resilient communication that can function in a grid-down crisis, devoid of internet communication (or with the internet shut down intentionally by means of a kill-switch).
2. Physical security and Independence - again as individuals, neighborhoods, towns, counties and states, to include forming neighborhood watches, mutual aid associations, a volunteer sheriff’s posse (staffed by volunteers under direct command of the sheriff), and county militias established by county ordinances but staffed by self-supplied and self-funded volunteers (as is done in volunteer fire departments all over this nation), and ultimately, a true state militia capable of “repelling invasions” (using the research and model bills of Dr. Edwin Vieira). Americans have plenty of guns, but not enough organization. See operationsleepinggiant.org for details.
3. Economic security and independence - as individuals and communities, including barter networks, use of silver and gold as real money, the development of valuable trade skills, and sound money bills at the county and state levels (as Utah just passed into law). The localization of community commerce is the only sure way to counter globalization. The more independent and insulated cities and states are from the corrupt and dysfunctional mainstream economy, the more safe and secure they will find themselves when that economy implodes. We must have an alternative to the fiat money system in place to preempt such an event. See alt-market.com for details.
4. State sovereignty and nullification of unconstitutional federal laws and actions. Veterans must support only sheriffs, state legislators and governors who have the guts and integrity to keep their oaths. To vote for an oath breaker, is to become an oath breaker. We must defend the powers reserved to the states and to the people by supporting state sovereignty resolutions and nullification of unconstitutional laws. See tenthamendmentcenter.com. And eventually we must kick the bums out, as GOOOH recommends. See goooh.com.
We will soon be publishing an upcoming series of articles that will provide in-depth details on each of the above four key pillars of action. While we should not turn our backs on the tactics of educating the public, supporting constitutional legislation, voting for honest and principled representatives, or nullifying unconstitutional laws (we should certainly make full use of the soap box, the ballot box, and the jury box) it is now time to dedicate ourselves to much more. The very future of our country, our liberties, and the prosperity of the next generation depends upon this.
Monday, April 18, 2011
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
(Not to beat a dead horse even more but, BUY SOME GOLD and SILVER! YES THIS MEANS YOU WILLY!)
From Gold Core
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.
Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year).
Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning.
Euro gold has been in a range between €900 and €1,070 for nearly a year (since last May – see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz .
In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.
Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.
Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing which is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.
One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news).
Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.
The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default.
The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable”.
A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today’s monetary system.
NEWS
(Financial Times) -- Euro slides on sovereign debt fears
Reports that Greece had asked for a debt restructuring – subsequently denied by Athens – have rattled the euro and the continent’s bourses.
Markets were initially proving stoic in adjusting to a tighter monetary environment, with traders betting that the global economy can absorb central banks’ moves to drain excess liquidity.
The People’s Bank of China increased its reserve ratio for the country’s banks by half a point to 20.5 per cent over the weekend – the fourth time this year it has used the tool to tighten liquidity – following a 5.4 per cent rise in March consumer prices.
But shortly after European markets opened, Reuters reported a Greek newspaper as saying that Athens had asked the International Monetary Fund and European Union to restructure its sovereign debt.
The euro was already weaker after an anti-euro party gained ground in the Finnish general election, raising questions about whether the bloc will be able to agree a bail-out for Portugal.
The Greek newsflash saw the single currency shed nearly 1 per cent to $1.43, while the FTSE Eurofirst 300 index stumbled as investors sold those banks with high sovereign debt exposure.
Factors to Watch
It’s a light week for US macroeconomic data, so the market is likely to be more focused on the ongoing first-quarter earnings season. On Monday, the highlights include Citigroup, Halliburton and Texas Instruments.
An unattributed official denial of the Greek restructuring story helped brake the slide, and the euro is now down 0.6 per cent to $1.4334, with the Eurofirst off 0.4 per cent. The S&P 500 futures contract points to a 0.3 per cent fall when Wall Street opens and Treasury yields are slightly softer as risk aversion rises a touch.
Nevertheless, the FTSE All-World equity index is lower by just 0.3 per cent, helped by a belief that Beijing’s attempts to rein in lending and cool inflationary pressures is not so aggressive that it will derail growth in the world’s second-biggest economy. Shanghai’s Composite index rose 0.2 per cent.
In keeping with this underlying optimism about the global economy, industrial metals are firmer – copper is up 0.4 per cent to $4.27 a pound. This in spite of the dollar bouncing off last week’s 16-month lows with a 0.4 per cent advance, a move that would usually be considered commodity-negative.
Investors are having to come to terms with the end of the ultra-loose monetary era in big developed economies following the European Central Bank’s move to raise interest rates from 1 per cent to 1.25 per cent earlier this month and amid increasing acceptance that the US Federal Reserve’s quantitative easing programme will finish on time in June.
Major stock benchmarks are close to cyclical highs, suggesting traders feel corporate profitability will not be too severely affected by the economic impact of this policy shift.
However, some investors seem to believe that central banks are not doing enough to combat inflationary pressures and they are continuing to snap up precious metals to hedge against price rises. Worries about the eurozone are also boosting gold’s haven cachet.
Gold has hit a record high of $1,489 an ounce and is currently up 0.1 per cent at $1,486, while silver has hit a fresh 31-year record of $4.35 an ounce, and is now up 0.4 per cent at $43.17.
The additional support for bullion comes despite a small pullback in oil prices, a commodity that has carried the most inflationary concern for analysts. Brent crude is down 0.5 per cent to $122.88 a barrel as Saudi Arabia challenges the bulls with its contention that the market is oversupplied and it has consequently cut output by 800,000 barrels a day.
Another currency move of note is the yen, which has recaptured the sub-Y83 level relative to the dollar as the post-earthquake intervention impact wanes. With the Bank of Japan staying relatively looser-for-longer, because of the need for increased largesse as the country recovers from the tremor and tsunami, the yen’s interest rate differentials are likely to deteriorate.
This would normally put pressure on the yen, so the currency’s current strength may revive talk that it reflects the much muted repatriation of funds – a trend that if continued could call into question the resumption of the yen carry trade.
This is turn could affect some higher yielding or riskier assets, favourite destination of yen carry trade funds. There is little sign of this so far on Monday, however. The only clear casualty of the yen’s strength is the Tokyo stock market, which has slipped 0.4 per cent as the firmer currency hurts the country’s exporters.
(Bloomberg) -- Gold Climbs to Record as Investors Fret Over Rising Inflation
Gold advanced to record as investors seek the metal as a hedge against inflation. Gold for immediate delivery gained 0.1 percent to $1,488.35 an ounce, while bullion futures for June delivery rose 0.2 percent to $1,489.40 an ounce.
(Bloomberg) -- World Gold Council Says Position Limits Could Impair Liquidity
The World Gold Council said in a letter that proposed position limits in the gold market could “reduce or impair liquidity and trade.” The council published the March 28 letter to the Commodity Futures Trading Commision on its website today.
(Bloomberg) -- Shortage Threat Drives Texas Schools Hoarding Bullion at HSBC
Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.
Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.
While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.
The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.
Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.
Printing Money
“If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass, who isn’t related to Fort Worth’s billionaire Bass family. He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Sovereign-debt concerns also boosted demand for the metal on April 15, driving Comex futures to an all-time high. The price has climbed 28 percent in the past year.
Gold’s 10-year rally has attracted billionaire investors such as George Soros and John Paulson, who seek a store of value as record-low interest rates erode returns on currencies.
Wealthy Buyers
Few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.
Physical deliveries have slowed as gold topped records this year, said Blake Robben, a senior market strategist who handles deliveries of Comex metals for clients at Chicago-based broker Lind-Waldock.
“It’s usually wealthy individuals with net worths over $1 million who want to take delivery to diversify away from the dollar,” Robben said. “Generally, it’s a big hassle and not worth it to take delivery.”
Investors can own 100 ounces of gold futures with Lind- Waldock by paying a $100 fee and putting up $6,571 in a margin account to purchase one contract. To take delivery of a 100- ounce bar, investors have to pay the full price of the contract.
Bass, a Texas Christian University graduate who was named to the endowment’s board in August, is a former salesman with Bear Stearns Cos. and Legg Mason Inc. He said about 5 percent of his hedge fund is invested in gold.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 664,300 ounces of bullion in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at a meeting in Austin.
“I simply voted as a board member to approve the storage facility and concurred with their decisions,” Bass said.
(Bloomberg) -- Texas University Endowment Storing About $1 Billion in Gold Bars
The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.
The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.
The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Gold reached an all-time high of $1,489.10 an ounce yesterday in New York as sovereign debt concerns boosted demand for the metal as a store of value. Gold has climbed 28 percent in the past year on Comex.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 6,643 bars of bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at the meeting in Austin.
From Gold Core
$1 Billion of Gold Bars Taken Delivery Of By Pension Fund Due to Risk of COMEX Default and Shortages
Concerns that the sovereign debt crisis may be entering a new phase and the risk of contagion has seen peripheral eurozone bonds fall sharply and the euro fall against major currencies and gold today.
Sovereign debt risk, global inflation concerns, geopolitical risk, disappointing European earnings and concerns about Japan's coming reporting season have seen equities weaken and new record nominal highs for gold and silver (all time and 31 year).
Greek bond yields have continued their relentless march higher and have risen above 14.07% (10 year) and Portuguese debt (10 year) has risen to a euro era record over 9.27%.Spanish and Irish debt are also under pressure this morning.
Euro gold has been in a range between €900 and €1,070 for nearly a year (since last May – see chart) and this period of consolidation looks set to come to an end as gold pushes higher. Once the technical resistance at the record high of €1,072/oz (12/28/10) is breached, gold will challenge €1,100/oz .
In the current bull market, euro gold has seen many long periods of correction and consolidation prior to rapid gains and sharp moves upwards. The length of the recent correction (almost a year) suggests that the coming move could be very sharp and see gold rise to €1,200/oz in the coming weeks.
Gold is increasingly being seen as the superior currency in a world of trillion dollar and euro deficits and bailouts. Indeed, the printing and electronic creation of billion and trillions of the major paper currencies is increasingly making gold and silver the currencies of last resort.
Governments and central banks are debasing currencies through bailouts, deficit spending and quantitative easing which is leading to a massive increase in the supply of fiat currencies. Precious metals are rare and finite and this is why major currencies are falling in value versus gold and silver.
One of the largest pension funds in the world, the University of Texas Investment Management Co (which manages the endowment for the Texas teachers pension fund), has realized this and has put 5% of the pension fund into gold bullion (see news).
Unusually, but likely to be seen more frequently in the coming weeks and months, the pension fund has opted to own physical bars worth nearly $1 billion dollars in allocated accounts.
The fund has previously expressed concerns about the counter party risk in ETFs. However, the reason given for opting for taking delivery of 100 oz gold bars in a warehouse was that if the holders of just 5 percent of COMEX futures contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand leading to a COMEX default.
The risk of a COMEX default increases by the day and appears to be moving from the realms of the “conspiracy theory” to that of “of course we knew it would happen, it stands to reason and was inevitable”.
A COMEX default would have serious ramifications for the dollar and all fiat currencies as it would further erode trust in central banks, fiat currencies and today’s monetary system.
NEWS
(Financial Times) -- Euro slides on sovereign debt fears
Reports that Greece had asked for a debt restructuring – subsequently denied by Athens – have rattled the euro and the continent’s bourses.
Markets were initially proving stoic in adjusting to a tighter monetary environment, with traders betting that the global economy can absorb central banks’ moves to drain excess liquidity.
The People’s Bank of China increased its reserve ratio for the country’s banks by half a point to 20.5 per cent over the weekend – the fourth time this year it has used the tool to tighten liquidity – following a 5.4 per cent rise in March consumer prices.
But shortly after European markets opened, Reuters reported a Greek newspaper as saying that Athens had asked the International Monetary Fund and European Union to restructure its sovereign debt.
The euro was already weaker after an anti-euro party gained ground in the Finnish general election, raising questions about whether the bloc will be able to agree a bail-out for Portugal.
The Greek newsflash saw the single currency shed nearly 1 per cent to $1.43, while the FTSE Eurofirst 300 index stumbled as investors sold those banks with high sovereign debt exposure.
Factors to Watch
It’s a light week for US macroeconomic data, so the market is likely to be more focused on the ongoing first-quarter earnings season. On Monday, the highlights include Citigroup, Halliburton and Texas Instruments.
An unattributed official denial of the Greek restructuring story helped brake the slide, and the euro is now down 0.6 per cent to $1.4334, with the Eurofirst off 0.4 per cent. The S&P 500 futures contract points to a 0.3 per cent fall when Wall Street opens and Treasury yields are slightly softer as risk aversion rises a touch.
Nevertheless, the FTSE All-World equity index is lower by just 0.3 per cent, helped by a belief that Beijing’s attempts to rein in lending and cool inflationary pressures is not so aggressive that it will derail growth in the world’s second-biggest economy. Shanghai’s Composite index rose 0.2 per cent.
In keeping with this underlying optimism about the global economy, industrial metals are firmer – copper is up 0.4 per cent to $4.27 a pound. This in spite of the dollar bouncing off last week’s 16-month lows with a 0.4 per cent advance, a move that would usually be considered commodity-negative.
Investors are having to come to terms with the end of the ultra-loose monetary era in big developed economies following the European Central Bank’s move to raise interest rates from 1 per cent to 1.25 per cent earlier this month and amid increasing acceptance that the US Federal Reserve’s quantitative easing programme will finish on time in June.
Major stock benchmarks are close to cyclical highs, suggesting traders feel corporate profitability will not be too severely affected by the economic impact of this policy shift.
However, some investors seem to believe that central banks are not doing enough to combat inflationary pressures and they are continuing to snap up precious metals to hedge against price rises. Worries about the eurozone are also boosting gold’s haven cachet.
Gold has hit a record high of $1,489 an ounce and is currently up 0.1 per cent at $1,486, while silver has hit a fresh 31-year record of $4.35 an ounce, and is now up 0.4 per cent at $43.17.
The additional support for bullion comes despite a small pullback in oil prices, a commodity that has carried the most inflationary concern for analysts. Brent crude is down 0.5 per cent to $122.88 a barrel as Saudi Arabia challenges the bulls with its contention that the market is oversupplied and it has consequently cut output by 800,000 barrels a day.
Another currency move of note is the yen, which has recaptured the sub-Y83 level relative to the dollar as the post-earthquake intervention impact wanes. With the Bank of Japan staying relatively looser-for-longer, because of the need for increased largesse as the country recovers from the tremor and tsunami, the yen’s interest rate differentials are likely to deteriorate.
This would normally put pressure on the yen, so the currency’s current strength may revive talk that it reflects the much muted repatriation of funds – a trend that if continued could call into question the resumption of the yen carry trade.
This is turn could affect some higher yielding or riskier assets, favourite destination of yen carry trade funds. There is little sign of this so far on Monday, however. The only clear casualty of the yen’s strength is the Tokyo stock market, which has slipped 0.4 per cent as the firmer currency hurts the country’s exporters.
(Bloomberg) -- Gold Climbs to Record as Investors Fret Over Rising Inflation
Gold advanced to record as investors seek the metal as a hedge against inflation. Gold for immediate delivery gained 0.1 percent to $1,488.35 an ounce, while bullion futures for June delivery rose 0.2 percent to $1,489.40 an ounce.
(Bloomberg) -- World Gold Council Says Position Limits Could Impair Liquidity
The World Gold Council said in a letter that proposed position limits in the gold market could “reduce or impair liquidity and trade.” The council published the March 28 letter to the Commodity Futures Trading Commision on its website today.
(Bloomberg) -- Shortage Threat Drives Texas Schools Hoarding Bullion at HSBC
Dallas hedge-fund manager J. Kyle Bass helped advise the University of Texas Investment Management Co. on taking delivery of 6,643 gold bars, worth $987 million on April 15, now stored in a bank warehouse in New York.
Bass, who made $500 million with 2006 bets on a U.S. subprime-mortgage market collapse, said managers of the endowment, known as UTIMCO, sought board approval to convert its gold investments into bullion this year. A board member, Bass, 41, said he was asked to help with that process.
While Bass, a managing partner at Hayman Capital Management LP, said in an April 16 e-mail that “the decision to purchase and take delivery of the physical gold” was made by endowment staff members, “I helped where I could.” Gold futures touched a record $1,489.10 an ounce April 15 in New York before closing at $1,486.
The Texas fund’s $19.9 billion in assets ranked it behind only Harvard University’s endowment as of August, according to the National Association of College and University Business Officers. Last year, UTIMCO added about $500 million in gold investments to an existing stake, said Bruce Zimmerman, the endowment’s chief executive officer. The fund’s managers sought to take delivery of bullion to protect against demand for the metal overwhelming supply, according to Bass.
Open interest in gold futures and options traded on the Comex typically exceeds supplies held in its warehouses. If the holders of just 5 percent of those contracts opted to take delivery of the metal, there wouldn’t be enough to cover the demand, Bass said.
Printing Money
“If you own a paper contract where they can only deliver you 10 cents on the dollar or less, you should probably convert it to physical,” said Bass, who isn’t related to Fort Worth’s billionaire Bass family. He said holding cash wasn’t a better choice because the rate of inflation exceeds money-market rates by 2.5 percent to 3 percent, eroding the value of cash.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said April 15 in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Sovereign-debt concerns also boosted demand for the metal on April 15, driving Comex futures to an all-time high. The price has climbed 28 percent in the past year.
Gold’s 10-year rally has attracted billionaire investors such as George Soros and John Paulson, who seek a store of value as record-low interest rates erode returns on currencies.
Wealthy Buyers
Few investors take physical delivery of bullion. As of April 14, 2,860 contracts this month, about 0.5 percent of total open interest, had been converted to metal, exchange data show.
Physical deliveries have slowed as gold topped records this year, said Blake Robben, a senior market strategist who handles deliveries of Comex metals for clients at Chicago-based broker Lind-Waldock.
“It’s usually wealthy individuals with net worths over $1 million who want to take delivery to diversify away from the dollar,” Robben said. “Generally, it’s a big hassle and not worth it to take delivery.”
Investors can own 100 ounces of gold futures with Lind- Waldock by paying a $100 fee and putting up $6,571 in a margin account to purchase one contract. To take delivery of a 100- ounce bar, investors have to pay the full price of the contract.
Bass, a Texas Christian University graduate who was named to the endowment’s board in August, is a former salesman with Bear Stearns Cos. and Legg Mason Inc. He said about 5 percent of his hedge fund is invested in gold.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 664,300 ounces of bullion in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at a meeting in Austin.
“I simply voted as a board member to approve the storage facility and concurred with their decisions,” Bass said.
(Bloomberg) -- Texas University Endowment Storing About $1 Billion in Gold Bars
The University of Texas Investment Management Co., the second-largest U.S. academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.
The fund, whose $19.9 billion in assets ranked it behind Harvard University’s endowment as of August, according to the National Association of College and University Business Officers, added about $500 million in gold investments to an existing stake last year, said Bruce Zimmerman, the endowment’s chief executive officer. The holdings are worth about $987 million, based on yesterday’s closing price of $1,486 an ounce for Comex futures.
The decision to turn the fund’s investment into gold bars was influenced by Kyle Bass, a Dallas hedge fund manager and member of the endowment’s board, Zimmerman said at its annual meeting on April 14. Bass made $500 million on the U.S. subprime-mortgage collapse.
“Central banks are printing more money than they ever have, so what’s the value of money in terms of purchases of goods and services,” Bass said yesterday in a telephone interview. “I look at gold as just another currency that they can’t print any more of.”
Gold reached an all-time high of $1,489.10 an ounce yesterday in New York as sovereign debt concerns boosted demand for the metal as a store of value. Gold has climbed 28 percent in the past year on Comex.
The endowment, which oversees funds held by the University of Texas System and Texas A&M University, has 6,643 bars of bullion, or 664,300 ounces, in a Comex-registered vault in New York owned by HSBC Holdings Plc, the London-based bank, according to a report distributed at the meeting in Austin.
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