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XMFSinchiruna (27.59)

Is Your Safe Haven a House of Cards?

Recs

57

April 05, 2010 – Comments (9)

Well ... is it?

Please follow the above link the read the full article, vote in the Motley Poll beneath it, and if you enjoy the article please recommend it and spread it along to your friends, co-workers, or favorite discussion boards. This is a gargantuan story that must be told.

"A recent extraordinary hearing held by the Commodity Futures Trading Commission (CFTC) to discuss the need for position limits in metals futures morphed unexpectedly into what I will argue was the grandest expose of potential fraud in modern financial history."

"I repeat: "There is a hundred times what there is." Did he learn from Bill Clinton what the definition of is is? I sure hope that kind of leverage never comes toppling down the way lesser leverage did in the mortgage securitization industry. Not to fear, assures Mr. Christian while commenting earlier on the short segment of the market, "there are any number of mechanisms allowing for cash settlements." It appears that he actually perceives no structural problem inherent in a metals market that would seek to deliver cash in lieu of physical bullion to investors who may be inclined to call this paper bluff. In some circles, one could call that for what it would be: default."

"If you have never considered the topics of price suppression or leverage in silver and gold before, this is a lot of material to process all at once. I believe that these revelations place this entire leveraged house of cards at risk. Conceivably, all it would take would be a few deep-pocketed investors overseas to call the market's bluff by demanding physical delivery of bullion, and the world's major futures exchanges could break down before our very eyes. Adrian Douglas points out that the LBMA exchange in London alone trades some $5.4 trillion per year in "gold" on a net basis. If the leverage of paper instruments to bullion stands anywhere near 100:1, then the implications are sufficient to make the Enron debacle look like child's play. Without mincing words, if the supposed quantities of gold and silver bullion simply are not there, then we may witness the greatest incidence of fraud in financial history."

http://www.fool.com/investing/general/2010/04/05/is-your-safe-haven-a-house-of-cards.aspx

If this is the first you've heard of this topic and you want to delve deeper, please see my prior blog post here ... which is intended as a rough repository of supporting evidence.

 

9 Comments – Post Your Own

#1) On April 05, 2010 at 5:33 PM, EnergyCzar79 (33.42) wrote:

Nice post. +1 rec.

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#2) On April 05, 2010 at 5:38 PM, nuf2bdangrus (< 20) wrote:

DO you anticipate that CEF and PHYS would sell off in sympathy, or would they rally?

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#3) On April 05, 2010 at 6:00 PM, XMFSinchiruna (27.59) wrote:

nuf2bdangrus

Who knows. Depends upon the momentum behind the snowball.

If rational trading were to prevail, then I believe we might see an influx of buying in the two you mention coincident with a sell-off in the proxies held by the custodians named. However, expecting rational trading to prevail during that kind of a deleveraging event might well be wishful thinking.

All I can say is that I consider those two instruments that you mention significantly less risky under the circunstances.

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#4) On April 05, 2010 at 6:01 PM, chk999 (99.97) wrote:

Interesting. Maybe those mining stocks I own are worth something.

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#5) On April 05, 2010 at 6:36 PM, XMFSinchiruna (27.59) wrote:

chk999

Absolutely! :)

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#6) On April 05, 2010 at 6:46 PM, goldcountry (< 20) wrote:

Great article Chris, keep up the good work, people are slowly catching on to what we have known for years.

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#7) On April 05, 2010 at 7:55 PM, ChrisGraley (29.86) wrote:

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#8) On April 05, 2010 at 9:04 PM, XMFSinchiruna (27.59) wrote:

The article was posted on GATA's website:

http://gata.org/node/8510

 

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#9) On April 05, 2010 at 9:20 PM, ChrisGraley (29.86) wrote:

Gotta be the shoes!

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