Silver Whistleblower Interview on King World News

Login or register to post comments Last Post 17870 reads   67 posts
Viewing 10 posts - 21 through 30 (of 67 total)
  • Wed, Mar 31, 2010 - 07:52am

    #21
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

[quote]…because they simply did not posses the gold bullion which they had sold short [an illegal act which in trading parlance is referred to as a “naked short”]. [/quote]

I invite anyone so inclined to cite a regulatory reference to support the assertion that a naked short in the futures market is an “illegal act”. I’m presently short a whole bunch of stuff I don’t actually own in the futures market and am not aware of any such regulation. In my “trading parlance”, it’s known as an entirely legal and quite routine short futures position.

The hyperbole and exaggeration in the metals discussion is rather amazing.

Erik


  • Wed, Mar 31, 2010 - 08:21am

    #22
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

These people agree with you Erik

http://www.kitco.com/ind/nadler/oct212009.html

[Quote]

The market continues to be inundated with allegations of dastardly deeds and imminent collapses in orderly functioning. Intrepid Dow Jones reporter Simon Constable found one large piece of tinfoil littering the ‘Internets’ and set out to lift the veil of (non-existent) mystery from it all:

“A recent gold market conspiracy theory detailing nefarious activities by big bad banks should be dismissed as bogus.

The piece, by Rob Kirby published Oct. 9 on the popular GoldSeek.com Web site, stated “utter panic” broke out in London when certain banks that made “illegal” short sales of gold futures quickly found themselves unable to fulfill their obligations. The reason: Their customers demanded physical delivery of the metal. A shortage of metal in London meant that the banks needed to pay a premium above spot prices to buy metal in the spot market. Eventually, the Bank of England got involved, the piece states.

Kirby cites “impeccably reliable sources.” He doesn’t name them, though. The short takeaway: It’s rubbish. Still, there was enough gold-market-specific jargon in the column to bamboozle a normally skeptical friend into thinking it might be true. That’s a shame because there were clues contained in the text to signal its falseness as well as the author’s lack of knowledge of how gold is traded. “They have absolutely no clue how the market actually functions,” says Jon Nadler, a gold market analyst at Montreal-based bullion dealer Kitco.

I sent Kirby an email, but he didn’t reply. There are too many off-target comments to detail in my column so I’ll only dissect a few. A passage in Kiby’s column says, “…they simply did not possess the gold bullion which they had sold short [an illegal act which in trading parlance is referred to as a “naked short’].”

It’s not illegal to sell futures contracts when you don’t own the underlying commodity. In fact that’s completely normal. Naked shorting is a stock market phenomenon not a futures market one. Kirby continues “…a number of well-heeled market participants ‘bought’ substantial tonnage worth of gold futures on the London Bullion Market [Association].”

That’s curious because the LBMA is an over-the-counter market where forwards are traded, not futures. Gold futures are traded on the Comex division of the Nymex in New York. And then there’s this from Kirby:  “…these banks did not have the bullion to honor their contracted commitments, [so they asked if they could settle on a] “cash basis.”

There is so much gold in London vaults at present that the idea of not being able to deliver gold is silly,” says Jeff Christian, gold market veteran and managing director at New York-based commodities research firm CPM Group. Silly, indeed.”

The Ministry of Silly Talks would certainly approve. Folks, use mental floss at your own risk.[/quote]

  • Wed, Mar 31, 2010 - 08:31am

    #23
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

I could have sworn there was a difference between selling short. amd selling naked short.   (and i mean this lightly, cause I very well could be backwards or something)

One being what you do Erik, and the other involving selling an item, in this case silver, at a leveraged rate of 100-1…..in other words, They do not have physical ownership, yet they still sell it into the market as though they can make good on delivery (when in fact they cant)..

This is something that has been talked about for a long while, about the ETF paper markets being mostly crap, The big difference now is we have someone trying to blow the whistle on it. I dont see how this couldnt be big, AND, at least this guy is willing to talk.

(also, silver has gone up to 17.5 spot in the last 48hours……fairly fast rise, but the question is will it stay…)

 

Mike

 

 

  • Wed, Mar 31, 2010 - 09:18am

    #24
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

[quote=that1guy]

I could have sworn there was a difference between selling short. amd selling naked short.   (and i mean this lightly, cause I very well could be backwards or something)

One being what you do Erik, and the other involving selling an item, in this case silver, at a leveraged rate of 100-1…..in other words, They do not have physical ownership, yet they still sell it into the market as though they can make good on delivery (when in fact they cant)..

This is something that has been talked about for a long while, about the ETF paper markets being mostly crap, The big difference now is we have someone trying to blow the whistle on it. I dont see how this couldnt be big, AND, at least this guy is willing to talk.

(also, silver has gone up to 17.5 spot in the last 48hours……fairly fast rise, but the question is will it stay…)

Mike[/quote]

Mike,

As the excellent Kitco piece above said, what’s going on here is that some pretty ignorant people are throwing around terminology they don’t understand, and are coming to some pretty stupid conclusions as a result. I can certainly see how you and others have been confused, since unless you actually trade these markets the terminology can get quite confusing.

For the record…

An illegal naked short is a term that applies to the stock market, not the futures market. In order to sell something on the stock market, you have to have it first. (Or better stated, in order to sell something legally on the stock market, you have to have it first). To sell shares, you have to either own them (sell to close) or borrow them from someone else in order to open a short position (sell to open). An illegal “naked” short is when you sell shares you don’t own and haven’t borrowed. It’s supposed to be impossible but it happens every day and the SEC is asleep at the switch as usual.

When we talk about the futures market, it’s important to understand that the whole point of the futures market is to trade FUTURES – contracts promising to buy or sell things that we and our counterparties don’t yet have. For example, when you buy December 2011 Wheat Futures, the seller obviously doesn’t have the wheat yet. His intention is to grow the wheat between now and then, and he’s doing the selling now to lock in a good price in case the economy tanks after he plants his seeds. So it’s regular and normal to sell stuff you don’t own in the futures market, and that’s the whole reason it’s called the futures market.

I forget the exact statistics, but the vast majority of futures contracts traded are never delivered. For example, that farmer who sold Wheat futures is probably not going to transport his wheat to Chicago to deliver on the futures contract. Instead, he waits until harvest time, then buys back the futures contract (closing his position) right after he sells his wheat locally on the spot market. The purpose of his futures trade was to offset his actual sale price (up or down) to lock in the net price that prevalied when he first sold the futures contract.

[quote]

…..in other words, They do not have physical ownership, yet they still sell it into the market as though they can make good on delivery (when in fact they cant)..[/quote]

Mike, the basic issue here is that you’ve been completely misled by some people who should know better but who fundamentally don’t understand the functioning of the futures market and who choose to flaunt their ignorance rather than educate themselves. Nobody is sellng anyting “as though they can make good on delivery”! They are selling futures contracts in the most common and normal manner of selling futures contracts, which is to say that they sell them with the intention of closing the positions before the first notice date, and settling in cash. That’s how the futures market is intended to operate, and nobody is doing anything sleazy or inappropriate by selling futures contracts when they don’t own any metal.

The 100:1 comment made by Jeff Christian was taken completely out of context and misrepresented as having great relevance when it never did. Just as the vast majority of wheat contracts are closed out and settled in cash before they expire, the same is true for gold and silver. In that sense, it’s certainly true that (at most) 1 out of 100 metals contracts bought or sold ever get assigned for actual delivery. That’s perfectly normal, and I would even go so far as to say that anyone trying to make a big deal over it fundamentally doesn’t understand the market and you’d do well to ignore anything else they have to say about any aspect of metals trading. GATA is loosing credibility fast in my book.

Best,

Erik

 

  • Wed, Mar 31, 2010 - 09:59am

    #25
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

[quote=that1guy]

(also, silver has gone up to 17.5 spot in the last 48hours……fairly fast rise, but the question is will it stay…[/quote]

I meant to cover this in my last post but forgot…

There is absolutely no reason to conclude that the move up to 17.50 in Silver had anything to do with this hearing. You gotta pay attention to the charts, not the rhetoric. Gold, Silver, and to a lesser extent, equity futures all moved up coincident with a big move down in the dollar index. That’s why the move up.

Erik

 

  • Wed, Mar 31, 2010 - 10:01am

    #26
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

Thanks Erik,

Well I had a feeling i had something backwards…..and i did, LOL.  So it seems to me, that for the most part futures contracts is a bet more on price of the item rather then said item, although if one chose to, they can take delivery for said price. Sounds to me like this market is naturally leveraged to some extent….hmmm, this leads to another hypothetical question…

If the leveraging within the futures, or more specificly, PM’s is inffact so high couldnt even the smallest percent of people actually taking delivery still cause a default? (grant it  this seems to be more of a grey area rather then illigal….)

SIDE QUESTION since i got the first concept backwards–Defaulting in futures is infact a non delivery of product or cash right, which every the holder chooses?

 

Am I close?

Mike

  • Wed, Mar 31, 2010 - 10:10am

    #27
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

In terms of the CFTC here are some points from the latest Jason Hommel article.. To clarify point 9

1.  A CFTC commissioner asked:  Why are there exemptions to position limits granted to “bona fide hedgers”? 

 

2.  CFTC asked:  What is the difference between a bona fide hedger and a speculator, when one reason to hold gold and silver bullion is to hedge against the inflation of the dollar?

 

The day started with a startling admission:  There is no enforcement of position limits unless they are excessive, which is defined if there are “sudden and unwarranted changes in the price”.  CFTC asked their own DMO if that has happened, and the answer was, “Yes, it was volatile in 2008”, I believe in reference to silver.

 

3.  Even more shocking:  CFTC asked:  If an entity has an exemption to position limits, and they are under “accountability levels” then what happens when they exceed those accountability levels?  (Answer, the Division of Market Oversight (DMO) does nothing, and nor does it sanction such activity by doing nothing.)

 

4.  CFTC asked, “What justifies exceeding the accountability levels”?  The CFTC’s DMO answered, “nothing”.

 

5.  Bart Chilton even said that hiding the names of the large traders that have such exemptions leads to less transparency, which is not the goal.

 

6.  It was pointed out that revealing the names of market participants is prohibited by statute.

 

7.  But Chilton pointed out that if they are so large that it reveals who the trader is, then that kind of proves that there is an “issue”!  I almost applauded.

 

8.  Chilton pointed out that current position limits appear to be like speed limits on a dark desert highway that nobody enforces.

 

9.  The DMO pointed out that the largest ETFs do NOT hold futures contracts

  • Wed, Mar 31, 2010 - 10:26am

    #28
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

Here is Jason Hommels opinion of Jeff Christian trying to protect his baby from criticism..

(Before I start, I should note that Jeff Christian should be nominated both for the Moron of the Year Award, and also for the “worst and most unconvincing liar award.”  I note he claimes to have helped pioneer the invention of the futures contract, so it seems like he’s trying to protect his baby from criticism.  He also gathers the industry statistics on silver supply/demand, which is what you would need to walk this tightrope of trading futures safely, and yet, while the fundamentals appear wildly bullish, it appears he earns his money from the short side of the street, working for the shorts, and being one of their apologists.  Clearly, they can afford to pay more.  If you could say the silver market fraud is not a conspiracy, but rather it must be the actions of one insane main, it would be him — but he’s probably not short himself, but long.  I think he’s both a deceiver, and a rather deceived and pathetic character in this amazing drama of our age.)

Sorry last post forgot to include link

http://www.24hgold.com/english/contributor.aspx?contributor=Jason+Hommel&article=2770694054G10020

West

  • Wed, Mar 31, 2010 - 10:35am

    #29
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

[quote=that1guy]

If the leveraging within the futures, or more specificly, PM’s is inffact so high couldnt even the smallest percent of people actually taking delivery still cause a default? (grant it  this seems to be more of a grey area rather then illigal….)[/quote]

You’re exactly right that if all of the longs (people who bought contracts) suddenly opted for physical delivery rather than closing their positions for cash settlement, there could be a shortage of actual product (be it metals or anything else) and there would be a failure to deliver. In that case there would be a forced cash settlement declared by the exchange: People who wanted to take physical delivery would have to settle for cash equivalent to the price at expiration instead of taking actual delivery.

But there’s no great conspiracy here and nothing unique to the metals market. Think of this as akin to fractional reserve banking. If every depositor suddenly tried to withdraw all their funds, the bank wouldn’t have the money. The classical run on the bank. But in regular and normal times, the reserves on hand are adequate to cover routine withdrawals. There has to be a fallback plan if the unexpected happens and more people want to withdraw (or take delivery) than there is supply available. In the case of banking, the fallback is FDIC insurance. In the case of the futures market, the fallback is cash settlement. The rules are spelled out in the exchange rules and all competent futures traders understand that if they elect to take physical delivery – which is actually an unusual occurrence – it is possible there will be insufficient product and a failure to deliver resulting in forced cash settlement. It’s just part of the game.

Again, nothing about this is unique to metals. For example there might be far more open interest (contracts outstanding) in wheat than the actual size of the crop. Most of the longs were speculators who close their positions and prefer to settle in cash before expiration, so by the time the contract expires, most contracts have been closed out and only a few are actually settled through delivery. If all the longs suddenly and unexpectedly demanded physical delivery, there wouldn’t be enough to go around and a fail to deliver and cash settlement would be the result.

[quote=that1guy]

SIDE QUESTION since i got the first concept backwards–Defaulting in futures is infact a non delivery of product or cash right, which every the holder chooses?

Am I close?

[/quote]

Not too far off. First of all, some futures contracts are cash settled, for example the dollar index. For those contracts, nobody takes physical delivery ever – it’s not even allowed (or possible in the case of an index like the DXY). For contracts where physical delivery is an option, the contract has something called a First Notice Date – a deadline by which you always have the option to close out the contract (settle in cash) and be done with it. Once the first notice date has come and gone, a short position can be assigned meaning it is matched up with a long that has indicated it wants to take physical delivery. After that date you are in default if you don’t deliver the physical goods by the delivery date. But so long as you close the position before the notice date, the deal is done and delivery is never expected or required.

Also, FYI, the vast majority of futures brokers don’t even allow their clients to enter “delivery situations”. So for example if I screwed up and forgot to close my short position before the notice date, my broker would automatically close it for me whether I wanted them to or not. Actually taking physical delivery of a futures contract is pretty rare, and only a few brokers even allow those transactions.

Erik

 

  • Wed, Mar 31, 2010 - 10:51am

    #30
    Peak Prosperity Admin

    Peak Prosperity Admin

    Status Bronze Member (Offline)

    Joined: Oct 31 2017

    Posts: 1616

    count placeholder0

    Re: Silver Whistleblower Interview on King World News

The real issue will be a fairdinkum short squeeze on the bullion banks…

The latest from John Rubino.

Because the bullion banks have promised to eventually return the borrowed gold to the central banks, they, in effect are “short” gold. That is, at some point in the future they are obligated to buy gold in order to repay to the central banks. The bullion banks thus benefit when gold is available at a low exchange rate, and are hurt, potentially very seriously, when gold rises.

By the end of 2002, I estimate that the amount of gold that central banks had loaned out was at least 12,000 tonnes, or about 385.8 million ounces. That’s almost five times the world’s annual gold production, worth about $160 billion. If the banks have borrowed this gold at an average of $350 ($11.25gg), and gold rises to $400 ($12.86/gg) (leaving the euro out of this equation for simplicity), the bullion banks are looking at a loss of $50 times 385.8 million ounces, or $19 billion. If the banks borrowed at $300 ($9.64/gg) on average, they’re facing a potential loss of $38 billion, more than enough to bankrupt some of the more aggressive players.

As the cost of acquiring gold begins to rise, the bullion banks might be tempted to cut their losses by covering their shorts (i.e. buying back their gold) en mass. In the stock market this is known as a short squeeze, and it often results in a buying panic, in which everyone heads for the exits at once, sending the price of the security in question through the roof. For the bullion banks the short squeeze is a terrifying prospect because of the potential losses they might incur. For the central banks, a short squeeze in gold is equally terrifying  because the result will be, in effect, a massive devaluation of their currencies versus gold, potentially undermining the monetary status quo they try so hard to maintain.

In any event, the failure of one or more bullion banks (remember, these are among the world’s biggest financial institutions) might threaten the entire global financial system, a prospect that no doubt has central bankers shaking in their boots.

Viewed this way, the recent gyrations in the gold market make perfect sense. When free individuals, observing the debasement of the world’s fiat currencies, begin to bid up the exchange rate of the one money that’s immune from debasement, the bullion banks run to Washington (or Paris or London) for a bailout, and the central banks oblige by pushing gold back down. But the game is just about up. The bullion banks’ short positions have reached unmanageable proportions, and gold’s exchange rate is surging into the danger zone. A short squeeze is coming, and for the world’s central banks (and bullion banks’ shareholders) it will be a disaster. But for those who value and understand gold’s enduring role as money, it will be a classic case of poetic justice.

http://www.24hgold.com/english/contributor.aspx?contributor=John%20Rubino&article=2770894708G10020

Oh yeah time to rock n roll 70s style

West

Viewing 10 posts - 21 through 30 (of 67 total)

Login or Register to post comments