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Scared by PM Volatility? Identify Severe Undervaluation Points in Gold & Silver v. Trying to Call Perfect Bottoms

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For a new investor in gold and silver, here is the most lucid piece of advice I can offer. Identifying severe undervaluation points in gold and silver, buying gold and silver assets during these times, and not worrying about interim short-term volatility, even if the immediate volatility is downward, is much more likely to impact your accumulation of wealth in a positive manner than trying to perfectly time market tops and bottoms in the highly manipulated gold and silver game. I am posting this article today to help all gold and silver investors, especially those new to the game, to frame their perspectives about gold and silver price behavior in the proper manner. I hope this article helps gold and silver investors so stand firm and maintain their faith in the face of anti-gold, anti-silver banker propaganda and that it helps investors to identify significant corrections in gold and silver as huge buying opportunities, and not as times of despair, that do not require perfect timing to yield very significantly rewards. During the last week of 2011 and the first couple of weeks of 2012, I posted two articles on our blog that I felt would be critical to investment success this year.

 

Did Bankers Deliberately Crash MF Global to Crash Gold and Silver Prices?

Gold & Silver Banker-Cartel Prolonged Price Suppression Has Set the Foundation for an Explosive Move Higher in 2012

 

In the first article, “Did Bankers Deliberately Crash MF Global to Crash Gold and Silver Prices?” I discussed two crucial points that are important to anyone that keeps any amount of digital savings in a bank (due to the fractional reserve system, the majority of the global currency in circulation today exists in digital form only). One, bankers deliberately invented paper markets in gold and silver to kill the influence that the physical demand and supply determinants of gold and silver have over prices. Two, bankers have historically rapidly contracted and expanded paper gold and paper silver contracts (that are backed with nothing but air) to introduce volatile movements in gold and silver with the express intent of scaring people away from real money (physical gold and physical silver) and keeping people invested in their bogus paper and mostly digital money (Euros, USD, Yuan, Yen, Pounds Sterling, etc.).

 

In relation to the MF Global debacle, we released private messages to our members that warned them that the MF Global liquidation and theft of client assets provided hard direct proof and critical legal precedent, that in the event of a bankruptcy of a major financial firm, clients had zero rights and property theft was now being sanctioned by and approved of by the State. There are still millions of people today that don’t understand the very dangerous precedent that MF Global set for future bankruptcies of financial firms that WILL HAPPEN in coming years.

 

If you have not been keeping up-to-date with the MF Global dispute over hundreds of millions of dollars of client money, then I highly urge you to read these three articles below:

 

MF Global Clients May Lose in $700 Million Bankruptcy Fight

SW Minnesota Farmer Testifies in Commodity Scam

How JP Morgan And George Soros Ended Up With MF Global Customer Money

 

The first MF Global article shows you that it is still a strong possibility that clients will lose $700+ million of their money they had with MF Global before it declared their bankruptcy. That is not a sum to sneeze at by any means. The second MF Global article is in regard to a Minnesota farmer that has not been able to recover $253,000 he held at MF Global. The farmer claimed, “This money was real money in real banks. It wasn't under somebody's mattress,” a statement that underscores the lack of understanding about our monetary system that exists among the masses. In fact, the opposite of what the farmer stated is becoming true today. The vast majority of money that is used in global financial transactions today exists only in digital form, not even in paper form, so paper money stored under one’s mattress is more “real” than any digital bytes on a computer at your bank. Secondly, real money is not fiat digital or paper currency but real money is physical gold and physical silver, NOT paper gold and paper silver as those that bought gold futures contracts with MF Global, hoping to take delivery of physical gold with their paper contracts, sadly discovered. The third MF Global article emphasizes, just as the US & many EU countries demonstrated during the 2008 free fall of financial stocks, that lawmakers and regulators are in the back pockets of bankers and will always change the laws at their whim to benefit the bankers and to defraud the people.

 

In 2008 to prevent bank stocks from plummeting that were deservedly plummeting, lawmakers in the EU and the US forced a short squeeze higher in financial stocks by arbitrarily changing the laws and banning any short sale of any bank stocks. Even though MF Global was clearly operating as a commodities firm, they applied for and were granted, the right to be dissolved as an equities firm. In this case, everyone from the legal system and the trustee of MF Global are merely ignoring the law to profit the bankers and defraud the clients.

 

“Rather than being treated as a bankruptcy of a commodities brokerage firm under sub-chapter IV of the Chapter 7 bankruptcy law, MF Global was treated as an equities firm (sub-chapter III) for the purposes of its bankruptcy, and this is why the MF Global customer money in so-called segregated accounts 'disappeared'. In a brokerage firm bankruptcy, the customers get their money first, while in an equities firm bankruptcy, the customers are at the end of the line.”

 

In laymen’s terms, the unfolding debacle regarding MF Global also has critical repercussions and implications regarding the implied safety of any money you have in a money market account or savings account at a bank. Remember MF Global clients believed that their money was being held in "segregated" accounts that protected their assets in the event of a bankruptcy. If you don't believe that the MF Global bankruptcy proceedings has affected how banks view their clients' deposits, then you are hugely mistaken. At the end of last year, Bloomberg ran a story titled "BofA Said to Split Regulators Over Moving Merrill Derivatives to Bank Unit." In this article, the journalist stated, "The bank doesn’t believe regulatory approval is needed". ZeroHedge explained why BofA was making this move in their article "Bank Of America Forces Depositors To Backstop Its $53 Trillion Derivative Book To Prevent A Few Clients From Departing The Bank":

"it shifted anywhere up to the total of $53 trillion of the total derivatives it held as of June 30 (as Zero Hedge previously reported) on its books at Q2 from the Holding Company, which was downgraded last by Moody's from A2 to Baa1 (the third-lowest investment grade rating) to its retail bank, which was downgraded to the far more palatable A2 (from Aa3). The reason for the transfer? Bank customers who were uneasy with the fact that suddenly the collateral backstoping the operating entity handling their counterparty risk was downgraded to just above junk, demanded that said counterparty risk be mitigated by the bank's $1 trillon in deposits."

 

The MF Global case has clearly demonstrated that any insurance of banking accounts up to $100,000 or $250,000, no matter what country in which you reside, is simply MEANINGLESS if

(1) the insurance company insuring the aggregate deposits in your country is severely underfunded;

(2) the ruling corporatocracy allows financial firms to steal your property in the event of a bankruptcy; and

(3) banks are using customer deposits as collateral against the riskiest of their junk assets.

All three of the above have already been proven to be the case inside the United States and will likely be the case in countries around the world as well. From the US Federal Deposit Insurance Corporation’s (FDIC) own website, you can find this statement:

 

“On July 21, 2010, the President signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) into law. The Dodd-Frank Act established a minimum designated reserve ratio (DRR) of 1.35% of estimated insured deposits, [and] mandates that the FDIC adopt a restoration plan should the fund balance fall below 1.35 percent.”

 

As recently as March, 2009 the US Deposit Insurance Fund had as little as $13 billion to insure nearly $4.83 trillion of deposits in US banks. By mid-2009, five US banks, Citigroup, JPMorgan Chase, Bank of America and Wells Fargo, held about 39% of all deposits in the US and in 2012, that figure is almost certainly higher given the large number of US bank failures since mid-2009 until the present day, including very large US banks like Washington Mutual (which yours truly predicted in advance). It doesn’t take a math genius to understand that should just one of these top US banks fail,

(1) the Deposit Insurance Fund would be completely wiped out, thus rendering the $250,000 guarantee of bank deposits worthless and meaningless; or

(2) necessitate the creation of trillions of new money to maintain the guarantee, thus severely degrading the value of all existing money, thereby making the guarantee worthless once again.

Should a large US bank or European bank go bankrupt, a highly likely event in the future that can only be prevented by excessive monetary creation out of thin air, backed by nothing, (which in essence is an admission that the bank is bankrupt), then once can refer to the recent MF Global debacle to understand that no one will have any rights in recouping any money that is lost during a bank’s bankruptcy. If push truly comes to shove during a bankruptcy of a financial firm, and a decision must be made to either make the clients whole or the creditors of the bank whole, we all know that the clients (us) will lose the battle.

 

These critical talking points lead nicely into our second blog article, “Gold & Silver Banker-Cartel Prolonged Price Suppression Has Set the Foundation for an Explosive Move Higher in 2012.” As we stated in that article, sentiment was the lowest in nearly three years regarding gold & silver mining stocks at the end of 2011 and that entering 2012, bankers were still heavily distributing propaganda that silver was going to crash to $20 an ounce and gold was going to crash to about $850 to $1,000 an ounce. I made it clear in that article that strong fundamentals in the gold & mining sector combined with super low bullish sentiment in the mining sector produced a super strong buying opportunity and fantastic valuation for gold & silver mining stocks. In this article, I stated:

 

“there are still many reasons to expect a stellar next couple of years from gold and silver performance, including the mining stocks. From a technical standpoint, gold and silver appear to be on the verge of making a very significant run higher. I’m not saying that this will happen tomorrow, but it does look very probable within a short-time period. From a manipulation factor standpoint, gold and silver also look poised for a run higher too.”

and

“we see 2011 as nothing more than a temporary setback in gold/silver mining stocks…from a technical standpoint, gold and silver appear to be on the verge of making a very significant run higher. I’m not saying that this will happen tomorrow, but it does look very probable within a short-time period.”

 

Given the severe undervaluation of gold and silver and the fact that nobody should ever trust paper gold and paper silver futures as a means of taking delivery of real physical gold and real physical silver ever again. We believe that the divergences between paper gold and silver futures and spot prices and real physical gold and silver prices will eventually become enormous, as we first started predicting would happen in 2008, with premiums in the price of physical gold and physical silver eventually rising so high above the paper prices that the paper gold and paper silver markets will either

(1) eventually be ignored for purposes of price discovery; or

(2) eventually implode into its own current cesspool of lies, fraud and deceit.

 

Many new investors to gold and silver investing always make the mistake of trying to time exact bottoms and also to repeatedly time exact tops and to exit and re-enter markets repeatedly during the year. Given the enormous amount of volatility that the global banking cartel has introduced into all paper gold and paper silver products, including mining stocks, we believe that this type of mentality is counter-productive when the long-term picture in gold and silver has been as clear as it has been for the past several years. For example, when silver dropped below $30 an ounce last year, it was entirely irrelevant to one’s long-term wealth whether one purchased silver at $30, $29 or $28 an ounce given the fact that the probability silver will eventually rise to triple-digit dollar prices is extremely high.

 

We have always told our members that is a mistake to try to time the absolute bottoms of these corrections. When tremendous value exists in a sector, as existed in mid-January in the mining sector, then we always tell all new members to our services to “go all in” in their buying strategies during these times and to not worry about any short-term downside volatility or any of the misinformation being spewed by the financial mass media during these times about collapsing gold and silver bubbles. Furthermore, when the US Federal Reserve announced recently on January 25, 2012 that they would be extending low-rates into late 2014 and jump-started a one-day 5%, 6%, 7%, 8% explosion in gold and silver stock, this underscores my point even further. When the global banker cartel slams gold & silver mining stocks by 10% or more as they did at the end of last year, taking an already undervalued sector to greatly undervalued status, if one understands fundamentals, one will always view this as nothing more than a buying opportunity and not as a time to panic.

 

The performance of our Crisis Investment Opportunities newsletter portfolio, in August of 2010, was flat YTD, but then piled on whopping +33% gains in the last four months of the year. In 2008, our portfolio gains of a nominal 3.21% gain was followed by explosive gains of +63.32% in 2009. Though last year was our most difficult year to date since we launched our newsletter in June of 2007, our cumulative gains from June, 2007 to December 31, 2011 of +135 .18% has still outperformed the S&P 500, the FTSE 100, the ASX 200 respectively by +153.12%. +152.37%, and +169.20%. Thus, our track record of outstanding performance over time backs up our strong belief that worrying about every rise and fall in gold and silver every year will do nothing but drive you crazy and merely prevent you from handling your investments properly and intelligently. It is impossible to predict every single global banking cartel smash down of gold and silver with perfect accuracy; however, as long as one can foresee enough of them, as our outperformance of the PHLX Gold/Silver index by +104.75% over the last 4-1/2 years proves, and maintain the nerve and confidence to stay invested in gold and silver even when the “pundits” are screaming at you to get out, as they were at the end of last year and the beginning of this year, then you will do quite fine in continuing to build wealth as the monetary crisis deepens.

 

If one understands the possibility that all digital credits in your bank and investment accounts could disappear given the failure or a major global bank (an inevitable event it seems right now), then one should clearly understand that owning physical gold and physical silver is NOT an option but a necessity if you are to survive the second phase of this global monetary crisis. Even if we are wrong about the failure of digital financial products and fraudulent paper derivatives in the future, we will still be right, as owning physical gold and physical silver will continue to protect the purchasing power of people’s money as this monetary crisis deepens. Remember, though many have been jumping on the gold and silver bandwagon this week, we, at SmartKnowledgeU, have been publicly advocating gold (and) silver ownership since 2006, and privately, for years prior to 2006, for the same exact reasons we’re still advocating it today.

The global banking & monetary system is a fraud, a mess, and there is no turning back from US dollar & Euro destruction at this point.

Just click here to read our 2006 article “Gold’s Speculative Stigma is Unwarranted.

 

It has taken about five years since we wrote that article for the public-at-large (at least in the Western world) to understand that gold's label as a speculative investment is not deserved and is mere banker propaganda. Within the next five years, the remaining skeptics will be forced to finally recognize that gold and silver are real money, and that Yen, Pounds, USD, and Euros are not. Given the severe undervaluation of gold/silver mining stocks, junior mining stocks in particular, and the undervaluation of gold and silver right now, we believe now is an optimal time for new investors to gold and silver to begin their journey. To help all newbie investors to gold/silver begin their journey, we are currently cutting as much as 30% off of all our major services during a special, limited two-week sale that will run from January 26, 2012 to February 9, 2012. To receive the coupon codes for this sale, please visit us at www.smartknowledgeu.com and please join our mailing list.

 

 

 

About the author: In 2006, fed up with the rampant immorality of Wall Street, JS Kim, walked away from his job with a Wall Street firm to found and become the Chief Investment Strategist of SmartKnowledgeU, a fiercely independent investment research & consulting firm. Since then, JS has tirelessly campaigned to increase understanding about real money like gold and silver and about the fraudulent nature of fiat money.

 

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Wed, 04/25/2012 - 05:20 | 2372651 handbags replicas
handbags replicas's picture

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Tue, 03/13/2012 - 09:07 | 2249948 Gelir
Gelir's picture

Sohbet Chat Hi, just wanted to let you know that I really appreciate your post. Torna

Fri, 01/27/2012 - 16:22 | 2103654 Nage42
Nage42's picture

If you think that you will be able to get your hands on physical gold when the paper ticker prints $800 (be clear that I'm not denying this could happen), then I predict you'll be the guy at the ticket gate holding your fare money with the sign "closed" posted at the door. The author talks about not sweating the peaks/troughs and you're posting that you're gonna call the trough perfectly. Whatever... If you're "a believer" I do hope you don't miss the train based on your desire to time it perfectly... Tranches and cost-averaging, do look into it.

 

edit: weird, my reply was to a later post that the guy talked about buying "everyone's" $800 gold.  Not sure why the system bumped me up a thread...

Thu, 01/26/2012 - 23:36 | 2101620 plata pura
plata pura's picture

Long xrf analyzers.

Fri, 01/27/2012 - 00:44 | 2101706 Always Positive
Always Positive's picture

Plata pura -  it's easily done, getting them mixed up.  I suggest you put your meds AS SOON AS THE SCRIPT IS FILLED into those little plastic boxes marked 'Monday, Tuesday' etc. Then in the smaller sub-boxes marked 'AM - PM - EVENING'.  Try colouring the boxes with different coloured textas, if it helps.

Don't be afraid to ask a stranger, 'Excuse me Sir/Madam, what day is it today? Is it AM, PM or Evening? Most folk are extremely helpful, you'll find, even if they appear a little afraid at first.

But if you do end up again in that place, please surrender your belt & shoe laces without too much fuss. It is for your own good. You know that. Have a sleep now.

 

Thu, 01/26/2012 - 23:27 | 2101605 plata pura
plata pura's picture

The wise and powerful chieftain of the crakatoa tribe "pure silver"  has vision of a 1/14 gsr going into the great turning. Sky master putang abin saeculum has sent delegates to prepare.

Thu, 01/26/2012 - 18:17 | 2101027 Always Positive
Always Positive's picture

As I've said before, all you, 'to da Moon' gold bugs will have your heads handed to you on a plate.

Gold is going to sub $1000, probably as low as $800.  At which point, yours truly, being Always Positive will back up the truck...and say, 'thanks guys' as you sell in abject fear & desperation.

Only then will gold fulfill its destiny as real money. After you've sold (oh, and I will be buying your gold - did I mention that?)

Deflation - real deflation -  is everywhere, concealed by misleading, relatively insignificant  indicators like utilities, groceries, petrol; that will change, probably very quickly.

Most of you can't see the wood for the trees and greatly under-estimate the power of the movers & shakers, the market manipulators. And the power of a carefully planned & executed deflation.

Imagine  sausages on a grill, slowly sizzling. Put up the heat. The sausages start jumping around a little; more heat and 'BANG! go the bangers...

Need I tell you who are the sausages?

 

 

 

 

 

 

 

Thu, 01/26/2012 - 20:54 | 2101386 Dr. Gonzo
Dr. Gonzo's picture

You completely panicked me. Is there any chance you'll buy my gold from me now for $800 an oz so I don't have to go through trauma of your deflation prediction? I'm sure it's 100% spot on.  What? you only have $40 in your bank account? Never mind. I guess I'll take my chances with it. 

Fri, 01/27/2012 - 00:12 | 2101673 Always Positive
Always Positive's picture

No, Dr Gonzo. I'll take your gold from you, anonymously, at the appropriate time. Your ego will not be denied your trauma. Enjoy.

Thu, 01/26/2012 - 19:30 | 2101197 Anton LaVey
Anton LaVey's picture

OK, Deflation. I'll bite.

In case Deflation happens, CASH will be king.

But, wait a minute, Gold will still be pretty good. But why is that? Because Gold value never goes to zero. And you can almost always exchange your Gold for Cash.

The only exception to this rule would be a massive "Let's all go back to the Stone Age" type-of-event (cue: "You cannot eat Gold!" choir). But Deflation is not that.

Furthermore, everyone around here, Fed BOJ BOE ECB SNB, etc... has decided to PRINT money in one way or another. And printing money is NOT deflationary. Au contraire!

So: Deflation? Naaaaaaaaah. I have quite a lot of Cash on hand, just in case (Bank runs are still very much possible) but I don't think we are going to have Deflation any time soon.

In other words? You are the sausage, my friend. Enjoy the heat. I'll get the hot-dog bun and the ketchup. Bon Appétit!

Fri, 01/27/2012 - 00:21 | 2101664 Always Positive
Always Positive's picture

AV you miss the point. Gold will never be worth zilch - but it will be worth a LOT less than now before it takes off -seriously takes off - because of deflation that is about to purge the entire putrid mess.

But like all good sheep, you & most of the rest of big talkers will panic as it breaks through $1000 and unload - through fear (more likely) or necessity.  That's what sheep do, even the sheep who don't think they're sheep -they think they're lions - but are still sheep when the chips are down. Think 90% of ZH posters. Baaaaa..

We've yet to see a big, BIG panic to the down-side. Just wait..

And as for printing, well aren't they printing now? To what effect? Pushing on the proverbial string. Money velocity is declining, it's leaving the system. That's Deflation. There IS A Plan, you know.

Keep your cash on hand. Maybe you won't be be a well-toasted bun. But I doubt it. Fear beats greed, always. Positively.

Thu, 01/26/2012 - 23:53 | 2101649 Fred Hayek
Fred Hayek's picture

And who can forget how "helicopter Ben" got that nickname. He said that his response to an impending deflationary depression would be to drop currency on the populace from a chopper if necessary. Yes, there are deflationary pressures on almost every economy right now from the bursting of a generation long credit bubble. But the ECB and FED are not going to let it happen.

Fri, 01/27/2012 - 00:14 | 2101677 Always Positive
Always Positive's picture

Ben is not in charge

Thu, 01/26/2012 - 18:30 | 2101058 akak
akak's picture

Deflation!   Hah!

Keep watching for unicorns and Bigfoot while you're at it.

Thu, 01/26/2012 - 18:09 | 2101008 tempo
tempo's picture

The obvious answer to Gold and silver investors...the law. The President with one stroke of his pen can and probably will at some point mandate that all citizens must itemize and then sell and then deliver all gold and silver holdings no matter where it is stored within 48 hours at 50% of current prices. The penalty for non compliance is $1000/oz penalty and/or 10 years imprisonment per oz withheld. This really happened in 1933 and will happen again. So buy gold. hold gold, sleep with your gold, move your gold to So. America. But be prepared to bring it to your master when he calls.

Thu, 01/26/2012 - 19:23 | 2101178 Anton LaVey
Anton LaVey's picture

(strangled laughter)

You have NO IDEA what you are talking about, right? This is freaking hilarious!

First of all 1933 was opening all the safes and taking all the Gold inside. If you kept Gold at home, instead of at your local branch, you were safe. Nobody invaded your humble abode in 1933 to take the shiny shiny from your cold, dead fingers, if you catch my drift.

I have said it before and I'll say it again: if you are scared of the Big Bad Federales taking your precioooouuuussssss away... Keep it close to your home! Gold does not tarnish, so wrap it up in a plastic tarp or put it in a plastic box and go and bury it (discreetly) in your garden. Make sure you remember where you hid it. Done.

If the Big Bad Federales were to go to your home and seize all Gold, just play dumb or show them a big pile of money and say: "Sold all of it two weeks ago to this guy I met in Cancun". Really? "Yes sir, Mister FBI, sir". "I don't believe you!". "OK, prove it. In the meantime, here is my lawyer - talk to him now, please".

Then, just wait for the Black Market to explore, hide your bullion into your car (hard to see Gold on Xray machines in a big pile of steel, you know?) cross the border to either Canada or Mexico and sell it to the highest bidder. Done.

Or, just wait until the US$ crashes. I strongly suspect that then, your Gold will come into its own, no questions asked, if you see what I mean.

In other words, relax, your Gold is... as good as Gold (HA! I kill myself!)

Oh, and you are a dumbass. Just so you know.

Thu, 01/26/2012 - 23:42 | 2101631 Fred Hayek
Fred Hayek's picture

The other thing his point of view ignores is who *has* the gold at this point in time. Back in 1933, a LOT of americans had gold coins. There was still, in the populace, a residual belief in real and not paper money. One can fall into a mistaken perception, on a site such as this or likeminded ones, that belief in the value of precious metals is widespread. It's not. The percentage of americans who own precious metals in any form is tiny compared to back in 1933. The powers that be would be disproportionately affected by such a confiscation now. That's another reason why it's less likely to happen.

Thu, 01/26/2012 - 19:35 | 2101210 akak
akak's picture

LOL!

Indeed, it is a complete lie to talk about gold confiscation, now or in the past --- gold has NEVER been "confiscated", at least from the average, discreet individual, and it is only a meek and servile sheep who would willingly surrender it to a sociopath merely for wearing a uniform.

Thu, 01/26/2012 - 17:27 | 2100895 tony bonn
tony bonn's picture

it seems as though you are belaboring the obvious but it is only obvious to less than 1%.....thank you for your exceptional work..

Thu, 01/26/2012 - 16:15 | 2100696 MrBoompi
MrBoompi's picture

I've been buying gold and silver for a few years.  The fees associated with buying PMs are quite high, and turn a lot of people, mainly small investors, off.  For instance, if you buy silver from APMEX, the fees and shipping can easily run 7% over spot.  Who wants to be down 7% immediately?

But who wants gold or silver if its not real gold and silver you can hold in your hand?

I have discovered it doesn't take very long to make up that 7%, and like the article says if you buys the dips, you make it up relatively fast.  I think it's wise to have about 10% of your assets in PMs.  Besides, they work REAL HARD to suppress the prices.  If the free market was allowed to work, we'd see where the prices would be.

Thu, 01/26/2012 - 16:09 | 2100679 anonnn
anonnn's picture

More vital data...

This excerpt* [[[my hilites]]]  :

What was this [[[2005]]] ammendment? The ammendment exempted repos (and hypothecated and re-hypothecated assets) and a whole range of derivatives from the automatic stay. It also allowed lower quality assets to qualify for the exemptions.

Which means,

The special bankruptcy treatment given repos and derivatives means that repo lenders and parties to derivative contracts can keep the collateral if their trading partner becomes insolvent. This exempts them from the "automatic stay" rule in bankruptcy, which prohibits most creditors from trying to collect ahead of others.

Or as the official report from the US Financial Crisis Inquirey Commission said,

under a 2005 amendment to the bankruptcy laws, derivatives counterparties were given the advantage over other creditors of being able to immediately terminate their contracts and seize collateral at the time of bankruptcy. (p. 48)

So when a bank goes bankrupt, BEFORE even the most senior bond holders, the repo lenders and derivatives traders can remove, or keep all the assets pledged to them.

This amendment which was touted as necessary to reduce systemic risk in financial bankruptcies also allowed a whole range of far riskier assets to be used, making them too immune from the automatic stay in the event of bankruptcy. Which meant traders flocked to a market where risky assets would be traded and used as collateral without apparent risk to the lender. The size of the repo market hugely increased and riskier assets were gladly accepted as collateral because traders saw that if the person they had lent to went down they could get your money back before anyone else and no one could stop them.

It also did one other thing. Because the repo and derivatives traders ran no risk – they could get their money out of a failing bank before anyone else, it meant they had no reason at all to try to stop a bank from going under. Quite the opposite.

All other creditors – bond holders – risk losing some of their money in a bankruptcy. So they have a reason to want to avoid bankruptcy of a trading partner. Not so the repo and derivatives partners. They would now be best served by looting the company – perfectly legally – as soon as trouble seemed likely. In fact the repo and derivatives traders could push a bank that owed them money over into bankruptcy when it most suited them as creditors. When, for example, they might be in need of a bit of cash themselves to meet a few pressing creditors of their own.

The collapse of both Bear Stearns, Lehman Brothers and AIG were all directly because repo and derivatives partners of those instituions suddenly stoppped trading and ‘looted’ them instead.

 

 

 

 

 

 

http://www.golemxiv.co.uk/2011/12/plan-b-how-to-loot-nations-and-their-banks-legally/   

* Read the whole explanation at

 

 

 

 

Thu, 01/26/2012 - 14:46 | 2100404 DosZap
DosZap's picture

Basically what the (for me) most salient point that was made was the fact WE Know the FDIC,is close to Bankrupt.

Last numbers I saw was approx 7 Billion in reserves.

IF ONE of the biggies goes down, in essence there is a 100% guarantee you will lose all your fiat held in any bank.

UNLESS, the Fed pumped multiple billions/trillions into the FDIC,would they?, could they?.

Dunno.

I just know that if the inevitable does happen then any banks we use in the US, are no different than MFG, and there is a VERY good chance we lose all funds held in any US bank.

The FDIC (by that name or some other,like Credit Unions have ) insures all accounts........................so if it's DOA,and not made whole (or at least solvent w/ more worthless FRN's),WE are all SCREWED.

Bottom Line: Do we take ALL fiat out of the system,or roll the dice?.

Also, keep your Gold & Silver in two baskets?, Miners, and Phys?,what happens WHEN the Miners are Nationalized?, and IMHO they will be,if HIS scenario plays out.

Opinions/other options welcomed pls.

Pt is on a tear because of the shortage and the places it comes from,it has never been used as money,as it is not money.

That is why Gold is KING. Can you play it and win big,sure,but the bulk of the fiat better be in G & S.

 

Thu, 01/26/2012 - 13:33 | 2100063 onlooker
onlooker's picture

This article would have been better timed if were published a few weeks/months ago when gold was at a low point.

 

Jessie’s Café listed on the ZH list at the left of the screen seems to be a good leading, and objective viewpoint.

Thu, 01/26/2012 - 14:37 | 2100361 DoChenRollingBearing
DoChenRollingBearing's picture

Jessie runs a good site.

Thu, 01/26/2012 - 19:12 | 2101152 Anton LaVey
Anton LaVey's picture

I'll second that, Jesse is definitely one of the very best source of infos.

Thu, 01/26/2012 - 12:56 | 2099904 ZeroPoint
ZeroPoint's picture

Unless they discover some major unknown silver source, silver is on path to become a rare earth within 20 years due to depletion of supply.

So buying silver at market price is always under valued.

 

Thu, 01/26/2012 - 19:53 | 2101202 Silver Pullet
Silver Pullet's picture

There are lots of gold/copper, silver/zinc deposits under the ocean, but nobody has got any out yet. My company has done some work for Nautilus Minerals which will likely be the first to do so.

www.nautilusminerals.com

So silver will 'never' go 'extinct' but the supply will probably keep getting tighter.

Thu, 01/26/2012 - 12:29 | 2099802 xela2200
xela2200's picture

Roubini picked the bottom just fine last quarter. As soon He said the gold bubble was over, I knew we had hit a good solid support. Just do the opposite of what He says. He is the best contrarian indicator for PM. He even went on the attack against Rickards, and criticized his book without even reading it. Have tried getting the Rickards' book? It is in back order everywhere I go.

Fri, 01/27/2012 - 02:23 | 2101828 geekgrrl
geekgrrl's picture

Yea, it was back ordered for me too, but after a few weeks of waiting it finally came to a local indy bookstore.

It was an easy read, although I was somewhat bothered that he was helping the pentagon run currency war games. I follow the points he was trying to drive home to the military, but I don't think the military should have anything to do with money (And I'll add that they should be getting a whole lot less of it). Anyway, the last section of the book was more interesting, in that he speculates on the possible end-games, and none of them are good, even for gold. He thinks that if there is a reversion to the gold standard, the government would implement a 90% windfall tax on any sales, since its adjusted value would have to be many multiples of its current value to cover the monetary base.

I've argued here before that I think that's silly because there are so few gold holders that all it would mean is a minor redistribution of wealth (and in all likelhood it would mainly be an advantage to the top 1%, since most of them own some gold). Some gold bugs would move up a notch or two in the class ladder, but otherwise not much difference. In any event, I'm not especially convinced a gold-standard is coming, and his arguments weren't really persuasive; he presented three other possible scenarios, but really they seemed more like guesses. The main issue I had with the book is that it is loaded with unexamined assumptions, and as is the case in most of economics, it's the underlying assumptions that are faulty. I want to get a copy of Steve Keen's Debunking Economics because I've seen Steve on the Keiser Report ripping into the central myths of economics, and I think that's the root of the problem.

Fri, 01/27/2012 - 10:44 | 2102368 xela2200
xela2200's picture

Here is a link that presentation. It is a bit dry at the beginning, but it gets good at the end

 

http://outerdnn.outer.jhuapl.edu/rethinking/VideoArchives/MrJamesGRickardsPresentationVideo.aspx

Tue, 03/13/2012 - 23:19 | 2252922 geekgrrl
geekgrrl's picture

Thanks Xela!

Thu, 01/26/2012 - 12:12 | 2099749 JW n FL
JW n FL's picture

 

 

the end is near!

the end is near!!

sell all your pm's to me at a discount!!

hurry!!

the end is near!!!

 

The FED can NOT! buy donw the price of metals becuase Congress has NOT! ok'd the $1.2 trillion debt ceiling increase..

I could go on and on talking about it.. but why?

the facts are the facts..

now go chart gold and silver prices when the dbet ceiling had been reached... and the increase in the price of metals UNTIL! an increase was implemented by the FED.

 

Thu, 01/26/2012 - 14:36 | 2100355 DoChenRollingBearing
DoChenRollingBearing's picture

NO!  Don't listen to that man!

Sell you PMs to ME instead.  Hurry up!

Thu, 01/26/2012 - 16:21 | 2100712 moondog
moondog's picture

I wonder if this is the same guy.

http://www.icepeople.net/mark/lindauer.html

Thu, 01/26/2012 - 15:07 | 2100473 akak
akak's picture

Maybe that author should retitle his article:

"Why the fiat-related propaganda of John Lindauer is rapidly becoming comical."

Thu, 01/26/2012 - 10:57 | 2099486 mrgneiss
mrgneiss's picture

It seems that the bearish gold/silver noise from the MSM and blogs is the loudest near bottoms and before big bullish announcements - and that the MSM gets on board the bull train just before big sell-offs - perfect for playing into the novice investors emotions and turning them off PM's forever when the correction around the corner hits.

Thu, 01/26/2012 - 11:22 | 2099562 gina distrusts gov
gina distrusts gov's picture

the slam downs are a great time to buy the metal ---until the metal price is totally disconnected  from the spot (fixed) price

Thu, 01/26/2012 - 10:51 | 2099461 JMAH
JMAH's picture

Tyler, give me Admin access to ZH NOW so I can fix all those damn typo's everywhere.

Thu, 01/26/2012 - 10:58 | 2099487 mrgneiss
mrgneiss's picture

OCD - I think their r suport grups

Thu, 01/26/2012 - 12:50 | 2099873 Bananamerican
Bananamerican's picture

i lukt but didint se enee... r yu shur?

allso, yu mispeled "thair" moran!! LOL

Thu, 01/26/2012 - 13:14 | 2099977 Uchtdorf
Uchtdorf's picture

Ban an American...thare, i fiksed teh spelin on yur nem, dont furgit them spases.

Thu, 01/26/2012 - 19:22 | 2101175 akak
akak's picture

Y your making sew many mistake's?

Fri, 01/27/2012 - 01:10 | 2101737 Imminent Crucible
Imminent Crucible's picture

Buncha idjits. Ca'nt nobuddy spel propper round hear.

Thu, 01/26/2012 - 10:44 | 2099437 HungrySeagull
HungrySeagull's picture

Good article.

I am a net buyer.

Know when to back up the truck and know when to stay home and wait.

 

Always buy something. But be mindful of taxes and costs.

Thu, 01/26/2012 - 10:42 | 2099433 Dr. Gonzo
Dr. Gonzo's picture

Platinum $110 away from the gold price and closing fast. Closer and Closer and then poof. It's gone! Rear view mirror time. Most of the supplies come from S.A. and Russia. I don't know how keen they are going to be giving it up for USD's. If I was accepting foreign irredemible paper for my precious platinum I'd sure want a heck of alot more than what the NYMEX wants to give. 

Thu, 01/26/2012 - 12:06 | 2099719 Fuh Querada
Fuh Querada's picture

seen this ?

http://www.caseyresearch.com/cdd/industrial-mans-gold?active-tab=archives

For what it is worth - they are pretty negative. I still like Pt though.

Thu, 01/26/2012 - 13:03 | 2099933 Dr. Gonzo
Dr. Gonzo's picture

Good article but I find it essentially irrelevant that pt and au occur at about the same rate in the earth's crust though. The fact is you can only pull it out in S.A. a spot in Russia and a  very small spot in the Montana area. There is probably between 100 and 200 times gold above the ground as platinum. Yes. Most of this gold is horded and not for sale in any USD price but I still find this fact the most provocative. The fact that is perceived as useful only as industrial is a half truth because you could say the same for gold only being good for jewelry. It's simply not true and perceptions change with the times. Anyways. I do like all 4 PM's. I just got really excited when pt hit $1350 at the start of the year.  My thoughts are pt could eclipse gold and not look look back. Time will tell.

Thu, 01/26/2012 - 14:34 | 2100349 DoChenRollingBearing
DoChenRollingBearing's picture

@ Fuh and Dr. G

+ 1 to you guys.  Platinum is EXCELLENT PM diversification!

Thu, 01/26/2012 - 17:00 | 2100819 CompassionateFascist
CompassionateFascist's picture

I doubt that a farmer at a local green mkt - the guy w a corner on FOOD - is going to take platinum seriously. Won't even know what it is.

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