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Copper Plunges Most In 3 Months As "Rehypothecation Evaporation" Concerns Grow

Tyler Durden's picture




 

Copper prices accelerated lower overnight and are sitting at 5 week lows following rapidly growing fears that the commodity warehousing probe will uncover exactly what we have been warning about for months - there is no 'there', there. As we explained in great detail here and here, the discrepancy of reportedly 80,000 tonns of aluminum and 20,000 tonnes of copper is sparking wholesale liquidations as carry traders, lenders, and borrowers all scramble to find out if their promised commodity is there. Iron ore, which has seen its price tumble dramatically, is also on the watch list as the port had said it was investigating whether iron ore warehouse receipts were fraudulently used multiple times to raise finance by different banks.

 

 

As we concluded yesterday,

So far it is unknown just what happens next: when it comes to copper and certainly gold, there has been a substantial downswing in prices. How much of that is attributed to CFDs unwinding is unclear. But the bigger question, and not just for gold prices, but for the Chinese economy is if indeed the funding deal house of cards is imploding, what happens to China's shadow banking system, which is extremely reliant on the billions in "rehypothecated" dollars emanating from non-existent metal collateral.

Because should the Qingdao port fiasco spread and be confirmed at all other venues that use commodities for funding purposes, then that may just be the straw that breaks the already weakened back of China's credit system. How the PBOC will respond to that may be just the variable that answers what happens to China's inflation, and thus to the price of the simple, unencumbered underlying physical metals in the coming weeks and days.

Stay tuned.

For those who want to learn more, please read "How China Imported A Record $70 Billion In Physical Gold Without Sending The Price Of Gold Soaring"

 

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Fri, 06/06/2014 - 08:18 | 4829455 THX 1178
THX 1178's picture

Dr. Copper collapses in a pile on the floor. Call a doctor.

Fri, 06/06/2014 - 08:21 | 4829460 prains
prains's picture

who's gonna make the Hello Kitty Vibrators now?

Fri, 06/06/2014 - 08:26 | 4829482 negative rates
negative rates's picture

He means to say imported hearts of tungstun.

Fri, 06/06/2014 - 08:28 | 4829484 dontgoforit
dontgoforit's picture

It has 'zero' value if there's none there to purchase.

Fri, 06/06/2014 - 08:49 | 4829512 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

The value will increase though if there's now a rush to put the copper 'there'

Any company that previously lied about the stocks will now have to buy to prove their stock

combined with the cheap new liquidity and loans via PBOC there will be extra cash ready at the same time as extra demand for copper

it went down because the idea that copper as collateral is clearly less valuable than was perceived, so in the future it may longer be accepted as this as much, and therefor would hurt demand and so the price goes down. the contracts go down because there's no longer anything backing it.

however, it should also have upward pressure as a lot of this collateral will now need to be secured, so it could force a rush by those caught to lying about their stocks but especially those who haven't been caught yet and want to secure their copper before they get caught.

lastly, there could be some downward pressure just because no one really knows wtf is going on. these port warehouse districts are all a mess and everyone shits all over every numbers. the whole fake export/import stuff. the empty warehouses. the switcheroo goods to get lower taxes or fees. there's so many container, warehouses, contracts, balance sheets that basically have no fucking order and no real strict regulation about if they are what they're supposed to be... so this is like another one of those things but about copper, so that tarnishes copper a bit and the market, algos, whatever react/overrreact

Fri, 06/06/2014 - 09:04 | 4829622 Badabing
Badabing's picture

repost from yesterday

So the Chinese beat us at our own game. Forced the price of gold down with Paper while buying physical!

But this Aluminum and copper fraud is very different. Anyone who supplies the physical can call the shots on price!

The normal outcome should be the paper price goes down because no one wants to be stuck with a worthless contracts and sells at any price. While the physical price skyrockets to meet demand for the metal they didn’t have with out disrupting industry consumption.

The only way we will not see a disconnect in price is with an under the table intervention. The suppliers will get some freshly printed fiat under the table as compensation. We still will see inflation as a side effect to unwind this monster.

 

Fake inventory = a disconnect in price or inflation.      Keep in mind that this is the third largest port!

Do you think port 1 and 2 is immune ?

Fri, 06/06/2014 - 09:07 | 4829640 CheapBastard
CheapBastard's picture

"If you don't hold it, you don't own it."

 

Nothing new here. Be careful...Bail-ins, MFGlobalizations, Rehypothecations, and "I know nohting; I was relying on what my accountants told me" are all just around your corner too.

Fri, 06/06/2014 - 09:28 | 4829705 DeadFred
DeadFred's picture

We are talking about China here. A few widows get charged for the bullets that executed their spouses and some fake numbers get printed and all is well. The only way this gets out of hand is if the government wants it to. On the other hand my paranoid mind can think of several reasons why they would want it to.

Fri, 06/06/2014 - 10:50 | 4829844 Anasteus
Anasteus's picture

Anyway, I don't get it... why on earth copper is falling when the recent revelation has pointed to missing physical supply due to naked rehypothecation aka leverage? That's a standard supply squeeze, which means scarcity that should logically work in favour of physical metal.

So why isn't the price of copper going up? This doesn't make sense to me at all.

...

But... perhaps there exists an explanation, a bit weird though. The more amount of missing physical is publicly exposed the lower spot price must be managed... in order to grab copper from elsewhere as fast as possible and as cheap as possible to rebuild the physical supply and thus restore the fading credibility. A paperwork. This somewhat reminds me of FOFOA's words I couldn't grasp for quite a long time: "Gold is too valuable to be expensive."

Fri, 06/06/2014 - 11:07 | 4830047 DonutBoy
DonutBoy's picture

I'm with you Anasteus - the headlines is a non-sequiter.  "Copper plunges ... rehypothecation evaporation concern...".  If in fact people have warehouse receipts for copper and they fear it's not there - then the result is everyone goes to the warehouse and asks for their copper.  

Now the flip-side is - if people with warehouse receipts are forced to settle in cash ("Well Sir, we don't have your copper available today, but you can buy it elsewhere - here's the full market value of your copper in renimbi...) then there are alot of vested interests who do want the price low to clear out the receipts that aren't backed by metal.  I think that's happening in gold right now.  I would have thought there was too much copper through the machinery of the global economy for it to happen there.

 

Sun, 06/08/2014 - 15:53 | 4830251 Anasteus
Anasteus's picture

Well, I also think that the recent case of metal evaporation and consequent illogical price plunge may somehow be pivotal for understanding of what's going on in the gold market. The case 'missing copper' likely has inadvertently exposed another hidden tactics.

Fri, 06/06/2014 - 09:08 | 4829646 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

and up it comes from the jobs number... thought that alone will probably be fickle

but give the weekend to process the EU NIRP, US jobs, and this warehouse story

and then a PBOC stimulus announcement next week about further lowered rates and 'forced' lending and liquidity injections

maybe toss in another upward-trending hard data report on railways or electicity

and we could see 3.15 again

Fri, 06/06/2014 - 09:11 | 4829657 Buckaroo Banzai
Buckaroo Banzai's picture

We are seeing Stage 1 of the process. Stage 1 is, paper prices plummet as everyone who doesn't HAVE to own copper for legitimate industrial uses flees to the sidelines. Stage 2 is, physical prices surge as warehouses scramble to produce the actual physical copper for their industrial customers who actually use it.

Where the price ends up is unclear. Do the warehouses primarily store copper for paper speculators, or industrial users? If industrial users largely held their own copper on their own property, then the price will stay down. If industrial users largely held their copper in the warehouses, and that copper was rehypothecated beyond what is actually required to satisfy physical demand, then the price will rise above the pre-crisis levels.

Fri, 06/06/2014 - 11:29 | 4830150 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Excellent question. It would be great if ZH could find out more about this.

Fri, 06/06/2014 - 12:23 | 4830336 KnuckleDragger-X
KnuckleDragger-X's picture

Considering manufaturing is swirling the toilet I don't think phys is going to be a problem but this was collateral so somebody is going to get really bent over covering this.

Fri, 06/06/2014 - 11:06 | 4830051 Panafrican Funk...
Panafrican Funktron Robot's picture

"Any company that previously lied about the stocks will now have to buy to prove their stock"

Pretty sure the contracts are going to end up being cash settled.  Think the ABN AMRO gold default model.  

Copper is being sold off because we're talking about paper copper, not physical.  If I own a paper contract for an underlying claim for physical, and that underlying claim turned out to be bullshit, I would sell that paper contract at whatever I could get for it.

Also, demand for physical copper is not as high as you would think, consider the "real economy" and re-assess what the physical demand actually is.  The real/verifiable base metal stockpiles (esp. in China) are still several multiples of what an un-fucked market would actually demand.  They may have a geopolitical strategic idea in mind around stockpiling common resources, but from a current supply/demand standpoint, supply is absurdly higher than demand.  

 

Fri, 06/06/2014 - 08:36 | 4829513 Sudden Debt
Sudden Debt's picture

Maybe woman will now buy the American All Bundy vibrators?

Fri, 06/06/2014 - 08:21 | 4829462 Headbanger
Headbanger's picture

Calling Doctor Howard, Doctor Fine, Doctor Howard!

http://www.youtube.com/watch?v=53KcqITIPlA

Nyuk nyuk nyuk..

Fri, 06/06/2014 - 08:23 | 4829468 Took Red Pill
Took Red Pill's picture

so there's a lot less copper than they thought and the price goes down?

Fri, 06/06/2014 - 08:26 | 4829481 EscapeKey
EscapeKey's picture

Paper contracts are worth less, so they're sold.

Nevermind that it's supposed to have some sort of connection to actual, physical metal.

Fri, 06/06/2014 - 08:37 | 4829515 tarsubil
tarsubil's picture

Someone on here once made the prediction paper gold would go to 0 while physical price exploded. Bonkers.

Fri, 06/06/2014 - 11:18 | 4830114 Panafrican Funk...
Panafrican Funktron Robot's picture

This is broadly in line with the FOFOA opinion based on their understanding of the market function, ie., the paper price crashes when the underlying contracts are "discovered" to not be sufficiently backed by the commodity in question.  Those underlying contracts would be cash settled similar to the ABN Amro default; this would collapse future demand for paper operating under the same scheme.  I personally think the drop in gold price is largely reflective of the distrust in the underlying value of the contracts in question.

Fri, 06/06/2014 - 11:37 | 4830174 _ConanTheLibert...
_ConanTheLibertarian_'s picture

Could very well be. I'd say there's actually going to be two prices, one for physical and for paper. This in gold and silver but perhaps in other metals too.

Fri, 06/06/2014 - 08:50 | 4829558 thisisjustarand...
thisisjustarandomusernameicreatedforzerohedge's picture

yes and no... potentially =/ yeah not a good answer i know... just trying out the 'ole tea leaves. truthfully, i dunno if it should go up or down... it could be either because there's pressure for both. depends how bad either is.. and that's the bad. we're not really sure yet, and that alone is bad and confusing news... so that's really what drove copper this week -- not really how this fundamentally impacts copper as collateral in china but the market just saying bad news is bad and we don't effing no what to do yet, so sell sell sell

 

between us jobs data just now, ECB NIRP, and probably more PBOC stimulus in june... copper should recover a bit next week or the week after

and should have an OK summer if the PBOC is serious about stimulus and avoiding a hard landing (though that just means the eventual fall will be from an even greater height so the threat will just be delayed)

Fri, 06/06/2014 - 10:36 | 4829943 gcjohns1971
gcjohns1971's picture

Just an opinion here...

But the issue is not what convolutions will happen amongst the thieves in the corrupted market when their crimes are discovered.

The demand did not change. The supply was shown to be less than thought.

Steady demand. Lower supply. Price rises.

To the extent the price isn't rising it is an indictment of not just of the warehouse who didn't have the material they said, but of the market itself. The market is allowing AN INCREASE in naked trades as a result of the discovery that someone was a fraud.

This activity is the cockroaches scrambling when the light has been turned on.

The dropping price is not the price of the metals - because there aren't any metals there. It is the price of the market itself.

It is the demand for the market's paper that is dropping. Because everyone now knows there are no metals there.

The extent that this is accepted as a market price for METALS is the measure of the extent of the fraud not yet exposed. The unexposed frauds are the ones who continue to propose that paper promises and physical reality are interchangeable.

They are not interchangeable, thus the dropping price of paper.

Fri, 06/06/2014 - 09:05 | 4829634 fattail
fattail's picture

If I get a loan and claim to have the physical as collateral for a loan, would not I or the bank then sell the paper to hedge my collateral?  if I can't make delivery i need to buy back my contract, forcing the price up?  

It looks like more manipulation or maybe just front running the chinese economic credit contraction/hard landing.

Fri, 06/06/2014 - 08:25 | 4829474 disabledvet
disabledvet's picture

Dr. McGuilicuddy's sounds about right.

Iron Ore headed to twenty bucks a ton?
That'll stick up the phuckers' asses mighty good.

Wanna see West Virginia become the next Saudi Arabia? "Morgantown" as it's Capital?

Works for me just fine.

Elon Musk can build the nickel-hydride plant right there...just like everyone else is doing.

Here they have a "rocket town" there too.

Fri, 06/06/2014 - 12:17 | 4830297 KnuckleDragger-X
KnuckleDragger-X's picture

Thank god nothing like that could happen here. /sarc

Fri, 06/06/2014 - 08:23 | 4829466 Dre4dwolf
Dre4dwolf's picture

And copper bullion is still 6$ a lb... out of all the metals, I think copper is the most disconnected from market valuations, the paper price is pretty much meaningless when its over 100% off from the "real" price.

Fri, 06/06/2014 - 08:26 | 4829479 disabledvet
disabledvet's picture

Wait until it hits a buck.

Fri, 06/06/2014 - 08:31 | 4829494 dontgoforit
dontgoforit's picture

Copper has been 'disconnected' since the CA teachers retirement fund drove the price to sky heights several years ago.  It was time for a fall - long since time....however; the supply side of this says 'up' not 'down' so it fits the current disconbobulation of everything else: upside down and inside out. 

What does Stevie Wonder and a tampon have in common?  Uptight, out-of-sight and in the groove. 

Fri, 06/06/2014 - 08:24 | 4829470 Oldwood
Oldwood's picture

One can't but wonder about the massive importation claims of gold by China. How much of it is "there"?

Fri, 06/06/2014 - 08:25 | 4829477 Took Red Pill
Took Red Pill's picture

and that will make the price of gold collapse?

Fri, 06/06/2014 - 08:27 | 4829483 disabledvet
disabledvet's picture

If I can get copper out of the ground profitably for a buck a ton you're god damn right it will.

Fri, 06/06/2014 - 08:48 | 4829559 Pool Shark
Pool Shark's picture

 

 

Well it only costs $5 to dig gold out of the ground,... right?  ;-)

 

Fri, 06/06/2014 - 09:22 | 4829688 Bastiat
Bastiat's picture

That was silver.

Fri, 06/06/2014 - 08:28 | 4829486 Oldwood
Oldwood's picture

Paper gold yes, if we think its only paper and there is no gold to back it.

Fri, 06/06/2014 - 08:24 | 4829471 buzzsaw99
buzzsaw99's picture

so the metal is missing, which drives the price DOWN? Okay, i guess we live in bizarro world, I can accept that. worx that way 4 gold anyway

Fri, 06/06/2014 - 09:42 | 4829759 Hail Spode
Hail Spode's picture

Yeah I was wondering how far the price will drop once we get down to 1 KG available for the whole world.  What will that last KG sell for, a (zinc) penny?

Fri, 06/06/2014 - 10:40 | 4829953 quasimodo
quasimodo's picture

It will just get thrown in the streets

Fri, 06/06/2014 - 08:24 | 4829473 tmosley
tmosley's picture

Paper to zero, bitchez.

Fri, 06/06/2014 - 08:28 | 4829487 disabledvet
disabledvet's picture

The debt...not the DOLARES.

Fri, 06/06/2014 - 08:24 | 4829475 colin
colin's picture

why does price fall when it is all gone? how do the kenysians explain that ?

Fri, 06/06/2014 - 08:27 | 4829480 Oldwood
Oldwood's picture

Maybe for the same reason we don't want fake money? The value declines if its not really there.

Fri, 06/06/2014 - 08:33 | 4829501 dontgoforit
dontgoforit's picture

It's ok.  Let me hold five 'til Tuesday.  Need a BJ and a beer.

Fri, 06/06/2014 - 08:29 | 4829491 disabledvet
disabledvet's picture

Martians. :-0

Fri, 06/06/2014 - 08:32 | 4829498 praps
praps's picture

If you have a paper claim on a pile of copper and you're not sure if that copper is there or not best to sell the claim, then it doesn't matter if it's there or not.

Fri, 06/06/2014 - 08:43 | 4829543 lakecity55
lakecity55's picture

!! + 10

And, since everyone is trying to dump, the price goes south.

Fri, 06/06/2014 - 09:10 | 4829654 fattail
fattail's picture

And since there isn't enough collateral, and we won't make any new loans or roll the ones we have with no collateral; do you guys mind if I front run the coming chinese credit contraction?

Fri, 06/06/2014 - 08:41 | 4829537 lakecity55
lakecity55's picture

The only thing I can think of is that since they can't trust the paper metal, it starts to lose it's value.

Joe Blow enters the bank. "Hey, I have a copper cert here, worth 1 million yuans." The banker says "Dude there is too much fake copper paper out there. I will only give you 1/2 million for it."

Meanwhile the real copper is sitting in a warehouse somewhere with dobermans around it. But since 5 guys have the same metal on paper, it is worth less until it all shakes out and they find the actual copper.

This seems to be a great lesson in Paper Value setting the price of physical material.

Fri, 06/06/2014 - 08:54 | 4829577 shovelhead
shovelhead's picture

But the lesson never gets learned until someone with juice says "Hey...Wait a minute here."

Fri, 06/06/2014 - 08:24 | 4829476 Big Corked Boots
Big Corked Boots's picture

So there's less physical copper than anyone expected - and the price goes down. How F'ed up is that.

The lesson I get here is that the paper market makes the price, not the physical, just like it does for gold and silver. It ain't right, but there it is... it might be a long wait before reality takes hold and the markets behave like they are supposed to. I've been waiting years.

Fri, 06/06/2014 - 08:32 | 4829499 Oldwood
Oldwood's picture

If they were actually using the material as a consumable missing inventories would push costs up, but when it is only another asset backstop for paper, who would want it if you can't verify it even exists? China's consumption of this material is declining so it is just another "investment".

Stocks are going up, does that mean there is a shortage?

Fri, 06/06/2014 - 08:35 | 4829507 dontgoforit
dontgoforit's picture

As much as they've been using for the last 15 years, could this be considered 'shrinkage'?

Fri, 06/06/2014 - 08:32 | 4829500 pob
pob's picture

I don't think we're in kansas anymore Toto

Fri, 06/06/2014 - 08:25 | 4829478 Winston Churchill
Winston Churchill's picture

Silly Chinese should have set up their own MERS system

I hear Rinda Gleen is available.

Fri, 06/06/2014 - 08:28 | 4829489 madbraz
madbraz's picture

Just imagine if a probe was conducted to find out if the same treasury bond is rehypothecated multiple times by financial players who all claim ownership and proceed to short them.  

 

Wait a second, this is actually what happens here and is encouraged by the NY FED...

Fri, 06/06/2014 - 08:29 | 4829492 Eyeroller
Eyeroller's picture

What happens if the dollar collapses?

FED would have to quit printing.

Markets would fall.

FED must print.

Popcorn time..

Fri, 06/06/2014 - 08:30 | 4829493 Cat Sniper
Cat Sniper's picture

Will this send creditors in these deals in China scrambling to confirm the existence of their collatoral? I would think highly likely.

Fri, 06/06/2014 - 08:31 | 4829496 lakecity55
lakecity55's picture

"Fractional reserve currency."

"Fractional reserve metal."

Fri, 06/06/2014 - 09:17 | 4829670 Sofa King Confused
Sofa King Confused's picture

Wait till the people find out the stocks are fractional resserve also

Fri, 06/06/2014 - 08:37 | 4829497 kashey
kashey's picture

there has not been any articles here on Ukrainian fascist government which bombs civilians in Lugansk (eastern Ukraine) with support of usa and eu , so I decided to post this video here. it's results of Ukrainian air strike on Lugansk city administration. be aware - very graphic, a lot of blood http://da-dzi.livejournal.com/242675.html

i hope this video will be posted as a separate article by modertors. it eserves it.
I live in Moscow, my wife's relatives from Lugansk right now are trying to flee to us and I hope they will be safe. And now it is my personal responsibility to stop obamafascists from ruling the world.

Fri, 06/06/2014 - 09:19 | 4829674 fattail
fattail's picture

Please repost.  they removed it for shocking disgusting content.

Fri, 06/06/2014 - 09:41 | 4829721 shovelhead
shovelhead's picture

I hope your family makes it to safety.

I wish more Americans were aware of the criminal part their govt. is playing in bringing on this tragedy so we could bring it to an end. They only know what they have told by the govt. controlled media.

All of us here at ZH and many other outlets of reporting are doing what we can to get people to understand that our govt. has been hijacked by criminals and murderers and we have to take it back.

Again,  my heart-felt wishes that your family remains safe and can be so in their own homes.

I'm confident that all of us at ZH feel the same.

Fri, 06/06/2014 - 10:15 | 4829873 gcjohns1971
gcjohns1971's picture

I am so, so sorry that your family is going through this.

And I am ashamed that we have failed to keep evil deeds of the criminals in my country contained within our borders.

My means are modest. I am not an important person.

But I can maybe arrange for a nice evening at Tinkhoff, or dinner at a nice place in Arbat for you?

I know it in no way makes up for the horrors in Ukraine, but a pleasant hour of life is better than an unpleasant one.

And though modest, it is probably something I can accomplish. If you wish it?

Fri, 06/06/2014 - 08:41 | 4829534 foxenburg
foxenburg's picture

I gotta admit I am flummoxed. There's less copper than was thought....so the price plunges. Does this mean that when they find there's no gold "there" we can expect the same?

Fri, 06/06/2014 - 08:43 | 4829546 Winston Churchill
Winston Churchill's picture

Yes.

The paper will go to zero.The phyz premiums will rise.

 

Fri, 06/06/2014 - 09:17 | 4829668 fattail
fattail's picture

As noted above:  No collateral, no loan;  No collateral, no renewal of loan;  No loans =credit contraction=chinese hard landing.  chinese hard landing=short the shit out of paper contracts to front run hard landing.

Wait for price collapse; buy up physical assets on the cheap. Concentrate wealth and power. Wash, rinse, repeat.

So much easier than being creative or productive

It all makes sense in sterile keysenian logic.

Fri, 06/06/2014 - 09:57 | 4829803 shovelhead
shovelhead's picture

That's a pretty good summary of the entire US financial sector. You could add some bells and whistles but, essentially, it comes out the same.

Fri, 06/06/2014 - 08:42 | 4829540 toadold
toadold's picture

Well the demand  for manufactured goods that use copper has been going down so they need less copper. Which causes a price drop. This made holders of warehoused copper certificates nervous because it looked like they might have to sell to reduce their loss.  Then it turns out the copper isn't there.  Now the whoo haa oh shit is about the worth and price of all those certificates rather than the actual price of copper.  

The banker bought a pig in a poke and didn't check to see if it was a cat instead of a pig. Now the banker opened up the poke and there isn't even a cat in the poke just another poke. The banker can't even make cat chow mein. Now there is also a surplus of pokes. 

Hey Mr. Banker we are from the PLA and we want our deposit back.

Fri, 06/06/2014 - 14:29 | 4830745 WmMcK
WmMcK's picture

Schrodinger's cat is now a pig?

Fri, 06/06/2014 - 08:45 | 4829548 EasyForYouToSay
EasyForYouToSay's picture

check out what happned to MCX in India

Fri, 06/06/2014 - 08:47 | 4829553 NoWayJose
NoWayJose's picture

The price is down as the paper copper positions are sold. Once they are done liquidating the new shortage of 20,000 tons will send copper prices up - but only if there is no shadow banking collapse first. If that happens there will be no demand for copper or anything else (like stocks), so we get the 2008/2009 collapse - Again.

Fri, 06/06/2014 - 08:52 | 4829571 Calculus99
Calculus99's picture

Amazing isn't it when we now have certain commodities where their price doesn't have much to do with the actual commodity. Cost of mining, supply, demand and all the other important factors now have little to do with the price one pays.

 

Fri, 06/06/2014 - 08:56 | 4829586 Calculus99
Calculus99's picture

I'm still a buyer of physical Gold on the first of every month, regardless of price. If price moves up I buy less, if it moves lower I buy more. Over the last few years I've  been able to buy more :)

Aha, but you're offside people say? On some of my Gold sure, but the problem with that is what exactly?

Buying Gold isn't always about making money....

Fri, 06/06/2014 - 10:15 | 4829872 shovelhead
shovelhead's picture

That offside won't matter when you hold money and everyone else holds paper.

Anyone with a surplus of goods will gladly exchange them for historically proven money.

You might have to do some bargaining because "price discovery" will be in an entirely new and dislocated environment. Perishable goods give you the upper hand. Therein lies the true utility of real money.

Coincidence of wants and so forth.

Fri, 06/06/2014 - 08:58 | 4829600 AbbeBrel
AbbeBrel's picture

Alchemy is alive and well as the world continues to regress : Copper has been Transmuted into AnthraShite by HypoCritters. Assuming the Critters can find the copper in the first place...

Fri, 06/06/2014 - 08:59 | 4829602 Pumpkin
Pumpkin's picture

Many seem to miss the point.  Investers in copper are selling because they are realizing that they only invested in fake copper.  Worthless pieces of paper.

Fri, 06/06/2014 - 09:10 | 4829648 CheapBastard
CheapBastard's picture

But my broker said, "The price of copper never goes down."

 

... or was that my mini-skirted Reator former-housewife talking to me about my house price.....I forget [so busy looking at her tah tahs]

Fri, 06/06/2014 - 09:47 | 4829769 cuttlefish
cuttlefish's picture

I do not get it why would it drop ? or is it an ETF drop not a physical drop ?

Fri, 06/06/2014 - 12:44 | 4830438 Wooden Tiger
Wooden Tiger's picture

The drop is due to halting of trading during the investigation.

Fri, 06/06/2014 - 10:09 | 4829850 gcjohns1971
gcjohns1971's picture

This clearly indicates that in China, as in the US and London, paper sets they physical price and not the other way around.

The difference between the up-and-coming BRICS at this moment in time, and the established economies is...

...only timing.

This supports my idea that Russia/China only want to take over the banking rehypothecation scam and not replace it.

Accept no substitutes. Demand delivery until the criminals who sell things they do not have go out of business.

Fri, 06/06/2014 - 10:20 | 4829886 shovelhead
shovelhead's picture

Button...Button.

Who's got the button?

Funny how some games never get old.

Fri, 06/06/2014 - 10:49 | 4829970 shovelhead
shovelhead's picture

Okay help me out here.

In a 5x rehypothicating scam from A to E, does E get the copper (or it's market value) while everyone further up the line eats  the loss above the value of the copper?

Holy shit. What if A uses the copper cert. to get a loan from player 1, B and 2. Now 1 does the same as B and 2 does also. It becomes a Ponzi pyramid. This can't be possible. Somebody has to hold the certificate in possession.

I need more coffee to work this one out.

Fri, 06/06/2014 - 11:07 | 4830052 PoliticalRefuge...
PoliticalRefugeefromCalif.'s picture

What better way to control the direction of an actual commodity but by temporarily exposing the paper cousin for what it is, wonder who placed a big short on the issue?

na.. that would be too cynical- last thing I want is to be called a cynic.

Fri, 06/06/2014 - 12:10 | 4830265 Casserole of no...
Casserole of nonsense's picture

20,000 tons of copper in an 18,000,000 ton annual market is pissing in the ocean. I fail to see why this has any effect on the price.

Fri, 06/06/2014 - 12:55 | 4830478 Wild Theories
Wild Theories's picture

Some are fearing there's more to the rabbit hole.

But some, maybe, are overreacting... just a bit.

 

Going by yesterday's report  "- there have been triple issuing of documentation." if accurate, that means the actual physical is more likely to be 7,000 tons.

Even less piss in the ocean.

Fri, 06/06/2014 - 18:06 | 4831417 StychoKiller
StychoKiller's picture

Maybe so, but if you're caught swiming without a suit in China, you might find a Pb/brain imbalance in yer future!

Fri, 06/06/2014 - 18:22 | 4831442 ken
ken's picture

Manufactured transfer opportunity? Does this portend a low?

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