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CME Goes To Collateral DefCon 1: Makes Maintenance Margin Equal To Initial For... Everything!?

Tyler Durden's picture




 

Update: Based on unofficial statements by the CME, it appears that the exchange has gone the way of inviting more risk by lowering Initial to meet existing Maintenance margin across the board. We will likely only know for certain on Monday. We suppose the proposed explanation will be to minimize margin exposure for onboarded MF positions. Of course, that this is very much counterintuitive at a time when risk is spiking and vol readings per SPAN are soaring, and instead is inviting even more risk, is apparently irrelevant to the exchange.

The most important news announcement of the day was not anything to came out of Cannes  (as nothing did), nor from Greece (the merry go round farce there continues unabated). No, it was a brief paragraph distributed by the CME long after everyone had gone home, and was already on their 3rd drink. It is critical, because not only is this announcement a direct consequence of what happened with MF Global several days ago, but because also it confirms one of our biggest concerns: systemic liquidity is non-existanet. We confirmed interbank liquidity in Europe was at an all time low earlier today, and can only assume the same is true for US banks. But what is very disturbing is that this is just as true at the exchange level, where it appears the aftermath of the MF collapse is just now being felt. What exactly was the announcement. Unless we are completely reading it incorrectly, it is nothing short of a margin call for tens if not hundreds of billions worth of product. Because as of close of business on November 4, today, the CME just made the maintenance margin, traditionally about 26% lower than the initial margin for specs, equal. For everything. Which means that by close of business Monday, millions of options and futures holders will be forced to deposit billions in additional capital to the CME just so they are not found to be margin deficient, and thus receive a margin call. Naturally, since it is very unlikely that this incremental amount of liquidity can be easily procured in one business day, we anticipate the issuance of hundreds of thousands of margin calls Monday, followed by forced liquidations of margin accounts across America... and the world. Just like when Lehman blew up, it took 5 days for Money Markets to break. Is this unprecedented elimination in the distinction between initial and maintenance margin the post-MF equivalent of the first domino to fall this time around?

From the CME (source):

And for those asking, here is a complete breakdown of all CME products and associated margins:

 

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Fri, 11/04/2011 - 21:24 | 1847266 jesse livermoore
jesse livermoore's picture

manic monday

Fri, 11/04/2011 - 21:27 | 1847283 SWRichmond
SWRichmond's picture

IF YOU'RE GOING TO PANIC, PANIC FIRST.

Fri, 11/04/2011 - 21:35 | 1847308 Motley Fool
Motley Fool's picture

I sense a disturbance in the force.

Fri, 11/04/2011 - 21:47 | 1847353 High Plains Drifter
High Plains Drifter's picture

rick santelli was trying to talk about this stuff all morning long..........he was feeling a disturbance in the force..........

Fri, 11/04/2011 - 21:58 | 1847406 greased up deaf guy
greased up deaf guy's picture

translation...

 

sucks to be (listed below):

you.

Fri, 11/04/2011 - 22:41 | 1847567 strannick
strannick's picture

I heard it doesnt refer to 'everything' only to 'performance bonds' (thanks Ulikadese)

Fri, 11/04/2011 - 22:48 | 1847581 sqz
sqz's picture

Performance Bond, in the case of CME or clearing parties, normally just another word for acceptable collateral.

I'm guessing the error is that it does not apply to all products otherwise things get "interesting" (in Chinese proverb sense) on Monday, lol.

Fri, 11/04/2011 - 22:54 | 1847597 island
island's picture

Worse comes to worse, Timmy and Bennie will provide the collateral.

I'm thinkin' this is a snoozer - no way will TPTB let the CME wreak havoc.

Fri, 11/04/2011 - 23:02 | 1847617 tmosley
tmosley's picture

Could be a "them or us" situation for the CME, if it's hand is stuck in the cookie jar.  They may well cut it off rather than being caught.  Damn the consequences from "TPTB".

Fri, 11/04/2011 - 23:15 | 1847644 nope-1004
nope-1004's picture

It's those damn evil speculators.  You know, the ones with the cash that the CME wants to steal.

They're all short now into early next week.  Going to ride this pig down and profit short, then steal positions back and ride it up as Ben announces more easing to come in the folloiwng weeks / months.  Money can't be made in a thin market without volatility.

It's all in a bankers life!  Get used to being stolen from and put aside the "injustices", and you begin to see the game for what it is:  The CME THEMSELVES are the evil speculators and bet wrong, now short on cash.  LMFAO!!

 

 

Fri, 11/04/2011 - 23:17 | 1847659 trav7777
trav7777's picture

nah...it's indicative of cash shortages.  The economy doesn't really support the growth of credit so everyone, in realizing that there is a shortage of it, is demanding more of everything upfront because the "down the road" picture doesn't look like anyone will be able to pay.

the system is no longer "creditworthy."

Fri, 11/04/2011 - 23:44 | 1847702 slewie the pi-rat
slewie the pi-rat's picture

 

it's tautological, trav!

  1. lack of liquidity = L0L
  2. L0L (EU) + L0L (US) = L0L (zH)

"We are not worthy!"

Fri, 11/04/2011 - 23:56 | 1847759 Ahmeexnal
Ahmeexnal's picture

so if you are holding PMs in your hand, that means you got a margin call too?

 

Sat, 11/05/2011 - 00:13 | 1847796 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

There will be a day when the Fiat Ponzi crumbles.  Debt/money has had little recourse considering it has zero value.  Debt/money is a ficticious creation of sore minds.  It is a way to leverage wealth from the base of the society to very few.

Along the way promises were made, and quiteness was kept.  People went about buying and spending, hoping to repay their loans with future earnings reamed of.  But these days were far out of reality.  Now we see that leverage makes no distiction among its prey.  We see that when the House comes down, those praying in it will be trapped.

Those holding real assets are far from this mess.  Those who have their ability are above the clouds.  Humanity creates, and it destroys.  This is a time of destruction.  The creation will come from its ashes.

Sat, 11/05/2011 - 00:34 | 1847836 JW n FL
JW n FL's picture

 

1. You can be "First".

2. You can be "Smarter"

3. or.. You can "Cheat".

 

Banks are open until 12 noon tomorrow unless you have a private banker and a branch that will open for you, ala' Northern Trust. http://www.northerntrust.com/pws/jsp/display2.jsp?XML=primary/locations/import_0921_39.xml&TYPE=locDetail&TYPE2=fl&TYPE3=Palm%20Beach&nxml=empty&ntype=/xsl/locIndex.xsl&nav=global_about&services=persServ

 

If you dont believe in tangibles or in backwardation.. unless this gets called off.. you will be a firm believer by 12 noon Monday when the Markets Open Late and still are diving past 7,000.. from a close today of 12,000(ish).

 

There is not enough energy to go around.. 300% +++ in monetary base growth.. and the World markets are still going to fast? and need to be slowed?

I dont know, I am just spit balling with the rest of you.

God Bless and Good Luck!

 

Sat, 11/05/2011 - 01:19 | 1847900 FrankDrakman
FrankDrakman's picture

What, did you watch the movie "Margin Call" last night?

Jeremy Irons does not cheat, and Kevin Spacey will think he's a great guy while he rapes every client the firm has. And life imitates art.

Sat, 11/05/2011 - 06:32 | 1848126 French Frog
French Frog's picture

Will it matter that much if it's only for "performance bonds"?

Sat, 11/05/2011 - 11:32 | 1848461 redpill
redpill's picture

In CME-speak I believe that's a generic term referring to collatoral margin requirements, so if true would seem to be a fairly significant event.

But I tend to think we don't see the whole story here, I can't believe CME would "go rogue" with something that would cause a major disruption in financial markets like this.

Sat, 11/05/2011 - 13:48 | 1848801 tmosley
tmosley's picture

These are the people in charge of our commodities exchanges.

The incompetence is simply STUNNING.  Taking on more risk in this environment is nothing short of insanity.

In any event, this is good.  No collapse Monday.

Sat, 11/05/2011 - 13:55 | 1848819 trav7777
trav7777's picture

another day, another mosely-claven prediction falls flat on its face

Sat, 11/05/2011 - 14:20 | 1848874 Max Fischer
Max Fischer's picture

 

 

So after 75,000 views and 800+ comments, all of this was for.... nothing?

 

Sat, 11/05/2011 - 08:38 | 1848217 monkeyboy
monkeyboy's picture

Weird. Just watched the film last night.

Sat, 11/05/2011 - 11:09 | 1848435 ToNYC
ToNYC's picture

With the well-known Jungle compensation plan: "You Eat What You

Kill", are ther many wonders why evisceration of assets is a fine art. Smart monkeys move on while the patriarcal baboons deeply-rooted in their entitlement by hierarchy try to buy love with the merde at hand.

Sat, 11/05/2011 - 01:50 | 1847945 trav7777
trav7777's picture

every dollar owed relies on another borrower to borrow.  This is the problem in the face of aggregate contraction.

The issue we face as plebes is that the BANKS are the sole conduit of money into the economy.  So, when the economy grew, the banks prospered.  As the Bernank prints, the banks prosper.

This is the point of the deflationists, credit becomes artificially scarce not because of individual borrowers' inability to repay but the fact that there don't exist the MORE borrowers in the future who will have to borrow the interest owed.  It's a systemic problem.  It's that proverbial someone else, the lack of growth, that prevents the system from functioning.

So, everyone has to repay, everyone has to put everything up front, everything real and in existence now trades at a premium.  The system can't grow to pay today's interest, so nobody will lend even if the individual interest or venture lent to would be viable.  The system in a state of contraction makes the credit growth necessary for a compounding interest system untenable, therefore lending ceases.

Today's principal P becomes tomorrow's principal P + interest I.  The system necessarily requires someone to borrow (request the creation of money) more at every future point time T+1.  It always has to grow.  There always must be more credit created.  A loan today can't be created, exist, be viable, be repaid, without that.

Sat, 11/05/2011 - 03:12 | 1848013 zhandax
zhandax's picture

Then let the fucker collapse.  Except it won't happen next week because our inimitable central banker has decided he is both the party to request the creation of money at every T+1 and the creator of that money and he is still running loose.

Sat, 11/05/2011 - 09:26 | 1848261 Madcow
Madcow's picture

yes exactly - unless 

- they unveil a new fiat pyramid 10x the size of the old one

- they let gold go to 20K to refinance the old system

- a technology comes along to economically harvest heavy oil and bitumen

or some combination of the above ...  i know you don't believe that last one is possible - but that's really the only way forward. i'm not prepared to live in a mad max deflation.  positive EROI is possible with the right technology breakthrough(s)

Sat, 11/05/2011 - 10:57 | 1848403 Hansel
Hansel's picture

Yes, it is systemic.  I'll add that one person cannot have money without another person/entity going into debt.  When work is performed no money is added to the system; one person is paid cash and another goes into debt, but the money to cover the interest never existed.

Sat, 11/05/2011 - 00:15 | 1847800 PeterB
PeterB's picture

No, but beware the leveraged neighbour who can't wait to give it away to save his ass. I'm afraid it was always going to be every man financial entity for himself & let the devil Wall Banks take the hindmost MF Global

Sat, 11/05/2011 - 02:03 | 1847967 Ag Star
Ag Star's picture

I don't think so dude. My pm's resting nicely and still doing better than any stock over the last year.

No counter-party risk--ahhhh,  I'm sleeping real good.  Remind when the last time gold or silver went to zero.

Sat, 11/05/2011 - 02:20 | 1847983 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Zero what?  Dollars?  They can't.  Dollars are leveraged on gold; just ask Bernanke how his 14k tonnes are doing. 

Sat, 11/05/2011 - 03:17 | 1848018 derek_vineyard
derek_vineyard's picture

First rule of having physical PM:   Do not tell anyone

Second rule:  If you tell, it will be taken.

Sat, 11/05/2011 - 11:11 | 1848440 ToNYC
ToNYC's picture

How do you use something in trade that you can neither show nor tell?

Sat, 11/05/2011 - 18:06 | 1849359 derek_vineyard
derek_vineyard's picture

You await until you need to trade. Then you will have to change your life and gaurd your valuables and take extreme security measures.  In the meantime STFU.

Like the kid growing the pot plants....if you tell anyone , they will be gone.

Sat, 11/05/2011 - 19:46 | 1849514 ToNYC
ToNYC's picture

When does your army of one sleep when you do deed one with your stash in the midst of real strife?

Sat, 11/05/2011 - 03:19 | 1848022 derek_vineyard
derek_vineyard's picture

oops

Sat, 11/05/2011 - 03:20 | 1848023 awkward squad
awkward squad's picture

Same rule applies when you're growing weed in your house.

 

Sat, 11/05/2011 - 03:33 | 1848028 MsCreant
MsCreant's picture

So where you shacked up theses days?

Sat, 11/05/2011 - 09:40 | 1848276 JPM Hater001
JPM Hater001's picture

A commodity is a commodity whether you grow it or mine it.  Personally, I prefer to smoke it.

Sat, 11/05/2011 - 11:57 | 1848530 topcallingtroll
topcallingtroll's picture

Cant wait till I get home today. Got a little sativa sensamilla (sin semilla or "without seeds") waiting for me. Wish I could still find juahacan or acapulco gold. You kids can keep your skunky indicas. Old fashioned sativas, particularly sensamilla wakes you up and clears your mind. I dont like the comatose buzz from indica.

Sat, 11/05/2011 - 23:13 | 1849794 BigDuke6
BigDuke6's picture

My sort of chat.

U should come to oz, u'd be impressed with the resources here...

Sat, 11/05/2011 - 07:10 | 1848151 mayhem_korner
mayhem_korner's picture

the system is no longer "creditworthy."

 

The system was never creditworthy.  Returns (interest) aren't high enough to cover quantum default risk plus a profit.  So it's a losing battle from the get go.  Problem is, when those "prosperous" 4-6 year episodes take hold, the illusion of lending profitably becomes a contagion, and the system levers up (i.e., fractional reserve lending, investing on margin, etc.).  No one "learns" because the purveyers of each wave are either promoted up or kicked out, and the next wave of creditor enthusiasts repeat the pattern, only with new tools and more confidence.

But as you say, every dollar of debt is owed and must be resolved on someone's balance sheet.

The weight of the unrepayable debt is so ugly I don't think even those that know what's happening can aptly imagine the crushing pain that is coming.

Sat, 11/05/2011 - 12:18 | 1848583 trav7777
trav7777's picture

the system was creditworthy as long as the aggregate economy was growing

Sat, 11/05/2011 - 12:23 | 1848595 GenX Investor
GenX Investor's picture

It's called Debt Deflation bitchez!!!

Fri, 11/04/2011 - 23:00 | 1847610 JustObserving
JustObserving's picture

CME lists margin for 3186 products.  How can they increase margin for all products simultaneously?  - this will require trillions.

Something does not compute

 

Sat, 11/05/2011 - 00:12 | 1847794 bernorange
bernorange's picture

Maybe someone copy & pasted all the numbers from one column into the other by accident.  /fat finger

Sat, 11/05/2011 - 07:45 | 1848172 Smiddywesson
Smiddywesson's picture

Yes, but the real story is the system is so complex and so close to the edge of the cliff because of can kicking that some fat finger can come along and push it over the edge.  Then, like the assassination of Archduke Ferdinand, everybody will say, "how did it all happen because of this?" when the real answer is it was just time for the lemmings to jump.

Sat, 11/05/2011 - 13:37 | 1848765 TheSilverJournal
TheSilverJournal's picture

Is it time for the dollar collapse now? Or do we have months? Or Years?...

My vote is in the months category.

Thu, 11/10/2011 - 16:08 | 1867327 Smiddywesson
Smiddywesson's picture

My guess was Jan or Feb of 2012, but I don't know either, I'm just guessing how many jellybeans are in the jar.

Sat, 11/05/2011 - 19:48 | 1849516 ToNYC
ToNYC's picture

How far is KreditAnstalt from Erste Bank and Dexia besides rhyming in time and fashion?

Sat, 11/05/2011 - 12:49 | 1848660 I only kill chi...
I only kill chickens and wheat's picture

http://www.robertsinn.com/2011/11/05/margin-misunderstandings/

How many traders out there are swinging $170,000 of silver exposure with less than $25,000 of equity in their accounts? This is already a leverage ratio of nearly 7 to 1, are there really hundreds of thousands of traders out there leveraged up to the razors edge? Use your brain, there may be a couple hundred margin calls followed by liquidations on Monday but these will mostly be smaller accounts in which inexperienced traders have blown themselves up. Moreover, it is not clear that these liquidations will have a directional impact upon markets – Remember, futures markets are zero-sum games in which there are both longs and shorts.

Sat, 11/05/2011 - 13:02 | 1848686 Great Dane
Great Dane's picture

Remember, remember the 5th of november.....big, bad,  blatant dominoes to fall.

Sat, 11/05/2011 - 05:19 | 1848101 SRSrocco
SRSrocco's picture

COMPARING THE SILVER MARGINS TO THE 2 YEAR TREASURY

After reading the post here on the what the CLOWNS at the CME-GROUP are doing, I decided to do a little research on margin histories of silver and the 2 year note.  I put together a very interesting post at the SilverGoldSilver blog if anyone would like to see the comparison.

Here is the link: http://www.silvergoldsilver.com/index.php?option=com_smf&Itemid=39&topic=579.msg3032

I find it fascinating that the CME-Group is lowering margins on the 2 year treasury futures, but raising them on silver.  If you take a look at the post, you will see that silver margins have not been lowered since the price decline....BUT ARE STILL BEING INCREASED....LOL

It's time to be in physical and out of paper.

Sat, 11/05/2011 - 07:13 | 1848154 mayhem_korner
mayhem_korner's picture

I find it fascinating that the CME-Group is lowering margins on the 2 year treasury futures, but raising them on silver. 

 

Pretty obvious the complex doesn't want capital...er, leveraged digi-fiat...to migrate away from the statist currency into real money.

Sat, 11/05/2011 - 12:01 | 1848537 SRSrocco
SRSrocco's picture

mayhem_korner....yes I do realize that.  Maybe facsinating wasn't the appropriate word.  Anyhow, it is extremely interesting to see this comparison:

2 YEAR NOTE $500 Margin / $200,000 contract = 0.25%

SILVER 5000 oz $18,500 Margin / $170,000 contract = 10.8%

Both of those margins are based on the Maintanence margin on Sept 26, 2011.  You have to spend 43 times more Dollars to maintain 1 Silver Futures Contract than you do in maintaining (1) 2 Year Note futures contract.

FAIR AND BALANCED....

Sat, 11/05/2011 - 12:04 | 1848553 tmosley
tmosley's picture

How does the volatility of the two products compare?  That seems to be the relevant question.

Sat, 11/05/2011 - 12:34 | 1848628 SRSrocco
SRSrocco's picture

tmosley....are you aware that MORGAN STANLEY purchased $8 trillion in Interest Rate Swaps in Q1 2011?  This may be part of the reason why they are in so much trouble.  Anyhow...this buying of interest rate swaps gave the market the ILLUSION of a continued strong bull market in US Treasuries after the downgrade.

The governent is hiding VOLATILITY in US TREASURIES by the huge bloated interest rate swap market.  85%+ of all derivatives are interest rate swaps.  With that kind of leverage and hedging...it's easy to see why at face value the US Treasuries are less volatile than silver.

Sat, 11/05/2011 - 13:03 | 1848688 tmosley
tmosley's picture

Who on earth had that much debt to swap?  And how on Earth can Morgan Stanley possibly have that much debt to start with?

I know very little about this market, only what I have read on the wiki, and even that is difficult to understand.

Sat, 11/05/2011 - 13:47 | 1848795 SRSrocco
SRSrocco's picture

tmosley....Rob Kirby explains it all in detail with great graphics and links in the article below:

Derivatives: A Capital Markets Gong Show For Whom The Bell Tolls

http://news.goldseek.com/GoldSeek/1309532700.php

and actually I understated their increase in derivatives that quarter.  It was not $8 trillion, but $9.1 Trillion

Sat, 11/05/2011 - 13:50 | 1848796 SRSrocco
SRSrocco's picture

tmosley....Rob Kirby explains it all in detail with great graphics and links in the article below:

Derivatives: A Capital Markets Gong Show For Whom The Bell Tolls

http://news.goldseek.com/GoldSeek/1309532700.php

and actually I understated their increase in derivatives that quarter.  It was not $8 trillion, but $9.1 Trillion

Sat, 11/05/2011 - 08:11 | 1848197 Smiddywesson
Smiddywesson's picture

good article (s)

Fri, 11/04/2011 - 23:38 | 1847712 XRAYD
XRAYD's picture

 

How Trading and Performance Bonds/Margins Work:  An Example

Suppose a trader established a position to buy (go long) a September E-mini S&P 500 futures contract on June 13, when the contract was trading at 1050.00 points [This number is for demonstration purposes only – it is not meant to reflect the current value of the S&P 500]. Suppose also that CME at the time required an initial performance bond of $4,000 to trade that contract, with a maintenance bond of $3200. 

If the price variations of the contract bring the account balance under $3200, the trader will have to deposit additional funds to bring the account back up to $4,000. The trader’s potential gains and losses change each time the settlement price of the contract changes, with the final gain or loss determined when the trader either offsets the contract by selling it, or when the contract expires.

 

 

http://www.cmegroup.com/clearing/cme-clearing-overview/performance-bonds.html The current initial margin is $5,000 and maintainance $4,000. For stocks, S&P5 500 and E-minis trade on the CME.  SPY on AMEX. DIA on NYSE.

 

 

Sat, 11/05/2011 - 02:45 | 1847994 Uber Vandal
Uber Vandal's picture

Holy Moose, this is a rather "interesting" read:

Some former customers of MF Global Inc. (MFGLQ) scrambled Friday to sort through newly unfrozen funds--and awaited word on whether they will have to put up additional capital to back their market bets.

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=20111104...

 

Sat, 11/05/2011 - 10:50 | 1848387 kaiserhoff
kaiserhoff's picture

That would put your balls in a vice.  Sure instills confidence in the system.  not.

Sat, 11/05/2011 - 08:21 | 1848208 ToNYC
ToNYC's picture

Groucho says the magic word tonight is:

DE-LEVER (the goods)...send it in to Mr. Potter. The wonderful life needs refreshing.

Fri, 11/04/2011 - 21:58 | 1847410 AldousHuxley
AldousHuxley's picture

http://www.reuters.com/article/2011/11/04/us-berkshire-idUSTRE7A37B62011...

Berkshire Hathaway Q3 profit falls on derivatives
Fri, 11/04/2011 - 22:40 | 1847565 12ToothAssassin
12ToothAssassin's picture

If this is true, does it mean PMs will pllummet as everyone scrambles to sell since they cant meet their margin call(s)?

 

I got lots of dry powder waiting for a day like this...

Fri, 11/04/2011 - 23:14 | 1847652 s2man
s2man's picture

Me too.  I sold on the euro-rip spike, and have been waiting for a MFD.

Fri, 11/04/2011 - 23:20 | 1847664 tarsubil
tarsubil's picture

Meh, there is a certain security in holding PMs in your hand. Last PM order I made took forever. If there is a crash because of this, I'm guessing it'll be hard to buy physical, let alone for the paper price. I spent this morning loading my magazines. Talk about calming and inner peace.

Sat, 11/05/2011 - 06:57 | 1848145 mayhem_korner
mayhem_korner's picture

Last PM order I made took forever.

 

Delivery time is a coarse, but decent indicator of the stress in the markets.  I've been taking delivery of PMs for years from a handful of dealers, and have noticed since about Feb/Mar of this year that the delivery time for almost all of them has extended, some significantly.  A couple times I've gotten delivery about 3 days after a smackdown of the paper price, which causes me to wonder how healthy their inventories are.

Sat, 11/05/2011 - 07:52 | 1848178 cossack55
cossack55's picture

Agreed. I own some speed loaders but find it much more relaxing sliding those brass, copper and lead little beauties over and down the follower.  The compression of the spring is a music in its own rite.  I wish I were more poetic so to do proper justice to the ceremony of the prepper.

Sat, 11/05/2011 - 12:01 | 1848544 LasVegasDave
LasVegasDave's picture

Agreed Cossack.  Nothing like the click clack sound (and serenity) of loading 7.62 ammo into a 40 round mag.

Fun to stack those too

Fri, 11/04/2011 - 23:26 | 1847682 bernorange
bernorange's picture

Physical PMs may be going on sale - if you can find a dealer willing to sell it when the spot/futures gets monkey hammered.

www.pmbug.com

Sat, 11/05/2011 - 00:23 | 1847814 unununium
unununium's picture

I'll have a lot more dry powder when I cash in my shorts on Monday.

Sat, 11/05/2011 - 01:04 | 1847882 kito
kito's picture

Bye bye gold the deflation monster cometh

Sat, 11/05/2011 - 02:22 | 1847984 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Central Banks use gold to leverage their trades.  You take gold down and the Fed has that much less under assets.  Can the Fed aford a margin call right now?

Maybe gold falls $35 on Monday.  So then it evens out on Tuesday.  Watch a mid week bounce, and then at the end of the week it goes apeshit as everyone realizes no one has the physical.

Sat, 11/05/2011 - 02:23 | 1847986 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Central Banks use gold to leverage their trades.  You take gold down and the Fed has that much less under assets.  Can the Fed aford a margin call right now?

Maybe gold falls $35 on Monday.  So then it evens out on Tuesday.  Watch a mid week bounce, and then at the end of the week it goes apeshit as everyone realizes no one has the physical.

Sat, 11/05/2011 - 12:26 | 1848604 nope-1004
nope-1004's picture

Which economic textbook defines deflation cometh as "a mercantile exchanges manipulation of position limits on futures contracts"?

 

Sat, 11/05/2011 - 12:08 | 1848561 topcallingtroll
topcallingtroll's picture

Stagflation is the best we can hope for kitco. Hyperinflation would require bigger cajones than Bennie boy has shown yet. It would kill banks and the welfare state if repudiation ocurred. Central banks and governments will allow starvation and deflation if necessary to save their fiat. They have no power without a fiat system.

Sat, 11/05/2011 - 12:25 | 1848601 trav7777
trav7777's picture

why is this false dichotomy constantly trotted out?

Governments in the 20th century went hyper in abundance; big countries.  Rampant inflation was the rule, not the exception.  Places like brasil, italy, you name it.  They have the fiat because they have the guns.  The FRN is meaningless when you can issue FRN2.  You guys keep acting like the FRN is sacrosanct.  Brazil is on its 3rd currency in the past 20 years and I know people who grew up there during this.  They have old pictures on facebook.  Guess what, they are SMILING.  They are not stacking fucking ammunition and living like fucking zombie apocalypse in The Road.  They had ordinary lives and friends and did shit with themselves.

Sat, 11/05/2011 - 13:10 | 1848699 tmosley
tmosley's picture

Nice false dichotomy you have there yourself.  One can't be prepared AND happy?  One is either living a "normal life" or they are "living in a zombie-proof bunker"?

But then, you are totally miserable, so I guess it is understandable that you can't understand how anyone else could possibly be happy while also knowing what you know.  You think your misery comes from knowledge, when in fact it comes from your personality.

Sat, 11/05/2011 - 13:58 | 1848829 trav7777
trav7777's picture

prepared for WHAT, moron?  A future that ISN'T COMING?

You're NOT prepared; that is my fucking POINT.  I should have spelled it out more clearly so that even an idiot of your calibre might have had a shot at grasping it.

Sat, 11/05/2011 - 19:03 | 1849466 UP Forester
UP Forester's picture

Two words:  Carrington Event.

Sat, 11/05/2011 - 21:43 | 1849505 tmosley
tmosley's picture

Which future does the great and mighty Trav proclaim is not coming?

What does the future look like, o wise one?

Sat, 11/05/2011 - 13:53 | 1848815 TheSilverJournal
TheSilverJournal's picture

In order for the Bernank to allow deflation, he would have to allow depositors to lose their money, leaving physical cash to maintain some value. There are absolutely no signs that the Bernank will allow granny to go to the bank and not get her money. 

Sat, 11/05/2011 - 02:05 | 1847970 GiantVampireSqu...
GiantVampireSquid vs OWS UFC 2012's picture

If your market maker doesn't close your account first.

Sat, 11/05/2011 - 01:17 | 1847896 Josh Randall
Josh Randall's picture

Roger that -- hand over fist buying to commence once the elevator heads down towards that $26 support line for SLV if it gets that far

Sat, 11/05/2011 - 08:18 | 1848204 Smiddywesson
Smiddywesson's picture

If this is true, does it mean PMs will pllummet as everyone scrambles to sell since they cant meet their margin call(s)?

Perhaps, but which group of traders has been conditioned to weather margin calls while everyone else has not?  You might see PMs fall, or they may even rise, but you would certainly see everything else plummet.  There are unintended consequences to playing the margin hike game too much, and we just saw that with the iron floor below gold at $1600, and we may be seeing the same result at $1700 because it's looking pretty strong too.  If you beat a dog over and over, you just make a tougher, meaner dog.  They have been beating gold traders for a decade, and the dog smells blood.

Sat, 11/05/2011 - 01:18 | 1847899 Freddie
Freddie's picture

I wish that big dopey Kiwi cadd, who had worked for Tiger Woods, would shove a belly putter or 3 wood up Warner Beffert's arsehole.

Fri, 11/04/2011 - 22:01 | 1847426 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Mother Fucking Global panic, bitchez.

Sat, 11/05/2011 - 03:52 | 1848050 hero HNL
Sat, 11/05/2011 - 09:49 | 1848291 JPM Hater001
JPM Hater001's picture

Dont waste your time

Fri, 11/04/2011 - 22:20 | 1847505 Divided States ...
Divided States of America's picture

At first, it was main street deleveraging....and finally it looks like wall street is starting its deleveraging....I think this is gonna get sucked up into a vacuum in a jiffy.

Fri, 11/04/2011 - 22:30 | 1847543 Growyourownfood
Growyourownfood's picture

This wont have a big effect. Initial margin for s+p futs is 11:1 leverage, whereas maintenance is 13:1. It will only affect the truly insanely leveraged, those between 11:1 and 13:1.

Fri, 11/04/2011 - 22:35 | 1847553 tmosley
tmosley's picture

And what % of the market do you think that is?  I would say it's probably pretty damn high.

Fri, 11/04/2011 - 22:50 | 1847589 Growyourownfood
Growyourownfood's picture

its not

Fri, 11/04/2011 - 22:54 | 1847598 Divided States ...
Divided States of America's picture

Even if leverage isnt high, its the perception of a changing trend that scares the shit out of people. Today its the CME, what other exchanges will follow suit? Much like the MF debacle where client money was used, although the amount wasnt that big, it definitely revealed how inept and inadequate our financial and capital markets have become.

Sat, 11/05/2011 - 05:07 | 1848097 Temporalist
Temporalist's picture

How does anyone have any confidence in this shithole system anymore?

 

Did the stress test really instill confidece?  Is the second bailout of Greece really such a positive?  Is lying about GDP, unemployment, inflation, "recovery" not enough to make people see what the fuck is going on?

Sat, 11/05/2011 - 07:55 | 1848183 cossack55
cossack55's picture

Apparently not. Groupon anyone?

Fri, 11/04/2011 - 23:29 | 1847691 tmosley
tmosley's picture

"nuh-uh" might be a good argument on the playground, but not here.

Fri, 11/04/2011 - 22:57 | 1847606 Triggernometry
Triggernometry's picture

Tmosely,

Will you be buying on monday afternoon?  I might just sell this weekend so I can BTFD.

Fri, 11/04/2011 - 23:05 | 1847628 tmosley
tmosley's picture

I will be watching spot.  This caught me flat footed.  I thought something like this might happen prior to the end of the year, but I thought it would be early December, with the COMEX struggling to find silver to meet industrial demand.

I will be scraping together all the cash I can this weekend, but I certainly won't be selling physical.  It is just as likely that there will be no physical to be had if this goes down the way I think it will.

I think I would avoid buying online for this particular "dip", if you can.

Fri, 11/04/2011 - 23:27 | 1847677 Libertarians fo...
Libertarians for Prosperity's picture

 

 

Hey Cliff

This "caught you flat-footed"? 

*LOL*

If I'm reading your post correctly, you're predicting yet another COMEX default and another silver shortage?  How many times do you plan on making this dumb prediction until you finally just give up?

Buy Physical, Crash JPM!  The industrial panic is right around the corner! Price doesn't matter!  

 Garbage... all of it.

 

Fri, 11/04/2011 - 23:27 | 1847686 tmosley
tmosley's picture

Are you a fucking retard?  This is the SAME ONE that I predicted.  At the beginnning of the year, I gave 75% odds that the COMEX would be done by the end of the year, and it still looks like 75% to me.

Go fuck yourself, Repugnicunt.  People are going to lose their life savings on Monday, and all you can do is run around trolling.  You are scum.

Fri, 11/04/2011 - 23:56 | 1847747 Libertarians fo...
Libertarians for Prosperity's picture

 

 

*LOL*

The same one?  You're right... it is the same one....  the same prediction since 2008.

You've been crying wolf about a COMEX implosion since 2008 over on the Ron Paul forums - you know the place...  the forum where you have 5,000+ posts. 

Every three months, you tell everyone it's imminent.  Just this year, you've predicted it would happen in March, July, sometime in the early Fall and now December.

It's a 3 year rolling prediction, and it's continually proven wrong.  Fuck, you don't even understand what the COMEX even does!  It's an EXCHANGE! 

<Napoleon Dynamite voice> Idiot!

Fri, 11/04/2011 - 23:57 | 1847760 fuu
fuu's picture

Maybe now your sub-1000 call on gold will finally come true.

http://www.zerohedge.com/article/gold-plunges-paulson-liquidation-specul...

Sat, 11/05/2011 - 00:06 | 1847781 UP Forester
UP Forester's picture

Does that mean sub-100 GLD?  Sign me up for about 1MM so I can take possession!

Wait, I'm broke....

Sat, 11/05/2011 - 00:08 | 1847786 tmosley
tmosley's picture

Must have been following the investment advice of Trav, Bob Dabolina, and Red Neck Rebugnicunt here.

Sat, 11/05/2011 - 00:48 | 1847855 UP Forester
UP Forester's picture

Nah.  Before I got edumacated, I actually contributed to a 401k.  Now I'm tapped out on loans to it, buying Walking Liberties at $180/roll.

Outperforming my 200.5k by a long-shot....

Sat, 11/05/2011 - 00:08 | 1847784 Libertarians fo...
Libertarians for Prosperity's picture

 

 

You're pulling quotes from July 2010, before the announcement of QE2? 

QE2 changed everything. If you want to pull quotes from outer space, you might as well quote Cheeky Bastard who was, in Spring 2010, calling for deflation, as well.  And he happens to be one of the most respected gentleman at ZH.

Again, QE2 changed everything.

 

Sat, 11/05/2011 - 00:17 | 1847804 tmosley
tmosley's picture

Wow, you just admitted to being a lying sack of shit.

I thought you weren't RNR, yet here you are, confirming his posts are yours.

Why should anyone take your lying ass seriously?

Sat, 11/05/2011 - 08:33 | 1848214 Smiddywesson
Smiddywesson's picture

LOL, too funny.  

Hey RNR, how's that Cash is King deflation theory going? It's king alright, until it isn't.

Sat, 11/05/2011 - 08:42 | 1848219 nmewn
nmewn's picture

On a long enough timeline...all statist-fiat banker-shills hang themselves with a real rope...lol.

Sat, 11/05/2011 - 00:20 | 1847810 PeterB
PeterB's picture

ZH Reincarnation?

Sat, 11/05/2011 - 00:24 | 1847817 fuu
fuu's picture

Flail more.

Sat, 11/05/2011 - 00:07 | 1847779 tmosley
tmosley's picture

Boy are you mad.

The pre-K level of your ad hominem is amusing.  What effect, EXACTLY, does my having made a large number of comments on a board that includes numerous different subjects have on ANYTHING, much less my credibility?

You keep claiming that I make the same prediction "every three months", yet I have in fact only made it twice in human history.  Once, in 2008, I was looking for it to happen, but this year, I assigned it a 75% chance of happening a month before they started defaulting!

It's even more amusing that you think the exchange isn't responsible for all trades executed on it, such that if a counterparty defaults on a contract, the exchange must locate the silver and tender it to the long that stood for delivery.  Never mind that they have failed to do that every single month since last December, but that is futures 101.

You have literally no idea what you are talking about.

Sat, 11/05/2011 - 00:11 | 1847790 Raymond Reason
Raymond Reason's picture

Hey Napoleon, it's easy to see that tmosley's posts upset the shit out of you. 

Sat, 11/05/2011 - 01:54 | 1847952 trav7777
trav7777's picture

so, you're on record predicting a banking system collapse and loss of life savings on Monday?

I'll be here Monday to hold you to that.  And I'll file it with all the predictions of Comex implosion, Tokyo mass death or evacuation (even Fukushima City hasn't), and silver to "$60 within the next week" that have all failed miserably.

Sat, 11/05/2011 - 10:47 | 1848376 tmosley
tmosley's picture

I love how your intense personal hatred of me drives you to continuously make shit up about me and the things I say.  You can se it right here--I didn't say that it would happen Monday.  I only said there is an increased likelihood that it would happen, given this action by the CME.  

You are mixing up all the things I said about Fukushima.  I said that Tokyo would be dead or evacuated BECAUSE THEY HAD SHUT OFF THE WATER AND THERE WAS NO BOTTLED WATER.  This implied that they only had to return water service to the city to avoid that immediate disaster, but the sheer level of incompetence exhibited by the government put that into question.  I said that the RADIATION would make that area a wasteland within 10 years.

And for the 50th fucking time, I didn't make a "$60 by next week" call.  I was exasperated at how fast the price was rising.  I said "Christ, at this rate it'll hit $60 by next week."  But you are so stupid, you don't understand what a qualifier is.

Sat, 11/05/2011 - 12:31 | 1848620 trav7777
trav7777's picture

In other words, you talk out of your ass, make bold proclamations, then when they don't materialize, you just claim you were "exaggerating" or "exasperated."

In reality, you are an "idiot."

Sat, 11/05/2011 - 13:12 | 1848702 tmosley
tmosley's picture

Yes, there is a difference between an "often repeated investment thesis" and a "one time comment".

But since you can't count past one, I guess it's all the same to you.

Sat, 11/05/2011 - 14:02 | 1848839 trav7777
trav7777's picture

keep weaseling, weasel.

Face it, your predictions have fallen flat on their faces.  You haven't been right ONCE.  The markets have moved the opposite of your predictions.  Everything has.  You are a classic "fade."

Pounding the table won't make your failures go away, cliff.

Sat, 11/05/2011 - 19:39 | 1849506 tmosley
tmosley's picture

Go back in time and short silver from my first "Comex collapse" comment (in late 2008) and tell everyone how well you did.

Sat, 11/05/2011 - 03:15 | 1848015 RobertMugabe
RobertMugabe's picture

Tmosley you truely are an idiot if you don't understand debt deflation, and how it affects equities as well as commodities, including your PM's. You're a perfect example of a lemming and you don't even realize it. The first time you told someone, "Price doesn't matter, just stack PM's" did it not hit you how completely indoctrinated you are? Even the best hedge fund managers/investors/traders in the world question their own positions from time to time. You actually believe that you know what the future holds, that you know more than the greatest minds out there? You NEVER go into an asset 100%, unless you truely are a moron. DEBT. DEFLATION. Do yourself a favor and look it up, moron. Ignorant people such as yourself who believe with so much certainty that one specific asset class will avoid collapse in price while all other fall as the deleveraging continues give ZH a bad name

Sat, 11/05/2011 - 03:43 | 1848039 jeff montanye
jeff montanye's picture

what happened to gold in the '30's and what happened to everything else?  hmmnm?  gold 22 to 35 in dollars, more in some other currencies, down in none, i believe.  gold miners bucked the 80% equity decline '29 to '32 (they were up to unchanged with volatility) then went up maybe 500% when the falling knife finally hit the granite floor in june '32 after everyone's hands were bloody from trying to catch it.

Sat, 11/05/2011 - 10:37 | 1848361 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What happened to gold in the early 80's?  Gold does fine during periods of deflation.  And don't we happen to be in a period of deflation now?  Housing, Americans largest investment, is experiencing a huge price decline, and gold has continued to go up.

 The person above is a MORON.

Sat, 11/05/2011 - 08:48 | 1848222 Smiddywesson
Smiddywesson's picture

Your argument, like all deflation arguments, assumes the system can survive this (it can't) and the currency will not be destroyed (it will).  Calling people names because they don't have their heads stuck in the sand doesn't change anything.

Yes we have deflation, and no it's not a magical process that will save your fiat paper.  They can debase that paper as fast as the rate of deflation, or faster.

Normally you would be right, you never go all in on one asset.  However, when all asset classes are being destroyed at once, to include all fiat currencies, you take the few lifeboats available.

This is a unique event.  You have to look further in the past for guidance than Japan in the 90s.  The problem with deflationists is they have these rules of thumb for the past and can't think for themselves.

Sat, 11/05/2011 - 09:29 | 1848266 snowball777
snowball777's picture

Yes, we have deflation, and debasement...the latter can be solved by gold, the former: not so much.

 

Sat, 11/05/2011 - 10:04 | 1848308 SWRichmond
SWRichmond's picture

One must always remember exactly what is deflating with respect to what, how "money" behaves in a deflation, how stocks behave i a deflation, and how commodities behave in a deflation.

Gold is not a commodity, it is money; fiat is more propoerly understood as a commodity and NOT money.  (It is precisely this inversion of reality that central banking relies upon.)  In a deflation, the buying power of money increases w.r.t. almost everything else and it becomes more scarce.  If one examines the prices of things denominated in gold, one can see my point.  The confusion arises oinly when one tries to examine the "prices" of things (houses, stocks, bonds, commodities) denominated in fiat.

Sat, 11/05/2011 - 10:39 | 1848369 snowball777
snowball777's picture

Will there still be credit in your "gold is money" world?

What precisly do you mean by 'money'...M1? M3?

Sat, 11/05/2011 - 19:09 | 1849474 UP Forester
UP Forester's picture

By money he means gold.

Sat, 11/05/2011 - 10:49 | 1848383 tmosley
tmosley's picture

Lol, a deflationist calling other people ignorant.  That shit's hilarious.

Fri, 11/04/2011 - 23:25 | 1847680 trav7777
trav7777's picture

the comex does not supply industrial demand, you freakin idiot.  major consumers of silver negotiate directly with producers

Fri, 11/04/2011 - 23:28 | 1847689 tmosley
tmosley's picture

You keep saying that, yet you constantly fail to provide evidence.

Wow, all three anti-tmosley trolls are out tonight.  You guys must be shitting your pants.

Sat, 11/05/2011 - 02:00 | 1847964 trav7777
trav7777's picture

It is NOT FOR ME to provide EVIDENCE as to YOUR statement that Comex provides industrial consumers with silver!

It is for YOU to support that statement.  Comex is a fucking exchange whose function is price discovery and primary CASH settlement of futures trades.

Do you REALLY believe that 736Moz last year of this metal were mined all over the globe then delivered physically through NYC and Comex's warehouses in order to go on sale to consumers (who would then have to ship that shit all over the planet) like Comex is some kind of big ass fucking Walmart?  Are you actually that stupid?

The SHORTS on comex are on the hook for the silver, NOT COMEX.  Comex is a fucking EXCHANGE, not a goddamned seller of Silver or any other commodity.  Comex cannot "default" for failure to deliver, the shorts would be in default if they cannot make delivery to a long. 

There have been commodities defaults before, asswipe, most recently in nickel on the LME.  The LME still exists, there was not a global catastrophe, apocalypse, or anything else.  The exchange worked out a CASH settlement between the parties.  That is what the fuck happens.

The ENTIRE Comex inventory is a fraction of ANNUAL silver production.

Sat, 11/05/2011 - 02:25 | 1847987 FlyPaper
FlyPaper's picture

A "fucking exchange?"   Totally kool.  And you can settle with cash too?   That'll definitely help.  I didn't know NYC has whorehouses run by COMEX - and some of them are "hooking for Silver?"

PARTAY ON !!

Sat, 11/05/2011 - 03:37 | 1848033 MsCreant
MsCreant's picture

Out of the mouths of babes...

Sat, 11/05/2011 - 09:19 | 1848253 snowball777
snowball777's picture

Elliot Spitzer? Is that you?!

Sat, 11/05/2011 - 09:58 | 1848297 SWRichmond
SWRichmond's picture

No one above (or anywhere else, for that matter) should imagine that there are "rules" that "matter" anymore, in the sense that they can be relied on in a pinch.  There are not.

 

The "rules" exist to serve the status quo and keep it alive.  They will be manipulated to serve that end right up until the bitter end.

Sat, 11/05/2011 - 08:57 | 1848230 Smiddywesson
Smiddywesson's picture

When a 50% haircut is redefined as something other than a default, how can anyone say ANYTHING has to happen because of those silly rules.

I'll make a prediction.  We are going to see a whole lot more redefining of reality before this is over.

Sat, 11/05/2011 - 10:58 | 1848406 tmosley
tmosley's picture

Yes, the shorts are accountable for delivering the silver, but the EXCHANGE is responsible if they default.

And I would think that the DEFINITION of a futures exchange would be enough to convince you that this futures exchange is supposed to deliver physical metal.  Christ, you would think that someone would at least bother to read the wiki article on the subject before spewing utter nonsense over and over and over again.  http://en.wikipedia.org/wiki/Futures_exchange

Yes, there have been commodity defaults before, but NEVER ON THIS SCALE.  And when they happened, what happened to the price of those commodities?  Now scale that up, and see what will happen to the price of physical silver!

Fuck, you are so stupid.  Now you are claiming that just because the amount of money you have in the bank is less than the amount that is printed each year, you are in no danger of default given that you have hundreds of times as much as you have in callable loans.

I have never met anyone as willing to devovle themselves out of hatred as much as you.  

Sat, 11/05/2011 - 14:09 | 1848853 trav7777
trav7777's picture

LOL...you post a wiki link and expect it to do your arguing for you?

Did you even READ the article, or did you just expect it to magically say what you think it says?

You have no effing CLUE what an exchange's primary function is, and you suppose that the legacy activity of physical commodities, something that is an anachronism held over from the 1900s and before will somehow carry the day?  What a fucking retard.

Never on WHAT SCALE, you obtuse IDIOT?  There haven't BEEN any defaults on silver.  NONE.  You have been bleating for THREE YEARS about "imminent" Comex "default" and catastrophe, but reality has not blessed you with conforming itself to your absurdly stupid predictions.

This blather about banks and callable loans is just utterly irrelevant to your FAILURE to understand what Comex IS and DOES.

You are a FAILURE, Cliff, a miserable punk, and a fool.

Sat, 11/05/2011 - 14:19 | 1848873 tmosley
tmosley's picture

You are ignorant, and proud.  I guess "this time is different" because the mighty Trav says so.  The mighty Trav who thinks futures exchanges are nothing but ETNs.  The mighty Trav who doesn't understand why the COMEX bothers to report physical inventories when according to him they "don't make deliveries".  The great and mighty Trav, who thinks that in the last 100 years, mankind has figured out how to produce goods with no material inputs, and simply trade futures contracts out of habit or something.

Every single month since last December, contracts that have stood for delivery have been taken off the board without delivery notices being filed.  If you actually paid any attention to the market, you would know this.

You keep calling me names, but you are the one who looks foolish.

Sat, 11/05/2011 - 14:36 | 1848893 JPM Hater001
JPM Hater001's picture

Can you guys take this offline.  You mucking up my view of the collapse....

Thu, 11/10/2011 - 16:44 | 1867226 bigerny
bigerny's picture

I have been active and trading in the PM markets for going on 33 years now,and I have always gone along with the line of "a COMEX default" line without giving the line proper due diligence.Your terse,to the point response made me actually study up.

I signed up just to tell you( trav7777)that you are right and to thank you.

Fri, 11/04/2011 - 23:09 | 1847613 cowdiddly
cowdiddly's picture

Wrong. Come Monday Billions and Billions of assets will have to be liquidated. Tis is a giant Margin call for every commodity and futures contract across the board. Sugar, wheat, pork bellies corn gold well you get the picture. MUSHROOM CLOUD. Everything will be diving Monday as money will have to be raised. The grease is seizing up, I knew something was fishy all week. Now I know. Hope you are out of paper.

Fri, 11/04/2011 - 23:26 | 1847684 Growyourownfood
Growyourownfood's picture

wrong. you really think the "insider conspiracy that exists between the exchanges and the old boys club" wouldnt have let the elite of the finance world know that a something so supposedly game-changing was coming ahead of time? of course they would have.

Sat, 11/05/2011 - 03:52 | 1848046 jeff montanye
jeff montanye's picture

those previously at mf global clearly missed the memo.

belief in the omnipotence of the modern central bank is what has given the bear market rally its remarkable legs.  

the lapse of that belief ....

Fri, 11/04/2011 - 23:27 | 1847687 Cursive
Cursive's picture

@cowdiddly

Even if it's not Monday, that day is coming within the next 6 months. I'd say less, but this gives me plenty of breathing room on my prediction (not that I'm long). The Piper will be paid....

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