Eric Sprott: "The Financial System Is A Farce"

Tyler Durden's picture




 

From Eric Sprott and David Baker

The Financial System is a Farce: Part Three

2011 was a merry-go-round of more bailouts, more deferrals and more denial. Everyone is tired of the Eurozone. It’s not fixable. There’s too much debt. The politicians don’t know what’s going on. Nothing has structurally changed. We’re still on the wrong path. There’s more global debt than there was a year ago, and it’s the same old song: extend and pretend, extend and pretend,… around and around we go,… and it isn’t fun anymore.

Just as we wrote back in October 2007, and again in September 2008, we feel compelled to state the obvious: that the financial system is a farce. It’s a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system’s continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar (which are admittedly two of our least favourite asset classes), it was not a year that rewarded stock picking or safe-haven assets. Many developments during the year bordered on the ridiculous, and despite some positive news out of the US, we saw little to test our bearish view. If anything, our view was continually re-affirmed.

Let’s start with MF Global. With more than two months passed since the scandal broke, federal officials are still unable to find the estimated US$1.2 billion of missing customer funds.1 The whole episode has been a disaster for the CME, the self-regulatory body in charge of making sure the futures brokers play by the rules. Normally in instances of broker bankruptcy, the CME is supposed to backstop client accounts and keep them liquid – i.e., allow them to continue trading while the bankruptcy gets settled. It never happened in this case. Client accounts were frozen for weeks. Funds have remained missing for months – an eternity for clients who were caught short. The great shock was watching how inept and incapable the CME was in 1) preventing the fraud in the first place and 2) recovering client assets during the aftermath. The CME essentially copped out of their responsibility, offering little more than some perfunctory press releases along the way. They were also surprisingly quick to offer excuses for their non-action. According to CME, it really wasn’t their fault, since CME had “no control over the disposition of customer segregated funds that are held by MF Global and not by CME Clearing”.2 Their on-site review of MF Global’s operations the week before its bankruptcy suggested that the brokerage firm was in full compliance of all the rules, so it wasn’t really the CME’s problem. But of course it was their problem. That’s what the CME is there for – to protect clients in cases of fraud or bankruptcy. To protect the “integrity of the exchange”.

In the weeks that have passed, a curious web of transactions have surfaced between MF Global, JP Morgan and Goldman Sachs. Before its bankruptcy, MF Global had been drawing down a $1.2 billion revolving line of credit with JP Morgan. In bankruptcy court, JP Morgan was able to negotiate a lien on some of MF Global’s assets in exchange for paying $8 million towards bankruptcy costs. According to Reuters, “The lien puts JPMorgan’s interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.”3 It is also alleged that JP Morgan accepted a roughly $200 million transfer from MF Global the day before its bankruptcy to cover an overdraft in MF Global’s trading account held with them (it still isn’t clear if JP Morgan has the cash).4 MF Global also appears to have sold hundreds of millions worth of securities to Goldman Sachs in the days leading up to its collapse, but did not immediately receive payment for them from the MF Global’s clearing firm, none other than JP Morgan.

To be fair, on November 22nd, the CME did offer to pledge $550 million as a guarantee to the SIPC Trustee in the event that they did not recover all of the missing client funds, but we cynically wonder if that pledge was made after they finally figured out where all the money had gone. The CME seems to have had a good idea by early December, based on comments made by Commodity Futures Trading Commission (CFTC) member, Jill Sommers.5 The bottom line is that MF Global’s client interests and security appear to have been side-stepped to buy time for bigger, more important players to cover their losses (asses), and that is not the way the regulatory system is supposed to function.

We’re not naïve – we know the government will always protect the interests of the big banks over paltry retail investors, but do they have to be so brazen about it? The MF Global episode is basically shameless. Then there’s Dodd-Frank. Remember Dodd-Frank? It’s the massive financial regulatory reform act that was signed into law by President Obama back in 2010. We are certainly not fans of cumbersome overregulation, but in its essence, Dodd-Frank was supposed to provide a new framework to address the potential failure of a too-big-to-fail bank. There’s nothing wrong with that. Given the sheer size of the off-balance sheet derivatives market, we don’t see a problem with at least attempting to prepare for another large scale banking failure in the US. But almost two years later, we have to laugh at how little of the Dodd-Frank framework has actually been implemented. According to law firm Davis Polk, a mere 21% of the act’s 400 rulemaking requirements have become finalized since the law passed in July 2010. Of the 200 Dodd-Frank rulemaking requirement deadlines that have already passed, 74.5% of them have been missed to date.6 The lawyers must be having a field day with all the paperwork.

One part of the Dodd-Frank story that interests us is the CFTC positions limits rule set to go into effect on January 17, 2012. The new position limits are aimed at preventing excessive speculation in the commodity markets which are believed by many, including ourselves, to have driven wild fluctuations in the gold and silver spot price over the past decade. Position limits are an obvious threat to large futures speculators like the big banks, so it was no surprise when two Wall Street lobby groups, the Securities Industry and Financial Markets Association (SIFMA) and the International Swaps and Derivatives Association (ISDA) launched a lawsuit against the CFTC demanding that the new rules on commodity trading be thrown out, or at the very least, delayed. The CFTC voted on the request to delay implementation and officially rebuffed it on January 4th, which is a heartening development in an otherwise cynical saga.7 Back in December, however, the CFTC had already quietly waived the position limit filing requirements on all CME participants until May 31, 2012.8 So even if the new rules go into effect this month, banks won’t have to report their position levels until May 31st either way. Given the lobby groups’ outstanding lawsuit against the new rules, combined with the CFTC’s apparent tendency to grant temporary reprieves, we don’t expect the new position limit rules to be enforced any time soon. Once summer approaches, there will probably be more delays and more deferrals, granting the big players plenty of time to protect themselves. Extend and pretend. Delay and defer. That’s the song we sing on the merry-go-round.

Then there’s Europe and the European Central Bank (ECB). Back in December, the mighty ECB had to step in with yet another massive liquidity injection to avert a total meltdown in the EU banking system. On December 21st, they flooded 523 separate EU banks with a “Long Term Refinancing Operation” (LTRO) program totaling €489.1 billion ($626 billion).9 The program consists of loans that are due in three years and will charge an accommodating 1% interest rate. The liquidity injection will allow the EU banks to participate in a delightfully convenient carry-trade whereby they can take the borrowed money at 1% interest and invest it in various sovereign debt auctions that will likely pay them 3% or higher. The banks will keep the difference in profit, and the EU PIIGS countries get to breathe easier knowing they’ll be able to sell their garbage paper to the EU banks at suppressed rates as long as the LTRO loan money lasts. And the best part? It doesn’t involve any money printing, so there’s really no risk of inflation, you see? So just so we’re on the same page, if everything goes according to plan this year, European sovereign governments will fund their debt auctions with borrowed money lent to them by over 500 European banks who have themselves borrowed hundreds of billions of euros from the European Central Bank,… who as far as we can tell, borrowed those euros from the various EU sovereign states (or simply printed them). Do you get it? Do you see the circularity? Do you see the can being kicked down the road? And guess what? Since €489.1 billion is clearly not enough to avert disaster this year (most EU banks are so undercapitalized they’ve simply parked the borrowed LTRO money back with the ECB at 0.25% interest), the ECB has promised to launch another LTRO injection this coming February!10 No wonder gold was down in December. They completely solved the European debt crisis!

Last but not least, we must mention an alarming component of this year’s National Defense Authorization Act (NDAA) that was quietly signed into law by President Obama on December 31st, 2011. This year’s defense bill, officially known as Senate Bill 1867, includes a specific provision that seems to grant the US government the power to detain accused terrorists, including US citizens, indefinitely, without trial.11,12 There has been much uproar and confusion over the language used in the sections of the Bill related to the subject, and it’s still not clear how the Bill will change  the existing laws related to terrorism detention in the US, but it doesn’t bode well for constitutional freedom within the country. There’s obviously no direct market impact to the legislation, but we mention it only to remind investors how quickly the rules can change when governments feel vulnerable. ‘Political risk’ should no longer only be applied to mining investments in third world countries. In 2012, it may apply to us all.

It’s very difficult to predict what lies in store for the stock market this year. Anything could happen. Government intervention in the financial system has never been more extreme. We hope the examples above have shed some light on that. As we enter 2012, there are significant debt-related financial risks festering within the three great economic theatres of the world: the US, Europe and China. The market may rally, it could crash, it could tread water, we just don’t know. A lot will depend on how the central banks react. But we are eager to maintain the positioning that we held in 2011. We will maintain our exposure to precious metals equities and bullion. We will maintain our large gross short weightings in our hedge funds. We are confident that they will protect us on this farcical merry-go-round that seems to spin faster and faster with every passing day.

 

1. Associated Press (January 11, 2011) “MF Global trustee will meet with customers”. The Wall Street Journal. Retrieved January 11, 2012 from: http://online.wsj.com/article/APcb5dba3691894bb4a61b19357ebe8824.html
2. CME Group (November 6, 2011) “CME Group Statement Regarding MF Global”. CME Group. Retrieved January 5, 2012 from: http://cmegroup.mediaroom.com/index.php?s=43&item=3202&pagetemplate=arti...
3. LaCapra, Lauren Tara and Goldstein, Matthew (January 3, 2012) “MF Global sold assets to Goldman before collapse: sources”. Reuters. Retrieved January 5, 2012 from: http://www.reuters.com/article/2012/01/04/us-mfglobal-goldman-idUSTRE803...
4. Patterson, Scott and Lucchetti, Aaron (December 21, 2011) “MG Global Transfer Draws Scrutiny”. The Wall Street Journal. Retrieved January 5, 2012 from: http://online.wsj.com/article/SB1000142405297020405840457711076166560264...
5. Roeder, David (December 15, 2011) “Regulator: We know where MF Global cash went”. Chicago Sun-Times. Retrieved January 5, 2012 from:
http://www.suntimes.com/business/9447562-420/regulator-we-know-where-mf-...
6. (January 3, 2012) “Dodd-Frank Progress Report”. Davis Polk. Retrieved January 5, 2012 from: http://www.davispolk.com/Dodd-Frank-Rulemaking-Progress-Report/
7. Protess, Ben (January 4, 2012) “New Limits on Commodity Trades Are Approved”. DealBook. Retrieved January 6, 2012 from:
http://dealbook.nytimes.com/2012/01/04/regulator-refuses-to-delay-tradin...
8. CME Group Market Regulation Department (December 20, 2011) “Temporary Waiver of Annual Update for Position Limit Exemptions”. CME Group. Retrieved January 5, 2012 from: http://www.cmegroup.com/tools-information/lookups/advisories/market-regu...
9 Jones, Marc (December 21, 2011) “Banks gorge on ECB loans, market cheer short-lived”. Reuters. Retrieved January 11, 2012 from:
http://www.reuters.com/article/2011/12/21/us-ecb-3yr-loans-idUSTRE7BK0MC...
medium=feed&utm_campaign=Feed%3A+reuters%2FbusinessNews+%28News+%2F+US+%2F+Business+News%29
10 Cottle, David (December 21, 2011) “ECB’s Massive LTRO Gives Risk Assets Wings”. The Wall Street Journal. Retrieved January 5, 2012 from: http://online.wsj.com/article/BT-CO-20111221-703943.html
11 Miles, Donna (January 6, 2012) “Obama signs Defense Spending Bill despite having reservations”. American Forces Press Service. Retrieved January 5, 2012 from: http://www.fortgordonsignal.com/news/2012-01-06/Viewpoint/Obama_signs_De...
12 US Library of Congress (December 1, 2011) “112th Congress, 1st Session, S. 1867”. (See Sections 1031-1032) Retrieved January 11, 2012 from: http://www.gpo.gov/fdsys/pkg/BILLS-112s1867es/pdf/BILLS-112s1867es.pdf

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Thu, 01/12/2012 - 19:10 | 2060118 Richard Head
Richard Head's picture

You know it, I know it, the American people know it. - Bob Dole

Thu, 01/12/2012 - 20:04 | 2060201 akak
akak's picture

"Get off my lawn, you damn punks --- and give me back my pen!"

- Bob Dole

Thu, 01/12/2012 - 20:48 | 2060261 NuYawkFrankie
NuYawkFrankie's picture

Erectile Dysfunction?

Thu, 01/12/2012 - 21:05 | 2060287 akak
akak's picture

Reptile dysfunction.

Dole is a dinosaur, after all --- Republicansaurus neoconensis

Thu, 01/12/2012 - 18:14 | 2059973 silverserfer
silverserfer's picture

strange no news on the Lucky friday silver mine in Idaho being closed for a year by the feds for "safety issues"

heard it on NPR this morning of all places and not one peep from anyone about it. Dont think it will affect silver prices too much but interesting theroies behind why the shut down the mine.

Thu, 01/12/2012 - 18:22 | 2060004 cossack55
cossack55's picture

How are those Hecla "paper" minig shares workin' out for ya?  Oh, BTW, that reduces US silver production by 2m ozs this year.  Kind of like the 2.8m BPD of oil now not coming from Nigeria. 

Thu, 01/12/2012 - 18:42 | 2060048 mrgneiss
mrgneiss's picture

They're having ground control issues, just a mine engineering problem, nothing nefarious, but I'm surprised Jamie hasn't volunteered to send the mine a few truckloads of shotcrete out of his own pocket to keep the silver supply going.......

Thu, 01/12/2012 - 19:47 | 2060169 Rakshas
Rakshas's picture

Good point, reducing physical supply is not in anyone's interest right now even if it is only a couple MM oz's. 

Thu, 01/12/2012 - 18:46 | 2060067 oddjob
Thu, 01/12/2012 - 18:15 | 2059976 Zola
Zola's picture

+1 Eric  - it was indeed a farcical year. Orwell said good is bad , up is down...

Thu, 01/12/2012 - 18:16 | 2059977 lolmao500
lolmao500's picture

In other news, water is wet... and doomsday machines exist :

http://www.wired.com/politics/security/magazine/17-10/mf_deadhand?curren...

Thu, 01/12/2012 - 18:16 | 2059983 Caviar Emptor
Caviar Emptor's picture

To the untrained eye all is well, including the stock market. In reality the stock market is a barometer for inflationary monetary policy which is one of the two forces eroding away at your purchasing power and the purchasing power of dollars. That's why there's been decoupling from economic fundamentals aka all that's deflating and "wrong" like today's retail sales report showing a 3.9% decrease in electronics sales. 

The paper economy is inflating. But the real economy is tanking. And the two are locked in a self-reinforcing vicious cycle. Unlike troubles we've had in the past, we're beyond the point where the vicious cycle can be unwound. Get prepared for a rocky year both economically and politically

Thu, 01/12/2012 - 18:16 | 2059985 HedgeAccordingly
HedgeAccordingly's picture

meow

Thu, 01/12/2012 - 18:19 | 2059995 navy62802
navy62802's picture

The system will eventually kill itself. It cannot go on like it is.

Thu, 01/12/2012 - 18:23 | 2060006 Caviar Emptor
Caviar Emptor's picture

Eventually? 

Fri, 01/13/2012 - 00:03 | 2060609 Calmyourself
Calmyourself's picture

10-15 years depends on how much police state they can implement..  Hunger, only hunger..

Thu, 01/12/2012 - 19:50 | 2060175 lemonobrien
lemonobrien's picture

Its like watching fish in a slowly shrinking pool drying up. 

Fri, 01/13/2012 - 04:49 | 2060886 BlackholeDivestment
BlackholeDivestment's picture

...did you know D.C. water kills Goldfish? Yeah, watching dead fish in a shrinking pool of municipal water. You dump ill liquidity into the fishbowl and the buggars are instantly upside down and the naked truth shortly fails to deliver smiles to the kids. 

http://www.youtube.com/watch?v=KiqkM53Vg0g

Thu, 01/12/2012 - 18:28 | 2060016 Zola
Zola's picture

Hey cosack actually this is quite good for the stock if you think about it bc in one year there is a good chance silver will be above 50 so instead of depleting their mines like morons selling at such low silver prices they keep the stuff in the ground. True there are capex needs to upgrade the mine but not as bad as people think i would venture. If silver rockets this year, they will look like geniuses..

Thu, 01/12/2012 - 18:31 | 2060028 ironmace
ironmace's picture

So, now what? TPTB can keep the balls in the air a long time. They are not going to let all that power go by a simple thing as massive amounts of debt get in the way.

Still all the rules are out the window now it's every man for himself.

Thu, 01/12/2012 - 18:33 | 2060029 quacker
quacker's picture

Everyone talks as if there is sanity left. There is no sanity.

The key driver is that we collapsed. Not had a setback, not a bump in the road, we completely collapsed. And the most important moment since the civil war was upon us. Our government had a choice to make. And they chose to bail out the very criminals that collapsed us.

This began the "nothing matters" society that proceeds a revolution. Then what was supposed to be John F. Kennedy to the Martin Luther King power turned out to be a two-bit banker.

"Nothing matters" became full blown surreal insanity. Down became up. Bad became good. The criminals began openly looting the store and our government brazenly assisted them before our eyes.

Animal Farm has started and a police state is emerging.

Yes, under normal times a farce would be bad. But this is surreal insanity, so farces are now bullish.

Thu, 01/12/2012 - 21:00 | 2060283 Absinthe Minded
Absinthe Minded's picture

I gave you a thumbs up. You hit the nail on the head. The way a coroner arrives at a cause of death. With cold and callous candor you lay it out there as plain as can be. Once great America has been fitted with a toe tag.

Thu, 01/12/2012 - 22:09 | 2060384 quacker
quacker's picture

Indeed. We're enduring the in-plain-sight bailout of a nation's rapists, while those very rapists, secure in the arms of our governmet openly mock their bailers. This undercuts why we would even exist as a nation.

Tens of millions have lost most everything and are ready to burn this fucker down. 

Thu, 01/12/2012 - 21:07 | 2060293 rayduh4life
rayduh4life's picture

Yes but, when everyone is guilty, no one is.

Thu, 01/12/2012 - 21:38 | 2060329 quacker
quacker's picture

"Everyone" was a poor choice of words - I meant the ZH posters.

Thu, 01/12/2012 - 23:44 | 2060576 Cathartes Aura
Cathartes Aura's picture

I too gave you an upvote quacker, as it's good to acknowledge "where we are."

but maybe a small change of words - "nothing matters" that we've been taught to believe matters, and it's time to scrupulously take stock of what really DOES matter going forward - this will vary from individual to individual, but to begin to change life/lives according to just what really matters to YOU and yours is the next step. . .

the "holidays" are over, time to make some adjustments to what matters. . .

Fri, 01/13/2012 - 01:31 | 2060751 Freddie
Freddie's picture

Millions of morons keep watching TV and Hollywood's crap to enpower our overlords and keep them in control.  They control TV and the money supply plus Military Inc. too.

We cannot get Americans to even yank the plug on their HD brainwashing boxes.

Fri, 01/13/2012 - 04:47 | 2060885 Snidley Whipsnae
Snidley Whipsnae's picture

Excellent observations, quacker. MF Global debacle should be in the headlines of MSM daily until the customers are made whole... Not happening.

Anyone still trusting the clearing houses, brokers, CBs, Treasury, regulators, or gov should seek serious professional help.

The remainder of the wealth will be stolen and then the theives will board their private jets and wing off to their estate in where ever.

Those left here will be working on FEMA farms and shipping produce to SE Asia.

Got PMs?

Thu, 01/12/2012 - 18:37 | 2060038 PaperBear
PaperBear's picture

Doesn't he mean the monopolistic monetary system dominated by the American fiat paper dollar ?

Thu, 01/12/2012 - 19:46 | 2060045 ironmace
ironmace's picture

Yes, the NDAA was passed and they can hold Americans suspected of being terrorists indefinitely. OK, what about the bilions in spending attached to that bill? $662 Billion. I don't know which is worse.

Not to mention the sanctions in the bill, which step on the neck of Iran and any other country that does business with the US but gets it's oil from Iran. Poasibly making them more irrational and desperate. I like the statement from Donald Sutherland in JFK: "in that document lay the Vietnam War" In NDAA may lie WWIII.

Thu, 01/12/2012 - 21:52 | 2060354 WonderDawg
WonderDawg's picture

It's plain to me which is worse. Indefinite detention for an American suspected of being a terrorist is absolutely worse. The reason being, they can use pretty much anything against you, don't have to bring charges, don't have to let you see a lawyer, don't have to tell anyone why you're being detained. That, to me, is fucking scary.

Thu, 01/12/2012 - 23:37 | 2060567 Cathartes Aura
Cathartes Aura's picture

. . . and to the human beings living in Iran, I would guess the sanctions and threats and circling war carriers are fucking scary too. . .

chickens coming home to roost, and soon there will be no denials. 

Fri, 01/13/2012 - 00:31 | 2060657 Alpha Monkey
Alpha Monkey's picture

There will always be denials.... some people just can't see reality no matter how well they think they may.

Fri, 01/13/2012 - 01:04 | 2060713 Cathartes Aura
Cathartes Aura's picture

truth.

always wise to not be "all in" invested in your reality tho' - keep up the due diligence, hedge accordingly.

Thu, 01/12/2012 - 19:10 | 2060060 slewie the pi-rat
slewie the pi-rat's picture

the MFGlobal BK was probably directed by the SEC to the stock-broker type BK where the (re-) colateralized assets are shuffled and dealt to the creditors from our "local shadowBanking bother & cistern-hood"

if the BK had been more along the design used for commodity brokers, the squid, morgue, and other top predators would have stood behind the account holders in the pay-back line

now, we have this utter bullshit from the CFTC, today CFTC acts to protect trader collateral, endorses 'Volcker rule' | Gold Anti-Trust Action Committee

so bart&co are pretending they weren't in on this?  well, they were!

but, their bankster bosses had set up the whole thing to be run thru the wrong BK in the first place, and they were told to STFU and present this bilge-water & barf and instead of defending the interests of the commodities traders they just served them up to the multi-national bankstering interests of the crimex

so, the CFTC is sure earning its pay, again, today!!!

bifurcate the damned BK proceedings if you need to and treat the bona fide commodities traders as commodities traders before the (BK) law!

STOP! the never-ending bullshit about "looking for the money" and just figure out a judicial manner to claw it back from the shadow banksters who received it and restore the assets to the proper individual account-holders

pretty-please, you viscious toy-boy asswipe banksters 

after all, if the political cover for these decisions wanes, and possibly even if it doesn't,  there's enuf of a public record to figure out who to go after with the FOA requests and  RICO subpoenas isn't there?  ass-u-me-ing that this highly-levered "support of the euro & sovewreign debt" was planned and orchestrated by banksters during the CHF devaluation and swiss bankster support of ditto, up to & including the "exit"

the days of dithering by "auditors", who was involved, and who said & did what around MFG's lies and misrepresentations about its financial decisions leading up to the final travesty of a BK are all well-documented and have already been published, haven't they? 

huh?

Thu, 01/12/2012 - 19:36 | 2060154 DavidPierre
DavidPierre's picture

Once again...

The U.S. mint announced that January sales of Gold AND Silver Eagles surged to near record levels in "the first days" of the month. The "first days" being by January 3rd which by the way was THE 1st business day of the month. Yes, Silver Eagle sales were higher than ANY full month except for Jan and Sept. of last year and the first month of sales back in 1986!

We are to believe that this was ALL done in one business day?

No, the sales were actually logged in Dec., you remember that don't you? Dec. saw both Gold and Silver prices trashed and supposedly investors were regurgitating their positions because as Dennis Fartman said, "the Gold bubble has popped and now in a bear market".

Yes, AGAIN...just like May for Silver and Sept. for Gold of last year, the "price" collapsed while demand exploded higher. I don't know what planet anyone else lives on but I payed good money to attend a university where they taught me that prices go down because of marginal selling and up because of marginal buying. Of course these sales were reported by the mint as "January sales" but you must understand that "they" think we are stupid.

"They" did not want to report ALLTIME RECORD SALES for Dec. while another arm was trashing the price, that would not add up now would it?

No, instead they report a monthly record that was all ordered and purchased in just one day BEFORE the close of business that day! "They" figured that "we" are so stupid that we couldn't put 2+2 together?

Do you see that last month's bullshit hammering of price was done with paper contracts as the real physical metal was being gobbled up? Do you see WHY it will be so hard for Sprott to actually source 50 million ounces of Silver that must be of the "real" variety as opposed to worthless paper contracts stating that they "really really really will deliver the metal"?

Hellooo...CFTC... Bart Baby and da Boyz...are you watching?

Did you AGAIN see that you are presiding over a tail market that is wagging the physical dog's body? Do you not see that paper levered at least 100 to 1 at a minimum is making "price discovery"?

How is your 4 year "investigation" into the Silver market going? Anything yet?

No... didn't think so.

The CFTC is really stuck. Just another "damned if you do, damned if you don't" scenario. They surely cannot admit the truth that these markets are a fraud because they would start a run on supposed inventories. They also cannot give a clean bill of health because when it all blows up, well, they were already on record telling the world that "all is well. Besides, even an illiterate monkey can see the manipulation" so why beat a dead horse, right?

So here we are, sitting, waiting, watching and being irritated by the obvious lies churned out by the paper markets. But sitting, waiting and watching what? Simple... until the last dregs of supply run out or physical demand "demands" delivery to the point of a default. Or of course, until a billionaire steps up with a measly paper order and asks for delivery that cannot be filled.

It really is this simple folks. The paper suppression schemes have for 15 years enhanced the real physical demand, slowly at first and now with a force that will turn into a buying panic. This is not rocket science, this is pure street logic that an 8th grade dropout couldn't miss. It is so funny to watch CNBC trot out "experts" who spout the stupidity that Gold and Silver are "oh so risky".

I wouldn't trust these "experts" at bagging my groceries!

www.lemetropolecafe.com

Thu, 01/12/2012 - 21:40 | 2060333 Teamtc321
Teamtc321's picture

Excellent piece imo. +1000

Thu, 01/12/2012 - 22:33 | 2060390 slewie the pi-rat
slewie the pi-rat's picture

Once again...   wtf?

"I wouldn't trust these "experts" at bagging my groceries!"

so, bag your own fuking groceries! 

i was talking about the crimex vis-a-vis the MFG blow-up &  BK

so was ericSprott, by the way

no mention of it from you...  you seem to be talking when the Mint books it's "sales"  and...let me guess!  you're just wildly bullish?  oh, and anyone who doesn't see this is a blind, illiterate monkey?

...you're trying to be another "good guy" spammer?

pretty pathetic, imo

Thu, 01/12/2012 - 23:56 | 2060598 Boxed Merlot
Boxed Merlot's picture

the financial system is a farce. It’s a complete, cyclical farce that defies all efforts to right itself. This past year continued the farcical tradition with some notable scandals, deferrals and interventions that underscored the system’s continuing addiction to government interference. With the glaring exception of US Treasuries and the US dollar...

 

The common denominator with "US Treasuries" and the "US Dollar", (aka frn), is Mr. Timothy Geitner's robo-signed Linda Green.

 (This is not to be confused with the original term of endearment of a "John Hancock" that gracefully adorns the US Declaration of Independence.)

 The only thing Mr. Geitner’s official autograph never made it to was a proper IRS 1040 in the time frame required by law.

 

Fri, 01/13/2012 - 04:57 | 2060888 Snidley Whipsnae
Snidley Whipsnae's picture

Excellent post David P... and keep up the good work at Jesse's Cafe Americain... Great site with great links and articles.

...and, you are right about the Dec mint sales reported as Jan sales!

Keep on stacking.

Fri, 01/13/2012 - 11:20 | 2061406 slewie the pi-rat
slewie the pi-rat's picture

Once again...    ???

L0L!!!

what "post"?

...don't you mean excellent paste?

or are you so entralled w/ "david's" mockery of CNBC you can't tell the difference any more?

why don't you goto his site and get w/ the sychophantic ass-kissing?

or are you too wasted after stroking your bone [& his] because "david pierre" appeared right here on zH?

next time maybe the douche-nozzle leaves slewie alone w/ his/her trolling, Once again... 

if:  even an illiterate monkey can see the manipulation" so why beat a dead horse, right?

then:  davidP has exposed you as a monkey, applauding him/her as he beats the crap outa fido's future dinner, here, snide, = pathetic X 2!

Thu, 01/12/2012 - 18:45 | 2060061 PMakoi
PMakoi's picture

From Sprott;


The custodian of the Sprott Physical Gold Trust’s gold bullion is the Royal Canadian Mint, which stores it unencumbered and fully allocated in the name of the Trust. The Trust’s auditor audits the physical count of the bullion on a yearly basis.

Thu, 01/12/2012 - 23:44 | 2060566 akak
akak's picture

Isn't that the very same Royal (sic) Canadian Mint that lost millions of dollars worth of gold bullion a couple of years ago?  I remember how Jon Nadler nearly blew a gasket when people holding gold accounts with them (and with several TBTF Canadian bullion banks) started losing trust in the Mint, asking for their physical metals instead.  Damn, how publicly indignant and hysterical that made him!  That in and of itself made the effort worth it, but his response to the situation was to me VERY revealing of just what his agenda really is, and to just whom he owes his loyalty --- and it is NOT with Kitco's customers, or gold holders in general.

Fri, 01/13/2012 - 05:00 | 2060889 Snidley Whipsnae
Snidley Whipsnae's picture

akak... The big mystery for me is why Kitco continues to employ Nadler to scribble bs articles for them.

Any observations on that?

Fri, 01/13/2012 - 07:20 | 2060935 PMakoi
PMakoi's picture

As I recall, they had a plausable excuse for the accounting error.  There were some stories about possible theft, nothing came of it.  Gold physically held is no doubt best.  If you can afford large purchases and storage fees held in a trusted facility, maybe that is second best.  I just think that PHYS is safer than GLD.  I also have a little more trust in the Canadian Mint than others.

Fri, 01/13/2012 - 10:36 | 2061254 chubbar
chubbar's picture

There were unsubstantiated rumors at one point that KITCO didn't actually hold the PMs they sold in unallocated accounts but instead were using futures to hedge that obligation and were playing around with investors money. Anyone who is holding PMs in an unallocated account is an idiot, plain and simple. At the time it was not clearly understood how a company could cheat an investor using this vehicle, now I would assume everyone knows after MF Global. It's hard to understand what kind of company would go into the PM business and hire a guy like nadless nadler. I just take it for granted that there is something underhanded going on with them because he makes no sense as an analyst for a PM company.

Thu, 01/12/2012 - 18:49 | 2060072 roy10
roy10's picture

http://www.gsb.stanford.edu/news/research/admatiFTletter11.09.10.pdf

This says it all. For osme reason, lawmakers are protecting bank profits as if society cannot live without banks which are leveraged 100 to 1. Banks should have 25% of capital (real capital). If these banks were properly capitalized, we would never need LTROs or a fed window or any of this crap.

Enough already with taxpayer subsidies and guarantees. We need a stable banking system and not a system which constantly teeters on the brink. Is BAC going down to $5 and up to $7 a sign of stability. Does it imply that the bank is viable? BAC should be forced to raise $200B in additional equity. 

Thu, 01/12/2012 - 20:25 | 2060229 Miss Expectations
Miss Expectations's picture

Welcome roy10. WARNING: In a month or so your head may explode.

Thu, 01/12/2012 - 18:57 | 2060088 kaiserhoff
kaiserhoff's picture

The solution is to rub Obummer's nose in this vomit all day, every day...,

and try Ben and Timmy for treason.

The MSM deserve to have their balls in a vice as well.  What a cowardly clusterfuck.

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