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The Gold "Rehypothecation" Unwind Begins: HSBC Sues MF Global Over Disputed Ownership Of Physical Gold

Tyler Durden's picture


That paper gold, in the form of electronic ones and zeros, typically used by various gold ETFs, or anything really that is a stock certificate owned by the ubiquitous Cede & Co (read about the DTCC here), is in a worst case scenario immediately null and void as it is, as noted, nothing but ones and zeros on some hard disk that can be formatted with a keystroke, has long been known, and has been the reason why the so called gold bugs have always advocated keeping ultimate wealth safeguards away from any form of counterparty risk. Which in our day and age of infinite monetary interconnections, means virtually every financial entity. After all, just ask Gerald Celente what happened to his so-called gold held at MF Global, or as it is better known now: "General Unsecured Claim", which may or may not receive a pennies on the dollar equitable treatment post liquidation. What, however, was less known is that physical gold in the hands of the very same insolvent financial syndicate of daisy-chained underfunded organizations, where the premature (or overdue) end of one now means the end of all, is also just as unsafe, if not more. Which is why we read with great distress a just broken story by Bloomberg according to which HSBC, that other great gold "depository" after JP Morgan (and the custodian of none other than GLD) is suing MG Global "to establish whether he or another person is the rightful owner of gold worth about $850,000 and silver bars underlying contracts between the brokerage and a client." The notional amount is irrelevant: it could have been $0.01 or $1 trillion: what is very much relevant however, is whether or not MF Global was rehypothecating (there is that word again), or lending, or repoing, or whatever you want to call it, that one physical asset that it should not have been transferring ownership rights to under any circumstances. Essentially, this is at the heart of the whole commingling situation: was MF Global using rehypothecated client gold to satisfy liabilities? The thought alone should send shivers up the spine of all those gold "bugs" who have been warning about precisely this for years. Because the implications could be staggering.

Probably the core primary consequence of this discovery, which obviously has a factual basis, or else it would not lead to an actual lawsuit between two "reputable" firms (aka ponzi participants), is whether gold in the GLD warehouse, supervised by HSBC, is truly theirs, or has it all been hypothecated from some other broker who never really had the asset or the liquidity, and so on in what effectively can be an infinite chain of repledging one asset to countless counterparties. Because if there is on cockroach...

Suffice to say, expect either a prompt settlement in this lawsuit, or a fervent denial by all parties involved that any gold was misplaced. Because here is the punchline: each physical gold or silver bar has a unique deisgnator that should never be replicated, yet this is precisely what happened to lead to the lawsuit! In a non-banana world, there should never be any debate over who owns a given physical asset, as replicated ownership (note - not liens) effectively means someone stole the gold (or there was counterfeiting involved) and was never caught... until MF Global finally expired of course. 

So in other words, is this the eureka moment when everyone realizes that any gold, be it paper or physical, is either a irrelevant electronic binary claim held in some semiconductor, or at best an asset in some vault, that the brokerage next door suddenly also has claims over?

The end result is that the biggest loser is Joe Sixpack who bought the gold, and decided to keep it in a bank warehouse for "safekeeping" only to realize said gold will never be seen or heard of again.

From Bloomberg:

Five gold bars and 15 silver bars underlie eight Comex contracts between the brokerage and client Jason Fane of Ithaca, New York, London-based HSBC said in a court filing yesterday. Both parties have asserted claims to the bars, creating difficulties for HSBC, which is storing them, the bank said, asking a judge to decide who the rightful owner is.


HSBC has received conflicting instructions regarding ownership and disposition of the property,” it said. “Accordingly, HSBC is exposed to multiple liabilities with respect to the disposition of the properties.”


According to Fane’s letter, the five Comex gold contracts are for an average of 99 ounces of gold each.


Giddens, who is liquidating the brokerage, has transferred about 38,000 commodity accounts to other firms. Three transfers of collateral made and pending will give commodity customers more than $4 billion of their assets, according to court filings.

The punchline:

The judge handling the bankruptcy said today he would deal in January with issues about distributing physical goods, such as gold and silver bars, after lawyers for some customers said they couldn’t get their share of the payouts because bars can’t be broken into pieces.

...indeed there is a reason why people say gold can not be diluted.

As for our advice: move any gold out of the LBMA or CME warehouse system immediately. And only treat any GLD investment as a day trading vehicle that can and will be lost the second there is a global liquidity or solvency freeze, because that particular asset will be wiped out as easily as "C:\format C:"

The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).


Update: as reader D points out, none of this should come as a surprise: after all the UK financial regulator, the FSA, already warned about each step of this unwind back in March 2010.

3.1 In this chapter we consider restricting two practices we believe pose an unacceptable risk to protecting client money and assets, and financial stability.

a) Restricting the placement of client money deposits within a group


3.2 Please note that our policy proposals in this section apply to UK authorised firms that place client money in client bank accounts held with a group bank, credit institution or qualifying money market fund. These requirements will not apply to incoming EEA firms conducting investment business, as under MiFID regulating client assets is a home state responsibility. We will consider extending these proposals to general insurance intermediaries when we begin reviewing CASS 5 – Insurance Mediation Activity in the first quarter of 2011.

Intra-group client money deposits

3.3 CASS contains guidance requiring firms to conduct an appropriate level of due diligence on institutions with which client money is held and to ensure deposits are appropriately diversified. We currently allow firms to hold client money with a deposit taker within the same group as the firm subject to appropriate due diligence and diversification.

3.4 There is no standard market practice for depositing client money within a group structure. For example, a number of investment firms take an explicit decision to hold client money deposits outside of the group, while other firms deposit significant amounts intra-group. Existing handbook provisions seek policy outcomes that ensure an appropriate level of diversification is achieved to protect clients’ money.

3.5 CASS contains provisions regarding a firm’s selection of a bank, credit institution or qualifying money market fund. A firm must exercise all due skill, care and diligence in selecting, appointing and periodically reviewing the institution where the client money is deposited and arrangements for holding this money. Handbook guidance also provides a list of matters a firm should consider in the process.

3.6 The money deposited at a group bank is held on trust by the firm for the firm’s clients, but it is treated as an ordinary banking deposit at the bank. Put another way, all client money at the end of a chain will eventually be held as a deposit. There is always a risk that a bank with which the deposit is held will enter insolvency proceedings and at this point it becomes possible that not all money deposited in client bank accounts as client money will be available for return to the underlying clients. Accordingly, the regime does not envisage a 100% return to clients in the event that client money is lost due to a bank’s insolvency, with CASS providing that clients will generally share rateably in the loss.

3.7 The issue under consideration is not that the funds are held as a deposit, but that when held within a group, there is an increased contagion risk that both the investment firm and the group bank or affiliate will fail simultaneously (or one will fail shortly after the other).

3.8 The resulting risk is that a firm will place an inappropriate amount of client money intra-group, usually as a source of liquidity, which has a lower cost of capital than external sources. Furthermore, as a group’s financial position deteriorates, there is a risk that firms within the group will deposit more client money intra-group to fund operations. This may give clients an inappropriate level of exposure to the bank’s credit risk. It also may lead to clients unfairly bearing the risk of the group as a whole, rather than just the individual firm. The existing sourcebook provisions which address this mismatch of firms’ and their clients’ incentives can be strengthened so the risk to clients is mitigated in the event of a firm’s default.

3.9 Imposing a hard limit on the proportion of client money which can be held intra-group is attractive and will mitigate concentration risk. However, limiting the level of client monies held within a group may increase overall credit risk where outside options are less highly rated. We have considered consulting on the basis of a 20% limit in order to fully identify stakeholders’ concerns, particularly if there is a knock-on effect on liquidity.

3.10 We have worked with firms during 2009 to reduce the concentration of client money held intra-group. During pre-consultation firms estimated that the proposals would result in an increase of approximately 10–25 basis points for additional costs, together with removing stable funding and increasing compliance and operational overheads.

3.11 Accordingly, we propose limiting the amount of client money held by a firm which can be deposited in intra-group client bank accounts to 20%. We understand firms may require some flexibility in holding money intra-group (for example, where a firm’s client specifically requests their money is held with that specific institution) and propose to address this on a case by case basis. We also propose changing existing guidance into a rule to provide a clear basis for our expectations.

3.12 We take this opportunity to highlight that our proposal to re-introduce a client money and asset return to the FSA (see below) which includes content regarding intra-group client money deposits.

b) Prohibiting the use of general liens in custodian agreements


3.13 Our proposals apply to all UK authorised investment firms and overseas branches of these UK firms. These requirements will not apply to incoming EEA fiirms conducting investment business as under MiFID regulating client assets is a home state responsibility.

3.14 Some firms in the UK appear to have inappropriately allowed custodians and subcustodians to include general liens covering, for example, group indebtedness to the custodian or sub-custodian in contractual agreements, or they have failed to pay due regard to this issue. As we have observed from LBIE’s insolvency, liens have contributed to significant delays or obstacles in an IP’s ability to recover  assets from depots not under their direct control.

3.15 CASS 6.3.3G requires a firm to consider the terms of its agreements with third parties with which it will deposit a client’s safe custody assets. As part of this guidance, the firm should consider restrictions over the third party’s right to claim a lien, right of retention or sale over any safe custody asset in the account, as well as identifying client assets separately from assets belonging to the firm.

3.16 We believe the sourcebook can be enhanced with hard rules rather than guidance in this regard. This would enable us to effectively monitor compliance and take enforcement action where appropriate.

3.17 Accordingly, we are consulting on the basis of changing the existing guidance into a rule. We propose creating a rule that prohibits using general liens over client assets which are held under custodian agreements, except to cover the situation when a firm (or if the client has a direct relationship with the custodian, the client) does not pay custodian fees and charges to the third party holding the custody assets.



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Fri, 12/09/2011 - 16:08 | 1964075 GeneMarchbanks
GeneMarchbanks's picture

It all ends in cash settlements. Or war.

Fri, 12/09/2011 - 16:10 | 1964081 Almost Solvent
Almost Solvent's picture


Fri, 12/09/2011 - 16:13 | 1964100 GeneMarchbanks
GeneMarchbanks's picture

Let me just add that the GATA boys are watering/foaming at the mouth whilst having raging erections...

Fri, 12/09/2011 - 16:17 | 1964108 Barbarous Relic
Barbarous Relic's picture

Me, bitchez!  

But only the physical kind.  

Fri, 12/09/2011 - 16:18 | 1964135 Turd Ferguson
Turd Ferguson's picture

Hmmm. I wonder what Andy Maguire would have to say about this?

Fri, 12/09/2011 - 16:29 | 1964175 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

I told you so

Fri, 12/09/2011 - 16:30 | 1964177 Ahmeexnal
Ahmeexnal's picture

Hemorrhoids, meet fan.

Fri, 12/09/2011 - 16:37 | 1964204 Oh regional Indian
Oh regional Indian's picture


Butt, yes, now the top-rung cannibalization begins. An interesting phase, as this is shit being tossed much closer to the fan too. Source shit so to speak.

Could it be that Gold, generally is going to suffer a massive ownership question (fractally much like the RE situation in the US) and could that jam the market? 

Thing is, gold market can be jammed. Industrial demand will keep the silver market alive.

Something to ponder.



Fri, 12/09/2011 - 16:41 | 1964221 tmosley
tmosley's picture

It'll do more than that.  It's going to send it close to parity, at least.  No real reason to think it won't overshoot by a factor that will stun the whole world.

That doesn't mean that the paper prices for both won't be zero, or close to it.

Fri, 12/09/2011 - 16:43 | 1964236 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

What are you writing about?  Pairty of what? 

Fri, 12/09/2011 - 16:45 | 1964243 tmosley
tmosley's picture

Silver will go to parity with gold.

Fri, 12/09/2011 - 16:46 | 1964248 gmrpeabody
gmrpeabody's picture

All your gold are belong to us!

Fri, 12/09/2011 - 17:09 | 1964322 JPM Hater001
JPM Hater001's picture

I am going into the weekend with such a warm fuzzy feeling like everything is going to actually go my way for once.

I love you silver bar.

I love you too silver round. 

And yes, even you you old raggedy 1932 Quarter that'll still buy me a gallon of gas.

*Um, sorry you had to see that. <blush>

Fri, 12/09/2011 - 18:26 | 1964611 trav7777
trav7777's picture

..but if you start pulling your cash out, they call you a terrist for inciting a bank run and then they seize it because it's obviously the proceeds of criminal or terristic activities.

Fri, 12/09/2011 - 18:51 | 1964692 CharlieSDT
CharlieSDT's picture

You can buy a gallon of gas with a dime, you dont need a quarter.  The quarter should be worth a two girl lap dance after full price discovery.

Fri, 12/09/2011 - 19:11 | 1964731 JPM Hater001
JPM Hater001's picture

Game on.

Fri, 12/09/2011 - 19:36 | 1964783 FEDbuster
FEDbuster's picture

If you can't hold it or touch it, you don't own it.  Buy a damn gun safe, get some guns and gold and when the Federales come for your guns and gold.....  Out of my cold dead hands, molon labe.

Fri, 12/09/2011 - 20:41 | 1964943 Problem Is
Problem Is's picture

"See me! Feel me!"
"Touch me! Hold me!"

My Silver Maple Leaf(ves) loves me...

Leaf side up so I don't have to look at Charles bag hole mother of course...

Fri, 12/09/2011 - 22:41 | 1965247 AldousHuxley
AldousHuxley's picture

You know financial crisis is bad when bankers are suing each other....


HSBC sues MF Global

Rothchild ibanksters sue Nazi gold UBS

Credit Unions suing JP Morgan

Holocaust victims working in banking still suing Deutschbank



Fri, 12/09/2011 - 23:33 | 1965348 jackinrichmond
jackinrichmond's picture

 hmm..  i'm wondering what time my bullion dealer opens tomorrow  :)

Sat, 12/10/2011 - 00:13 | 1965400 Mauibrad
Mauibrad's picture

Physical gold and silver, bitchez!  Just seein' how thin I can get this thing. :-)

Sat, 12/10/2011 - 03:38 | 1965602 MayIMommaDogFac...
MayIMommaDogFace2theBananaPatch's picture


Sat, 12/10/2011 - 13:15 | 1966154 MsCreant
MsCreant's picture




Thinner still.

Sat, 12/10/2011 - 13:18 | 1966157 nmewn
nmewn's picture


Sat, 12/10/2011 - 14:17 | 1966259 chumbawamba
chumbawamba's picture

Still several inches from where I stand, little boys.

I am Chumbawamba.

Sun, 12/11/2011 - 01:05 | 1967202 secretargentman
secretargentman's picture

Well this is going to be bearish for gold...  I mean who wants to own an asset if you're not even sure whether you own it.


Physical gold buried in your backyard, however, is a different matter. 


Strong hands will pay off.

Sat, 12/10/2011 - 16:42 | 1966535 xela2200
xela2200's picture

If you can buy it with a dime, it means silver is undervalued. Oil has become scarcer than silver during the same period of time. Therefore, it should be worth a silver quarter and not a silver dime as it once did. How much will the last gallon of oil should be worth in silver terms?

Sat, 12/10/2011 - 17:10 | 1966590 tmosley
tmosley's picture

I guess you haven't heard about the utter devestation of silver stocks.


Fri, 12/09/2011 - 21:13 | 1965036 RafterManFMJ
RafterManFMJ's picture



I lost my gold, silver, guns, ammo, food supply and virgininty in a boating accident. Whoosh! You shoulda seen my shoes!

Sat, 12/10/2011 - 07:02 | 1965732 The Navigator
The Navigator's picture

For about $2k you can buy a Cal25 (plus another $200 for a VHF radio) and go sailing and dial 911 for a rouge wave. Be sure to add an EPIRB and a survival floatation suit and your story may stand up.

But beware, this story is going to get old as more and more gold goes missing. Amateur sinkings will be easily discernible in shallow waters.

Semper Peratus, The Navigator

Sat, 12/10/2011 - 07:35 | 1965748 onthesquare
onthesquare's picture

It cannot go missing if it never existed.  Abbot and Costello can explain the whole thing.

Sat, 12/10/2011 - 09:24 | 1965822 Bendromeda Strain
Bendromeda Strain's picture

If you claim a rouge wave, they will know you makeup the story...

Sat, 12/10/2011 - 14:19 | 1966268 chumbawamba
chumbawamba's picture

Just tell them your name is Moses.


Sat, 12/10/2011 - 23:08 | 1967082 TheFourthStooge-ing
TheFourthStooge-ing's picture

Bendromeda Strain correctly ascertained:

If you claim a rouge wave, they will know you makeup the story...

That's downright mascary.


Sat, 12/10/2011 - 11:21 | 1965958 Mr Pink
Mr Pink's picture

You're busted Rafterman. Everyone knows that virginity floats!

Sat, 12/10/2011 - 13:45 | 1966190 Doña K
Doña K's picture

That reminds me that a 15 year old with the IQ of a Kardasian, when she was asked if she was a virgin, she thought for a few seconds and said: "Not yet."

Sat, 12/10/2011 - 16:43 | 1966540 xela2200
xela2200's picture

But you didn't loose your life :-)

Fri, 12/09/2011 - 22:56 | 1965280 Chuck Walla
Chuck Walla's picture

And SEIZE you because they just said they could, if youze a terrorist!

Sat, 12/10/2011 - 14:36 | 1966316 Ahmeexnal
Ahmeexnal's picture

A 1932S quarter will buy you a whole lot more than just a gallon of gas. All coins are equal, but some are more equal than others.

Fri, 12/09/2011 - 17:20 | 1964369 fonestar
fonestar's picture

We tried to warn you people who thought physical and paper metal was one and the same.  You didn't listen to us and so, if you even have any time left to take possesion, hopefully you will listen to Olivia Newton-John:

Fri, 12/09/2011 - 17:30 | 1964408 Hard1
Hard1's picture

Hahahahaha brilliant link

Let's get ...physical, physical
I wanna get physical
Let's get into physical

Fri, 12/09/2011 - 17:56 | 1964505 DaveyJones
DaveyJones's picture

two in the celebrity bush

Fri, 12/09/2011 - 23:15 | 1965318 AldousHuxley
AldousHuxley's picture

gold in the hand is worth two in ETFs.

Fri, 12/09/2011 - 17:29 | 1964403 LawsofPhysics
LawsofPhysics's picture

It's about bloody time.  Sweet.

Fri, 12/09/2011 - 18:25 | 1964606 trav7777
trav7777's picture


Fri, 12/09/2011 - 18:32 | 1964626 tmosley
tmosley's picture

You keep using that word.  I do not think it means what you think it means.

Fri, 12/09/2011 - 18:40 | 1964654 Badabing
Badabing's picture


Its all a mater of figure of speech or how you look at it. Like you can say, that’s the shit or that’s the bomb, but you cant say that’s the shit bomb. It just doesn’t sound right. Or you can say that’s phat,  or like butter, but you cant say butter phat. And under no circumstance ever ever say shit bomb butter phat!

Fri, 12/09/2011 - 18:52 | 1964683 bob_dabolina
bob_dabolina's picture

There are a few shit bombs on this thread tonight. 

Or perhaps the posters are just shit bombed.

Fri, 12/09/2011 - 19:16 | 1964747 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Good thing you're here, Bob.

Fri, 12/09/2011 - 19:47 | 1964813 High Plains Drifter
High Plains Drifter's picture

shit bombed or shit faced?  

Fri, 12/09/2011 - 18:51 | 1964690 trav7777
trav7777's picture


Fri, 12/09/2011 - 19:33 | 1964778 BigJim
BigJim's picture

He's probably got darker skin than you, Trav; that'll explain it.

Fri, 12/09/2011 - 18:32 | 1964634 Dr. No
Dr. No's picture

The only why I could see it go to parity would be due to some technical glitch.  There is much more silver than gold.  I dont feel gold will loose its value in relation to silver since Central banks own gold (not silver).

Fri, 12/09/2011 - 18:43 | 1964665 tmosley
tmosley's picture

Examine your assumptions.  One of them is incorrect.

There is much more silver than gold in the ground.  But the silver stockpile that has been hoarded since 4500 BC has been almost totally expended thanks to industrial demand that has only appeared in the last 150 years.  There was a time when there was 20 times as much silver above ground as gold.  Now there is less than 1/3rd as much.  The price must move in order to correct this imbalance.  It will take ten years at current production levels with ZERO INDUSTRIAL USE to build a stockpile of silver equal to that of gold.

Fri, 12/09/2011 - 18:53 | 1964697 CharlieSDT
CharlieSDT's picture

ooh, muy interesante, can you cite a source?

Fri, 12/09/2011 - 23:26 | 1965338 Crash N. Burn
Crash N. Burn's picture

From - "Currently, there is only enough investment-grade gold available on Earth for every living person to have 1/3rd of an ounce." and ".. there is only enough investment-grade silver on Earth for every person to have 1/14th of an ounce."

Sat, 12/10/2011 - 07:42 | 1965752 onthesquare
onthesquare's picture

operative words "investment grade". Jew elry dealers are opening up booths in malls to scam you of your 10 and 14 carot (10/24 and 14/24) gold.  Then are alchemists and know how to pull the Au out.

Fri, 12/09/2011 - 18:53 | 1964698 trav7777
trav7777's picture

your assumptions are incorrect and your argument is based upon false premises.

Why do you ASSUME the price is set by the the amount of metal remaining above ground?  Oh wait, I know why, because you're a fucking idiot silverbugz pumper shill.

Commodities prices are set at the margins by slack production.  Not by your asinine theory of "ground stockpiles"

If you want a good stockpiling story against ACTUALLY low production, check out Palladium and Platinum. 

Fri, 12/09/2011 - 19:00 | 1964713 bob_dabolina
bob_dabolina's picture

Rhodium is even better.

Fri, 12/09/2011 - 19:07 | 1964726 DosZap
DosZap's picture


Rhodium is even better.

Much cheaper now too.

Talk about a drop in prices....................damn.



Sat, 12/10/2011 - 07:16 | 1965738 The Navigator
The Navigator's picture

Hi Bob

My problem with Rhodium, Paladium and Platinum is I have no way to determine if it's real (ie what it looks like) and it's content (fineess).

With Gold or Silver there are ways to determine both. It's why I didn't buy diamonds - neither I or a potential buyer/trader can easily agree on quality or value, the opposite of junk silver where almost anyone can determine its' validity and silver content.

Just saying - ie in the case of the SHTF or currency failure.

If it's not SHTF or not currency failure and you're talking about short term investment, you may be right about Rhodium; beyound my pay grade to estimate this.

Sat, 12/10/2011 - 08:38 | 1965781 Confused
Confused's picture

Diamonds? Isn't that the same scam, run by the same people, as the fiat game? 


just asking. 

Sat, 12/10/2011 - 09:49 | 1965846 Bendromeda Strain
Bendromeda Strain's picture

Thay are both scams to perpetuate a false mating paradigm.

With one you make it rain, the other you make it shine...

Fri, 12/09/2011 - 19:55 | 1964831 tmosley
tmosley's picture

Why do I assume that price is set by supply and demand?

Because reality exists outside your head, Trav.

Sat, 12/10/2011 - 11:39 | 1965985 donsluck
donsluck's picture

Sorry, but YOU started the phylisophical thread. Reality's aspects are a combination of "inside and outside" your head, the majority influence swinging back and forth, sometimes mostly "inside", sometimes mostly "outside". When you're in love, reality is mostly "inside" your head, when your wife lights your bed on fire, it's mostly "outside".

And don't get me started on group "reality", the Tonal and the Naqual.

Sat, 12/10/2011 - 11:57 | 1966015 tmosley
tmosley's picture

Trav lives in his own world, where any and all qualities are linked only to race, and no other variables.  In his world, the state is God, and it's bounties are only denied to us by inferior beings, who should be sterilized so that the remaining 3% can breed like rabbits.

I am not joking.  This is what Trav actually believes. 

Sat, 12/10/2011 - 17:21 | 1966604 akak
akak's picture

Your obvious sour grapes are probably just a reflection of the fact that you are either a nigger or a spic.




Sat, 12/10/2011 - 17:16 | 1965229 Catflappo
Catflappo's picture

So tell me Trav, based on your logic, am I to assume that I can go to a store and get salt for absolutely nothing, because there is a near-infinite amount of it in the sea ?    

Sat, 12/10/2011 - 02:54 | 1965560 Burnbright
Burnbright's picture

Why do you ASSUME the price is set by the the amount of metal remaining above ground?

I don't know why would you assume the price of oil would go up if their were less supply? Your blind hate of everything not white and or tmosely makes you sound real fucking stupid.

Sat, 12/10/2011 - 09:55 | 1965853 Teamtc321
Teamtc321's picture

Trav, there is on difference that is not discussed between silver and say oil. Once a oil well is drilled and online, the flow is constant until such reserve is drawn. Silver usually takes constant mining and work load to draw the silver from the mine.

Just a thought to consider.  

Fri, 12/09/2011 - 19:12 | 1964734 DosZap
DosZap's picture


Estimated 15-1 diff,in earths crust.

But the reasons it gets slammed like a bitch, is because there is a huge above ground shortage v.s.actual use.

Hence Margin hikes, and COMEX hyjinks,JPMorgue.

Fri, 12/09/2011 - 18:51 | 1964684 Mine Is Bigger
Mine Is Bigger's picture

I think you are mistaken.  Apparently, gold is more abundant than silver.

Fri, 12/09/2011 - 19:46 | 1964812 El Oregonian
El Oregonian's picture

I think you mean your going to go party with your silver and gold.

Sat, 12/10/2011 - 01:38 | 1965505 European American
European American's picture

And what will those of us, who have the Gold and Silver, be able to do when spot hits the stratosphere?


Watch it slip from our possession when we attempt to buy our way out of the Gulags?

Sat, 12/10/2011 - 01:41 | 1965508 tmosley
tmosley's picture

You overestimate the likely longevity of our fascist government.

Sun, 12/11/2011 - 02:27 | 1967261 European American
European American's picture

How does a minimum ten years of Authoritarian Control sound for your "longevity"? In terms of the great Time/Space continuum, why that's just a drop in the bucket, right?


Fri, 12/09/2011 - 16:41 | 1964222 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Gold is the cornerstone of all bank balance sheets, because it is held on said balance sheets, so yes, if there is a question as to ownership, the SHTF.

Fri, 12/09/2011 - 23:51 | 1965377 Al Gorerhythm
Al Gorerhythm's picture

Yo, Mr Hendrix. It's the cornerstone of everything financial, in the end. Honest money, no counterparty risk. The ultimate meaning of "what have you got as security?".

Sat, 12/10/2011 - 07:46 | 1965754 onthesquare
onthesquare's picture

i have a big gun.

Sat, 12/10/2011 - 16:53 | 1966560 smiler03
smiler03's picture

I have a little penis.

Fri, 12/09/2011 - 16:41 | 1964227 LookingWithAmazement
LookingWithAmazement's picture

But what if industrial demand fades? Silver will crash.

Fri, 12/09/2011 - 16:47 | 1964254 GeneMarchbanks
GeneMarchbanks's picture

Silver might crash or might just go parabolic. As a long term holder of money this is a tough one...

Fri, 12/09/2011 - 19:13 | 1964739 duo
duo's picture

have you heard of lead-free solder?  It's abpit 15% silver and will be required worldwide in a few years for every circuit board.

Fri, 12/09/2011 - 20:42 | 1964946 Seer
Seer's picture

What's a "circuit board?"  Someday that won't sound like a dumb question.

Economies of scale in reverse will hit mass-production, which will in turn kill off such things as (mass-produced) circuit boards.

Do you really think that there will be greater regulatory enforcement?

Fri, 12/09/2011 - 23:12 | 1965310 jeff montanye
jeff montanye's picture

yes.  down the road, perhaps even the same one on which the can is kicked, will be things different from today.  countervailing forces.  thesis-antithesis=synthesis.  don't say it can't happen (again) just because it hasn't happened yet (isn't happening now).

Fri, 12/09/2011 - 16:49 | 1964260 tmosley
tmosley's picture

If silver industrial demand fades, it means we have entered a new dark age, and things will definitely NOT be boring.

Silver is used in practically every high tech electronic device.  The only thing that could stop that demand is a total systemic collapse.

Not to mention the fact that if there were such a tremendous crash, investment demand in silver would soar right alongside gold, and would greatly exceed it as there is so much less silver than there is gold, and it would become much more expensive to extract, as the demand for the base metals that currently subsidize silver extraction costs would crash.

Fri, 12/09/2011 - 16:51 | 1964264 LookingWithAmazement
LookingWithAmazement's picture

So investing in silver is highly recommendable?

Fri, 12/09/2011 - 16:53 | 1964269 tmosley
tmosley's picture

Not for you.  For you, I would suggest a 3x long treasury ETF.  

But for most everyone else, yes.  So long as you take delivery, and cost average.

Fri, 12/09/2011 - 17:19 | 1964361 Smartie37
Smartie37's picture

Best ever application of "Know Your Client" rule !

Fri, 12/09/2011 - 18:00 | 1964519 DaveyJones
DaveyJones's picture

funny. Biblically?

Fri, 12/09/2011 - 18:06 | 1964541 knukles
knukles's picture

How well do you know Jon Corzine?

Fri, 12/09/2011 - 18:14 | 1964564 DaveyJones
DaveyJones's picture

I don't but I hope guys doing hard time will

Fri, 12/09/2011 - 19:21 | 1964756 Bullionaire
Bullionaire's picture

HAHAHA - Sam Adams Old Fezziwig out the nose!



Let's hope Co(mingling)rzine gets some "hard time" from Jerry Sandusky!!!

Fri, 12/09/2011 - 20:32 | 1964912 Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Sandusky is a pedophile.  He likes boys. 

Fri, 12/09/2011 - 20:49 | 1964963 Problem Is
Problem Is's picture

Sandusky & Co(mingling)rzine will both get their asses pounded in prison...

Sat, 12/10/2011 - 03:27 | 1965590 PsychicWebbah
PsychicWebbah's picture

Not for you.  For you, I would suggest a 3x long treasury ETF.

Now that is why I read the comments!

Fri, 12/09/2011 - 17:28 | 1964397 fuu
fuu's picture

I have some mercury dimes I could sell you.

Fri, 12/09/2011 - 18:08 | 1964549 knukles
knukles's picture


Fri, 12/09/2011 - 18:24 | 1964602 fuu
fuu's picture

Now as then all silver flows east.

Fri, 12/09/2011 - 18:53 | 1964699 tmosley
tmosley's picture

That has almost always been the case.  China has always been silver poor.  For much of its history, silver was valued at 1/4th gold.  This was not corrected until the major silver mines came online in Japan sone hundreds of years ago.

The only exception is when China turned out its silver hoards to the West to continue the silver supression scheme.

Sat, 12/10/2011 - 08:06 | 1965762 mick_richfield
mick_richfield's picture

I think the whole eastern hemisphere is relatively silver-poor.

I believe the long-term Au::Ag ratio changed from 12::1 to 17::1 after Europeans discovered the western hemisphere and all its long-amassed silver.

I can't bring myself to believe in your parity idea, but i'm not far off.  My thesis is that Au::Ag goes back to historical ratio ( 15::1 ) and then overshoots significantly.  My guess is overshoot by no less than a factor of 1.5 -- that seems very conservative -- and by no more than a factor of 5.    So my guess is Au::Ag top is between 10::1 and 3::1 .

At 3::1 I would definitely be selling Ag for Au.   And not because "what I really want is gold".  ( DCRB, noto bene ).   Just because at 3::1 I think Ag would be clearly overpriced.  Price does not depend only on scarcity, but on emotion & memory as well.  And by the time we reach 3::1, there would have been an awful lot of new silver mines getting started.

Of course, I also sold Network Appliance a month after they went public, so ... take my silver advice with a grain of salt.

What I won't be selling it for is US dollars.


Sat, 12/10/2011 - 12:04 | 1966026 tmosley
tmosley's picture

That is a more likely "final" goal.  The problem is the extreme deficit in silver above ground, vs gold, where nearly every ounce ever mined is still available.  It would take ten years at current production rates with no industrial usage for silver reserves to equal those of gold.

We have a system of normalcy bias that is, at its youngest, 4500 years old, where silver has always and everywhere been cheaper and more abundant than gold.  But we are entering a new regime, where that is not the case, as the reserves we have above ground are the same for gold, but the silver is depleted.  Supply and demand must take hold and raise the price high enough for the silver stockpile to grow again if we are to re-enter the regime where silver is cheaper than gold.

There was a time and place when silver was two to four times as valuable as gold (from the pre-dynastic period until the first intermediate period, when trade with silver refining Greece opened up).  It has happened before, based on above ground reserves, and it will happen again.

Fri, 12/09/2011 - 19:43 | 1964801 knukles
knukles's picture


Fri, 12/09/2011 - 18:01 | 1964524 fockewulf190
fockewulf190's picture

It would be interesting to see if under such a dark age scenario that the copper mines continued production not because of the demand for copper, but because the by-product silver raised so much in worth that mining operations would still be profitable.

Fri, 12/09/2011 - 18:30 | 1964623 trav7777
trav7777's picture

what a retard...a new dark ages all because silver is going to defy your supersmart predictions.

Silver is still substantially more abundant in the crust in ANY EVENT than gold is...a GSR of 1 is more likely in the event gold crashes to $32 than the opposite.

Nobody is going to invest in silver in a crash you idiot.  Haven't you cost ENOUGH PEOPLE their life savings with your shameless silver pumping?

WTF is this there is far less silver than gold?  That is complete bullshit.  There is 15x as much silver in the earth's crust than there is gold, and hundreds of millions of ounces more mined per year than gold.

You want to make a case for parity and shit, make it on palladium, not silver.  Stop your stupid lunatic silverbugz pumper bullshit, dude.

Fri, 12/09/2011 - 18:36 | 1964639 JLee2027
JLee2027's picture

Wrong....can't use the silver sitting under thousands of ton of rock.  And the industrial uses of silver especially since 1980 have drained the supply.

Silver is money, and will be used as money again after the crash, despite what you think.  The transitory above-ground shortage in supply will cause the value to soar and it will take years if not decades for mining to restore balance.  

Fri, 12/09/2011 - 20:50 | 1964971 margaris
margaris's picture

it boils down to the question how easily can the used up silver be recycled? Because the silver is actually there, its not used up, its just indisposed for the moment. Silver is a pure element, you cant use it up like other compounds/molecules.
So every big dumping ground for electronics and household appliances contains maybe hundreds of kilos of silver....

what is harder? mining the silver or recycling it? What takes more oil?

Fri, 12/09/2011 - 22:06 | 1965161 JLee2027
JLee2027's picture

Industrial use is generally destructive to silver.  What was once tens of billions of ounces is now under a billion. Silver is not mined directly because of the low is a "byproduct" of searching for other metals. Most of the "new" silver supply on the market is recycled already - 215 million ounces in 2010 according to the Silver Institute.

To be profitable to start digging in landfills for tiny fractions of an ounce of silver in unrecycled cell phones and computer - silver would probably need to be many thousands of dollars per ounce in my non-expert opinion.  Those same cell phones and PC's have Gold in them and mostly everyone ignores them and tosses them out.  

Fri, 12/09/2011 - 22:56 | 1965281 Uber Vandal
Uber Vandal's picture

Might be rather problematic recyling silver from the thousands of missiles and rockets that have been fired or sent into orbit.


Sat, 12/10/2011 - 05:38 | 1965679 BigDuke6
BigDuke6's picture


Lets not forget the 15kg of silver in every tomohawk missile.


Sat, 12/10/2011 - 03:30 | 1965596 PsychicWebbah
PsychicWebbah's picture

I burn silver in my reactor to produce unobtanium so you can blame me for the silver shortage.

Fri, 12/09/2011 - 18:35 | 1964640 tmosley
tmosley's picture

Hey look everyone, it's a guy talking 100% out of his ass about a market that he has absolutely no understanding of.

Who gives a shit about silver in the crust?  It's silver above ground that matters, and there is now less than 1/3rd as much above ground as there is gold, and we use more than we extract each year.

lol, yeah, no-one is going to invest in hard currency in the event of an economic collapse.  Sure.  Hold your breath on that one.

Maybe you should blame some black people or something?

Fri, 12/09/2011 - 18:45 | 1964672 HamyWanger
HamyWanger's picture

"Who gives a shit about silver in the crust?  It's silver above ground that matters, and there is now less than 1/3rd as much above ground as there is gold, and we use more than we extract each year."

I would be interested in a reliable source about that one.

Fri, 12/09/2011 - 18:55 | 1964702 tmosley
tmosley's picture

Is Ted Butler reliable?

Of course, that article is old, and the numbers don't match what I said (his are more bullish for silver than mine).  The situtaion has only gotten worse, as you can track the change in silver inventories at the Silver Institute.  We keep using more than we mine.

Fri, 12/09/2011 - 22:35 | 1965210 Michael Victory
Michael Victory's picture

Sat, 12/10/2011 - 00:16 | 1965403 oldman
oldman's picture


Definitely not reliable            om

Fri, 12/09/2011 - 18:56 | 1964704 trav7777
trav7777's picture

you motherfucking IDIOT.

The earth mines 800 MILLION ounces of this shit every year.  The amount ABOVE GROUND does NOT FUCKING MATTER as far as setting the price of the commodity.

SUPPLY MATTERS, not the goddamned number of ounces sitting in a fucking stupid warehouse where you seem to believe ALL silver consumers go to buy the fucking stuff.

Next you will claim how much OIL we have in tankers matters.

Fri, 12/09/2011 - 19:38 | 1964780 akak
akak's picture

tmosley's talking about silver going to parity with gold during a possible price spike, NOT as a permanent or long-term situation, in which case the roughly 15:1 ratio (or somewhat less, given modern industrial demand for silver) could well take hold again --- that is, if the price suppression campaign by TPTB were to finally come to an end.

And if the amount of above-ground silver "does NOT FUCKING MATTER as far as setting the price", then I guess we can just stop mining it altogether --- because the price will not rise, according to you, because the supply is irrelevant, right?

Really, Trav, sometimes you can be such an idiotic asswipe and a dipshit.

Fri, 12/09/2011 - 21:21 | 1965051 Exposer of Inte...
Exposer of Internet Shills's picture

"Really, Trav, sometimes you can be such an idiotic asswipe and a dipshit."


or a SHILL.  (s)he talks like a fed shill with all that cursing and the foul mouth.  Typical of a shill not making any headway

Fri, 12/09/2011 - 21:38 | 1965089 tmosley
tmosley's picture

His racism serves a dual purpose.  First, people see his filth when they come here, which helps to discredit the comments section.  Second, his racism allows him to subtly promote the state.  He can blame ANYTHING on blacks because they exist within the bureaucracy.  "Sure, the fundamental model is fine, it's just that there are all these low IQ monkeys in there."  He does the same thing with peak oil.  "There is nothing the government could have done, this crisis was caused by peak oil--trust your government, they will take away our freedoms to save us!"

Shill seems likely.  At a minimum, he has simply been totally corrupted because his wife and kids left him, so he spouts the vilest trash he can think of to try to hurt others like he has been hurt.

These are the actions of a weak, inferior individual.  Quite certain that some day soon he will go into his former office (I doubt he has a job) and murder everyone there before killing himself like the weak willed faggot that he is.

Fri, 12/09/2011 - 21:44 | 1965103 trav7777
trav7777's picture


that was DELIRIOUSLY personal best for you, cliff

Fri, 12/09/2011 - 22:24 | 1965202 tmosley
tmosley's picture

Nervous laughter, false bravado, projection.  And all in such a short post.


Fri, 12/09/2011 - 23:46 | 1965365 weinerdog43
weinerdog43's picture

Heaven knows I'm not Mr. Mosley's biggest fan, but he is a gentleman and a scholar compared to baby Rick Perry, aka Ms. trav7777. 

Fri, 12/09/2011 - 22:30 | 1965206 akak
akak's picture

You obviously have a fair level of intelligence (at least sporadically), but you should know, Trav, that you almost always come across as a complete prick and exceedingly unpleasant asshole --- the kind of guy who people meet at parties and then do anything and everything they can to get away from.

But if you honestly don't give a damn about being an irritating, arrogant, disagreeable dickwad ..... carry on.

Fri, 12/09/2011 - 22:56 | 1965279 DaveyJones
DaveyJones's picture


Fri, 12/09/2011 - 23:43 | 1965346 Bay of Pigs
Bay of Pigs's picture

I guess Trav feels the need to speak up for the abrasive trolls that are long gone?

Smailes? MethMan? Bravo?

And where the hell is my sidekick Jon Nadler? 


Sat, 12/10/2011 - 17:24 | 1966617 akak
akak's picture

Snails.  Methman.  JonnyBravo.


Good times.

Sat, 12/10/2011 - 04:50 | 1965655 Better_late_tha...
Better_late_than_never's picture

Why would anyone who thinks Pm's are a joke spend so much time on a forum like this? I like hunting and fishing. I don't go over to the PETA forums and tell them they are wrong, I go hunting. Why would you care about what other "crazy" people chat about? Shill?... I'll bet FRN's its just a dose of crazy.

Sat, 12/10/2011 - 08:08 | 1965763 mick_richfield
mick_richfield's picture


Trav, you should really go away.  You're not worthwhile.

Fri, 12/09/2011 - 19:41 | 1964797 Bullionaire
Bullionaire's picture

Start digging, Trav.  I've got some silver soupspoons you can borrow - oh wait, I already lent them out, over a hundred times...

Fri, 12/09/2011 - 19:44 | 1964807 High Plains Drifter
High Plains Drifter's picture

silver bugs never get any respect............

Fri, 12/09/2011 - 19:58 | 1964839 tmosley
tmosley's picture

"Supply doesn't matter"

"Supply matters"

Your personal hatred has made you go crosseyed, there.

If we had 100 years worth of oil in tankers, it would matter.  If the market was used to having 100 years worth, and then it was suddenly revealed we have 3 days worth, what reaction do you think the market would have?

But by all means, don't put any thought into your answer.  Just blame it on the genetically inferior.

Fri, 12/09/2011 - 21:46 | 1965110 trav7777
trav7777's picture

I said that commodity prices are set on SLACK SUPPLY, at the margins, you fucking MORON.

I truly WISH you were intelligent enough to understand what this means, then I wouldn't have to type so many insults to you.  Unfortunately you are just STUPID.

"Silver to $60 by next week."

You stupid cunt

Fri, 12/09/2011 - 22:26 | 1965207 tmosley
tmosley's picture

And just what exactly do you think a "stockpile" is, Trav?

You are drowning in the foam coming out of your mouth.  You are so weak, it's actually sad to even talk to you.

Sat, 12/10/2011 - 04:17 | 1965635 akak
akak's picture

It's not really his fault --- Trav went into a store today and had to deal with not only a hymie salesman, but a spic cashier and a nigger security guard as well, and the experience left him totally unhinged.  He's organizing a Stormfront boycott of that store even as we speak.

Sat, 12/10/2011 - 08:12 | 1965767 mick_richfield
mick_richfield's picture

Trav7777 said:


WISH you were intelligent enough



What do you think it would mean if you met an angry man whose most devastating insult was "I bet you have a really small cock!" ?


Sat, 12/10/2011 - 00:28 | 1965417 Pinch
Pinch's picture

The earth mines 800 MILLION ounces of this shit every year.

We mine, not the Earth, numbnutz. Since silver is almost all a byproducts of goodtimes mining for boomy base metals, a severe downturn, which is inevitable, will see a big drop in base metal mining and a total cessation of silver supply, whereas silver demand will not go away (too many vital applications). I smell a huge price pop coming!

Sat, 12/10/2011 - 00:34 | 1965429 Bay of Pigs
Bay of Pigs's picture

Now Pinch, don't go confusing old Trav with the facts.

Sat, 12/10/2011 - 01:32 | 1965501 the 300000000th...
the 300000000th percent's picture

How does the "earth" mine itself??

Fri, 12/09/2011 - 20:39 | 1964935 John Bigboote
John Bigboote's picture

Do you apply the same arguments to silver in the crust that you apply to peak cheap oil in the crust? Doesn't sound like it.

Fri, 12/09/2011 - 21:47 | 1965112 trav7777
trav7777's picture

ROTFL, boy the MORONS are out in force tonight.

If you have READ what I wrote about it, I have done exactly that, pointed out that silver production has not peaked (gold did in '01).

And there is NO SUCH THING as peak cheap oil.

Fri, 12/09/2011 - 21:52 | 1965124 John Bigboote
John Bigboote's picture

You're gay.

Fri, 12/09/2011 - 22:51 | 1965273 tmosley
tmosley's picture

Yeah, you are making a lot of posts tonight.

Sat, 12/10/2011 - 00:34 | 1965428 Pinch
Pinch's picture


ROTFL, boy the MORONS are out in force tonight.

Said their leader

Sat, 12/10/2011 - 00:31 | 1965422 Calmyourself
Calmyourself's picture

Good point Trav.

The ocean holds over 20 million tons of gold, lets be honest that yellow crap is worth nothing. I am generous and will grant you 100 FRN's for each ounce of worthless relic you deliver..

Sat, 12/10/2011 - 08:44 | 1965786 Confused
Confused's picture

Even if silver is more abundant, the cost to extract would likely increase in the future. No? This would certainly have an effect on the price. 


Can't mine, what you can't get to. 

Fri, 12/09/2011 - 20:40 | 1964938 delacroix
delacroix's picture

if the demand faded, the production,would also decline, as half the silver, comes as a by-product, of other industrial metals.

Sat, 12/10/2011 - 03:37 | 1965601 PsychicWebbah
PsychicWebbah's picture

You are making a case for an ineleastic supply curve by stating silver production is highly dependent on demand curves for other rare earths.

Fri, 12/09/2011 - 20:55 | 1964988 Seer
Seer's picture

High tech is hitting a dead-end.  Economies of scale brought it here, and the reversal of economies of scale will take it out.

Who s going to be buying high tech stuff in the future?  Folks who are already drowning in high-tech toys, folks that are massively in debt?

It's all a Ponzi.  If it can't continue to grow it will collapse.  And given that this is a finite planet it is an absolute certainty that growth will end.

"Not to mention the fact that if there were such a tremendous crash, investment demand in silver would soar right alongside gold"

Shit ONLY works when the majority are playing the game.  People are getting poorer, not richer.  In the future people won't be able to sit on a pile of PMs (even IF they had "wealth" above the subsistence level).  It'll be like the scenario of the millionares stranded on an deserted island trying to exchange their money to each other for goods and services that none of them are able to produce.

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