September 16, 2013
I have several things I'd like to talk about today but first something needs to be said about Harry Reid. On Friday, majority leader of the Senate Harry Reid made comments on the floor regarding Tea Party members. Specifically he said:
We're diverted totally from what this bill is about. Why? Because the anarchists have taken over. They've taken over the House and now they've taken over the Senate.
People who don't believe in government - and that's what the Tea Party is all about - are winning, and that's a shame.
-The Hill, September 12, 2013
"Anarchists?" "People who don't believe in government?" Really? The way I see it, the Tea Party members are the ONLY ones left in the government who actually believe in what created the government in the first place, the Constitution. Our current "rulers" have gone so far off the rail that they cannot even see it anymore. Think about what Nancy Pelosi said regarding the Obamacare vote with less than 12 hours for anyone to even read it...she said, "We have to pass it...to see what's in it!" Unfortunately, anyone now who is a strict Constitutionalist is also branded as some type of nut job terrorist. Anyone who loves this country and what it once stood for is considered a threat to the current government. How obvious is it that these people who "swear their allegiance" to defend the Constitution either crossed their fingers when they "swore to God" or are just plain delusional. Think back just 25 years ago in 1988 while Ronald Reagan was still president, the above words spoken on the House or Senate floor would have been enough to impeach for treason against The Constitution, now it's OK for the majority leader to say it ...and sadly mean it. OK enough "rant" over.
This week we get to hear from the "nonfederal" reserve and whether or not they will "taper." Before going any further, can you imagine the same 25 years ago after the 1987 crash Alan Greenspan was talking about cutting back on $85 billion per month of pure "monetization?" Again, it would have been heresy. To put the current $85 billion into perspective, the Fed is "buying" this many Treasuries and mortgage securities each month...with "equity" of only $60 billion...EVERY month! Oh, and did I mention that the Fed has already lost over $300 billion (or their capital 5 times over) just since May of this year. Will they "taper?" Maybe $10 billion or so. Does it matter? Of course not. THE only thing that matters is being able to open the markets each day which is getting harder and harder as we go further and further down the rabbit hole and away from reality.
Friday was a very interesting day indeed in the precious metals markets. We got smashed on Thursday for over a dollar in silver and more than $40 in gold...it is important to note that open interest in gold went up nearly 5,000 contracts so the action was not the longs selling to close, it was shorts selling to open...or should I say "selling to make price." There were 2 pieces of news that floated around Friday. First, there was an unconfirmed report that GLD is no longer delivering gold to their institutional clients, it is said that they are refusing delivery. If this turns out to be true, coupled with the declining COMEX vaults then fireworks are just around the corner. Hopefully we can get some sort of verification this week one way or the other.
The other big news was in the silver market, I had heard rumors of this a year ago and it sort of dropped off of my radar screen though it should not have. We are now at the end of 5 years of the CFTC "supposedly" investigating the silver market smash of 2008. Many are worried that the statute of limitations will run out and the "perpetrators" will get off Scot free. I say not to worry for the CFTC can also look into the Spring 2011 price fixing (smashing) and again this year in April...heck, they could pull the "time and sales" tickets for this past Thursday and put some traders in jail and some firms out of business with their eyes closed.
The metals did turn around and go positive for the day from some very deep losses on Friday after Andrew Maguire related that he led 2 JP Morgan whistleblowers to the CFTC a year ago with information (proof?) that JP Morgan does in fact manipulate the precious metals markets. These two traders have hired a law firm that specializes in representing whistleblowers. The CFTC has had this information for a year...they have been "investigating" for 5 years and have had several "in your face" manipulations along the way to see first-hand...will they do anything about it? Below is a chart that shows the timing of the news and the reaction in the pits... maybe something will come from this? One can hope I guess.
I have written about this investigation several times before and I still am of the same opinion. The CFTC CANNOT in any way come to a conclusion. Think about it, if they say that there is no manipulation they will be laughed at...and especially now since they were reportedly handed even more proof. The CFTC cannot contradict the obvious and were they to say that the market is "clean" (and then followed by the inevitable defaults coming by the paper markets) they will be on the hook. When I say "on the hook," I am saying that there will be outrage because they made a ruling that nothing was wrong and will then be spotlighted and cornered when it turns out that in fact there is.
On the other hand, if the CFTC were to "discover" that there is manipulation and actually "named names" they have another problem(s). First off you have the problem of "whom" and what would the punishment be and secondly you would see a mad rush into the metals with orders FOR DELIVERY. Please understand that $3,000 gold and $100 silver means that oil should be $200 per barrel, PE ratios in the equity markets are far lower and interest rates are far higher. This combination will break everything. It will break markets, market participants, derivatives and of course confidence. There is no way that the CFTC can find "manipulation" unless their goal is to pull the plug on everything.
In my opinion there is a far better chance that they would announce "no manipulation" but it seems that their strategy of "running the clock out" is what we will see. Yes, Bart Chilton will probably make some sort of noise or announcement which may or may not be followed by his resignation or termination but "no announcement" seems better than any other option. They know what has happened, they know what is happening and surely they know what will happen. As I wrote earlier in this piece, "Can you imagine anything like this 25 years ago?"
I wrote the above and planned to finish there but I have two more notes to make. Some people say there is no manipulation (naïve), others say it is JP Morgan and the banks, others say it is not the banks it is the HFT traders. I say why not just use common sense, "who benefits the most?" Pretty simple. Also, the CFTC, SEC, NYSE or any other regulatory agency could simply pull the "time and sales" from last Thursday's massacre and know within a day's time who did what and when. Then match the perpetrators up with what happened this past April...then again match it up with May of 2011...and guess what? These will all match up with 2008. So simple! "TIME AND SALES" tells all! Nothing else is needed, nothing else is necessary. OK, you want to go whole nine yards? Have the "sellers" show that their sales were hedges and that they were "long" somewhere else...ANYWHERE else. They can't because the metal simply does not exist above ground for these short positions to even remotely be hedges. This exercise could be done, prosecuted and put to bed in very short order and performed by minimum wage clerks with 8th grade educations...but it won't...because it can't!