Oldtent Archives 2007 - 2008

When I left this morning POG was 760 and things were improving.   Just got back in to check and saw the carnage.  Can anyone give me the short version?  I don’t have time to go back and sift through the posts.

when anyone defaults in a market, the trust and reliability is gone. people abandon those markets in an instant.

rno

why would the next contract rise if there is no delivery? the sellers just keep the market depressed and pay the fee again. usually when sellers default, the buyers abandon that market and it dies. i think nickel at the lme is toast, but i’m not sure. that market defaulted early this year, i think.

rno

Bill,
On Tuesday withdraws of gold and silver from the COMEX continued with 6,903 ounces of gold removed and 314,095 ounces of silver removed. Total gold stocks now down to 8,108,978 ounces. Total silver stocks now down to 128,720,340 ounces. To show how woefully inadequate these amounts are to supply any return to gold and silver money, I checked previous U.S. coin mintage records. In 1904, the mint turned out 11,390,972 double eagles, 270,988 eagles, and 489,136 half eagles for a one year mintage of 11,270,163 ounces of gold. Similarly, in 1921 the mint produced 68,656,778 ounces worth of silver coin. These rates of production would wipe out COMEX supplies in less than one year for gold and two years for silver. In the first 10 plus months of 2008, the U.S. Mint has produced 648,500 ounces of gold eagle coin and 16,875,000 ounces of silver eagle coin. The fact that mint was able to produce gold coins in 1904 with antiquated equipment at 15 times the current rate is proof that the mint is currently either incompetent or that there is a shortage of gold.
Regards,
Bryant

Max Keiser on gold and the Comex…

www.youtube.com/watch?v=BMzEhCfanbs

***

  Thanks for that. No doubt you are right. They’ll just pay the penalty.

  What will it do to the reputation? and if players know they can’t delivery would they go long even more considering they get a guaranteed 10%?

take a look at the open interest in the bond options and bond action. do you think maybe the folks who have the call options are the ones running the bond market to new all-time highs?

maybe our new president will want some additional fiat for the government and goes after the crooks but i think after he checks his campaign donor list, it will de ja vue all over again.

rno

a 10% penalty is all?….that sucks……………..would that still be called a default ?……and wouldnt that in and of itself make the next contract month rise ?

But judging by the inexorable beating Aussie shares are receiving, there must be a bloody big woodshed behind the ASX building in Sydney!

commodity trades are in “contracts”. these contracts have specifications which describe what may be delivered and where. the person who promises to accept delivery is known as a “long” (buyer). those who wish to make delivery are know as a “short” (seller). whenever a new long and a new short form a contract, open interest interest has increased by one. these contracts are readily transferable. the same contract may have a life of seconds or months. as delivery approaches, longs and shorts may liquidate their positions by the opposite action they used to form the contract. a long will sell and a short will buy and each are out of the market. if the longs feel the shorts are weak or can’t make delivery, they will hold their position until the price rises high enough to force the shorts to cover. the only way a short can exit the market is to buy his contract back or make delivery.

in the delivery process, the long must deposit in his account the full purchase amount of the underlying commodity. the short must produce a warehouse receipt from an approved warehouse or vendor. the fiat is transferred from the buyers account to the seller and the warehouse receipt is transferred to the buyer. less than 1% of contracts go to delivery.

given the current demand for gold and silver and the absence of supply in the retail channel, common sense would dictate that some buyers will take delivery. coin dealers must have inventory to stay in business. the only way they will get them now is to take delivery and send the bars to a foundry to be melted and poured into smaller bars and coins.

since price of gold and silver is not going up, it’s logical to assume that the comex has adequate supplies or the shorts really don’t think the longs can cough up enough fiat to take delivery. delivery is at the option of the seller. they can wait until the last delivery day if they choose. they may wait until the last delivery day and pay the fiat penalty for non-delivery. if several shorts pay the penalty and not deliver, a firestorm will follow. most markets have a system of delivery or an index to settle trades. if that index can be influenced by a small group and not market oriented, the fan will become very dirty and the lawyers will get wealthy.(to hell with the people who didn’t get what they bought) gold and silver are traded on a threat to take/make delivery. if sellers fail to deliver, and the fee is not substantial, the threat of delivery is gone and the buyers lose market gain.

a current example is silver on the comex and silver on ebay. comex silver is less than $10. while it sells on ebay for just under $15. if silver closes on the last trading day at $10. and the penalty for non delivery is 10%, the positions are closed out at $10. and the seller must deposit an additional $1.00 per oz (10%) to go to the buyer. the seller saves $4.00/oz and the buyer gets screwed.

i personally believe the sellers are prepared to pay the penalty and continue screwing the buyers.

rno

an ounce of Gold costs Tonight per Kitco quotes

5 Thousand Chinese Yuan
7 Thousand South African Rand
10 Thousand Mexican Peso
20 Thousand Russian Ruble
37 Thousand Indian Rupee

and …………………………….

71000 of those incredibly powerful Japanese Yen !!!

  Interesting stuff - surprised I haven’t seen something like that surface around the internet.

  I’d say the Canadians are screwed the most in that deal.

Talked with a long haul trucker, he is hauling meat, he can no longer have a cell phone or a camera while they are loading and till the load is sealed.
In questioning of “why”, he was made aware that their is a logo on the boxes in the shape of a football and within the logo were the UNITED STATES
on top CANADA in the center
and MEXICO on the bottom, after the 1st of the month upon delivery, it will not be accepted without logo.

I said that i would like to have a snapshot of the logo, he responded “NO WAY”.

Dave from Denver last night…

Something insidious is lurking beneath the surface of the FNM/FRE agency bond market. The spread had blown out to 164 on 10-yr paper by the end of the day on Tuesday. With the Governmnet “explicit” guarantee of FNM/FRE in place, agency paper should be trading, at most, 5-10 basis points behind the equivalent maturity Treasury. The idea that there is a large of supply of agency paper saturating the market because foreign central banks are selling does not explain this spread. This is so because large hedge funds with cash, like a Soros or SAC Capital, would be arbitraging this spread in the 10-yr maturity range by buying up 10-yr agencies and selling Treasuries. This should be a true riskless arbitrage opportunity. They would do this all day long and could use plenty of leverage because is an example of a “spread” trade that a bank would be happy to finance because it’s theoretically riskless. The key descriptive is “theore tically” and therein lies the problem. There is something about the U.S. Treasury’s explicit guarantee of FNM/FRE that the market

All the numbers appear red.