Sheer Bedlam/gold and silver attacked/bourses around the world fall in price
Dear Ladies and Gentlemen: Today bourses around the globe plummeted as many have figured out that the Friday accord was really a phony and would not solve the economic crisis in Europe. No doubt today we had many getting out of GLD/SLV and into real metals. Confidence is now beginning to wane. The price of gold finished the session at $1664.20 down $47.80 dollars. The price of silver fell to
David Duval’s Commentary
This insightful commentary from MW in Burlington, Ontario regarding direct registration of shares in Canada should be of interest to Canadian readers.
Dear David,
I thought I’d update you with some research I’ve been doing regarding the DRS in Canada. My findings have a direct result in Jim’s comments about DRS not creating a tax event. This may not be the case in Canada.
Most of my mining equities use Computershare as the transfer agent. Some of the bigger ones use CIBC Mellon.
CIBC does not offer Direct Registration Services at present but they are working on something that they hope to have available in a couple of months.
Computershare obviously does offer DRS in Canada – but according to their customer service department they do not have RRSP or TFSA accounts. Therefore, any request to have equities held in an RRSP account moved to a DRS account means that the value of the account becomes taxable income at the time of transfer. In most cases this will likely result in a 30% withholding tax and then an additional 14% income tax as, I presume, in most cases the additional income would put the individual in the highest tax bracket (44%).
This will likely create a huge dilemma for Canadian investors – especially in light of the Thomson Reuters news article (see below) that casts suspicion on Royal Bank and CIBC.
If any of you folks at JSMineset can comment on this from a Canadian perspective it would be MUCH appreciated. In particular, whether you think Credit Unions might be safer than the large Canadian banks.
To me the gist of the article is that over-leveraging via UK subsidiaries (where there is no limit on re-hypothecation) contributed to what brought down MF Global and Lehman Brothers. The article goes on to say the Jeffries and others – including RB and CIBC – are involved in the same activities.
MF Global and the great Wall St re-hypothecation scandal
By Christopher Elias (UK)
(Business Law Currents) A legal loophole in international brokerage regulations means that few, if any, clients of MF Global are likely to get their money back. Although details of the drama are still unfolding, it appears that MF Global and some of its Wall Street counterparts have been actively and aggressively circumventing U.S. securities rules at the expense (quite literally) of their clients.
MF Global’s bankruptcy revelations concerning missing client money suggest that funds were not inadvertently misplaced or gobbled up in MF’s dying hours, but were instead appropriated as part of a mass Wall St manipulation of brokerage rules that allowed for the wholesale acquisition and sale of client funds through re-hypothecation. A loophole appears to have allowed MF Global, and many others, to use its own clients’ funds to finance an enormous $6.2 billion Eurozone repo bet.
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Why The UK Trail Of The MF Global Collapse May Have “Apocalyptic” Consequences For The Eurozone, Canadian Banks, Jefferies And Everyone Else
Submitted by Tyler Durden on 12/07/2011 23:06 -0500
Reposting by popular demand, and because everyone has to understand the embedded risks in this market, courtesy of the shadow banking system.
In an oddly prescient turn of events, yesterday we penned a post titled “Has The Imploding European Shadow Banking System Forced The Bundesbank To Prepare For Plan B?” in which we explained how it was not only the repo market, but the far broader and massively unregulated shadow banking system in Europe that was becoming thoroughly unhinged, and was manifesting itself in a complete “lock up in interbank liquidity” and which, we speculated, is pressuring the Bundesbank, which is well aware of what is going on behind the scenes, to slowly back away from what will soon be an “apocalyptic” event (not our words… read on). Why was this prescient? Because today, Reuters’ Christopher Elias has written the logical follow up analysis to our post, in which he explains in layman’s terms not only how but why the lock up has occurred and will get far more acute, but also why the MF Global bankruptcy, much more than merely a one-off instance of “repo-to-maturity” of sovereign bonds gone horribly wrong is a symptom of two things: i) the lax London-based unregulated and unsupervised system which has allowed such unprecedented, leveraged monsters as AIG, Lehman and now as it turns out MF Global, to flourish until they end up imploding and threatening the world’s entire financial system, and ii) an implicit construct embedded within the shadow banking model which permitted the heaping of leverage upon leverage upon leverage, probably more so than any structured finance product in the past (up to and including synthetic CDO cubeds), and certainly on par with the AIG cataclysm which saw $2.7 trillion of CDS notional sold with virtually zero margin. Simply said: when one truly digs in, MF Global exposes the 2011 equivalent of the 2008 AIG: virtually unlimited leverage via the shadow banking system, in which there are practically no hard assets backing the infinite layers of debt created above, and which when finally unwound, will create a cataclysmic collapse of all financial institutions, where every bank is daisy-chained to each other courtesy of multiple layers of “hypothecation, and re-hypothecation.” In fact, it is a link so sinister it touches every corner of modern finance up to and including such supposedly “stable” institutions as Jefferies, which as it turns out has spent weeks defending itself, however against all the wrong things, and Canadian banks, which as it also turns out, defended themselves against Zero Hedge allegations they may well be the next shoes to drop, as being strong and vibrant (and in fact just announced soaring profits and bonuses), yet which have all the same if not far greater risk factors as MF Global. Yet nobody has called them out on it. Until now.
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David Duval’s Commentary
What do you think the odds are of the Iranians complying with this request?
And if they did comply, would they be willing to fly it back to Afghanistan?
12 December 2011 Last updated at 15:03 ET
US asks Iran to return captured drone
President Barack Obama has said the US government has requested that Tehran return the surveillance drone captured by Iran’s military earlier this month.
Mr Obama said he would not comment on classified intelligence matters, but confirmed: “We have asked for it back. We’ll see how the Iranians respond.”
Iranian TV broadcast pictures of the intact RQ-170 Sentinel last week.
Tehran said the aircraft was brought down using electronic warfare; Washington insisted it malfunctioned.
Earlier on Monday, Iranian state TV reported that military experts were in the final stages of recovering data from the drone.
A member of the Iranian parliament’s national security committee, Parviz Sorouri, said the information they extracted would be used to “file a lawsuit against the United States over the invasion” by the aircraft.
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Jim Sinclair’s Commentary
Currency controls have never done anything but fail. Currency controls are quite bullish for gold.
Gold weakness is technical as people prepare for the EU to explode, not technical as in TA.
My Former Partner Yra Harris offers comments almost too smart for
this market. Yra’s problem, if any, is that he is too damn intelligent.
Gold is going to Alf’s $4500 target.
Notes From Underground: Exchange Controls Building a Stairway to Haven?
There’s talk abound about the possibility of exchange controls. The ability to slow the inflow and outflow of funds is being discussed from Greece to Germany and Switzerland. It is no secret that many citizens in the peripheries are moving Euros out of their domestic banks and into German, Swiss and British domiciled entities. The German paper Handelsblatt had an article during the weekend suggesting that the SNB and Swiss government are readying a plan to undertake exchange controls and a true negative interest rate regime. The overly strong Swiss franc has placed a great deal of stress on the Swiss economy and the Swiss authorities want to head off any demand for francs if the euro were to fail.
As money flees the peripheries, that puts more pressure on the domestic banks in the pariah money centers to raise funds from their own central banks. The pressure ultimately makes its way back to the ECB as the individual banks receive their funding from the ECB and EFSF. Soon the Greek government will have to place restrictions on the outflow of Euros from its banks to the stronger money centers, especially Frankfurt. The same process is ongoing in Italy and Spain as its citizens are moving to safety in the stronger core-based banking institutions.
When exchange controls are implemented it will be a positive for gold as it will replace euro deposits as the ultimate store of value. Currently, gold is failing to rally. I have discussed this a being the result of a large holder of gold liquidating a massive position to raise cash for possible short-term liquidity needs.
It seems that another reason for gold’s recent lacklustre performance may be due to many banks in Europe increasing their gold leasing programs, which have put gold lease prices into negative territory. The need to raise dollars has led to many gold holders swapping their gold for dollars. The result is not gold sales by the lessor but just a short term financing arrangement to raise liquidity for immediate needs.(it is the ultimate pawning of the family silver.) There is so much gold for lease that borrowers can attain it and get paid for doing so, which removes potential buyers from the market.
A potential need for gold is averted by pushing the price higher and the borrower gets paid. This is just another element in the balance sheet recession plaguing the banks of Europe. The gold leasing factor is something to watch for an indication of continued bank stress. Also the gold/silver should turn to silver’s favor if this continues to hold up for European financing needs.
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Jim Sinclair’s Commentary
When providing capital by any means to other central banks, that central bank acts as a beard for the final borrower of the funds.
This is why the US legislative can pass all the laws they want, and not stop the Fed from providing US money from propping up the EU world.
No One Telling Who Took $586B in Fed Swaps By Scott Lanman and Bradley Keoun – Dec 11, 2011 3:01 PM PT
For all the transparency forced on the Federal Reserve by Congress and the courts, one of the central bank’s emergency-lending programs remains so secretive that names of borrowers may be hidden from the Fed itself.
As part of a currency-swap plan active from 2007 to 2010 and revived to fight the European debt crisis, the Fed lends dollars to other central banks, which auction them to local commercial banks. Lending peaked at $586 billion in December 2008. While the transactions with other central banks are all disclosed, the Fed doesn’t track where the dollars ultimately end up, and European officials don’t share borrowers’ identities outside the continent.
The lack of openness may leave the U.S. government and public in the dark on the beneficiaries and potential risks from one of the Fed’s largest crisis-loan programs. The European Central Bank’s three-month dollar lending through the swap lines surged last week to $50.7 billion from $400 million after the Nov. 30 announcement that the Fed, in concert with the ECB and four other central banks, lowered the interest rate by a half percentage point.
“Increased transparency is warranted here,” given the size of the Fed’s aid and current pressures on European banks, said Representative Randy Neugebauer, a Texas Republican who heads the House Financial Services Subcommittee on Oversight and Investigations.
Whether the U.S. should make disclosure of the recipients a condition of the swap lines is “probably a discussion we need to have,” possibly in a hearing that includes Fed Chairman Ben S. Bernanke, Neugebauer said.
Unprecedented Transparency
The secrecy surrounding foreign central banks’ emergency lending contrasts with unprecedented transparency at the Fed, which was compelled by the 2010 Dodd-Frank Act and court-upheld Freedom of Information Act requests to release details on more than a dozen programs used to combat the U.S. financial crisis from 2007 through 2010. Bernanke this year began holding regular press conferences and has said he is considering ways to make the Fed’s objectives more clear to the public.
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Dear Mr. Sinclair,
Here is another reason to believe gold is headed towards $4,500:
Kind regards,
CIGA Willem
www.profitimes.com
Gold Model Forecasts $4380 Gold Price
You’ve probably heard it many times: “Gold is a good hedge against inflation”.
But IS it? That’s the question we will try to answer in this article.
Let’s have a look at a chart:
The chart above shows us the gold price (left hand scale, red line) since 1968, when the Gold Pool broke down. At that time, the gold price was no longer fixed, and was able to rise (substantially).
From February 1968 to February 1980, gold rose almost 25-fold, from $35,50 per ounce to as high as $875 per ounce.
From that point, gold started a multi-decade long decline towards $250 per ounce at the beginning of the 21st century. In the same time period, CPI doubled from 78 to 175,60.
From then on, gold rose substantially, from about $250 to $1,920 earlier this year (x7.68), while the CPI rose from 175,60 to 226,42 (only 29%).
So for that matter, it seems there isn’t really a strong correlation between the gold price and the general price level.
I thus figured there had to be other forces at play that influence the price movement of Gold, and yes, I think there are…
Eddy Elfenbein from Crossingwallstreet wrote an article that really intrigued me. He had found a “model” to explain the movements in the Gold price.
He said:
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Gold Marking Time, Counting 1-2-3
CIGA Eric
Don’t let “gold is dead” argument corrupt your discipline. It is designed to organize the public for the abattoir. The bearish argument will disperse faster than flatulence in the wind once gold finishes marking time. Right now it’s counting 1-2-(maybe 3).
London PM Fixed Gold and GLD (ETF) Total Assets WA Stochastic
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By Greg Hunter’s USAWatchdog.com
Dear CIGAs,
“Disintegration.” That’s the word both billionaire George Soros and French President Nicolas Sarkozy have recently used to describe what’s going on with the European economic crisis. It is really a solvency crisis for the big banks there, and leaders are trying desperately to fix the problem. Last week, 26 European countries agreed to give up sovereignty and vote for new rules on tax and spending and tough sanctions to enforce them. One country, the United Kingdom, voted “no” in the form of a veto from Prime Minister David Cameron. Here’s how British newspaper The Sun reported the story, “The PM vetoed a new treaty and kept Britain out of a dodgy deal to save the euro. But his bulldog spirit left the nation facing an unknown future and risking an EU backlash. The PM defended his historic veto of an EU deal intended to save the euro — despite infuriating pro-Europeans.” (Click here for more from The Sun.) Cameron could not give up sovereignty over budgets in his country. I don’t blame him because, after all, the Brits still have the Pound Sterling and don’t need the Euro to conduct business.
Reuters’ take on the story was decidedly against the Mr. Cameron’s veto and said, “Napoleon dreamed of it, De Gaulle fought for it, but Nicolas Sarkozy may have achieved it — a Europe of Nations with France in the cockpit and Britain on the sidelines. The French president emerged as one of the big winners of a European Union summit on Friday which ended with up to 26 member states agreeing to move forward in economic integration around the euro zone, and Britain alone in staying out.” (Click here for more from Reuters.) But what did these 26 countries really gain? This is just a pact to cut everything in order to pay back the loans of reckless bankers. There is no guarantee any of this will work because of the enormous debt in the EU banks. The financial press will love this deal, but the people of these EU countries will not.
Britain’s decision to stay out of any monetary union is not a sign of harmony but another sign of “disintegration.” The 26 countries voted, not to liquidate debt, but to keep it afloat. In the process, they have agreed to add even more to the tab in the form of more bailouts. Where are the trillions of dollars or euros going to come from? I’d say the printing press, and according to legendary investor Jim Sinclair of JSMineset.com, money printing will continue to lift gold prices. In an interview last week, Sinclair said, “The only thing left is to create the liquidity to overcome it. And, with liquidity as your only tool, the risk is hyperinflation. The lack of understanding of what’s brought this about, the lack of understanding that there are no tools in the box that are going to fix it, the understanding that there’s no will to face it politically here or in Europe, it has to convince any thinking person that gold as an asset without any liability attached to it, really the money of the people, is in fact displacing paper, which has been the tool of confiscation of people’s hard work. Nothing has changed that. There isn’t anyone out there in government that understands that. There are no plans that I see anywhere that have the ability to combat that. The logical conclusion then is that the price of gold will reach much higher levels over time.” (Click here for the complete Sinclair interview.)
More…
Dear CIGAs,
“Disintegration.” That’s the word both billionaire George Soros and French President Nicolas Sarkozy have recently used to describe what’s going on with the European economic crisis. It is really a solvency crisis for the big banks there, and leaders are trying desperately to fix the problem. Last week, 26 European countries agreed to give up sovereignty and vote for new rules on tax and spending and tough sanctions to enforce them. One country, the United Kingdom, voted “no” in the form of a veto from Prime Minister David Cameron. Here’s how British newspaper The Sun reported the story, “The PM vetoed a new treaty and kept Britain out of a dodgy deal to save the euro. But his bulldog spirit left the nation facing an unknown future and risking an EU backlash. The PM defended his historic veto of an EU deal intended to save the euro — despite infuriating pro-Europeans.” (Click here for more from The Sun.) Cameron could not give up sovereignty over budgets in his country. I don’t blame him because, after all, the Brits still have the Pound Sterling and don’t need the Euro to conduct business.
Reuters’ take on the story was decidedly against the Mr. Cameron’s veto and said, “Napoleon dreamed of it, De Gaulle fought for it, but Nicolas Sarkozy may have achieved it — a Europe of Nations with France in the cockpit and Britain on the sidelines. The French president emerged as one of the big winners of a European Union summit on Friday which ended with up to 26 member states agreeing to move forward in economic integration around the euro zone, and Britain alone in staying out.” (Click here for more from Reuters.) But what did these 26 countries really gain? This is just a pact to cut everything in order to pay back the loans of reckless bankers. There is no guarantee any of this will work because of the enormous debt in the EU banks. The financial press will love this deal, but the people of these EU countries will not.
Britain’s decision to stay out of any monetary union is not a sign of harmony but another sign of “disintegration.” The 26 countries voted, not to liquidate debt, but to keep it afloat. In the process, they have agreed to add even more to the tab in the form of more bailouts. Where are the trillions of dollars or euros going to come from? I’d say the printing press, and according to legendary investor Jim Sinclair of JSMineset.com, money printing will continue to lift gold prices. In an interview last week, Sinclair said, “The only thing left is to create the liquidity to overcome it. And, with liquidity as your only tool, the risk is hyperinflation. The lack of understanding of what’s brought this about, the lack of understanding that there are no tools in the box that are going to fix it, the understanding that there’s no will to face it politically here or in Europe, it has to convince any thinking person that gold as an asset without any liability attached to it, really the money of the people, is in fact displacing paper, which has been the tool of confiscation of people’s hard work. Nothing has changed that. There isn’t anyone out there in government that understands that. There are no plans that I see anywhere that have the ability to combat that. The logical conclusion then is that the price of gold will reach much higher levels over time.” (Click here for the complete Sinclair interview.)
More…
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![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
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