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

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.

 

Evolution Securities Warns Of "Total Carnage And Meltdown" As European Bank Sales Of CDS On European Sovereign Debt Soar

As much as we hate to say it, Europe is now without a shadow of a doubt the new AIG, only this time such heretofore considered insane (in retrospect) activities as doubling down to infinity on ones TBTF status are out in the public record for all to see. At least AIG conducted Joe Cassano's "made in London" $2.7 trillion bet on home prices never dropping in the shadows of Curzon 1. Whereas two days ago we made it  clear how the unwind of trillions in rehypothecated securities could be the avalanche that buries first Europe and then the world, we explicitly excluded the impact of synthetic products such as CDS. Now it is time to bring the picture full circle, and put CDS front and center. As Bloomberg reports, "BNP Paribas SA, France’s biggest bank, sold a net 1.5 billion euros ($2 billion) of credit- default swaps on the nation’s sovereign debt, according to data compiled by the European Banking Authority. UniCredit SpA, Italy’s biggest lender, and Banca Monte dei Paschi SpA are net insurers of more than 500 million euros each of their government’s bonds, and Oesterreichische Volksbanken AG, the Austrian lender which has yet to pay interest on 1 billion euros of state aid received in 2009, has guaranteed a net 839 million euros of its national debt, EBA data show." (EBA source - link). For those confused by the above, here is the explanation: European banks, in order to generate modest cash flow from collecting on the pariodic interest premiums owed to them in order to plug increasingly large capital shortfall holes that otherwise would simply keep growing ever larger, have sold and continue to sell massive amounts of default protection on their very own host countries! As a reminder, it was precisely this that destroyed AIG when the illusion of the credit bubble burst.

The Bull, Bear, And Secular Case From BofAML

While consensus forecasts for next year continuing to be muddle-through mediocrity with a crashtastic defensive bias, BofA Merrill Lynch provides a very succinct outline of the bullish, bearish, and interestingly secular cases for risk assets going forward. The cross-asset class implications are noteworthy and provide an excellent jumping off point for asset allocation decisions. We are not sure the seeming knife-catching perspective of "buying humiliation and selling hubris" will work out, but one thing is for sure, with this volatility, relative-value remains the critical alpha as beta chops everyone up. Once again the bull case relies heavily on government printing presses and the bear case on the reality of debt saturation breaking through.

Report: Federal Agents Demand Customer Lists From Food Storage Facility

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by Mac Slavo, SHTFPlan.com:
“Just because I’m paranoid doesn’t mean they’re not out to get me.”-Unknown

You may recall that the FBI, Department of Homeland Security and local law enforcement have regularly issued bulletins regarding domestic terrorist related activities that include suspicious purchasing habits to look for and how to recognize the 8 signs of terrorism. Federal training programs held for police departments across the country detail specific habits and characteristics of potential domestic terrorists including everything from homeschooling, leaning towards libertarian political philosophies, and holding strong religious views, to reading survivalist literature. It’s no secret that the government has been attempting to keep tabs on Americans who are acting outside of the status quo, warning those in the mainstream that any deviation in “normal” behavior should be construed as suspect and potentially dangerous – even your best pal could be a terrorist if he begins acting counter to his usual behavior.
The latest government effort to identify would-be terrorists and persons-of-interest comes to us from Tennessee, where federal agents have taken the need to acquire actionable intelligence to a whole new level. They are, by all accounts, no longer just sitting back and waiting for business owners like surplus store owners or the general public to provide them with suspicious activity reports, but rather, are taking matters into their own hands.
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RANsquawk Weekly Wrap - Stocks, Bonds, FX – 09/12/11

Submitted by RANSquawk Video on 12/09/2011 - 12:43 RANSquawk

Gold is the Rock of Stability in the Middle of the Euro Storm

from GoldMoney.com:
We witnessed a somewhat disappointing performance from the ECB’s Mario Draghi yesterday, at least for those that were expecting the “big bazooka”, and many in financial markets were. After all if the ECB is to exceed its treaty-defined mandate, it might as well get the go-ahead from the original source of that mandate: elected representatives of euro-member countries. So the central bankers left their options open and passed the buck to the politicians meeting today.
That does not mean that nothing was done, interest rates were lowered to 1%, historical lows for the common currency, which leaves the most important currencies in the world all in negative real rate territory as this interactive chart shows.
Markets expressed their disappointment with zest: EURUSD, major European indices and Brent crude plunged, risk spreads and euro debt yields rose. Even gold fell from above $1,750 per troy ounce at the beginning of Draghi’s speech to a close just above $1,710, although the gold price in euros remained near its €1,300 per ounce peak.
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US Army Preparing To Crush #OccupyWallStreet

 

 

How an Economy Collapses… and How to Protect Yourself (Part 1 of 2)

by Paul Mladjenovic, GoldSeek.com:
There are growing fears that an economic collapse is on the way. Is this fear justified? Before we conclude that it is a by-gone conclusion and that it’s time to head for the hills, let’s first cover how and why an economy collapses. In this essay I talk about economic collapse as an “internal event”. Keep in mind that there are “external” reasons for an economy to collapse (such as war and/or natural events such as earthquakes etc.)
Keep in mind first that we are talking about an “economic” collapse… don’t confuse this with a “currency” collapse. History has witnessed thousands of currencies collapsing into oblivion and in many of those the economy in question was able to get through it without general harm to the economic infrastucture and much of society. Yes…currency collapses are very painful but they don’t necessarily spell doom for society.
My former country, Yugoslavia, experienced both a currency collapse and also an economic collapse. It was, after all, a communist country (hard-core socialism) and so it was already an “economic basket case”. The populace was already suffering before its currency was hyper-inflated into oblivion. During 1993-94, Yugoslavia’s hyperinflation caused the dinar (its currency at the time) to become worthless and the currency indeed collapsed. As I have written before, “Economic disintegration leads to social disintegration”. Soon the currency collapse led to economic collapse. Chaos and civil war followed.
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Interview with Ian Farrar – Trained by Jim Sinclair – Gold Buyer Since 1990 12-6-11

from The Financial Survival Network:
Ian Farrar was fortunate to connect with legendary investor Jim Sinclair. Sinclair has been one of the acknowledged masters of precious metals investing. And he should be, he’s been doing it for many decades now. In 2001, he predicted that gold would hit $1650 per ounce by January 11, 2011. He was only a few months off, a pretty amazing call made so many years ago.
What did Jim Sinclair know that the rest of us didn’t? He understood what governments do in times of trouble, and he understood that the greatest currency collapse in history was on the horizon. While it is very difficult to predict the price of any security or commodity in the short term, some people are able to recognize and follow a long term trend. Gold and Silver have been in 11 year bull markets. You can trace the beginnings of their moves back to the end of the DotComm (DotBomb) era.
While many others have piled on into the precious metals bandwagon and have provided valuable commentary, only a few were spot on in 2001. Ian has followed Jim’s advice to the “T” and has gotten through much of the Global Financial Collapse unscathed. But the good news is, it’s not too late for you to do the same.
Click Here to Listen to the Interview

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