Mega-Battle Investor Opportunities and Threats: Gold, Debt, Markets, Politics
Stock-Markets / Financial Markets 2010 Jul 30, 2010 - 12:29 PM GMTBy: DeepCaster_LLC
“In his latest commentary blogger FOFOA (Friend of Friend of Another) concludes that gold lease rates are being falsified to conceal that gold for some time has been in backwardation because supplies available in exchange for fiat currency have dried up. Along the way FOFOA reports that, like GATA's Adrian Douglas, he too last week had trouble getting access to the usual data at the Internet site of the London Bullion Market Association.” (emphasis added)
“FOFOA: Lease rates falsified to hide gold backwardation” FOFOA via Chris Powell, Gold Anti-Trust Action Committee Inc., 7/26/10
“The London Bullion Market Association has just taken the highly unusual step of blocking access to statistics relating to the trading activities of its member bullion banks. This information has been available to the public since 1997 but as of this week it is available only to LBMA members.
I have recently written a series of exposes of the LBMA (see References 1-4 below) using the association's own data to show that the LBMA's bullion banks are operating on a "fractional reserve" basis. My analysis indicates that the bullion banks are holding only 1 real ounce for about every 45 ounces of gold that they have sold, a reserve ratio of just 2.3 percent…
There is a cover-up of back-door injections of liquidity of physical gold, and the LBMA now is trying to conceal trading information. I interpret the LBMA's move to secrecy as a sign that the opportunity to get real metal is closing fast…” (emphasis added)
Adrian Douglas, GATA.org, 7/25/10
But the next day July 26, 2010 Adrian Douglas indicated:
“Interestingly today the information I sought was once again accessible in the public domain at the LBMA Internet site. So I called the LBMA to find out what had happened……(LBMA) suggested that the problem perhaps had been with my computer, but I told her that others had been unable to get access to the data at the same time as well.
Only then did (LBMA) reveal that the LBMA had completely changed its Internet site architecture…
A bit strangely, today an inquiry to the LBMA from a major U.S. newspaper as to what had happened with the clearing data was met with "no comment."
So the question remains whether the new Internet site architecture initially blocked access to the clearing statistics and was modified after publication of my essay, or if the blocking was simply a glitch in the Internet site's updating.”
“Adrian Douglas: LBMA restores access to gold, silver clearing data” Adrian Douglas, GATA.org, 7/26/10
“…When AIG received a bailout worth $182.5 billion, it reimbursed Goldman and other banks…
Much of the federal rescue money for AIG was used to pay its obligations to its Wall Street trading partners on credit default swaps. The biggest beneficiary of the AIG money was Goldman, which received $12.9 billion…
The payments have been controversial because of concerns that the banks should have absorbed more losses on their investments rather than be reimbursed with taxpayer money. Last month, a watchdog panel raised new doubts over the likelihood taxpayers will be fully repaid for the government's bailout of AIG.”
“Documents detail $4.3B in Goldman Sachs payouts” The Associated Press, 7/24/10
Titanic Battles are being waged in Several Venues. The Battles are Related. The Stakes are Very High. Investor Opportunities and Risks are Substantial and Increasing. Here we briefly Survey the Titanic Battles, and note the consequent Opportunities and Threats.
The Cartel* is striving mightily to suppress the Gold Price, and has been succeeding modestly recently, but with increasing difficulty. That Gold Price Battle is related to the others we outline here, so we address those first.
In the Political Arena the private for-profit Federal Reserve has gotten nearly everything it wanted from the Fin Reg Bill. It got no Meaningful Audit, but just a very limited “Audit” to serve as a Fig Leaf covering Politicians going into the November Election.
And, incredibly, it got the right to determine the Fate of Non-Financial Companies which it deems to be systemically significant – a Power characteristic of Marxist Command Economies, if there ever was one.
And, several Obama Administration nominations to Courts and Administrative Agencies arguably have a similar Marxist pro-all-powerful Government perspective as well.
Such a perspective represents a Threat to both Capitalism and Civil Liberties. The Upcoming Elections provide an Opportunity to “Vote the incumbents out”.
But two Major Contests, important to the Cartel*, remain undecided (as we write) in this pre-election season.
One is the battle over who will head the new Consumer Protection Agency. From The Cartel’s Perspective, Elizabeth Warren represents someone who does not “play ball”, via e.g. not unconditionally sanctioning the Mega-Bankers and their Allies and Agents highly leveraged, highly profitable, and highly systemically risky (unless the taxpayers will pick up the tab) OTC Dark Derivatives Game.
Of course, the Real ‘Main Street’ U.S. Banking System of State, Regional, and Local Banks is suffering – over 100 have failed already this year.
Indeed, with over $600 Trillion in Notional Value of Dark OTC Derivatives still outstanding, Systemic Risks are intensifying as a result of this ongoing Mega-Bankers “Game”. (See “Surmounting The Armageddon Scenario & Cartel ‘End Game’” (2/26/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com and www.bis.org, path: statistics>derivatives>Table 19.)
Another Battle of Great Interest to the Powers-that-be, pits the Globalist Open Borders Advocates against the Internationalist Partisans of Sovereign Nations and States.
The Sovereign State of Arizona recently passed a Carbon Copy of the Federal Law regarding Illegal Aliens, but Arizona intends to enforce it, unlike the Obama Administration which apparently thinks Border Protection is not a Critical National Security Issue. A Judge recently enjoined enforcement of key Provisions effectively gutting the law, albeit perhaps only temporarily.
There is much at stake in this battle because it is set in the context of about 30 million de facto American Unemployed (Real U.S. Unemployment is 21.6% per shadowstats.com).
With legal immigrants and offspring adding about 2 million annually to the U.S. population and illegal about another 2 million, and illegal immigrants alone costing $338 billion per year according to The Center for Immigration Studies for “free” (taxpayer-funded) Health Care, Education, etc. this is an issue that will not disappear.
And a Titanic Battle Rages too in the Equities Markets as reflected in the number of recent Panic Buying and Panic Selling Days. Last Thursday was the ninth 90% Panic Buying UP day since the April 26 top and last Friday the eleventh 90% Panic Selling down day since that top.
This unhealthy Equities Market Action is an all-too-close analogue to the Market Action which creates a Hindenburg Omen typically preceding Market Crashes. In the Omen Scenario, a Hindenburg omen is created when a number of new highs are coupled with a number of New lows. We provide our Markets Forecasts in our August, 2010 Letter in the ‘Latest Letter’ Cache at www.deepcaster.com.
Internationally, the Sovereign (and other) Debt Crises have not disappeared but rather are intensifying. The EU’s recent Solution to the PIIGS debt problem was no Solution at all, but rather mainly an “Extend and Pretend” Bailout of the Big Banks. Europe just “kicked the can down the road” a few months.
And a Titanic Battle also rages in the Precious Metals Market. The recently Weakened, but not yet Vanquished, Cartel* still continues its Gold and Silver price-Suppression Attempts, with some limited Success very recently. The Battleground these days had been centered around Gold $1,200/oz. pivot point. But The Cartel has been winning very recently, pushing Gold down to $1,160ish as we write, as we earlier Forecast.
Nonetheless we recommend being Buyers of certain forms of Physical.
Indeed, we emphasize that recent widely distributed Allegations/Revelations indicate that certain Ostensible Bullion Repositories do not have the bullion they say they do (above). This has led increasing numbers of Major Buyers to demand Delivery and Possession of Physical, a wise move in our opinion.
Regarding Gold Bullion, significantly, the LBMA data on Gold trading activities was removed from public view and then restored, but with conflicting explanations from LBMA. We concur with Adrian Douglas that it is likely LBMA does not have the Physical Gold they say they do. Indeed, Douglas is probably right in saying that they are “holding only 1 real ounce for about every 45 ounces they have sold”.
If true, this would tend to put a floor under the physical Gold price. We also concur with Douglas that the disappearance of the Trading Data, and its reappearance is “curious”. So curious, we believe that it reflects the extreme difficulty the Cartel is encountering in obtaining Physical Metal.
A Deficit of Physical is The Cartel’s Achilles Heel. And that is, in part, why Physical Commands such a High Premium. Our unscientific survey of some retail Dealers yesterday revealed that the form of Physical Bullion we recommended recently is selling for 25% more than the Gold Bullion spot price. It is thus increasingly difficult for The Cartel to sustain any Takedown.
As well, we think the disappearance of LMBA Gold Trading information from public view and alleged falsification of Gold Lease rates are but two more signs that the Cartel is under increasing pressure to acquire Physical Metal.
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
The Cartel’s Degree of Success in its ongoing Gold and Silver Price Takedown Attempts will be a Measure of Cartel Strength, which we believe has been significantly diminished in recent months, especially so far as Bullion is concerned. Our Forecasts regarding Gold and Silver are posted in the ‘Alerts Cache’ at www.deepcaster.com.
Regarding Equities, in the long run, Cartel Intervention in the Equities Markets cannot greatly influence their ultimate destination, but just delay it.
Regarding Debt, there is increasing evidence that The Fed is Covertly Monetizing U.S. Debt – A covert Quantitative Easing as we pointed out in last week’s article. But this too cannot continue indefinitely. The impact of $77 Trillion in Downstream Unfunded Liabilities plus Trillions in Budget Deficits cannot be neutralized indefinitely.
That is a Main Reason why Mid and Long-term, we remain very Bearish on U.S. and Much other Sovereign Nation Debt. Too much Sovereign Debt, too many budget deficits and too much Fiat Currency Printing and Credit Provision will eventually impel higher yields and eventually much higher inflation (i.e. Hyperinflation) in the middle and long term.
The key is determining when the U.S. Treasury market is about to break (resulting in sky-rocketing yields) and determining that requires attention to the Interventionals.
And what of the fate of the U.S. Dollar given the Tidal Wave of Debt? The Cartel has some $49 Trillion in Notional Value of Dark OTC Derivatives Foreign Exchange contracts available to move the U.S. Dollar and Other Currencies Markets according to the BIS. But Paper alone cannot indefinitely forestall consequences.
In sum, the rest of the Northern Hemisphere’s Summer and Fall, 2010 will provide a Key Test of Cartel Strength, or Weakness, and will reveal more Opportunities and Threats.
Best Regards,
By DEEPCASTER LLC
www.deepcaster.com
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