Icarus

Gold futures are now being traded on HKMEX. Good news for competition and free markets. Bad news for the CME and the dollar. When commodity futures are traded in RMB the dollar's reserve currency status is gone. A gift to the east from the CME. http://www.hkmerc.com/en/index.html

Suggesting that margin requirements do not affect price reveals gross incompetence. It is a well understood that raising margins decreases price and lower margins increases price. See, for example, the paper 'The role of margin requirements and haircuts in procyclicality' by David Longworth of the Bank of Canada. 'In the upswing, a reduction in haircuts or initial margins increases the maximum leverage available to a borrower even if other credit terms remain unchanged. As the leverage that can be effectively employed increases, additional purchases of collateral assets can be financed.... ...In a downturn, actions taken by individual market participants to protect themselves, such as calling for additional collateral, reducing the amount of credit extended to specific classes of counterparties or ceasing to accept certain types of collateral, can induce further contraction of the supply of credit through collateralised lending. This may lead leveraged investors to liquidate assets, which in turn may lower collateral values and intensify deleveraging pressure through further margin and collateral calls, or other responses by credit providers. In extremis, where calls for additional collateral cannot be met, forced liquidations or seizure of collateral by lenders can result, reinforcing and accelerating the adverse asset price dynamics.' http://www.bis.org/publ/cgfs36.pdf To even suggest that raising margin requirements does not affect price suggests gross incompetence at best. People who do not understand the relationship between margins and prices should not be setting margins at the CME. In which case they should step down. If they do understand the relationship between prices and margins they have knowingly commited fraud.

Over the years I've come to trust my own judgement over the advice of most so-called experts.But there are rare exceptions to this rule. Ted Butler's advice on silver is one such exception. His review of last weeks mess is here http://news.silverseek.com/SilverSeek/1304873055.php

That is a restricted, local metal exchange. I could not buy and sell gold there. 'At present the Chinese regulations stipulate that only the companies or organizations that are organized and registered on Mainland China or Mainland citizens are allowed to participate in the trading of local futures markets.' http://www.shfe.com.cn/docview/docview_410172833.htm The Hong Kong based exchange is aiming to provide a regional benchmark price. I will be able to buy and take delivery of metal. 'While gold futures trading on Asian exchanges has demonstrated significant growth, there is currently no contract that is or will likely become a regional benchmark contract for gold pricing. Without a regional benchmark, true price discovery for gold is either confined to the local in-country market or must depend on the European or North American markets. In-country markets generally restrict foreign participation and often subject it to adverse currency restrictions or tax treatment. Meanwhile, global benchmark pricing from the western hemisphere provides imperfect hedging for Asia’s trading community. HKMEx is well positioned to address the demand of Asia’s trading community for the establishment of a gold futures contract as the regional benchmark.' http://www.hkmerc.com/en/products/products_information/index.html

The 18th should be a big day for gold. The opening of the HKMEx allows gold price discovery to take place in Asia. It will be interesting to see how the comex enjoys a little competition. If they are less corrupt than comex, which means anything less than outright price fixing, they are likely to become the world's preferred trading venue. After recent events in the silver market I think most people would rather trade somewhere where they are less likely to see 5 margin hikes in two weeks. The PBOC might turn out to be less accomodating to JP Morgan than the fed. I shall be looking to the far east for price discovery from the 18th. Hopefully more commodities, such as silver, oil and wheat will be joining gold soon. http://www.hkmerc.com/en/index.html

The sooner the better. My living standards were cut to bits by the boom. I wasn't stupid enough to allow myself to take out loans I could never hope to repay. But those who were bid up prices with money they didn't have, preventing me from buying a nice home. Idiots were calculating the maximum monthly payment they could possibly make after they bought food and petrol and taking out the largest possible mortgage. Prices became ridiculous. The entire got economy turned into a house flipping ponzi scheme. And all though it I was forced out of the market. I kept my cash and waited for the inevitable crash. But no! Instead of a crash I got zero percent interest rates. My savings were and are being eroded, so that the foolish could keep their houses at my expense. Idiots get a free house, and I get to pay for it!

His misconception is here. 'here is no reason for investors to expect anything more from silver: Why would a metal -- a commodity with no yield -- accrete value?' Silver is a commodity, not a company. Its price responds to supply and demand. Increased demand from China, India et al industrialising pushes up the price of all industrial commodities, like silver and oil. Do you see the price of oil falling anytime soon? But silver is better than oil. Why? Because silver is a store of value. As money is printed increased investment demand pushes up the silver price.

If this were a top I'm pretty sure the CME wouldn't need to raise margin requirements twice per week.

Seeking Alpha's article 'Short Sellers Now Screaming About a Buy Side Silver Conspiracy' is one of the best articles on silver I've read in a long time. 'It was only a matter of time. Now the talk of silver price conspiracies has shifted from long buyers to those on the other side of the fence. On April 21st, the historically anti-precious metals editorial staff of the London Financial Times ran an article titled "Silver Surge Prompts Conspiracy Theorists". Meanwhile, order was reestablished among the short side conspirators once the COMEX trading floor opened on Monday morning.' http://seekingalpha.com/article/265381-short-sellers-now-screaming-about-a-buy-side-silver-conspiracy?v=1303940178

Jim Turk gave a really good explaination of backwardation here. When silver can't be borrowed traders cant fill contracts with borrowed silver and repay with cheaper future contracts. It's very bullish for silver.

The 'experts' have been calling a bubble since gold hit 400 dollars per ounce. Strange that they never noticed the biggest house price bubble in history. Taking into account risk and inflation I don't see anything I'd like to invest in. Take a look at the divident on stocks With inflation, measured using fiddled CPI stats, is four percent. Do I really want to risk my wealth investing in stocks during an inflationary depression? Gilt yields are also about four percent. So if inflation increases I would lose money by buying gilts. European govt bonds yields look good, but I doubt they can afford to pay. Where should I put my wealth to escape the gold bubble? Any suggestions?

Here's an article discussing the length of commodity bull markets by a GEIer - http://www.moneyweek.com/investments/commodities/money-monring-commodities-bull-market-10605 And a video by krassimir petrov - http://video.google.com/videoplay?docid=-4020393826410739752#

In the 20th century there were three commodity bull markets. These were from 1907 -1923, 1933 -1953 and from 1967 to 1982. All three lasted for 15 years or longer. I don't have a crb / dow chart easily to hand, but gold is a good proxy for commodity prices. This gold / dow chart shows the last century's commodity and stock bull markets. The current bear market in stocks and bull market in commodities began 1n 2000. History suggests there are about four years left to go. Interestingly several web forums have actually banned the discussion of commodities and metals during this huge commodity bull. The same sits also encourage people to buy stocks during a major bear market. Such sites have probably cheated a lot of people out of a lot of money.

It's almost magical, isn't it? Wealth is disappearing from savings, pensions, stocks, housing and the like and reappearing in your silver coins. They may still look and weigh the same but, without moving or changing form, they have somehow been imbued with a bunch of extra purchasing power. But the best is yet to come. All the crazy money printing means inflation will be rampant for years. And even small percentage increases are beginning to look good as a percentage of your original investment. A one dollar increase is ten percent! What's more some states are sensibly beginning to reintroduce sound money. Giordano Bruno wrote about that here 'Thirteen states currently have proposed measures which would reinstitute the long suppressed need for a precious metals standard. Utah is the furthest ahead in this battle, its House just recently passing a bill which would make gold and silver officially recognized as legal tender within its borders. All that remains is a signature from Utah's governor' http://www.silverbearcafe.com/private/03.11/return.html So sit back and enjoy. This bull market still has a fair bit of gas in the tank.

I must admit that these charts are very good. My general feeling about using charts to make investments is that the process falls somewhere between hepatoscopy and tea leaf reading. However, your success here does leave me quite impressed. In fact several people on this forum have seemed to successfully use charts to make predictions over the years . Some that go way beyond extrapolation and are actually quite extraordinary. Perhaps there is something to these lines joining seemingly random highs and lows. Yet I remain sceptical. Sure charts are good for identifying general trends. You can visually get a sense of rates of change and such. But I personally would be reluctant to make an investment based on a chart alone. When it comes to money there is no place for superstition.

This is the worst of both worlds. Pensions, savings and fixed incomes are destroyed by inflation. And house prices will still need to fall so that people can reasonably afford to buy them.

Housing benifit is going to be phased out in 2013. 'The universal credit will see existing out-of-work and in-work entitlements, such as Jobseeker's Allowance, Income Support and Housing Benefit, paid as a single lump sum although it is unclear how many benefits will be included in the new payment.' http://www.bbc.co.uk/news/uk-politics-12486158 I expect this will lead to a crash in the btl market. Given the choice some people may chose to share houses or live in cheaper 'bedsit' type accomodation and keep a larger portion of theior incomes. This may lead to many rental houses being split into smaller units.

I don't know much about her to be honest. After GW Bush did I can understand why people have strong feelings about the republicans. GW was a walking, talking disaster. He took the US from surplus to bankruptcy, started a couple of aimless wars, introduced the Office of Homeland Security etc. etc. On the other hand this video only shows Sarah Palin making a slip of the tongue. For me the people who made the video come away in a much worse light. I am left with the impression of her being targeted by a bunch of hate-filled buffoons. Maybe it would be better to explain how stupid her policies are?

Governments attempting to keep prices at boom levels is characteristic of economic bubbles. First an asset class, perhaps houses or stocks, tulips or bags of sand, has its price bid up by moneylenders. As the price of the asset increses more and more people invest their wealth in that asset. They see huge returns and congratulate themselves for being such clever fellows, having forseen the increased demand for tulips. But after a time reality begins to assert itself. People begin to realise that paying two years salary for a tulip bulb or a million dollars for a one bedroom flat or a hundred thousand euros for a bag of sand is rather a lot. They decide to sell and prices begin to fall. The trouble is that, by this time, a great portion of the economy has become dependant on the rising price of that asset. So many people need a bag of sand to sell for the same price as a house in the country that if there price fell the country would face ruin. It would be a calamity. So the government comes in to bail out banks and prop up prices.

Silver at 20 gbp per ounce qill be a milestone. The pound stirling was originally a pound of silver. In those days a penny was a silver coin 1/240 of an pound in weight. At twenty gbp per ounce a modern pound is worth an old penny.

Never noticed that before. I only have a few ASEs, but mine are like that. New silver coins have a lovely white quality to them. It's easy to see if you look at the reeded edge. They also ring like a bell if you jangle them together.

I'm waiting to see if JP Morgan and co can take the price down some more. Hopefully the price will go lower. I'm not good at calling the market but I think they might be able to get it below 25. Or even $20. I'd say hold off and let the suckers take the price down. I can't guarentee there wont be a rally, but I'm hoping for a real gift here.

They just don't know when to stop. Jeff Nielson talks about the informal defaults that have already been taking place in this article. 'For obvious reasons, there has been a great deal of discussion about actual, formal “defaults” in the gold and silver markets. Among those “obvious reasons” is that informal defaults are apparently already taking place in both markets. Beginning in the London gold market over a year ago, and now rumored to be occurring in New York’s “Comex” silver futures market, buyers who have legally contracted to take “physical delivery” of the metals they have purchased are said to be accepting large, paper bribes to accept a “cash settlement” instead.' http://www.bullionbullscanada.com/index.ph...&Itemid=131 If you are offered spot plus ten percent to settle in cash they are not doing you a favour. These are not generous people making you a kind offer from the goodness of their heart. But you are doing them a favour if you accept. When the COMEX can't deliever you can ask for as much cash as you like and they will pay. 'I'll take a two hundred dollars per ounce thanks very much. Or the physical silver, that I know you don't have.' Remember the proposed limits tell us that going short 125% of the entire physical supply is acceptable. So going long 125% of the deliverable supply and standing for delivery must also be acceptable. March is going to be a month to watch. http://standfordelivery.com/stand.php

The selling is because of the COMEX's proposed position limits. The limit for spot months is proposed to be 25% more silver than the deliverable supply per trader. Basically they are designed to allow JPM to short as much as they like. 'Spot-Month Limits The proposed rules set spot-month position limits at 25% of deliverable supply or five times that amount in exclusively cash-settled contracts for entities holding a physical position less than 25% of the deliverable supply. A trader with positions in both the cash-settled and physically delivered contracts could hold up to the spot-month limit in each contract. In the first phase of implementation, the CFTC proposed to adopt DCM estimates of deliverable supply. In the second phase, the CFTC proposed to determine deliverable supply itself, although it may still rely on DCM estimates.' http://www.lexology.com/library/detail.asp...98-eac76246bbbd Non spot months may, of course, be shorted without limit. I expect the selling to continue until all the silver has given away for rock bottom prices. When there is no silver available for delivery the COMEX will default. Physical silver prices will rocket. Confidence in the COMEX will evaporate. The value of silver derivatives will also collapse. This could domino into the rest of the derivatives market causing the entire financial system to collapse. The comex is running out of silver quickly. 'We witnessed a massive withdrawal of silver unprecedented in the history of the comex. First there was a smallish 6507 oz of silver deposited to two customers, one being 497 oz and the other 6010 oz). But just look at the huge withdrawals: Four customers (not dealers) withdrew a total of 1,019,310 oz from the comex vaults. This is real silver leaving from 4 registered vaults. The individual withdrawals are: 579,081, 30,380, 399,994 and 9855 oz. The dealer (our bankers) also were involved in the withdrawal of silver to the tune of 769,941 oz (there were 2 dealers involved removing 102,866 and 667,875 ozs). When you see this massive drain of silver, the fire is raging. The total silver withdrawal by both dealer and customer totalled an astronomical 1,789,251. The Brink's trucks must have been very busy yesterday. The comex folk notified us that an amazing 85 notices were sent down for servicing for a total of 425,000 oz of silver. The total number of silver notices sent down so far total 323 or 1,615,000 oz. To obtain what is left to be served, I take the open interest for January at 153 and subtract 85 deliveries leaving a total of 68 notices or 340,000 oz left to be serviced. Thus the total number of silver ounces standing in this non delivery month of January is as follows: 1,615,000 oz + 340,000 = 1,955,000 oz (Thursday total = 1,625,000). As promised to you, this number is rising and will continue to rise until the end of the month as our banker cartel scrambles to get any morsel of silver to satisfy the massive demand for this metal. Our bankers are stunned to see such a huge amount of silver options in a traditionally slow month.' http://harveyorgan.blogspot.com/2011/01/ma...-silver-at.html That was December. And hasn't demand for physical silver been unprecidented this month? This could blow up nicely. And soon, too.

Now that the price is falling the COMEX the will surely decrease margin requirements . I mean, they increased them twice per month as the price rose. Part of their 'normal market operations' so I'm told. So undoubtably they will now reverse those margin increases. Don't you think?