Thursday, November 10, 2011

Fool Me Once, Shame On You

Fool me twice, shame on me.  Fool me three or more times shame on...insanity?  I thought about this reading Ted Butler's latest newsletter discussing the MF Global situation and the problematic role of the CME and the CFTC in this financial catastrophe.  Butler ends by saying, to paraphrase, maybe this is the event that will get the CFTC to crack down on the CME.  Watching Butler year after year espouse hope and optimism for the eventual reform of our system and the restoration of Rule of Law and property rights with respect to our financial system is even more hilarious than watching the video of that shit-for-brains Governor from Texas in the debate last night.

Make no mistake about it, Butler does cutting edge, brilliant analysis on every aspect of the technicals and fundamentals of the silver market.  But for some reason he goes blank on his ability to analyze human nature and the completely corrupt nature of our system.  It's gone way past the point of no return and there will never be real change until the system collapses and a new one is formed from ground zero.

One would have thought that after Long Term Capital way back in 1998, Enron, Refco, Amaranth, Madoff, Bear Stearns, Lehman, AIG, ad nauseum that our system would have been properly reformed by now.  Not only do the disasters get worse, the outright theft and corruption become more blatant. That's insanity. One of the board members of the CFTC just the other day admitted in public that the silver market is manipulated.  And of course nothing will done about this.  GATA has bombarded the CFTC and other Governmental entities with evidence for at least a decade now in support of the precious metals market manipulation.  Nothing has been, is being or will be done about it.  Bank on that.  Jon Corzine should end up in jail over the MF abortion.  But both myself and a person smarter than me would be very surprised if he gets much more than a wrist-slapping and a ban from the securities industry for 10 years, or something like that.

What will happen is that eventually the market forces will overwhelm the paper manipulators and there will be a move higher in the precious metals and mining stocks that will shock everyone.  It will make some of the moves seen with internet stocks during the tech bubble seem like non-events.  What will trigger this?  I don't know.  I do believe that at some point China will say that it will be happy to continue exporting goods to the United States of Walmart shoppers but that it wants gold or silver for settlement and is not interested in dollars.  I would say that the process has already started given that China openly has trade agreements with several large trading partners (Iran, for instance) in which the dollar is not used.

Until then, the best way to play this market is to learn to adapt to the manipulation and corruption.  I plan my core investing and my trading around the expectation that the market is always manipulated.  But that notwithstanding, I know that the precious metals sector is still in the nascence of a long term bull market and this means that I buy corrections and take profits on big moves higher.  I always keep a core position because one of these days the manipulation attempts will fail and this market will embark on a truly parabolic move that I don't want to miss.


  1. How a financial bailout works

    It is a slow day in a damp little Irish town. The rain is beating down
    harshly, and all the streets are deserted. Times are tough, everybody is
    in debt and everybody lives on credit.

    On this particular day a rich German tourist is driving through the town,
    stops at the local hotel and lays a €100 note on the desk, telling the
    hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.

    The owner gives him some room-keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher.

    The butcher takes the €100 note and rushes down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of animal feed and fuel.

    The guy at the Farmers' Co-op takes the €100 note and runs to pay his drinks bill at the friendly neighbourhood pub. The pub owner slips the money along to the local prostitute drinking at the bar - who, in spite of facing hard times, has always gladly offered him her 'services' on credit.

    The hooker then rushes over to the hotel and pays off her room bill to the hotel owner with the €100 note.

    The hotel proprietor quietly replaces the €100 note back on the counter, so that the rich traveller will not suspect anything. At that moment the traveller comes down the stairs, states that none of the rooms are satisfactory, picks up the €100 note, pockets it and leaves town.

    No one has produced anything. No one has earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.

    And that, dear ladies and gentlemen, is how a basic financial bail out
    package works!

  2. Every day silver is under $50 I consider it a day to BTFD.

  3. Ted Butler = Charlie Brown
    CFTC = Lucy
    Silver positions limits = football

    Lucy will always snatch the football. Charlie Brown will always end up flat on his back.

    We like you Charlie Brown but, let's be real, you are chump.

  4. Everyone should re watch Once upon a time in America

    Is There No Shame?

    “Never be afraid to raise your voice for honesty and truth and compassion against injustice and lying and greed. If people all over the world…would do this, it would change the earth. ” - William Faulkner

    I wish I could believe William Faulkner’s advice was possible in the world we live in today. But sadly, I am losing hope in our civilization. We seem to have entered a death spiral with little likelihood of pulling out. Our society has become so degraded and our populace so apathetic and willfully ignorant, that I think we are too far gone to recover. Honesty, truth and compassion have been soundly defeated by injustice, lying and greed. Our technologically advanced society has become a stinking cesspool, devoid of humanity, common sense and morality. Those with the power and wealth who control our country do not concern themselves with quaint concepts like good and evil, right and wrong, or moral and immoral. Sociopaths see no obligation to society, humanity, or posterity. They only care about themselves, their wealth, their status, their reputation, and their control of others. They are incapable of feeling shame or remorse. They blindly march forward towards their own and society’s self-destruction.

    As I’ve watched this tragedy unfold I was struck by the thought process of rich men in positions of power. They have huge egos and believe they are above the law. They think so highly of themselves they believe they can make the rules and ignore the laws which the little people must follow. They have no moral compass whatsoever.

    This is an institutional cancer that eats away at the fabric of our society. It is not isolated to Penn State. It is a societal sickness that threatens to overwhelm every facet of our lives. There is a constant thread that runs through every incident that comes to light. In 99% of the cases it is men protecting men. Money and greed always trump morality and truth.

    Not only have our educational and religious institutions failed us, but our financial and political institutions have spectacularly self-destructed over the last decade. Shockingly, these institutions have been run predominantly by men.

  5. Good day, Dave

    I'm an avid reader and I'd like to say I (and probably alot of other people) appreciate your blog, which provides me much analysis-tainment almost daily, for free.

    So anyway, I thought Blackrock would've at least been down a bit today, and it was green! As someone who knows the investment world, what's the rationale behind those buying/holding BLK? I mean, they were JUST extolling the virtues of Italian debt last month. What gives? Is there some sort of hope that yields will go back down, maybe?

  6. Turner Interview on MF Global Accounting Practices

    Nov. 9 (Bloomberg) -- Lynn Turner, a former chief accountant at the U.S. Securities and Exchange Commission, talks about the accounting practices of MF Global Holdings Ltd. Turner speaks with Erik Schatzker and Stephanie Ruhle on Bloomberg Television's "InsideTrack."

  7. (Dave)

    RE BLK: thanks for the feedback. I appreciate it. Regarding people who own/buy BLK - I have no idea why anyone would own any financial stock in our system. Blind faith I guess. Look at John Paulson, he made an absolute fortune shorting the mortgage market and then turned around and became one of the largest shareholders of BAC and C and got his ass kicked - or at least his investors' ass kicked. Thru 3 qtrs he was down like 40% this year...

    The play on Italian bonds is that if you assume that ultimately they get monetized, on a nominal basis its a good return. I would assume they will be monetized by ECB printing. But hey, if it doesn't work out for the managers at BLK, it's someone else's money anyway, right? The guys at BLK get paid regardless...

  8. Will Western Civilization Rediscover The Moral Foundations Of Sound Money?

    Modern fiat currency fuels the growth of both government and the financial sector because it is not a promise to repay that which has been produced. Rather, it is a threat to squeeze the taxpayers of the future, including the yet unborn. And because the tokens can be manufactured at will, governments can harness the power of inflation to pay off their debts in coin that is worth less than the currency in which those debts were incurred.

    Those near the source of modern money creation are expert at its manipulation, weaving it into complex financial instruments that function more like casino chips than real money. Wealth accumulated under this system is not capital at all, but rather a pile of IOUs, the sum total of which can never be redeemed. When too many customers try to redeem these IOUs at the same time, financial institutions fail—unless these institutions are bailed out by governments, propped up with more IOUs. This can cascade until too many people try to redeem those IOUs, at which point governments begin to fail.

  9. "How a financial bailout works"

    There is a major falicy in that simplistic story. The falicy is, what is owed is equal to what is earned.

    The problem we have is people living beyond their means. If they get paid every penny that is owed them, they still will be far short of paying their debts. That is why the bailout won't work plain and simple.

    There is a reason employees at McDonald don't drive a Porsche and it's not because they don't want one.

    Well we ever learn?

  10. Add worldcom, adelphia, authuranderson, haliburton, ah forget it, there's simply too much. Thank the fiat system for all of this fraud. The bre-x fraud is not even 15 yrs old yet and I'm sure many more bre-x type of fraud will surface if/when this mining stock boom does ever happen. Fraud fraud fraud, so what's new?