Monday, December 5, 2011

MF Global And The Truth About Our Entire System

MF Global would not have been able to do what they did without Corzine's close relationship with CFTC Chairman Gary Gensler (see this:  LINK) - Dave in Denver
My thoughts for this blog just sort of flowed from a back and forth exchange I had earlier with long-time market colleague and GATA Chairman Bill Murphy, aka "Midas" of  We had been discussing why the metals sold off today despite the fact that it's becoming more obvious by the day that both the Fed and the ECB will have to print a lot more money OR be willing to accept the consequences of system collapse.

With regard to the market in gold and silver, I said that when I woke up and saw gold down with no real news I assumed it was what Jesse says it is ("Jesse" of  It's become crystal clear that the Government has absolutely no intention whatsoever to stop the illegal manipulation of the metals market. The best thing to do is keep accumulating physical on these dips and be careful with margin.

Bill pointed out that the action in the shares on Friday - unexplainably lower - forecast today's action in the metals, as the big bank manipulators - left unregulated by the regulators - usually hit the mining shares before they try to raid the metals.  I agreed with that for the most part except that the hit on silver didn't work on Friday. It's true the hit on the shares forecast this but the reason for it is to try and reduce the amount of actual Comex gold and silver deliveries they have to make, especially if the receivers (stoppers) ask for the metal to be delivered off the Comex. I think there's a real inventory stress building on the Comex. I think the advent and growth of SLV and GLD alleviated this for a few years but now more investors are understanding the difference between ETFs and real metal and the risks of leaving your metal with a questionable custodian. Just the movement of the reported inventory of metal at the Comex over the past couple of weeks tells us something unusual is going on.

And don't underestimate the stress that the Venezuela move has put on the physical market  (Venezuela President Hugo Chavez has recalled 200 tonnes of gold being stored in England, Switzerland and New York and had it shipped back to Venezuela out of justified distrust of the custodians in those countries). Chavez is no dummy. He didn't do that to try and squeeze the market, he did that because he wants to make sure Venezuela has its gold and there's no risk of an MF-type event at the big bullion custodians like HSBC and JP Morgan. Which brings me to one more point, even though the MF thing will probably be minimized by the media and the perps will walk relatively unpunished, there is no doubt in my mind that it's "raising the eyebrows" of smart, wealthy investors all over the world. This will be a problem for the fractional bullion custodians if I'm right.

Furthermore, for what it's worth, my partner and I think most of the risk of big hits on the metals has been washed out. We think we will see a significant move to the upside over the next 3-6 months and have started positioning our portfolio accordingly. There's no doubt in my mind they are working like hell to contain the risk of a possible run on Comex metal. Again, we should not be underestimating the trust/confidence factor that has been introduced by the MF situation. You would have to be absolutely brain-dead to believe that this can't happen at one of the big Too-Big-To-Fail banks.
Regarding my above-statement about MF, hilariously the CTFC today passed "tougher" regulations with regard to commodity and futures brokers abilities to use customer funds.  Interestingly:  
The Commodity Futures Trading Commission, which voted unanimously to approve the rule, originally planned to finalize it months ago. But the agency delayed the overhaul amid fierce push-back from Jon S. Corzine, who at the time was the chief executive of MF Global.   LINK
It's been my contention all along that MF Global would unequivocally have NOT been able to embezzle customer funds the way they did if it were not for the tight relationship between Jon Corzine and CFTC Chairman Gary Gensler.  In fact, I strongly believe that Gensler should be forced to resign his position and AG Eric Holder should open an investigation into his link to Corzine.  Anything short of this and you can be assured that the integrity of our system is rapidly collapsing.

The truth of the matter is that as people who are paying attention start to really lose faith in the system - the banking and brokerage industry, traditional wealth safekeeping custodians and the entitie which make money insuring their integrity (clearing agents like the CME), and the Government regulators who are supposed to be enforcing the rules already in place but are more likely in bed with the corrupt operators like Corzine - we will see a massive sweeping of money from of all paper wealth depositories that will be channelled into in the world's oldest currency and the only one that does not have any counter-party risk - gold and silver. 

For those who are wondering how the dollar has "counterparty risk," understand that the dollar is backed by the "full faith and credit of the U.S. Government."  The Government is therefore the counterparty obligated to maintaining the value of the U.S. dollar and guaranteeing its use as a currency.  Given that the dollar has lost 96% of its value since the 1913 establishment of the Fed, I would say that the risk of the U.S. Government as a counterparty to the dollar is substantial.  Eventually the dollar will completely collapse, as have ALL "fiat" currencies in the entire history of human  existence.  In the meantime, those who are in a position to do so are stealing as much wealth from the people in this country as they can - and they are often enjoined in this venture by those in charge of preventing the theft.  Corzine/Gensler is the perfect example and proof that I am right about this.  Got gold?


  1. Hi Dave,

    Looks like you stating ''And don't underestimate the stress that the Venezuela move has put on the physical market'' is becoming fact already.

    See; Mark Cutifani CEO of $16B AngloGold Ashanti: “Major Buyers Are Finding It’s Hard To Get Physical Gold”

    Keep up the good work, I really enjoy your blog. Thanx.

  2. Just a quick correction. Chavez is repatriating only about 12M ounces of gold (365 tons) and not 200M oz.

    All the best


  3. Hey Dave really on a roll lately thanks! I know this sounds like conspiracy theroy maximus but the more I think about the MFing Global the more I get the pricklies that the whole things was contrived to stop the Dec. COMEX run a lot of us were expecting. What a great way to

    1)Cancel out a lot longs and deliveries
    2)Punish the heck out of the long spec/hedgers and deprive them of capital. i.e. we know who most of the shorties are (Resolution thru the trustee is delayed or maybe never...)
    3)Scare the crap out of everyone else thinking about going long in the commodity space except the TBTF.
    4)Leverage up odds for TBTF shorting success

    Keep the circle tight by the sinister connections of the butt buddies.

    5) Trust that the supreme audaciousness of the whole thing is beyond mosts ability to conspiracy theroy the whole thing

    Next something really odd happens to a key participant???

    Sounds a bit crazy I know but I am well past underestimating the crap these bas-turds can contrive.

  4. Bill Clinton collected 50k per month from MF Global courtesy of Corzine, prior to the collapse.

    Corzine should have his fucking nuts cut out. The thieving piece of shit should be forced to explain where the billion $ went.

    Watch what I say. That degenerate cocksucker won't do a fucking single day in prison.

    What a crock of shit.

  5. Kind of OT but relevant to the big picture:

    John Hussman, one of the few economics PhDs I respect (and therefore one of the few I would not spit at, in the street), goes postal:

    "...Frankly, I am concerned that Wall Street is becoming little more than a glorified crack house. Day after day, the sole focus of Wall Street is on more sugar, stronger sugar, Big Bazookas of sugar, unlimited sugar, and anything that will get somebody to deliver the sugar faster. This is like offering a lollipop to quiet down a 2-year old throwing a tantrum, and expecting that the result will be fewer tantrums... "

    The full article, like all of John's work, is well worth your time.

  6. Is there a list of the MF Global customers? Are there any politicians on it?

  7. Ron Paul Defends The 99 Percent: ‘It’s A Very Healthy Movement’

    During a campaign stop in Concord late last month, Paul was asked for his thoughts about Occupy Wall Street. Unlike other GOP candidates who have denigrated the protestors, including Newt Gingrich and Michele Bachmann, Paul defended the movement and attacked those who used ad hominem attacks against it. “In many ways, it’s a very healthy movement,” said the Texas congressman. He went on to push back against absurd criticisms of the movement: “I’m not one to say, ‘why don’t you get a bath and go get a job and quit crybabying.’ I don’t like that at all.”

    PAUL: In many ways, it’s a very healthy movement. I’m not one to say, “why don’t you get a bath and go get a job and quit crybabying.” I don’t like that at all. I think that’s a misunderstanding of where the unemployment comes from. The unemployment comes from policy, government policy, and it’s the federal reserve and the business cycle is not a consequence of free markets. That doesn’t mean I think they’re all perfect out there. [...]

  8. Dave!

    Nice move in Rye Patch. I think I recall your fund was in it.

  9. (Dave)

    Re: Rye Patch - good memory! I wouldn't chase it but I think it's still very very cheap relative to its potential. We'll see a lot more stocks like RPM start popping like that and then making moves that will shock and awe.

  10. Dec 7 is last day to be registered R to help us Ron Paul supporters get to the next level beyond caucus. Caucus is Feb 7 and you can help us get to the next level of the establishment and nominate Ron Paul.

    Please put some actions where your thoughts are, and help us make this happen for America.

  11. The Dec 7 registration is for Colorado. With everyone helping, we can win Colorado! One night, Feb 7, free, two hours of your time.

    Must be registered R very soon to take action and help us.

    Dave, thanks for the forum and your articles!

  12. Thank you for your blog.

    If you haven't listened to the interview by Tekoa da Silva with Mark Cutifani of Anglo Ashanti.

    A few interesting nuggets in there but that doesn't apply to the fractional system.

    Firstly Big buyers want direct access to the product.

    Secondly it is mind boggling about the mining shares values! Is this time different, ie will they really stay this way relative to gold or diverge even more? Its hard to believe.

    Ashanti's cashflow increased by 400% since 2008 and the share has gone nowhere . In fact the share touched 46 the first time in Nov 2003. Mind boggling!

    At the same time the company is a very different company now - no hedges, more efficient with the South African part savings in energy of 17%.

    On the nationalization front - I am of the opinion that as taxes etc increase for the miners so Gold will go up - but here is the crux - Governments will do the same to the end product - so miners are leading in that thinking. Governments will do the same to physical by increasing the cost of carrying it and "exchanging" it.

    The interview

  13. Perhaps this is of interest here.

    If you have come across Project Camelot then you might have a view about certain disclosures happening at a faster rate now in finance, technology etc.

    Here something interesting about Swiss Banking. Their reason of existence was always for "SAFE" and therefore "SECRET" banking. This is now very difficult to achieve.

    Guess what will replace this - as there is the need even more so today!

    Well your own bank in the form of physical precious metals.

  14. What’s an example of how a credit default swap functions? Chris Whalen provides this example:

    When JPMorgan does a credit default swap with a customer, they keep the collateral. There is no separate trust company that is part of the exchange that holds all the money the way you do in a good poker game.

    So nobody knows if it’s fully collateralized or not because they’re trusting JPMorgan to operate their business in a prudential way. Until we had the minor reforms of Dodd-Frank and the Corrigan Group before that, the dealers weren’t posting any margin with one another. It was all naked. And so the first thing that Corrigan did when he started getting people focused on this was to force the dealers to require minimum margins from one another. That was the problem. The systemic risk was actually among the big dealers. They dealt with that somewhat but look at Dodd-Frank, they didn’t touch the bilateral relationship between the client the dealer bank.

    So if I am the customer, and I’m dealing with JPMorgan, I can’t go to any other bank because all these contracts are bespoked, they’re all different. I can’t get another bank to net me out, so that’s the problem. On an exchange, all contracts are fungible—I want to go long, I want to go short, whatever it is, I do my trade, I don’t even know who the other counterparty is because I’m dealing with the exchange.

    What is the “Antidote” to this form of Greedy Bastardism? You want to have an exchange traded product, you want to have full public disclosure of all trading every day so we can see all prices for all trades, and you want to require physical delivery of the underlying asset,” says Chris. “In other words, you own a bond, a loan, it could be commercial paper, even a vendor. Let’s say you are big vendor and you have credit exposure with a bank and you want to hedge it. That would be okay, you could deliver the accounts receivable for your insurance payment. That’s what we need. It’s to re-link this derivative market with the real world. And then we’ve got something,” he explains.

  15. Solution?
    So if there is no Deus ex Machina and if governments or bankers can’t rescue the world, who can and what is the solution. Let us return to the wise von Mises to look at the options available now:


    Ludwig von Mises

    Mises is absolutely correct: “There is no means of avoiding a final collapse of a boom brought about by credit expansion”. Whatever politicians, bankers, economists or others experts say, there is no solution to this crisis. We have reached the end of the road and are now staring into the abyss.

  16. "Just the movement of the reported inventory of metal at the Comex over the past couple of weeks tells us something unusual is going on."

    Thanks Dave. IMO, it's further confirmation that our discussion a while back was portending something of importance.

  17. ‘Gold For Bonds’ in Japan as Bond Buyers Get Gold Coins - May Enhance Returns 5.9 Times

    The government and the department of finance of Japan also understand the value of gold.

    Japan will reward investors who buy reconstruction bonds with half an ounce of gold, an added incentive that could boost the return by nearly six times according to Japanese Finance Minister Jun Azumi.

    Individual investors who purchase more than 10 million yen ($129,000) in the debt with a 0.05 percent return and keep it for three years will receive a gold commemorative coin weighing 15.6 grams (0.55 ounces), the Finance Ministry said in Tokyo today, worth about $948 based on current prices for the precious metal.

  18. My baloney has a first's jon
    My baloney has a second's corzine

    The Very Structure of Risk Management/Internal Audit Departments In Big Broker-Dealers Are J-O-K-E-S! Ask MF Global Clients
    Internal audit/risk
    management needs to answer to a separate entity, apart from the CEO and
    possibly apart from the Board itself if the CEO has had a part in
    selecting the board. This way there is true independence and the
    nonsense that you just saw with MF Global has a much less lkely chance
    of happening.

  19. Hillary wants to investigate Russia but this might be more germane to the US...

    Jon-Bubba twist
    MF Global hired Clinton’s group

    Even as Jon Corzine’s MF Global was collapsing, a firm that includes former President Bill Clinton in a senior post was raking in huge fees for public-relations and financial advice from the ill-fated brokerage, The Post has learned.

    Clinton’s office insists the former president did not profit from the relationship between MF Global and Teneo Holdings, where he is chairman of the advisory board. But Teneo, on whose advisory board former British Prime Minister Tony Blair also sits, was paid $125,000 a month for at least five months in one of MF’s biggest consulting arrangements, according to sources at the brokerage house.

    Read more:

    uh humm.....

  20. So Dave,

    you wouldn't initiate new positions in Rye Patch at where it is now, $0.68-.70?

  21. (Dave)

    re RPM: i think if you really want to invest in it, by a 1/3 position here so you have room to add in case market volatility or lack of news/fatigue takes it lower.

    mining stocks are volatile and juniors like RPM are very very volatile. KGC owns like 13% of it so that helps stabilize it a bit. eventually i think KGC could buy it out.

    if you read yesterday's press release, you'll see that they are going to start drilling on the new land immediately so we should get some results back in Q1 2012. If those drilling results are good, this stock will fly over $1.