Wednesday, December 21, 2011

The Comex Exposed

I just saw another "worse than 2008" post linked on  I don't know about anyone else, but I just don't find that commentary helpful.  That's old news.  It's no-value-added to comment on that. 

I was going to post on the ECB Long Term Refinancing Operation (LTRO) today and explain why it's just another "back door" QE operation, but I'm too busy to get into that at the moment.  I'll try to post something on it tomorrow.  I explained in a comment response under yesterday's post what the basics are. 

At any rate, celebrity hedge fund manager Kyle Bass has been commenting lately on the reasons to be diversifying heavily into physical gold and silver and why it is important to avoid using Comex futures contracts and ETFs for this purpose.  The bottom line is that they are derivatives of owning real gold, not valid substitutes.  In fact, they are fraudulent substitutes and we have seen from the MF Global abortion that even owning warehouse receipts entitling you to delivery of bars is no longer a valid claim on Comex gold.

Bass' firm apparently went to do an informal audit of the Comex:    The Comex had $80 billion of open interest vs. $2.7 billion of actual gold inventory. That means that actual gold at the Comex is less than 4% of the potential outstanding claims. It will only take one big delivery month 4% of the open interest decides to stand for delivery and the Comex is busted.  You'll see he also comments that the bars that were owned and supposedly allocated for Bass' firm were scattered all over the vaults.  This is bad. 

If this concept doesnt' horrify you, then carry on watching reality TV and worry about Kate Middleton's pregnancy. Those are the important topics anyway, right? Who cares about the fact that bankers and politicians are openly stealing your wealth.

Here's the video and it's well worth taking a 2-minute break from MTV to watch:


  1. Kate Middleton's pregnant? OMG!


  2. Results for #boycottJPM!/search/%23boycottJPM?q=%23boycottJPM

  3. Bank chased out
    MF Global victims start boycott of JPMorgan

    Read more:

  4. I've kept track of Bass for the past 2 1/2 years. I listen to all his interviews right after they are posted, and hang on every word. He knows his shit lights out. Kyle Bass and this blog are my favorite sources. ZH is okay, but on that site anymore you have to wade through a huge volume of useless shit to arrive at worthwhile info.

  5. Dave: you are preaching to the choir. You have to wonder just who is left playing at comex. Meaning, pardon the expression, are the remaining players just playing with themselves?

  6. Bass claims that his firm purchased around a billion in bullion. This is versus the $2.6 in OI.

    Wouldn't you expect to see inventory movement between dealer and customer?

    In addition, he also used the phrase "they weren't segregated" in reference to where his bars were located in the vaults.

    This to me says that he is holding gold in an unallocated account.

    What say you, Dave ?

    In regards to rehypothecation, I did so with your chart from yesterday, and created one of my own.

  7. rickjames: nice chart on Turd's comment section. I thought about taking that extra step but was too lazy. (you ever see Dave Chappelle's skit on Rick James? It's epicly funny)

    Ya Bass's comment that he took delivery of $1 billion in bullion caught my ear as well. If you assume his average delivery price was around $1000 (since he's been somewhat tardy to the gold train) spread out over a couple of years, then he's taken delivery of about 1 million ounces. I can easily swallow this number w/out seeing obvious movement out of the Comex per the delivery reports. I think all of us know that the Comex reports are somewhat fraudulent anyway and taking delivery off-Comex of 1mm ozs over a couple years is very believable. Given his comments, I can guarantee you that once he saw the state of storage at the Comex, he started moving gold out pronto.

    It's just like David Einhorn unloading all of his GLD once he actually read the whole prospectus and understood the source of fraud embedded in it - his fund was the largest holder back in early 2009 - and moving it into actual physical that is safekept privately. As is the bullion in our fund.

  8. rickjamescouch,

    Bass is a trustee of the University of Texas. He purchased the bullion for the university with the university's funds nearly 1 1/2 years ago. The bullion is being stored in the vaults of a bank. I believe the bank is HSBC in NY City.

    It was widely publicized in the news when it occurred.

  9. Rickjamescouch - I'm a total newb at this PM shit but even I know that unallocated means-pooled-means-leveraged-means-shit - physical bars that you go to collect are only available when you've beaten down the merchant's sales pitch for unallocated and stipulated ALLOCATION. If you go unallocated, you might as well have gone for an ETF.


  10. LOL. Great description of the process. You'd be surprised at how many moronic investment advisors and investors think GLD is gold.

    You might be interested in this piece I did on GLD back in early 2009. I need to update the numbers in it but everything else is good:

  11. MF Global wasn't too big to fail. After all, it failed. MF Global wasn't the "prime domino".

  12. Dave - I actually think I read that article already, IIRC via LeMetropoleCafe.

    All the best.

  13. Stock market
    top is coming

  14. Thanks for your comments on the ECB 500 facility yesterday.

    I think it would be very worthwhile for someone like you to do an in depth analysis of this as you were intending to.

    I have thought about it extensively - Harvey - calls it by its rightful name, ie OE. It seems the market hasn't reacted to it.

    To me this is as all debt comes into existence - backed by nothing. Once the three years are up then what - banks are deeper in debt - having to pay back what troubles them now plus this facility!!! How on earth does it improve things. Liquidity???? Well its a short term thing liquidity - by its definition always is. So liquidity is the symptom and not the cause. Liquidity issues only come into existence due to some other causes and thus to solve liquidity with liquidity is like solving debt with more debt.

    This is QE slightly disguised to me. And its almost the same size as the original TARP.

    It is these kinds of facilities which got the world into the problems we have.

    So are we all hoodwinked here??

    The definition of QE should be wider than just actually printing or monetizing.

    Your previous comments

    re the ECB loans to EU banks. Your question actually brings up an interesting distinction between "QE" and a simple liquidity facility. The ECB said that there would not be any bond purchases by the ECB, which is what is defined as "QE" because it involves printing money and expanding the Central Bank balance sheet. Loans, however are not regarded as "QE" because it involves a fixed time commitment for the borrower to pay back the loans. In this case 3 years. So the argument (not mine) is that this is "sterile" money in that it did not involve a permanent increase in the money supply.

  15. Another thing...

    You may read Jim Willie on occasion - well his latest piece about Agent2000 and that the good guys are depressing the paper gold market to suck out the physical.

    Whatever you think about his latest.

    What I think is that in a game theory when you get hammered continously by a certain part of the game - eventually you say ok how will I progress and try and work around this. And I can well believe that the "good" guys are now using the same thinking and by doing that taking the actual asset away. Sucking the system dry of physical to open another exchange somewhere else.

  16. One last note...

    One big takeaway of this latest ECB (EuroBond) issue is that the central planners WILL DO ANYTHING TO SAVE THE BANKS - aka the system!!!!!

    This issue comes a few weeks after the world Central Banks provided swaps at low rates.

    So these people are trying to hoodwink us with the QE definition. IT IS ALL THE SAME.

    Hence the best tactic now is to help the planners suppress the paper precious metal system but suck the physical dry...

    As with all the paper stuff - the regulators are helping this transfer of real assets along. When will the light go on and all will realize that this "money/asset system" is all a fractional system - ie Ponzi system.

  17. Who Owns Our Politicians? Goldman Sachs

    You know the old saying, “a picture is worth a thousand words”. Hmmm, is there any correlation here to the contributions (purchases) they are making now? Is Romney their new choice for continued unregulated fleecing of America? Perhaps. As Romney says, he is a business man not a Washington insider. But he sure wants to become one and possibly with the aid of large corporate dollars like we are already seeing, he will become the insider.

    Not a pretty picture.

    Former President Thomas Jefferson, we have a problem.

  18. Here an understandable piece regarding the ECB action.

  19. Dave,

    Thank you for replying to my Harry Dent post the other day.

    I agree with you that he exagerates things and uses exageration to sell his newsletters and books.

    You make a good point in that he ignores the government influence for the most part.

    Like Jim Rogers says "I am long commodities because if the economy gets worse then teh government will print money because that is the only thing they know how to do and when that happens commodities will go up and if the economy gets better commoditied will go I am long commodities"

    Simple yet true.

    I am gonna be pulling the trigger on some more Silver Maples soon.

  20. Ann Barnhardt Discusses MF Global with Peter Schiff - "There Is No Rule of Law Anymore"

    There are some interesting facts brought out in this discussion. I do not necessarily agree with everything she says, and she is obviously outraged, and Peter Schiff is promoting his agenda. This leads to a rather comical exchange between her and Peter towards the end regarding the proposed boycott of the financial industry.

    The way the government, the Exchange, the Court, the CFTC and Wall Street treated the MF Global customers after their money was stolen is an absolute disgrace.

    And in this perhaps is a cautionary tale for the rest of us who might not have been affected directly by this particular episode.