Dear Victor,The SK Options link I provided above was their 2012 update of their Aug 27 2010 article (1) wherein they do acknowledge Adrian Douglas’s work published on August 14/15…it was this update by SK Options that provoked all the recent attention. But in the intrerest of accuracy, you are correct and lest I stand accused alongside SK Options of failing to update acknowledgements you did provide me the link to Dimitri Speck’s work which I referred to above, and for which I thanked you at the time. SK Options suggested refinements which have made this a viable trading concept and Mr Christian’s reference to averages comes across as double-speak in the context of SK Options work.
As to this feud with Andrew Maguire, I thought I effectively refuted your doubts about the Feb 5 2010 trade, but possibly they remain though I cannot see how that could still be the case. Claims of "fishy" claims is one thing, but accusations of "total fraud’ as made by Jeff Christian is another entirely. I note the admin redacted some of Mr Christian’s words which presumably went beyond the pale of "total fraud"…the mind boggles. I may have missed earlier tit-for-tat tirades that have drawn this ire but my own experience of dealing with Andrew Maguire through Coghlan Captial reveals him to be everything he claims. I admire the fact he provided information to the CFTC that sparked the ongoing enquiry into silver manipulation.
I note an earlier comment expressing bewilderment that Mr Christian is regularly attacked whenever he appears in print and though I have attacked him here I think I have done so in a civil way and with cause in regard to his comments on this thread. The referred comment also noted that Mr Christian is a competitor of the Bullion Banks and so should be regarded as an ally of the aggrieved small precious metals investor. As with schisms within faiths, the fiercest enmity is often reserved for those closest, seemingly in broad agreement but caught up in detail.
And so, not wanting to fall foul of Sayre’s Law myself, best wishes to all.
SR
(1) http://www.skoptionstrading.com/updates/2010/8/27/proposing-an-overnight-gold-fund.html
Strawboss,
if you like CEF, you might want to take a look at GTU-UN.TO (Central Gold Trust) and SBT-UN.TO (Silver Bullion Trust) [Yahoo! tickers] which are part of the same family of funds, just gold and silver separately. Only listed at the TSX though.
Is it possible that the mining sector is leading the metals in a long term downtrend
I don’t think anyone can give you a precise prediction on this. I have two thoughts. Firstly, it is possible that paper gold goes down substantially if liquidity becomes scarce, for example, because the U.S. goes back into recession or there is more trouble in the banking sector. Down by how much?
No idea, but if the price of gold is too low, a lot of physical gold will disappear into strong hands. I read this morning that Russia and Mexico just reported to the IMF that their central banks had bought some 16 tonnes each in March alone (numbers from memory). There must be plenty of others who don’t report, including China. So I guess 2012 will be another year of record purchases by the official sector (contrary to what GFMF have claimed), and the trouble with the dollar has not even started yet. So if the paper price drops too much, the market is at high risk and may easily run out of reserves.
How about the mines? Perhaps the mines will continue to lag although gold itself performs rather well. Why? We are in a situation in which physical gold is used as a hedge against a major breakdown of the financial system or against a dollar crisis. If the situation gets really bad, the mines won’t help. Just think about where many of the mines and the head offices of these companies are located: Australia, Canada, Britain - all countries whose central banks sold most of their gold long ago. So if there is a dollar crisis, I wouldn’t be surprised if there are import/export restrictions or outright nationalization of the mines. Sure, you will be compensated: in cash and after the stock market has crashed. Note that when Australia sold their gold reserve, it was explicitly stated that they need not worry because they had so much gold in the ground.
Think about it from the point of the government. Your central bank sold their gold a decade ago. Suddenly, the US dollar crashes, and they need to stabilize your own currency. You need a lot of gold immediately. The London gold market will fail within the first few days. Then what? Which gold would you take? I think it is a good guess that the mines and the major ETFs are the obvious targets for nationalization and seizure. In contrast, it is rather unlikely that they will send the military with metal detectors from door to door in order to confiscate the private gold.
So the mines might be lagging because this time, the threat is a dollar crisis, and the mines don’t offer protection in this case.
Sincerely,
Victor
Lance Lewis has given us a potential short term signal mechanism for lows in the gold price apallingly but wonderfully named the "GLD Puke". He has observed that there has been a noticeable reduction in GLD holdings towards the end of past corrections.I have no evidence, however it makes sense to me that any large trader who could induce cascade selling in the metals would then take delivery of baskets of physical from the ETF at their desired price, thus leaving the impression of capitulation selling, aka The GLD Puke.
I would welcome any comments on this theory as I have taken it into account when considering the effects of systemic stress.
@S Roche
You are absolutely correct that I was mistaken about Feb. 29th. The event that precipitated the decline in metals was not an FOMC Minutes release, but rather what Mr. Bernanke didn’t say in a speech. My error there, but honestly I don’t see that it makes much difference. My POINT was that the sell-off was in reaction to news, and basically made sense. I stand by that analysis.
Please do not falsely accuse me of making ad hominem attacks on Mr. Organ or anyone else, as I have done no such thing! Ad Hominem means attacking a person’s character, as opposed to the substance of what they say, e.g. calling a person a "Fat, ugly retard" or somesuch. I’ve done no such thing. I have characterized these men as charlatans, and I stand by that characterization. A charlatan is a person who represents themself to be an expert or authority on some subject, when in reality they are not. I have more than adequately substantiated this allegation by debunking the factual inaccuracies in their substative statements and writings. That’s not ad hominem.
@General discussion
I’ve debunked the whole "PHYS has the gold but GLD doesn’t" myth elsewhere, and don’t have time to repeat my case here. Frankly, the distinction was off topic to start with. My point was that given there are plenty of easy ways to make investments that really are backed by bullion (choose PHYS over GLD if you must), I can see no intelligent reason for anyone to want a fractionalized unallocated bullion account. While we may disagree on the extent to which there is real cause for concern about GLD, one thing we should all be able to agree upon is that unallocated accounts definitely do NOT have bullion backing, and are only receivable credit interests. A couple of people have alluded here to leverage - I was not aware of leverage being a feature of unallocated bullion accounts.
So I’ll restate the question, because I think it’s worth discussing: Can anyone think of a GOOD reason to prefer an unallocated account over owning shares in (insert whichever bullion-backed ETF or closed-end fund you prefer)? The ONLY advantage I can see is that the funds all have very small custodial fees, whereas some unallocated accounts do not charge any custodial fee. Of course they don’t own any metal either, so there’s nothing to be custodian of! So can anyone think of a reason where opening an unallocated bullion account would be a SMART move? I can’t.
I pity anyone who takes Andrew Maguire seriously. He continues to do his best to perpetuate the myth that the ratio of cash-settled (paper) to bullion-settled (physical) transactions has something to do with leverage, an utterly ridiculous contention that has been widely debunked. He also continues to imply that the bullion in LBMA valuts collateralizes cash-settled "paper" forwards, another ridiculous falsehood. Anyone listening to his recent "Special Announcement" podcast announcing his "Army" should have instantly recognized all the ingredients of a con job. It was instantly obvious to me that Maguire is setting himself up to be able to frontrun and exploit his new "army" of fools. To me, Maguire appears to be as phony as they come.
One place where I disagree strongly with Jeff Christian is the question of the charlatans’ intent. I do not represent Jeff, but it appears to me that he has become convinced that GATA, Ted Butler, etc. are consciously and intentionally lying with the malicious intent of deception. I believe he bases these views on the fact that some of these guys have been around this market for 30+ years, and have obviously had more than ample opportunity to learn the basics about how the markets work. Jeff appears [to me] to be deducing from this that since they clearly have had the opportunity to "know better", they must "know better", and therefore he believes them to be disingenuous and intentionally misleading people.
I couldn’t disagree more. I think these guys are just as dumb as they seem, and I don’t think there’s anything more to it than that. I am particularly impressed (favorably) with Ted Butler’s character. I’ve never met Ted personally, but we’ve exchanged several e-mails, and the guy comes across to me as a perfect gentleman. I have no doubt that Ted means well and sincerely believes every single word of the utter nonsense he writes in his newsletter. He just doesn’t seem to grasp that the facts refuting all of his theories are right in front of him. Or so it seems to me, anyway.
All the best,
Erik
Well, I can’t win this one…the whole world reports that Bernanke hosed down QE3 in his Congressional testimony when he didn’t mention it but repeated all his dovish proclivities (and I provide the transcript). Then , the gold price action was because Bernanke did NOT mention QE3.The selling action started Feb 29 well before Bernanke spoke. Lazy journalists saw the gold price drop, knowing Bernanke had spoken they assumed it must have been something he said, or when confronted with the transcript, didn’t say. The fact the LTRO 2 was being announced, and a la SF Peg Day, gold was pummelled, the more likely explanation just gets lost in the noise. If she floats she is a witch. Some analysis.
Apart from that, wonderful thread and thank you. I woud be happy to share with you what I believe is convincing evidence of price signalling on Feb 29 if you would like to contact me via this site.
Regards,
SR
Here is why the GLD puke indicator is plausible. Recall how GLD acquires the gold. It does not work like a unit trust or an investment fund in which you pay in, and then they purchase bullion for the additional cash. It rather gets the gold by arbitrage. This works as follows. There are a number of institutions (about 15) called "Authorized Participant" (AP). They can add or remove bullion from the trust in multiples of a basket (100000 shares) as follows:
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Give the trust the gold that corresponds to 100000 shares and receive 100000 new shares (creation) in turn
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Give the trustee 100000 shares (redemption) and receive the corresponding gold. There shares are then cancelled.
This way, every outstanding share is always backed by the required amount of gold (contrary to one of Ted Butler’s favourite false claims by the way). The maximum amount of unallocated gold in GLD is less than one LGD bar, i.e. the last fraction that is too small for one bar.
The arbitrage works as follows: If investors buy GLD shares (but nothing else happens in the market), GLD will trade at a premium over the gold price. Now an AP can buy a basket worth of gold in the market (allocated) and sell the new shares at the premium, earning an arbitrage profit. Conversely, if investors sell GLD (but nothing else happens in the market), GLD will trade at a discount. Now an AP can buy a basket of GLD shares at a discount to the gold price, take the bullion out of the trust and sell the bullion, again earning a small profit from the arbitrage.
The arbitrage in and out of GLD is very interesting for the following reason. It may be that the main price action is not in GLD shares, but in physical gold in the OTC market (which you might not see by looking at the paper price alone). For example, if there is strong buying of physical gold OTC. In this case, an AP can buy GLD shares in the market, redeem the shares and get the bullion.
So a GLD puke (i.e. GLD loses a lot of inventory by arbitrage - Lance Lewis uses a 1% threshold) indicates that one of the following two happens:
a) there is more buying pressure in the physical OTC market than buying pressure in GLD shares
b) there is more selling pressure in GLD shares than in the physical OTC market
Conversely, if the GLD inventory increases by arbitrage, this is because
c) there is more buying pressure in GLD shares than in the physical OTC market
d) there is more selling pressure in the physical OTC market than selling pressure in GLD shares
And so the GLD arbitrage is a probe by which you can see something about the flow of physical gold in the OTC market that you cannot otherwise see. The spot price, for example, is a mixture of allocated and unallocated, and may not show this.
Now Lance Lewis says that GLD pukes (i.e. loss of more than 1% of inventory) precede a price rise. This suggests case (a) above. This has indeed worked in 2008-2010. But since September 2011, there were a number of false signals (that would have destroyed the performance by the way). So why does this not work?
An anecdotal explanation might be that John Paulson’s fund was selling GLD, and so what happened was (b) above which is not bullish at all. Finally, you can try to find a correlation between GLD inventory changes and future price behaviour. The challenge is open. I haven’t found any yet by the way. If you can do better, please tell me. (One reason this dooes not work may be that the spot price is a mixture of paper and physical, and even if GLD inventory changes indicate the flow of physical, this might not result in changes of the paper price). Perhaps GLD inventory changes correlate with changes in the lease rate? Not yet verified.
Sincerely,
Victor
Erik,I have been behind on reading posts and articles and listening to podcasts (Chris, Adam - I guess that means you are doing a good job providing content - like drinking from a fire hose) and just managed to read your initial post on this thread.
I want to say that both this post and the other post you made regarding resource shortages and the likely strong handed reaction powerful countries will take to ensure that they get more than their fair share of the pie when push comes to shove were among the best that I have seen in my nearly one year of CM membership.
While I appreciate most of the content on the sit and I have to say that the Crash Course went a long way toward helping me clarify a lot of my thinking (I have given DVD’s to many friends) I think that your two recent posts are a good dose of reality and a good counter towards a possible trend towards over-optimism or of blindly taking what is said or written as handed down truth without thinking for one’s self.
When I compared the two metals podcast as you suggested I did see a big difference. While I am no expert it did seem like Harvey Organ was making a lot of unsubstantiated opinions sound like facts.
I also listed to the McAlvany Weekly Commentary and they routinely present people with opinions different from theirs so their listeners can absorb competing viewpoints and amalgamate from many points of view. The Harvey Organ interview was interesting, but I agree with you that people need to keep in mind any potential bias or agenda when listening to speakers.
Thanks for your involvement with the CM site. I appreciate you taking the time to do it.
Joe
The puke indicator is discussed more here;
Link: FOFOA: Who is Draining GLD?
FOFOA presents his own theory as to what might be going on… and surprise…!! it involves unallocated Gold accounts;
"What we appear to have here is a severely tight noose around the supply of Bullion Bank deliverable physical gold at a time when the Giants are chomping it up! Bullion Banks have many means at their disposal to shuffle around a globally limited quantity of gold reserves and get it to where it needs to go. Especially when "important clients," like those in the East or Middle East, come calling for physical delivery or allocation.
Upon getting requests from unallocated depositors for either outright withdrawal, or more simply for transfer into allocated accounts, any Bullion Bank has options. Yes, it can seek to acquire (through borrowing or purchase) the requisite ETF shares for redemption of a "basket" in its special capacity as an Authorized Participant of GLD, or it can pursue alternate avenues such as buying gold on the open market or, better still, borrowing it from either its own unallocated pool of deposits or turning to other members in the BB fraternity to borrow the adequate quantity to cover the immediate needs. Whatever combo is deemed most efficient or cost-effective is what the bank will do.
But what if those other options are disappearing faster than a sack of currency left on the COMEX trading floor? If gold (in size) on the open market is scarce, the unallocated pool is spoken for (in other words, undergoing allocation) and the fraternity brothers are all suffering the same noose, what do you think becomes the most efficient and cost-effective option? Raiding the GLD reservoir perhaps?"
Victor, You said,While I don't disregard the threat of nationalization... at some point during the impending crisis... I don't ascribe to the market the same forward looking intelligence that you suggest here... ESPECIALLY when it comes to anything related to hard asset investing. I have to say that I am starting to lean more toward Erik T's contention that some players are just dumb... and I often think of the stock market as a big dumb dog.. running wherever it thinks the stick has been thrown. A big dumb dog named Momo Algo. My opinion is that the miners are still acting like levered Gold and Silver (if you don't believe me.. just watch.. Silver miners will often move harder than AGQ up or down). PM's are in the doldrums... and so, in a magnified sense, are miners. Just give them a reason... like a hint at QE3 tomorrow.. not that I am making any predictions.. and they will explode back up."Think about it from the point of the government. Your central bank sold their gold a decade ago. Suddenly, the US dollar crashes, and they need to stabilize your own currency. You need a lot of gold immediately. The London gold market will fail within the first few days. Then what? Which gold would you take? I think it is a good guess that the mines and the major ETFs are the obvious targets for nationalization and seizure. In contrast, it is rather unlikely that they will send the military with metal detectors from door to door in order to confiscate the private gold.
So the mines might be lagging because this time, the threat is a dollar crisis, and the mines don’t offer protection in this case."
Folks,
I just plugged back in. As Erik T. mentioned on the weekend, I tend not to hang out in sites. I came in tonight (to avoid work?) to see what had been said since Sunday. Quite a bit, and quite a bit of good stuff. I feel it all should be printed and edited into a handbook of metals trading.
I saw some comments I would like to respond to, but did not keep notes. I will make a few points, however.
-
Someone alluded to the class action lawsuit against Morgan Stanley several years ago. I was the expert witness for the plaintiffs on that. Oh, the stories I could tell!
-
Someone expressed surprise about my comments toward Andrew Maguire. Here are some notes on him. Sorry about the ugly type, but it’s from a presentation about silver conspiracy theories. The point is, he does not seem to ever have worked in the metals markets, and has refused to qualify himself to every legitimate news outlet that has tried to write about his incredible claims.
In March 2010 Andrew Maguire approached conspiracy theory marketing groups. He said he had worked at Goldman Sachs in metals trading, and had first-hand knowledge on how JP Morgan manipulated silver prices on a short-term basis. He also said that he had sent an e-mail to the CFTC in February 2010 saying that JP Morgan was about to ‘slam’ the silver market.
More important:
The conclusion is that he is an attention seeker who has never worked in the metals market.
- It gets better. Here are some notes on Ted Butler. Bet you did not know these things. In 2008 a ‘student’ (reminiscnet of the Iranian students we knew in the late 1970s) pretended to be asking me questions out of honest intent. In fact, he fed my responses to Butler. Butler threatened to sue me, until I sent him one of his letters, a copy of which he had sent to me in the 1980s, to the attorney general at the time. Butler never got back to me. See, when Butler first started making his allegations, we were paid by some mining companies to work with him, to see what he knew and to help him understand the market. it was clear he did not have any real information, and he seemed resistant to learning about how markets work. In that regard, perhaps Erik T. is right, and these guys are just too stupid to learn. I give them the benefit of the doubt, however: I think they are nasty evil liars, not stupidos de primo clase, as my Italian mother used to say. So here are some notes on Butler.
Ted Butler was a broker in southern Florida for Drexel Burnham Lambert in the 1980s. He put together an illegal commodities pool of his clients segregated accounts and attempted to use that pool to manipulate frozen and concentrated orange juice futures illegally circa 1984.
The CFTC noticed the irregular trading patterns in FCOJ and investigated.
Drexel fired Butler, paid a fine for insufficiently supervising him, and let the CFTC deal with him.
He offered to show the CFTC how Drexel was manipulating silver prices in exchange for a more lenient penalty. What he showed the CFTC led to Drexel being fined for one or two rather small pre-arranged trades, apparently made with a bullion dealer after market hours in order to allow the dealer to have a squared, fully hedged book.
Barred from the commodities markets by the CFTC, Butler began sending letters to politicians and mining company executives talking about Drexel’s silver market behavior. After Drexel went bankrupt in early 1990, Butler said it was Merrill Lynch manipulating silver prices. After Merrill exited the silver bullion business in the middle of the 1990s, he said it was JP Morgan.
Butler earns his income selling his views to silver conspiracy believers.
Again, sorry for the type face.
But, also, thanks for the compliments here and there, and congratulations on putting a lot of pieces of the puzzle together. This is an enormous complex market. Gold and silver trade all over the world, in ways that most people would never guess.
Jeff Christian
Jeff,
Thanks for your continuing participation here. It’s unusual to have someone of your prominence in the industry participating in the discussion threads, and you add a lot of value.
I wasn’t aware of the details of the FCOJ thing, but I do know that Ted acknowledged to his readers at the time of the recent (like 2 years ago recent) CFTC hearings that the reason he was not invited to testify was that he had a history with CFTC. He didn’t elaborate, but he made it clear he had been in hot water before, and I give him credit for his honesty there. I’m not suggesting his actions were excusable - but frankly this is a business full of criminal activity, and Ted is not the only got who got barred from the industry and took up writing newsletters instead - that’s where ZeroHedge came from, afterall. Again, I am not trying to excuse his conduct - just saying that among people who have been barred from the industry, he’s been more honest than most about his past.
To your theory that he knows better and is being disingenuous, I want to point out that in one of his newsletters, Ted shared with his readers the story of how when he was starting out in the industry, he spent a whole MONTH (his words) in his office, poring over and over books trying to get his head around how it could be possible to sell something you don’t actually own (i.e. a basic short-sale transaction). To my eye, Ted was being totally honest, and shockingly candid in telling his readers the story of what a hard time he had coming to terms with the concepts behind the mechanism of borrowing to sell short, then repaying the loan of shares after covering.
To me, that story says a whole lot, and the fact he chose to openly share it with his readers says even more. I remember my Dad explaining the mechanics of a short-sale transaction to me as a teenager. It took less than 60 seconds before I "got it", and that was at age 15. By Ted’s own description, the same exercize in learning a concept took a full month of study, and that was after he had begun working in the industry.
The above plus the story you shared with us paints a very clear picture to me. This is a not-particularly-smart man, who got in some trouble, and got barred from the industry. He had to pick up his life somehow, and like a lot of other guys barred from working in finance, he chose newsletter writing. I have no doubt whatsoever that he believes sincerely that he was fired to distract attention from what he perceived as greater crimes his employer was guilty of, and he underestandably chose that topic to start writing about. Since then, I think he’s been feeding his own imagination. He comes up with these theories of how manipulation is occurring, and convinces himself they are real. He no longer works in the business, so he’s not routinely in the company of smarter, more experienced professionals who might set him straight.
Ted DOES get a lot of interest in his letters, and I think we agree that this further bias him. But you (Jeff) seem to think he is intentionally fabricating lies so he can sell newsletters. I think it more likely that the fact that his newsletters sell well and well-respected professionals like Eric Sprott have bought into his BS serves as positive reinforcement, making him feel that his work is legitimate and that he’s not really crazy afterall. Given all the kudos Sprott has given Ted publicly in the last few years, he probably FEELS vindicated.
I don’t doubt a single word of the history you shared, Jeff, but it just further cements my own image of Ted as a REALLY nice guy who doesn’t happen to be particularly bright, and who is trying to make the best of his life after being fired and barred from the only industry he knows. I remain convinced that Ted believes every word of the nonsense he writes, and frankly it’s easy to see how endorsements from people of Eric Sprott’s stature could help reinforce his own false sense of self-credibility.
Bottom line, despite never having met him personally, I like Ted as a person and feel sorry for him. I don’t take his ideas seriously any more, but I see no reason to accuse him of malicious deception. He’s just doing his own personal best in life, and it is what it is. That’s how I see it anyway.
Best,
Erik
Dear Jeff and Erik,
now that this thread is really getting hot and the cool stories are coming up, perhaps someone can explain the origin of Zero-Hedge to me. Honestly, I don’t know.
Another remark on the mining companies. Jim, you are probably right that the market is rather stupid than politically sophisticated. So my comment probably tells you why I would be careful with mining companies rather than why all the others don’t buy them.
Finally, the major operating expense of the mines is energy, more precisely diesel fuel and electricity. While electricity prices are probably quite stable, the oil price isn’t. But what is remarkably stable though is the gold-oil-ratio.
(I just googled and took the first chart I found)
This means that if the gold price rises, it is likely that the oil price follows which means that the profit margin of the mines remains a fixed proprtion of their sales rather than exploding with the gold price.
There are several indications that the gold/oil ratio is political and is managed indeed. If true, this rules out any huge spike in profits for the mines simply because their energy expenditures (oil) will follow the gold price. The following is the political story about oil and gold as told by Another/FOA/FOFOA:
You should think about the role of the dollar in this game. As long as the U.S. can make sure that the oil countries require payment in dollars, one might think that they overpay for this privilege if measured in gold, i.e. oil in dollars is too expensive and gold in dollars is too cheap. (It is known that certain oil countries require payment of some portion of their exports in gold. If they receive dollars and have to get their gold somewhere else, you have to provide them with some incentive. This incentive is cheap gold in terms of dollars.)
Without the US dollar in the world reserve currency function, gold would be more expensive and oil cheaper (say if measured in Euros), i.e. the gold/oil ratio should be higher, say 100…1000 rather than 10…20. But then, once the US dollar loses its reserve role, the mines will be in difficulties for political reasons.
Sincerey,
Victor
[quote=victorthecleaner]
Dear Jeff and Erik,
now that this thread is really getting hot and the cool stories are coming up, perhaps someone can explain the origin of Zero-Hedge to me. Honestly, I don’t know.[/quote]
I’m not sure anyone but the founders know for sure what the whole story is, but the basics are that "Tyler Durden" is really somewhere between 4 and 40 real people writing anonymously. Dan Ivandjiiski, a former hedge fund trader barred from the industry for insider trading, was widely believed to be the founder, although he has apparently taken to denying that he is the founder.
The Wikipedia entry on Zerohedge tells the story pretty well.
Best,
Erik
There are lots of studies but the one I like is where 94% of college professors rated their own work as above average. One general trait of stupidity, apparently, is an inability to recognise it. A chastening thought.
Jeff Christian, thank you for putting some meat on your criticism of Andrew Maguire, I can only reiterate that in my past dealings with him and Paul Coghlan everything was 100%.
Excellent point Victor. I used to work for an owner of mines, oil & gas producers and pipelines, in his day he was a big cheese. He always referred to his ventures as having the alternative of mining the market, which he did, often.
Erik T, in case you missed this http://screwtapefiles.blogspot.com.au/2012/04/james-turk-learn-from-master-of-chart.html , it is a rapier sharp piece disguised with humor. I recommend it to you.
All the best,
SR
This is the kind of info that made me a CM subscriber. This thread is quite disillusioning as sources that are frequently cited here are being properly thrashed. Erik T is quickly making me a convert, not that I dismissed him before, but he has in many instances been a single voice against the chorus of conspiracy theory promoters.
For me the question now becomes where do I go for authoritative info on markets, particularly PM markets? Could someone cite some sites (pun unintended) where such info is available to the uninitiated?
Thanks
Doug
Im exhausted just from reading all this.Thank you all for your input
Others may chime in but I believe you will find a well-grounded view at http://screwtapefiles.blogspot.com.au/ and for an in depth introduction and understanding Victor has his own site http://victorthecleaner.wordpress.com/ . From there are very good links as well.Erik T makes the very valid point that we must train ourselves to discern nonsense, which I try to do, with that in mind I find the contributions by commentators on the sites of what might be describe as "the usual suspects" usually have some gems of information, often in the links provided.
Cheers,
SR
Thanks, I already have screwtapefiles bookmarked.
Doug
My goodness. I just woke up to another half dozen new posts here, and again as many in the Part II thread. At the rate we’re going, we may be headed for an all-time record number of comments on a PeakProsperity.com podcast comment thread!
I happen to know that comment count is one of the key metrics used to rate the quality and popularity of the podcast guest. I can’t help but see irony in that - in this case, anyway.
I wonder why Harvey hasn’t joined the conversation here in the comments? With people like Jeff Christian and Bron Suchecki taking the time to participate personally, it’s hard to argue there is a very astute audience assembled here, and an excellent environment for polite, reasoned intellectual discourse. I would think Harvey would want to join the conversation and perhaps substantiate some of the claims he made in the interview, but so far all silent on that front. Interesting.
All the best,
Erik
The reason this thread is so popular is that we have learned more from this thread than just about any we’ve read anywhere in ages.
This thread ties in the COMEX, OTC market and input from highly experienced insiders such as Bron Suchkeki and Jeff Christian, and the insights of a clever, well studied guy like Victor. No idea what Victor does for a living.
This probably belongs in a separate thread, but one thing that I alwasy try to consider when trying to follow the markets is how peak oil plays into gold in all of this. My memory could be serving me hopelessly wrong, and I might be making a food of myself, but I regularly listen to Jim Puplava and I believe Jeff Christian recently suggested that all-in mining costs of gold average around $1200 per ounce extracted now. Forgive me if I have misquoted, but I think that’s what was said.
How do you, Erik (or Victor or anyone else), see the decline in availability of cheap energy affecting the supply of precious metals and it’s affect on gold prices and how this ties into a prolonged liquidity starved event as Victor was talking about, where even as more physical is being demanded the gold price declines because more speculators bought fractionalized unallocated gold (even on margin) or I suppose simply because the most liquid assets (gold) gets sold first by those who are desperate for funding. This would be quite a strange confluence of events: physical gold is in demand at lower prices; unwind of leveraged unallocated gold accounts would depress gold price due to problems in banking system but then the declining gold price confronts the rising cost of mining gold…The rising costs should act to steady the gold price as long as physical is being bought, but a liquidity event could cut through that theoretical support like a warm knife through butter over very short time horizons…then maybe some great oppportunities lie there, if you can sidestep political risk.
Look at Silver Wheaton, they recently removed something like 100 million ounces of silver from their reserves because they are no longer economic to mine at today’s high costs and lower silver prices.
I’m not sure I’m making sense, my brain is tired after a long day and I’ve had a glass of very nice wine.
What I’d like to know, in a nutshell, is how the gold price (and silver) will hold up under a declining EROI world and in a "peak-oil" shoc in a tug-of-war between deleverageing OTC unallocated gold and greatly increased mining costs.
And when it costs $1500 to mine an ounce of gold (proabably not that far off) then where will the gold price be?
Is one to be overall positive on bullion prices over the next 2 - 5 years? Do mining costs, seeminly increased readiness of CB printing in an liquidity event, provide a relatively stable floor under their prices?
[quote=CPTWaffle]The reason this thread is so popular is that we have learned more from this thread than just about any we’ve read anywhere in ages.
This thread ties in the COMEX, OTC market and input from highly experienced insiders such as Bron Suchkeki and Jeff Christian, and the insights of a clever, well studied guy like Victor. No idea what Victor does for a living.[/quote]
I’m delighted to hear you’re getting so much from the discussion. I have a passion for trying to help people see reality in the face of a lot of BS coming from biased interests with an agenda to push. I know that Jeff shares that passion, but it’s quite difficult for both us (particularly Jeff given his schedule) to make time to participate in these discussions when it feels like nobody is willing to listen to reason. It’s quite rewarding to me to hear that at least one person here is learning something of substance and appreciates the effort we’re putting forth.
My earlier comment was admittedly somewhat rhetorical. This is clearly a very informed, knowledgeable group we have assembled here. And we have experts with opposing viewpoints - always a key ingredient for worthwhile intellectual discourse. Meanwhile, the moderators are doing their usual outstanding job of making sure we all maintain our civility, and not stoop to making ad hominem insults at others we may disagree with.
In short, this is a really ripe opportunity for anyone with a strong view on the PM markets to chime in, make their views known, and have the opportunity to test their knowledge against the peer-review of several very well informed participants. Some here have gone to some length to bring charts, data, etc. into the discussion to substantiate their views. Seems to me that anyone with a bona fide, defensible viewpoint should be anxious to jump into this conversation, make their case, and prove their points. How odd it is, then, that neither Harvey nor Ted seem interested in participating, especially considering it was Harvey’s podcast with Chris that started this discussion! When I once suggested to Ted that he should debate Jeff, Ted’s reply (via e-mail) was that he views Jeff as a "lightweight", implying it would not be worth Ted’s time to debate a little fish like Jeff. I humbly contend that the group now assembled here represents a formidable base of PM knowledge, so this would seem to be Ted’s chance to have that debate not directly with Jeff (the "lightweight"), but with a heavier-weight group of knowledgeable professionals. I’ll leave it as an exercise for the reader to speculate as to why those gentlemen have chosen not to participate thus far.
[quote=CPTWaffle]I alwasy try to consider when trying to follow the markets is how peak oil plays into gold in all of this. My memory could be serving me hopelessly wrong, and I might be making a food of myself, but I regularly listen to Jim Puplava and I believe Jeff Christian recently suggested that all-in mining costs of gold average around $1200 per ounce extracted now. Forgive me if I have misquoted, but I think that’s what was said.
How do you, Erik (or Victor or anyone else), see the decline in availability of cheap energy affecting the supply of precious metals and it’s affect on gold prices and how this ties into a prolonged liquidity starved event as Victor was talking about, where even as more physical is being demanded the gold price declines because more speculators bought fractionalized unallocated gold (even on margin) or I suppose simply because the most liquid assets (gold) gets sold first by those who are desperate for funding. This would be quite a strange confluence of events: physical gold is in demand at lower prices; unwind of leveraged unallocated gold accounts would depress gold price due to problems in banking system but then the declining gold price confronts the rising cost of mining gold…The rising costs should act to steady the gold price as long as physical is being bought, but a liquidity event could cut through that theoretical support like a warm knife through butter over very short time horizons…then maybe some great oppportunities lie there, if you can sidestep political risk.[/quote]
Jeff is FAR better qualified to answer this than I am. If I felt confident he’d have time to do so, I’d shut up and let him address your question, because his data is far better than my own. If Jeff does answer, please assume he knows better than I do.
First, I don’t remember exactly what was said in that interview, but my own sources (from a couple years ago) said the cost of extraction was running around $800. That was with $65 crude oil, so it’s certainly gone up. But I strongly doubt it’s gone up to $1200. So I think a good first step would be to go back to that FSN interview and validate the $1200 number. But setting that aside, the cost of energy will eventually go way up, and your scenario will come into play.
I see it as a race between two separate processes. The oil price right now (short term effects) is mostly about Iran geopolitical risk and to a much lesser extent, inflation due to monetary policy. But over the long run, Peak Oil will be the major price driver. We just don’t know when Peak Oil production declines will "hit the tape", dramatically increasing energy costs. Think of this whole thing as Process #1.
Meanwhile, in parallel, we have Process #2, which is entirely about monetary policy, QE, and the absolute value of the USD. That’s the primary driver over the long run for the gold price.
For the moment, we have a gold price (due to process #2) which is well ahead of cost-of-production. Sure, some very ambitious silver projects might not be economic given the pullback, but for the most part there’s plenty of gold and silver to be produced at extraction cost well below market price. So the increasing oil prices will eat away at miners’ profits, but that’s about it.
The trouble comes if Process #1 accelerates ahead of process #2, such that extraction cost rises above market price. In that case, projects get shut down, supply decreases, and the normal supply/demand feedback loop forces prices back up to extraction cost. I don’t see this scenario as likely, however, unless a major monetary regime change occurs and Mr. Bernanke’s printing press is taken away from him. Market is already way above production cost, so there’s a buffer. Peak Oil may be delayed by demand destruction from a weak global economy, but money printing will continue unabated. So I think the most likely answer is that monetary policy drives gold prices well above extraction cost, which also means mining shares should do very well.
Hope this helps, and thanks again for your kind words.
All the best,
Erik