Trade With Dave

photo: Wikipedia

What is DaveOS exactly, you ask?  It’s Dave’s OS… you know, his operating system.  It’s Dave’s MS-DOS or Dave’s I-OS if Dave was a Mac instead of a PC.  DaveOS is not to be confused with Davos (rhymes with ”have oats”).  Davos is a ski resort in Switzerland.  Dave has started a new tradition of spending an entire week with other like-minded Daves celebrating DaveOS while everyone who is not invited to DaveOS goes to Davos to avoid feeling left out.

It’s kind of like one of those clubs for baldheaded men (which Dave is not… Dave is whiteheaded and proudly got his first gray hair at 14 years old), or a club for guys with handlebar moustaches (which Dave also does not sport).  If you’re not following Dave fully, think of it as a Star-Trek convention for Trekkies, but instead it includes Daveys… like Davey Crocket who was king of the wild frontier and no doubt was one of the first people to ski down a hill on hickory bark and probably invented the sport (which Dave loves more than a box of Swiss chocolates from Gump’s of San Francisco). 

This year’s Davos attendees who were just not DaveOS’ cup of tea, will still receive the consolation prize of the Gump’s “Let Them Drink Cake” coffee mug as their parting gift.  http://www.gumps.com/p/my-cup-of-cake?CatalogCategoryID=o7bAqAsLNF8AAAEx_64z9_OY .  DaveOS itself is a Swag-Free-Zone similar to Geneva’s free trade zone for overpriced wristwatches and underhanded tax evasion. 

When you join DaveOS online each year to discuss the So So DEF (Dave’s Economic Forum) not the So So WEF (World Economic Forum) you won’t even have to buy airfaire to a foreign country where corned beef sandwiches cost $25 plus you still get to sleep in your own bed.  So sign up now for DaveOS 2013 by following @TradeWithDave on Twitter.com and you’ll get your exclusive invitation. 

Just how exclusive will it be?  Well, none of these people in the high-resolution photos at the link below will be invited… that’s just how exclusive Dave is and you don’t even need to be named Dave, you just can’t be a member of Soros Open Society because unlike Davos, DaveOS is closed to anyone without an internet connection… Davos is as Davos does (nametags not included). 

http://publicintelligence.net/world-economic-forum-davos-2012-photos/

This post was not brought to you buy GUMPS of San Francisco who like George Soros are also celebrating The Year Of The Dragon: http://www.gumps.com/gifts#~gift-galleries|year-of-the-dragon

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Ted Butler on silver, courtesy of Harvey Organ:

“If JPMorgan is not selling but is, in fact, buying, then a very different scenario could develop, similar to how I have speculated in the past. If JPMorgan is buying and not the technical funds, then a very different and bullish scenario emerges. If JPMorgan decides not to put its head back into the lion’s mouth and withdraws from manipulating silver, then a new silver chapter may have begun. Let me be clear – there is no way of determining for sure who is buying and selling today and this past Friday; only future COTs will reveal that. If it turns out that JPMorgan is buying back more of its short position on these rallies that would suggest much higher prices to come and maybe real soon. This goes to the heart of the silver manipulation. Take away the big silver short and you should take away the manipulation itself. I’m not saying that is the case, just that it might be. I would play it, as I always do, like it may be the end of the manipulation, simply because if it is, there will be little likelihood of second chances to get on board easily.”

Dave’s take on Ted is Rudyard Kiplingesque… “If ” would indeed be the operative word.  It does feel like a jungle out there.  A quiet jungle in the middle of the night.  Who is the lion now, JP Morgan or a few million guys sitting in their boxer shorts with a tin box filled with silver eagles buried in their backyard?

http://harveyorgan.blogspot.com/

SK Options on how an overnight gold trade works:  http://www.skoptionstrading.com/updates/2012/1/14/revisiting-our-proposal-for-an-overnight-gold-fund.html

Dave on why you can trade Blythe Master’s alarm clock from March 5, 2011:  http://tradewithdave.com/?p=5583

I believe the Pan-Asian Gold Exchange will begin trading in June of 2012.  Once they start trading, I believe but cannot verify that this overnight phenomenon will dissipate:  http://tradewithdave.com/?p=9012

More on PAGE:  http://tradewithdave.com/?p=8934

Janet Tavakoli January 19th for HuffingtonPost on manipulation:  http://www.huffingtonpost.com/janet-tavakoli/cftc-price-manipulation_b_1215565.html

Tavakoli again on January 25th:  http://www.huffingtonpost.com/janet-tavakoli/gold-and-silver-price-man_b_1231011.html

Previous silver and JPManipulation posts:  http://tradewithdave.com/?p=9003

http://tradewithdave.com/?p=8293

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Do you have any of those friends who email you the joke of the day, or the latest goofy video of some cat falling into an aquarium or something? Dave generally tries to avoid this, but sometimes I too succumb to the power of humor, especially on the receiving end of a Glock 9 mm. Now, Hopalong Cassidy…

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Before Google, we had the Codex Gigas (i.e. Giant Book)

If you haven’t read it about it, this is the official change from “Don’t be evil” to “Be evil.”  It’s your “choice.”  No one is making you use google.  How else are they going to get the upper hand over Twitter?

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Charles Feng, regional head of fx, rates and credit trading for North East Asia at Standard Chartered in Hong Kong, said RMB (China’s Renminbi currency) is now viewed by many investors as a fully convertible and fungible currency. 

“The centre of the action is still obviously in Asia, but we see more European corporates who used to do their USD/CNY hedging in non-deliverable forwards or onshore USD/CNY.  They’re now using USD/CNH to hedge their exposures.  The European base and customer are expanding quite rapidly as well.” 

Institutional Investor Derivatives Week, December 26, 2011

http://www.iinews.com/site/rss/DW122611.pdf

An ISDA master agreement and a NAFMII master agreement will not be fungible, for instance, meaning banks will have to set aside two different sets of capital for both instruments.  Clearing houses looking to settle both types of derivatives will also have to collect two different sets of margin, the official said.  “But, if NAFMII does get appproval, all it takes is one local Chinese bank to say that it’s going to use it, say the Bank of China, then you’ll have every local bank using it,” the official said

From the November 28th edition of the same publication. 

http://www.iinews.com/site/rss/DW112811.pdf

Why is Dave making such a big deal about all this?  It seems complicated, but it’s really quite simple.  To be a global reserve currency a country has to allow its currency to freely float.  The same thing would apply to having your currency included in the International Monetary Fund’s “basket” of currencies known as Special Drawing Rights. 

According to the mainstream financial media, China has a goal of becoming an alternative to the U. S. Dollar as the world’s reserve currency.  To do that, China would have to remove certain capital controls that it has in place.  To move one small step in this direction, China has dipped their toe in the water by divorcing its currency (Yuan/Renminbi) into a two-part currency known as onshore Yuan (i.e. CNY) and offshore Hong Kong Yuan (i.e. CNH). 

According to Mr. Feng of Standard Chartered, some of his customers are acting “as if” Beijing has lifted their capital controls and that the market is the single driving force behind the value of their currency swaps.  Why is this a big deal?  If banks have separate capital requirements for CNH and CNY, but customers are operating under the concept that CNH and CNY are fully convertible and fully fungible.  Regardless of how their trading range may be narrowing, wouldn’t that be a trap?

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Dave’s been busy. You wouldn’t know it from the amount of blogging that’s been going on, but trust me, I’ve been busier than a Chinese laundry. You see, there’s a world class game of cat and mouse going on between the Chinese and the Euros that has resulted in Dave having to figure out just exactly who moved his cheese around on the global monetary board game. 

Here’s what Dave has figured out so far.  If you’ve read the blog or been watching the financial news, you know like everyone else knows that something hot is being stirred up in the wok.  Why else would George Osborne be busier than a take-out delivery guy on a Friday night as he has been fluttering around Hong Kong shaking hands with the local bankers and monetary authorities?  The Chinese are letting at least one cat out of their bag with the globalization of their Renminbi while Her Majesty, like any good monarch, is spreading her agent’s wings and promoting the City of London’s potential for clearing up the excess pollenation (i.e. the gold).

The bankers are having a problem however becoming fully One with Yuan (aka the RMB/CNY/CNH) because it seems that what was once the Yuan, is now two… not one.  You see the peoples over in Beijing have, like the queen, been following the king… Mervyn King to be exact.  You see Mervyn as the governor of the Bank of England was the one who originally proposed the idea that the first steps towards marrying up your global currencies is to get a divorce.  Rather than draggin’ their feet, the Chinese are celebrating the year of the dragon with an all out global currency trading extravaganza that’s starting in Hong Kong and is spreading faster than the bird flu.   

Like most divorces however, one currency is ending up with the primary residence, while the other currency is ending up with the offshore vacation residence.  You see the CNY (that’s the hometown version of the Yuan/Renminbi/Double Coincidence of Wants/domestic currency) has been separated from the CNH (that’s the offshore version of the Yuan/Renminbi/Corporate B2B-SDR/global currency) creating two distinct and separate currencies for the purpose of promoting the global agenda of the People’s Bank of China. 

There are all kinds of conversations being held by everyone from Joseph Stiglitz and David Lipton to Nicholas Sarkozy and Haywood Cheung about including the Yuan in with the International Monetary Fund’s Special Drawing Rights basket, but which Yuan is it, Yuan1 or Yuan2?  Inquiring minds want to know and so does Dave. 

You’re probably thinking like Dave was; why would the powers that be in the PBoC subject themselves to the inevitable arbitrage fee?  You see they’re trading the Y2 or CNH offshore in Hong Kong while to actually do business with the main man on the mainland you’re going to need onshore Y1 or CNY to satisfy the red dragon.  Like everything else in a centrally controlled economy the Chinese are restricting just exactly who and just exactly how one becomes one with the Yuan.  Free market makers need not apply. 

The folks over at Standard Charted describe the process of being imposed upon by “the party” as “a headache.”  They go on to propose that the Party’s  likely solution to keeping the currency party going while it spreads to other countries is for the Red Party itself to become “the counterparty.”  (see page 15 – 16 of their January 2012 report:  http://www.gramercy.com/portals/0/pdfs/2011%20January%20-%20Offshore%20Chinese%20Yuan%20Market%20Supports%20Reserve-ification%20-%20SCB.pdf ) 

Party On!

http://www.webb-site.com/articles/gaffe120120.asp

For more background on exactly what’s cookin’ in the global kitchen:  http://tradewithdave.com/?p=9088

If the party gets out of hand, the U. S. Congress can always revive The Currency Exchange Rate Oversight Reform Act of 2011.  It’s already passed the Senate.

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Nothing to see here folks… please move along.

hat tip – economicpolicyjournal.com

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If you haven’t heard of him, his name is Eric Sprott.  He runs something called Sprott Physical Trust out of Canada. 

Today’s silver action. My guess is that Mr. Sprott is responsible for this.

http://sprottphysicalsilvertrust.com/

http://www.nyse.com/about/listed/lcddata.html?ticker=PSLV

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Do you remember the old movie/tv show “Our Gang.”  You know it was Spanky, Alfalfa and my favorite Matthew “Stymie” Beard.  You don’t see the show much anymore.  My guess is that is the case because it is no longer politically correct.  Of course, the stuff you see on TV today is politically correct, just not worth watching. 

Looks to Dave like his favorite financial regulator, Mr. Bart Chilton of the CFTC, is circling Wall Street in his circuitous search for the culprit of MF Global.  The only problem is that traveling the D. C. Beltway isn’t going to take you anywhere. 

Here’s what Bart had to say, according to Reuters, about how financial accounting is suddenly “non-linear.” 

While it may appear that records for the trades would be clear, regulators say they have been stymied in tracing the money flowing to and from MF Global.

“They are circuitous money trails,” said Bart Chilton, a commissioner at the Commodity Futures Trading Commission, one of the agencies probing MF Global. “They are not simple linear transactions.”

http://www.reuters.com/article/2012/01/19/us-mfglobal-jpmorgan-idUSTRE80I02520120119

Dave may not know much, but he knows a thing or two about financial accounting and if there is one thing that it is not… it’s circular.  Accounting is linear.  It runs from the top of the spreadsheet to the bottom line.  It’s not a circle… it’s a square. 

Dave thinks that this whole fiasco is funnier than an episode of Our Gang and if anything it personifies the “gang-ness” of Wall Street and the regulators that are charged with enforcing the regulations.  But don’t forget it was the folks at the CFTC that came up with “points system” that ran circles around the old dollars system.  It’s kind of like those frequent flier points that you build up right before your favorite airline spirals circuitously into bankruptcy. 

So Bart which is it?  Circular or linear.  That’s enough with the stymie routine… show me the money… simply follow Dave’s linear directions also known as the Debit & Credit Gang. 

http://tradewithdave.com/?p=9025

http://tradewithdave.com/?p=8689

http://tradewithdave.com/?p=8536

http://tradewithdave.com/?p=8369

http://tradewithdave.com/?p=8355

http://tradewithdave.com/?p=6964

http://tradewithdave.com/?p=4791

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Imagine,  if you can, for just a minute that you’re not Jon Corzine.  You’re not sitting comfortably in your new office down on 40 Wall Street at the site of the old Bank of Manhattan.  Instead of being Jon,  you are a credit default swap.  You’re a  living, breathing incorporated entity in the eyes of the courts thanks to Citizens United v. FEC.  You’ve been charged, arrested and convicted of a “capital” crime and been given the death sentence.  Your name is Grease and so is the collective plan for your future. 

You are put in a room with one chair… an electrified one to be specific.  You’ve been told that if you voluntarily sit in the chair, then you will be allowed to continue as a member of society and that your debt is paid in full but you will be strapped down through your golden and austere retirement years and indeed the reset switch will remain enabled by your handlers should you attempt to break free. 

On the other hand, if you don’t volunteer to sit in the chair, then you have acted in an involuntary manner and you will be foreclosed upon and no longer be allowed to participate with the other prisoners.  You can keep your flag and your crystal blue waters, but no more money from your neighbors, not even for a pack of cigarettes.   

Here’s how the folks over at the Institute for International Finance (aka the Occident/Orient Express train station) described the visit to the break room for Grease to enjoy its Twix moment.

Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach. We very much hope, however, that Greece, with the support of the Euro Area, will be in a position to re-engage constructively with the private sector with a view to finalizing a mutually acceptable agreement on a voluntary debt exchange consistent with the October 26/27 Agreement, in the best interest of both Greece and the Euro Area.

http://www.iif.com/press/press+224.php

Don’t forget that if choose to by-pass “the chair” then these guys will be picking over what’s left of your breathing carcass for years.  Then again, you could always claim a property right in your own body, but that would mean that habeas corpus was still in force.  Better check on that before you try it.  Then again folks at the NY Times are describing the Grease debt as no less than 120 percent of G.D.P. in 2020 as “progress.” 

http://www.nytimes.com/2012/01/19/business/global/hedge-funds-may-sue-greece-if-it-tries-to-force-loss.html?_r=1

All Dave can think is…. wonder what happens if they choose Pepsi instead.  It’s kind of tough to face the Pepsi challenge when you already sold out your shipping business to China.  http://tradewithdave.com/?p=827

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