A Buyer’s Market In Silver Spoons

Part 1 of this post is here:  http://tradewithdave.com/?p=15524

Just wonderin’… does customs come aboard private vessels and how many tons of gold can be carried on a 536 foot long yacht? Roman Abramovich will dock this big baby on New York’s Hudson River for a couple of months awaiting his little baby’s arrival.


Dave’s guess is that it doesn’t bother anyone else that that the Federal Reserve just completed its so-called gold “audit” at the same that the Russian gold-mining oligarch Roman Abramovich decides to dock the Eclipse as close to the New York Fed as you can get with the world’s largest private yacht.  It’s probably nothing and Roman’s just another hard-working Russian businessman, English soccer fan and expectant father.

It’s not everyday that you do an audit and find even more than you were looking for.  Who exactly gets credit for the extra $43,500 in value from the Fed’s gold that is attributed to higher purity levels than expected?  At less than one cent per American, will  the windfall be equally divided amongst the population?  With the Fed’s book value for gold at $42.22 per ounce, this discovery of unexpected purity is like finding an extra 1,030.8 ounces of gold.  That would be like finding a $1,618,356 platinum coin on the sidewalk.  Wait a minute?  $43,500 is like finding $1,618,356.  I’m confused if you found 1,030.8 ounces of gold you could make 1,030 buffalo gold coins stamped with $50 on their face.  Those coins would be worth $51,500 in face value.  Who’s the bookkeeper around here anyway?

Regardless of who you choose to value and audit your gold (see 7 lucky choices below), we can all celebrate the fact that with the recent collapse in precious metals prices being able to afford to purchase that silver baby rattle or silver spoon for “Roman, Jr.” hasn’t been this affordable in quite some time.

Choice 1:  Audit of the Department of the Treasury’s Schedule of United States Gold Reserves Held by Federal Reserve Banks as of September 30, 2012


Choice 2:  Case Research highlights how audit accuracy just may be affected by the recognition of leasing, swapping and oversubscription:


Choice 3:  Gold Anti-Trust Action Committee echos the same question:


Choice 4:  Peter Degraaf and Ted Butler on how prices just might be manipulated.  Is this because of a Lehman Brothers short positions inherited by JP Morgan?


Choice 5:  You can ask James Turk about the value of the audit and he’ll tell you it was “rubbish”:


Choice 6:  Finally you can check the value before the NYMEX opens every day or after it opens everyday if you’re looking for a lower value as explained by Adam Taggart of Peak Prosperity:


Choice 7:  If you’re the CEO of Barrick gold, you can go back precisely one year to when you unloaded your shares of Abramovich’s Highland Gold.  Who wouldn’t want to be business partners with a straight-shooter like Roman who goes from making plastic sailors to sailing the world’s largest private yacht.




Suffice it to say that there’s a lot that we don’t know.  There are a few things that I do know.  I know it took forever for the CFTC to come up with their swaps definition.  I also do know that about the same time that the Dodd-Frank submarine was finally surfacing with the swaps definition was coincidentally the same time that there were the first sightings of Bruno Iksil (aka the London Whale).

Here’s some background on those otherwise eclipsed patterns if you have time on your hands and nothing better to do than rearrange deck chairs while waiting for the baby to arrive and trying to sunbathe in the shadow of 55 Water Street home of the DTCC in New York.

Starting off with the Chiltonian “swapification of futurization”: http://tradewithdave.com/?p=15275

On the cleansing effect of 89 year old judges and CEO trimmed bonuses: http://tradewithdave.com/?p=14862

Here’s the timeline for the holiday Cascade with Dave of Dodd-Frank implementation: http://tradewithdave.com/?p=14193

So what does Dave know for sure?  Dave knows that U. S. bank net short positions in silver are spiking and that the price of silver and gold are falling faster than an anchor of concrete tennis shoes dropped into the Hudson River.


Let’s roll the clock back to 2007 when Bear Stearns and their silver paper printing ponzi known as the SLV was still a profitable way to exchange what became worthless paper for Federal Reserve Notes prior to the company’s $70 per share stock being handed over to JPMorgan for $10 per share.


Back on April 11, 2012 Dave wrote:

“In Dave’s opinion, the CFTC and/or the SEC can’t come down with a decision on whether or not swaps are insurance while simultaneously allowing the CME Group’s balance sheet  to withstanding the impact of such an iceberg.  Comex registered silver inventory has dipped back under 30 million ounces.”


As Dave has said many times before I am no financial adviser.  I would not be surprised at all if we witness gold head down further towards the $1,300 neighborhood.  Nonetheless, it is my opinion, that this is the LAST STOP on the precious metals train before the journey reaches its final terminating destination point known as “the reset” so if you’ve been considering purchasing a ticket do it NOW!  It is impossible to call a bottom or a top, but solely based on the amount of effort that has gone into working out the impact of the losses experienced during the credit crisis of 2007-2008 and the illegal machinations that have been well-documented here the risk that is baked into this cake will jump out eventually and it will not be pretty – (think of a pregnant Jamie Fox as Wanda on In Living Color just before receiving an obstetric “Caesar Salad Section” http://www.youtube.com/watch?v=8q4L8b8s6mo.

How easy is it to drive down the price of something when you can simply flood the market every morning with massive amounts of relatively free ETF paper and sweep weak physical long positions up in the momentum?  It’s not hard when the United States Government and its Too Big To Nail banking partners work together in concert.  The only thing bigger than all that is the truth and the truth is that the West is broke and that smoke you see coming from the East is the clearing of new terrain in the agenda towards global equilibrium.  It’s where the new economic fires are burning and your gold and your wealth have been transferred there to add fuel to the fire as Martin Sibileau elaborated on in the first of his 3-part series released today which seems designed to bring respectability to the art of conjecture as practiced by Dave while turning helicopter pilots into conspiracy theorists:  http://sibileau.com/martin/2013/02/21/gold-manipulation-the-logical-outcome-of-mainstream-economics/

As Dave turns his focus backwards to see just how we got here, don’t overlook the big business that is the Lehman Brothers bankruptcy with payments going out to the post-bankruptcy managers and advisers already exceeding $2 billion.  How have creditors fared so far?  Well, they have received 9 cents on the dollar which is estimated to double between now and 2016 thanks to those great advisory and management services.


To gain a more detailed perspective into just what is going on out there, let’s take a look back at what Jim Willie had to say in late December 2012:


The COMEX is under constant unrelenting pressure. They must shift around ill-gotten precious metal inventory in order to avoid a default. That would be embarrassing. The main device for maintaining order at the COMEX continues to be naked shorting of futures contracts, a blatantly corrupt practice. The naked short ambushes occur with greater frequency in recent months. The arrival of Scotia Mocatta as a provider of gold supply and naked short commitments will kill them eventually, as they have made a deal with the devils. The overnight dispatch of silver from the US to London has grown enormous. One can only suspect that the raids of GLD gold inventory and SLV silver inventory is much greater than is estimated even by its most ardent critics. The illicit sources for COMEX precious metal are fast drying up.

The new wrinkle to render damage to the COMEX is the arrival of the Shanghai Gold Exchange. The graphic displays the differential, a basis for potential arbitrage. Complex arrangements can be constructed that take advantage of the differential, basically buying the gold metal in New York, finding a way to make it available in Shanghai, where it is sold at a $20 to $30 higher price. The end result of the arbitrage is high volume drainage of gold in New York. The snapshot below is taken from December 7th. Several other snapshots are available, with similar price spreads. Finally COMEX based in New York, a major nucleus of corrupt financial markets, has some competition. Expect the spread to widen, the opportunity for arbitrage to grow, and pressure to build for a breakdown.

Sadly for the evil camp, they are fast running out of sources. They stole the entire MF Global private accounts, denied the clients their legal right to receive silver in delivery, and received legal protection by the USGovt and Appellate courts, after changing the law applied to financial firm liquidation instead of brokerage firm liquidation. It was a blatant maneuver that has depleted the COMEX of a major slice of legitimate business. The subsequent similar raid on PFG-Best had an echo effect, adding to the removal of COMEX clientele. The end result is that the risk hedge trade is finding ways to conduct their business without use of the indescribably corrupt COMEX. So the COMEX is being isolated in risk hedging just like the USDollar in global trade.


As Dave has considered where we have been and where are going, I have thought a lot about the parallels between the precious metals manipulation story and the seemingly unrelated (yet entirely concurrent) saga of the London Whale.  When Dave looks back at the historic price of silver, it sure seems like it was the choker chain collar that was used to cut off the air supply to Lehman Brothers in their final days in search of liquidity.  Gold may be too tough to control at times, but if you can put a collar around silver you can appear to control the head.

I have asked myself the same question posed in the Martin Sibileau article linked above many times.  Why would anyone invest in precious metals when the price is manipulated?  Dave certainly wouldn’t “invest” in such a thing. Then again, why would anyone buy a fire extinguisher as an investment?  All fire extinguishers do is sit there, hanging on the wall, doing nothing for years until one day that little dial moves from the green to the red and you have to replace the entire fire extinguisher.  What kind of an investment is that?  It’s not.  It’s no investment whatsoever.  It’s insurance.

In a nod to the Dodd-Frankian thing that started us down this yellow-wrapped tungsten brick road from the beginning, the big debate about swaps is when they are insurance, forwards tied to non-financial commodities or just plain bets. Well, we see what resolving that issue has led to and the machinations that JP Morgan and others have gone to in an effort to make that transition all of which has been detailed in this blog to the best of our ability.

Now the lawyers for Lehman Brothers wants to talk to Bruno Iksil about it and JP Morgan is suing its own former employee, Javier Martin-Artajo, Iksil’s boss.  How would you like to be responsible for all that risk only to be let go and then sued by your former employer with a nearly unlimited war chest?  If you ask Dave, this story is far from over just like the falling gold price may be far from its bottom… who knows?  What Dave does know is that if there’s a financial debt fire, everyone is going to be looking for a fire extinguisher at the same time.

In the words of Sandeep Jaitly, only gold extinguishes debt.  I don’t agree with Sandeep about everything and I do expect that some form of modern jubilee (with a tiny fractional backing of gold) will be the facility whereby the debt is rolled over rather than extinguished, but when it comes to the search for confidence to replace the confidence in governments that has been liquidated since the crisis and spread far and wide through expanding central bank balance sheets, gold-backed-non-paper-electronic-money will be the order of the day.  As far as what you can expect in the way of a return on investment for your fire extinguisher investments, a slowly leaking unit value would be the answer.  Then suddenly, there will be a debt fire and the question is will you have your extinguisher handy and its value will only be experienced if the contents are quickly and accurately deployed.

Remember back in mid-October 2012 when we had that staggering 3.6 million ounce silver withdrawal from Brinks on a Friday?  Think of that as a brush fire.  Someone somewhere decides they want to realize their COMEX contracts in physical rather than paper form.  That type of behavior is simply not acceptable in a market where the paper claims so greatly exceed the physical reality.  The lengths that the banks and the government (one in the same) will go to to insure this type of thing does not become a regular occurrence is as unlimited as the Fed’s ability to print money.  The weak longs must be decimated and indeed they are.


Watching the price of silver drop from $19 in mid-July 2008 as the Lehman liquidation accelerated and bottoming out below $11 with Lehman’s mid-September bankruptcy set the stage for where we are today.  If you ask Dave it looks clear enough that JP Morgan’s “Whale Trade” exposure IS the value of the baked in short exposure to the SLV at say $30, minus the $10 price where they got in on the Lehman event.  Using a figure of $10 billion of Net Asset Value for the SLV at say $30 (for round numbers) would mean that JPM’s exposure is 2/3 of that value or $6.66 billion.  How big are they saying now that the “Whale Loss” could be?  $6 billion+… probably just a coincidence.

Has Dave found a smoking gun connection between CDX IG 9 and the SLV?  No.  Neither has anyone else to my knowledge.  Please email me if you have a better explanation than Dave’s $6.66 billion SLV short exposure realized equating to the $6.66 billion “Whale loss.”

William Black for Democracy Now attempting to explain to Amy Goodman what happened to JP Morgan’s “derivative of a derivative.”

Well, I can try. One of the things about this kind of derivatives is that it’s extremely opaque, and we only have JPMorgan’s side of the story at this point, without any real investigation, and JPMorgan’s story doesn’t make a whole lot of sense. But here’s what the story that they’re telling is. They had about $15 billion in distressed European debt. As your, you know, listeners and viewers know, Europe has been in just a ton of trouble. And so, those investments were losing all kinds of value. Now, the story, which, again, doesn’t make a whole lot of sense, is that they decided to hedge this position. A hedge is something where you invest in a second asset that is supposed to offset losses that you suffer in the first asset. In this case, the first asset was that distressed European debt, and the second asset, the supposed hedge, was a derivative of a derivative. In this case, it was an index of credit default swaps, which are a form of derivative that blew up AIG. Now then, the story gets even murkier, but it—the claim from out of JPMorgan is nobody was looking very carefully at the supposed hedge, and the hedge didn’t perform to offset losses, instead it increased the losses and increased the losses dramatically. And supposedly, no one was looking, and no one adjusted for this. And they woke up, and they had a $2 billion loss. So that’s the story from JPMorgan, as I said, that doesn’t make sense, and I can explain that, if you wish. 


Then again, we can all rely on Senator Carl “$#*%%& Deal” Levin to get to the bottom of this once and for all.  The Wall Street Journal on possible public hearings on the “Whale Loss”:



Previous articles where Dave questioned the motivations of Martin Sibileau in a spirit of full disclosure: http://tradewithdave.com/?s=sibileau

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