Thursday, August 29, 2013
Wednesday, August 28, 2013
Tuesday, August 27, 2013
Saturday, August 24, 2013
Friday, August 23, 2013
Thursday, August 22, 2013
Wednesday, August 21, 2013
Monday, August 19, 2013
Sunday, August 18, 2013
Saturday, August 17, 2013
Friday, August 16, 2013
Thursday, August 15, 2013
Wednesday, August 14, 2013
ObamaCare Destroying Jobs In America? You Bet!
Visit NBCNews.com for breaking news, world news, and news about the economy
Tuesday, August 13, 2013
Monday, August 12, 2013
Saturday, August 10, 2013
Tuesday, August 6, 2013
Friday, August 2, 2013
MUST READ!!!
Author : Bill Holter
Published: August 1st, 2013
"Liquidity" is what makes the world go 'round. "Liquidity" if you recall was (still is) the primary tool that was applied to "fix" the world after the 2008 Lehman event. Yes, it was absolutely necessary to flood the system, otherwise we would have seen a default cascade. And no, "liquidity" did not fix anything. It only kept the system going and prolonged the end game.
Well, we are again seeing a big problem right now behind the scenes when it comes to liquidity. Not with stocks, not with bonds...but with commodities. I spoke today with the owner of a large supplier to Miles Franklin and he told me that "liquidity" is drying up for the ability to hedge precious metals. I will try to explain this the best that I can, it is somewhat above my pay grade as I am a horseman with street smarts, not a computer geek esoteric rocket scientist.
When you call a coin dealer to purchase (or sell) in any sizeable quantity, the dealer will then call their supplier. The supplier will then take the order and call their dealer, in the meantime there will be 2-4 days before the metal arrives so this dealer must protect themselves against market movement. They will call an "aggregator" to lay off the risk. An aggregator deals in OTC contracts and will write a contract down to the exact ounce. They take the opposite side of the trade in other words, for a small premium which of course is built into the original price of the trade and is ultimately paid for by the end client.
The above is super simplified but please understand that this is how the world turns in ALL markets. Risk must be, and is hedged through these aggregators with ECP's (eligible contract participants). We heard on the 20th that Morgan Stanley was exiting this market, then on the 25th it was JP Morgan's turn and now this week it is others. These firms are "ECP's" who ultimately take on the risk. I should rephrase that…they WERE the ones who took on the risk as they are now exiting the business.
So I asked, "how can you still do business without hedging?" to which I found out that so far this week almost ALL of the hedging has been done through Europe, particularly for Silver. There is liquidity...just not any coming from the US. He also told me that between 2:00PM and 5:00PM this week he was not able to do any Silver hedging at all because there was nowhere to hedge as Europe is sleeping.
Oversimplified? Yes of course it is and I hope someone else (smarter than me) picks up the ball and runs with it because this is really big news. As I have always said, the world runs on "credit" and without it everything stops. Now this is not credit so to speak, this situation is one of "swaps" (derivatives) used as insurance to hedge risk. Without it, flow slows down, risk increases along the supply chain and the risk of supply disruption increases. In layman's terms, this would be like the trucking industry having to call Europe to get cargo insurance because no US based companies will write the coverage. Will a trucker haul an uninsured load? Maybe…maybe not, but flow slows down and all that is associated with it.
So what does it mean? First off, something has changed or is changing in the precious metals (and base metals) arena for sure. We already knew that inventories are being drawn down and the lower prices have created unprecedented demand. We also have evidence that the Bank of England has bled out 1,300 tons of Gold over 4 months time which equates to more than half of the entire world's production. …And now this?
My simple take? They don't want to take the other side of the trade, period. The Goldman's and Morgan's of the world know how to make money, lots and lots of it and rarely pass up an opportunity to make more. They are plugged in and are "in the know" yet now they don't want to write OTC derivatives insuring against volatility (upward) in Gold and Silver. This should tell you something, no, this should SCREAM something at you! They do what they do to make money, not lose it and they by their actions are telling you what they think (probably know).
Subscribe to:
Posts (Atom)