Wednesday, February 23, 2011

Paper vs Physical

I must keep this comment short tonight due to time constraints but I wanted to start a conversation.

With all of us acutely aware of the supply problems of the Comex, we need to start preparing for the post-EE world. At some point in March or May or July of this year, the Comex will default. Whether or not its a de facto default is of no matter for this discussion. At some point soon, "paper" silver will cease to be a actual asset. Paper silver only has value because it is perceived to be backed by some measure of physical. A Comex failure will, inevitably, lead to a failure of all paper metal assets. Everything from futures and options on futures to ETFs, both the SLV kind and the AGQ format.

So, three questions:

1) Do you accept this general thesis?

2) What is the trigger point for liquidating all paper metal? It can't be at default because, by then, it will be too late.

3) If you can't exchange into physical because of lack of supply, what do you buy? I say non-hedged, junior miners. What do you say?

OK, have at it. I'm very much looking forward to reading your responses in the morning.  TF

p.s. I had a great planing meeting with my web team yesterday. We are looking into a new site that combines elements of blogs and forums, maximizing for us the opportunity to exchange information. We're utilizing many of the suggestions you provided over the weekend so thank you all very much for your input. I have a target date of April 1 for the unveiling...provided the world hasn't ended before then.

p.p.s. We've now had four consecutive business days of 65,000+ pageviews with a peak yesterday of over 72,000! This is madness! I'm sure glad you all enjoy this so much. I'll keep up my end. You hold up yours (heh heh, he said 'up yours'). Lets keep it clean and focused and we'll keep growing.

226 comments:

  1. We have avoided paper in the first place but if I had a sizable investment I would be unwinding it into physical in $5 increments and plan to be fully out by $100. My $0.02 (probably worth much less! lol)

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  2. when comex defaults, what will happen to the mining stocks? They are still paper but I think they will not collapse like SLV or other paper assets. Any thoughts?

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  3. I guess that's my thought...an equity is paper but a miner is producing that which is in short supply and would therefore be a good investment.

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  4. Will PSLV default when SlV goes down? I thought Sprott really had physical silver.

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  5. You say non-hedged miners. That's fine if you can a list of the miners that aren't hedged.

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  6. What about trading Spot on FOREX? How would electronic trading fare?

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  7. 1) Yes.
    2) Trigger: when first initially denied?
    3) Mostly have calls on SLW. Intent to shift to physical, PCH and PCL.

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  8. Any thoughts of SLW futures or are all options "on the table" for destruction when comex defaults?

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  9. Ok I just realized that wasn't understandable. To clarify what I meant, every time silver hits the next plateau in $5 increments, cash out 7% of my position (100-30 = 70 /5 = 14 = 7%), and wait for a dip and buy physical. If I didn't care about physical shiny shiny I would probably go for some miners yeah. Hope that makes more sense.

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  10. First point is to define what we mean by paper, because it's a term thrown around loosely. I think that mining stocks are not paper, becuase they represent ownership of real income-producing assets.
    I also think that ETFs that are a collection of mining stocks (such as GDX, GDXJ and SIL) are also not paper, for the same reason.

    Yes, I agree that GLD and SLV are paper, if it's true that they are not truly backed by metal that is owned by them unencumbered. I've avoided them due to this uncertainty.

    Yes, futures themselves and ETFs that are made out of futures (AGQ) are paper as they only represent promises, that may not be backed by physical metal.

    The one I am constanly unsure about and that impacts me the most is spot positions in silver (XAG) and gold (XAU). These represent a bet on the changing values of one currency (including gold and silver in the defintion of currency) vs. another. If COMEX and other futures market collapse, I think the spot market can and will carry on. How else will people have a reference point for pricing physical metal?

    My one concern, which I can't resolve, is that the spot markets rely on the system of leasing of gold and silver. I know who the sources of leased gold are (mainly central banks) but I don't know the sources for leased silver and I am very worried that such sources will dry up when silver supplies truly run out.

    I agree that non-hedged miners are the best vehicle if physical runs out. Junior or majors depends on your risk appetite.

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  11. Something I've been wondering about,,, if the Crimex defaults, what would prevent another entity from forming to take its place? Somewhere far from the Fed, the CFTC and the rest of the useless regulators. Somewhere where the game wouldn't be rigged like,,,,Pyongyang or Tehran. Just kidding about those locations but still wondering.

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  12. 1. Yes, but not necessarily within that time frame.
    2. The trigger will either be some seemingly ambiguous announcement by the Morgue (not related to their naked shorts) or BlackRock and BBH close their funds just prior to COMEX default.
    3. Miners will survive, the unhedged will fare better.

    Just my 2 oz. UF

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  13. Turd,

    I am seeing all this talk of Comex default in isolation of JPM default, which I am not able to understand.

    What I feel is, there are all Risk Management processes in place, onus of providing metal to the buyer is of a seller. Exchange (Comex) is a proider of the platform.

    First the seller (JPM) has to go insolvent before Comex can raise their hands if the need arise i.e. default on delivering the metal.

    So first in line would be EE and next would be Comex. But all in all I feel US Gov/EE would have some last min trick to save both.

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  14. Can I hedge my SLV call options by insuring against default with AIG?

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  15. I think PSLV will do well. Seems to have real silver bars in the vault.

    If Comex defaults.... does the whole comex edifice, (IE not just silver) come apart?

    I can't see the entire COMEX folding, they are probably considered TBTF so US gov bails it out.....
    how the bail out prices the failed contracts....
    I'm not sure. I can see it maybe being used as some kind of excuse to establish a new intrusive oversight/control over the PM market.

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  16. I had a comment a few days back on this question - specifically relating to SLV - but I stupidly put it as one of the last comments of a just-outdated thread, so I don't think it got many views.

    So is the general consensus here that SLV really doesn't have silver in the vault? SLV doesn't deal with futures like AGQ, so regardless of default with futures on the comex, SLV is fine.... unless, of course, it doesn't have the silver in the vault.

    I know the custodian contract limits liability, but I view that more in the sense that when you put something in the house safe at a hotel they don't vouch for, say, the rolex being a real rolex; they simply vouch for the "rolex" that you withdraw being the same one you deposited. In this light, owners of SLV shares still have legal recourse if the silver either wasn't real silver or wasn't there at all. The legal recourse isn't against the custodian (after all, why should it be, they're just the safe), rather it's against the ETF itself for fraud.

    I've thought long and hard about this and plan to stay away from AGQ, but continue trading SLV when the SHTF. I'll probably sacrifice some potential upside by staying out of the game altogether for a couple days early next week anyway.

    Have at me. :)

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  17. If Comex defaults does that mean there is no longer an exchange anywhere in the world for the daily function of price discovery for precious metals? How then would that function be accomplished? Is it the Comex that defaults or is the paper shorts(EE)? Or are both responsible? Between the two of them do they have access to sufficient funds to settle in cash? I don't think a Comex default means the end of paper silver. I think it leads to radical changes and an end to fractional accounting in precious metals. Thats my two Ameros.

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  18. @Turdle,
    According to the WAG, the CBs no longer have the BBs back since 1999.

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  19. One thing I would be concerned about is the nationalization of the mining industry in light of the possibility that our creditors would demand physical in lieu of a now-recognized-to-be-worthless dollar. The fear of mine is that the US Gov't would take control of the mining companies in order to devote ALL mining production to generating physical to pay down debts to our creditors.

    This is why I say go physical, completely. For me, being a common wage earner, money either goes into silver (depending on price action) or into supplies, whichever is relatively cheaper. I have to remember to maximize utility of my money per dollar. It made sense to buy as much silver as I could afford back when it was $6-7 an oz. But now $100 doesn't even buy 3 oz now.

    In the meantime, I'm focusing on buying survival supplies from the company I work for, as I can buy them at prices our customers can't buy them at, even below wholesale. I have to pursue that opportunity before it's gone forever. After I have gotten everything I need from the wholesale program, then I look for the next "less-cheapest" raft of supplies to go after, like personal supplies (bathroom, etc.). I'll buy me enough to last several years. I have to figure out what I will do with the money I earn after everything is in place (it doesn't sound like I have enough time to get everything in place UNLESS silver takes off in the next few months). I know it's not going into paper anything except a few months of cash, but not much.

    SE

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  20. I'm playing out of the money calls on SLV - the miners haven't been keeping up. I'm way long physical - so that's not a concern, I'm just trying to hit the lottery with this. I bought a couple of handfuls of SLV OOTM puts in case of a default - what do you think happens to SLV? Does it go to zero and the puts pay off?

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  21. I am not sure that a Comex default would result in anything but sharply higher prices until the market clears.

    It is unclear what happens to paper assets like SLV -- the fine print is murky in the prospectus, but small players would clearly only get cash.

    The Sprott funds and things like CEF should be OK since their metal is audited. Look at the premium on PSLV and you will see that many others believe they can survive a paper market collapse.

    There are unknown risks in the miners. Some might be OK with proven reserves, but there would probably be negative stock market effects as well. Unpredictable.

    Premiums on physical might increase.

    There is no post-EE world. One EE goes away and another takes its place.

    Thanks, Turd. You are a superstar.

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  22. "With all of us acutely aware of the supply problems of the Comex, we need to start preparing for the post-EE world. At some point in March or May or July of this year, the Comex will default."

    Did anyone else find that statement a little unnerving? All of us here agree with Turd's outlook I'm assuming ..and we know in our gut that it is going to happen.. .but I don't know.. ..having TF just flat out state it as a certainty and even moreso with the close-horizon timeline mentioned.. .it just made me so completely sad. I guess the inevitability of it really hit me. I'd trade all my silver and miners.. well, everything I own if I could give my 2 small kids a country to grow up in where... ....well, you know.

    But anyway, I posted last in the former thread about appreciating all the good information shared here by everyone and in case it didn't get seen.. I want to reiterate. Some of us can't contribute as much from a technical standpoint...and Lord, I wish I could because at this point those of us who don't know how to trade like the rest of you...we just feel we are at a disadvantage in coming up with enough resources to convert to physical. But I appreciate how no one here makes you feel unwelcom even though it is CLEAR (lol) that we (read: I) can't hold our own on the TA. Thanks for letting us belong anyway and thanks for letting us learn from you.

    My goal: Continue to buy silver just as much... or little as I am able. Continue to learn from you all and contribute where I am can. Encourage you all to PREPARE..as Turd has said so many times. Stock up on food, water, everything you can possibly think of as making your life and those you love a little better. Remember others.. even if we don't have the means to give physical items..we can always lend a kind word or a helping hand. If you pray..do so for your country and our entire world. The times are changing. We at least can walk through this change knowing we are all in this together.

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  23. atlee,
    There's still the GLOBEX and LBMA.

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  24. http://silvergoldsilver.blogspot.com/2011/02/100-oz-bars-about-to-be-extinct-we-only.html

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  25. I don't think there will be anything resembling a COMEX default, based on what we've seen in the banking world. Maybe COMEX will pay out in physical, maybe in cash, or maybe just in IOUs for "future delivery".

    Or as Paul said maybe the Fed moves in and sits on all of us.

    This has become a world where the "rules" get re-written on a daily basis, to expect that COMEX will agree to a situation that damages it is simply wishful thinking.

    Cynical Kiwi

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  26. Junior minors, exploration and development companies should see their share prices rise as physical becomes key. Commercial interests would need to show proof they've secured physical supply to meet operationa requirements throughout the metal spectrum. Add in rising retail demand.

    Long established mining operations would seek out the best close to production or decent performing juniors in order to expand resources controlled. I'd expect more joint ventures, partnerships for exploration. innovations in mining technology to maximize life of mine etc.

    Examples 2011:
    copper
    HudBay Minerals acquisition of Norsemont
    http://www.norsemont.com/_resources/news/NR_Jan_10_2011_final.pdf

    Gold
    Newmont Expands Nevada Growth Potential With Acquisition of Fronteer Gold
    http://phx.corporate-ir.net/phoenix.zhtml?c=66018&p=irol-newsArticle&ID=1523892&highlight=

    Thank you to Marco G for introducing Norsemont.

    Cheers,

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  27. 1.Yes
    2. JPM down the tubes
    3. Better have physical already buried in your backyard when it happens.

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  28. I'm probably in the minority here, but I highly doubt the Comex is going to default in some kind of spectacular explosion. My feeling is that they have enough tools at their disposal to prevent that from occurring. More likely what will happen is if silver bullion becomes extremely scarce for an extended period, they'll just wind down operations. Maybe they'll have really strict limits so as to make the Comex fairly irrelevant in pricing gold and silver.

    If that happens then money will naturally flow into the miners since that will be one of the few ways left to obtain exposure. Also I would expect physical bullion and whatever trusts do survive to go up considerably in value.

    I think your biggest risk with paper instruments will come if/when the Comex has to do something drastic in order to reduce its exposure to long-side contracts. I don't think paper will suddenly go to zero, but there could be considerable downside in that event. "Premiums" at that point would be irrelevant.

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  29. atlee,
    you said: "If Comex defaults does that mean there is no longer an exchange anywhere in the world for the daily function of price discovery for precious metals? How then would that function be accomplished?"

    The spot market for currencies is an inter-bank market that operates without an exchange. Silver and gold trade in that market. It's the spot market. A spot market does not need a futures market to go along with it. The whole world knows the EUR/USD exchange rate because it's a spot rate determined by the inter-bank market. Same with XAU/USD.

    Uncle Fester,
    Who is the WAG? Can you please elaborate or point me to source materials?

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  30. Seems a paper default would also slam the miners who hedge their production.

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  31. Last week I sold 7000 shares of SLV and put the proceeds into PSLV. Unfortunately, all of this actions was in my IRA so taking possession of physical silver is pretty much out of the question.

    The reason I switched? As I understand it, JPMorganChase is the "custodian" of SLV's "assets", and when JPMC gets hit with calls to deliver 30,000 or so maturing COMEX futures contracts, what do you think is going to happen? Yeah, yeah, lawsuits galore, but I figure we'll all be under martial law by then, so...

    Just call me.... MrJimm

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  32. @Jon

    I had more or less the same question and tried to ask it a number of different ways. Got some good responses. Here is the conclusion I have come to.

    I am down to two open positions (APR calls) on SLV. I will liquidate those in the next 2-3 trading days. I liked trading SLV options and have had some real good payoffs with them Great liquidity, big open interest. But I think the day will come soon when the market loses faith in that ETF, because nobody will have faith that the silver is really there. Once that faith is gone, the shares and the options will be worthless. Since there is a real possibility that could happen just about any, I will no longer trade them.

    But, there will be other options to trade. SLW and various mining stocks look like good alternatives to me.

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  33. I have been wondering what happens to miners when the $ collapses. ..Still trying to wrap my head around it. If you cash out a position, for example, after the collapse.... what do you get paid in? Worthless dollars? I don't understand how all this will work as far as the banks and miners, and paper trades ..etc.

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  34. Im not convinced miners will hold up with a collapse in paper gold. Getting into fofoa territory there. But i dont think the comex is going to default at this price level anyway, so my plan is to scale into physical gold with silver profits.

    At some point blue chips will come back into the equation on a larger scale, but probably not until gold reenters the monetary system.

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  35. Slightly off topic... anyone notice the US dollar index is currently at 77.21? I remember reading that if it dips below 77, the USD is in big trouble. We're not that far off...

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  36. @Ginger,
    Don't be so glum, if the EE were to disappear tomorrow...well, who cares? Would it not be a better place for your 2 little rugrats and mine? Also, check out what tekewin said above, there will always be an EE. Nothing new under the sun, which will come up tomorrow no matter what. That is to say: it was, it is, it will always be about how we treat others.

    Don't mean to be preachy, I just know how you feel. Then I remember what is good in life.
    Fester

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  37. What is EE? sorry for my ignorance.

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  38. @trashcan

    EE = Evil Empire (all the nasty TBTF banks)

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  39. another question, when you all say buy physical... how many ozs are you planning to buy? 100,200 or it is in 1000s?

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  40. 1. I don't believe the COMEX will default. They may restrict trading to liquidation only (as they did to me (and the Hunt Brothers) in 1979) and the folks on the short side might have to pay big premiums to get out. The silver futures market would collapse for a while and then come to life again. If we are lucky JPM would be bankrupted (not likely, since they seem to have government support).

    2. I've moved from SLV to SLW. The PSLV NAV premium keeps rising. Currently at 14.77%! Must be lots of folks fear an SLV default to get such a premium.

    Been through many bogus conspiracy theories in my long trading life, but this one is hard to ignore. Especially after the CBOE ignored the new law on position limits and gave JPM carte blanche to manipulate. Isn't that criminal?

    Just found this site a few days ago. Great! Thank you.

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  41. I will get out completely when there is not much silver left to buy on all the websites.

    If you can't get physical metals, I guess miners wouldn't be bad. I might just start buying a ridiculous amount of food though for storage. Still better than dollars

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  42. Is this a good place to ask where you guys get your silver? I am buying monster boxes for spot+$2.60 for American Eagles. Is this a reasonable price?

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  43. Turdle,
    The Washington Agreement (WAG) was an agreement betwix CBs. One provision stated that the CBs would no longer lease their gold. IMO that started the BB price manipulation unwind and the PM bull market, now 12 yrs old.

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  44. Thanks Fester. ..Yes.. the EE I can do without.. won't be mourning that loss. :] ..It's the broader outlook of the whole domino effect I was thinking of. I guess I foresee an extreme inflationary event over the horizon once all of this gets going and that will not be a pretty picture.

    I guess I got off topic a bit and carried Turd's post out a little further than maybe he was taking it.

    Ah..yes. The sun will come up. Still much to enjoy about life. Silver lining in every cloud..

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  45. everything is still under control..... relax ....

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  46. Ginger, have you read Michael Maloney's book? He and Ted Butler and others have saying for years now it is only a matter of time before a major silver default happens somewhere. Too much silver being sold/leased over and over when the assets do not really exist. So, yes the COMEX may default, and soon, because their fraud is about to be exposed.

    I tend ti think Flaunt's description is more likely to be how it plays out, but who knows for sure.

    Does that mean the end of paper trading? Certainly not. We just won't have certain products available any more. Our miners will serve us very well, I think. And, I am sure new paper vehicles (ETF) will appear that track the price of silver. We don't need the COMEX to do that.

    What worries me more is that I will not be able to use my profits from paper trading to buy physical silver because it will not be available on the retail market. Maybe I'll have to go to India...

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  47. Thanks Uncle Fester. I'll get myself up to speed on it. I wonder about silver, though.

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  48. Ginger,
    Yes, it will be rough going for awhile. BUt I gotta believe we will be better in the long haul, no? Might be too much to ask for a complete Fed, JPM, GS, CITI, BoA meltdown. I just want the hamster wheel RPMs to slow a little and let us all catch up.
    Cheers, UF

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  49. This video says to own your your nations mining stocks as system collapses, us defaults, armies come home, borders close, etc. I want there to be 'good guys' in this scenario, don't you.

    http://www.youtube.com/watch?v=Lwkpr8D-Fjc&feature=uploademail

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  50. 1) Yes, I agree with your thesis.

    2) Trading will be halted by the government and your shares will be liquidated by the government. They will claim mismanagement and lay the blame at someone else's feet, claiming if they had implemented position limit earlier they could have kept this from happening. Now that it has, there is nothing to do but move forward with more regulation and to pay everyone off with devalued US dollars. THEY ARE DOING IT WITH CHINA WHY OH WHY DO YOU THINK THEY WOULD NOT DO IT TO YOU?!?!

    3) Then hard assets like land, cattle, water storage, bulk food, BB Guns and BB's for taking small game, Firearms to defend yourself (crime will go up no doubt) or taking large game and maybe spend a little money starting a neighborhood watch program. It helps you to get to know your neighbors and you can help each other in times of need or trouble. Anything that you can get your hands on to reduce your reliance on a systems that may not always be there to meet your needs.

    One quick story I have to share. I am a preparer of sorts and I have decent emergency supplies here at the house. During the Super Bowl which was hosted in the DFW Metroplex, as many of you know we were hit with a heavy ice/snow storm. My wife went to the store during that time period and it was pretty much wiped out of goods. No items on the shelf. She came home, walked up to me and said "I get it now. I never understood why you have the supplies you have, but now I do. What's for dinner?"

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  51. Believe it or not, I view owning PSLV or CEF as paper as well. Its not too hard for the DTCC or whoever to change ownership of shares. It also isn't hard to have a quick easy target for govts to seize, tax, etc... Now to answer your questions:

    1. Yes
    2. Use paper to hedge downward movements or dramatic upswings only. If the metal goes more than 10% in either direction, get out of the paper. NOTE: I said METAL, I don't care how leveraged you are or not. Make your decisions based on how the metal trades.
    3. Gold will probably be the #1 flight to safety, but I don't think its a wise idea. The CBs can easily flood the market with silver for short durations. I personally like ammunition (it only goes up in cost each year), but its hard to have your wife let you buy $500 dollars of the stuff.... she'll never let you buy $50,000 worth!
    What to buy at a moments notice? Tradeable assets. Anything that has no counterparty risk is good, but if you can get a local farmer (or coop) to agree to forward sell portions of their crop, thats a good investment.

    I don't think buying land is a good idea to do as the currency starts to collapse. That is something you'll do AFTER the collapse and ONLY when you have faith in the govt honoring land ownership rights, water rights, etc. Don't go hog-wild buying land DURING the event!

    Man, question #3 is the hardest one... I just don't have a single good answer.

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  52. I have 33% of IRA in AGQ, 33% in PSLV and the remaining cash waiting for a BTFD moment. I will move the AGQ and cash to PSLV and ride it out. Has the dual benefit of being "offshore" to us USA blokes, although the .GOV could declare it contraband and try to confiscate it.

    Tyler: I went on a shopping trip to the EBay tonight to see what PMs were getting. All I see are a ton of 1 gram, .5 gram, clad, asian forgeries and other garbage for sale. The real good stuff is getting pretty thin. Not many sellers unloading their stash.

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  53. Turdle,
    As I understand it...Bear Stearns naked shorted silver for decades. This, coupled with the gold leases helped make the $ look stronger than it actually was in the 1990's. When BS collapsed, JPM inherited their shorts.

    It has alot to do with Au and Ag being currency metals. Ag is just easier to manipulate, but the point is to keep Au down. Like a beachball underwater....pop!
    UF

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  54. Hey Guys,

    Well, if Comexico goes out of business, price discovery could be done at my local coin shop.

    My coin shop buddy may even barter with me. His shelves are very tidy.

    Wonder if I can trade the wife's Neil Diamond record collection for a Silver Maple? She's got one album signed by Neil back in the 70's. That should be worth something? Maybe not.

    I never cared for his music, but I have fond memories of digging post holes while listening to Cracklin' Rosie, and sipping warm Pabst.

    The Price Is Right has never been the same since Bob retired to promote dog neutering.

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  55. 1. No. The following is one scenario:
    - paper and physical prices increase several times from current levels.
    - Result of this is velocity of silver increases (stale longs sell, higher prices encourages more trading / investment / speculation).
    - Many Comex longs close for cash.
    - All those demanding delivery in Mar, May, Jul get it.
    - At some point a Comex 'holiday' is called.
    - From that point, the Comex contract is in liquidation mode. All trades are to close existing positions.
    - Transactions can still settle in physical.
    - COMEX ceases to function as price discovery mechanism.
    - Trading continues on physical markets (eg London).

    2. Under this scenario there is no need to swap paper for physical.

    3. Can always exchange into physical. The question is at what price? However in this scenario mining shares will skyrocket. Whether to invest in juniors or seniors is slightly moot and would depend on personal circumstances. Personally I favour seniors (liquidity, also because being in production they proxy an investment in the metal more closely) but would never dissuade those who want to go for juniors.

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  56. @trashcan I know people who are proud of their hard earned 60oz stack and I know a few who are in the 10-20k oz range, but they've been stacking for years at much lower prices. I think 500oz is a decent amount but I personally wouldn't be comfortable with anything less than 1,000.

    @Darren The US Mint charges dealers spot+$2 for ASEs. $2.60 is pretty good. Compare your price with Tulving.com. Best price I know of on MB with free overnight shipping included.

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  57. Someone said several months ago to be careful what we wished for. He said you needed to think of your PMs as an insurance policy. When the time comes that you have to cash them in, that is all you will have. I have two months of food, a couple of thousand ounces of junk coin, gold here, silver here and abroad, cash in a bank account overseas denominated in the local currency and tons of guns and ammo. I am as prepared as I can be. But for what? None of us knows what it is going to be like and frankly, I'm not sure any of us want to live in the world we are imagining. I believe Turd is right. I think it's coming faster than most of us imagine (I live in Wisconsin and spent last Saturday in Madison. I have an up close and personal vision of part of the future and it is here now and it's ugly). I've been trading miners and SLV but liquidated the SLV today and will hold the miners until this thing either blows up or blows overs. I truly hope we are all wrong. Unfortunately, circumstances wouldn't suggest it.

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  58. Just a quick question, though I think could be relevant to Turds post. Wasn't it during one of the "Flash Crashes" of the NYSE when they actually halted all trading and then rolled back trades made after 3:00 P.M. that day or something of that nature?

    What's to keep the COMEX from doing the same thing once they stare default directly in the face? They just blame it on us "Speculators", change the rules of the game and pretend all is OK with the world....

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  59. @Darren Just checked Tulving myself and a MB of Maples are +$1.99 and ASE MB is +$2.49 and those prices include overnight shipping.

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  60. Wayne,
    What you describe is default, no? C'mon, a COMEX "holiday"?

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  61. @Darren

    $2.60/oz over is about the cheapest I have found.

    Tulving is $2.49 for silver eagles but the minimum is 500 oz. This is your best deal if you're buying a whole box.

    Gainesville has reasonable shipping for $2.99/oz for singles and $2.80/oz tubes of 20. You can get $5 off shipping with code NAIUS. They have a really nice selection.

    Lear Capital has eagles in any quantity $2.65/oz over spot, you can get free shipping with code F7B9E.

    Northwest Territorial has reasonable prices but avoid them, you won't see your metals for at least 8 weeks after you pay them. Apmex prices are high unless you get 500oz and then you may as well go Tulving.

    Hope that helps

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  62. oldNavy,
    I think you will be right, unfortunately, about not being able to buy the physical at some point. I just think at some point..at any price.. it will be very difficult to come by. I have not read Maloney's book but I do understand and agree with his premise of a default. It just isn't logical to think it could be AVOIDED in my opinion.

    I hope...as you say..the miners will do well for us in the coming crisis. I don't have enought physical yet and am hoping to convert my miner shares/profits as well.

    Fester,
    Your statement about we would probably be better in the long haul is actually something I've been thinking about. ...It's like cleaning out a festering (no pun intended!) wound. I kinda think the financial mess our banks and gov't have gotten us in to can never 'heal' until we clean out all the garbage and start anew. Yes, we need a reset and in many respects..that's not a bad thing.

    phychoo5 said: "everything is still under control..... relax ...."

    Ok! :D

    ReplyDelete
  63. Impala:
    Great to have you back. Where have you been?

    ReplyDelete
  64. Timpa,

    Thanks for the silvergoldsilver blog link! I don't know exactly how it happened. I guess last week or early this week, I googled something and saw a reference to Turd Ferguson. It was a VERY good thing I decided to look up his web site. The funny thing was, the first web site I went to had photos of hot women on it. I was like, "This is the guy who said something about silver?" Yeah, uh-huh...

    The information I have been receiving for years has basically been "after the fact information," though it is information that most people will never see until it's too late and it helped me to gain the kind of financial independence I had dreamed of before. This web site here and the other bloggers like Trader Dan, Jesse's, et al, and the link you provided seem to provide "boots on the ground" information, as it is happening. Now, I'm beginning to see how some of this information flows to make up the reports at the end of the day that I have read for years.

    Thanks everybody for providing all the links I've followed up on. Fortunately, I'm on vacation from work, so I have ample time to read over the blogs frequently.

    It feels like all this time, I had been hundreds of feet up in the stands watching the action with very strong binoculars, and suddenly, I'm down on the ground taking in the action without the confines of the binoculars. Sure, I haven't been kidnapped by the coach, thrown into a uniform, and told to go play, nor do I know the all the players, but this is close enough.

    SE

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  65. 1) Not quite. I think it matters quite a bit whether the default is a true default vs a de facto default. If there is a true default i.e. the comex suspends all activity in the contracts because delivery can't be made, then all the paper becomes immediately worthless. On the other hand, as long as the contracts are being settled, even if it's at a large cash premium, then the paper keeps its value.

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  66. Uncle Fester
    Its not a default as I describe it. If I am long SI futures (as I am currently) my rights remain .... close contract for cash or demand physical.

    ReplyDelete
  67. If a tree falls in a forest and no one is around to hear it, does it make a sound?

    If the US is bankrupt and no one admits it, are we?

    If the Comex defaults and no one can physically prove it, did it?

    Physical for serious money, paper plays are only for mad money and keeping my finger on the pulse.

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  68. Pablo,
    I'll check with my local guy, but last week he was still spot + 4% and you walked out with physical. If it is 8% online, time to find a local dealer at these prices, no?

    Ginger,
    That's a very good point. Sometimes I want to find the nearest Rockefeller or Rothschild and shove the little green paper down their throats. Yes, the wound needs cleaning...desperately.

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  69. 6a1dbcdc-3c89-11e0-b484-000bcdcb8a73,

    Nationalization of miners is only a potential issue if you invest in US miners. I'm invested in 2 miners and they have 4 mines between them currently, 3 of which are not in the US. Both miners are Canadian-owned so the 1 mine that is in the US should be safe if that scenario were ever to go down. If not they still have 3 mines, maybe more by whenever the doom date is.

    AUNNF and GPL are my two miners and they did great today: 10.5% and 8.7%. These are two miners that will follow moves in silver unlike most hedged miners who are missing out on all the fun right now.

    I'm only in to 3 stocks right now, those two miners and one other one for fun(it's historical chart is horrific)that I am hoping will catch on with the recent food shortage/inflation/oil price drama at some point in the future. All the rest of my investment $ goes into physical.

    My 3 Picks

    Word Verification: bralift.

    I hope it's not Blythes bra.

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  70. Bottom line...I'd like a little advice. While I am a good friend of the Turd and we talk often (I am not nearly as smart as he is...just an ex football player who was dropped on his head as a baby), including numerous conversations about paper vs. physical, he doesn't like to give his good friend hold or sell advice when it comes to AGQ.

    Here's my question: I have a very nice position in AGQ. I've had it since "Turd's Bottom" around 119, it closed today at 182.54. Is it time to exit AGQ as soon as tomorrow and put my cash in physical and SLW (I already have a large position in SLW)? Or some junior miners that some of you might recommend?

    Thanks in advance for your advice...and Turd, thanks for all you do!!

    ReplyDelete
  71. Mark Says:

    Thanks for a great site.

    I am steering clear of all paper, including stocks.

    I know the returns could be huge for the junior miners, but the counter party risk of the brokerage firms etc has me nervous.

    All paper assets are correlated (in my opinion).

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  72. Jumped over to Harvey's blog for a minute to catch his post for the day and guess what I saw?! Here's the headline:
    Fed's Hoenig: Big banks too risky, must be broken up

    You see, the FED is already getting primed to gank the big banks. When it all come tumbling down they will point to them, blame them for the mess we are in and allow someone else to take over the manipulation PM's for them.

    It's all freaking rigged. The suppress the price for the goverment, they get lots of fiat bailout until extend/pretend doesn't work anymore, then they get broken up and someone else takes over. Just like they did last time. And all the while other countries are siphoning off the physical goods.

    Is this a logical conclusion to any of you as well?

    ReplyDelete
  73. Michael

    I have never really looked to buy on EBAY, but as long as sites like APMEX or Provident have supplies then I won't entirely cash out and will keep trying to trade a bit.

    ReplyDelete
  74. What does "EE" mean?

    "We need to start preparing for the post-EE world..."

    Sorry for dumb question...

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  75. Ted Binion of Binion's Horseshoe didn't trust banks :-)

    He had 6 tons of silver in a concrete bunker discovered after his death. Most of that silver, according to Wikipedia, remains at the courthouse unclaimed. Yeah, right.

    http://en.wikipedia.org/wiki/Ted_Binion#Buried_treasure

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  76. @Mr. Hyde

    I am in a similar position to yourself... Turd's bottom turned out to be very profitable entry point.

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  77. Matt - "EE" stands for the Evil Empire, referring to the banks that suppress the price of PM's on a regular basis.

    No such thing as a dumb question!

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  78. 1) Yes
    2) My best guess is when my gut tells me to get the hell out- sorry cant be more specific :(
    3) I will buy physical real estate- its cheap right now and will always hold some value

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  79. My main dilemma now is, when do you decide to swallow that opportunity cost pill and cash out your 401K pay the taxes and put it into something physical. You might be missing out on Dow 36,000 - or you might be saving your family's lives.


    @Fester

    If your guy can get ASE at 4% over spot by all means buy them. They have a 2$ premium (about 6% at 33.50 SLV) out the door from the US mint. So at 4% you're getting them below dealer cost!

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  80. On AGQ: For most of the day today, PSLV actually outperformed AGQ, but PSLV was hammered in the end of day sell-off, so that the closing numbers show AGQ +2.98% and PSLV +1.97%. I am sure that this is explainable by the volatility and leverage, but it is a red flag to me.

    I don't think that AGQ will be wiped out per se by a COMEX default. According to the prospectus they use different markets for their futures contracts. However, if the ETF relies on futures contracts, it seems like it must underperform the spot price during persistently deepening backwardation.

    Finally, even if AGQ or SLV were wiped out, is that not what buying cheap puts is for? Those must still be honored even if the underlying security is vaporized, right?

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  81. I would love to hear a cogent answer to the following:

    WHY do JPM, HSBC, etc. have this massive short position? In other words, how does it profit them?

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  82. Nigel - Not sure Turd is going to like his bottom being referred to as "very profitable entry point"

    Hahahah... sorry my mind is in the gutter most the time.

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  83. I'm actually kind of disappointed that I'm jaded enough to think that a default is not going to happen simply because there's too much power behind the EE. That being said, the thrashing they've apparently been taking and the inability to disguise their intentions or actions to the author of this great blog, has a little part of this skeptic thinking that maybe we've got a little bit more power than we might be ready to realize.

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  84. MrHyde,
    No advice here, I don't spend other peoples' ounces. But I will tell you what I do:

    I invest in physical, but I trade in AGQ and DGP. I "shimmy" on price with AGQ/DGP until I'm under spot. As the price runs away, I'll loosen my stops. After all, you can't catch a big fish without letting out a little line. Stop loss limit is up to you.

    After my stops have been hit I wire at least 1/2 my profits to the bank, then cash to physical. Then I start to "shimmy" again. For a good entry, check out the 2yr Au chart with the 150 DMA.

    Accumulate physical with the leveraged paper instruments. Pay the taxman with the paper ponzi bullshit.
    UF

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  85. Hoots, I am a newbie at this stuff. But you ask a very good question and I want to take a stab at maybe answering it.

    I look at the banks, the FED and the government as being the same entity with the same interests.

    SO, the banks use the short positions to manipulate the price. They do this because they know they will get bailed out or given money behind the scenes. This allows the FED to keep doing what it wants with monetary policy and the government to keep spending money and keep getting itself elected by promising people things into infinite. In my opinion that is it in a nutshell.

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  86. I have a number of thoughts on the subject and I am just going to start putting them down.

    The value of Paper: Like B said above me, the DDTC has the ownership of all stocks twice removed in a thing called "Dark Pools". And in the video that tgcopeland shared, Bix Wier talks about post currency event, that the mines will most likely get nationalized (which is much easier then confiscation). Lindsey Williams, who's elite insider predicted the run up to $150 oil, then the collapse to $50 oil, Lindsey also said he was told two months ago that all hell would break loose in the Middle East, listen to his broadcasts from a few months ago. Lindsey was told that paper is worth what it is written on and that you need physical gold and silver.

    Getting out of Paper (the timing): I am very interested in this. I have 20ish full silver future contracts that I got with the intention of putting the proceeds of selling my house into and taking delivery (starting at $17 an ounce). So the house hasn't sold, but I got about a dozen of the contracts are coming due in 2 days. So I got a few options.
    a) rolling them over to May
    b) selling all of my silver miners, the futures that come due later out and a few of the March, putting everything into taking delivery off the exchange (I will prolly need lawyers to threaten the exchange to get anything but a bunch of excuses, speaking from experience).
    c) sell all the March on Friday, pay the taxes, and buy physical from tulving.com or apmex.com.

    I know that there are worse problems to have, but if anyone else is in a similar situation, I'd love to hear your game-plan.

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  87. I started buying silver as an investment opportunity. I came across this blog from reading others about the upcoming silver squeeze and price manipulation. I have been reading this blog for a few days now and I am hanging on every word. However, the overall tone has though seems to have shifted to one that is expecting a complete crash of the US dollar. I don't want to offend anyone because I am new but that sounds like a conspiracy theory.

    With that being said, i am getting a little nervous because everything you guys are saying seems plausible. With the stuff going on all over the world, and the continued dropping of the dollar compared to other currencies, it's hard not to want to prepare for the worst.

    So what can I do? I am just a (grad)student and I have hardly any money to save much less take what I consider an educated guess on all of these things happening and prepare.

    I have been buying as much silver as I can. 38oz so far. I have a tax return coming I was considering 1)Buy Swiss franc ( hopefully if the dollar failed it wouldn't go down too) or 2) buy more silver. I must say I am still skeptical and need every dime I can get. So I need to make a low risk purchase. Silver is volatile and I could lose most of my money in a day. So go foreign or go more physical?

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  88. @Nigel...if you knew Turd you wouldn't say "Turd's Bottom was a very profitable entry point".

    However, the Turd is very smart, and has this uncanny ability after looking at all the charts and the fundos to make some very accurate calls. He has certainly helped along the way to a few profits.

    So what are you going to do with your AGQ?

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  89. @Hoots

    From what I've gathered on here and other blogs, it's something along the line of the big banks get paid pallets of cash money by the fed/govt to suppress the price of metals in order to mask inflation. The govt gets its "stability" and "recovery" and the tbtf banks get their bonuses (which they no doubt buy physical with!)

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  90. 1. Maybe. Strictly speaking Comex already defaulted with the Hunt Bros. Life goes on. They lie. "These new rules apply effective immediately to correct an otherwise disorderly market"...

    2. The trigger point will be when your trusted dealer (who you are always in touch with) tells you (one of his best customers) he thinks this is the last new supply he will get...cash out paper & electronic instantly and buy all you can.

    3. With a Comex default all the miners will be unhedged...no? All the same, when you cash in the miners what do you get? Fiat.

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  91. Something I forgot, Jim Rickards' stated in an interview with King World News that there wouldn't be a Comex default. They would just close the delivery window until they could catch up with the miners. And that the Comex isn't in the business of warehousing all of the physical for all of their commodities.

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  92. @Mr. Hyde,

    I bought AGQ at 118, got nervous, and bought again at $132. A week ago I sold a third, securing a tidy profit even if it should go back to $132. I put the proceeds into some miners. Depending on how many shares you have, consider selling a portion. You won't worry as much once you've locked in profit. Depending on how many you have, you might sell covered calls on the rest.

    It sounded like you hadn't yet purchased physical precious metals. My opinion only of course, but the priority of work for your profit should be to Get Prepared Accordingly (food, water, physical security, communications, energy, medical/hygiene, maintenance, and transportation) if you haven't already, then to buy physical precious metals, and then to trade to generate more fiat to Prepare Even More Accordingly and then buy more physical precious metals.

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  93. Alright lets talk turkey already. This thread is sadly short of stock picks. As Pierre Lassonde said on KWN, the HUI is trading at a fraction of what it should be compared to miners. Junior miners are still a steal. So if you love silver, you should madly love the junior miners. Its money we want to make from silver's rise no? That and VINDICATION!
    I like CMA.
    -Its marketcap per ounce is super thin by comparison
    http://www.goldminerpulse.com/silver-chart-ore-value.php
    -its got two drills given 'er to move a bunch of the inferred to indicated.
    -its hugely owned by Sprott and Pinetree.
    I also like SLX. Again goldminerpulse says its comparitively undervalued. Premerger it traded at $4.00. Now you add the ex-Hecla guys from preMerger Silvermex, and you have a timebomb.

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  94. I would also like to get some clarification. I read that it's not the COMEX the delivers the silver. Bare with me. I though the COMEX was a platform, kinda like Ebay that brings the Buyer and seller together. At the the buy and seller go through brokers to gain access to the COMEX. The buyer and seller don't know about each other. That being said, it is up to the seller to produce the silver not the COMEX. So if JPM is selling they would produce the silver and if they can't the the broker has to. Only after that does the COMEX have the option to provide the silver it doesn't have or pay up. Default, because they make the rules would be having to pay up. Is this accurate at all?

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  95. Thanks Uncle Fester...Makes a lot of sense.

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  96. Very interesting thread. Many thoughtful points. That's why I love this blog.

    1. Central thesis is correct

    2. As i think Turdle pointed out, this depends on definition of physical and paper. I beleive PSLV and CEF will do extremely well as they will be relative islands of verified hoards of physical metal.

    I never quite understand the misgivings about paying a premium. I think of it as the entrance fee to a VERY exclusive club, and it is only bound to go UP, UP, UP. (this is a similar reason to why I hold Eagles preferentially -- i think the premium we now see for them can only go up.)

    I will consider getting out of paper at the FIRST sign of a breakdown in process -- announcement of funny rule, etc. The minute there is a THOUGHT that a lawsuit ic coming or it is not 100% clear I can liquidate into fiat, I am gone. What use having a winning lottery ticket ( a call option) if you cant collect.

    I think that wiull be very soon btw.

    3. Miners are producers -- they are a great way to go. As someone said, its like holding physical, in the physical vs. paper debate. The thing that SOLD me on TRE was the suggestion that dividends would be distributed in metal. Right there, my neck stiffened and I said that's a GREAT stock.

    hehe, he said stiffened.

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  97. @Mr. Hyde... oops. Re-read what I wrote. Must admit I had a good laugh.

    What I will probably do is take the profit from AGQ and buy physical. The balance (principal), I will put into PSLV. Based on what I am reading, both should do very nicely over the next few months.

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  98. ginger

    "/

    Now I know what it reminds me of! It's not from popeye. It's those little spy vs spy guys!

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  99. @Tim,
    Don't mind us...we're old and cranky. IMO the only reason to get interested in PMs is b/c at some point you questioned the $. Some of us have come to the conclusion that ever since Nixon, the $ is worth less than we are led to believe, nothing more and nothing less.

    That's some of us, Tim, not all of us. I do not speak for everyone here, and neither does Turd. Speculators, gamblers, Ponzi-artists will always be around, PMs are a way to save your time and energy outside of the their system.

    UF

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  100. ALCON:

    Whew, after reading these comments I feel like I have at least an MBA, whatever that's worth these days. Here's my direction RE:the future... Quit worrying about JPM/Bm for God's sake you all sound greedy. They are a distraction from your focus/goals/security. Hold phyiscal (f-the comex) period. Take your cash out NOW! You need to be concerned with a solar flare, which just occurred BTW, that could disable our IT networks not to mention the global BS that is shakin' out(ie No Korea,Iran SA ect ect). Never go below 1/2 tank of fuel. C'mon this is the game plan from y2k, except now it will happen. So Guess what, no ATM, drive up window or payday check cashing options. Nothing... Our society may not understand PM as liquidity and only recognize the almighty $$$. So get cash for daily transactions, have food, PM, be prepared to barter, ammo, read Turd. This is common sense gang, wake up, you know the routine " prepare for the future, do not fear it. COL Turdite

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  101. Jimmy, thanks for the response. None of us knows what goes on behind the scenes, but I think my ideas are close to yours. A key question is - how tight is the collusion in the Fed/Bank/Gov structure? Let's pick on JPM. It would be natural to assume that they take financial positions for their own (financial) profit and thus it's hard to see the justification for their outrageous silver short. On the other hand, if they are in some sense buying access to the Fed system by propping up the dollar, then maybe it has paid off for them. But is the whole system really so well coordinated via secret handshakes and wink-wink deals between greedy bankers? I've been called a conspiracy nut, but it does stretch the imagination.

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  102. 1) not expert enough to say for sure. Seems like better than even chances that the comex could default.

    2) I don't own paper silver, wouldn't buy it. For me, it's untrustworthy and unpredictable. If I owned any, I would sell it immediately.

    3) Miners, big & small. Non-hedged would be better, but I haven't found out how to determine if a miner is hedged.

    question: if a miner is hedged, are they required to report it on their balance sheet or somewhere?

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  103. Uncle Fester - That's what she said! Oh wait a second...

    On a serious note to Tim. I think that the tone around here has changed a bit and I think that is a direct reflection of what we are seeing around the world and in the areas of work that many of us around here do.

    Turd has attracted people from all walks of life to his message board for a variety of reasons, but I invite you to take a look at the top of Turds main page. It says "The end of the Great Keynesian Experiment is upon us. Prepare accordingly."

    We've been through, what, ten different kinds of paper money since the US decided to use it? It is either 10 or 13, I can't remember. The point that I am trying to make is that we very well could be nearing that point in time when we will have a to make a switch to the way we transact business and trade goods.

    I suggest that if you are going to try to preserve some wealth that you put it into PM's. You have to do your own due diligence though and decide if that is something that you can do or not. My argument is this and yes I stole this argument from someone else, "Do you trust Bernanke or do you trust gold?" Gold and silver have been real money for thousands of years and Bernanke's been lying his ass off under oath ever since he took that position from Greenspan. Plus, many folks in the USA do not currently look at gold and silver as money (YET), but I assure you the rest of the world does!

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  104. +1 for unhedged junior silver miners. First Majestic (AG) and Great Panther (GPL) are unhedged as far as I know. Both are pretty solid IMHO. Up to 2008, Endeavor Silver (EXK) was unhedged. Anyone know if EXK is still unhedged? I would think so, since it is a favorite of Turd's.

    Revett Minerals was mentioned here before, and it is 20% hedged for 2011.

    Also, have you all heard of this new "Internet Freedom" bill? It's Crazy Orwellian. Under it, the government would have the authority to shut down, amongst others, "financial" networks. I assume this includes my Ameritrade account. Does anyone have an opinion on whether this effects a decision to invest in junior miners online? Are there any alternatives to investing in miners?

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  105. Buff daddy,
    Already there brother. Got cash, PMs, food stuffs et al. That's why I can be greedy now and wait to see what happens with th OI!

    Hoots,
    Apply tinfoil as necessary...but the FED, PDs, and .gov circle jerk is pretty well documented fact, no?

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  106. Tim

    As to your first post, I would just keep buying physical silver and holding on to it. It is incredibly safe as a wealth protection vehicle while at the same time has tremendous upside potential.

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  107. Does anyone have any idea how this will affect trading of silver cfd's (contract for difference) on sites like oanda or FXlive etc etc..

    Like others I have my core physical position, but dabble in the markets but have no idea how a COMEX default would affect the spot silver price. I doubt it is a paper instrument as such, but with money on the line I'd rather know for sure!!

    Thank you Turd for everything you do. I enjoy coming to your site ..the way you put your thoughts on paper is highly informative and I get a good laugh too!

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  108. Snick, I just google "[miner] unhedged" or "[miner] hedged." After digging a little, it worked for Revett and I got out. Google searches also showed that AG and GPL were unhedged until recently. With prices as they are, I assume they remain unhedged.

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  109. The world was supposed to end several times over in my investing lifetime. It hasn't yet.

    As for the COMEX, the suspense is killing me to find out how they are going to wriggle free from this seemingly obvious default. As far as my personal investing I really don't worry too much about it. I go for physical and miners because that's where my comfort level is. I'm not comfortable owning a piece of paper that says "somebody owes you some silver".

    I have to fess up. I don't really understand all the COMEX stuff, and I'm not convinced that I need to. I read Harvey's stuff for 2-3 months and most of it is still like a foreign language. And I'm OK with that.

    I think it's enough to simply get your head around "the end of the Great Keynesian Experiment" and to "prepare accordingly". I think maybe we are all chasing our tails a little bit here, burning up valuable mental energy, in trying to work through failing COMEX scenarios. I'm more concerned with failing currency scenarios.

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  110. Does anyone have a problem with the fact that EE can get help from the "Plunge Protection Team" in manipulating the PMs by naked shorting all of the mining stocks. I feel that this has been happening viciously for a while now and the reason behind the miners not keeping up with the PMs.

    Also, the miners can simply issue more stock, there by preventing any rise along with the price of PMs.

    You also have to trust that they are not hedging. I was tearing it up with US Silver Corp., then they announced that they were going to lock-in profits from the big rise in silver and start hedging some future production at $27.50. Great move guys.....

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  111. The spot price won't collapse though.

    Sources buying for the Chinese wouldn't be doing this:

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/2/7_KWN_Source_-_Expect_Massive_Chinese_Gold_Buying_Using_GLD.html

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/14_KWN_Source_-_When_That_Happens%2C_The_Game_is_Over.html

    Particularly - the second. The Chinese are buying spot.

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  112. Uncle Fester,
    Circle jerks work (i assume) because all participants have an incentive. I'm just trying to figure out what JPM is "getting" for their trouble. And as we know, the trouble is real.

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  113. I would think there is a large difference b/w futures/options in gold and holding SGOL (not a fan of GLD). Futures by definition is paper, SGOL at least go thru the effort of semi-annual audits etc...you may question the validity but it's better than nothing. I would think future/options would be the first to blow up...perhaps the physical gold etfs would follow but I would think there at least would be some time to get out before a complete failure. Any thoughts?

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  114. I agree to those that say the COMEX will simply do a little break, go into liquidaton only mode, and then after some days or weeks resume normal business, but perhaps restricting volume a little so things do not get out of hand again too fast.

    Or it will declare a holiday, meaning temporary complete trading stop, and the price discovery will simply be done on the other many exchanges.

    I think "ability to get out of paper" is no concern at this point and at pretty much any point in the coming years since you will be able to liquidate your paper and put it into physical via the coin/bullion dealer of your choice.

    Mine supply will remain steady over this decade. After 2020 it'll probably slowly drop off and fade off and die out completely sometime between 2030 and 2040. Yes, silver will be basically extinct by then since 90% or more of it is used up forever and cannot be recycled. That means the silver price will pretty much be infinity by then, but I don't think fiat price will play a role at that time.

    BUT for now and the coming years, at a mine supply of 20000 tonnes a year, the small investor will always be able to find a few kilos of physical to add to his own private stash ;).


    IF the COMEX defaults, it only means that they have no physical to deliver against the outstanding future contracts. This doesn't mean the exchange blows up or something. Trading pretty much will resume in a normal fashion or with some restrictions, BUT the only ones that will have problems are those that counted on being able to get their hands on physical via their future holdings, and the company that owns the COMEX, and maybe the COMEX registered warehouses.

    Of course though a COMEX default would have huge implications for the market as it signals that actual supply of silver is very low, meaning a lot of investors and entities, especially industrial users, will realize that they have their hands on paper while they actually need or want physical.. as they have not been prepared for this they will panic and short or even medium term, all physical supply will be bought up at pretty much whatever price, I believe.


    So in summary, I think a COMEX default can only mean good things for someone who already holds physical... or even holders of paper that can wait a few weeks or at worst months to convert their paper into physical.

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  115. Thanks for yall's responses. I think I just needed a little perspective.

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  116. Jimmy,
    I don't really blame Keynes for this, he said to Hayek...as long as someone like (Hayek) was around we wouldn't have to worry about "Keynesian economics"...or something like that.

    However, I understand the Turd's point and it is a good one. Credit expansion and speculation has run rampant on our markets, local societies (hate that word), and infected our day-to-day lives. The expansion and speculation IS coming to an end...yes, we do need to prepare accordingly.
    UF

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  117. http://seekingalpha.com/article/246053-is-the-ultra-silver-etf-a-dud?source=qp_investment_views

    Quick read, worth a scan

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  118. JimmyTheHand, I read that article from Zerohedge today. My comment is when was the last time the Fed did anything that Thomas Hoenig suggested!

    Also for everyone buying puts. I remember another article by TD concerning buying puts on those fraudulent Chinese companies. If the stocks don't trade, you can't force the sale. That makes the puts worthless.

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  119. vic mackey,
    CFDs are not legal in the US, so many of the contributors here will not know what you are talking about.

    A CFD is a derivative, an agreement between you and the broker you use. It is most definitely a paper instrument! As such, there is counterparty risk and other risks to consider. Take a look at the fine print in the agreement you signed with your broker, in particular the clause that will be titled "Force Majeure" or similar. A failure of COMEX or interbank FX markets as they relate to gold and silver will likely fall within the definition of force majeure. If so, the agreement will list the things your broker can do with your position.

    I trade CFDs with IG Markets. I am comfortable with them for now. But, I will close every position and withdraw my money immediately if things get too heated.

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  120. Heres my (hopefully) fictional scenario;

    1) Yes. The outrageous short positions can only be cleared by cash settlement on all outstanding Comex contracts. Comex holiday suddenly declared and last settlement price used. EE will probably have advanced warning and drive the price down a lot prior to this occurring. This can happen very soon and possibly to gold as well. Futures market hits reset and we start over.
    2) Blyth triggers by advising Comex that JPM can't deliver physical. (Chinese counter parties blamed or some BS). CFTC never saw it coming :)
    3) Miners should be excellent investment on subsequent price explosion of physical once Crimex 'price discovery' shackles are off.

    Jeez I'm scaring myself now!!

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  121. Hoots,
    Yeah...I've struggled with that one too. My best guess is a holdover from the late 70s, early 80s with the unraveling of the Hunt brothers. BS figured out a way to make a profit with it. The Fed appreciated it...with its affect on the $/Au thermometer (see Greenspan)...hence it's legacy. But that is all speculation, now the question is: how does Blythe get out from under it with JPM still intact?

    UF

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  122. I'm 100% physical.

    I bought silver at first because I could afford to buy more ounces that way. My plan was to wait until the price doubled and then trade it for gold. That happened the first week of January. The only silver I didn't sell was some Perth Mint Kookaburras and Lunar Tiger coins which are worth a lot more as collectibles than the spot price.

    I will keep adding more silver and gold on the dips and plan to exchange all my fiat for real money in the next six months.

    I really have no faith in the USD and strongly believe it will not last long as the reserve currency. Any paper or digital 1s & 0s will be wiped out and it will be game over for our fiat experiment.

    I proudly wear my tinfoil beanie with solar powered propeller.

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  123. Tomorrow will be an interesting day. How many OI must close on average now? 15000/day?

    G'night all, sleep well.
    Fester Out

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  124. Hoot, I wondered the same thing about JPM at first. Why short something which has everything going for it?

    I believe JPM inherited most of their silver position from Bear Stearns. However, JP Morgan was a founder of the Fed. One corp is private and one is public, a two headed beast with the same goal, monetary control. What's good for JPM is good for the Fed and that is making sure confidence isn't gained in PMs because that means confidence will be lost in their FRNs. These are the scales of monetary confidence. For every action, there is an equal and opposite reaction.

    Their interest is a much larger macro picture. Stocks, shorts and futures are micro compared maintaining monetary control over the world's reserve currency.

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  125. Tim wrote:
    ...I have been buying as much silver as I can. 38oz so far. I have a tax return coming I was considering 1)Buy Swiss franc...I need to make a low risk purchase. Silver is volatile and I could lose most of my money in a day....

    Tim:

    If you're talking up to a thousand dollars or so you might consider nickels.

    Seriously.

    For some reason they forgot to debase that particular coin (so far). Current value of the nickel and zinc, according to Coinflation.com, is just over seven cents.

    It's currently illegal to melt these down, but in a shit-hits-the-fan scenario either that won't matter, or they'll begin trading for the metal value, as silver coins do.

    So:

    (1) you have an item with intrinsic as well as money value, so there's zero risk of losing any of your "investment"

    (2) the intrinsic value (nickel and zinc) is currently 141.99% of what you pay for them

    (3) easy exchange - just turn in for currency to spend as you need to

    Here's an article if you're interested:

    The Case for Withdrawing Nickels

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  126. Hoots - I completely get what you mean by the conspiracy theory nut. I just say take a look at whats happened around you.

    In 2008 we were told that the financial world was in shambles and the banks were to blame for taking on to much risk. The government then transferred that debt from them, to the American taxpayer. They said we would be paid back.

    Now just today we have Hoenig coming out from the Federal Reserve saying "The banks are to big and are to much of a risk and need to be broken up."

    Looks like wash, rinse, repeat to me.

    Do you ever see those folks going to jail over these things? The answer is no, NOT until they try to steal from one another. When a case does get one against them in court, all that happens is that they pay a fine... with our tax dollars! And who do they pay the fine to most the time? The government, who either hands it back to them or they go out and buy another $10,000 toilet seat.

    Dwight D. Eisenhower warned about this very thing happening Hoots. When he was President he saw first hand how bad things were even back then! He came from the military establishment and back then they spent money like crazy and the different military branches were rivals when it came to getting funding for projects. So Eisenhower appointed Roy Johnson who was then the VP of General Electric to head ARPA. Eisenhower then forced all the military branches to seek their funding through ARPA rather than the various channels they had acquired over the years.

    But like that whacked out turtle in Kung Fu Panda said, "One often meets his destiny on the road that he takes to avoid it." ARPA, gave way to other agencies and the monster quickly grew even larger than Eisenhower feared I think. I am curious what he would think now.

    Anways, sorry I know I can ramble at times, but it is all connected. It's all been growing up around us for the last 100 years or so Hoots. It's not a conspiracy, its just business to them.

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  127. So, given my comment above, one might wonder why I own GTU. It was a practical compromise. The money wasn't available outside of my Roth IRA to buy more physical. GTU was easy to buy in my Roth brokerage account.

    I have as much confidence as I can possibly have that GTU really has the goods. But does that mean that I really feel that, in the case of some kind of blow up, GTU is really, totally 100% as good as gold in my hand? Mmmmm.........no. 90%, 95%, 98% probably yes. But not 100%. In some sense, my finger is always resting on the sell button for GTU.

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  128. Quick physics note. Silver foil is afar better conductor than tin. This makes it superior for keeping unwanted signals out.

    And now you know!

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  129. thed comex doesn't really defualt it just pays of in cash like the LME did with nickel a few years ago.
    so what if jpm loses 20 billion it's not even paper just digits. Then the market reopens and we get the real price of silver that will draw silver out of hoarding.
    If that doesn't work then we've reached the "last Contango" as Prof. Fekete calls it where no one will exchange their gold or silver for any amount of fiat. And the $ is done, toast, cooked no mas!
    So there you have it.
    Maybe we get a forced cash settlement but think about what price would you sell your physical for-then we will have the beginnings of a real market place...or not

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  130. Great article about the chain of events in the case of a default.

    http://seekingalpha.com/article/111852-will-comex-default-on-gold-and-silver

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  131. I realized how fabulous silver is as a conductor the first time I took a sterling silver spoon, not a plated one but the real deal, and stirred a hot cup of tea with it. Ouch!

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  132. Before TPTB lets Comex default, I believe they will stretch out delivery / settlements to allow for the Gov / Treasury to confiscate remaining PM's to backstop US portion of new Global/ Regional currency. With that, the ponzi can be restarted, settlements can happen in new currency and the world keeps turning.

    In addition, wouldn't surprise me to see 401k's / Ira's be forced to have a percentage of gov debt instruments as well.

    Yes, possibly far fetched, but they won't let the system go down without a fight. Yes, there will be huge disruption, rioting, and stuff you see going around the world here.

    The fiat / debt system is hitting the mathmatical wall. Comex may be the least of problems.

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  133. Dear Turdle GG

    Thank you for taking the time to reply. That certainly sets things out clearer, and I will have a read through that later today.

    It's funny - my core physical position is about 10x larger than what I play with on the paper side, but it's the paper which has me sweating bullets (even though not too highly levered) - fortunately my physical holding allows me to sleep like a baby!

    Many thanks again.

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  134. Hahah.. Scisco, I have to agree with you there. He was calling for interest rate hikes back in October of last year so I use him like a canary in the coal mine kinda way. He was calling for the rate hikes in October and now we have runaway inflation in third world countries 4 months later. Well we had it before then, but you get the point.

    He's probably jockeying politically to take the reigns from Bernanke once the Bernanke gets hung out to dry with Blythe/JPM. He's the opposite of Bernanke right? So it makes sense they would choose him for another round of extend and pretend :)

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  135. I have a problem with holding shares: share lending.

    For example, I know for certain one Canadian on-line discount broker who lends/sells their customer's shares over night and buys them back in the morning. Ever wonder how discount brokers can offer such good prices?

    What matters is that stocks you paid money for are not in your possession for duration of the share loan -- and if something happens to your broker or the borrower... you are S.O.L.

    The Golden rule apply to shares too: unless you hold the physical share certificate in your hand, you don't own it.

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  136. Turd,
    First time poster, long time reader... thanks for all of your insights, wish I had started to trust you sooner, but I was DMODD.

    1) i don't buy comex failure. JPM will cover (or has already covered) by buying shares of SLV and converting to physical, minimizing loss or making a profit on the SLV to physical premium that they charge investors. on this note, i don't think SLV will default, though enough people may choose conversion that it simply disappears. JPM may also be long silver through a variety of miners with long term contracts for mine production.
    2) assuming "paper metal" fails. the "paper metal" is very useful for leveraged investments right now, but thanks to you, all of my "paper metal" is now profit. as long as I can, my goal is to have my leveraged paper investments growing in absolute value, but decreasing as a percentage of my total money pool. lets say I started with 10$, i bought 2$ of leveraged papers, and now I'm at 15$ total worth...but i sold some of the leveraged and am now at 12$ in real investments and 3$ in leveraged paper. hopefully after some more meltup i might get up to 20$ total with maybe 4$ leveraged paper. I will continue playing with leveraged paper until it don't make sense or I lose my play margin. might switch to calls on GLD instead of SLV.
    3) i am already moving my profits from the leveraged paper plays into two main areas, 1) miner ETFs: GDXJ, SIL, NUGT (2xgold miners), and 2) energy ETFs: XLE, XLES, ENY. I like the ETFs because there is quite a bit geopolitical diversification, and it may help mitigate risk from events like those going on in the ME, and potential for individual governments to seize assets. I think individual stocks carry more risk from geopolitical instability - someone mentioned liking a stock if only it was in mexico. wtf?!? mexico is fucking crazy crazy crazy!

    disclaimer: DYODD
    long: XLE, XLES, SIL, GDXJ, CVX, PDS, AGQ, NUGT, wild stab at CZICF
    long calls: SLV, GLD, UGL, wild stab at TRE
    wannabeshortbutnoguts: SPY

    My.Harbl.Testes (my favorite anagram, just barely beat out a close second Marbly.H.Testes)

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  137. vic mackey

    Oh, yeah I know what you mean. With physical I sleep like a baby. Junior miners worry me quite a bit. If I had some silver calls I'd never sleep a wink. Finding our own comfort level is critical to being able to "be right and sit tight" and ride the trend of a long term bull market. If anxiety is too high for you, fear will make you bail out of a position at precisely the wrong time.

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  138. Suddenly I'm back...I needed 1 more, no 2 more drinks before bed.
    UF

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  139. OK it is actually 13,200 OI closed/day...I was being optimistic.

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  140. Yes, your premise/conclusion is correct Turd. My advice, get out now and buy silver (which you should have done from the beginning, but Aquarians always do things a little differently =) Everyday you stay in paper silver, you are giving $$$ to the Morgue and life to their zombie ponzi scheme. Sorry about having to say this, but it's true. You're generating great karma with this blog, but bad karma by working against everybody (including the "Buy Silver--Crash JP Morgan campaign) buy staying in paper silver. Take possession of silver Turd. If you do so now, you won't have to worry about where else to store your assets.

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  141. Jimmy,
    You're right, it's wash, rinse, repeat with so many aspects of our fraudulent financial system. There's no doubt that regardless of whether the various conspiracies are explicit or merely devious coincidences, they are ruining our markets and livelihoods. I'm playing the PMs just to try and keep my head above water, and it's enough to know that the big shorts are in a tight spot. I just like having a big picture view and some working theories to help me get in the heads of our banking buddies. Sometimes those theories are hard to come by.

    As an aside, I hope that most here would not salivate too much at the thought of a Comex default. A JPM bust would be great, but a commodities exchange is a vital part of a healthy economy. I know it's mismanaged by a bunch of bought-and-paid-for cronies, but they'll get exposed eventually. Ideally, the big shorts will get held hostage every delivery month until the silver price is well into three digits, the Comex will get reformed, and we'll all take our millions and find another playground.

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  142. @ Fester are there 3 day left? I know that the COMEX shows data from the previous day. So do we look at the numbers of OI on monday that show fridays numbers or do they have until monday and we will find out on tueday how many will sstand for delivery?

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  143. silderblick,
    I cannot help it. I was raised in the get rich fast genre. You know the quick, hot, fast money...dry-hump you to declare my dominance after-the-fact bullshit.
    UF

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  144. Here's an idea I haven't seen discussed:
    Let the Comex go.
    Open a new cooperative exchange owned by the miners in Canada. A bullion clearing house.

    But there's always a rub:
    Forward selling AG production or price points is in a way a hedge. Heck, SLW is really just a company living off cheap hedging. (High risk in the unknown streams - big rewards for the upfront cash infusion.) Whether it is called a royalty, a hypothecation of assets for a loan, or a future contract at an agreed price, they are all hedges.

    It's mining, kids. Every gimmick ever invented is found here. You can't escape it.

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  145. According to Harvey Organ (who I think is correct).

    A JP Morgan Silver default will result in a banking crisis that will close every bank because of trillions of dollars of silver derivatives that depend on a low price. It cannot be bailed out..Too big. So, system crash.

    The would probably kill the US Dollar and a Brave New World will have arrived. If you see a default coming move all assets/cash out of the banks. Stock up on food. Prepare accordingly.

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  146. Lurking for a long time, first post here.

    Thought I would point something out for the guys who have a hard time believing the Fed and the TBTF banks would be in on a scheme together.

    The TBTF banks OWN then Federal Reserve. The Fed is a private bank, and since its private, someone owns it right? JPMorgan, Rockefellers, Schiffs, etc etc own it. So when they bail out Wells Fargo or JPMorgan, its transferring from the left pocket into the right pocket, but at taxpayer expense.

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  147. 1) Yeah. Only the main media will never use the word "default". Maybe not a holiday but they will call it something else that sounds more comforting, perhaps even appealing.

    2) I echo the sentiments of many others who have posted here already, I would never deal with stocks or paper. Paper is just that; paper. Wether its US dollar bills or toilet paper it will have the same value soon if everything goes as many have forseen. And which would you rather be without?

    Buy durable goods! Others have mentioned in previos threads, in mad max they used shotgun shells as currency in bartertown.

    Than you for your insights so much. Remember the worst thing you can do in an intense situation is panic. Stay cool, we will all ride this out together.

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  148. Hi,

    Sold my last bit of SLV last week, and GLD earlier.

    Took delivery of more silver today...Over the weekend ferreted out some 90/40 quarters and dimes.
    Started collecting all nickels in sight....only real currency left, with 75% copper, until the wise up in DC. A nickel is now worth 7+cents. It will always be worth 5c and maybe more. Someday they may be dealing like junk silver...

    Ordered a lot of my special foods for the rest of this year and through 2012.
    Long way to go, though...

    Joined the local CSA....hope to volunteer to wash veggies and get my weekly box in exchange once harvest starts!

    Best thing ever, my SUNOVEN...makes great sweet potatoes, best money I've spent...so far!

    You can see it here:
    http://openrangeramblings.wordpress.com/2010/05/30/its-sun-oven-season-solar-cooking-revs-up/

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  149. 1) Do you accept this general thesis?
    No. If anyone thinks that TPTB will let joe avg. become the "new rich" this way, they're sadly mistaken. If the comex defaulted in any way and the disconnect between paper and physical became public knowledge (if it's really that bad), the USG would simply declare silver (PMs) a strategic industrial resource and
    suspend trading (other countries would simply follow suit...as usual). I rather hope this (extend and pretend) will continue until it no longer can (making me rich in the process), I'll be securing more tangible assets. My XAU/USD position that I bough tinto @turd bottom earned me 5yrs worth of salary in 3 weeks. Thanks to everyone here for helping me overcome my fears.

    2) What is the trigger point for liquidating all paper metal? It can't be at default because, by then, it will be too late.
    If you expect to see silver "re-enact" the hunt brother's chart, you can set a fairly comfortable exit price. I however don't think this will happen. (just look at the middle-east and Africa, they're not revolting for a "free silver market"); The estern countries population's have been raised with an un-shakebale faith in fiat. The 99% of the population that don't have it (PMs), would turn on you the moment the "collapse" (everyone keeps hoping for) would actaully happen.

    3) If you can't exchange into physical because of lack of supply, what do you buy? I say non-hedged, junior miners. What do you say?
    This is really dependent on the goverments reaction to the "default"; nationalization of miners or "mining taxes" can be marketed as "securing americas future". Just don't rely too heavily on the sheeple being on your side of the bet. (you're gonna get hurt badly). I'd diversify and invest some of the cash into a good community structure, because the people (and infrastructure) around you will be far more important than PMs, should we really reach "dark times" again.

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  150. Hi Turd,

    I agree but I have one thing that bugs me, really:

    WHAT if the longs kinda NEVER stay for delivery? I mean, it would take 20.000 contracts to empty Comex' warehouse. And that means that those longs would need to put approx. 3,4 billion USD on the table of the house to have the silver delivered (20.000 contracts where each contract stays for 5.000 ounces).

    What if this just never happens. Wouldn't the story go on forever then and they will never be f***ed?

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  151. Amazing Thread Loving it!!!!! Thanks TURD

    PHYSICAL is REAL and all the Rest NOT!!!!

    Vote:- Physical vs Paper

    Physical = 100%
    Paper = 0%

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  152. I need some serious advice, gang. My IRA holds the bulk of my net worth and am all in with CEF, GTU and various miners. Additionally I am 4 months away from being "mature" enough to withdraw all or part of it without the 10% penalty. This whole DTCC thing appears to be weakest link in the chain when SHTF. Sinclair was all over this in 2008 meltdown advising taking delivery of stock certificates, which is no longer possible. What'dya think?

    Buy - Sell - Hold?

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  153. @TurdleGG

    Hi Turdle, I read you trade CFDs with IG. I've just opened an account with them to trade options, but I'm having trouble getting a few questions answered, can you help?

    I'm basically trying to work out whether an options CFD can be 'sold to close', ie. sold at a higher price than what you pay for it before it expires. Can you advise? It would be much appreciated! Best regards.

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  154. well if slv fails....that means it will fall suddenly in value or something else? how about just putting automatic sell stops on it.

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  155. I am curious as to what 'paper' means. I believe society will not regress to the point where we do not accept paper w/ meaning.

    The whole notion that 'paper' to be not worth anything would mean society as a whole would not honor birth certificates, IDs, stock certificates, etc.

    I have had NO REAL experience of delivery and futures w/ comex or exchange, but I am sure fixing something w/ money can be done. Aren't these contracts hedged or insured?

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  156. To answer the questions directly --

    1) Do you accept this general thesis?
    >> Yes. It seems inevitable now. This is similar to FOFOA's idea that gold will not have a known physical price for a time when the paper fails.

    2) What is the trigger point for liquidating all paper metal? It can't be at default because, by then, it will be too late.
    >> Done some time ago. I have NO paper metal now, and would advise the same to anyone who listens. I do have a small play in gold miner shares, and a biofuel producer. It's a speculative play that may or may not pay off.

    3) If you can't exchange into physical because of lack of supply, what do you buy? I say non-hedged, junior miners. What do you say?
    >> Not an issue. I've already gone out the door, so I'm not going to get stuck in the burning theatre in the last few seconds.

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  157. Morning All,

    Nice positive action on silver this morning. Dollar Index sure looks like it could be in uncharted waters shortly...

    Still large OI at 39K - big day today to see how much this falls, then we'll have a better idea who is really going to stand..

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  158. Fiend's BV (funny name you've got there)
    Sorry I don't trade options, so don't know the answer. You best call them.

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  159. I have no expert opinion on what will happen if silver runs out of the Comex because I have not studied how it all works. That said, I've been around the block a couple of times and follow successful guys who predicted most of the calamaties in the past few years (i.e. stock bubble, housing crash, upcoming peak oil, etc) and will share some of what I've learned:

    1. COMEX Default on Silver is not = to US $ collapseAside from Silver likely shooting up in price like a rocket, a Comex default on physical silver delivery will have no major economic impact. I see people on this blog preparing of the end of the world and some making the jump in logic that comex default = end of us dollar. If you really believe that, please explain yourselves step by step - IN DETAIL, I'd seriously like to read and learn, maybe I am not fully informed, but I don't see the connection. I am not saying don't research SHTF scenarios and don't prepare for very high inflation and even riots etc, but as I read recently, betting on the end of the world is a lost cause, because you will only be right once but unfortunately you won't even be around to enjoy life after it happens ;-)

    2. US dollar will *NOT* hyperinflate in 2011 - Will the US dollar eventually crash and go to zero? Maybe, bu that's a BIG maybe, or at least not this year, and likely not even next year. I put that possibility at about 60% chance in the next 2 years. Why? Because no global ***RESERVE*** currency has ever experienced hyperinflation - EVER. Read your history. A hyperinflation of the US dollar would translate to the US dollar reserves of over 150 countries around the world going to $0 in a matter of a few months. China holds 2.7 Trillion worth - that's cause for WAR people. You think USA elites are stupid enough to provoke war with large countries around the world? One thing is to fight off guys on camels with tanks from 1970's another is to take on China and the Saudis. Now that doesn't mean that there couldn't be very high inflation (say 5 to 15% per month and beyond) due to continued QE + rise in oil. Hyperinflation by most economist's definition = 40% to 100% *per month*. We're currently experiencing REAL inflation between 7 and 15% *per year* (I'm not referring to CPI here that excludes food & energy). So will the dollar devalue another 15 to 40% in the next 2 years? Well devalue against WHAT exactly? All currencies are in a race to the bottom. So I say 15 to 40% against a basket of comodities and goods you buy at stores, in short against the average person's buying power - then I'd say yes.

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  160. .
    .
    .

    3. US Dollar "collapse" is NOT the end of the US dollar. All kinds of websites talk about the "collapse" of the dollar, but if you listen to the expert economists that throw this word around but seem to often forget to define it. It's like 2 people talking about love, but never defining what they mean by it. Until you ask them to QUANTIFY by *how much* will it collapse, you won't really understand what they truly mean by that. Many people listening just assume it will go to zero, but that's hardly the case when expert economists refer to "collapse". I've heard figures anywhere from 20% to 60%, not 100%, at least not from any reputable economist. Also the problem I have with the word "collapse" is that it suggests that it is an EVENT. Yes there may be a day or a week where it goes down 10, maybe even 20%, but until that day, we will be "collapsing" very sloooooooooooooooooowly. Inflation my friends, as you have been witnessing for the past...well 40 years, is not an event, it is a process. Yes it can accelerate as we're seeing right now, but it's typically not an event in as far as reserve currencies go.

    Got off topic there about silver & COMEX.

    Back to the COMEX & Silver...
    I view the COMEX as a place of exchange between 2 parties, neither of which is the COMEX itself. So the silver default will have counter parties. What happens to your paper contracts with those other parties depends entirely on who those parties are and how liquid they are. Best case scenario, they pay you cash 100 cents on the dollar for your contract - end of story. Worst case, they go bankrupt and then a court would decide who would get to claim $$ on their assets. Typically bond holders get the most of it at a fraction of its original value, and stock holders often get $0. Not sure how a court would decide on an options contract. If the counter parties are really large TBTF (too big to fail) like JP Morgan and HSBC, then either they pay up... btw, I don't see a mere $12 billion bankrupting JP Morgan. Firstl of all they make anywhere from 1 to 3.5 billion per QUARTER. So I imagine they have some savings or some of those billions invested in other areas that they could liquidate. See their 2009 Q1,2,3,4 profits:

    http://money.cnn.com/2010/01/15/news/companies/JPMorgan_Chase_earnings/index.htm

    Worse case scenario, they are TBTF - aka. The Fed will bail them out and somehow you will probably still get scammed out of your money. Hey it's JP Morgan, they win 97% to 100% of the time. Don't believe me? Read this:

    http://www.bloomberg.com/news/2011-02-15/jpmorgan-posts-perfect-trading-record-for-three-quarters-of-2010.html

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  161. Further, HSBC, if that's the other counter party, is an international bank. I'm not sure if it is even possible to bankrupt them. Why? Because bankrupcy laws are different from country to country. Further, they also make about $5 to $13 billion per YEAR. So, again, likely they have cash reserves, and other investments they could liquidate.

    http://www.telegraph.co.uk/finance/8291190/Big-banks-to-unveil-24-billion-profits.html

    Don't imagine for even 1 second that you can rally up the masses to buy 1oz silver coins and expect to crash entities like JP Morgan and HSBC. That's just plain naive. First of all 80% of the silver in the world is used for Commercial purposes. The BoS owns some 30%-50% of the rest of it, the ETFs own another 30-40%, and the rest might be physical coins and bars that you are buying. Further, the JP Morgans of the world (and they can be counted on 1 or 2 hands), only hire the brightest individuals from the best schools (i.e. Harvard) with fancy degrees and MBAs. Blythe Masters is one of those people. They are NOT stupid people. There's a reason their employees average $300K to $800K salaries per year - ON AVERAGE. FYI, a comodities broker these days goes for about $3 MILLION per year. JP Morgan had about 27 of them before they closed their prop desk and did an internal re-shuffle last year. I'm too tired to provide more links, just google this stuff if you want, it's all there.

    Silver has plenty of reasons to go up in value without the need to bust COMEX's or bankrupt JP Morgans (I am long silver in a big way) although either/both events would be wonderful if they were to happen, but you are dealing here with extremely intelligent people who's combined IQs and economic degrees (enhanced by cocaine addictions) are even greater than the combined brain power and trading skill of the 74,000 turd visitors that showed up yesterday.

    Appologies for the extremely long rant. Have a good night everyone, and thanks also for sharing what you know.

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  162. SilverSurfer,
    c'mon, "bright people"?? An MBA doesn't make you street smart.
    And best school? Harvard? Princton maybe? Where do all those economists come from destroying the worldwide economy?

    'Cause you know, last time I checked, there was a hedge fund with the brightest people. I mean, really the *brightest* people, like nobel laureates, those fancy beings. Remember? Bailout. Fail. Epic fail.

    And yeah, there was also another company where the CEO answered to the question "you think you are smart" with "I'm fucking smart". He was also supposed to be one of those brights. MBA and so.

    Honestly, I would call those people stupid. Ridiculously stupid. And top nominees for the Darwin award.

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  163. 1) Yes I accept this thesis. As a matter of interest, the gold camp had a leader 10 or so years ago known as 'Another'. He quite often said that 'all paper will burn' and find $0 value as physical finds it's true worth.

    2) The trigger point for a person, or for the whole world? For a person it should be reading and understanding. Now is a good time. For the world, sadly I believe that a heck of a lot of people in paper don't know what they really hold.

    3) What to buy if you can't get physical gold and silver? Tough question. As in the event of a gold\silver paper firestorm we are likely to also correlate with debt destruction. IN that environment all assets generally bought with debt will be greatly deflated. Property will die. Diamonds are a lie. There is not much really around. Junk silver will be gone. Maybe convert all cash in to nickles(or here in AUD, the 5c coin. Perhaps rare art? Collectors objects like coins? Ruby's, emeralds, pearls, etc...

    Honestly I have spent WAY too much time thinking about this, and in every doomsday scenario I always come back to farming tools, salt, soap, toilet paper, etc. Objects of true value, because they do something useful. Gold and silver are only interesting because they are rare and ideal objects for trade due to high wealth density. They are also recognised as something of value so they can be traded with a wide audience. Try offloading a 300 year old coin when you want some cheese...

    For those who do NOT equate a gold\silver default to doomsday, ask yourself... why are the manipulators even doing it? Keep inflation hidden to keep yields down? So what happens if the bond yield rose to say 15% Government debt default. So then what happens to international trade? All those foreign held dollars would be best spend buying something in the country of origin right? Can your country afford all foreign held reserves to return home? Does that sound like hyperinflation?

    I know I sound like a doomer, and I'm ok with that. But how can this end well? As far as I can see, the FOFOA $55,000 oz gold to recapitalise CB's might help a lot. Can that happen without paper assets burning?

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  164. Hey guys here's a simple chart I put together of the open interest for Sep10, Dec10 and Mar11 contracts vs the days. You can see when people roll over their contracts to the next contract. I was expecting more of a difference based on how everyone was talking, but generally the curve looked pretty similar to me.

    http://www.speedyshare.com/files/27050504/open-interest.xlsx

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  165. Interesting movements this morning, silver is going down whilst gold is going up. Further evidence silver is latching onto the spx. Be very careful with new longs now on silver now, stand aside.

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  166. here in India we do have the futures market in Gold and Silver, but we don't have options. In the case of silver we have 3 different contracts 1kg, 5 kg, and 30 kg. We have to pay up a margin of approximately 10% to take up a position in any of those contracts. The 1kg contract was introduced only a few days ago.

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  167. @TurdleGG

    Thanks for the quick response Turdle. I'll give them a bell today.

    The nickname harks from my early blogging days (back when I used Blogger), when I used to take the piss out of local journalism a lot. 'Fiend's Brave Victim' was a caption on a photo in a terrible free newspaper that used to come through my door. I only started using the account again when I started to comment here, only realised later how apt it was in my little war against Ms. Masters...

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  168. @Silverto500 - Do you make $300K to $3 Million on average per year? If not, you might not be as smart as they are, and if you are, you are one person, they are thousands. They are not stupid. Greedy? Without Morals? Delusional? Megalomaniacs? Absolutelly. But not stupid. Did even 1 person go to jail (aside from Madoff) from the 23.x trillion dollar collapse of the 2008 financial crisis? Nope. If you steal a $100 ipod from Walmart will you go to jail? You bet. Main Street smart & Wall Street smart, are two definitions of smart on different ends of the same pole. Yes, Bear Stearns went down to $2 - but it wasn't the common folk like you and I who took them down, it was their own excessive greed that caused a panic withdrawl of funds from their (already super millionaire) customers. The individuals who lost their jobs, just moved on to work at other IBs and continue to make $300K to 3Million/year.

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  169. @Peter - Can you re-upload that somewhere else? I can download it, but it just shows a SpeedyShare advertizement when I open the Excel spreadsheet. Thanks.

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  170. This comment has been removed by the author.

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  171. BTW, I'm really glad the US dollar index is fairly flat and down in the last 2 weeks. I was concerned that it might be used yet again as a flight to (ironic) safety when all hell started breaking loose in the middle east. Last time all hell started breaking lose was at the start of the 2008 financial crisis. Silver took a MAJOR nose dive then, so given Silver has had a pretty good up trend in the past 2 weeks is also very bullish, even more so during the month of Feb which historically on average has been a down month.

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  172. @Peter - Thanks for posting those charts, well done!

    As of this morning the Mar OI stands at above 31k contracts which with 2 days to go is very high compared with Sep10 and Dec10 (and indeed the CRIMEX warehouse level). I agree the general look of the graphs are the same but if you look closely at the last week before roll-over, you will see the big difference.

    I feel slightly eerie about the upcoming roll over and find it difficult to determine my ultra short strategy in silver. It has been remarkably quiet the last couple of days from the people who have been shouting from the roof tops about standing for delivery, $37 poz etc.. (I am very long physical so in the end it does not matter)

    However, I like the thought of shorting paper silver for a few days to make some fiat to buy more physical....

    I see a risk on the downside from now until Tuesday when BoS might be less inclined to buy as their focus will be on maximising their premium for not taking delivery.

    Having said that, I will be watching this roll over with more interest than any previous in my life....

    My $0.02

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  173. I have both physical silver and PSLV.
    To me I view my physical as saving/insurance. I would have to see ridiculous prices and have confidence in the currency to sell.
    PSLV on the other hand is my trade. I know there is a premium of 15%, but if you trade physical there is a premium, along with shipping/insurance/hassle. So if I assume that the world will not end and I just like to make dough on the stupidity of politicians and Ivy league economist, then trade some percentage of the PSLV holding and keep careful watch.

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  174. Is there any actual solid proof that this BoS thing is true?

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  175. @tpbeta - my point exactly. Yes, they have been very accurate in predicting price movements until Monday this week.

    Then.... a posting from WB stating that they will no longer communicate their strategy as it might not be aligned with the wider 'long' community. As I said there is a big risk on the downside in the very near term and tight stops for paper trades that are well in the money might be one way to go... As for putting shorts on... it feels wrong somehow :)

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  176. Two cents more before I shut up.

    If you want physical as an investor, then at what price do you want to take delivery? $34 now or say $44 in May. I am thinking we see a good amount of IO standing for delivery this month, but without a lot of price action higher. Then they charge a premium to wait months to take possession like Mr Buff did. Then they use future months to push prices up and sell the physical into.
    So I am not looking for an explosion of price or a visible default. At least not one in the news.

    So, buy you physical now while it is still cheap and then trade the paper, same as we have been doing for months/years

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  177. Hi Silver Surver

    >> If you really believe that, please explain yourselves step by step - IN DETAIL

    I will have a go.

    Comex default on Silver leads to a panic in redemptions on gold. Comex's fractional reseve dealer inventory is insufficient to meet 95% of the claims.

    This causes a run on other fractional reserve systems of all kinds around the world for all kinds of metals.

    Now a massive amount of investors out there are left bankrupt. Do you know how big the paper market is? I don't but it's fucking huge. If it hasn't already happened all interbank lending freezes in an instant. Banks collapse again. But on an unprecedented scale. Governments cannot afford to rescue the banks this time but they try and print trillions. But it's all too late - the baks have already stopped performing transfers. The collapse is here. Countries move to a cash only basis and hyperinflation ensues as the newly printed money hits the streets.

    6 months own the road governments fall and new caretaker governments are put in place and establish new non-fiat monetary systems based on historical models.

    That should do it :)

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  178. mining stocks that sell a portion of there own silver like first majestic would be the go if the comex price was at a discount to the physical for an extended period leading up to a comex paper default.
    Exploration companies an pre production companies may have substanial difficulties.

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  179. sorry for the typos - I was all excited ... :)

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  180. I hold some JPM puts, just in case that Lehman 2 event strikes...

    maximum bang for small money, although they're only paper (issued by Deutsche Bank). But yes - if the stocks don't trade - neither will options

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  181. @miked I'd say that the EE is constantly using the FOREX markets to work its magic, look at this ...

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  182. Doubt default, but just in case
    JR's take physical certificates(dtcc is first in line), green monster boxes buried, I have 70%/30% call/put options&slv '13 put options. See Stewart Thomson's Graceland JR's for best Jr's and strategies and likely scenario(s)/timeline. Default most likely means cascading effects war breadlines etc. Crimex is the glue that is holding ponzi together, once it goes CONfidence is lost. CRIMEX = TUNISIA,

    DOMINOES MOTHERFUCKA! as we used to say in the hood. Gold ,Silver, Food and Faith -
    Are You Prepared!
    a hui hou malama pono!

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  183. I am convinced that the power structures that run this world also have full control of the mainstream media. A comex default may be kept very quiet. It just depends on the integrity of journalists at CNBC et al, and whether or not they would risk their jobs. Blogs like this one may be the best place for news. I can see the PR teams for big banks & Comex telling the news that "Everyone will get their silver!" right up to the day the lock the doors and lay off 90% of their staff.

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  184. EE is at work again $33.25 ... FUBM!!

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  185. Silver slowly falling all morning...

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  186. @sILVER SURFER,
    yOUR BASICALY RIGHT EXCEPT THE SMARTER THAN THOU TIP REMEMBER LTCM HAD NOBELS AND COMPUTERS. THE SWANS CARE NOT WHO THEY SHIT ON. CRIMEX AND ALL EXES WILL CHANGE RULES, HALT TRADING AS THEY DID IN 70'S. SEE INVISIBLE CRASH- JIM DINES IF YOU CAN FIND ONE, DAY TO DAY JOURNAL OF MARKET ACTION UP TO 80 PEAK MIND BLOWIN SIMILARITIES AS IS HERBERT HOOVER'S MEMOIRS(AVAILBLE FREE ONLINE)
    A HUI HOU

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  187. The sage Richard Russell has a new comment posted:

    http://www.321gold.com/editorials/russell/russell022411.html

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  188. I have little paper silver/gold... All I have left, in terms of paper, is a GoldMoney Account (would love to hear what folks think about GoldMoney and the coming impact on that venue). I started transferring into physical in 2008 and am 90% there. Assuming that we will all be into physical or stocks related to physical in the very near future, what is to be done with the stockpiles of physical we all maintain? That is the question I have a hard time answering. Of course, sit and wait for the dust to settle, but what avenues do we expect will exist to trade this physical? Blackmarket? Barter? "Cash" in with whom? APMEX? I would like to know what folks think about these questions (GoldMoney, Post-Comex). Thanks Turd for all you do. DD

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  189. Anyone have a clue about that $33,40? It seems like it is somehow an important level...

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  190. Good morning Turd Town. New last night, Chris Waltzek of Goldseek radio interviews the one and only James Turk.

    Whenever Mr. Turk speaks, I find the time to listen:

    http://radio.goldseek.com/nuggets.php

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  191. Here lies the problem "THEY" the EVIL doers of the darkside can sell NOTHING(paper or virtual more precise) for SOMETHING. I have heard that all paper profit etfs are using this limited supply of monopoly bernanke dollars to buy the real stuff GOLD and SILVER bars. So as long as there are suckers(us) to leach off in the investing world"THEY" can profit from it. I highly encourage all to go to wwww.silverbearcafe.com under energy tab and read "better to light a candle than curse the darkness"

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  192. Does anyone know where OI is this morning? Thanks!

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  193. Wow! What a lively discussion!
    I'm glad I entered the topic and I think we can all learn a lot from the comments.

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  194. I see it as 31,064 on reuters. Been watching the 5min chart closely in london this am....volume has been good whenever 33.30 is approached

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  195. @Tyler - 31,064.... holding up well, will be interesting

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  196. Re: Mining Stocks

    I think all mining stocks will initially get sold off with all other paper when TSHTF. But the quality non-hedged miners will recoup rapidly then rocket up while all the other paper burns. If the miners are currently being naked shorted by the EE then when things crash they "flash crash" the miners then cover quickly and ride the rocket up.

    When TSHTF one either owns physical above ground ie in your hands or you own physical below ground ie miners.

    To find out if the miners you currently own are hedged or not write to their investor relations dept. State you are a shareholder and ask if it's development financing is recourse or non-recourse.

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  197. As of this morning the Mar OI stands at above 31k contracts which with 2 days to go is very high compared with Sep10 and Dec10 (and indeed the CRIMEX warehouse level).

    I feel slightly eerie about the upcoming roll over and find it difficult to determine my ultra short strategy in silver. It has been remarkably quiet the last couple of days from the people who have been shouting from the roof tops about standing for delivery, $37 poz etc.. (I am very long physical so in the end it does not matter)

    I see a risk on the downside from now until Tuesday when BoS might be less inclined to buy as their focus will be on maximising their premium for not taking delivery. It is slightly worrying.. a posting from WB stating that they will no longer communicate their strategy as it might not be aligned with the wider 'long' community. I know they most certainly are not the only game in town but still..

    Turd, any comment on this?

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  198. Could you name some "non-hedged" miners, please?

    Thanks.

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