Today the CEO’s of many major banks are meeting with the president in Washington…again. This will be the third such meeting in 5 months. Speculation and rumor has it that these CEO’s will be queried and discuss the current government shutdown and the debate to raise the debt ceiling. As I’ve said before several times, I would love to be a fly on the wall to hear not only what is discussed but the “tone” of these discussions.
I say this because gold was trashed last April right after one of these meetings and trashed again yesterday one day ahead of the meeting. Yesterday saw 40 tons of gold sold in 3 separate 1 minute intervals and exactly 1 minute after the pre COMEX open, again 1 minute after the COMEX open and then again 1 minute after the London morning fix. These sales accounted for over $27 of the $40 loss, those with any skepticism at all would ask “what are odds” of these way outsized trades occurring EXACTLY 1 minute after a round number on the clock? Do these guys set an alarm clock ahead of time and hit the “red” button when the alarm goes off? I would say, “Yes, they absolutely do.”
Another question that I’d love to have the answer to is why must gold be attacked on or around these bankster meetings with the president? What exactly is accomplished other than pulling the thermometer out of an obviously dying financial systems mouth and saying, “See, it’s all good!” We also have another G-20 meeting coming up in a week; it might be nice to be a fly on the wall there too. Rumors have been swirling around about the Italian bank Monte Paschi and also Deutsche Bank. Talk of a derivatives problem have become louder than they were earlier this year, are they real or just made up?
You know where I stand on this topic. There has been way too much volatility in a derivatives market that is far too outsized in relation to the economy, players’ balance sheets and retained equity. I firmly believe that “someone…somewhere” is already dead and alive in name only while clinging to the life support offered by the Fed or the ECB. Not only has the volatility increased, it is increasingly increasing. Just look at the world’s bond markets or the FOREX markets, you cannot have 10-20% (or 50% in the case of the 10yr. Treasury yield) moves without someone, somewhere, being wrong…and wrong in a big way. Just look at JP Morgan, I think they are part of over a total of $70 trillion in derivatives and after checking (they have $209 billion) I think they have a little over $200 billion in retained capital. What is this…35-1 leverage? Think about this, if they “lose” 3% on this derivatives portfolio…they lose EVERYTHING! They don’t even have to be wrong on their bets as they can be a winner on every single one of them…but, what if 3% of their counterparties cannot perform? …like I said, EVERYTHING!
Yes, I would love to hear exactly what is being discussed in these meetings because “fortress balance sheet” as we are told is complete and utter hogwash. We already know that the balance sheet of the Treasury is whacked out as there are over $200 trillion of debt, guarantees and future promises stacked upon an economy that even fudged only produces $17 trillion per year. This amounts to 12 times of leverage; can you imagine having a household income of only $30,000 per year and a bank lending you $360,000 with “nothing down” of course? This is looking at the “gross” number but what about the real, the important number…like tax receipts? Let’s be generous and say $3 trillion in receipts carrying $200 trillion of total future promises…oops, now we are looking at a borrower of 75 to 1 leverage. WOW, I’m even scaring myself with the reality of these numbers!
So here we are in a system that is too levered up to take on any more leverage…but must increase the leverage in order for past leverage not to deflate. Houston we have a problem!
I would say “and the funny thing is” (but I won’t) that owners of free and clear precious metals and mining shares are worried that the metals are “down.” Really? If you know for a fact that the entire system is absolutely upside down and completely broke from start to finish then what are you worried about? The current and falsely depressed “value” of your precious metals? When this thing goes up you will not care what your precious metals are valued at (though in dollars terms they will be multiples of a moonshot). No, you will only be concerned with what exactly you can receive in return for an ounce of silver or 1/10th ounce of gold. What I am trying to say is that it doesn’t matter what “they” say your metal is worth now, what will matter is what your metal will purchase AFTER “they” no longer have a say in the pricing mechanism.