I would like to direct you to some reader e-mails and my answers to them. I receive a lot of great emails from our readers. Our readers are very sharp and in tune with the real issues on finance and the economy. Their emails address the same questions that many of you would like to have answered. My reply to their questions will be useful to you. I do try and answer every email I receive, either personally or in this daily.
THE CONSPIRATORIAL VIEWPOINT: I present you with a lot of information from numerous sources that lay the blame on JPMorgan (and their friends at the CFTC and CME) for the major “corrections” in gold and silver. They represent the “conspiratorial” camp. Leading the way are Ranting Andy Hoffman, Bill Murphy, Bix Weir, Ed Steer, Bob Chapman, John Embry and Ted Butler. They are all very bright people and they are all very passionate about their position. There is no denying that a lot of what they say has merit.
AN ALTERNATE VIEWPOINT: But there are a lot of very bright people who I know personally who disagree, including Bill Fleckenstein and Trader David R.
Bill Fleckenstein, a mega-successful stock trader for the last 20 years, says that for JPMorgan “gold and silver are just ‘things’ (like pork bellies, or orange juice), and their only motive is profit.” Bill personally knows many of JPMorgan’s traders and he is adamant that they “do not conspire to hold back the price for political reasons.” He also says that they do not “naked short” silver and that they have the physical gold and silver to cover their short positions on Comex.
Trader David R knows all of the key metals traders at JPMorgan, HSBC and Goldman Sachs. David has been trading precious metals for the last 20-years, including a decade working in the precious metals trading department for several large banks in South Africa, followed by a job trading metals for Barclays in London, and more recently, heading up a large group of the most successful precious metals traders in NYC for a private hedge fund. He has worked closely with the central banks and the largest metals traders in the Far East. He does not work for any of the bullion banks. He trades his own personal account every day, and does it well enough to make a very nice living at it. He agrees with Fleckenstein. He maintains that the central banks lease their gold for profit (stupidly), not for any other reason. Bill Murphy (LeMetropole Café and GATA) would vehemently disagree on this point. David recently told me:
Here is what HSBC and JPM do on the silver. They get money from the FED for free. They own all the storage vaults, so do not have to pay the fees for storage. They then own the physical silver in their vaults and sell the futures contracts (which are in contango) at a much higher price than OTC price so then hold the both until delivery. Since there is no cost for money from the Fed, and no cost for storage, they make a fortune on earning the contango of the silver and gold market. It’s a brilliant strategy, which has made them a fortune.
There is common ground with all of them. They are all extremely bullish on gold and silver. Where they part company is the “motivation” for the central banks and JPMorgan’s actions. It is strictly for profit or is it politically motivated? Do the central banks lease their gold (to the bullion banks at extremely low interest rates) to help suppress the price and support their “fiat currencies,” or were they just plain stupid for unloading it for a piddling amount of interest?
This “debate” usually stirs the blood and ignites passion. I say – don’t get too hung up, one way or the other – focus on the endgame, which all of them agree on. Buy gold and silver, it is the best “thing” you can own. That’s what I do. It is a healthy debate and I listen to both sides. I leave it to YOU to decide which position has the most merit. In a way, it’s like something that I heard on last night’s episode of my favorite TV show, Dexter – a rehabilitated murderer, turned-preacher, told Dexter, “I can’t prove to you that God exists, but you can’t prove to me that he doesn’t.”
I am picking up Andy Hoffman at the airport on Tuesday morning. He will spend all week at Miles Franklin, learning about how the retail side of the Precious Metals Industry works. I will try my best to convince Andy to write for Miles Franklin. His “Rants” are among the industries best – and he doesn’t even work in our industry – yet!
For our “older” readers, here is a link to the 60’s that you don’t want to miss. I graduated college in 1964. I was married in 1964. I started my first full-time job in 1964. I can relate. Thanks to our good friend Dean Danielsen for the entertainment —
I am putting the final touches on today’s daily at 6:30 a.m. on Monday and the metals are UP coming into New York. Gold is up $15.00 and silver is up $0.30. This could be a good week for gold and silver!
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