Cut Off Your Tail to Save My Face
Cut Off Your Tail to Save My Face?[PDF]
Prof. Antal Fekete
August 30, 2008
The good Professor reprints his introduction to Ferdinand Lips’ book “Gold Wars”. I find this to be one of his more memorable insights into the gold standard and its present status in the world monetary system:
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“. . . governments have, correctly, identified gold as the only antidote in the hands of the individual against their effors to build the Tower of Babel of irredeemable debt . . . According to the Bible man had become so conceited as to challenge God by proposing to build a tower that was to reach to High Heaven. God?s punishment for the temerity was to confuse the tongues of nations . . The Biblical story may be interpreted allegorically as an admonition not to challenge God by attempting to build a tower of irredeemable debt that is to reach to High Heaven . . . Currencies of nations have been confused. The tower can never be completed for lack of compatibility among various means of payment.”
The remainder of this piece is a discussion of the Basis, which will be the subject of?the Fifth — but hopefully not –?Last Session of Gold Standard University Live in Canberra, Australia from November 11-14, 2008. The title of the session is “Primer on the Gold Basis”, which of course is right up my alley (actually, some of the past GSUL attendees can probably teach such a Primer better than I can at this point since my head is buried deep in the details!)
If I knew that?some of you?are rearing to?go, and specifically would like to hear me speak about?the basis at an advanced level,?that would help me?resolve to?cancel my other personal and business commitments so that I can make it to this very special, once-in-a-lifetime?event. I’ll try to put together a preliminary course outline over the next few days?to?share with you, but in the meantime please e-mail me with your thoughts and interest.?By the way, the basis could very well be the most important signal to watch in the silver and gold markets during?the next few weeks and months, so this is all very timely.
I recently came accross your blog and have been reading along. I thought I would leave my first comment. I dont know what to say except that I have enjoyed reading. Nice blog.
Tim Ramsey
I have just noticed a strange thing - there’s a big order for seemingly indefinite number of contracts posted at 12.70 Dec silver. Whatever is sold into it - is absorbed. I’ve seen at least couple of hundreds of contacts traded at 12.70 yesterday and today. It is likely a “hidden order” with only portion of it being shown on the exchange.
We bounced off it for the 4th time now.
Now, one may only think what will happen if this support gives way…
Maciek.
Getting back to manipulation. The point about only being 10% off of our highs just does not fly, at all. What phoney high are you talking about? The one at $1030 which is only $180 above the $850 in 1980.
You see my point here. You are looking at nominal numbers. The inflation adjusted value for Gold from 1980 should be at least $2500 and over $100 for Silver.
This is based on the increase of our money supply from 1980 to 2008. Everything in the world has adjusted in price, upward, except for PM’s.
The reason is simple. Gold and Silver are money and the fiat-masters must debase and control it in order to serve up their phoney-baloney paper.
Tom,
Are you going to share some of your silver basis work with the general bloggers?
Also, is your silver basis work of a statistical nature? Is there are correlation between silver basis and return on investment following a silver purchase or short sale? If you got hard data and analysis like this that shows that a ‘basis trading system’ is likely profitable, I would keep it to myself.
It strikes me that the silver basis is something that just meanders around most of the time in a definable range and offers only a marginal tool to the speculator must less the long term silver holder/investor. At times of severe crisis the basis may go crazy and offer some potential to the informed. However, these severe periods may be very few and far between (i.e., once every 30 years) and thus offer little practical benefit to most speculators/investors.
Note of course that we may be approaching such a crisis period in the near time.
Tom,
You seem to think that because the big shorts in silver were also buyers at the bottom, that means they weren’t manipulating the price down, and that the silver they bought is now in strong hands.
What you don’t understand, is buying on the dips is a big part of the game. The shorts cause a super spike down, during a low volume period, after hours and short holidays. Since they are the only reason the security is going down, they are able to call a bottom, and buy it hard.
Then as the stock recovers 20 to 30% or so, they start dumping all the shares they bought at the bottom. This is a source of big profits, and kills any attempt at a recovery rally. As the stock rolls over, the naked shorting starts, which pushes the snowball over the hill and down the other side.
When the stock falls far enough, they manipulators buy back in again. The process is repeated over and over, until the price falls so low, the remaining investors flee, because they can’t take the pain.
tom’s a smart guy, and i think IMHO likely the most knowledgeable silver guru to post on the net for free (for now.)
Mark, you are mistaken, I believe. The commercials were covering, on the way down. That would work against the price dropping. Further, common sense says that if you are making the price drop, why cover on the way down. You should only cover at the bottom. Further, unless you totally believe in the conspiracy side, a lot of the shorts would be producers, and the last thing they would like to see is the price drop out of the market.
this could go down to 11 or little lower on 50 crossing over the 200, dropping to 12 now solidly, no physical at 3 coin shops for all intensive purposes, 5 1 oz rounds, 1 5oz & 1 25oz, and 1 100 oz & 5 1 oz rounds, & 2 1oz rounds at last store yesterday
New lows for silver, on very bad news for the dollar. Not 2 steps back and one step forward, farther back than when we started. By the way, 12.20 looked like a blip at first, now it seems like the drop has held.
Between adjustments and new announcements, the economy lost over 150,000 private sectors jobs, since last months job numbers. Unemployment was up .4%, to 6.1%, You would think that was bad news for the dollar, good for silver.
This is where you need to take your blinders off, and realize your eyes aren’t lying to you, Naked shorts always sell on good news, and manipulated stocks always go down hard, on good news. This is the manipulators rushing in to stop a rally.
Did anyone notice what happened to SIRI and XM, both ” Reg Sho List Stocks” after their long awaited merger was apprived. They sold off immediately.
Just because the shorts buy and cover, doesn’t mean they are through. They sell and short more, after the counter trend rallies.
I dont know much about shorts and covering shorts and what not, but I tend to agree with mark because everytime supposed “good news” for gold and silver come out, the price either does nothing or drops…it does not seem to rise. That is what worries me some…this is seemingly a climax or close to a climax to the situation where gold and silver should be rocketing, yet it is dropping. What makes silver go up if all this doesn’t? Even though I have patience, someone has yet to explain this all that well to me…
The commercial shorts as per the COT were covering during the last drop. I am not saying there is no shorting, but that the last big drop was not implemented by the regular short players but was counter to a lot of them. If you watch the COT’s you will see that the commercials are reducing their net short position closing their shorts and putting up new longs. This bodes well, IMHO, as the new shorts are Large specs and Individuals (like you and me, or as they say, the “dumb money”). Therefore, they will be wrong…. eventually, and the price can rise, especially when the small specs are weak hands, especially when it comes to shorting.
I doubt there is anyone on the long side who saw this drop coming and it deserves extra attention to find out who, why and how they did it, since the massive short position per the big banks (JP Morgan as the prime suspect) didn’t seem to show up in the open interest. At least, I haven’t tracked it but I would think someone would be looking for it.
I am not trying to beat up on Mark, but if you could trade the markets based on the news of tomorrow or next week, it would be easy to become rich. Unfortunately, quant funds, momentum funds, professional traders, banks, etc. have trading programs, far more information, and far more experience, so it is difficult if not impossible for a lone trader to know whether to buy the rumour and sell the news or vice versa, as they look at far more than the news that is available to all, such as what will the dumb money ( ie. me and you ) will do with the news.
Overall, I think silver is going up, and gold, and the PM stocks, but right now, the market is trading against them, but this means it will be more spectacular as the traders and hedgies cover. Or so I hope.