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The Periodic Table of Commodity Returns ... not really but so what?

Submitted by Roanman on Fri, 02/03/2012 - 07:21

 

Here's a nicely done graphic from Bloomberg and US Global Funds of the yearly return over the past ten years for many of the most commonly traded commodities.

Click on the table for an enlarged version that you can actually read.

Click the gears above pointing at US Funds for Frank Holmes short, clear and simple piece with some more simple and clear charting from US Gobal Research who would like for you to open an account.

 

 

And should you choose to read Mr. Holmes article, do so with the wisdom of Casey Stengel firmly placed in the front of your mind.

 

 

 

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To quote Keith Neumeyer, President and Ceo of First Majestic Silver Corp.

Submitted by Roanman on Sun, 11/27/2011 - 18:52

 

The following was taken from an interview with Ron Hera of Hera Research that was published at Seeking Alpha this past weekend.

Keith Nueman's resume' was too heavy to cut and paste.

One must take into account that Mr. Neumeier has silver for sale so keep that thought in mind when considering his opinions on the price of silver going forward, but this is a man with tremendous experience dealing in futures markets as both a supplier/hedger and an investor/broker/dealer.

When he tells you the deal is rigged you have to take it seriously.

Click anywhere below for the entire interview.

Recommended

 

Keith Neumeyer: The job of the regulators is to protect the retail investor. That’s their only job. It’s not to protect the banks or the brokerage firms. The little guy is the primary taxpayer. Why were the Securities and Exchange Commission (SEC) and the CFTC put in place? They were put in place to protect retail investors. Prior to regulation, the banks controlled the market. Today, the banks control the market again. Who should control the market? Retail investors. Who’s protecting them? No one.

HRN: Are you saying that the CFTC does nothing while the COMEX caters to banks and brokerage firms?

Keith Neumeyer: Yes.

HRN: And the COMEX doesn’t serve retail investors?

Keith Neumeyer: No. Absolutely not.

HRN: Do you foresee a return to a free market in the future?

Keith Neumeyer: I’m an optimist. I believe one day that governments will rewrite the rules and force the regulators to protect investors. That’s where we were back in the ‘70s and that’s where I think we have to be again to correct the problems that have arisen over the past 40 years. Silver is being revalued. It’s going to affect a lot of people along the way and it will change the financial system. Ultimately, we’re going to have a new financial system and, hopefully, we’ll go back to natural markets, completely driven by supply and demand. It may take another 20 years but I think it will happen.

HRN: A new financial system?

Keith Neumeyer: If I’m wrong, the banks will run the world, even more so than they do today, 10 or 20 years from now. God forbid that we ever get there because that’s a one currency, one government world that would absolutely be a disaster for the human race. There would be no freedoms at all to move or to invest. It would be like having shackles on our ankles. There is a movement to go in that direction, unfortunately. There are a number of very wealthy people that want to see that. I hope that we can find the politicians to prevent that type of world from coming to pass.

 

Instructive in light of the following quotes.

Don't you think?

 

 

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Ponzimonium?

Submitted by Roanman on Tue, 04/20/2010 - 10:51

 

This one is a bit more complex.

You'd have to be a "Gold Bug" to have picked it up.

It has been percolating from site to site for the past week or so.

Simply put, people who think that they have acquired Gold that is being stored within some depositary somewhere have rather purchased only a promise of Gold to be paid upon demand, or have purchased a promise to pay in cash upon demand the value of some amount of Gold.

Got it?

You think you own Gold, but you don't.

This time it's mostly J.P. Morgan.

But Scotia shows up.

And of course, the ubiquitous Goldman Sachs.

The following are some of the more notable quotes, each will link to the story from which it was obtained.

"Ponzimonium" a word coined by CFTC Commisioner (Commodity Futures Trading Commision) Bart Chilton makes a nice title, and since Nathan Lewis has already grabbed it, I'll quote his story first.

 

During the CFTC hearings, Jeffrey Christian of CPM Group apparently informed us that the LBMA banks actually have about a hundred times more gold deposits than actual gold bullion.
 
This means that there are thousands of clients -- Asian and Middle Eastern governments and sovereign wealth funds among them -- who think they own hundreds of billions and perhaps trillions of dollars of gold bullion, and are being charged storage fees on that fantasy bullion, but they really own unsecured gold loans to the banks at a negative interest rate. 
 
Imagine now that you are one of these people who think they own billions of dollars of gold in an LBMA (London Bullion Market Association) bank depository. Now you find out that this gold doesn't really exist. 
 
You would ask for delivery of your gold immediately. It would be a "run on the bank."
What about things like ETFs linked to gold? Most of them also claim, as assets, these "deposits" at the LBMA banks.
The entire gold market is complete "ponzimonium," a word popularized by the CFTC's Bart Chilton.
 
This does not even take into account the tungsten gold bar counterfeit issue, which has emerged over the past year or so.
 
Imagine that you are an LBMA gold bank -- like JP Morgan, Goldman Sachs or HSBC. Your clients start asking for their gold, which you have been telling them is safely stored in your super-safe depository, but the gold doesn't actually exist. It's not so easy to buy it either, because none of the other LBMA members actually have any gold. Can you see the incentive to deliver a phony tungsten counterfeit instead? You might even ask your buddies in the U.S. government whether there is any gold left in Fort Knox that they could use -- this being an issue of National Security and all.
 
Four 400 oz. LBMA standard bars were discovered to be tungsten counterfeits in Hong Kong. This set off a wave of investigations, turning up more such phony bars worldwide.
 
These were very high quality counterfeits. According to some investigators, it appears that the original source and creator of these counterfeits was the U.S. government itself. Some people put the possible number of counterfeit bars out there in the hundreds of thousands! 
 
Let's say you are an Asian or Middle Eastern sovereign wealth fund taking delivery on a few billion dollars' worth of gold bullion. You find out that you were given a bunch of phony tungsten by an LBMA bank, whose original source was the U.S. government itself.
 
Today, in a post titled Where's the Gold, Nathan Lewis continues.
 
The Comex is the name for the largest gold futures market in the world, traditionally centered in New York City. Although the market recently became part of the Chicago Mercantile Exchange, it has retained its old nickname. Also, the depositories which hold the actual bars of gold used to settle the futures contracts remain in New York City.
 
A gold depository must be the most boring business on earth. They charge a small monthly fee to store 100oz. standardized bars of gold in an insured vault. It is an industrial-sized version of a safe deposit box.
 
The owner of a 100oz. bar owns a specific chunk of gold. It has a manufacturer, a serial number, and an exact weight measured to the 1/100th of an ounce. A written depository receipt -- similar to an old-fashioned paper share certificate -- shows the exact date the bar entered the depository, and the entire chain of ownership since that date; they often change hands without leaving the depository. You can request to withdraw the bar from the depository, and you should receive exactly the bar indicated.
 
Jim Sinclair of jsmineset.com, a legendary gold trader, reported that some of his contacts have told him that, when they request to withdraw their 100oz. bars from the Comex depositories, they have not received the proper indicted bars. They received a bar, but not one with the correct serial number or weight.
 
Why not?
 
One possibility is that an honest mistake was made. The high demand recently has apparently kept the depository workers very busy. Wall Street veterans recall that delivery errors were chronic in the days of paper share certificates.
 
Another possibility is that the bar indicated on the warehouse receipt does not actually exist. The implications of that are rather dire.
 
This would not be so troubling if there were not already a series of very odd things happening down at the Comex. Delivery delays have been chronic. This could be a symptom of an overworked staff. Or, it could be a purposeful stalling tactic. In any case, it should not take weeks and possibly even months, and sometimes dozen of inquiries, to get the gold you already own out of the warehouse.
 
The Comex itself, however, has been reporting that business at the warehouse is very slow. The daily reports of warehouse movements show almost nothing happening, day after day. So which is it, busy or not busy?
 
Adrian Douglas of GATA (Gold Antitrust Action Committee) continues.
 
At the public hearing on the metals markets held by the U.S. Commodity Futures Trading Commission on March 25, I was able to introduce testimony on the record that the London Bullion Market Association is operating a massive fractional reserve gold market that I called a Ponzi scheme. 
 
Jeffrey Christian of CPM Group confirmed that what is loosely called the London "physical market" is actually trading a hundred times more paper gold than there is physical metal to back those trades. 
 
How is it possible for the LBMA to sell so much more bullion than they actually have in the vaults?
It is possible because of what they define as "allocated" and "unallocated" accounts.
The LBMA describes "allocated" accounts on its Internet site as follows:
 
"These accounts are opened when a customer requires metal to be physically segregated and needs a detailed list of weights and assays. The client has full title to the metal in the account, with the dealer holding it on the client's behalf as a custodian."
 
One would be justified in thinking that an unallocated account is when the investor's metal is held by the bullion bank but not specifically identified by serial number. For example, if two customers each want to buy 200 ounces of gold they cannot have allocated bars because the standard gold bar is the London Good Delivery (LGD) bar, which is 400 ounces. This would mean that these two investors could together be assigned an LGD bar -- a specific bar and serial number cannot be allocated for them, but a real bar is held on their behalf.
 
A casual review of the LBMA definition of an "unallocated account" would support this view. The LBMA states:
"Unallocated accounts. This is an account where specific bars are not set aside and the customer has a general entitlement to the metal. It is the most convenient, cheapest, and most commonly used method of holding metal. The units of these accounts are one fine ounce of gold and one ounce of silver based upon a .995 LGD (London Good Delivery) gold bar and a .999 fine LGD silver bar respectively."
 
The LBMA clearly states that an unallocated account is still an account for "holding metal." The LBMA further says that specific bars are not set aside for unallocated accounts and that customers with such accounts have a general entitlement to the metal.
 
I think a reasonable understanding of this description is that if 10,000 unallocated account holders have collectively purchased 100 tonnes of gold, then there will be 100 tonnes of gold in the vaults of the LBMA for those unallocated customers.
 
But that understanding would be wrong, for the LBMA's statement is misleading and deceptive.
The LBMA's definition of unallocated accounts continues as follows:
"Transactions may be settled by credits or debits to the account while the balance represents the indebtedness between the two parties.
 
"Credit balances on the account do not entitle the creditor to specific bars of gold or silver, but are backed by the general stock of the bullion dealer with whom the account is held. The client is an unsecured creditor."
The balance on the account is a measure of "indebtedness between the two parties."
 
In other words the account balance is an IOU for bullion. It is NOT really a "method of holding metal" as first described by the LBMA. No, the unallocated account is backed by the general stock of the bullion dealer -- and that may be, as Jeffrey Christian has confirmed, only one physical ounce for every hundred ounces that have been sold in unallocated accounts.

Goldman Sachs has just been charged with fraud for failing to advise customers to whom they were selling a particular investment that the firm had been paid by the John Paulson Fund to engineer the investment in a way that made it likely to go down in price.

There is an exact parallel in selling allocated gold as a safe-haven investment and failing to disclose that activities of the same bank will impede its price from rising or even make its price go down.
 
In 2007 Morgan Stanley settled out of court a class-action lawsuit brought by precious metals investors. The complaint alleged that Morgan Stanley told clients it was selling them precious metals that they would own in full and that the company would store, but Morgan Stanley either made no investment specifically on behalf of those clients or it made entirely different investments of lesser value and security.
 
In a recent interview with King World News investors Harvey and Lenny Organ recounted their difficulties in getting the gold and silver that was supposed to be held for them by Bank of Nova Scotia. They recounted a visit to the bank vault, where they saw very little inventory.
 
Some bullion dealers and fund representatives have countered with their own eyewitness accounts, asserting that they have allocated metal stored at the bank and they have verified that the bullion is in storage there. These bullion dealers and fund representatives have misunderstood the issue, for the sanctity of allocated gold and silver investments was not in dispute. The Organs were referring to unallocated metal, not allocated. The Organs had bought metal on the Comex and taken delivery and asked Bank of Nova Scotia to move it to the bank's vault in Toronto . In the process the Organs' metal apparently was switched to unallocated and the unallocated metal inventory they were shown was insufficient to contain their holding.
 
Those rushing to defend Bank of Nova Scotia to claim there is plenty of gold and silver in the bank's vaults should check the bank's Internet site first:
Thus there is no guarantee that the certificates have any gold or silver backing at all.
 
Elsewhere the bank says:
"Unallocated gold is a claim on the Bank of Nova Scotia for the ounces entitlement to a specific quantity of gold bullion."
So unallocated bullion is not bullion at all; it's an unsecured claim against the bank.
Bank of Nova Scotia is a market making and clearing member of the LBMA and a member of the London gold fix group.
 

 Sorry about the way long post, I couldn't figure a way to shorten it.

 

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