Category Archives: Economics

Economics, Free Enterprise

JP Morgan Chase In Hot Seat Over Precious Metals

It’s been a contentious issue over fifteen years in the investment community. Are precious metals markets rigged? If you’ve never heard of GATA (Gold Anti-Trust Action Committee) I suppose it’s about time they get some credit for quiet behind the scenes research into irregular trading patterns of precious metals on the COMEX and LME. GATA has in fact appeared before U.S. law makers on the topic of market rigging during the period in which this alleged illicit trading was conducted. Did the U.S. government significantly digest claims made by GATA through GATA’s research? How could the U.S. Senate draft a 396 page report entitled “Wall Street Bank Involvement with Physical Commodities” having not discovered any of these trades though which allegedly number in the “thousands”.

The news….JP Morgan appears (a plea at minimum so far) to be guilty of conducting illicit futures trades in precious metals as reported by CNBC on December 13, 2018 and in fact there is a reference in the article to the trades by an employee of the firm as being conducted with the consent and direct knowledge of his immediate supervisors. A class action law suit is underway representing those who traded the futures precious metals markets between 2009 and 2015.

Chris Powell of GATA speculates in his December 18, 2018 article whether gold mining companies who have reason to trade futures in order to hedge production will participate. Mr. Powell goes on to elaborate why the gold mining industry has been reluctant to postulate about market rigging. Austrian economists could expound greatly on motives for the suppression of the gold price.    

Not surprisingly, we’ve seen the gold price rise to a six month high today. The big question will become…how far up the chain of command will we discover complicity in the conduct of this bank employee?     w

Economics, Politics

Loss Of Objectivity in Public Policy

Upon reading the Calgary Herald’s online comments to Rachel Notley’s letter to the editor today, I can’t help but feel dismayed by people’s vitriol. To preface this piece, I’m fiscally conservative and did not vote for Rachel Notley in our last provincial election and nor would I vote for her today. She has failed to act prudently with the public purse and public sector unions just as I had suspected. However; I do give her credit for adjusting somewhat when she took office to the market reality facing the oil and gas industry.

British Columbia has failed to honour its role in support of Canada’s industrial development. This mere fact underlies the basis which prevents the construction of increased pipeline capacity to the west coast. Ms. Notley has been an advocate of new pipeline construction. In fact, the taxpayer has now been exposed to the capital costs associated with preliminary pipeline construction because of British Columbia’s obfuscation and environmental idealism.

Unfortunately, when the electorate is exposed to politicians who have abused the public purse for their own benefit or witness politicians grand stand for social causes beyond the scope of their mandate, cynicism infiltrates objective debate thereby interfering with good decision making. People become so dug into their positions based on emotion as opposed to logic that coherent public policy is jeopardized.  The elicitation of a civil society is predicated by sound minds exchanging ideas, sourcing problems, contending with various interests, and ultimately planning and executing solutions. Canada in its size, its regional disparities, and its desire for satisfying everyone may in the end lose in global competitiveness. As a nation, we “stand on guard for thee” on Remembrance Day and on Canada Day, but do we do the same when critical industrial projects are on the precipice of deployment? Will we continue to operate from the premise that natural resources form the lifeblood of Canadian economic development or will we be naive enough to believe that service industries, computer gadgets, and the public sector will carry us all forward?

Could it be that your national government is simply reticent to thrust itself into a potential constitutional crisis over the jurisdictional rights of petroleum transport? Now that Canada’s federal government has taken an ownership stake in the Trans Mountain Pipeline, I ponder how it plans to illicit the benefits of such in the face of a provincial government which has been uncooperative. Wasn’t it Mr. Trudeau’s father who was last seen addressing elements particular to our constitution? May he have missed something?                 

Economics

Cognitive Dissonance and The Markets

Okay. It’s not my term (cognitive dissonance) but I like it. Dr. Jim Willie has used it in reference to what he believes to be malaise and the failure of 90 per cent of us who are failing to connect the dots in respect of the current shift underway pertaining to the economic “reset”. In his August 4th interview with X22 Report Spotlight, Jim metaphorically and substantially and endearingly refers to dialogue with his father as being someone as part of the 90 per cent group. As a music hobbyist, I’m familiar with dissonance as being a sound which clashes within a key and I relate to its contextual use. Jim displays noticeable frustration by those who have difficulty seeing the implications of events simply as they are with perhaps the luxury of not having lived through the great depression. One particular example of dissonance is official government statistics of inflation compared to your neighbours street feel assessment of inflation. 

At every turn in the news right now we are inundated with the political bizarre and I can’t help but wonder if folks have become so distracted with the Washington drama that they’ve been numbed by potential underlying distress of the financial system.  Consider this. Is it possible that there is actual good work going on in Washington unbeknownst to you and withheld from you because of the larger implication of crisis which could unfold should you be notified? Have you been prepared by your system of education to understand risks inherent to the financial system? If the system is in fact at risk and the risk has grown, what do you know about how to protect yourself? What about 2015 Greece, 1923 Germany, 2002 Argentina, 2018 Venezuela? What did their citizens believe regarding their economies prior to dramatic negative economic events. 

I’m writing about this because it’s not that difficult to create a hedge against something bad happening. Remember what your investment advisor said when your portfolio collapsed 30 per cent back in 2008? Don’t worry, it’ll come back. Well it may have taken 10 years so I guess they were right. Have you ever heard an investment advisor talk about the opportunity cost of 10 years of lost compounding?

   

Economics

Gold Swaps

Follows is a discussion of gold swaps. Over the past week or so, the S&P 500 has been forming a topping chart pattern and today has seen simultaneous down moves in both the S&P and the gold price. Gold price suppression theorists will cite this day in their argument that there are artificial forces working on the gold price. Apparently a down move in the indexes back in 2008 during the financial crisis correlated similarly with today’s gold action.  

Inquiries made by the Gold Anti-Trust Action Committee toward the Federal Reserve and the Bank of International Settlements regarding the derivative trading of Gold Swaps conducted from underlying U.S. gold inventories have not been absolutely transparent. On the one hand, the Federal Reserve has responded with “in connection with your appeal, I have confirmed that the information withheld under exemption 4 consists of confidential commercial or financial information relating to the operations of the Federal Reserve Banks that was obtained within the meaning of exemption 4. This includes information relating to swap arrangements with foreign banks on behalf of the Federal Reserve System and is not the type of information that is customarily disclosed to the public. This information was properly withheld from you.  (letter dated Sept 17, 2009 from the Federal Reserve is associating with Freedom of Information). On the other hand, they have recently made a simple assertion that gold swaps are not executed with U.S. inventoried gold reserves.   

Bill Murphy of Lemetropole has been beating the drum of gold price suppression since 1999. Although not a subscriber to this site over at Lemetropole, I have had the privilege of witnessing his fervour in person at conventions here in Calgary over the years. In fact, he was instrumental in a presentation showcased by the Gold Anti Trust Action Committee to congress some ten years ago regarding evidence of surreptitious trading patterns associated with the gold price.

 Through my own education of derivative markets, I came to learn of short selling and naked options.  Gold swaps fit right in to this category of financial instruments. Chartered accountants certainly didn’t Know much about them during the 2008 financial crisis having failed to ensure disclosure during audits. What if the U.S. government has over extended itself in its interest in gold swaps when inventories don’t support the trades? Then what?  

Jim Rickards has recently been leading the charge to help the public understand surreptitious gold trading through his most recent book “The New Case for Gold”.     

Economics, Philosophy

Being In The Know

We often think we’re in the know when we really aren’t. We come to know because of what we’ve been told but who has been doing the telling and why? In spite of the profligacy of information on the internet, we are deservedly suspect. The question becomes “what do we do and where do we turn?” if information has relevance in designing our lives. 

Conspiracy theorists appeal toward our insecurity of knowledge. Through their inflammatory portrayal and oftentimes sharpness in intellect, they can even dislodge us from sound judgment. We can only harbour outlook through experience, education, reason, and observation. However; what we lack is information deliberately kept from the public domain.

From the period 2004 to 2007 I took the time to digest insights from speakers adept in the field of Austrian Economics. Having studied basic economics through my financial education, I have been rather fascinated about the contrast in the Keynesian model versus this Austrian model and whether there would be any implication to me directly in the context of these models duelling alongside future economic events.

This brings me to Jim Willie of his Golden Jackass website. Jim is a no nonsense fellow with a P.H.D. in statistics. Jim showcases himself as an economist without the credentials of an economist. He has an interest in world affairs as they relate to our monetary system and speaks with an inflammatory style typical of someone imbued of conspiracy yet logical and charismatically intelligent. His stories mostly correlate to postulations. One wonders about the worthiness of his sources but his ability to incite in my estimation supersedes any laxity inherent to his research. 

He was one gentleman that struck me the deepest during this period of my economic inquisition. This weekend with the Dow Jones Industrial Average approaching a double topping chart formation, I wonder if elements key to Jim’s world view will trigger the next market correction.

During the past two weeks, I have immersed myself in learning specific market trading mechanics pertinent toward portfolio protection. I’m happy to share. Simply subscribe.