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By All Means, Sell Your PMs!

228
154
Thu, Jul 21, 2011 - 3:04pm

 Word of a pending "deal" between The Regime and The House sent the metals reeling this morning. This once again proves that WOPR does not have actual, human intelligence...at least, not yet.

Of course the debt ceiling is going to be raised in a package with some phased-in spending cuts and tax increases. That was never in question. The only question has been whether there would be a "plan" such as this or whether O'bottom would simply raise the ceiling by executive order. It's quite clear now what will happen. As partially discussed back on Monday, here's how this will play out:

1) The House cast a vote last night on a "Tea Party" package. It passes overwhelmingly but has zero chance of passing the Senate or receiving O'bottom's signature. No matter. It's all about "political cover". More on that later in point #4.

2) A "plan" emerges, brokered by The Regime and the Republican "leadership". 50 or so "safe seat" Repubs will vote for the plan in the House. Those 40-50 votes plus all of the Dem votes will be enough to pass the plan. All of the Senate Dems plus one or two Repubs will approve the plan in the Senate and O'bottom will sign it.

3) Problem solved. smiley

4) "Tea Party" Repubs are able to claim that they did their best. They'll be "on the record" as having voted against O'bottom but voting for their own plan. This is known as "having your cake and eating it, too". On balance, they will be safely re-elected next year and Boehner will keep his job as SOTH.

5) Every politician wins! You lose. Again. angry

So with that behind us, let's cut to the chase. The debt ceiling is going to be raised again by another $2T or so... (Don't forget about this chart!)

large_gc_1_0_0.jpg

...And it will only take about a year and a half to hit the ceiling again. With the passage of this "deal", all that will have happened is a kicking of the can down the road until early 2013. Hmmm. Early 2013. Why would that be significant?? Let's see, what happens in late 2012? I know it's something but I can't put my finger on it. Let me get back to you on that.

At any rate, the question you need to ask yourself right now is: "From where will this $2T be coming?".

I know! China! (Nope.)

Russia? (Nope.)

Japan? (Sorry.)

The EU and ECB! That's it! The owe us a few favors! (Negative.)

We'll raid pension plans and IRAs! (Someday soon but not yet.)

QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3QE3!!!!!!!

So, by all means, today's news means you should sell your gold and sell your silver. NOT! I sincerely hope all of you are wise enough now to not continue falling for the manufactured SPIN and MOPE of Washington politics.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  228 Comments

boob it · Jul 22, 2011 - 12:16am

Hi, thanks to terri , & stockgumshoe I figured out the hint is Agria Corp GRO. Im putting that 1000$ on agria tomorow morning, HAHA NIA!

GRO went up 30% today. NIA seems to do good at pump and dump, I agree LARRY, but A little pumpy and dumpy could help the old boob. So who knows what will happen tomorrow when NIA release their hint to everyone. I just released it to Turds favorites early!

1984 · Jul 22, 2011 - 12:26am

In 2013 there will just be a... wait for it... wait for it....

QE4!!!!!!

Turdle GG · Jul 22, 2011 - 12:30am

Markus,

see this:

https://www.pagold.net/List.asp?C-2-1.Html

Best information is on the page starting with "Our Characteristics - Trading Rules of the Exchange". They will actually deal in physical gold. Buyers can deposit 100%, 10% or 5% of the transaction amounts. So, physical gold, plus leverage. *Might* be a powerful combination.

Their website (where it's hard to find any better info than the above):

https://www.panasiagoldexchange.com/List.asp?L-2842749587.Html

Turdle GG · Jul 22, 2011 - 12:53am

See this:

https://www.hkmerc.com/en/market_news_data/today_quotes_news/HKS/index.html#/2011-09

661 x 1,000oz contracts have traded. Price shown on the chart is 20min delayed.

stoneeh · Jul 22, 2011 - 12:54am

Thank you very much for the links Turdle.

10.3 Traders may declare to the Exchange delivery and receipt of physical gold after traders pay in full at strike prices in accordance with directions of delivery and receipt.

11.2 Traders holding contracts of buying physical gold may apply to the Exchange to take delivery of the gold after they make the remaining payment for the gold

and

Article 2 Clearing and settlement refers to operations conducted by the Exchange based upon transaction results, publicized trading prices and relevant regulations of the Exchange to calculate, receive, pay, clear and transfer margins, losses or profits, handling fees, risk reserve funds and other funds between buyers and sellers .

So one is basically able to put up the full margin and take delivery. Frankly I don't see much of a difference to the fractional reserve schemes of all these other exchanges - except that delivery is possible constantly, instead of for example the respective delivery months at the COMEX.

I guess we have to see it in practice to judge it's impact, but so far sounds like another fractional reserve exchange that will draw some physical demand into paper, just like the London and American exchanges and the big ETFs are doing.

- Markus

agNau · Jul 22, 2011 - 12:56am

There is a slight similarity between the last time SLV hit 40, and this time. Note on a daily chart the pullback is similar. Perhaps a rhyme?

Turdle GG stoneeh · Jul 22, 2011 - 1:12am

Markus,

Another way of looking at it is that it's like buying physical direct from a mint.

Alternatively, they give you the ability to trade on margin and not take delivery - in that sense it's like trading XAU in the forex markets.

So, are the Chinese retail guys going to take physical or trade the price with leverage? No doubt they will do both, but with real estate now less attractive for them, and with the stock market down and with negative real interest rates, conditions are good for high PM demand.

My take on it is that it will only start to have an impact if/when physical purchases become substantial. As Ted Butler said in his latest commentary, there are about 1 billion oz of silver inventory in the world, and about 3 billion oz of gold inventory. After taking out the amount used for industrial purposes, there really is not much silver left over. So, I think it will be in silver rather than in gold that the Pan Asia exchange may have a bigger impact.

Turdle GG · Jul 22, 2011 - 1:21am

The key, of course, is the potential scale. This is what Maguire focuses on in the promo video. Who was it recently (Rickards?) on KWN who spoke about the fact that right now it's only the bigger cities that have gold and silver retail outlets, and that they are a little glitzy/shady.

If the major banks' million of clients who transact their banking via the internet are attracted to buying a few ounces of gold or silver through their banks' website (linked to Pan Asia exchange), that will be significant.

silvermedusa · Jul 22, 2011 - 1:24am

Does anyone know what time the HK exchange opens? Been watching like a hawk to see if it effects PM markets when it does. Have been neglecting work and other things trying to see what is going to happen with all that is reaching deadlines here: debt ceiling, budgets, Eurotrashcrash, et al. Don't know if I should spend the last of my dry powder to buy now, or be more patient. I keep getting this nagging feeling that if I don't buy now, it's all going to go to shit and I won't be able to later. Of course, that will happen when I am working or on the toilet so I will have no time to react. : )

thegoldenchild TheGoodDoctor · Jul 22, 2011 - 1:30am

Thanks for the welcome. This is without doubt the best PM site I've seen...

Re: my question.

So the soundbite = tax increases / spending cuts

The real means of paying for the increased debt = PRINT MORE $$$!

silvermedusa · Jul 22, 2011 - 1:37am

Thanks Turdle, I am tired, not thinking. So it's been trading for a few hours already? Nothing ground shaking happening there. I can go to bed now? Oops, shoulda looked a few comments earlier. See everything I needed there. Guess I will go to bed, I am not functioning anymore!

stoneeh · Jul 22, 2011 - 1:42am

Good points Turdle.

Another thing - PAGE is state approved/supported, isn't it? I don't think though is that China right at the moment is especially keen on seeing substantially higher PM prices. I mean, it might be that they wouldn't care about PMs (especially silver, as you also remarked) trading 10x higher because with their 3 trillion $ reserves they could still buy up the whole market a couple of times.. I just don't see a reason why they'd support something like that though.

I mean, we are not foolish enough to believe that government want to be fair, are we. Of course one reason could be because substantially higher PM prices would break the western economy. Point though is they don't want that either, because that would also cripple their own economy and that historically has led to revolutions and the last thing the Chinese dictatorship wants is a revolution.

- Markus

Turdle GG · Jul 22, 2011 - 1:47am

Nothing happens without government backing. The exchange is therefore 100% supported by the government.

It was Jim Rickards who spoke to your very questions about it not being in China's interest to push up the price of PMs. As he's more intelligent than me, I'd recommend listening to that interview. I think it was the most recent one, or the one before.

https://kingworldnews.com/kingworldnews/Broadcast/Broadcast.html

Bobbi · Jul 22, 2011 - 1:49am

In fact, we just ordered 100 more ounces of silver and assorted gold fractional this afternoon to fill out our stash. BRING IT jpmorgue et al you pathetic excuses for humanity.

Economical Disaster · Jul 22, 2011 - 1:55am

You've probably heard that Aug. 2nd is the drop-dead date for a debt-ceiling deal. Nuh-uh, the White House tells Damian Paletta. It's actually July 22nd. Writing and passing the legislation takes some time, as does working the money through the Treasury Department. This can't be left until the last moment.

But why are they telling us this now? Debt talks have completely broken down. The two parties's negotiating positions are spinning further apart, not coming closer together. Republicans are now pushing a balanced budget amendment they've specifically designed to repel even conservative Democrats. The GOP increasingly doubts that the debt ceiling matters and needs to be raised with any real expediency, while Democrats -- potentially including Treasury Secretary Tim Geithner -- increasingly doubt that the debt ceiling is constitutional and Republican demands ultimately need to be met. This doesn't seem like an environment in which moving the date of doomsday up by two weeks is going to have much effect.

https://www.washingtonpost.com/blogs/ezra-klein/post/wonkbook-is-july-22...

TheGoodDoctor thegoldenchild · Jul 22, 2011 - 2:06am

@thegoldenchild I don't know if you can come up with a formula. Maybe tax increases + spending cuts < increased spending due to raising the debt ceiling. Because they will go through that 2 trillion pretty quick up until the election or early 2013 when the President gets sworn in.

Then they revisit the debt ceiling/taxes/spending cuts again depending on what the Senate/House looks like politically. It's all really about the elections. Everybody wants to get reelected they could give a rats ass about the debt right now. They all just want to look good to those that might be voting for them.

Bottom line is you don't cut spending by adding more debt - which is what they are doing. It's the Federal Reserve that does the money creation to buy the treasuries from the US. So, it is money printing by the Fed. But more debt issued by our Treasury Dept. Thusly burdening the current/future tax payers of America.

Bobbi · Jul 22, 2011 - 2:17am

Brothers and Sisters

Gold and Silver are cheap today compared to where they are ultimately going. Cost average in, get yours while the getting is good! Our government (makes me sick thinking I actually was engaged and doing what I thought was right - exercising my right? to vote) will never do the right thing, they are too far down the road to hell paved by their arrogance and ignorance!

I Am The Unknown Comic silvermedusa · Jul 22, 2011 - 2:26am

Silvermedusa, if you haven't already been to bed yet, and then gotten up in the middle of the night to check PM prices, then for goodness sakes get your butt in bed because Friday trading is going to be one wild ride and you're going to need your wits about you. 

Goodnight, sleep tight, and don't let the bedbugs bite (Blythe has that taken care of already, and there's only so much blood one can lose in one day).

Biochar · Jul 22, 2011 - 2:30am

Don't expect much right away. The Chinese who have a clue as to the reasons for owning PMs have already bought. I have many friends there, small investors, and they will be adding to their physical stash. The bigger players will be adding too of course, so things will pick up. If you've never been to China, I suggest Shanghai for a first visit, there's so much to see and do in and around the city. April and September are the best months to go, warm, but not too hot or humid. Check out my blog posts here...

https://chinapositive.blogspot.com/2011/01/shanghai-to-zhouzhuang.html

https://chinapositive.blogspot.com/2011/01/shanghai-night-out.html

etc. 

brokeboater · Jul 22, 2011 - 3:28am

PM's have been taken to the wood shed twice now just on the rumor that a deal was in the works. What kind of ass reaming do you folks think the metals are going to get when here is a deal announced? I'm expecting a major take-down, and I'll load the boat at that time.

Rui · Jul 22, 2011 - 3:36am

I was thinking at least a trip to 20-DMA, and it's not happening. I guess we'd have to wait till next week CRIMEX option expiry.

illyasviel · Jul 22, 2011 - 4:57am

They raid it for 20 minutes, bringing it down -$0.3, but then they let it go and an hour later we're back up $0.2

I dont get it, what was the point? Trying to make people loose interest?

thegoldenchild TheGoodDoctor · Jul 22, 2011 - 5:33am

Thanks for the info. Imho economy is not getting better...bernank & co will need to do something in H2...

thegoldenchild brokeboater · Jul 22, 2011 - 5:36am

PM's have been taken to the wood shed twice now just on the rumor that a deal was in the works. What kind of ass reaming do you folks think the metals are going to get when here is a deal announced? I'm expecting a major take-down, and I'll load the boat at that time.

I would agree.

But this just doesn't make sense does it? Debt ceiling goes up = PMs go up!

Throwing Sliver Hammers · Jul 22, 2011 - 6:10am

https://af.reuters.com/article/metalsNews/idAFL3E7II0W920110718

SINGAPORE, July 18 (Reuters) - The Hong Kong Mercantile Exchange (HKMEx) said on Monday it will start trading a dollar-denominated silver futures contract on July 22, hoping to tap into the growing demand for the metal in China.

The silver contract will trade in lots of 1,000 troy ounces and be delivered in Hong Kong, the exchange said in a statement.

illyasviel · Jul 22, 2011 - 6:17am

Everyone keeps saying there is a raid, but doesn't anyone find it wierd that they always rise and recover at the exact same time aswell? And by equal amounts too. They move pretty much equally tick by tick.

I'd say with the low trading volume we're in; we're at the mercy of HFT computers and the banks running them. Seems like it to me...

duckwomanloulou thegoldenchild · Jul 22, 2011 - 6:30am

I wake up and read all the news & think WTF!! But then I log in to my, not so little, online community of like minded souls and think to myself Phew it's not just me who thinks they're going mad - so do all these people too :) An oasis of sanity in an increasingly insane world. Thanks again Turd and all my fellow Turdites for ensuring that I am not carted off to the funny farm in a padded jacket!!

Lou

D E · Jul 22, 2011 - 7:11am

Looks like something is beginning to hit the fan, and it is not hot air...Fitch rating agency is calling a spade a spade and the Euro deal 2 on Greece a "restricted default"...I know I'd be really pissed if I owned CDS on Greece and my "insurer" was saying, "sorry, no default, no claim"...gold and silver coming alive

Greece Faces ‘Restricted Default’ After Debt Accord, Fitch Says
2011-07-22 10:53:10.280 GMT

By Anchalee Worrachate
July 22 (Bloomberg) -- Greece faces a “restricted
default” after the European Union crafted a 159 billion-euro
($229 billion) bailout for the nation, which includes getting
bondholders to assume part of the cost, Fitch Ratings said.
Greece would be cut to “RD” should the plan be
implemented, Fitch said today in an e-mailed statement. The
ratings company cut Greece by three levels to CCC on July 13.
The program “of financial support for Greece, as described
in the Institute for International Finance proposal issued at
the summit will, in Fitch’s opinion, constitute an event of
“restricted default,” the statement said. “According to the
IIF, the proposed debt exchange implies a 20 percent net present
value loss for banks and other holders of Greek government
debt.”
Greek two-year yields tumbled 768 basis points to 26.13
percent as of 11:42 a.m. in London. That’s the biggest decline
since the EU and the International Monetary Fund created a 750
billion-euro fund to backstop the region in May 2010.
The Greek financing package will consist of 109 billion
euros from the euro region and the IMF, while financial
institutions will contribute 50 billion euros after agreeing to
a series of bond exchanges and buybacks that will also cut
Greece’s debt load.

‘Life After Default’

Banks will reduce Greece’s debt by 13.5 billion euros by
exchanging bonds and “potentially much more” through a buyback
program still to be outlined by governments, said the Institute
of International Finance, a Washington-based group representing
banks.
“There is life after default,” said Aninda Mitra, head of
Southeast Asian economics at Australia & New Zealand Banking
Group Ltd. in Singapore and a former sovereign analyst at
Moody’s Investors Service. “It certainly helps to have a more
equitable burden-sharing agreement which will ease the
insolvency burden that Greece was carrying upon itself, which
politically would have been unsustainable.”
Russia, which defaulted on $40 billion of debt in August
1998 and devalued the ruble, now has an investment-grade rating
three levels above junk from Moody’s, while Standard & Poor’s
and Fitch grade the nation one step lower.
Argentina defaulted on a record $95 billion worth of debt
in 2001. After $62.3 billion was restructured in 2005, President
Cristina Fernandez de Kirchner last year swapped a further $12.9
billion of securities.

Argentina Default

Argentina’s debt-to-gross domestic product ratio fell to 48
percent as of June 2010 from as high as 166 percent in 2002,
Finance Secretary Hernan Lorenzino said in September. The South
American nation is still ranked non-investment grade by the
three ratings companies.
Before yesterday’s accord, the EU forecast Greece’s debt
burden will rise to 158 percent of GDP this year from 143
percent in 2010. Greece was cut to Caa1 by Moody’s on June 1 and
CCC by S&P on June 13.
Euro-area leaders also empowered their 440-billion euro
fund, the European Financial Stability Facility, to buy debt
across stressed euro nations after a market rout last week
sparked concern the crisis was spreading. The fund can also aid
troubled banks and offer credit-lines to repel speculators.
“For now, the imminent risk to the monetary union itself
has significantly reduced,” Mitra said. Next is “the
implementation and the coordination between the EFSF, the
national governments within the monetary union and the reforms
that Greece has to implement,” he said.

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