ROGUE WAVES & ROGUE TRADERS ON OUR FINANCIAL SEAS
Jim Puplava's Financial Sense Perspectives
October 26, 2000
The Perfect Financial Storm?
Financial Storms Heading Towards the U.S. Economy
financialsense.com
Part 5 ROGUE WAVE & ROGUE TRADER
CRISIS ACCELERATORS
... to today’s unstable financial markets.
These are known as "crisis accelerators".....
Accelerator #1 Leverage...
Accelerator #2 Forced Selling...
Accelerator #3 Momentum Mood Swings...
Accelerator #4 Loss of Confidence...
These four accelerators mimic the "train" effect of waves,
which build to create the rogue wave.
TODAY'S COMPLACENCY
... a basic moral hazard at work in the market place fostered by..
There will come a day unlike any other day...
an exogenous event, a rogue wave...
Two prominent areas to be looking for their emergence
are in derivatives and the geo-political realm.
It is these two areas that pose the greatest risk.....
THE DANGER OF DERIVATIVES
Derivatives Defined
Derivative Dilemmas
Three Kinds of Risk
Formula for Disaster?
The Players in Derivatives
... are highly leveraged and risky,
they can produce high returns when they go right
and catastrophe when they go wrong.
THE "TAIL" OF LONG TERM CAPITAL MANAGEMENT
... so huge and came so quickly,
that it would take.....
Reckless Disregard for Lessons
Rogue Roulette
Rogues at The Wheel
Derivative Positions - A Telling Story
... that they are built on certainty,
while the real world is not.
THE GOLD CARRY TRADE - A HARBINGER OF TROUBLE
There is another risk to this derivative strategy
which is even more ominous, the gold carry trade.....
... very cheap source of capital for New York bullion banks
like Chase, Morgan, and Goldman Sachs.
Paying the Piper Poses Problems
... unlikely to be resolved by appealing to the good nature
of women around the world to relinquish their jewelry
for paper certificates of deposit.
Veneroso Associates estimates that official-sector gold loans
stood at 9,000 to 10,000 tonnes at the end of 1999.
Most of this gold has been converted into jewelry
so it can’t be retrieved.
These figures could be even higher this year since
the gold derivative book at bullion banks has increased.
With demand for gold far exceeding supply, inflation on
the rise, oil prices exploding, tensions rising in
the Middle East, the price of gold should be exploding.
It hasn’t. Why not?
The only plausible explanation is that "someone" wants to keep
the price of gold artificially suppressed.
The culprit can be found in the gold derivatives market. [ vi ]
It is beyond the scope of this Perspectives series
to cover all of the reasons why the price of gold
is being suppressed. For readers wishing to know more
about this situation, an excellent source of information
and detail can be found at gata.org under
the "Gold Derivatives Banking Crisis."
It is a long document, 118 pages, but well worth the read.
(The author, Bill Murphy, was a guest on my program.
His interview is available in real audio format.)
... Washington and Wall Street are preparing for the next bailout.
... looks like we'll have financial market guarantees.
Hold on to your wallets, this is going to get interesting.
... when that rogue wave will appear.
It will be a day when events overwhelm he financial markets.
... when the house of paper will fall...
... we will know if the Holy Grail of... truly exists.
(Continued Next Week)
Future installments of The Perfect Financial Storm? will include:
Part 5 Rogue Wave - Rogue Trader Continued
A look at geopolitical events that could cause storm fronts to collide
Part 6 Storm Tactics
An exploration of investment opportunities in either inflationary
or deflationary environments.
Jim Puplava's Financial Sense Newshour Real Audio Interviews
Don McAlvany, Editor, The McAlvany Intelligence Report
Richard Maybury, Editor, Early Warning Report
Bill Murphy, Chairman, The Gold Anti-Trust Action Committee
Notes for Readers: Link to a TEXT ONLY page if you wish to print the article.
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