Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED -- Ignore unavailable to you. Want to Upgrade?

To: farkarooski who wrote (50053)	4/15/2002 12:15:34 PM
From: Jim Willie CB	Read Replies (1) \| Respond to of 65232

suppose you need 50,000 oz silver for your business that is equivalent of 10 silver futures contract you dont purchase the silver no, that is passe', old world, silly you lease 500k oz of silver from bullion banker e.g. JPMorgan or somebody with large vault supplies you dont lease from the Federal Reserve, all gone most of the owners of that vaulted silver believe it is safe they believe what they own is theirs, easily retrieved but who wants to go pick up about 1.6 tons of silver in a truck? hard on the back, and who can find good help these days? so rightful owners just leave it with JPM in vaulted form they can go visit the bank and look at stacks of silver bullion bars it is very impressive "there you are MrSmith, your silver is among that roomful of bars" "very impressive, young man" so you lease the silver at 1.5% per year that is $225,000 worth of silver leased at that rate, you pay $33,750 per year in lease fees which translates into $2812 per month but you run a business that requires silver consumption bullion bankers set this insane system up to handle bullion holding requirements as escrow or earnest deposits as pertaining to larger contractual obligations so you secure your large amount of silver in physical form you pay $2800 per month to keep dogs away you dont mind the monthly added cost, because the $4.50 underlying cost is historically shitcheap silver is at a century low in price now, CPI-adjusted meanwhile, the business keeps its books clean and hedged by buying long 10 silver contracts in order to offset the 50,000 oz to be consumed if silver rises over that year, the business is not affected it CAN BUY back the silver in 12 months at a higher price but use the profits from the 10 long contracts to offset the price increase but the bullion banker is another story they realize that a sudden huge silver price rise will increase the likelihood of not getting back their leased silver so they hedge on their books with essentially 10 naked short silver contracts they figure they can deliver sold contracts in such an event as necessary how many people would default on them anyway? (a weak foundation underpinning the fractional deposit scheme) fast forward 11 months the business doesnt want to buy back the silver and replace it so they lease twice as much for the next year 50,000 oz is carried over 50,000 oz is newly leased the game doubles in size FAST FORWARD 8-18 MONTHS the bank is close to empty on physical gold but it has perhaps 500 short silver futures contracts THEY ARE NAKED AND VULNERABLE their depositors dont even know their silver is gone the bullion bankers and Federal Reserve have engaged in this game for almost a decade now they control the flow of leased silver via lease rates when Buffet bought 130 million oz in 1997, he affected the lease rates word got out, and bankers suspected a run would be possible so the lease rate rose 50-fold to 75% but it came back down as soon as the flow reduced all is well again, back to normal the banks figure the leased silver CAN BE returned anytime since the precious metals all controlled in price and we have an endless supply of both gold and silver OR DO WE ??? it continues until the silver is gone, above ground the day is nigh for such a reality Buffet saw the insanity of the system, and bought physical silver he vaulted it in a European bullion bank with no leasing the system thumbs its nose at supply & demand dynamics the arrogance of the Federal Reserve and Bullion Bankers is huge they will be humbled when defaults spread like wildfire Butler believes it might happen by December 2002 but it really doesnt matter guessing when the system ensures it will happen and suckers like the Chinese deliver 1260 tons silver I wonder what they got in return..... e.g. F16 blueprints, fiberoptic deliveries, relaxation of Intellectual Property enforcement after WTO trade as long as no suspicion of a faulty system, deliveries of scarce supplies continue how else could a depleting commodity have a decreasing and now flat price? Enron is knocking at the Federal Reserve door nobody seems to hear it / jim

To: farkarooski who wrote (50053)	4/15/2002 1:34:43 PM
From: Jim Willie CB	Respond to of 65232

damage in leasing is with growing shorts, inadequate longs the business should maintain an increasing number of long futures contracts for the silver they consumed thus hedging against a rise in silver price, which would kill their business, dead gone but they tend easily to view the silver leasing fee as an amortized cost on the books this works ok as long as price remains extremely stable why bother with tied up money in long futures contracts? the cost shows up just fine as leasing fees on the books the upshot: fewer longs than should be for consuming businesses the bullion banker is another story he merely wants to cap the silver price, thus reducing risk of being discovered as a fraud he is leasing his vaulted silver out unbeknownst to his clients he has made a dead asset into an interest bearing asset brilliant, eh? NOT his short futures contracts are at first backed by real silver eventually as more silver is leased though, less backing to the short position and eventually the shorts open interest exceeds his supply then he is running naked on silver, very slippery when his vault is nearly empty, he is in big trouble then he has a large naked short position, which serve as IOU's for his clients they get pissed and sue his stupid corrupt ass he gets it from both sides: legal and accounting fast forward to when the silver supplies are nearly vanished word gets out in the press at first from anecdotal evidence later this Comex reports that supplies are less than believed the world silver price doubles overnight, nearing the teens here is where it gets ugly for BOTH sides the businesses that didnt hedge long sufficiently go bust maybe just take serious financial hits what follows is shortages of silver necessary to remain in business financial hits are endured initially, then continue with employee costs and business winding down, thus declining revenue stream the bullion banker gets sued for leasing and "losing" his clientele's silver he holds IOU's in the form of silver short futures but they are MASSIVELY UNDERWATER the bullion banker risks going bankrupt Congress investigates a new scandal, with the Fed at the center the leasing game is exposed as corrupt and ineffective press wonders why silver is regulated in price while it disappears from above ground sources the answer: to sustain the dollar fiat currency system silver jumps past 20, past 30 speculators climb onboard, bidding up the price further but no physical silver is available to satisfy the higher price it continues past 50 reports surface that the world is out of silver silver is a beautiful metal, but its match with leasing represents a marriage made in hell we have a commodity with INELASTIC DEMAND i.e. higher prices do not lessen demand, too essential we have a leasing system with INELASTIC SUPPLY i.e. lower supply does not increase price so the flow continues until the silver is all gone, vanished meanwhile the silver mines are not in full operation many are shut down in money losing pricing situation because price is below production costs some is mined as byproduct the shortfall in supply versus demand is made up in leasing it does not show up as consumption on the books though that is where the corruption lies bullion bankers know deep down the leased silver will never be replaced but the system is engrained deeply simply unbelievable the investment opportunity of a generation silver could easily surpass $100/oz and continue to climb mines cannot deliver new supply at any price for 18 months typo in my last message: 50,000 oz silver in example / jim