Posts Categorized: General Editorial

Posted by & filed under General Editorial.

Short Sellers, Legal, Illegal and Pool Managed Seek Legal Protection From Market Risks of Their Actions

Dear CIGAs,

1. Will regulators support their despicable request?
2. Longs must disclose their positions above defined levels of ownership.
3. Will shorts be permitted to DESTROY from behind regulator-protected secrecy that is practically risk free?
4. Regulators in USA, Australia & GB to reveal shortly if they support the equity carnage and may well have and continue to engineered it.
5. If regulators protect the secret activities of the hedge funds from law demanding transparency, as longs must provide, then regulators are behind the degree of the CARNAGE from financials to industrials.

Fight, or be a damn lazy, worthless, coward!

1. Email every Bloomberg, Reuters, Financial Times, Herald Tribune, Chinese publication, Russian publication, CNN, CNBC, Aljazera and all news wire reporters (their email addresses are at the bottom of every article written).
2. Email every gold and silver writer because as a group they would take your money and moan daily without taking any action at all.
3. Email every company your are invested in of whatever kind telling management to get off their worthless asses, and get into the fight.
4. Call your elected representatives.
5. Email the regulators by going to their respective web sites and use the “contact us” buttons.
6. Scream holy murder, rape, theft and pillage.

“Let’s hire Greg Hunter as our Lobbyist for Fair Play”

Monty says and only says:

Dear Jim;

From THE WE DO THINGS AND DON’T WANT YOU TO REALIZE IT FILE;

Today’s Financial Times had an article entitled “Fund Heads Voice Short Selling Fears”

The first paragraph said, “Three associations representing fund managers in Australia, The UK and the US have joined forces to warn that their industry would be damaged if market regulators publish detailed information on short selling trading positions.”

What else is there to say? Evidently, the old song refrain…”let the sun shine… let the sun shine in,” is not a favorite of fund industry.

Respectfully yours,

Monty Guild
www.GuildInvestment.com

Posted by & filed under General Editorial.

Dear CIGAs,

The US Dollar will replace the US Dollar come The Revitalized and Modernized Federal Reserve Gold Certificate Ratio, not tied to interest rates, but rather gold value held by the Fed/Treasury versus a measure of international liquidity.

History
(From: http://en.wikipedia.org/wiki/Rentenmark)

The Rentenmark replaced the Papiermark. Due to the economic crises in Germany after the Great War there was no gold available to back the currency. Therefore the Rentenbank, which issued the Rentenmark, mortgaged land and industrial goods worth 3.2 billion Rentenmark to back the new currency. The Rentenmark was introduced at a rate 1 Rentenmark = 1:1012 Papiermark, establishing an exchange rate of 1 United States dollar = 4.2 RM.

The Rentenmark was only an intermediate currency and was not legal tender. It was, however, accepted by the population and effectively stopped the inflation. The Reichsmark became the new legal tender on 30 August 1924, equal in value to the Rentenmark.

The monetary policy spearheaded by Hjalmar Schacht—the Central Banker—together with the fiscal policy of German Chancellor Gustav Stresemann and Finance Minister Hans Luther brought the inflation in Germany to an end.

The Rentenbank continued to exist after 1924 and the notes and coins continued to circulate. The last Rentenmark notes were valid until 1948.

Coins

Coins were issued dated 1923, 1924 and 1925 in denominations of 1, 2, 5, 10 and 50 Rentenpfennig. Only small numbers of Rentenpfennig coins were produced in 1925. A few 1 Rentenpfennig coins were struck dated 1929. The 1 and 2 Rentenpfennig were minted in bronze, with the remaining coins in aluminium-bronze.

Banknotes

The first issue of banknotes was dated November 1, 1923, and was in denominations of 1, 2, 5, 10, 50, 100, 500 an 1000 Rentenmark. Later issues of notes were 10 and 50 Rentenmark (1925), 5 Rentenmark (1926), 50 Rentenmark (1934) and 1 and 2 Rentenmark and dated 1937.

More….

Click image to enlarge

Wikipedia

The Federal Reserve Gold Certificate Ratio is the mechanism of the Rentendollar.

More On the Federal Reserve Gold Certificate Ratio
Author: Jim Sinclair
Posted On: Thursday, August 14, 2008, 7:20:00 PM EST

Why will the effort to call any top in the gold price be a waste of time for the gold-ignorant gurus?

Prior to being reduced to zero percent and then removal from the books, there was a direct link between the value of US Treasury gold held (a fixed price of gold then) as a percentage of the growth of the US money supply. As an example, when the cover was deemed to be 25% that meant that as the money supply expanded the value of gold had to be expanded by 25% as well.

Because the price of gold was fixed, the gold cover clause as this device was known, mandated an automatic change in the Federal Reserve Discount rate in order to depress the demand for funds in the US economic system.

There is an argument that says as the dollar was becoming a primary reserve currency and world trade was growing at record rates, the automatic changes in a monetary system were restraining the true wishes of the Administration and Federal Reserve.

After the demise of the Bretton Woods Agreement, everything financial moved towards a floating non-system. The move away from fixed points towards a fully floating financial system was the process of removal of all financial ALARMS. No longer was there a currency parity rate that when hitting the lower or upper bands rang an ALARM. The concept of financial crisis no longer existed.

The movement of any currency up or down, as the Euro recently did, would have been considered a financial crisis.

We have just witnessed multiple central bank interventions that are accepted by the establishment’s international investment community as a dandy deed in the cover up of other serious systemic weaknesses. As a result, upper and lower bands have been considered and implemented. To benefit the plan, the lower limit of $1.49 will not be defended yet in time the market will. $1.49 is only a point after which no great undertaking of intervention will be applied. Let the apples fall from the tree, if they please, as per today.

There is no return to a FIXED anything, but there is a clear indication of a return to the relationship of floating financial alarms, a marriage between the thesis of Bretton Woods and the floating sins of our Financial Fathers.

The Revitalized and Modernized Federal Reserve Gold Certificate Ratio will be tied to a broad measure of money supply, M3 or another new definition of liquidity.

The gold that the US Treasury has held primarily at the New York Federal Reserve will be valued at market at the time of adoption of this mechanism. Please understand that regardless of the arguments concerning the number of ounces the Federal Reserve/Treasury holds, since it will never be audited, accept what is said as correct.

Now the floating increase or decrease in monetary aggregates will mandate a change in the value of the gold held by the US Treasury.

The US Treasury will never have to buy or sell any gold because vehicles will be created that are immediately traded on exchanges that will speculate on the changes in the broad base monetary aggregate in terms of the gold price. That will serve the needs as the aggregates increase.

This is in fact a public way to view the aggregate change by changing the value of another asset, which is a means of balancing the balance sheet of the USA as it was at the day of adoption.

It is not convertibility. It floats and is not fixed.

When the need is greatest (.52 USDX or $2 Euro)) it will be seen as an acceptable return to a form of disciplined central banks actions. It will be a reinstatement of an alarm mechanism but with parts that float.

The market value of gold on that day will be a pendulum-starting point, not a fixed price. The broad measure of money supply on that day will be 100 on the liquidity index.

Assuming the dollar is at .5200, the adoption of this mechanism could mark the low of the US dollar for this chapter of the financial history of the USA.

There are other items that will have to fall into place if that is to be the dollar saver from a complete Weimar Experience. This is the major criterion for success.

I assume it is January the 14th, 2011 and gold is trading at $1,650 or higher. Then I would assume the price of gold to trade $100 above and below the price of gold on that day according to changes in the liquidity index.

If the USA would like to avoid a Weimar experience in the US dollar this is the key ingredient to preventing that.

The US dollar is headed in the direction of the Weimar Experience in order to satisfy significant financial failures. Some smaller entities will be rescued by Federal Money, exploding the US Federal Budget deficit and putting the weight of more newly created dollars on the inherently weak dollar.

There is a 70% possibility that since central banks have moved to floating currency parities that the modernized and revitalized Federal Reserve Gold Certificate Ratio will follow under the pressure of future systemic and grave financial circumstances.

Posted by & filed under General Editorial.

Dear CIGAs,

They say it cannot occur HERE.
They say it cannot happen NOW.
They Are SO wrong. It is happening here and now!

German Papiermark
From Wikipedia, the free encyclopedia
http://en.wikipedia.org/wiki/Papiermark

The name Papiermark (English: paper mark) is applied to the German currency from the point in 1914 when the link between the Mark and gold was abandoned, due to the outbreak of the First World War. In particular, the name is used for the banknotes issued during the hyperinflation in Germany of 1922 and especially 1923, which was a result of the Germans’ decision to pay their war debt by printing banknotes.

Jim Sinclair’s Commentary

All you need to do is erase the words above “pay their war debt” and replace with the phrases, “compensate failed OTC derivatives and their manufacturers,” and you have the Papierdollar with all the same results both present and forthcoming.

Excerpts from Wikipedia’s article on Hyperinflation:
http://en.wikipedia.org/wiki/Hyperinflation

1. Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money. Either one or both of these encourage inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly.

The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation.

In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money destroying confidence.

2. “Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

* Outright lying in official statistics such as money supply, inflation or reserves.
* Suppression of publication of money supply statistics, or inflation indices.
* Price and wage controls.
* Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
* Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency”

3. In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government. Because people do not want to hold notes that may become valueless, they want to spend them in preference to holding notes that will lose value. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value.

Under this model, the method of ending hyperinflation is to change the backing of the currency — often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleonic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.

4. Since hyperinflation is visible as a monetary effect, models of hyperinflation center on the demand for money. Economists see both a rapid increase in the money supply and an increase in the velocity of money. Either one or both of these encourage inflation and hyperinflation. A dramatic increase in the velocity of money as the cause of hyperinflation is central to the "crisis of confidence" model of hyperinflation, where the risk premium that sellers demand for the paper currency over the nominal value grows rapidly. The second theory is that there is first a radical increase in the amount of circulating medium, which can be called the "monetary model" of hyperinflation. In either model, the second effect then follows from the first — either too little confidence forcing an increase in the money supply, or too much money destroying confidence.

In the confidence model, some event, or series of events, such as defeats in battle, or a run on stocks of the specie which back a currency, removes the belief that the authority issuing the money will remain solvent — whether a bank or a government. Because people do not want to hold notes that may become valueless, they want to spend them in preference to holding notes that will lose value. Sellers, realizing that there is a higher risk for the currency, demand a greater and greater premium over the original value. Under this model, the method of ending hyperinflation is to change the backing of the currency — often by issuing a completely new one. War is one commonly cited cause of crisis of confidence, particularly losing in a war, as occurred during Napoleonic Vienna, and capital flight, sometimes because of "contagion" is another. In this view, the increase in the circulating medium is the result of the government attempting to buy time without coming to terms with the root cause of the lack of confidence itself.

In the monetary model, hyperinflation is a positive feedback cycle of rapid monetary expansion. It has the same cause as all other inflation: money-issuing bodies, central or otherwise, produce currency to pay spiraling costs, often from lax fiscal policy, or the mounting costs of warfare. When businesspeople perceive that the issuer is committed to a policy of rapid currency expansion, they mark up prices to cover the expected decay in the currency’s value. The issuer must then accelerate its expansion to cover these prices, which pushes the currency value down even faster than before. According to this model the issuer cannot "win" and the only solution is to abruptly stop expanding the currency. Unfortunately, the end of expansion can cause a severe financial shock to those using the currency as expectations are suddenly adjusted. This policy, combined with reductions of pensions, wages, and government outlays, formed part of the Washington consensus of the 1990s.

Whatever the cause, hyperinflation involves both the supply and velocity of money. Which comes first is a matter of debate, and there may be no universal story that applies to all cases. But once the hyperinflation is established, the pattern of increasing the money stock, by whichever agencies are allowed to do so, is universal. Because this practice increases the supply of currency without any matching increase in demand for it, the price of the currency, that is the exchange rate, naturally falls relative to other currencies. Inflation becomes hyperinflation when the increase in money supply turns specific areas of pricing power into a general frenzy of spending quickly before money becomes worthless. The purchasing power of the currency drops so rapidly that holding cash for even a day is an unacceptable loss of purchasing power. As a result, no one holds currency, which increases the velocity of money, and worsens the crisis.

That is, rapidly rising prices undermine money’s role as a store of value, so that people try to spend it on real goods or services as quickly as possible. Thus, the monetary model predicts that the velocity of money will rise endogenously as a result of the excessive increase in the money supply. At the point when ordinary purchases are affected by inflation pressures, hyperinflation is out of control, in the sense that ordinary policy mechanisms, such as increasing reserve requirements, raising interest rates or cutting government spending will all be responded to by shifting away from the rapidly dwindling currency and towards other means of exchange.

During a period of hyperinflation, bank runs, and loans for 24-hour periods, switching to alternate currencies, the return to use of gold or silver or even barter becomes common. Many of the people who hoard gold today expect hyperinflation, and are hedging against it by holding specie. There may also be extensive capital flight or flight to a "hard" currency such as the U.S. dollar. This is sometimes met with capital controls, an idea which has swung from standard, to anathema, and back into semi-respectability. All of this constitutes an economy, which is operating in an "abnormal" way, which may lead to decreases in real production. If so, that intensifies the hyperinflation, since it means that the amount of goods in "too much money chasing too few goods" formulation is also reduced. This is also part of the vicious circle of hyperinflation.

Once the vicious circle of hyperinflation has been ignited, dramatic policy means are almost always required; simply raising interest rates is insufficient. Bolivia, for example, underwent a period of hyperinflation in 1985, where prices increased 12,000% in the space of less than a year. The government raised the price of gasoline, which it had been selling at a huge loss to quiet popular discontent, and the hyperinflation came to a halt almost immediately, since it was able to bring in hard currency by selling its oil abroad. The crisis of confidence ended, and people returned deposits to banks. The German hyperinflation of the 1920s was ended by producing a currency based on assets loaned against by banks, called the Rentenmark. Hyperinflation often ends when a civil conflict ends with one side winning. Although wage and price controls are sometimes used to control or prevent inflation, no episode of hyperinflation has been ended by the use of price controls alone. However, wage and price controls have sometimes been part of the mix of policies used to halt hyperinflation.

Hyperinflation and the currency

In times of hyperinflation, gold is a store of value whose value cannot be printed out of existence.

As noted, in countries experiencing hyperinflation, the central bank often prints money in larger and larger denominations as the smaller denomination notes become worthless. This can result in the production of some interesting banknotes, including those denominated in amounts of 1,000,000,000 or more.

* By late 1923, the Weimar Republic of Germany was issuing fifty-million Mark banknotes and postage stamps with a face value of fifty billion Mark. The highest value banknote issued by the Weimar government’s Reichsbank had a face value of 100 trillion Mark (100,000,000,000,000; 100 billion on the long scale).[6] [7]. One of the firms printing these notes submitted an invoice for the work to the Reichsbank for 32,776,899,763,734,490,417.05 (3.28×1019, or 33 quintillion) Marks.[8]

* The largest denomination banknote ever officially issued for circulation was in 1946 by the Hungarian National Bank for the amount of 100 quintillion pengő (100,000,000,000,000,000,000, or 1020; 100 trillion on the long scale). image (There was even a banknote worth 10 times more, i.e. 1021 pengő, printed, but not issued image.) The banknotes however didn’t depict the number, making the 500,000,000,000 Yugoslav dinar banknote the world’s leader when it comes to depicted zeros on banknotes.

* The Z$100 billion agro cheque, issued in Zimbabwe on July 21, 2008, shares the record for depicted zeroes (11) with the 500 billion Yugoslav dinar banknote.

* The Post-WWII hyperinflation of Hungary holds the record for the most extreme monthly inflation rate ever — 41,900,000,000,000,000% (4.19 × 1016%) for July, 1946, amounting to prices doubling every thirteen and one half hours.

One way to avoid the use of large numbers is by declaring a new unit of currency (an example being, instead of 10,000,000,000 Dollars, a bank might set 1 new dollar = 1,000,000,000 old dollars, so the new note would read "10 new dollars".) An example of this would be Turkey’s revaluation of the Lira on January 1, 2005, when the old Turkish lira (TRL) was converted to the New Turkish lira (YTL) at a rate of 1,000,000 old to 1 new Turkish Lira. While this does not lessen the actual value of a currency, it is called redenomination or revaluation and also happens over time in countries with standard inflation levels. During hyperinflation, currency inflation happens so quickly that bills reach large numbers before revaluation.

Some banknotes were stamped to indicate changes of denomination. This is because it would take too long to print new notes. By time the new notes would be printed, they would be obsolete (that is, they would be of too low a denomination to be useful).

Metallic coins were rapid casualties of hyperinflation, as the scrap value of metal enormously exceeded the face value. Massive amounts of coinage were melted down, usually illicitly, and exported for hard currency.

Governments will often try to disguise the true rate of inflation through a variety of techniques. These can include the following:

* Outright lying in official statistics such as money supply, inflation or reserves.
* Suppression of publication of money supply statistics, or inflation indices.
* Price and wage controls.
* Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or something similar.
* Adjusting the components of the Consumer price index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation. Price controls will generally result in hoarding and extremely high demand for the controlled goods, resulting in shortages and disruptions of the supply chain. Products available to consumers may diminish or disappear as businesses no longer find it sufficiently profitable (or may be operating at a loss) to continue producing and/or distributing such goods, further exacerbating the problem.

More…

Posted by & filed under General Editorial.

Dear CIGAs,

The following article is brought to you by CIGA Greg Hunter.

The Madoff Sideshow
By Greg Hunter 1/7/09

A friend of mine, who is a crack investigative producer, just got a gig with a major network. His new job will be to cover the Madoff story. There is no doubt this is a big story and in the press been called the “crime of the century.” Madoff is a self proclaimed fraudster who puts a face on the Wall Street “banksters” as in gangsters with brief cases instead of Tommy Guns. But for most Americans this story will be nothing more than tragic theatre. This story’s outcome will not matter to those in or headed for financial ruin.

The real story is what’s going on over at the Treasury, Federal Reserve and Congress. This trio has already spent, “loaned” or committed 8.5 trillion dollars to the economic problems plaguing our country. It appears the carnival of money printing is nowhere near ending. Now, there is even talk of another government bailout for the people who were ripped off by Madoff. This plan proposes to recapitalize SIPC, the Securities Investor Protection Corporation, with 15 billion dollars to augment its paltry 1.5 billion dollar insurance pool to protect investors. I guess 1.5 billion does not go very far when the pool of cheated customers is 50 billion dollars deep. Where do all these bailouts stop? America, in my view, has gone from a capitalistic society to bailout nation in little more than a year.

The Federal Reserve is in the process of bailing out the nation through a series of “lending facilities.” The TAF, TSLF, MMIFF, TALF and PDCF are the acronyms that are funnelling money to everything from banks to brokers to money market funds and even select hedge funds. None of these “lending facilities” were around little more than a year ago. All of this bailout activity adds up to more than 2 trillion dollars and is being done in secret without the public knowing who gets money for what! The latest facility to be added to the bailout bucket is provided by the Treasury and is called the TIP or Targeted Investment Program. This one is for “Citi-style” rescue programs. The government is clearly ready to bail out just about any business that issues a W-2.

Add all these “programs and lending facilities” together with the bailout of GM, Chrysler, AIG, the monetization of billions of mortgage debt from bankrupt Fannie Mae and Freddie Mac, along with the upcoming Obama stimulus package, and some people are getting worried about a little prosperity killer called inflation. In a few years, most people will not remember the Madoff story but will be living or surviving some pretty big price increases in just about everything they consume. In the end, it will all come down to a crisis in the dollar because just like Madoff it will no longer be trusted.

There is only one alternative to the dollar
By David Hale
Published: January 5 2009 19:01 | Last updated: January 5 2009 19:01

The great challenge confronting the foreign exchange market at the start of 2009 is finding a good alternative to the US dollar. One of the ironies of market events during 2008 was that the US financial crisis produced a flight to safety in the dollar. The dollar erged triumphant from a financial debacle that centred on $1,300bn (€960bn, £890bn) of subprime US mortgage loans. The fallout has triggered a $32,000bn decline in global stock market capitalisation and driven all the Group of Seven leading industrialised countries into recession.

The dollar slumped against the euro during the final weeks of 2008 but fears about the financial system still drove US Treasury yields down to zero on three-month paper and less than 2.1 per cent on 10-year notes. This fear factor is likely to sustain demand for the dollar during the early months of 2009.

There is not now a clear alternative to the dollar because all big economies have slid into recession. Real gross domestic product could contract by 1.5 per cent in both the US and Europe during 2009 and by as much as 2.5 per cent in Japan. The decline in world trade and commodity prices will also reduce significantly the growth rates of the emerging market economies. South Korea and Taiwan are already in severe slumps. The growth rate of China could halve.

The US economy could be the first to emerge from recession this year because it appears to be headed for a far more aggressive macroeconomic stimulus programme than any other country. Barack Obama’s administration will announce a $700bn-$800bn multi-year fiscal package focusing on cuts in payroll taxes, aid to state and local governments and infrastructure investment. The Federal Reserve is also engaging in a programme of unprecedented monetary stimulus. It has slashed its core lending rate to zero and tripled the size of its balance sheet since August. Ben Bernanke, the Fed chairman, has also stated his willingness to engage in further large liquidity injections to buy mortgages, consumer loans and government securities. Mortgage rates have recently eased to 5.1 per cent after remaining above 6 per cent during the past year.

The European response to the recession has been far less aggressive. The European Central Bank is still under the influence of the Bundesbank and will ease monetary policy far more gradually than the Fed. Some Bundesbankers are opposed to cutting interest rates at this month’s meeting. The ECB policy could produce political tensions because interest rate spreads on Greek and Spanish bonds have risen sharply compared with German bonds. Japan’s government has been announcing modest fiscal policy changes but it cannot act decisively since it no longer controls the upper house of the Diet. And an election, before September, could produce a change of government.

More…

Posted by & filed under General Editorial.

My Dear Extended Family,

Today may set the record for emails sent to you on key subjects.

I am writing to you from Africa and it is quite late here.

In the now 50 years of my career, I have never seen so many subjects in one day demanding immediate clarification.

It is my joy to serve you.

Respectfully yours,
Jim

If you are currently not receiving JSMineset emails and would like to, enter your email address in the Join Our Mailing List box in the top right corner. Our emails are purely informational and we do not sell our list to ANYONE. You can opt out at any time if you no longer wish to receive notifications.

Posted by & filed under General Editorial, Trader Dan Norcini.

Dear CIGAs,

In relation to the story Jim brought to your attention earlier about the Fed monetizing US agency debt…

The reason they are being forced into buying the debt is because no one else wants it. We have been charting this for some time here at the site by monitoring the Custodial data from the US Federal Reserve system.

I am attaching the chart for you all to review so you can all once again see how foreign Central Banks are dumping Fannie and Freddie debt in large amounts onto the market. Without the Fed monetizing that debt, there would be a significant drop off in the amount of funds for mortgages. I expect this week’s data to show no change in the liquidation of this agency debt which has now reached a total of $167 billion and is rising.

The Fed is going to need every bit of that $500 billion they are going to create out of thin air to acquire what the foreign Central Banks are unloading.

Best wishes from your pal,
Trader Dan

Click chart to enlarge today’s Agency Debt chart in PDF format with commentary from Trader Dan Norcini

AGency debt chart - Custodials.jpg

Posted by & filed under General Editorial.

Dear CIGAs,

Here is the other "WHY" gold was sold down today.

The truth will set you free of the manipulators.

$25,000,000,000 of index commodity funds follow the index readjustments made herein.

Gold is REDUCED from 10.8 to 7.9 percent of the index which therein causes related selling by INDEX FUNDS.

Buying or selling by index funds is a yearly, onetime event. These adjustments are needless artificial buying and/or selling of specific commodities that skew market prices and produce opportunities both to buy and sell short.

You think reweighting is a product of a hands off process in today’s rotten to the core world? You probably also believe in Santa Clause.

Beware, commodity index rebalancing ahead
Posted by Izabella Kaminska on Jan 05 15:34.

The major commodity indices rebalance their respective asset weightings once a year (or occasionally more) — and with that comes a mass dose of buying and selling. The 2009 rebalancing is expected to start sometime this week.

Luckily, JP Morgan has produced its best guess of how the 2009 reweightings of the DJ AIGCI and the S&P GSCI indices will impact the market.

The weightings for both indices are released ahead of time, but begin to kick in the first few working days of the new year. In the case of the DJ-AIGCI — which JP Morgan estimates has $25bn in funds tracking it — the new weightings come into force during the roll period that begins January 9th. The S&P GSCI index weightings kick-in after its January roll which commences January 8th. JP Morgan estimates about $50 bn of investment into that index.

As the DJ weighting multipliers account for changes in US dollar-denominated values there is generally more potential for large changes there than in the GSCI, whose weightings are set in terms of ounces/tonnes (on the basis of liquidity and are weighted by their respective world production quantities).

Accordingly, JP Morgan see the most significant change coming in the DJ-AIGCI rebalance. Here the market weight of crude oil is expected to increase from 9.6 per cent to 13.8 per cent, gold from 10.8 per cent to 7.9 per cent, copper (COMEX) from 4.5 per cent to 7.3 per cent, live cattle from 6.4 per cent to 4.3 per cent and sugar from 4.7 per cent to 3.0 per cent. Meanwhile, S&P GSCI crude oil weight will go from 32 per cent to 33.8 per cent. Their analysis:

In financial terms, we expect the rebalancing to have the greatest impact in gold, COMEX copper, crude oil, gold, and live cattle. We estimate that the rebalancing of the two indices is expected to result in $877 million of selling in gold, $699 million of buying in COMEX copper, $528 million of selling in live cattle, and $523 million of buying in crude oil.

More…