Posted on 05/19/2010 12:10:08 AM PDT by DontTreadOnMe2009
It appears that the German Government has just plain had enough of the crap that the banksters have tried to pull, and has decided to do what Barack Obama should have done in early 2009.
That is:
No more naked credit crap, especially against sovereigns but not only against sovereigns. No insurable interest, no CDS - period.
Naked shorting will now be actually stopped in 10 leading financial institutions.
Germany has had it with naked shorting of Gold, and specifically noted bank manipulation of gold prices via naked shorts beyond intent or ability to deliver.
(Excerpt) Read more at market-ticker.denninger.net ...
He concludes by saying:
It is illegal to defraud people.
It is illegal to rig markets, including the massive bid-rigging that I wrote about this morning, the Jefferson County Alabama scam and dozens if not hundreds more - all committed, it is alleged (and in some cases proved) by the major banks.
It is illegal to short stocks with no intention or ability to deliver.
And it is illegal to bribe government officials, no matter how you accomplish it.
These are not "isolated incidents" or even a pattern of conduct - as the bid-rigging report this morning makes clear ripping people off has become an institutionalized practice and policy throughout the entire banking system.
No good will come of them screwing with the markets.
These are socialists doing it - they know nothing about business.
I’ll have to rummage around and see where he’s getting this stuff about gold. It spiked hard early today but gave it all back and then some. Not the sort of action we’d see if a whole lot of shorts were forced to cover as a matter of law.
Especially when you STILL the markets to lend you (and EU) trillions upon trillions. A few rumors, combined with some grudge and you’re out.
You got that right. Some tweaking might be in order but this is dangerous.
What I would suggest is the firing squad for anyone that was party to corrupt trading, say, for anything over $1 billion. Life in jail under that.
They can start with Standard and Poor's and Moody's execs for their fudging the mortgage bond ratings to keep their commissions flowing.
If Mr. Obama even thought of doing this George Soros and his ilk would have him in Ft. Leavenworth or on a slow boat to Kenya before you could say Nikita Krushchev!
Are you suggesting naked shorting is ok? And making it illegal is somehow a socialist act?
Do you know what naked shorting is?
‘Germany has had it with naked shorting of Gold,....’
How does this work with the commodities market? What, no more selling Puts?
Working and inspired people are enslaved by socialism and ‘let-my-money-work’ do nothings. We need to get both into a situation where they can only succeed with products in a market.
A naked short sale is ment as an insurance - not as a source of transferring huge ammounts of states money into a small number of accounts of people that didn’t create an advantage for anyone.
We need rules for a society that lets entrepreneurs and business men get real rich.
No the do-nothings of both sides of the society.
Well it’s about beeing naked and something short and I think selling it is not ok.
I seem to recall the a “Naked Short” is a market trade where the person offering the trade doesn’t even own the stock being shorted. Even though they are supposed too.
It’s sort of like going to a yard sale and they have this Xbox 360 for $50.00 bucks. And they had acquired it by breaking and entering somebody’s house and “borrowing” it for the purpose of selling it to you.
Is this correct?
It is a funny “picture” but if Zero ever tried to get off his knees he would get a bullet in the head so fast...
In a way I kinda feel sorry for the dumb b@st@rd, he is possibly the biggest “prisoner” in the entire scheme. The “deal with the devil” he struck got him AF1 and a big sandstone house painted white but that and a teleprompter is about it. Oh, and apparently the Secret Service to pimp for him. (Boy, that story went down the memory hole fast, didn’t it?)
The markets are screwing with us. A CDS is basically an insurance policy written against a specific risk. If I am buying a certain bond and I want to insure it against defaulting, not a problem as long as I insure it for what it’s worth and do not try to bring about the very event I am insuring against, ie I take out a million dollar policy on the, i shouldn’t do anything that will increase my odds of collecting. If I get caught do it I go to jail.
Insurable interest is a basic tenant of the insurance industry. You can’t take out a policy on your neighbor’s home because you don’t own it. If this was allowed, there’s a moral hazard in that you paid a small premium and now stand to reap a windfall. The potential risk of you burning your neighbor’s house is too great to allow a free market in insuring other people’s homes and lives. Same thing with insuring against currency risks that you don’t have. You can trigger a crisis by jacking up the insurance rates and making it appear a crash is imminent.
This is pure gambling with the advantage being given to the gambler in allowing him to take an advantage against the house by changing the dice before the roll.
Now this action will not save the Euro in the long. However it will slow down it’s eventual disintegration thereby preserving the dollar for a while.
A word on naked shorting. In the market shorting a stock is completely legitimate. You borrow the stock and then sell it to another buyer. The stock goes down you have a profit after you buy it back and cover your short. If it goes up, you have a loss when you buy it back to cover your short. In addition you pay a fee to the party you borrowed the stock from. The problem is when the banksters dispense with the step of borrowing the stock. They simply sell something they don’t have. This has the potential to distort the price of the security in question. It is possible to have many times the number of shares of a stock sold short than actually exist. If you believe that stock pieces are set mostly by supply and demand, how can artificially increasing the supply of a stock not depress the security’s price and effectively manipulate the market thereby cheating Investors?
I believe in free markets, but you must have certain rules in place to assure they remain free and fair. Insurable interest and banning naked shorting do that.
As far as gold and silver go they are among the most manipulated markets. The exchanges pretend to possess a certain amount of the metals to back up each trade. When someone buys a gold futures contract, he is buying the right to take delivery of 100 ounces of gold at certain price at a certain time in the future. If everyone tries to take delivery at once in the future, these markets will not be able to deliver and will violently crash and burn. In a recent hearing a major player admitted that they have one percent backing for these contracts. Actually the number I’ve heard is one one for every 170 ounces traded. Therefore the market isn’t really trading on gold as there is no possible way it can deliver if participants exercised their right to take delivery. This is the very essence of a confidence game. If the players lose confidence the market will cease to exist. Much like our fractional reserve banking system. So, the precious metals markets are not really metals markets at all, but they are rather places that people and mostly banks go to place bets on the future value of these metals. Once there is no metal backing the trades, naked shorting comes into play. JP Morgan and HSBC can come in and write an almost unlimited number of shorts to slow down or even decrease prices. They never have to deliver so what’s the harm. The harm is that the paper market is setting the price for actual metal. And the banks have these huge unsustainable short positions that many say they have done at the behest of the government. Eventually these shorts will become due when there is a loss of confidence in the markets ability to deliver. That day will be here soon. These markets will be exposed as little more than high stakes casinos backed up by nothing but air.
Thank you for the great info and insight.
Question:
When this mess happens, what will happen to the price of gold and silver ?
Long range, what will the VALUE of gold and silver be ?
(I’m talking about ‘in-hand’, real coins and bullion)
Shorting a security means by definition that you don’t own it when you sell it. Instead, your broker finds some of that security to borrow and sells that instead.
Now, of course there’s more to it: The broker has to be in a position to replace that borrowed security at any time; so he requires you to keep enough liquid funds in your account with him that he can immediately purchase and replace, with those funds, the securities that he borrowed. Of course, the first part of the funds in your account are the proceeds from the short sale itself.
If the security moves against you (i.e, if it goes up), your account balance with the broker may no longer cover the purchase of the security at current prices. If that comes close to happening, you’ll get what is in effect a margin call from your broker asking you to pay more into the account. If you can’t or won’t do that, he will cover himself by closing out your position, taking the balance of your account, buying the security at the (now elevated) market price, and repaying the source from which he borrowed the security, in kind.
A “naked” short, if I am not mistaken, can be undertaken by a large trader such as a bank, where they do not have funds specifically sequestered to cover their short position. Why this is allowed, I have no idea.
Name one thing that is better because the government got involved.
Reverse the question: do you even know what our government does and is doing?
Thank you for selling the left the rope they’re going to use to hang us...
very good explanation, but “They never have to deliver so what’s the harm” this is wrong. They may have to deliver.
this is different than a Credit Default Swap. JPM and Company are shorting gold in such volume in order to decrease prices. When you are borrowing a 0% interest, what does time matter.
Let’s say you owned a company that had 1,000,000 shares outstanding and they sold for $10 each; thus a $10,000,000 capitalization. Now let’s say Mr. Badshorter thought it would be a good idea to sell 5,000,000 shares of your stock even though there were only 1,000,000 outstanding.
What will happen to your company’s value? Do think that should be allowed?
So in your view, Fascism is okay? (As long as it’s done “for the common good” - which basically means they can do anything they want.)
Got it.
The left needs more people like you. :)
I’m willing to bet that if I looked at German law, I would discover fraud, theft and false advertising are already illegal.
But hey, since those laws aren’t working we just need more laws. :)
I don’t know what the heck you are talking about. Fascism? Just because a country bans selling stock you don’t own?
Get a clue, dude.
FYI - naked shorting of equities is illegal in the US.
It only matters if a large percentage of contract holders decide to exercise their contracts and take delivery of their gold/silver. Right now there are contracts for 60 million ounces of gold, which theoretically could be exercised. At current prices, that gold is worth 72 billion. But if 10000 people exercised their contracts, that would mean they would have to come up with 1million ounces. They don’t have it. At most they have to come up with 400k ounces in a day. Now they have the option to settle in cash, but this would cause gold to sky rocket and the paper market would no longer set the price. It would be the mother of all short squeezes. The remaining 590k contracts would now be worth around 350 billion if the price of gold shot up to 5000. Now that would put a hurt on JP’s balance sheet and would necessitate a government bailout.
Now not every one of those 600k contracts is unhedged or naked. Some are spread trades where the owner is long and short at the same time. But most are not. And eventually they will have to pay the piper. The situation is even worse in silver. This is not a question of if, but rather when. My own personal belief is that the meltdown will begin with silver and spread to gold. It is inevitable. Fractional reserve schemes always fail.
Jim Sinclair who has forgotten more than I will ever know says gld 1650 by the end of the year. 5000 to 10000 after the implosion of comex is possible. This is going to be a big bang. Everyone with any money will be begging sellers to take their paper for gold. It will be a mania.
But silver has the biggest potential. 30 years ago there was 10 times more silver above the ground than gold. Now there’s three times more gold than silver above the ground. The US mint is selling Over 2million silver eagles per month. So I believe that the gold silver ratio will fall from the current 60 plus back to the traditional 16 to 1. So if gold hits 5k, silver could hit 750. There’s going to be a major panic. Get ready.
I don’t know what statement you are responding to. I made a comment about equities and you are talking about commodities.
Just saw what you were responding to.
Thanks
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