Mish today on paper vs physical....
mariner67
Posts: 2,746 ✭✭✭
"Any time you see articles promoting the difference between physical gold and paper gold you are most likely reading a pile of crap."
http://globaleconomicanalysis.blogspot.com/2015/08/reader-question-is-gold-manipulated.html#fHIHzDhWr6GEXJDe.99
http://globaleconomicanalysis.blogspot.com/2015/08/reader-question-is-gold-manipulated.html#fHIHzDhWr6GEXJDe.99
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Saw that when he posted last night and immediately emaied him my views. While I hold a lot or respect for Mish, his thesis this time is flawed. As stated in his post, his definition of "physical gold" includes the likes of GoldMoney and Bitgold, while those writing the "crap" articles he refers to are speaking of gold in your hand, not in someone else's. Your gold in someone else's hands (or vault) is still a paper promise until they honor that promise by delivering it to you. There is never a shortage of promises. Note that GoldMoney buys ad space on his site and that he has promoted both of them in the past in his writings.
"Interest rates, the price of money, are the most important market. And, perversely, they’re the market that’s most manipulated by the Fed." - Doug Casey
lol. That's some hardcore analysis there.
I knew it would happen.
<< <i>"Any time you see articles promoting the difference between physical gold and paper gold you are most likely reading a pile of crap."
lol. That's some hardcore analysis there. >>
It is mired in fact , though.
We know they're (paper gold and physical) nothing like each other. I'll take a pound of gold over a pound of print.
how can one read, but not actually read???? Don't know...
And how about gold otc derivatives? How have they been doing? Any manipulation there like silver and commodities? Well we don't know any more. The recent financial restructuring by the BIS/Basel 2/Dodd Frank, etc. now places gold into a tier 1 asset. So it now has to appear on OCC reports with currency derivatives. Gold used to be reported separately. No problem right? The numbers are technically still there. Well, considering forex derivatives are 30X larger than gold ($30 TRILL vs. $100 BILL), we won't have any clue if gold derivatives went up 2X, 3X, 4X or even 6X to match the 2008 record of $650 BILL (3-4 years of world production). Gold is now just background noise in OCC charts. Nope...nothing to see here Mish. Ask Mish where he keeps his own gold and silver, and whether it's paper or physical.
If such paper positioning is normal "market dynamics", legally allowed, and irrelevant as the leading fiat bugs seem to state, then show me comparable positioning in other major financial sectors. Hey, the CFTC spent 5 years investigating JPM's positioning in the silver market from 2004-2014. They didn't find a thing wrong. In fact, they've never found any wrong-doing in gold and silver markets. Yet other regulators around the world have routinely found massive manipulations in currencies, interest rates/libor/bonds, stocks, etc. But none of those guys would DARE to do it with gold or silver. Now that I think about it, there was one SEC/CFTC action in the gold or silver markets years back. Morgan Stanley was running a PMs fund for investors and vaulting the metal for them at a fee. It later turned out they had no metal at all and were just collecting fees. They received a piddly fine & wrist slap and moved on to bigger things...such as approx $50 TRILL in otc derivatives.
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I knew it would happen.
<< <i>98% of the time, it looks foolish to buy physical bullion instead of playing with paper contracts. >>
It depends on what the person values. If they're trying to simply make an easy profit, or book a loss, gambling with a paper version is the most efficient.
If one enjoys forming a collection of artistic and historic objects, for wealth preservation, asset allocation/diversification, and financial insurance policy (i.e "SHTF" or "black swan" scenarios) then physical is by far the smarter choice (although I'd estimate the probability of actually using it for that last one, as I define it [TEOTWAWKI] as far far less than 2%, more like 0.00002%)
Liberty: Parent of Science & Industry
M1+M2+M3+M4 x D(derivatives) squared plus I(interest) x DC (digital currency not yet accounted for) - CD (currency destroyed by fire) / Pi to the 56th power, check those numbers again...
<< <i>I think you are a little of on the 4zero2 fractional percentage...
M1+M2+M3+M4 x D(derivatives) squared plus I(interest) x DC (digital currency not yet accounted for) - CD (currency destroyed by fire) / Pi to the 56th power, check those numbers again... >>
No need to create numbers or formulae. You can find them all here in the quarterly OCC reports which reflect "unmarket dynamics" or Bizzarro world economics. Enjoy.
OCC data
Credit risk is a significant risk in bank derivatives trading activities. The notional amount of a derivative contract is a reference amount that determines contractual payments, but it is generally not an amount at risk. The credit risk in a derivative contract is a function of a number of variables, such as whether counterparties exchange notional principal, the volatility of the underlying market factors (interest rate, currency, commodity, equity or corporate reference entity), the maturity and liquidity of the contract, and the creditworthiness of the counterparty.
Credit risk in derivatives differs from credit risk in loans due to the more uncertain nature of the potential credit exposure. With a funded loan, the amount at risk is the amount advanced to the borrower. The credit risk is unilateral; the bank faces the credit exposure of the borrower. However, in most derivatives transactions, such as swaps (which make up the bulk of bank derivative contracts), the credit exposure is bilateral. Each party to the contract may (and, if the contract has a long enough tenor, probably will) have a current credit exposure to the other party at various points in time over the contract’s life. Moreover, because the credit exposure is a function of movements in market factors, banks do not know, and can only estimate, how much the value of the derivative contract might be at various points of time in the future.
Measuring credit exposure in derivative contracts involves identifying those contracts where a bank would lose value if the counterparty to a contract defaulted today. The total of all contracts with positive value (i.e., derivatives receivables) to the bank is the gross positive fair value (GPFV) and represents an initial measurement of credit exposure. The total of all contracts with negative value (i.e., derivatives payables) to the bank is the gross negative fair value (GNFV) and represents a measurement of the exposure the bank poses to its counterparties.