Tavakoli: How to Corner the Gold Market

[thriftyandboringinohio]

Re: Tavakoli: How to Corner the Gold Market

Fascinating.

While Ms. T tells us this is similar to the plan the Hunt brothers used attempting to corner the silver market, we should bear in mind that they ultimately failed and their investing partners were wiped out.

As I recall, some of those investors sued the Hunt brothers about their losses. The Hunt brothers won using the infamous "Bunky Hunt Defense" -that the entire scheme was so absurd on its face that no reasonable person had any right to expect the plan to succeed. That defense prevailed; the investors remained empty-handed and had to pay their lawyers, too.

If Ms. T is telling us someone is doing this again (in the gold market), one might expect the same outcome.

[jtabeb]

Re: Tavakoli: How to Corner the Gold Market

What Tavakoli is saying is much less interesting that why she's saying it.

THAT is the observation of the the day.

[Fiat Currency]

Re: Tavakoli: How to Corner the Gold Market

The point here is that I don't find anything particularly contentious about her claim that the role of the gold etf's is to cut the ground from underneath gold as the anti-matter to money (i.e., debt) creation by imposing on it a version of fractional reserve accounting.

This is what I've told my friends for years. If you are buying physical gold - then also buying the GLD ETF is simply undermining your position.

One or the other. Not both. Others may surely disagree, but for me it's physical or nothing.

[gnk]

Re: Tavakoli: How to Corner the Gold Market

I think it's important for those that have not, to read the full article written by Janet T. It's a lot more nuanced:

http://www.tavakolistructuredfinance.com/Gold.pdf

My questions, for those that are following this:

Who is "you" that she is referring to?

Some hints:

Get 　to 　know 　as 　many 　hedge 　fund 　buyers 　as 　possible, 　and 　encourage 　everyone 　to 　buy 　physical 　gold. 　　Remove 　the 　gold 　from 　custodian 　banks, 　and 　stash 　it 　in 　a 　vault 　solely 　under 　the 　control 　of 　the 　hedge 　fund. 　　Use 　your 　network 　of 　people 　with 　net 　worth 　of 　$1 　billion 　or 　more 　to 　get 　them 　to 　buy 　gold, 　too. 　　Then 　work 　on 　the 　"small" 　investors 　with 　only 　$100 　million 　or 　more 　net 　worth. 　　Keep 　the 　key 　decision 　making 　group 　as 　small 　as 　possible 　to 　make 　it 　harder 　for 　anyone 　in 　your 　group 　to 　try 　to 　back 　out. 　
. 　

(sorry for the poor formatting - I copied from the pdf link above)

Ultimately, "you" becomes a rather large group. But using the pareto rule, only a handful are truly "in the know."

The only persons capable of this are Soros, Paulson, Sprott, maybe some Arabs that got burned with their US banking investments/failed bailouts?

Either way, here's my tinfoil view: Gold is already a defacto world (reserve)currency. Every serious central banker in the world already knows that the US Dollar reserve paper standard is about to collapse. It's a mathematical certainty.

The transition can be rather violent and fast, or gradual. Obviously a quick violent transition makes for the most profits. Thus, Financial NGOs (hedge funds, investor Giants, etc...) will force the transition in a krakatoa type event (I'm borrowing jtabeb's technical term here).

The Hunt's endeavor differed. Silver is not hoarded by CBs, and the dollar still had legs and room for debt growth in the 1970s. It's different now. We reached peak credit.

[newnewthing]

Re: Tavakoli: How to Corner the Gold Market

What Tavakoli is saying is much less interesting that why she's saying it.

Indeed!

Familiarity with Tavakoli's writings provides some clarity. She reflects Buffett's concern re financial derivatives writ large.

[radon]

Re: Tavakoli: How to Corner the Gold Market

This is what I've told my friends for years. If you are buying physical gold - then also buying the GLD ETF is simply undermining your position.

One or the other. Not both. Others may surely disagree, but for me it's physical or nothing.

I guess I'm one of them. I don't own GLD but I can think of plenty of reasons for buying or selling it,or any PM ETF for that matter, while holding onto physical gold. Not the least of which is that you can buy and sell large amounts of GLD quickly and with low overhead. Not all your PM positions need to be long term.

[radon]

Re: Tavakoli: How to Corner the Gold Market

Indeed!

Familiarity with Tavakoli's writings provides some clarity. She reflects Buffett's concern re financial derivatives writ large.

Then why go to the trouble of publishing a completely unworkable scheme to somehow demonstrate the paper market is collapsing. Unless this is a use of sarcasm to show why the paper market cannot blow up, it really doesn't help her credibility.

Who are you getting the margin from? Who holds the shorts you want to blow up? Who else is going to lend you the money? How can anyone expect that you will be able to borrow the billions dollars with the help 100s of people to pull this of without anyone noticing. The whole plan is so unworkable it borders on comedy.

On a side note after reading that story I walked down to my local bank yesterday and asked to borrow 50 million dollars to speculate in the gold market. The entire department fell out of their seats laughing. One of the loan officers had a heart attack. After that, they threw me out.

[radon]

Re: Tavakoli: How to Corner the Gold Market

Every serious central banker in the world already knows that the US Dollar reserve paper standard is about to collapse. It's a mathematical certainty.

Certainty or not, collapse is a strong word. If you are trading on the dollars demise you will need to be able to wait a long time.

[gnk]

Re: Tavakoli: How to Corner the Gold Market

Certainty or not, collapse is a strong word. If you are trading on the dollars demise you will need to be able to wait a long time.

We print Treasuries to roll over our debt (old Treasuries), we print money to buy our (new) Treasuries.

If (when/as) rates go up, we accelerate the process above. Makes sense, right?

I give it two-five years.

[medved]

Re: Tavakoli: How to Corner the Gold Market

Fascinating.

While Ms. T tells us this is similar to the plan the Hunt brothers used attempting to corner the silver market, we should bear in mind that they ultimately failed and their investing partners were wiped out.

As I recall, some of those investors sued the Hunt brothers about their losses. The Hunt brothers won using the infamous "Bunky Hunt Defense" -that the entire scheme was so absurd on its face that no reasonable person had any right to expect the plan to succeed. That defense prevailed; the investors remained empty-handed and had to pay their lawyers, too.

If Ms. T is telling us someone is doing this again (in the gold market), one might expect the same outcome.

Hunt bros. scheme went against the gov't. Current gold scheme helps the gov't. It will never be blown up the way silver scheme was. The problem is, the gov't and its cronies are mistaken. They are not bigger than the physical gold market. Eventually, they will fail, but it will take quite some time. In the meantime the paper gold market behavior will remain just as predictable as it was in the last 10 years.

[jtabeb]

Re: Tavakoli: How to Corner the Gold Market

On a side note after reading that story I walked down to my local bank yesterday and asked to borrow 50 million dollars to speculate in the gold market. The entire department fell out of their seats laughing. One of the loan officers had a heart attack. After that, they threw me out.

I am sorry you had that experience, some people have no vision. I went to my local bank last year and asked for $50,000 to speculate in the gold market, instead, they said that since they were TARP reciepients, that they could lend me $50 Billion. So I took the loan and the rest, is as they say, history. (Try another bank would be my advice, specifically one that GOT TARPED)

Disclaimer: (The above was meant as sarcasm and should not be taken as the literal description of past events;))

[Sharky]

Re: Tavakoli: How to Corner the Gold Market

You might want to have a look at Tavokoli's original newletter; it looks like the Huffington Post version was edited slightly:

http://www.tavakolistructuredfinance.com/Gold.pdf

[jtabeb]

Re: Tavakoli: How to Corner the Gold Market

You might want to have a look at Tavokoli's original newletter; it looks like the Huffington Post version was edited slightly:

http://www.tavakolistructuredfinance.com/Gold.pdf

Oh, I read the WHOLE thing. And if you don't think that Soros can do something exactly like this, well, I'll just say
"Ejection from the Exchange Rate Mechanism".

Ring a bell?

It should. He's done it before, AND WON.