22 July 2015

Free Markets At Work - Gold and Silver 'Owners Per Ounce'

"The government is the potent omnipresent teacher. For good or ill it teaches the whole people by its example. Crime is contagious. If the government becomes a lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.

To declare that the end justifies the means -- to declare that the government may commit crimes -- would bring terrible retribution."

Louis D. Brandeis

I was curious to see what the big price smackdown had done at The Bucket Shop relative to the 'claims per ounce' in the precious metals.

I will be checking again tomorrow to see what the little extra kick we saw this morning might have accomplished.

In summary in silver the 'claims per ounce' actually rose a bit. This is not surprising so much because this is an active month for silver, and it clings stubbornly, almost as if by its fingertips, to the $15 handle.

Gold was as you know hit harder, being smacked down by an avalanche of futures contract selling into one of the quietest periods of the overnight trade.

The open interest actually declined a bit, but significant amount of new gold for delivery appeared, so the 'claims per ounce' as I prefer to call it dropped only to about 97:1.

They did, however, break the uptrend which had been driving towards 100:1.

Have you ever heard the rarely told story from the great bull market of the 1920's, about an unremembered  'publicist,' which is a five dollar word for a simple 'bagman,' named A. Newton Plummer?
'An investigation later discovered that business journalists for at least eight papers promoted stocks in their writing in return for bribes. The most embarrassing were at the Wall Street Journal, where reporters who wrote “Broad Street Gossip” and “Abreast of the Market” took payoffs for stock tips in the 1920s.

The revelations about the Journal reporters came out during hearings by the Senate Banking and Currency Committee in 1932, more than three years later, when Congressman Fiorello LaGuardia produced cancelled checks written to the Journal reporters from publicist A. Newton Plummer. The stories based on the bribes had gone as far back as 1923. The Journal ran the story about the testimony before the committee on page 11 the next day.

University of North Carolina, History of Business Journalism
We are very fortunate that such a thing could not happen today.  Can you imagine any self respecting analyst or media type or politician accepting physical checks?  In our modern era it would be much more likely to be hot tips on which way the HFT wind will be turning, or some drinks and dinner, maybe even hookers and blow. The only risks there might be some nasal cartilage or some extra time at the gym.

A. Newton Plummer apparently presented a whole suitcase full of cancelled checks to the Congress in 1932, and wrote a book about it titled The Great American Swindle Incorporated.   There were only 2,000 copies printed.   There is one in my library.

"I would say that practically all the financial journals were on the take. This includes reporters for The Wall Street Journal, The New York Times, The Herald-Tribune, you name it. So if you were a pool operator, you’d call your friend at The Times and say, “Look, Charlie, there’s an envelope waiting for you here and we think that perhaps you should write something nice about RCA.” And Charlie would write something nice about RCA. A publicity man called A. Newton Plummer had canceled checks from practically every major journalist in New York City."

Robert Sobel in PBS, The Great Crash of 1929

Of course with so many other innovations in finance, the information sharing culture of privilege has moved from the inkstained cubicles of 'journalists' to the hallowed halls of the Congress.  This was the most read story of all time at Le Café when first published.   

And since then you will be happy to know that the Congress has officially told the SEC to go take a hike, that they are immune to any laws against insider trading and dealing in dodgy information, apparently even for 'pay.'  There is even a cottage industry of lobbyists who share information with the Congress on behalf of hedge funds.  Nice to see entrepreneurship at the lower levels who can never expect to bring in the big bucks making 'appearances' and giving 'speeches' for fabulous fees.

The precious metal pool operators can surely make some nice profits on their short bets on related items after their latest escapades, and then acquire quality mining assets on the cheap for the next trip up when you know what hits the twirling blades, thanks to their servants' gross mismanagement and policy errors.

Well done.

So many assume that the 'rig' in the metals is similar to the London Gold Pool and past operations that were undertaken in order to support some otherwise unsustainable policy and persuasion initiative.  
What if something like this started out that way, but then found its momentum in some mutually lucrative private profiteering that proved too easy and tempting and perhaps inconvenient to stop?  It certainly has been hard of late to overestimate the self-serving venality and audacious excesses of these jokers.

When you don't know, you don't know.  And that is how they seem to like it, what 'it' is.  In a society not of reason and laws but of secrecy and privilege, knowledge, like the ability to print and distribute money, is power.