Stocks and Precious Metals Charts - Quiet Comex Option Expiration - Bitcoin, the Mania

The rebound for gold and silver off the lows associated with the recent Non-Farm Payrolls and FOMC continued with gold taking and holding 1280 and silver putting a stick in the ground above 16.50.  I lightened up on a largish short term position I had put on at the time.  I did circle these instances of short term lows on the chart as you may recall.

As noted with the publication of the new Comex options calendars yesterday, today was an options expiration for precious metals.

February is the new active month for gold contracts.  March is the next active contract for silver.

Although it still matters for pricing, the Comex listed warehouse complex is starting to resemble a museum.   Very little gold flows in or out of its approved warehouses, excepting for those in Hong Kong which is by far their largest source of physical gold movement.

Silver is a bit different, because CNT is an active wholesaler of physical silver for the Mint among others, and it uses the Comex to warehouse its inventory flows.  But I just don't see the shortage of physical silver in the same light as gold.  It is easy to see that JPM is sitting on a massive hoard which is interesting.

Gold is a funny market now.  In some ways it reminds me of a ponzi scheme in which a relatively small amount of free float physical gold is being leveraged over a very large and growing number of commitments.

Since the young man is home for the holidays, we had a nice long conversation about blockchains and bitcoin again.   He understands the technical aspects of the data structure aspects of it, and built his own GPU based bitcoin mining operation in his bedroom just for grins a few years ago.

The net result of our long conversation is that bitcoin seems more like a mania that I had even thought before.

Blockchain as a data structure is an interesting way of recording transactions.  But its scalability is severely constrained unless the users delegate the maintaining of the blockchain, or the decentralized ledger of transactions, to a central authority with an enormous amount of computing power at their disposal. 

So at first blush it seems more suited for applications that involve fairly tight communities of users who wish to have a common record of their transactions that is decentralized.  But scalability is going to be a real issue unless you bolt something on that undermines the whole 'trust' issue.

Most 'users' of bitcoin have lite wallets, and rely on some third party to insure the integrity of their 'money.'  They do not generate their own blockchains, which is the very definition of how much 'money' you have.  You go back and sum up all of your recorded user transactions, and what you have left is what you have.

And this is contrary to the principles that drove technocrats who distrusted the Fed, for example, to seek an 'independent' crypto-currency.  And since it is unregulated, and in the hands of a few oligarchs in let's say China for example, it seems fairly dodgy even compared to a fiat currency which is transparent and regulated.   And you know how I feel about that sort of thing.

Once I understood the mechanics of how the chains are updated, it became a lot clearer why it takes an hour or so for a genuine bitcoin transaction to complete.  Most people who say they are using bitcoins for transactions are really just trading obligations held in trust by some third party.

If you have made money on it great.  But in my own estimation, and I could be wrong, the hyping involved in bitcoin is all too reminiscent of the dot com bubble.  And there is no talking to people who are seized by the desire to be rich, and those who seek power.

Like the dot com bubble, I suspect that the rewards from this digital gold rush will be taken primarily by those who sell the picks and shovels and storage and assaying services to the miners, and a few insiders and lucky early adopters.   And the average person is going to get skinned.

Have a pleasant evening.

Stocks and Precious Metals Charts - The Bubble Has Awakened - Come and Get It

It looks like the pigmen in Congress and their corporate overlords are going to get their 'tax reform' for Christmas.

Winning...

The various stock and serveral bond markets are in a financial asset bubble, and certain stocks are surging higher in some fairly impressive daily moves based on utter nonsense.

Bitcoin and the various related crypto-currency plays are now a bona fide mania.

I think this tops the valuations of the worst of the gerbil tossing tech stocks in the internet bubble at the turn of the century.

Who wold have thought they could do it again two more times, albeit with the generous assistance of the Fed and the acquiescence of the regulators.

Ski these black diamond slopes at your own risk.

If you are an expert, you don't need any advice from me.

I am just the old guy in the kitchen, baking cookies.  lol.

It is interesting to wonder what will break the bubbles, and if they will start falling in unison, or if one breaks and others get some legs before they too roll over.

We'll never learn.  We should not have bailed them out.  Perhaps we ought to have driven a stake in their collective heart of darkness.

Have a pleasant evening.

Currency Wars: Global Sustainable Currency Summit - Sept 26-28, Xi'an China: Bitcoin

The world is looking for a replacement for the outdated US dollar global reserve currency arrangement.

 The reasons for this are fairly obvious. How can the Fed independently conduct monetary policy to support domestic US needs for a global currency?

The Anglo-American banking cartel will fight this development at every turn, because control of the currency is power.

I trust that a basket of currencies anchored with gold and silver will be on the table.  The discussion of such an arrangement was circumvented by the US and UK.

The BRICs are not happy with the status quo.  As you may recall, they have recently discussed forming their own version of the World Bank.

A global fiat currency for the world, without fiscal and political union, is the euro experience writ large.

Currencies have a life cycle, and often a regional life and custom.   No money in the world has lasted for more than ten generation and achieved almost universal acceptance other than gold and silver.  It seems to be in their very nature, and in the nature of money.


About Bitcoin

As an aside, people ask me now and then to comment on Bitcoin.    I did look into it quite intensively over the Christmas holiday and was aware of it before then. 

The good news for Bitcoin is that is does have 'a flywheel' in the fairly transparent algorithm that expands the money supply in a reasonable predictive manner.  And from a technology standpoint it does have a coolness factor.

The Achilles heel is its inherent instability because of the manner in which it is sustained and exchanged.  The exchanges are a serious weakness because they are unregulated, opaque, and privately owned.   They rely heavily on the efficient markets hypothesis and on a few other articles of faith.

Liquidity and stability is the name of the game for money:  use and store of value.

It is almost predictable that the Bitcoin currency will have speculative booms and busts, because it has the nature of a Ponzi scheme with the greatest gains going to early adopters and promoters.

It does have its good points, but I am afraid I would defer on it unless a number of sovereigns were to adopt it and guarantee liquidity and exchangeability. Starting a new currency is not easily done. It must be based on something widely accepted and easily exchanged for a broad range of goods and services with a easily recognized unit of value.

But for now the early adopters and adherents do not wish to hear this, very much in the manner of an early stage Ponzi scheme.  You'll miss out, better get aboard, you're losing money!

Money is a funny thing.  So few people understand it.  It often takes on the nature of a belief system, a religion.  I recall the very heated and passionate inflation/deflation debates of not so long ago.

Welcome to the fog of currency war.

On the behalf of the organising committee, we cordially invite you to join the Global Sustainable Currency Summit (GSCS-2013), held during September 26-28, 2013 at the International Convention Center in Xi’an, China.

Due to the imbalances in global trade, countries and regions adopted different currency policies to develop and defend their economies, causing a serious international currency crisis - even currency wars and treasury collapses.

These circumstances have led us to promote the establishment of an international mechanism to create a global currency by organizing the GSCS-2013 summit with leading economists and policy makers as international platform for the analyses of the failures of actual and past currency systems, discussion and resolution of the international currency crisis and for the determination of future needs of all nations and the world trade by defining a global solution with a Global Currency G, based on the Global Money Charter for Sustainable Development, as announced at the Rio+20 Summit.

GSCS-2013 aims to discuss and resolve the international currency crisis/currency wars and establish an international mechanism to create a global currency to create an even level playing field for everyone.

It will bring together economists, university professors, Nobel Price laureates, industry leaders, legislators and senior officers from governments, the United Nations, Regional Economic Zones, and financial institutions. Attendees will get an opportunity to meet world-class economists and bankers benefiting from their analysis and solution presentations, and also learn about the major trends of the currency markets.

We would like to invite you to be part of GSCS-2013 and actively join this historical event in the field of global currency policy. You will experience unforgettable encounters and have a wonderful travel to the cradle of the first coins and the origin of the Silk Road in China.

Read the details here.