Gold Daily and Silver Weekly Charts - Calm Before the Storm

An eerie quiet is over the US markets. The SP 500 has slid sideways in an exceptionally narrow range for the past five sessions despite some intraday intramurals.

Gold was hit with a half-hearted bear raid today, while silver remained stalwart.

SP 500 and NDX Futures Daily Charts

A dull day with light volume and little conviction.

Forbes: Regulators and Trustees Suppressing Details on MF Global

I seem to recall predicting this coverup when the MF Global scandal broke at the end of October.

Eventually the regulators and financiers will spin a story and it might stick together. But there is also a possibility that it may come unhinged, and the coverup, not the theft of funds itself, will bring down careers and institutions.

And the scandal is much wider than MF Global and their unfortunate customers. This is not the sort of thing that those in positions of stewardship might wish to see come uncorked in an uncontrolled manner.

This ongoing farce with the financial sector should send a chill down the spines of all retail investors and the public.

It is good to see a respectable media publication like Forbes being so forthright in its ongoing coverage of the scandal, when the propensity to dismiss fraud and cheerlead the financier's agenda is the primary impulse of much of the financial press and mainstream media.

If the full extent of the fraud, manipulation and insider dealing that has occurred, and is still taking place, in Washington, Wall Street and the City of London were made known, the public might react strongly in their righteous anger.

This is really appalling.

Forbes
The Neverending MF Global Story: Regulators Block The Truth
By Francis McKenna
January 9, 2012

Instead of looking out for MF Global investors – and customers who are still waiting for their money – it looks like regulators and the bankruptcy trustees are busy suppressing information. Instead of full transparency, regulators and the trustees are holding onto crucial details that might tell us all who was asleep at the wheel when the broker/dealer and futures commission merchant (FCM) headed over the cliff.

Bob English, an independent trader and contributing editor to the blog, Economic Policy Journal, published a post this morning that raises serious questions about the Securities and Exchange Commission’s program of regulation for broker/dealers and, in particular, the agency’s role in keeping the truth from the public about what went wrong at MF Global.

We’re also being kept from the truth about other broker/dealers who may be putting risky trades on their books or whose controls over segregation of customer assets may be weak or non-existent.

“It seems that sloppy scanning and filing standards combined with preferential treatment for certain large brokers has substantially reduced the value of this part of the SEC’s public filing system. Since this is often the sole repository for disclosures about private companies, including broker dealers that do not have public holding companies, investors are being deprived of timely and critical information.

Even for those broker dealers that do have public holding companies, such as MF Global Inc., the financial notes of the broker audits disclose different, and oftentimes, more substantial information. Since it is now apparent that Louis Freeh, the former FBI Director cum MF Global Holdings trustee, is running cover for MF’s largest creditors, not the least of which is JP Morgan Chase, it is all the more critical that the integrity of the SEC’s public filing system be scrutinized."

On November 4, 2011, days after the bankruptcy filing, I described in an American Banker column the information the regulators and investigators should be looking for:

“Since MF Global is a broker-dealer and a Futures Commission Merchant, PwC’s job went well beyond a standard audit. The auditor for a firm like this must annually review the procedures for safeguarding customer and firm assets in accordance with the Commodity Exchange Act. The annual audit must include a review of a firm’s practices and procedures for computing the amounts that, by law, have to be set aside in clients’ accounts each day. MF Global also had to send regulators an annual supplemental report from PwC. This report would describe any material inadequacies existing since the date of the previous audit and any corrective action taken or proposed.

I’m sure the CFTC wants to know if PwC ever documented any material inadequacies in MF Global’s controls over safeguarding customer assets. But wouldn’t they already know that? Regulators like the CME Group, the CFTC, the SEC, and FINRA received audited financial information annually, unaudited information semiannually and monthly reports that provided a capsule view of MF Global’s financial position. MF Global is required to perform calculations daily (by the CFTC) and weekly (by the SEC) to ensure that the proper amount of customer funds is set aside in the separate accounts.

PwC’s report to the SEC of internal control discrepancies for 2010, and there is one according to the filing index, is private. None of the auditor’s reports specific to the broker/dealer and FCM are available to the public on Edgar for 2011.

Is this just sloppy scanning? It’s no coincidence to me that auditor PricewaterhouseCoopers may also be playing a role in keeping uncomfortable or incriminating information from the public about its audit clients which include MF Global as well as Bank of America, JP Morgan, and Barclays...

Read the rest here.

NAV Premiums of Select Precious Metals Trusts and Funds

The premium on PSLV looks like a short squeeze or some other anomaly.

It does not appear to be otherwise rational given the relatively modest premiums on silver in quantity available at publicly quoted sites like Tulving.com which are offering silver in quantity at between 1.99 to 2.69 over spot for Maples and Eagles.

I think the higher premium on American Eagles is due to the restrictions on IRA ownership. Otherwise it makes little sense other than 'marketing.'

Perhaps something else is going on behind the scenes.

But given the low estimated cash levels in PSLV and the likelihood of another unit offering from their shelf that premium looks a little out of historical bounds.