Sunday, 6 January 2013

'You're an idiot if you believe in Silver price fixing' - really?

Recently, I found out that one of my 'friends' had been talking behind my back about how I was some sort of 'conspiracy nut' and that my video was just some elaborately long sales and propaganda video. I'm not one for discord but suffice to say I confronted him about it all and that conversation sparked several issues which I thought were good lessons in terms of market knowledge/conspiracies and trust. So let's start with the conspiracies.

This topic always makes me chuckle as it's human nature to be cautious of something you're unfamiliar/have no knowledge of. Just like in the old days (or even today), technology in remote tribes would be construed as sorcery or magic. The same applies to conspiracy theories. Yes, there are a lot of 'nuts' out there who believe in all sorts of crazy things (like Scientology), but there are lots of conspiracy theories that have actually been later proven to be true. Events like the CIA's 'Project MKULTRA', the Enron scandals and even more recent, the huge LIBOR scandal. If I said last year that the biggest banks in London were working secretly together to manipulate and fix interest rates, you'd probably take that story with a huge truck of salt. But sitting here in 2013, we've seen that it was in fact 100% true. In fact it was larger and more horrid than initial thoeries suggested. We now know that the City of London is one of the most corrupt places in the financial world,  UBS have also been naughty and HSBC has been caught money laundering for terrorists and drug cartels in Mexico. But this is nothing new. What you'll find when studying cycles and history of finance, is that during the lead up to huge economic shifts, these 'conspiracies' occur a lot more frequently and a fair percentage of them end up being true. There were numerous financial scandals proven to be true in Germany in the lead up to the Nazis taking over, Zimbabwe during their hyperinflation and also in Argentina. It's rife. When there's large sums of money and/or power in the mix, there's bound to be some greedy crook lurking in the background. So what should we believe in these days? Well with life and in investing, I'm always open-minded. The moment you become narrow-minded, you can sometimes find yourself drinking your own 'Kool-aid', so when these new 'fanciful' conspiracy theories pop up, I now pop on my Sherlock Holmes hat and investigate it with an open mind and armed with Ockham's Razor. This razor principle pretty much means that one should believe the most plausible solution until this solution is proven otherwise. Or the one with the fewest assumptions in the equation.

So I'd now like to share with you a comment and a bit of background about my 'friend' I mentioned earlier. I've known him for about 5 years, he's a hard working professional. Good at what he does, earns well, gambles with online poker and also dabbles in the Stock Market. He's also lost a lot of money in the Stock Market. NOTE: Anyone who says that they dabble with stocks and shares is more often than not in the red and has now resorted to a buy and hold principle in the belief that their share is a 'ten bagger' and will recoup their losses.

So in this conversation he said something along the lines of:

"You must take me for a fool trying to get me to believe that all of the worlds banks are conspiring against us by actively manipulating and suppressing Gold and Silver prices. They just have no need for it, it would be too obvious and so many people would have to be in on it."

Well for someone who knows very little about the Gold and Silver market, this is actually a fair assumption. He's sub-consciously applying Ockham's Razor which is good. However it was obvious that he was being very narrow-minded and stubborn in his stance and no matter what I next said to him would convince him otherwise. So I didn't bother. It's not my place to convert people into 'believers'. All I do is present the facts and when they come to an informed logical conclusion and want help in investing in precious metals, I can then guide them. However, as a friend, I couldn't help but think that despite him having a good job (which he'll probably do very well in the future) he should know about this stuff as what happens in the Gold and Silver market may very well affect the economy in a huge way. This will then affect his job. I literally had a whole list of things in response to his statement like:

i.) If Barclays and other international banks fix and manipulate interest rates, it can also be done with Gold and Silver prices.
ii.) If UBS can commit fraud in Sep 2011 by losing $2 Billion from unauthorised trading and then covering their tracks, it can also be done with Gold and Silver.
iii.) If the Federal Reserve can 'LOSE' $9 Trillion, then fixing Gold and Silver would be relatively simple.
iv.) If rising Gold and Silver prices directly indicates to the public that the banks are doing a very bad job at managing the currency supply and are also losing them billions every day, why wouldn't they fix the prices?
v.) In the 1960's they had the London Gold Pool whereby in order to keep the structural integrity of the Bretton Woods system, the worlds banks openly fixed, suppressed and manipulated Gold prices in order to keep Gold at $35 an ounce. If it's been done before, why is it so hard to believe now?
vi.) There HAVE been whistle blowers. Andrew Maguire was a 40 year trader and former Goldman Sachs trader. He testified in court, '"JP Morgan acts as an agent for the Federal Reserve; they act to halt the rise of Gold and Silver against the US dollar. JP Morgan is insulated from potential losses (on their short positions) by the Fed and/or the U.S. taxpayer." He then went on to give detailed reports of how they do this and even predicted when the next round of price fixing would happen. And it happened exactly how he said. It's also coincidental that there was a hit and run incident soon after he gave his evidence....
vii.) Due to JP Morgan's vast short positions on Silver, it's been reported that for every Dollar that Silver rises in price, JPM loses $100 million. I'm still trying to verify this statement, but even if this was partially correct, why wouldn't they fix the price of Silver?
viii.) It's very obvious when they slam Silver prices. Just cast your eyes back to a post I made a while back.

I could go on, but you've probably got the hint. It's probably fair to say that my 'friend' has a lot of reading up to do if he is to ever fully understand this market and make an informed opinion of it or even profit from this information. But this also brings us nicely to the point of TRUST.

From bad experiences, I've adopted the rule that in the world of investing, you shouldn't trust ANYONE. Even more so if a person is trying to sell you a financial product. Even if they're a fully qualified Financial Advisor and have a plethora of letters after their name and they work in a fancy corporation. At the end of the day, they get a commission from products that they promote. (For IFAs reading this, I'm aware of RDR - that's for another blog post later). So if you do invest or are thinking of trading/investing in something whether it's Timber, Stocks or Silicene, it's worth approaching the investment how I do with conspiracy theories: open-minded and investigate the investment until you know everything about it. Then only invest once you have a solid reason(s) why you're putting your hard earned money into it. So going back to my 'friend', one of the reasons why he found this Gold and Silver malarky so hard to believe is because he probably didn't trust me (a bullion dealer). Which is good. At least he's doing something right!


  1. Great post Siam, Here is another one to add to your already convincing list - Federal Reserve Chairman Alan Greenspan telling Congress: "Central banks stand ready to lease gold in increasing quantities should the price rise." If that isn't admitting they are controlling prices I don't know what is!

  2. Ahh yes! I should have included that! Good knowledge Simon.

  3. In the current economic climate and looking at the silver and gold charts there certainly seems to be something going on as per your post. But there was a tremendous bull run from 2007 to mid 2011. So if there's price fixing now in order to hide banking ineptitude what do you think it would take to break their hold and for another bull run to establish itself? Surely the price fixers are never going to let go because they have too much to lose?

  4. Valid comments Pat. Without going into too much detail, one of the main reasons why we had that large run from 2008 to 2011 is due to the investigations and the 2008 crash.

    i.) There were a lot of investigations going on with the CFTC and SEC about price rigging and so they actually set up their investigations in JP Morgan's proprietary desk. (The actually office JPM uses to suppress Silver prices). As a result of having their hands tied behind their back, Silver prices rose very quickly, the investigation reports indicated that JPM were doing nothing, but as soon as they left, JPM then immediately orchestrated 3 very large smackdowns to ruin sentiment.

    ii.) The 2008 crash. JPM does the Silver rigging whilst HSBC does the Gold. In 2008 there was the big crash and so they saw that as aan opportunity to really hit the precious metals, but got a bit too carried away. They knocked Silver down to $8 from $21 and so investors across the globe like myself saw this as a huge opportunity to buy dirt cheap Silver. As a result, there was a physical shortage and Silver bounced up from $8 to $49 in less than 3 years.

    So in answer to your question, in order to break out from this rigging, it's going to be the pure physical demand that takes over. Everyday more and more people are buying physical metals or demanding delivery from the ETFs. We're now getting close to the end game as they're finding it hard to suppress the price now as everytime they drop it, it just springs back. I'm personally expecting a JPM scandal on the scale of the LIBOR scandal to emerge in the next few years. And yes, they do have too much to lose, but they can't really do much as China is now setting itself up to remonetise Gold. Once that happens, the whole story changes. I'll be writing about that soon...