'Suicide Bombers' in the Gold Market?18/02/2011 18:42
The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage. The opinions expressed are those of the author and do not represent the views of TheStreet or its management.
NEW YORK (Bullion Bulls Canada ) -- I was listening to another fine interview on the King World News site, this one with Ben Davies of Hinde Capital, when I was immediately intrigued by some of Davies' remarks.
He stated that he considered the entire, recent trading-episode in the gold market "suspicious" for two reasons. First of all, he was surprised that any (competent) trader would have leveraged himself into such a dangerous position in the first place. Secondly, and connected with his first observation, he expressed equal surprise that the so-called "regulator" (i.e. the CME Group) would have allowed such a flawed and vulnerable trading position to have been created, in the first place.
What Davies (and others) have apparently not considered is that this "leveraged," "dangerous" trade was created to fail -- in spectacular fashion. Essentially it appears that the Wall Street banksters (and the corrupt institutions who serve them) have imported the terrorist concept of "the suicide bomber" to precious metals markets.
For those not familiar with the episode Davies refers to, a previously unknown "metals trader" named Daniel Shak used $10 million to leverage his way into an $850 million "spread trade" (i.e. 85:1 leverage) in the U.S. gold futures market - equal in size to more than 10% of this entire market.
With the banksters printing up "money" by the trillions, $10 million is nothing more than "pocket change," and even eating the entire $850 million loss represents just slightly more than 0.1% of Bernanke's most recent money-printing. Does anyone here think that Wall Street would be happy to throw away a mere $850 million -- when default in the precious metals market threatens JP Morgan (and others) with out-and-out bankruptcy?
The logic here is elementary. When you have a committed hyperinflationist like Ben Bernanke ready to create another $600 billion (out of thin air) with merely a mouse-click -- any and every time Wall Street requests a new shipment of Bernanke-bills -- then throwing away (deliberately) a few billion dollars on a "bad trade" is (literally) no different than losing a game of "Monopoly."
The "game" ends, another batch of Bernanke-bills is printed up -- and another "suicide bomber" enters the precious metals market. While readers may be horrified at yet another example of Wall Street's incessant "economic terrorism", precious metals investors need have no fear of yet another desperation tactic by this crime syndicate.