At breakfast I told the kids that I was instituting some new austerity measures
around here, and they became so insistent that I heard all about how this was
going to "ruin" them and their stupid social lives that I did not have to tell
them that I was going to use the money to buy silver, which would have sent
them ballistic.
The impetus for my New Mogambo Crusade (NMC) to acquire more silver came as a
result of reading in Ed Steer's Gold & Silver Daily where he noticed in the
Comptroller of the Currency's "Q1/2010 Report on Bank Trading and Derivatives
Activities" that "the bottom-line numbers show that two US banks ... JPMorgan
and HSBC, USA hold between 97% and 99% of all the gold and
silver derivatives held by all US banks." Yow!
This is a result of naked short selling. Normally, to short something, you
would have to borrow it from somebody, and then sell that. Now, to short gold
or silver is as simple as getting somebody to pay money for a piece of paper
that says it represents gold or silver. Easy! There is nothing behind it!
Of course, there are the slimy apologists who insist that while it is true, the
shorts can simply buy back the paper gold or silver with cash, so everybody is
happy.
It was this ridiculous comment that was the start of the now-infamous Mogambo
Food Supply Program (MFSP) where I sold pieces of paper that promised "One
complete, five-course, home-cooked steak dinner", and I only charged them one
dollar! I took the dollar and invested the money in no-risk Treasuries.
Of course, business boomed, and any time anyone wanted to "cash in" their paper
dinners, I would pay them with another piece of paper promising a complete,
five-course, home-cooked steak dinner. Or, when they got tired of that scam, I
would offer to pay them back their original dollar, while I keep the interest
their money generated.
Of course, this Fabulous Mogambo Plan (FMP) was soon shut down, and my defense
was that this is essentially the same scam that is going on - right now! - in
the gold and silver futures markets!
This is not, of course, about how I am a soulless, greedy vulture who wants to
make a lot of money in a hurry without actually working and using the actual
workings of the futures markets and the stock markets and the bond markets as
my business model, but about how JPMorgan and HSBC hold almost all the
derivatives of gold and silver and, even worse, how this may actually be
understating it.
Mr Steer goes on "I want to qualify those percentages a bit, by saying that if
a bank has a holding company [like Goldman Sachs does], any gold or silver
derivatives held by them do not have to be reported to the OCC ... and will not
show up in this report. Right now the OCC reports that GS holds no derivatives
in either gold or silver ... but their bank holding company might ... and
there's no way of finding that out."
In fact, he goes on, "The other bottom-line number of interest is that the six
largest US banks report holding 99.5% of all the precious metals derivatives in
the US banking system."
Now you know why silver, in serious short supply and evermore vitally needed,
is selling for less than $19 an ounce right now, when gold is over $1,200!
Using the last 4,500 years as evidence of their average correspondence, a
gold-to-silver ratio of 15:1 means that silver should be $81 an ounce! Right
now! 426% higher!
And with the roaring inflation that is guaranteed because of all the money that
the Federal Reserve is creating so that the federal government can borrow it
and spend it, both silver and gold will be much, much, MUCH higher from here!
And if you have to cut the allowances of your own kids to get the money to buy
silver, then trust me that the aggravation of them glaring at you all the time,
and telling you how much they hate you, is a small price to pay to get more
silver at such a low price, perhaps the Biggest Freaking Bargain (BFB) of the
century!
And the best part is that it is so easy that I squeal in delight, like a hot
pig in fresh mud, "Whee! This investing stuff is easy!"
Richard Daughty is general partner and COO for Smith Consultant Group,
serving the financial and medical communities, and the editor of The Mogambo
Guru economic newsletter - an avocational exercise to heap disrespect on those
who desperately deserve it.
(Republished with permission from
The Daily Reckoning. Copyright 2010, The Daily Reckoning.)
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Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
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