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Avery Goodman  

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  • Mortgage Mess Means Trillions in Losses for Wall Street Banks [View article]
    One thing more, TBode. It is not like returning a gallon of sour milk primarily because returning a security does not involve a refund of $3.40. It usually involves millions or billions of dollars in either direct or potential losses to the issuer (or trillions if enough buyers demand redemption). So, it involves time and litigation, even if it is an inter-institutional matter that goes to arbitration, which is the fastest scenario. Indeed, some buyers may well limit their legal claims to less than they could get under the law, like the Federal Reserve Bank of New York has done. If every buyer demands its full legal rights, for example, it will mean probable bankruptcy for many of the biggest banks in the USA, and, possibly, abroad. We can only watch and wait as this situation fully unfolds.
    Oct 21, 2010. 05:41 AM | Likes Like |Link to Comment
  • Mortgage Mess Means Trillions in Losses for Wall Street Banks [View article]
    Wrong. Under Section 12(a)(2) of the 1933 Act, a purchaser of securities may seek to rescind the purchase if the prospectus contained a material misstatement or omission. Similar rescission provisions exist under state laws. That was not changed by the Private Securities Litigation Act.

    Issuers might try to defend themselves by claiming, in as many cases as possible, that there was no "public" offering, and that the buyers are "sophisticated" investors. However, most of the securities have clauses in the paperwork that permit rescission by contract, outside the securities laws, if errors like this occur.

    It may be possible to argue that many of the buyers were sophisticated financial institutions who should have known better. It may also be possible to argue, in some of the cases, that the transaction was not a public offering. However, because of the rescission clauses within the contracts, we arrive back in the same place as we get to by use of the securities laws. Huge exposure to loss.

    I am certain that purchasers are going to be seeking rescission in large numbers now that the errors have become clear.
    Oct 19, 2010. 07:47 AM | Likes Like |Link to Comment
  • Hidden Benefits of a Greek Debt Default [View article]
    The whole world economy will be in danger of total collapse, in a few years, if this bailout mania does not stop. I prefer a double-dip to a "Fall of Rome" scenario, complete with currency debasement, hyperinflation and a new dark ages to follow.
    May 4, 2010. 11:35 PM | Likes Like |Link to Comment
  • Hidden Benefits of a Greek Debt Default [View article]
    You make a very good point. Nations, companies and people should NOT be encouraged to steal from creditors by means of defaulting on debt. But, when I say that the Greeks would be better off defaulting, I do not mean that they should never pay off their debts. Missing payments is also a "default", and it would trigger credit default swap payments that would cause many banks in Europe to become insolvent.

    At any rate, subsidizing the Greek government with EU/IMF giveaways will solve nothing. They are merely delaying the inevitable and making it worse. The Greeks WILL NOT be able to enact austerity budgets, because until there is no choice, whatsoever, their unions will not allow it. Bailouts will allow the government to avoid the hard choices and painful cuts. Its debt load will continue to grow until, no matter how much they cut back, it will still be impossible to raise enough cash to pay the money back. The bailout insures that the taxpayers of Europe and the USA will be on the hook, instead of the banks which loaned the money and wrote the CDS.
    May 4, 2010. 11:29 PM | Likes Like |Link to Comment
  • Are SEC Charges Against Goldman More Serious Than Market Understands? [View article]
    "Paulson and his hedge fund are likely to be named defendants in most of civil lawsuits."

    Let me proactively correct myself by correcting this.

    "Paulson and other hedge funds are likely to be named defendants in many of the civil lawsuits involving CDOs in which they worked closely with investment banks to take short positions."
    Apr 21, 2010. 11:57 AM | Likes Like |Link to Comment
  • Option Trader Friday Outlook: Is the Dollar Going UUP? [View article]
    I agree that the dollar is about to rally, and commodities, including gold (to some degree), are going to take a temporary beating. However, I disagree with your reasons why, and your idea that money disappears from the system simply because debtors default. The fundamentals are far more complex than that.

    A $700 billion stimulus, especially when combined with TARP, TALF, and various Fed credit provisions is certainly NOT "piddly". Federal Reserve printing programs represent a real and important threat to the long term stability of the financial system.

    I believe and hope that the Fed is about to drain some of the funny-money. However, if they don't, and, instead, add more funny-money, they will be putting our Republic in jeopardy. They will cause a spiral of negative opinion toward the dollar that will prove extraordinarily expensive or impossible to control, in spite of the current demand for dollars overseas. In that scenario, we will face the toxic fallout of hyperinflation, of the same type that created Hitler, after the Wiemar period.
    Nov 8, 2009. 12:59 PM | Likes Like |Link to Comment
  • The Truth About Unemployment Numbers [View article]

    If Fox Business News is covering news in the honest forthright fashion that is going out of style, that is good news.

    On Jun 22 08:33 AM Mark Lieberman twitter/foxeconomics wrote:

    > You should be following emlployment / unemployment reports on Fox
    > Business Network. We regularly not the widening gap between those
    > collecting benefits (including extended benefits) and those reported
    > as unemployed by BLS. That gap is now over 5 million.
    > The other concern is the impact on businesses who contribute to unemployment
    > insurance funds. Those contributions are based on experience factors
    > (the number of former employees collecting benfits) and could mean
    > employers will be making higher contributions long after a labor
    > recovery -- on a greater number of employees.
    Jun 22, 2009. 03:27 PM | Likes Like |Link to Comment
  • Fed Minutes: We Have Not Yet Even Begun to Print! [View article]

    All the central banks are engaging in a race to the bottom. The issue is who can devalue paper money the fastest and furthest. They are all schooled in the same narrow minded Keynesian economic philosophy, so they all think alike. Only Germany stands out, because they have a direct connection to the 1919-23 hyperinflation. But, they will eventually be outvoted by the Club Med countries of Europe (Italy, Spain, Portugal, Greece, Cyprus, Malta) and soon as France swings into the currency debasing camp.

    I think we will have something like a "worldwide Weimar". The currencies that are likely to collapse the most, and first, into heavy inflation and/or hyperinflation, are the U.S. dollar and/or British pound.

    There is no telling what a particular currency will do over a space of a month or even 6 months to a year. Looking at trade flows, I'd say that China and Japan have huge problems. Both are also notorious historical currency debasers. So the yuan and yen are useless (and you can't buy yuan outside of China, anyway)

    The Australians, New Zealanders, and Canadians may not do as much printing as a lot of other countries. Even that, however, is questionable, given recent statements by the Bank of Canada. I suspect that the low on the Aussie is in the mid-$1.50 to the US$ range (for the short term) and it is now near $1.40, so it is overbought, and probably will be cheaper in a few weeks to a month or two. Same with NZ$ and C$. When these currencies fall, as I believe they will, they will be the "place to be" for the longer term, at least with respect to that part of any portfolio that must be in cash.

    Incidentally, over the next few weeks, I think the U.S. $ will rise, because of various things the Fed and Treasury are doing that I don't have time to fully discuss right now. But, over the long term, the dollar will deeply collapse, as predicted in this article.
    Apr 11, 2009. 10:10 AM | Likes Like |Link to Comment
  • Did the ECB Save Comex from Gold Default? (Part 2) [View article]
    Kohalakid, I can't properly answer a specific legal question in this forum, because that is giving legal advice. You should direct the question about puts to your lawyer.
    Apr 7, 2009. 11:37 PM | Likes Like |Link to Comment
  • Did the ECB Save COMEX from Gold Default? [View article]
    I believe what Spectator is suggesting is if two banks can trade between themselves, creating fake prices for the public to see, and either settling the matter in a "dark pool" exchange, or having a prior agreement not to take or provide delivery. Is that correct, Spectator?
    Apr 2, 2009. 02:45 PM | Likes Like |Link to Comment
  • Silver Backwardation: Prices About to Soar [View article]
    I don't care for CEF. While its prospectus is more clear about its assets than those of the various ETFs, it sells at a very high premium over net asset value (spot price of its gold and silver bars).
    Mar 13, 2009. 09:47 AM | Likes Like |Link to Comment
  • Silver Backwardation: Prices About to Soar [View article]
    It is possible that one or more of the zombie banks will be allowed to fail. If it happens, that will cause a temporarily delay in advent of high inflation, but only temporary, in my opinion. Precious metals, including gold and silver, might be down for a short time, as a result, if the Fed manages to pump up the dollar efficiently enough to prevent its collapse in the wake of those bank failures.

    Zombie bank failure, however, as I see it, is highly unlikely. Only a small number of select Republicans are advocating it, and they no longer have the political clout to make it happen. I agree with them, but reality is reality. The big banks will continue to suck money from the Federal teat, and receive increasingly hefty gifts from the taxpayers, regardless of what the majority of people think about it.

    A re-review of the the pricing history in London reveals that the price of silver has been backwardated for longer than I thought. About a month now. The price has risen nicely and steadily ever since it started, so, I would have to disagree with those who say backwardation causes falling prices in the medium term. The backwardation exists, in all likelihood, as a result of vastly increased investment demand for physical silver, meeting reduced production from mines. The paper instruments will eventually respond to the physical demand, as they always do, with a lag time.

    As for the clearing members of COMEX and NYSE-Liffe who may appear to have sold more futures contracts than they have real metal...I continue to believe that they will NOT default. If they do, the short sellers will be in a heap of trouble, far beyond the possibility of civil damages lawsuits.

    Remember, precious metals are just one part of the greater CME universe. Even if the precious metal bullion banks of a few of the clearing members are unable to meet their obligation to deliver bullion, the exchange also has a huge number of other profit centers. I believe there will be sufficient money to compensate contract holders, per the contract rules, for the difference between the price they must pay in on the spot market for physical bullion, and the price of their contracts, even in a worst case scenario.

    All of this is not to say that I endorse the current state of the futures exchange "casinos". A lot of reforms are needed. But, I would reiterate that, in my opinion, they will not legally default any time soon.

    I understand, and share some of the concerns about the vague wording of the GLD ETF trust prospectus, and the possibility that the trust or its sub-custodians may be holding derivative based gold of some kind. Although GLD is an option, it seems to me that most non-institutional investors would be better off buying futures contracts and either taking physical delivery, or, if they cannot, simply keeping their numbered bars at the exchange warehouse. In the alternative, small investors can also buy mining stocks, which is the most leveraged method of investing, short of engaging in speculation in the futures markets.
    Mar 9, 2009. 02:14 PM | Likes Like |Link to Comment
  • Silver Backwardation: Prices About to Soar [View article]
    You can exchange the Federal Reserve notes for gold or platinum or other things.

    On Mar 06 12:19 PM heartbone wrote:

    > Avery, since when does the constitution matter?
    > It is only a goddarn piece of paper.
    > And under those economic circumstances such as "nationalization"
    > (as if the Fed is part of the government)
    > who would want any Federal Reserve Debt Notes in exchange for mining
    > company share paper value?
    Mar 6, 2009. 12:47 PM | Likes Like |Link to Comment
  • Will COMEX Default on Gold and Silver? [View article]
    I need to update the information in this article to reflect a recent conversation I had with the legal compliance department of NYSE-Liffe futures exchange. I had a report, from a very upset person, who had purchased three (3) 1 kilo NYSE-Liffe mini-contracts for gold. Instead of getting 3 1 kilo bars, as he expected, the registrar told him he would need to accept a single 100 ounce bar.

    This is a significant development. According to NYSE-Liffe exchange rule 1408, each mini-contract is delivered by a so-called "warehouse depository receipt" or WDR. Potentially, however, the WDR can represent a 1/3rd interest in a 100 ounce bar of gold. This rule is now being enforced. It means, essentially, that a person buying mini-contracts on NYSE-Liffe may not be able to take physical possession of his 1 kilo bar anymore. He must have 3 WDRs in order to equal 1 vault receipt, and you can only take delivery of a 100 ounce bar with a vault receipt.

    This indicates to me that NYSE-Liffe must have had a serious "run" on their 1 kilo bar supply, and, if one looks at the number of deliveries that have been demanded lately, it is no surprise. Just as the U.S. Mint has run out of gold to mint 1 ounce coins, it seems to me that, now, NYSE-Liffe must have run out of 33.3 ounce bars of gold.

    In short, this news makes it clear that the gold supply is extremely tight. If you want to take delivery of cheap gold, through the futures exchange, you must buy at least 3 mini-contracts, so you are better off just buying one full 100 ounce contract. Given the latest shortage of 1 kilo size bars, it seems ever more likely that it is only a matter of time before the price explodes.
    Jan 14, 2009. 04:27 PM | Likes Like |Link to Comment