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Russ Winter spent fifteen years as a investment broker, wrote a blog called Winter Watch for six years and recently launched his new subscription service called Winter Actionables.
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  • A Question Of London And Western Central Bank's Remaining Gold

    Just a week ago, I wrote that gold attacks only serve to accelerate the transfer from West to East of the remaining physical metal. I thought that an attack (as opposed to mere suppression) would be particularly stupid in front of India's end to restrictions on purchases of gold, but I guess I didn't get the memo. Last week we saw the biggest price attack in eight months. While supply and demand data is of utmost importance in the real world, the real world is not where banker-gambler types dwell. Therefore, this attack is very poorly conceived.

    One can argue that every time there is negative news or derivative pressure, the Fed comes in via the banks and manipulates the markets to keep the appearance of strength. The U.S. economy must be in grave danger of collapsing. But in some aspects, since a collapse is inevitable, it smells like internal traitorous sabotage to set the conditions for their inside criminal kleptocrats to capitalize. And don't rule out a Cloward Piven at this stage [see the real Obama].

    The gorilla in the room for the gold market right now has to be India. If gold imports normalize, there will be 1,000 tonnes annually added to the demand side from the East. From where does this gold originate?

    Refining Activity Illustrates Gold in Motion:

    You can tell that gold from the UK's storage vaults is on the move when gold from London is recast in Switzerland, from 400-ounce (12.5 kg) bars to 1,000-grams and 3 kg bars prior to delivery in Asia. Indian consumers and investors favors a 1-kg (32-troy-oz) bar. The smoking gun, therefore, is gold refining activity.

    Few deny that substantial amounts of gold have left London vaults for the East. Even back in December 2013, Ken Hoffman, the head of metals and mining reporting for Bloomberg Research, remarked in a Bloomberg broadcast:

    You could go into a vault in London a couple of years ago and they were packed to the rafters with gold. You can walk in those vaults today and they're virtually empty. All the gold has been transferred out of London. ... 26,000,000 ounces has gone to Switzerland where it's been recast into a higher grade and shipped off to Hong Kong and then into China, never to return. That gold is just not there anymore."

    Hoffmann says 26 million ounces, or 727 tonnes, has been removed from London's vaults, but clearly much more than that was shipped through year-end 2013. We know from recently released data that Switzerland exported 2,777 tonnes of gold in 2013 alone. Switzerland has a 3,000-tonne capacity and all reports indicate their refineries were in full gear. That's an important number because Switzerland is the gold-transfer conduit between London and the East. Switzerland was at full capacity because nearly 1,000 tonnes was extracted from all the gold funds, such as GLD , since the end of 2012. Shifting to 2014, the supply out of the gold-traded funds has dissipated. Indeed, last week's attack yielded no gold out of GLD but rather resulted in an increase of 8.39 tonnes.

    I am among those who believe that at least part of the supply that was recast in Swiss refineries was previously leased gold from central banks. Because this gold was leased by central banks to banksters under the premise it would be returned someday, the central banks of the U.S., Germany, the Netherlands, Austria and others are still reporting it as monetary gold holdings. This is a fraud and a lie. It would explain why Germany can't get its gold back in a timely manner and why Austria wants audits. That means any central bank stupid enough to store it in crime centers like New York, London or Paris has been the victim of a stick up and their leaders are responsible for the victimization.

    The intelligence apparatus of Russia and China know this ugly truth full well. As I wrote in "Does Vladimir Putin Know Things," look for this fraud to be revealed publicly. It was already revealed privately, but leaders like Angela Merkel have been compromised and are accountable to this fraud. I think some of the gold leased by central banks was returned, but the majority is gone.

    The gold that's not already in China, Russia or India is being hoarded in the secret vaults of the plutocratic elites around the world, or is in the hands of forward-thinking normal folks. I have no doubt that the criminogenic elements who run the financial system scam of the U.S. and UK have been caught with their pants down. Is gold really a riddle shrouded in mystery wrapped in an enigma? Not at all, especially when viewed in this light.

    Koos Jansen, who has an excellent site with data and charts for gold activity, has an important observation about the net gold trade. He notes that in March the steady flow of the precious metal out of the UK dropped. What explains this? Has the supply dried up? Has demand from the East fallen? On the latter, China is still getting a hold of gold. A substantial 36.4 tonnes was withdrawn in Shanghai last week. So far this year 787 tonnes has been withdrawn at Shanghai alone. That is five and a half times more than the output of China mines. Plus Russia's central bank bought 28 tonnes in April alone. Russia mines about 20 tonnes a month. I think Russia is now on the scene to apply pressure on the West's central bank gold leasing scam at a critical moment. Vladimir Putin knows things. Meanwhile China has moved front and center in the New Cold War's geopolitical maneuvers.

    Also recall that gold was in GOFO backwardiazation for nearly a month in late April-early May. That has recently gone away, which signals that some gold has been scammed up from some source. But the big question now is whether the gold supply out of the UK truly dried up. Do they still have dupes from which they can steal?

    Rather unreported in the gold transfer business is that Dubai is getting in big. India is one of its customers, so this can only mean they are not only bullish on Indian gold demand, but they also think they can get a hold of the gold. They must be very bullish on Middle Eastern demand as well. Annual capacity in the United Arab Emirates is about 800 tonnes, including a 450-tonne refinery currently operated by Kaloti. The new refinery will have an annual capacity of 1,400 tonnes, bringing capacity to 2,200 tonnes of gold.

    When you take away above ground gold in jewelry form and that used industrially and add supposed monetary gold (assign 5000 tonnes monetary holdings to China), that really only leaves 25,000 tonnes globally for investment or future monetary holdings. And much of that is in strong hands. 2900 tonnes a year is produced.

    The forensics are in the Commitment of Traders report covering the paper Crimex "market." It reflects activity through Tuesday, with POG at $1,265. Those commercials that have been short in gold covered a whopping 29,583 contracts from the short side. Producers are now short 14,897. That's an 11,177-contract reduction. The managed money complex that hides the slinger (aka proxy for New York Fed? aka trading desk rogue trader?) added 22,435 to its shorts, bringing the tally up to 53,577. Since gold was attacked all week, we can assume that is now even higher.

    Finally, the Financial Times ran a B.S. psych-ops story that was nicely exposed by Zero Hedge for what it is. It seems FT was promoting a disinformation campaign, claiming gold would be negatively impacted by El Nino events threatening the crops of India's farmers. But in reality, the weather has dramatically shifted to a La Nina pattern that favors Indian farmers.

    In another psych-ops scam, the same Financial Times ran an absurd story and lie about China being the mysterious Belgian buyer of U.S. Treasuries. Clearly, this controlled media tactic should be taken as one more sign that London's gold vaults are empty and blow ups are occurring in derivatives.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

    Jun 02 2:02 PM | Link | Comment!
  • The Jefferson Cupronickel: America's Last Honest Currency

    "When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation." - Sir Thomas Gresham (Gresham's Law)

    The Jefferson nickel, or the Cupronickel, should be considered as America's last honest currency. Your first reaction might be "only a kook cooped up in bunker would hoard nickels, right?" Not exactly. Consider this: Kyle Bass, founder of the Hayman Capital Partners hedge fund, reportedly exchanged one million dollars for 200 million Cupronickel nickels.

    Cupronickels consists of 75% copper and 25% nickel. Coinflation tracks its "melt value," which is currently about 5.2 cents (3 cents copper and 2.2 cents nickel). At this level and with returns on savings nearly zero, a nickel is a open-ended call on both inflationary spikes in these metals and moves by the U.S. Mint to melt down the Cupronickels and reissue a cheaper version, thus putting Gresham's Law into play.

    (click to enlarge)

    Chart source: Bloomberg

    On the the prospect of a new coin, the Coin Modernization, Oversight and Continuity Act of 2010 recommends in its December 2012 report that advanced notice of two to three years be given before all old nickels are removed from circulation and further study proceed. They also note that the current 5-cent coin costs 10.1 cents to produce and distribute. Once the Cupronickel metal composition changes, prices of the coins will jump because sorting will become required. Then Cupronickel investing goes from incredibly cheap to having higher costs, making your initial capital investment in nickels even greater. At that point, a secondary market would kick in, similar to what happened with pre-1964 silver coins. This will be especially true if the underlying metals in the coins appreciate in the current deluge of fiat money printing. Although one might wait for the change in metal composition to occur, realize that the new coinage will enter the banking system quickly and banks may pull the old coins just as fast. Since the banking system is the best vehicle for procuring these Cupronickels, it makes since to be preemptive.

    (click to enlarge)

    (click to enlarge)

    Image sources: Coin Modernization Report

    Few investments offer a floor like this, or insurance back-up plan. Obviously, each Cupronickel holds a 5-cent face value, so worst-case scenario you can cash in on your currency for its original value as an exit strategy. At first blush, because of the weight and storage issue, this might seem to be more a working class investment. Perhaps so. Yet, even for well-to-do folks - and and particularly savers - $100 boxes or $2 rolls serve as real emergency money. One full shoe box weighing 110 pounds holds about $500. The $100 bank box pictured below is my preferred method of hoarding Cupronickels.

    Many argue that leaving lots of money in so-called insured banks offering no return is the poor option. I have had little problem picking up several $100 boxes at my local bank and have queried about picking up more from others and was told to give them a little advanced notice and they could arrange it. My test sort through about $30 in nickels for older and more valuable coins yielded virtually nothing. Silver content war years nickels have been picked clean.

    I've struggled with the idea of keeping gold or silver around because of potential theft. Nickels, however, are a stealth form of metal investment because it is less prone to attracting the attention of thieves. Given that $1,000 worth of nickels weighs 220 pounds, it is hard too imagine that a nickel holder would be a reasonable target. A thief would need a dolly, a moving crew and a good size truck for much of a take.

    As an investment, nickel as a component has good prospects, as it is quite depressed and trading at about a third of its 2007 super spike. The simple explanation is that the price spike of 2007 brought out more production. Now, nickel is selling at or below its marginal cost of production, which is about $17,500 to $20,000 a ton across the industry. Vale, the world's second largest nickel producer, has been shutting down older mines, as has Xstatra in Australia. Nickel is primarily used in the production of stainless steel. Additionally, European distributors are maintaining bare-bones inventory, another classic sign of a washed-out resource.

    (click to enlarge)

    Source: Wall Street Journal

    Jan 16 9:01 AM | Link | Comment!
  • China's Superwealthy Leaving Country

    Wealthy people are leaving China. Many of them are kleptocrats, corrupt officals and financial criminals, and some are seeking havens in the U.S. and Canada. According to, "On May 23, 2012, a conference focused on preventing corrupt officials from fleeing abroad was held in Beijing, gathering leaders from disciplinary inspection, judiciary and public security departments as well as the Ministry of Foreign Affairs. Last year, the People's Bank of China released a report on corrupt fugitives which shocked the public. The report, attributed to the Chinese Academy of Social Sciences (NASDAQ:CASS), said up to 18,000 officials had fled China between 1995 and 2008 with stolen assets totaling 800 billion yuan (US$125.7 billion)." Of late this trend and hot money outflows has been rapidly gathering steam.

    China has gone full tilt into Ponzi schemes. Now that domestic stock markets are widely considered rife with fraud (China's eleventh richest businessman jailed for stock fraud), the con men in China have conjured up "wealth management" scams to fleece the public and on a rather colossal scale. These are actively marketed by large banks.

    New York Times reports: "Absent from the product's prospectus is any indication of the asset underpinning Golden Elephant: a near-empty housing project in the rural town of Taihe, at the end of a dirt path amid rice fields in one of China's poorest provinces. 'They haven't even built a proper road here,' said Li Chun, a car repairman, who said he lives in the project. 'The local government is holding onto the flats and only wants to sell them when prices go up.'

    "Golden Elephant No. 38 is one of thousands of 'wealth-management products," instruments aimed at monied investors, which have shown phenomenal growth over the last five years. Sales of them soared 43 percent in the first half of 2012 to 12.14 trillion yuan ($1.90 trillion), according to a report by CN Benefit, a Chinese wealth-management consultancy. China Credit Trust Co, one of the country's biggest trust companies, has disclosed that one of its wealth funds, Jinkai #1, is at risk of default because of money it lent to coal company Zhenfu energy Group. Zhenfu's boss has been arrested, amid reports he owed a total of 500 million yuan."

    Now that the country has been looted, the ultra-wealthy are clearing out of China. Of the country's rich, 16 percent have already immigrated and another 44 percent plan to do so. Where the Chinese rat-line crowd ends up is another question and story. They apparently love malinvestment and misallocations.

    The following chart of helicopter flights around plutocratic haunts is an eye-opener. There are a few plausible explanations: bad economic environment certainly, but perhaps some are no longer even in China. This hot money flight is showing up in money flow data. The rest of the indicators are covered here.
    source: CEIC

    (click to enlarge)

    (click to enlarge)

    What I find fascinating about China is how official functionaries often call out bad practices, and this is largely ignored. That's because in reality, China is governed by local apparatchiks. Case in point, the China Banking Regulatory Commission says banks misclassified about 20 percent of their outstanding loans to local governments, understating the risk that slowing revenue will cut borrowers' ability to repay. Chinese banks have taken their bad lending practices to the U.S. and are making loans on New York City trophy properties.

    Another unheeded critique was conducted by the National Audit Office. Typical of Ponzi debt cycles, China's $2.7 trillion credit boom accounted for a third of all global banking "profits." This is classic rat-line activity, no doubt dumping the fallout on government. The report said banks:

    "Lend money for land acquisition purposes to companies that aren't in the real estate business. Engage in improper funding to real estate projects, with borrowers without sufficient capital or paperwork not done properly. Improper lending to local government financing vehicles (LGFVs). Provide trade finance for companies that aren't really in the business of trading. Also mentioned: use of Enronish 0ff-balance-sheet assets and liabilities, wrong financial statements, and poor auditing of the books for banks' subsidiaries. Some bank branches have poor risk management, with some lent money being lent outright stolen by borrowers. Asset qualities are not classified accurately."
    Aug 10 4:48 PM | Link | Comment!
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