Bullish For Metals?! Missing Collateral in China, Follow The Trail of Loans, Copper and Fraud.
"As we have discussed before, nothing on my blog represents the investment advice of any kind. I am only sharing my thoughts on the markets, our industries and our companies. It is important to keep the big picture in front of our eyes: not only headlines, but what is actually people with money are doing by using every manufactured opportunity to acquire The Real Assets at the Lower Price:
"China continues its buying spree of copper assets all over the Globe: last month the huge Las Bambas copper project in Peru was bought by Minmetals Group for $5.85 B and now Guandong is bidding for PanAust. Reuters reports on the deal and you can notice how the activity in M&A by Chinese companies is picking up during the "soft market". It is the very important indication of the major bottom in the mining cycle: it is cheaper "to dig" for Copper and Gold on the Stock Exchanges now, when valuations of assets in the ground of listed companies are discounted by the depressed mining markets. Read more."
And for all its followers as a great contrarian indicator Goldman Sachs came out with the major piece on the risks related to the China's Commodities Unwind Zerohedge: Goldman Explains How Big Is China's Rehypothecation Problem Is (Hint: Very):
"Step 4: Repeat Step 1-Step 3 as many times as possible, during the period of LC (usually 6 months, with range of 3-12 months). This could be 10-30 times over the course of the 6 month LC, with the limitation being the amount of time it takes to clear the paperwork. In this way, the total notional LCs issued over a particular tonne of bonded or inbound copper over the course of a year would be 10-30 times the value of the physical copper involved, depending on the LC duration. ZeroHedge."
"(Reuters) - China is investigating a private metals trading firm over a suspected metal financing scam at Qingdao port, police sources said, as CITIC Resources Holdings Ltd warned that metal it owns at the port may be affected by the probe. Reuters."
I find it quite interesting that really "Everybody Does It!" Matt Taibi: "Accidentally Released - and Incredibly Embarrassing - Documents Show How Goldman et al Engaged in "Naked Short Selling":
"It doesn't happen often, but sometimes God smiles on us. Last week, he smiled on investigative reporters everywhere, when the lawyers for Goldman, Sachs slipped on one whopper of a legal banana peel, inadvertently delivering some of the bank's darker secrets into the hands of the public.Market Manipulations, NI 43-101 And How The Honest Person Can Survive In Junior Mining.
The lawyers for Goldman and Bank of America/Merrill Lynch have been involved in a legal battle for some time - primarily with the retail giant Overstock.com, but also with Rolling Stone, the Economist, Bloomberg, and the New York Times. The banks have been fighting us to keep sealed certain documents that surfaced in the discovery process of an ultimately unsuccessful lawsuit filed by Overstock against the banks. Rolling Stone."
"Manipulation is rampant in all markets: HFT Flash Boys, LIBOR, FOREX, Pensions, Energy ... Gold. Some of the former conspiracy theories are going in the court rooms now, others are still waiting for their time. But nothing could be compared with naked shorting and manipulations in the illiquid junior mining stocks. Dirty tactics are used all over the market like the banging the juniors into the close, suppressing the prices during the accumulation. You can get the idea from the reports made by Jim Puplava on Financial Sense and the summary: Naked Short Selling: The Problem. Not a lot of people are talking about it - not a lot of us have the voice. And that is the real problem. Read more."
In my personal opinion, we are witnessing the same game of the rehypothecation as it is happening with FED, BIS, Investment Banks and Gold. This, actually missing metal as collateral, will be the very bullish set up for the commodities markets. After initial selling due to the margin calls and unwinding of Paper Positions in the market, Mr Market will realise that all these metal accounted for the supply and demand picture is NOT there. Industrial demand will stay in place, but Supply which was supposed to be hoarded in the warehouses is missing: the collateral was used a few times for the different transactions. You can study this subject more with explanation in plane English in the very good podcast I have published yesterday:
Sufiy: Federal Reserve Is As "federal" As Federal Express: Massive Conflict Of Interest In This Private Central Bank.
"In my personal quest for answers how does the world really work? I came across a lot of conspiracy theories and "tin foil characters", but to my very personal surprise a lot of these theories ... are happen to be true and the real secrets are hidden in the plain sight. I do not talk about any politics here, but in order to have All our Big Picture in place we must consider all options of How To Win Strategy is applied in The Art Of War, which employs Any Rules of Breaking The Rules. Read more."