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Author Topic: Gold collapsing. Bitcoin UP.  (Read 1806909 times)
rocks
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September 30, 2014, 04:10:50 AM
 #13041

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.



I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

The option being there ensures that prices are kept in line (by professionals if nothing else).

Since it is 100 ounces and roughly 120K USD per contract, a little paperwork is not out of line. The exchange mostly wants to know is that you can actually pay for and physically take delivery, to avoid broken settlements.

Legal Tender law allows the settlement of any debt in fiat.  Most of the ETF filings also make that explicit.  Make no mistake, they never have to give you gold.

Quote from: Language from GLD powershares ETF annual report
In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk. The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. The financial instruments used by the Fund are commodity futures, whose values are based upon an underlying asset and generally represent future commitments which have a reasonable possibility to be settled in cash or through physical delivery. The financial instruments are traded on an exchange and are standardized contracts.

They can opt deliver cash instead, at their choice.

Another example:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/7_Jim_Rickards_-_Swiss_Bank_Client_Denied_His_$40_Million_in_Gold.html

COMEX Futures have something called a "Force Majeure" clause. It essentially means that if there are events outside of their control, then alternative delivery or settlement is possible. Here is one example where they had to deny delivery in one location and move delivery to another. Yes, this was a reasonable situation and very reasonable resolution.
http://www.goldcore.com/goldcore_blog/cme-declares-force-majeure-due-%E2%80%9Coperational-limitations%E2%80%9D-nyc-gold-depository

The problem is what is "reasonable" seems to have a changing definition, especially in times of crisis. Just look at the last financial blowup when the capital structure and legal contract was blatantly thrown out in the GM bailout to screw secured creditors in favor of unsecured unions. Those actions were completely illegal, but that is OK "because crisis" "because evil rich people" (never mind that the creditors screwed were pension funds for middle class workers).

I don't subscribe to some gold bug imaginations that there will be a physical run anytime soon that breaks COMEX, at the same time it is very likely if COMEX does run into issues that settlement in dollars will be decreed as satisfactory "because crisis". Again just go to any MF Global allocated gold holder ask them what they received, the answer will be a) not their gold, b) not any gold, c) something other than gold and d) something less than the value of their allocated gold. The precedents are already set.
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September 30, 2014, 04:27:03 AM
 #13042

The problem is what is "reasonable" seems to have a changing definition, especially in times of crisis.

Yes I said in crisis all bets are off. That should really be quite obvious. Imagine the exchange itself (or its IT operation) gets blown up and records either can't be found or need to be retrieved from some sort of disaster recovery procedure. Things might very well not go according to plan.

As far as ETFs (gold, bitcoin, whatever) they really aren't intended to be a direct and perfect substitute for physical ownership, they are a trading vehicle that tracks some NAV. The same can be said for futures, though they are somewhat less removed from the physical asset, but still not 100% equivalent.

My original gripe with your statement (without qualification) was that COMEX gold contracts are settled in dollars, which is generally false outside of a crisis. They might settle in dollars under some unusual circumstances, but normally not. Other futures certainly are, so I take this to be a simple error. 



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September 30, 2014, 04:27:28 AM
 #13043

Most contracts are closed out without delivery because both sides agree, unless the guy wants physical.. then the exchange has "extra" paper work to do to sort you out.

This is true and it is hard to imagine how any trading market could be different. Not allowed to close out a position?

The important point is though, if you feel physical is worth more than the offered price for whatever reason, you have the option to take it.



I dont think you can like i said unless you tell the exchange before.. They want to know your intentions beforehand although by law you can always request delivery

The option being there ensures that prices are kept in line (by professionals if nothing else).

Since it is 100 ounces and roughly 120K USD per contract, a little paperwork is not out of line. The exchange mostly wants to know is that you can actually pay for and physically take delivery, to avoid broken settlements.

Legal Tender law allows the settlement of any debt in fiat.  Most of the ETF filings also make that explicit.  Make no mistake, they never have to give you gold.

Quote from: Language from GLD powershares ETF annual report
In the normal course of its business, the Fund is party to financial instruments with off-balance sheet risk. The term “off-balance sheet risk” refers to an unrecorded potential liability that, even though it does not appear on the balance sheet, may result in a future obligation or loss. The financial instruments used by the Fund are commodity futures, whose values are based upon an underlying asset and generally represent future commitments which have a reasonable possibility to be settled in cash or through physical delivery. The financial instruments are traded on an exchange and are standardized contracts.

They can opt deliver cash instead, at their choice.

Another example:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2010/12/7_Jim_Rickards_-_Swiss_Bank_Client_Denied_His_$40_Million_in_Gold.html

COMEX Futures have something called a "Force Majeure" clause. It essentially means that if there are events outside of their control, then alternative delivery or settlement is possible. Here is one example where they had to deny delivery in one location and move delivery to another. Yes, this was a reasonable situation and very reasonable resolution.
http://www.goldcore.com/goldcore_blog/cme-declares-force-majeure-due-%E2%80%9Coperational-limitations%E2%80%9D-nyc-gold-depository

The problem is what is "reasonable" seems to have a changing definition, especially in times of crisis. Just look at the last financial blowup when the capital structure and legal contract was blatantly thrown out in the GM bailout to screw secured creditors in favor of unsecured unions. Those actions were completely illegal, but that is OK "because crisis" "because evil rich people" (never mind that the creditors screwed were pension funds for middle class workers).

I don't subscribe to some gold bug imaginations that there will be a physical run anytime soon that breaks COMEX, at the same time it is very likely if COMEX does run into issues that settlement in dollars will be decreed as satisfactory "because crisis". Again just go to any MF Global allocated gold holder ask them what they received, the answer will be a) not their gold, b) not any gold, c) something other than gold and d) something less than the value of their allocated gold. The precedents are already set.

This is why im excited by decentralized exchanges... Will be interesting to see what patrick byrne announces at inside bitcoin
rocks
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September 30, 2014, 04:45:41 AM
 #13044

The problem is what is "reasonable" seems to have a changing definition, especially in times of crisis.

Yes I said in crisis all bets are off. That should really be quite obvious. Imagine the exchange itself (or its IT operation) gets blown up and records either can't be found or need to be retrieved from some sort of disaster recovery procedure. Things might very well not go according to plan.

As far as ETFs (gold, bitcoin, whatever) they really aren't intended to be a direct and perfect substitute for physical ownership, they are a trading vehicle that tracks some NAV. The same can be said for futures, though they are somewhat less removed from the physical asset, but still not 100% equivalent.

My original gripe with your statement (without qualification) was that COMEX gold contracts are settled in dollars, which is generally false outside of a crisis. They might settle in dollars under some unusual circumstances, but normally not. Other futures certainly are, so I take this to be a simple error. 

If there is one thing we can all hopefully agree on, it is the understanding that during the next crisis (whenever it happens) the rules will be changed/re-interpreted to protect the bankers and politicians at the expense of everyone else.
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September 30, 2014, 04:57:19 AM
 #13045

ok, this is very cool and important.

http://www.npr.org/blogs/alltechconsidered/2014/09/29/352476454/how-hong-kong-protesters-are-connecting-without-cell-or-wi-fi-networks

"Mesh networks are an especially resilient tool because there's no easy way for a government to shut them down. They can't just block cell reception or a site address. Mesh networks are like Voldemort after he split his soul into horcruxes (only not evil). Destroying one part won't kill it unless you destroy each point of access; someone would have to turn off Bluetooth on every phone using FireChat to completely break the connection. This hard-to-break connection isn't super important for casual chats, but during tense political showdowns, it could be a lifeline."

i can't wait for BitcoinCard or something similar to come along and give us the option to connect via Mesh Networking.
molecular
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September 30, 2014, 05:09:44 AM
 #13046

ok, this is very cool and important.

http://www.npr.org/blogs/alltechconsidered/2014/09/29/352476454/how-hong-kong-protesters-are-connecting-without-cell-or-wi-fi-networks

"Mesh networks are an especially resilient tool because there's no easy way for a government to shut them down. They can't just block cell reception or a site address. Mesh networks are like Voldemort after he split his soul into horcruxes (only not evil). Destroying one part won't kill it unless you destroy each point of access; someone would have to turn off Bluetooth on every phone using FireChat to completely break the connection. This hard-to-break connection isn't super important for casual chats, but during tense political showdowns, it could be a lifeline."

i can't wait for BitcoinCard or something similar to come along and give us the option to connect via Mesh Networking.

I think they removed that feature for the initial release because the "tech isn't there yet".

PGP key molecular F9B70769 fingerprint 9CDD C0D3 20F8 279F 6BE0  3F39 FC49 2362 F9B7 0769
cypherdoc
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September 30, 2014, 05:13:37 AM
 #13047

ok, this is very cool and important.

http://www.npr.org/blogs/alltechconsidered/2014/09/29/352476454/how-hong-kong-protesters-are-connecting-without-cell-or-wi-fi-networks

"Mesh networks are an especially resilient tool because there's no easy way for a government to shut them down. They can't just block cell reception or a site address. Mesh networks are like Voldemort after he split his soul into horcruxes (only not evil). Destroying one part won't kill it unless you destroy each point of access; someone would have to turn off Bluetooth on every phone using FireChat to completely break the connection. This hard-to-break connection isn't super important for casual chats, but during tense political showdowns, it could be a lifeline."

i can't wait for BitcoinCard or something similar to come along and give us the option to connect via Mesh Networking.

I think they removed that feature for the initial release because the "tech isn't there yet".


FireChat via Open Garden should be a good option.
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September 30, 2014, 10:54:20 AM
 #13048

Gold is plunging!

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September 30, 2014, 12:33:44 PM
 #13049

Ebay to spin off PayPal into a separate company:

http://finance.yahoo.com/news/ebay-spin-off-paypal-adopting-110014208.html

Bitcoin bullish?
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September 30, 2014, 12:35:58 PM
 #13050

Ebay to spin off PayPal into a separate company:

http://finance.yahoo.com/news/ebay-spin-off-paypal-adopting-110014208.html

Bitcoin bullish?

Bitcoin neutral. It won't happen before 2015. At the right price Paypal is a company I'd like to own.

cypherdoc
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September 30, 2014, 01:21:04 PM
 #13051

Ebay to spin off PayPal into a separate company:

http://finance.yahoo.com/news/ebay-spin-off-paypal-adopting-110014208.html

Bitcoin bullish?

Beat me to it.

Probably factored into their decision to accept Bitcoin in the first place.  They'll need an edge.
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September 30, 2014, 02:41:04 PM
 #13052

yep, silver continuing its break to the downside:

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September 30, 2014, 03:14:56 PM
 #13053

ok, this is very cool and important.

http://www.npr.org/blogs/alltechconsidered/2014/09/29/352476454/how-hong-kong-protesters-are-connecting-without-cell-or-wi-fi-networks

"Mesh networks are an especially resilient tool because there's no easy way for a government to shut them down. They can't just block cell reception or a site address. Mesh networks are like Voldemort after he split his soul into horcruxes (only not evil). Destroying one part won't kill it unless you destroy each point of access; someone would have to turn off Bluetooth on every phone using FireChat to completely break the connection. This hard-to-break connection isn't super important for casual chats, but during tense political showdowns, it could be a lifeline."

i can't wait for BitcoinCard or something similar to come along and give us the option to connect via Mesh Networking.

They can still shut it down fairly easily by strongly broadcasting noise on the frequencies used.  That technique can knock out Bluetooth or any other wireless communications in a fairly large area with a small transmitter.  Bluetooth is particularly vulnerable since it is so low power in the first place.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
12jh3odyAAaR2XedPKZNCR4X4sebuotQzN
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September 30, 2014, 03:23:43 PM
 #13054

bad sign for pm's; good for Bitcoin.  our trusty leading indicator, SLW, just broke support.

we have a number of factors converging that i very much like; continued PM breakdown, Circle, Paypal, longest Bitcoin bear in history of 10 mo possibly coming to an end, struggling economy, increasing VIX:

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September 30, 2014, 03:26:50 PM
 #13055

poor pm miners:

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September 30, 2014, 03:42:07 PM
 #13056

we all like charts that go up.  breakout:



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September 30, 2014, 03:45:40 PM
 #13057

silver breaking down below $17
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September 30, 2014, 03:51:05 PM
 #13058

https://twitter.com/cypherdoc2/status/516977939825819648
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September 30, 2014, 04:29:19 PM
 #13059

silver taking a wicked ass beating.  time for all those vocal buyers to step up:

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September 30, 2014, 04:32:00 PM
 #13060

PAAS doing a gap down today.  that's not good:

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