GLD – The Central Bank Of The Bullion Banks

The black curve (left scale) of the following chart shows the London pm gold fixing in U.S. dollars from 1 January 2006 to 30 April 2012. During the light-blue intervals which span about 35% of the entire period, the gold price increased at an annualized rate of 41.1%. During the remaining intervals, the price increased only at an annualized rate of 7.9%. The light-blue intervals are the result of a trading algorithm whose buy signals are indicated by the green dots and whose sell signals by the red dots.

GLD Inventory Strategy from 1 January 2006 to 30 April 2012

In this article, we explain how the signals can be computed from the variations of the inventory of the SPDR Gold Shares exchange traded trust (NYSEArca:GLD). We explain why the inventory adjustments can hardly be caused by price arbitrage between the GLD share price and the loco London spot price alone. We rather claim that bullion banks finance their inventory by lending it or selling it to GLD investors and that bullion banks manage their physical reserves by accessing the physical gold inside GLD.
The fact that a certain type of inventory adjustments has predictive power, supports the idea that large inventory changes are the result of active reserve management. This provides us with a unique window into the flow of physical gold that is usually obscured by the dominance of paper gold trading. A similar, but somewhat less robust result is shown for the iShares Silver Trust (NYSEArca:SLV).

The idea of a trading strategy based on changes to the GLD inventory goes back to Lance Lewis’ GLD Puke Indicator. The term Central Bank Of the Bullion Banks was coined by FOFOA who wrote about the GLD Puke Indicator in Who Is Draining GLD. In that article, FOFOA expands on Randal Strauss’ idea that GLD redemptions indicate a preference for physical gold over paper gold (see his Gold Dips Towards $1360/oz … and Gold Nears 3-Months Low…).

Creation and Redemption of GLD Baskets

The method by which GLD grows or shrinks differs radically from the way in which conventional investment funds operate. If you want to invest in such a fund, you wire money to the manager. If you wish to withdraw money, you fax them a withdrawal notice. Depending on the contributions and withdrawals, the manager then either invests the contributed cash or sells investments in order to satisfy the requests for withdrawal.
GLD is managed differently. As of 29 May 2012, there exist about 421 million shares of the trust. Each share corresponds to roughly 0.097 ounces of gold. The trust therefore contains 40.84 million ounces of gold (1270 tonnes) that are worth $64.5bn at the London pm fixing price of $1579.50 per ounce.
The number of shares of the trust can be changed only in multiples of a basket (100000 shares) and only by the so-called Authorized Participants (APs). According to the prospectus of 26 April 2012, these are Barclays, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, J.P. Morgan, Merrill Lynch, Morgan Stanley, Newedge, RBC, Scotia, UBS and Virtu Financial. Each of these APs can

• Transfer the physical gold that corresponds to a basket of shares to the trustee. The trustee then creates a basket of new shares and transfers them to the AP in return (creation)
• Transfer a basket of shares to the trustee and receive the corresponding physical gold in return. The trustee then cancels the shares (redemption).

Note that all the gold held by the trust is allocated except for an adjustment term that is smaller than one 400oz London Good Delivery (LGD) bar.

Creation and Redemption Statistics

Before we consider why an AP might wish to create or redeem baskets, let us take a look at the statistics of these creations and redemptions. The following histogram shows the frequency of the daily inventory changes depending on their size in millions of ounces (creations are counted positive, redemptions negative). Days on which the inventory remained constant, are ignored. We have analyzed the period from 1 January 2006 to 30 April 2012. Recall that one basket consists of 100000 shares which presently represents 9700 ounces or 301.67kg of gold, worth about $15.3 million.

Distribution of daily GLD inventory changes in millions of ounces from 1 January 2006 to 30 April 2012

We see that the changes to the inventory are not exactly normally distributed. In addition to a skew towards small redemptions and larger creations, there are obvious fat tails on both sides. In the following, we are interested in these fat tails, i.e. in the excess number of large creations and large redemptions.

The Trading Strategy in Detail

For GLD, we are interested in creations and redemptions that exceed the threshold of 250000 ounces on a single day, i.e. about 25 baskets or 7.78 tonnes (presently worth $394 million). Note that this threshold essentially captures the fat tails of the distribution of inventory changes displayed above.
On the first day (1 January 2006), our strategy is not invested. At about 4.50pm New York time on every New York trading day, i.e. after the close, the current inventory of GLD is published. If the strategy is not invested and the inventory has decreased by 250000 ounces or more compared with the previous trading day, our strategy buys gold at the London pm fixing price on the following day. If the strategy is invested and on any New York trading day, the inventory has increased by 250000 ounces or more, our strategy sells the gold at the London pm fixing price on the following day. These buy and sell signals are indicated by the green and red dots in the chart at the beginning of this article. The blue curve (right scale) shows the total inventory of GLD in millions of ounces.
Recall that the original GLD Puke Indicator by Lance Lewis counts a decrease of the inventory by 1% or more as a buy signal. We prefer an absolute threshold (250000 ounces) rather than a relative one. This yields a more consistent performance of the strategy over the entire period from 2006 to 2012 and is also more plausible in view of our interpretation of the inventory changes as reserve management (details below). Note that GLD began trading on 18 November 2004, and we have omitted the first 13.5 months from the analysis.
Of course, nobody would actually trade according to this strategy, simply because even during the times at which the strategy is not invested, the gold price still increases at an annualized rate of 7.9%. The strategy merely serves to demonstrate that inventory changes do have some power of predicting the future gold price.

Price Arbitrage

Let us now consider why an Authorized Participant (AP) might wish to create or redeem baskets of GLD. We therefore need to understand how GLD is priced and which type of arbitrage might enforce this price.
Assume you know from the data sheet that one share of GLD corresponds to 0.097 ounces of gold and that the London spot price is $1579.50 per ounce. This yields a Net Asset Value (NAV) of $153.21 per share. Even if you do not know the price at which GLD is currently trading, you nevertheless know that one share of GLD is worth $153.21. So if you bid $153.21 per share (plus spread), you should be able to purchase your shares of GLD, simply because GLD contains physical gold loco London that you could equally well purchase directly for the spot price (plus spread).
If you bid less than $153.21, you cannot expect to receive any shares, simply because the seller would be foolish to sell at this price. If you bid more than $153.21, you would effectively hand a free lunch to the seller. In fact, if you did, your counterparty can indeed capture this free lunch by arbitrage.

Paper Gold Arbitrage

Suppose there is a buyer of GLD shares who acts foolishly and who drives up the price of GLD shares well beyond their NAV. Any arbitrageur can now go short GLD and long any other gold investment that follows the London spot price. This allows him to capture the arbitrage, i.e. to lock in a risk-free profit. This works because GLD will eventually trade at its NAV again, and the arbitrageur can unwind both positions at that point in time. We call this form of arbitrage paper gold arbitrage because the arbitrageur can go long unallocated gold in addition to short GLD while the physical gold inside GLD is not touched.
If for some reason, GLD trades at a discount to its NAV, the arbitrageur can go long GLD and short paper gold. Most likely, GLD will sometimes trade at a small premium to NAV and at other times at a small discount, and so the arbitrageur can easily unwind the paper gold arbitrage after a short period of time.
Let us stress that paper gold arbitrage should be largely unnecessary though, simply because every investor knows that the NAV is the price at which GLD ought to trade. Deviating from this price would be foolish, and so in most cases the threat of arbitrage ought to be sufficient in order to keep the market efficient while the actual arbitrage would not be necessary.
In the unlikely event that there is so much buying pressure that GLD consistently trades at a premium even though paper gold arbitrage is performed, the short GLD and long unallocated gold positions of the arbitrageur would keep growing. How can this be avoided?

Creation-Redemption Arbitrage

The answer is that if an AP performs such an arbitrage and his position of short GLD versus long unallocated gold has grown beyond the size of a basket, he can unwind the position at any time by having a basket created, i.e. he

• has a basket worth of his unallocated gold allocated,
• transfers the gold to the trustee,
• receives a basket of created shares,
• uses these shares in order to close his short position in GLD.

If GLD has traded at a discount for some time, and the AP has accumulated a position of long GLD versus short unallocated in order to lock in the arbitrage profit, he can unwind this position by redeeming a basket, i.e. he

• transfers a basket of shares to the trustee for redemption,
• receives a basket worth of allocated gold,
• uses this gold in order to close his short unallocated position.

Whereas paper gold arbitrage has very little transaction costs, the creation and redemption of baskets involves the reallocation of gold and possibly even physical movements of gold bars into another vault, and is therefore subject to higher transaction costs. Note that Warren James at Screwtape Files discovered a fax from HSBC, the custodian of GLD, that confirms the reallocation of about 760000 ounces (or 1907 LGD bars of about 400oz each) related to the redemption of 79 baskets by Merrill Lynch, Goldman Sachs, and J.P. Morgan on 16 August 2011.
Due to the transaction costs, the APs will avoid the creation-redemption arbitrage as far as possible and perform it only if their paper gold arbitrage position gets way out of balance. Let us finally recall that every market participant knows the NAV and the spot price and therefore the fair price of a GLD share, and so even paper arbitrage should normally be unnecessary.
Then why do we see so many inventory adjustments? Is there a second reason for adjusting the inventory beyond the obvious price arbitrage?

Two Different Views on Inventory Changes

How can we better understand the creation and redemption of baskets? The arbitrage point of view was the following:
Some investor decides to buy a certain number of GLD shares, but he is not interested in other gold investments. If he is willing to pay a premium for these GLD shares if necessary, he will definitely get the desired number of shares. The price to pay is that an AP who acts as the arbitrageur, can pocket that premium as a profit for the service of creating the desired number of shares.
There is, however, a second point of view on the creation and redemption that is not centred around the GLD investor, but rather around the AP. Let us assume the AP decides to put a certain amount of gold into GLD. He therefore transfers the gold to the trustee, receives GLD shares in turn and sells these shares into the market. If GLD shares trade at a discount as the consequence, the rest of the market can act as the arbitrageur and, for example, slightly favour GLD over other gold investments, and thereby absorb all the newly created GLD shares.
So which one is it? Do the investors in GLD request a certain number of shares, and the AP delivers by performing the arbitrage and creating the shares? Or does the AP decide to place a certain amount of gold into GLD, and then the market absorbs these additional shares?
We suspect that at least those inventory adjustments that constitute the fat tails of the distribution, i.e. beyond the threshold of 250000 ounces per day, are in effect initiated by the AP rather than by the GLD investors.
If it were just the arbitrage in response to the investors, why would the trading strategy work? The only explanation would be that GLD investors represent the ‘dumb money’ (or ‘weak hands’) whereas all other gold investments represent the ‘smart money’ (‘strong hands’). In this scenario, GLD would lose a significant amount of inventory when the dumb money sells while the smart money buys, triggering a buy signal. Conversely, when the smart money sells and the dumb money buys, GLD would gain inventory which constitutes a sell signal.
The problem with this view is, however, that there is no reason to assume that GLD is held primarily by the weak hands whereas the other gold investments that are all tied to the London spot price, represent the strong hands. Both GLD and unallocated gold OTC or COMEX futures are held by sophisticated investors, endowment funds or hedge funds. Although many retail investors, i.e. typically weak hands, are in GLD, the same is true for other gold investments such as coins and retail bars, COMEX futures, and bank sponsored gold-related products that, in aggregate, all appear on the other side of the arbitrage, i.e. in the spot market outside of GLD.
The only consistent interpretation would be the following: The fact that the suggested trading strategy works, confirms that in aggregate GLD is dominated by weak hands whereas in aggregate all other gold investments are dominated by strong hands. This point of view is not plausible at all.
We therefore suspect that those inventory adjustments that are relevant to our trading strategy, i.e. those beyond 250000 ounces per day that form the fat tails, are rather initiated by the APs.

Inventory Financing and Reserve Management

Why would an AP decide to increase or decrease the inventory of GLD other than in order to capture some arbitrage profit? There are two plausible scenarios. In order to understand them, let us first note that all market makers except two (Mitsui and Société Générale) and all clearing members of the London Bullion Market Association (LBMA) are presently APs of GLD.

Inventory Financing

Consider a company whose operation requires an expensive inventory. In order to stay in the realm of the gold market, this might be a large coin store, a refiner or mint, or even the market maker of a public exchange. The regular operation requires a considerable gold inventory, but this inventory ties up a lot of capital.
In order to reduce the capital requirement, our company has several options, for example,

• To take out an unsecured loan in order to finance the inventory. This is usually an expensive strategy.
• To Take out a loan for which the inventory serves as the collateral. Given that the inventory is gold bullion, the collateral is easy to liquidate, and so the interest expenses on such a loan should be a significantly lower than those on an unsecured loan.
• To swap the gold for dollars with a bullion bank, i.e. our company borrows dollars from the bank and at the same time lends gold to the bank, both for a fixed term. This is almost the same as taking out a loan that is secured by the gold. Since such swaps are typically limited to 400oz LGD bars, this method is suitable for the market maker, but not for the coin dealer or for the refiner.
• To give private investors an opportunity to own a part of the inventory. The pooled accounts offered by Kitco or by the Perth Mint are examples of this type of inventory financing. Our company can sell the title to gold that forms part of the inventory, to private investors and offer to buy it back from them. Such a pooled account is indeed backed by physical gold, but this is the physical gold that flows through our inventory anyway. Voila, somebody else owns our inventory, and our capital is no longer tied up in order to hold this very inventory.

The London bullion banks can use GLD in precisely the same fashion as the last one of the above examples. They typically have many flow positions that contribute to their inventory, for example, receiving gold that has been sold forward by a mining company and then selling this gold to a wealthy investor. As long as the bullion bank knows which part of their inventory corresponds to this flow and how long it is held for, they can just move this inventory into GLD where it is owned by private investors and no longer ties up any capital.
Even better, should the portion of the inventory corresponding to this flow decrease unexpectedly, they can even purchase a basket of GLD shares in the market, redeem them and recover the gold at any time. In this sense, GLD is even superior to the Kitco pooled account. Kitco can decrease their inventory only if some of the investors in their pooled account decide to sell. GLD offers the advantage that there is a liquid market for GLD shares from which the bullion bank can purchase additional shares at any time. The average daily trading volume of GLD is about 12 million shares which represents an inventory of 1.16 million ounces or 36.2 tonnes.

Reserve Management

A second use of GLD for the bullion bank besides the financing of a part of their inventory is reserve management. This plays a role for every institution that accepts bank deposits in ounces, that lends ounces and that holds only a fractional reserve of physical gold against this created credit. For example balance sheets, we refer to Bullion Banking with Alice and Bob.
The bullion bank can hold gold instruments in various forms, for example,

1. physical gold in the vault,
2. allocated balances with other institutions,
3. shares of GLD,
4. unallocated balances with other institutions,
5. outstanding loans denominated in ounces,
6. long OTC Forward or COMEX futures positions,
7. and many others.

Only the first three of these are free of credit and counterparty risk and can therefore be considered as reserves. This is analogous to the reserves of an ordinary commercial bank that is in the business of lending dollars. The reserves of the commercial bank consist of cash in the vault and of reserve balances with the respective central bank.
Besides the credit risk, i.e. the risk that a counterparty fails to honour its obligations, any bullion bank that holds only a fractional reserve against their customers’ deposits, is exposed to liquidity risk. For example, customers might request allocation of their unallocated account balances. In this case, both a liability of the bank (the customers’ unallocated account balance) and an asset (a reserve of physical gold) disappear from the balance sheet. This is analogous to a customer withdrawing dollars in cash from a commercial bank or to a customer transferring out credit money from her account.
Since such a withdrawal involves a reduction of our bullion bank’s reserves, our reserve ratio deteriorates. We now have less reserves relative to the size of our balance sheet. This is where GLD comes in handy. We can easily replenish our reserves by

• selling unallocated gold or other instruments that involve credit or counterparty risk, and
• purchasing shares of GLD, and optionally
• redeeming these shares for physical gold.

In effect, on our balance sheet, we have replaced credit assets (paper gold) by reserve assets (GLD shares or physical gold).

Shortage of Reserves and Reduction of GLD Inventory

Although inventory financing may be one of the motivations for establishing GLD and for the APs to place additional gold in GLD, it is not the activity that correlates with the inventory changes on which our trading strategy is based. The reason is that our strategy is based on the creation and redemption of GLD baskets, but inventory financing occurs when a bullion bank sells existing shares of GLD to an investor.
Let us try to disentangle these steps. The bullion banks presumably hold a part of their reserve in the form of physical gold in their own vault and another part in the form of GLD shares. Whenever they acquire a larger amount of additional physical reserves, they probably place some of it into GLD and create new baskets of shares, but they do not necessarily sell these GLD shares to investors and even if they do, this need not happen at the same point in time.
Conversely, if a bullion bank faces a large allocation request and needs to replenish the physical gold in their vault, they can redeem baskets of GLD that they already own. In a true emergency in which a bullion bank runs out of reserves, they can even

• sell some paper gold, and
• purchase GLD shares with the proceeds, and optionally
• redeem these GLD shares in order to receive physical gold,

thereby replacing a credit asset (paper gold) with a reserve asset (GLD shares or physical gold).
Since our trading strategy uses only the instances in which shares of GLD are redeemed for physical gold, it is sensitive to the following two situations:

• The bullion bank has purchased shares of GLD in order to boost its reserves. In order to achieve a balance between their two forms of reserves, i.e. GLD and physical gold in the vault, they redeem some of these GLD shares.
• There has been a request for allocation by some investor who requires individual bars in the vault, and so GLD shares need to be redeemed in order to get to the bars.

We therefore expect that some changes to the inventory of GLD are related to the reserve management of the bullion banks. Excess reserves lead to a growing inventory of GLD whereas a shortage of reserves results in a reduction of inventory. If this picture is correct, we should find independent evidence that reductions of GLD inventory correlate with a shortage of reserves. There is indeed anecdotal evidence for such a correlation.
One of the largest recent reductions in GLD inventory occurred on 22 May 2012 with a net redemption of 563024 ounces, i.e. 58 baskets or about 17.5 tonnes. This event coincides up to one week with a negative one-month GOFO quoted by J.P. Morgan on 16 May 2012 as reported by Izabella Kaminska. This indicates that J.P. Morgan was presumably willing to pay a premium in order to swap dollars for gold, i.e. they were willing to buy at spot and sell a one-month forward at a discount.

GOFO on 16 May 2012 (Reuters)

Robert LeRoy Parker spotted another example. Some of the largest reductions in GLD inventory occurred on 23 and 24 August 2011 with redemptions of 798417 ounces and 876288 ounces, together 172 baskets or about 52 tonnes of gold. This coincides with the following reported Gold Forward Offered Rates (GOFO) found on the LBMA website at that time. The numbers are GOFO for 1,2,3,6 and 12 months:

19-Aug-11 0.40000 0.41600 0.42600 0.48800 0.51000
22-Aug-11 0.48250 0.43000 0.35000 0.25000 0.08750
23-Aug-11 0.40800 0.41600 0.42250 0.50000 0.52600

The term structure beyond one month was inverted on 22 August 2011, indicating that some bullion bank(s) frantically tried to borrow gold in the OTC market, gold that was needed within one to two months. They were willing to buy one-month forward and sell a longer forward at a discount. Recall that the GOFO rates reported on the LBMA website are not individual quotes that can be associated with a specific bullion bank, but rather the averages from their daily telephone survey of the major market makers. Also note that a few days later, these numbers were ‘corrected’ on the LBMA website.
A third example was again reported by Izabella Kaminska. On 10 August 2011, Société Générale quoted an inverted term structure:

GOFO on 10 August 2011 (Reuters)

Again, this coincides with losses of GLD inventory of 418373 ounces on 9 August 2011, 759559 ounces on 11 August 2011 and 408988 ounces on 12 August 2011, together 1.59 million ounces, 164 baskets or 49.3 tonnes. Since Société Générale is not an AP, apparently someone else took the gold out of GLD and lent it to them.
We have to concede that the published GLD inventory only records the aggregate daily changes. The fax from HSBC that Warren James at Screwtape Files discovered, shows redemptions of 759618 ounces for 16 August 2011. This must have been some intra-day movement that was compensated by even larger creations on the same day because the reported aggregate change of inventory for that day is positive. Apparently the inventory changes are such a good indicator that the trading strategy is still effective even if we work with daily aggregates only.

Interpretation

We arrive at the interpretation that large allocation requests by customers of a bullion bank sometimes force the bullion bank to take physical gold out of GLD. This is a buy signal that indicates a higher price of paper gold in the near future. Conversely, once the bullion bank has replenished its reserve of physical gold and shifts a part of this back into GLD, this forms a sell signal that indicates a less rapidly increasing price of paper gold in the near future.
FOFOA must have had this picture in mind when he called GLD the Central Bank of the Bullion Banks, i.e. a depository of additional reserves shared by those bullion banks that are at the same time APs.
It remains to understand why the paper price of gold rises during the period immediately following strong demand for physical gold.

Conservative Interpretation

A simple explanation is the following. Many large redemptions of GLD occur towards the end of a sell-off in the price of paper gold. There might be some sophisticated buyer(s) of physical gold who buy the dips and whose timing is excellent.
Notice that the buyer(s) purchase only about 5 to 50 tonnes of physical gold on the relevant days whereas about 2700 tonnes of paper gold are sold every trading day (total transaction volume of all sales, assuming 62.5 trading days per quarter) according to the Loco London Liquidity Survey published in August 2011. Although the physical purchase is tiny compared to the trading volume of paper gold, after this purchase the price of paper gold increases.
We might attribute this to the excellent timing of the large physical buyer whose activity we can sometimes spot by watching the inventory of GLD.

Speculative Interpretation

If you find this interpretation unsatisfactory and ask why should the paper price increase after the purchase of an amount of allocated gold that is small compared to the volume of paper gold traded, the only way out is more speculative.
What if somebody manages the price of paper gold in such a way as to control the flow of physical gold? The following chart shows the remarkably uniform increase in the dollar price of gold over the previous decade from 2002 to 2011. The black line is the regression line in the logarithmic diagram. It starts on 2 January 2002 at $266.60 and ends on 29 December 2011 at $1589.95 for an annual rate of increase of 19.56%. The blue and light blue bands are a factor of 1.118 and 1.25 away from the black line.

The London pm gold fixing in US$ between 2 January 2002 and 29 December 2011

Does this chart look ‘managed’? Maybe…
How would one manage the price in such a way as to control the flow of physical gold? Let us make up some numbers in order to arrive at a toy model. There is a flow of new gold into the market from mining and recycling. This amounts to about 3000 tonnes per year. If a third of this amount goes through the London market, this amounts to about 4 tonnes per trading day (assuming 250 trading days per year).
In addition, there are some investors who sell allocated gold and some who purchase allocated gold. Let us be generous and assume that this trading volume of allocated gold is three times as big as the flow of new gold. This suggests a trading volume of 16 tonnes of physical gold per trading day in the London market which is tiny compared to the trading volume of paper gold (2700 tonnes per trading day). It is important to keep in mind that the inflow of new gold has an approximately constant weight per day.
It firstly seems plausible that allocation requests of about 5 to 50 tonnes are big enough in order to affect the reserve management of the bullion banks and thereby result in changes to the GLD inventory. It is also plausible that the management of the physical reserve that underlies the gold market is a rather delicate business because the paper trading volume is so huge compared to the physical volume.
Secondly, let us assume that the allocation requests by the buyers of physical gold involve an approximately constant sum of dollars per time. Investors or central banks who gradually switch from dollars into gold or who gradually diversify their foreign exchange reserves. We therefore have an inflow of physical gold that is steady in terms of weight per time, but an outflow that is steady in terms of dollars per time.
In order to manage the flow of physical gold, someone might therefore try to manage the dollar price of paper gold. Since the physical inflow is by weight, but the outflow by dollars, one might try to increase the paper price in response to an increased outflow of physical gold and try to lower the paper price whenever there are plenty of reserves. There you go. This is indeed consistent with what we see in our trading strategy: The price of paper gold increases in response to an outflow of physical gold.
Let us keep this speculation in mind as a second possible explanation of why the trading strategy works.
In light of this interpretation, it would be worthwhile watching the total inventory of GLD (the blue curve, right scale, in the very first diagram of this article). The inventory of GLD, the central bank of the bullion banks, should move in line with their total physical reserves. We see that the inventory peaked at 42.1 million ounces (1310 tonnes) in summer 2010, a level that has not been reached ever since. Even though the dollar price of gold rose further from $1200/ounce to $1900/ounce, the investors in GLD were not able to entice the APs to make additional inventory available.
Nevertheless, the present GLD inventory of still 40.84 million ounces (1270 tonnes) forms a considerable reserve of physical gold which the bullion banks can draw on in order to replenish their own reserves. Should the total inventory continue to decline, this would indicate increasing pressure on the physical reserves of the bullion banks. The financial media, however, would presumably tell you that investors are no longer interested in gold, that they sold their shares in GLD and that this was bearish for gold. Nothing would be further from the truth.

The SLV Inventory Strategy

The same trading strategy that we developed for gold, can also be applied to silver. We therefore watch the inventory of the iShares Silver Trust (SLV) whose inventory management is organized in the same way as that of GLD. Note that a share of SLV presently represents about 0.97 ounces of silver. One basket consists of 50000 shares, i.e. about 1.5 tonnes of silver presently worth $1.37 million (London silver fixing of $28.25/ounce on 29 May 2012).
The following histogram shows the distribution of the daily changes to the inventory of SLV.

Distribution of daily SLV inventory changes in millions of ounces from 1 January 2007 to 30 April 2012

The threshold for our trading strategy is an inventory change by at least 3.5 million ounces (about 108.9 tonnes worth $98.9 million). Apart from the choice of this threshold, the trading strategy is identical.
The following chart finally shows the performance of this strategy. The black curve (left scale) is the London Silver Fixing in U.S. Dollars. Again, buy and sell signals are indicated by green and red dots, respectively, and the light-blue shaded areas are the times during which the strategy is invested, i.e. about 25% of the time. During the invested periods, the silver price increases at an annualized rate of 28.7% whereas during the remaining times it increases only at an annualized rate of 11.6%. The blue curve (right scale) finally shows the total inventory of SLV.

SLV Inventory Strategy from 1 January 2007 to 30 April 2012

Whereas in the case of GLD, basically any threshold beyond our 250000 ounces works, as long as it gives a sufficient number of signals at all, it is substantially more difficult to find efficient parameters for the strategy involving SLV and silver. Nevertheless, we do have an effective trading strategy, and so everything said about reserve management and GLD seems to apply to silver and SLV, too.

Comments

If you have comments, suggestions or corrections concerning this article, please comment here (comments are moderated, and it may take a while until I have time to check for new comments). FOFOA just opened a new thread GLD Talk Continued, and so for the further discussion, please take a look there.

http://victorthecleaner.wordpress.com/2012/06/01/gld-the-central-bank-of-the-bullion-banks/

$20 Pure Silver Commemorative Coin - Diamond Jubilee (2012)

Mintage Limited to 250000 coins worldwide

Composition fine silver (99.99% pure)

Finish specimen

Weight (g) 7.96

Diameter (mm) 27

Edge serrated

Certificate not serialized

Face value 20 dollars

Artist Laurie McGaw (reverse), Mary Gillick (obverse)

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Perth Mint 1oz Kookaburra Coins

Year Max Mintage Actual Mintage Difference
1990 300,000 300,000 0
1991 300,000 278,136 21,864
1992 300,000 195,118 104,882
1993 300,000 165,406 134,594
1994 300,000 153,414 146,586
1995 300,000 131,411 168,589
1996 300,000 146,286 153,714
1997 300,000 147,781 152,219
1998 300,000 91,550 208,450
1999 300,000 98,513 201,487
2000 300,000 93,238 206,762
2001 300,000 158,969 141,031
2002 300,000 76,245 223,755
2003 300,000 86,737 213,263
2004 300,000 74,059 225,941
2005 300,000 80,336 219,664
2006 300,000 73,765 226,235
2007 300,000 197,229 102,771
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Counterfeit 2008 American Silver Eagle

Tungsten filled Gold bars

ABC Bullion received the following email from one of our refinery partners this week as a general warning to those in the bullion industry.

Note:

• ABC Bullion did not purchased this bar, the bar was bought by a dealer in the UK that has no connection to ABC Bullion, the email and photos were sent to us as a general warning.
• The bar is a "one off"  
• I xxxx'ed out the city's name to avoid any second guessing as to the name of the dealer.

19/03/2012:

Attached are photographs of a legitimate Metalor 1000gm Au bar that has been drilled out and filled with Tungsten (W).

This bar was purchased by staff of a scrap dealer in xxxxx, UK yesterday. The bar appeared to be perfect other than the fact that it was 2gms underweight. It was checked by hand-held xrf and showed 99.98% Au. Being Tungsten, it would not be ferro-magnetic. The bar was supplied with the original certificate. 

The owner of the business that purchased the bar only became suspicious when he realized the weight discrepancy and had the bar cropped. He estimates between 30-40% of the weight of the bar to be Tungsten. 

 

This is very worrying and reinforces the lengths that people are willing to go to profit from the current high metal prices. Please be careful.

 

'God's Worker' Respondes to NYT OpEd

Greg Smith's OpEd in today's NYT has forced the man at the top to respond.  That's right, God's Worker himself has chimed in on the opinion of his 'disgruntled' former employee:

March 14, 2012
Our Response to Today’s New York Times Op-Ed:
By now, many of you have read the submission in today’s New York Times by a former employee of the firm.  Needless to say, we were disappointed to read the assertions made by this individual that do not reflect our values, our culture and how the vast majority of people at Goldman Sachs think about the firm and the work it does on behalf of our clients.

In a company of our size, it is not shocking that some people could feel disgruntled.  But that does not and should not represent our firm of more than 30,000 people. Everyone is entitled to his or her opinion.  But, it is unfortunate that an individual opinion about Goldman Sachs is amplified in a newspaper and speaks louder than the regular, detailed and intensive feedback you have provided the firm and independent, public surveys of workplace environments.
While I expect you find the words you read today foreign from your own day-to-day experiences, we wanted to remind you what we, as a firm – individually and collectively – think about Goldman Sachs and our client-driven culture.
First, 85 percent of the firm responded to our recent People Survey, which provides the most detailed and comprehensive review to determine how our people feel about Goldman Sachs and the work they do.
And, what do our people think about how we interact with our clients?  Across the firm at all levels, 89 percent of you said that that the firm provides exceptional service to them.  For the group of nearly 12,000 vice presidents, of which the author of today’s commentary was, that number was similarly high.
Anyone who feels otherwise has available to him or her a mechanism for anonymously expressing their concerns.  We are not aware that the writer of the opinion piece expressed misgivings through this avenue, however, if an individual expresses issues, we examine them carefully and we will be doing so in this case.
Our firm has had its share of challenges during and after the financial crisis, but your pride in Goldman Sachs is clear.  You’ve not only told us, you have told external surveys.
Just two weeks ago, Goldman Sachs was named one of the best places to work in the United Kingdom, where this employee resides.  The firm was the highest placed financial services company for the third consecutive year and was the only one in its peer group to make the top 25.
We are far from perfect, but where the firm has seen a problem, we’ve responded to it seriously and substantively.  And we have demonstrated that fact.
It is unfortunate that all of you who worked so hard through a difficult environment over the last few years now have to respond to this. But, our response is best demonstrated in how we really work with and help our clients through our commitment to their long-term interests.  That priority has distinguished us in the past, through the financial crisis and today.
Thank you.
Lloyd C. Blankfein Gary D. Cohn
Via the WSJ

Why I Am Leaving Goldman Sachs

By GREG SMITH

Published: March 14, 2012

TODAY is my last day at Goldman Sachs. After almost 12 years at the firm — first as a summer intern while at Stanford, then in New York for 10 years, and now in London — I believe I have worked here long enough to understand the trajectory of its culture, its people and its identity. And I can honestly say that the environment now is as toxic and destructive as I have ever seen it.

To put the problem in the simplest terms, the interests of the client continue to be sidelined in the way the firm operates and thinks about making money. Goldman Sachs is one of the world’s largest and most important investment banks and it is too integral to global finance to continue to act this way. The firm has veered so far from the place I joined right out of college that I can no longer in good conscience say that I identify with what it stands for. 

It might sound surprising to a skeptical public, but culture was always a vital part of Goldman Sachs’s success. It revolved around teamwork, integrity, a spirit of humility, and always doing right by our clients. The culture was the secret sauce that made this place great and allowed us to earn our clients’ trust for 143 years. It wasn’t just about making money; this alone will not sustain a firm for so long. It had something to do with pride and belief in the organization. I am sad to say that I look around today and see virtually no trace of the culture that made me love working for this firm for many years. I no longer have the pride, or the belief.

But this was not always the case. For more than a decade I recruited and mentored candidates through our grueling interview process. I was selected as one of 10 people (out of a firm of more than 30,000) to appear on our recruiting video, which is played on every college campus we visit around the world. In 2006 I managed the summer intern program in sales and trading in New York for the 80 college students who made the cut, out of the thousands who applied. 

I knew it was time to leave when I realized I could no longer look students in the eye and tell them what a great place this was to work. 

When the history books are written about Goldman Sachs, they may reflect that the current chief executive officer, Lloyd C. Blankfein, and the president, Gary D. Cohn, lost hold of the firm’s culture on their watch. I truly believe that this decline in the firm’s moral fiber represents the single most serious threat to its long-run survival. 

Over the course of my career I have had the privilege of advising two of the largest hedge funds on the planet, five of the largest asset managers in the United States, and three of the most prominent sovereign wealth funds in the Middle East and Asia. My clients have a total asset base of more than a trillion dollars. I have always taken a lot of pride in advising my clients to do what I believe is right for them, even if it means less money for the firm. This view is becoming increasingly unpopular at Goldman Sachs. Another sign that it was time to leave.

How did we get here? The firm changed the way it thought about leadership. Leadership used to be about ideas, setting an example and doing the right thing. Today, if you make enough money for the firm (and are not currently an ax murderer) you will be promoted into a position of influence. 

What are three quick ways to become a leader? a) Execute on the firm’s “axes,” which is Goldman-speak for persuading your clients to invest in the stocks or other products that we are trying to get rid of because they are not seen as having a lot of potential profit. b) “Hunt Elephants.” In English: get your clients — some of whom are sophisticated, and some of whom aren’t — to trade whatever will bring the biggest profit to Goldman. Call me old-fashioned, but I don’t like selling my clients a product that is wrong for them. c) Find yourself sitting in a seat where your job is to trade any illiquid, opaque product with a three-letter acronym.

Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them. If you were an alien from Mars and sat in on one of these meetings, you would believe that a client’s success or progress was not part of the thought process at all.

It makes me ill how callously people talk about ripping their clients off. Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,” sometimes over internal e-mail. Even after the S.E.C., Fabulous Fab, Abacus, God’s work, Carl Levin, Vampire Squids? No humility? I mean, come on. Integrity? It is eroding. I don’t know of any illegal behavior, but will people push the envelope and pitch lucrative and complicated products to clients even if they are not the simplest investments or the ones most directly aligned with the client’s goals? Absolutely. Every day, in fact. 

It astounds me how little senior management gets a basic truth: If clients don’t trust you they will eventually stop doing business with you. It doesn’t matter how smart you are. 

These days, the most common question I get from junior analysts about derivatives is, “How much money did we make off the client?” It bothers me every time I hear it, because it is a clear reflection of what they are observing from their leaders about the way they should behave. Now project 10 years into the future: You don’t have to be a rocket scientist to figure out that the junior analyst sitting quietly in the corner of the room hearing about “muppets,” “ripping eyeballs out” and “getting paid” doesn’t exactly turn into a model citizen.

When I was a first-year analyst I didn’t know where the bathroom was, or how to tie my shoelaces. I was taught to be concerned with learning the ropes, finding out what a derivative was, understanding finance, getting to know our clients and what motivated them, learning how they defined success and what we could do to help them get there. 

My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts. Goldman Sachs today has become too much about shortcuts and not enough about achievement. It just doesn’t feel right to me anymore. 

I hope this can be a wake-up call to the board of directors. Make the client the focal point of your business again. Without clients you will not make money. In fact, you will not exist. Weed out the morally bankrupt people, no matter how much money they make for the firm. And get the culture right again, so people want to work here for the right reasons. People who care only about making money will not sustain this firm — or the trust of its clients — for very much longer. 

Greg Smith is resigning today as a Goldman Sachs executive director and head of the firm’s United States equity derivatives business in Europe, the Middle East and Africa.

www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?pagewanted=2&_r=2

JP Morgan Whistleblower States JP Morgan Manipulates Silver & Gold Futures

 With today's NYT OpEd by Greg Smith of Goldman Sachs,  a JP Morgan insider has contacted us to release insider information regarding the manipulation of gold and silver futures by JP Morgan that he calls 'damning at best for JP Morgan', states that JPM is fearful of a cascading credit event being triggered in Greece as JPM has hidden derivatives in excess of $1 TRILLION USD, and confirms that JPM is involved with hiding client assets from MF Global.

This is the very first time this insider information has been made public, and the source is also contacting the CFTC with this same statement.

Dear CFTC Staff,

Hello, I am a current JPMorgan Chase employee. This is an open letter to all commissioners and regulators. I am emailing you today b/c I know of insider information that will be damning at best for JPMorgan Chase. I have decided to play the role of whistleblower b/c I no longer have faith and belief that what we are doing for society is bringing value to people. I am now under the opinion that we are actually putting hard working Americans unaware of what lays ahead at extreme market risk. This risk is unnecessary and will lead to wide-scale market collapse if not handled properly. With the release of Mr. Smith’s open letter to Goldman, I too would like to set the record straight for JPM as well.
I have seen the disruptive behavior of superiors and no longer can say that I look up to employees at the ED/MD level here at JPM. Their smug exuberance and arrogance permeates the air just as pungently as rotting vegetables. They all know too well of the backdoor crony connections they share intimately with elected officials and with other institutions. It is apparent in everything they do, from the meager attempts to manipulate LIBOR, therefore controlling how almost all derivatives are priced to the inherit and fraudulent commodities manipulation. They too may have one day stood for something in the past in the client-employee relationship. Does anyone in today’s market really care about the protection of their client? From the ruthless and scandalous treatment of MF Global client asset funds to the excessive bonuses paid by companies with burgeoning liabilities. Yes, we at JPMorgan that are in the know are fearful of a cascading credit event being triggered in Greece as they have hidden derivatives in excess of $1 Trillion USD. We at JPMorgan own enough of these through counterparty risk and outright prop trading that our entire IB EDG space could be annihilated within a few short days. The last ten years has been market by inflexion point after inflexion point with the most notable coming in 2008 after the acquisition of Bear.

I wish to remain anonymous as of now as fear of termination mounts from what I am about to reveal. Robert Gottlieb is not my real name; however he is a trader that is involved in a lawsuit for manipulative trading while working with JPMorgan Chase. He was acquired during our Bear Stearns acquisition and is known to be the notorious person shorting in the silver future market from his trading space, along with Blythe Masters, his IB Global boss. However, with that said, we are manipulating the silver futures market and playing a smaller (but still massively manipulative) role in manipulating the gold futures market. We have a little over a 25% (give or take a percentage) position in the short market for silver futures and by your definition this denotes a larger position than for speculative purposes or for hedging and is beyond the line of manipulation.
On a side note, I do not work directly with accounts that would have been directly impacted by the MF Global fiasco but I have heard through other colleagues that we have involvement in the hiding of client assets from MF Global. This is another fraudulent effort on our part and constitutes theft. I urge you to forward that part of the investigation on to the respective authorities.

There is something else that you may find strange. During month-end December, we were all told by our managers that this was going to be a dismal year in terms of earnings and that we should not expect any bonuses or pay raises. Then come mid-late January it is made known that everyone received a pay raise and/or bonus, which is interesting b/c just a few weeks ago we were told that this was not likely and expected to be paid nothing in addition to base salary. January is right around the time we started increasing our short positions quite significantly again and this most recent crash in gold and silver during Bernanke's speech on February 29th is of notable importance, as we along with 4 other major institutions, orchestrated the violent $100 drop in Gold and subsequent drops in silver.

As regulators of the free people of this country, I ask you to uphold the most important job in the world right now. That job is judge and overseer of all that is justice in the most sensitive of commodity markets. There are many middle-income people that invest in the physical assets of silver, gold, as well as mining stocks that are being financially impacted in a negative way b/c of our unscrupulous shorts in the precious metals commodity sector. If you read the COT with intent you will find that commercials (even though we have no business being in the commercial sector, which should be reserved for companies that truly produce the metal) are net short by a long shot in not only silver, but gold.

It is rather surprising that what should be well known liabilities on our balance sheet have not erupted into wider scale scrutinization. I call all honest and courageous JPMorgan employees to step up and fight the cronyism and wide-scale manipulation by reporting the truth. We are only helping reality come to light therefore allowing a real valuation of our banking industry which will give investors a chance to properly adjust without being totally wiped out. I will be contacting a lawyer shortly about this matter, as I believe no other whistleblower at JPMorgan has come forward yet. Our deepest secrets lie within the hands of honest employees and can be revealed through honest regulators that are willing to take a look inside one of America's best kept secrets. Please do not allow this to turn into another Enron.

Kind Regards,
-The 1st Whistleblower of Many

Below is a snapshot of our assets and liabilities in the trading space.

Perth Mint (Hong Kong) Limited

http://www.pmhk.com.hk/product.php

Anyone bought any products from PMHK? They are one of the distributor of Perth Mint products, the other distributor is HSB.

Capitalism Is An Alternative For What We Have Now

Maria Bartiromo: "What are the alternatives?"

Jim Grant: "Capitalism is an alternative for what we have now. I highly recommend it."  

Maria: "We all do."  

Grant: "No we don't."  

Maria: "The Federal Reserve may not."

Grant: "We ought to be discussing an intelligent move to a sound currency by which i mean a currency that is based on a standard and not at the whim and the discretion of a bunch of mandarins sitting around Washington D.C."

2009年曹仁超訪問

M：你在1948年出生，又是一個BABY BOOMER(戰後嬰兒潮)的受訪者了。

C： 以中國人來說，我差不多算是最早的BABY BOOMER。在四八、四九年左右，國共內戰已到尾聲，爺爺支持共產黨，將資金搬回上海，而那時候我老竇(爸爸)在香港做生意，她到上海娶了我媽媽便回香 港，我在上海出生的。五○年左右，大陸「抗美援朝」，而當時我們家族主要做煙草代理生意，抗美援朝將我們由「愛國份子」變成「黑五類」；加上當時聯合國宣 佈對中國禁運，煙草到港後未能運去內地，再死兩錢！

此舉對我們是雙重打擊，爺爺覺得勢色唔對，便叫媽媽帶我到香港避難三個月，於是我在三 歲來香港，那才第一次見到爸爸，也不懂叫「老竇」。老竇為了氹我叫他，帶我到告羅士打大酒店(即現在的LANDMARK置地廣場)聽演奏食西餅，那時代食 西餅是很「得人驚」的事情，還有食呂宋芒、上山頂…幾乎所有香港最高級的享受，都由老竇帶我去試過。他最初以為我只在香港留三個月，所以花了很多錢氹我， 第一年大約花了五千港紙，大約是現在五十萬元購買力吧。後來發現我們回不了大陸，加上生意一落千丈，老竇開始酗酒，後來爆血管，再之後便過身了。我懂事 時，家裡便開始變得貧窮，你可以想像我的六十年代，什麼穿膠花、油公仔、剪線頭、跟車送可樂等我都做過。

M：這種貧窮背景對你有很大影響呢。

C：坦白講，我小時不知道自己貧窮的，身邊所有小朋友都一樣，我常以為「冇飯食」先算窮，我有飯開又怎叫做窮呢？其實老竇留下小量積蓄給我們，媽媽亦很小心運用，所以我從未試過冇飯開，真正貧窮的日子不算很長。

M：那麼你從那時開始有窮的感覺？

C： 現在回看，是因為太多朋友話我窮，我才知道自己窮。我認為問題在六三年老竇過身之後，他的朋友一而再地告訴我，其實我很窮。以前我常到茶樓飲茶，去食西 餅，但現在不能，為什麼呢？我發現別人家裡有雪櫃、電視機，為什麼我家冇呢？因為冇錢，爸爸的朋友告訴我，因為我死老竇，很窮。窮的感覺是他們告訴我 的，I WAS TOLD。最令我感受到的，是別人對窮人的歧視眼光，甚至不准許自己的女兒和我玩，怕她愛上我這個窮鬼。

M：那時代找工作容易嗎？

C： 也不容易的，可以講，每個時代都有其艱難。在六十年代，找一份工作要有舖頭擔保，人浮於事，找工作並不容易，不是想做就有工作的。我在六七年中學畢業，暴 動之後更難找工作，那時有工廠便做，冇就去穿膠花釘珠仔，住板間房、有飯食便行。反而我覺得現在要找工作的話一定找到，不過你們較揀擇而已。(M：以前你 們的目標是搵食，現在我們的目標是發達嘛！)對啊！我曾經寫過：我們那時是搵食艱難、發達容易；現在社會是搵食容易、發達艱難。

M：現在越來越多人醉心投機，我不認為那是投資，而越來越少人工作生產，你認為這樣的社會沒有問題嗎？

C： 我認為社會是圓形的，例如美國戰後四九年大衰退，有工做便很開心了；到五十年代開始興旺；到六十年代美國進入所謂繁榮期，有飯食有屋住，有安定的工作，連 汽車都有，但看不到前路，所以到六十年代後期出現胡士托、頹廢派、吸毒問題等，直到八十年代初期，是美國迷失的二十年。(M：那香港的情況呢？)香港的 五、六十甚至七十年代類似美國戰後，是貧窮時期，大陸不斷有廉價勞工湧入搶飯碗，老闆絕不會加你人工，窮人永遠是窮人，只有寄望下一代受教育，能夠成為香 港的中產階級改善生活；(M：現在的香港類似美國的七、八十年代？)對，香港在八、九十年代至現在經歷了三十年的繁榮期，我們受過教育、有學問，而班鬼子 佬(外國人)一步步撤離香港，我們對上沒有CEILING，我們REPLACE了他們的位置兼夾享受了香港的全盛時期，我們由貧窮階級進入中產階級，叻一 點的更能發達！

M：那我們這一代後生的又如何？

C： 但問題是，當這班人坐上中產階級的位置之後，後來的一批如何上位呢？現在你們上來，已經有我們百幾萬中產階級坐晒位，我們不會讓你們上來的！這情況類似七 十年代的美國，而到八十年代後期上位的都不是中產階級，講的是INNOVATION、互聯網，二千年講的是INTERNET世代、X GENERATION。不過香港沒有X GENERATION，香港社群只得幾百萬人，如何建立互聯網呢？美國有數以億計的人口，因此能建立互聯網。

M：對啊！有年輕人投訴上一代霸著位置不讓年輕人上位呢！

C：點解我要讓個位出來？！對不對？我這個位置月入十幾萬，坐得好舒服，點解要我走啫？！我不單只不走，更專登不讓你上來！因為我沒有責任讓你上來的，這個位坐得我好舒服嘛！

M：你們那代人掌握了成功的方程式，上了位後便不斷重複流水作業，結果令到很多產業發展停滯不前呢。

C： 對啊！日本也一樣！九○年代到現在都是，上一代霸著位置，死都唔改，硬係不讓你上來，所以有「望窗一族」，不過我見到日本開始有所改變了。(M：我又看不 到香港年輕人凝聚了什麼力量出來呢。)所以我常說東方人有「奴性」問題，上一代人阻著，為何不反抗呢？另找商機呢？美國新一代找到互聯網、SOFT WARE、3-G、BIO-TECH等我們不懂的產業，打低美國既有的中產。當然，這班人又重複我們所做的，霸著位置，壟斷，不讓後來的上位，KILL YOU WHEN YOU ARE BABY！互聯網開始出現霸主時代，類似美國六、七十年代，我相信下一代又要用十多二十年時間去抗爭了。

M： 如果我們這一代人沒有或者未能去抗爭，你會否認為是因為我們渣斗？

C： 對！為何我們可以隊冧班鬼子佬取代他們，而你們不隊冧我們呢？(M：渣斗之處在那裡？)唔敢隊冧我地囉！我在七二、七三年已經在《明報》寫文章：「鬼子佬 滾回老家去！」因為將來是我們的，JARDINE？WHO ARE YOU？WHEELOCK？WHAT'S YOUR NAME？HUTCHISON？乞人憎呀！我在七十年代已經預言三行時代結束，十大地產商時代來臨，我們要做HERCULES(神話中的大力士)，只要讓 我們雙腳著地，連地球都能抬得起！所以我們兩腳著「地」，利用香港的房地產，就可以隊冧班鬼子佬！那年代讀大學的精英，畢業時便曉得「GOOD MORNING！SIR！」、「YOUR MOST OBEDIENT！SIR！」，六十年代大部份精英最大理想是守規矩做公務員，但最後被我們這班反斗星打低晒！我們這班不服從的，有錢便買地、冇錢的買地 產股，最後成為贏家，身家比他們多得很呢！我們憑著香港的房地產撈了一大筆，叻的就像李嘉誠，而這遊戲自七十年代玩到一九九七年，然後再冇新的地產企業出 現，亦不能再以房地產創造明天了。

M：你所講的利用房地產的HERCULES，不單只隊冧班鬼子佬，仲隊冧埋我們這班下一代喎！因為你們碌卡碌埋我們那張啊！

C： 不是你們，是四代人。第一，我們冇樓的上一代；第二，我們這一代冇樓的；第三，下一代冇樓的；還有大陸出來冇樓的。所以有四代人做我們的奴隸嘛！我們一代 人搵了你們四代人的錢嘛！(M：呀~Orz…)做乜你們這代人咁蠢，仲被我們呃！一出身便整個龜殼你孭，爬下爬下，你做乜孭個龜殼呢？(M： 呀~Orz…)「孭個龜殼做蝸牛」是我們SET出來的RULES嘛！點解一定要遵守我們的RULES呢？

M： 即是說我們自小接受你們的教育，要尊師重道、便宜莫貪、沒有不勞而獲、要守規矩，然後一出社會便上了你們的當呢。

C： 對啊！要不是哪裡來四代人養我們一代呢？有些學校提倡什麼知識博大、性格優雅，講出來堂而皇之，但對出來社會做事可能沒什麼幫助。我可以教你的，不是你的 人格會否優雅，而是「如何在不犯法的情況之下發財」，這其實是大學應該提供的教育，但這些都不能公開，說出來便會被責罵為「衰人」。欺負弱小，我每日都 做：回家食飯，食魚、牛、豬…這個世界永遠都是有智慧的動物食冇智慧的，「死蠢」就當然被人吃掉，但是，這些都不能寫進我的投資日記嘛。(M：你們那一代 人講一套做一套，還教我們做隻死蠢的豬呢！我們徹底地被整了！)作為農莊的主人，WHY SHOULD I TEACH THE PIG TO SING？冇理由教隻豬去唱歌㗎！只要你們聽教聽話、乖乖地做豬仔，那我就有豬肉吃了！對不對？聰明的人要THINK OUSIDE THE BOX嘛！要超越上一代，就不要一味聽教聽話，永遠成為上一代的COPY。

M：今時今日在香港可以不買樓不買股票嗎？

C： 你也可以去上海玩嘛~到了大陸的時候，你在社會上層，九七年後在大陸面對的環境，就類似我們在七十年代面對著你們。這個世界一定會有上層與下層，你在上層 便成為既得利益者，唔好運在下層的話，你便是被剝削那班。這世上無論什麼制度都有剝削者和被剝削者，我們這一代人是剝削者，而你們是被剝削者嘛！就算是我 比你勤力工作，我的財富最多比你多一個開，何解現在我的身家比你多十個、一百個開呢？因為我在剝削你嘛！你不知道嗎？我八元買匯豐銀行股票然後一百六十元 賣給了你嘛！我們這一代人的成就建基於你們身上嘛！

M：你對年輕人有什麼建議呢？

C： 年輕人不反叛就冇資格做年輕人，我主張年輕人反叛的，但要知道這世界不是你玩晒，所以要PLAY ACCORDING TO THE LAW，要在法律框框裡面造反，最多被人家話不道德，但要做法律容許之下的事，即是做一個「合法而不道德的人」！你們有兩個方法。第一，就好像我們在六 十、七十年代覺得唔服氣，「點解要去GOOD MORNING！SIR！」？於是我們就去玩一瓣鬼子佬不懂的，去炒地皮，最後會德豐(WHEELOCK)、和記(HUTCHISON)、怡和 (JARDINE)都輸了。你們為何不去玩一瓣我們不懂的？沒理由去葡京搵何鴻燊玩嘛！每一代人都要找突破點去隊冧上一代，你們這一代人連找破綻都不去想 不去做，又如何突破呢？我們很多人的死穴是「恐共」，我們身光頸靚，不夠膽去大陸玩，而你們身無分文就應該去闖，這是第二個方法─將我們成功的方法拿去另 一地方玩。今時今日的香港人一定要學懂兩件事：第一，ASSET ALLOCATION，資產配置；其次是STOCK PICKING，即揀股票。

M：我們在香港一定冇得玩嗎？

C： 你們在香港一定唔夠我們玩，第一，遊戲規則是我們SET的；第二，我們在香港搵老襯搵了幾十年，財雄勢大；還有，「喂~阿曾、阿任，點睇呀？搞搞佢啦~整 個勾地政策啦~」阿曾與我們是同一輩的，大家碌地沙玩大，我一個講唔掂，十個如何，我們是一群人，不單只這一群，連官都是自己人，都是同一代，都有共同語 言的嘛！WE ACT THE SAME，WE THINK THE SAME！有默契的，我們信奉同樣的價值，「嘩~冒牌BEATLES來港！」便一窩蜂湧去聽了，我們都是聽THE BEATLES長大的一代嘛。

M：房地產一日在你們手中，一日都仍然由你們話事呢。

C： 沒錯，房地產不跌，你們又如何上位呢？你們賺埋賺埋的錢只得三個選擇：第一個選擇─買樓，一炮過，供一世，條命賣給我們；第二個選擇─租樓，凌遲，每個月 割一塊肉；第三個選擇─瞓街。你們跑不掉的，甫進入這個系統，就不斷被我們吸水，我們是SUCKER，大概由十個傻佬供養我們一個，所以我們必定很肥的， 所以我們飲得起十多萬一瓶的紅酒，因為PAID BY YOU，NOT PAID BY US嘛！香港被我們DOMINATE，不單只房地產，是所有的都被我們控制了。

M：你們這班人的價值觀是「錢就是一切」，你覺得這是正確的。

C： 炒樓炒股票有什麼問題呢？(M：全港市民都炒樓炒股票也沒有問題？)你們不炒樓炒股票，誰來接我們的貴價貨呢？我們的貨大部份在七、八十年代建立，在九十 年代派給你們嘛！所以見你們在九七年接樓的時候，我覺得你們是傻佬，我們從每呎一百元炒至一萬元，炒了一百個開還接貨？！就算每呎四千元去接貨都是傻佬， 每呎四千元都賺你四十個開！我太太說，我什麼都沒有，只是有錢；而你們什麼都有，只是沒有錢！我一直相信「錢就是一切」，但這一兩年開始覺得不是了。 (M：為什麼呢？)有時都唔知賺咁多做乜，以我太太的理論講：第一粒鑽石就話嚇親我；第二粒鑽石，略有驚喜；第三粒，你應酬我嗎？第四粒，我覺得討厭；到 第五粒鑽石，喂，搞搞新意思吧。現在班有錢已經多錢到癲癲地亂花錢了。(M：那就不要賺太多，漏一兩粒鑽石可給我們吧！)幹嗎要給你？而且這可不是我一個 人決定，是一組人的決定。

《milk》雜誌 #406 2009年4月30日

Counterfeit Silver Lunar Dragons

Some photos of the fake Lunar Dragon (assuming the origin was China) were posted online recently. I've cut them out and posted them next to images of the real coin so you can see the differences. The images on the left are the counterfeit Silver Lunar Dragon coin and the images on the right are a real coin.

Major Differences.

Dragon Side:
- Swirls in clouds not as visible on the fake coin
- Smooth (instead of scaled) claws on the fake coin
- "Year of the Dragon" text on the real coin is thicker
- Detail in general (scales/edges) is more defined on the real coin

Queen Side:
- Queen looks to be smiling on the fake coin (not so on the real one)
- Queen has a sharper looking nose on the fake coin
- Wrinkle lines on forehead missing on fake coin
- Much more detail in the hair and crown on the real coin

These fakes even came in coin capsules which replicated the look of those from the Perth Mint.

This is only one version of a fake 2012 Silver Lunar Dragon, there may be others out there which look closer to the real item or have other differences to watch out for.

http://www.silverlunar.com/2012/03/silver-lunar-dragons-fake-vs-real.html

How Coins Are Minted Vintage Way

如果黃金係錢 (部分準備金銀行製度篇)

美國:
如果美國政府想發行美元,首先政府要發債券,將啲債券存入比美聯儲(US FED). 美聯儲可以話係美國政府的銀行, 政府稅收係存入美聯儲, 出糧比工務原又係美聯儲, 要借錢都係去美聯儲. 美聯儲收到啲債券就發行(印)美元(Federal Reserve Notes), 如果收到$10債佢係可以發行$100實體美元, 係債券的十倍/只需要一成儲備. 這$100實體美元唔係政府的, 係美聯儲自己既, 美聯儲再將這就$100實體美元借比政府,去應付日常需要(出糧/支出). 話明美聯儲借比美國政府就好明顯係有息收啦, 要還息就要再借, 所以係永遠還唔到. 如果美國政府自己發行錢唔係問美聯儲借, 美國債務會係現時的40%. 為甚麼會多咗60%? 就係因為複息(compound interest). 複息就係存$100落銀行, 銀行一年後比$2利息你, 再一年後比$2.04, 再一年係$2.08. 睇落唔係好多但只要時間越長複息威力越勁!!! 美聯儲1913年成立, 如果係個年問美聯儲借$100, 利息2利, 到2012年負責係$696.33, 這只是假設之後唔再借, 只要借得越多欠得越多.

美國政府的支出最後都係留落去民間銀行. 銀行收到啲實體美元就可以借錢出去. 但最多可以借自己存款10倍的錢出去, 一樣係一成儲備. 但所借出去的美元唔係實體美元, 為甚麼呢? 因為美國銀行唔可以印錢. 你會問唔可以印錢點可以借自己存款10倍的錢出去呢? 答案就係只要唔係實體美元就冇問題啦, 只需要電腦記錄. 你要買樓, 冇人會係銀行帳戶提走一百萬交比賣家, 賣家再將一百萬存入自己銀行帳戶. 通常都係支票/過數, 係唔會真係用到實體美元. 如果有個傻仔真係要一百萬實體美元, 只要銀行有, 銀行都可以將啲錢交比個傻仔, 如果無就要佢等吓, 問美聯儲印. 這個世界係永遠唔會唔夠錢因為只要有紙同墨水就可以印美元. 嗰層樓一百萬成交買家銀行A只需要將當天同銀行B金錢往來做個總數. 如果係負數就要比錢銀行B, 係正數就等銀行B比錢. 只要大家條數係一樣就無問題, 假如係負數就同美聯儲講聲, 美聯儲就會將銀行A戶口啲錢過比銀行B. 每一間銀行都會係美聯儲有戶口, 所以冇必要用到實體美元, 由銀行A去銀行B再去銀行C. 美聯儲都唔需要實體美元, 只需要係電腦做記錄就得啦, 所以民間銀行要發行錢係唔需要實體美元.

香港:
香港有三間發鈔銀行: 滙豐, 渣打, 同中銀香港. 港元匯價係與美元掛鈎, 可以作有限度的自由浮動 $7.75-$7.85港元對$1美元. 香港香港金融管理局要求銀行要有兩成半儲備. 如果有人將$100美存入香港, 香港三間發鈔銀行係可以印$775-$785港元, 再放大4倍就會有$3100-$3140港元. 但這些港元都可以係實體因為三間發鈔銀行係可以自己印, 一樣只要紙同墨水係永遠唔會唔夠港元用. 其它銀行想要實體港元就要比錢加小小手續費就可以將自己的電腦記錄變成實體錢. 其他同美國無咩分別...

Bering Sea Gold!!!

如果黃金係錢 (銀行篇)

第二 好啦當黃金係錢, 但人的本性係會想現在得到一啲自己買唔起的東西, 好似電話, 車, 樓, 冇錢唯有借啦, 唔通打劫咩.  問題就係如果借錢有冇部分準備金銀行製度(fractional reserve banking).

如果有:

阿A入左$100落X銀行, B想買新車所以借$10, 同車行交易. 車行將得到的錢 $10存入Y銀行. 只要時間耐左, 會越離越多錢(increase money supply)係社會到. 錢一多價值/格會跌, 物價會上升啦, 通貨膨脹(inflation). 大家有冇留意我上一篇文話黃金係錢會係通縮, 依家話通脹就係因為有"部分準備金銀行製度". 本來你的錢, 銀行借出去, 但你唔會覺得/認為你啲錢係少左.只要有咩事發生, 大家都會想要返自己的存款, 但因為錢係黃金(唔係紙無得話印就印), 又唔可以收返晒所有借出去的錢, 所以好大機會係無錢/得好小比返你.最後只可以同你say SORRY.

如果冇:

請問點借錢呢? 係會有銀行, 將啲(金/銀)錢存入銀行之後係無息收重要到貼比倉費, 因為佢地幫助你保管你啲錢. 做生意要借錢, 買樓又要借錢, 有啲人生活都要借錢(現在大部份美國人)... 如果到時間真係有啲人要借錢先可以生活到,就真係sorry, 應該冇咩銀行會借, 信用卡都唔會啦, 最多係屋企人/好朋友, 因為有借無還, 借比你啲錢係比你消費, 消費完邊可能有錢還, 點借比你呢? 

好當你係想做生意, 生產物品, 錢搵錢, 只要係好生意模式, 睇得出有機會成功, 點會唔比你呢. 同樣如果你要買樓, 有啲咩事還唔到錢就收返你層樓, 都叫有啲野係手, 同依家無咩分別. 為一分別係有可能銀行比錢你係入股(equity)唔係借錢比你(debt). 本人覺得公平啲, 做生意入股就係你出8成, 銀行入2成, 每年要還利息(小過純債務利息), 之後就分紅/派息. 如果無盈利就唔會有分紅/派息但都會有利息支出. 買樓都一樣你8銀行2, 每年要比息, 賺/蝕銀行都要按比例分擔. 這樣做銀行會保守啲唔會係又借唔係又借, 整嗰最大資產泡沫(地產). 當然唔一定入股, 借錢比你都得㗎.

但講咗咁多都係廢話, 如果冇部分準備金銀行製度(fractional reserve banking)銀行邊有錢(金)借比你呢?

Silverman

駝鹿出沒注意 Canada 2012 Wildlife Series #4 - Endangered Species - Moose

Modernized Gold Standard

Lewis Lehrman (true gold standard) 

FOFOA (freegold) 

Robert Zollick (gold as reference point of currencies) 

Jim Sinclair (gold virtual currency)