The Prestige

The discussion over at Chris Martenson's blog, has reached page 25 30, and seems to be drawing to a close. Reading through it to the end is an acheivement worth smiling about, same goes for comprehending it (two separate things). **

In that thread, you'll find a number of contributions from folk who know much more about the precious metals markets than most of us ever hope to know in your lifetime, and a feast of opinion and perspectives which will unsettle your stomach because of the variety.

A few comments caught my eye, and I want to discuss them briefly, in relation to Bullion Banking. But first, an allegory. This morning I had this scene in my head - it's from the opening scene of 'The Prestige', where character Robert Angier (Hugh Jackman) appears to be in trouble, and Alfred Borden (Christian Bale) subsequently tries to free his nemisis but fails.

It's the perspectives that's interesting here - Borden does not have the full set of information to work with, comes to the wrong conclusions - what he interprets as a trick gone wrong is in fact part of the complex con being played on him. After all, who would have thought that Angier killed a clone of himself each night of the performance (using Nikola Tesla's technology), simply as bait for Borden. Great stuff, great film.

Comment #1 is a random one from 'russiaways', who sums up the conversation thread quite neatly:
"Markets, global sized and instantly connected are inherantly complex interactive systems that will resist or ignore all our efforts to totally understand and predict them.  In this respect I have come to a greater awareness of this complexity within the PM markets, but only insomuch as to see deeper levels of interaction, interpretation and more potential actions/decisions available to traders based upon their judgements ..." (link)

Comment #2 is the contributions from Bron Suchecki (comments are made in a personal capacity and do not represent the views of the Perth Mint):
"On my to do list is a paper on a bullion bank run or how a paper/physical price divergence would play and this discussion has provided some good material. Problem is that I see that paper being at least 100 pages long, primarily because there are a multitude of actors in the bullion market with different motivations and how each reacts to some trigger event (or no event at all, just a slow melt) and react to each other's actions is complex to say the least."(link)

In the same thread, Bron makes an interesting point about his own personal position and how he is able to observe information on physical flows, my takeaway from that comment is that the actual Bullion Banks also have access to information about physical flows, if they see they are really in trouble then they are in a position to act, long before you and I can*. I've had the same thoughts as I've been looking at bullion bars data thinking that I can make some good money by correlating at inventory levels, stock movements and price levels ... the bullion banks already have that data and they are way ahead of me.

If, from my limited perspective, I deduce that the Bullion Banks are in trouble then I venture it simply means I've got a lot more homework to do. By the way, I'm not refuting any particular blog author(s), just trying to put forward an argument (however fragile) that the Bullion Banks (and by extension the lever-pullers like the FED and other central banks) might have things under control just fine, and that the discovery of how they are doing this, is indistinguishable from magic simply because the inner workings are complex beyond our best understanding.

* that is sort of FOFOA-ish, but my point here is that the music is still playing, when we have all expected it to stop by now. Is there a deeper magic by which the game of musical chairs can continue indefinitely?

** [Update 13-May-2012] the Martenson thread hit 30 pages before petering out. Lots of good stuff there. I have archived every page, and I'll monitor it for another month or so, then produce a final PDF archive of the discussion for our permanent files.


Bron Suchecki said...

Prestige is a nice analogy - operationally the market is a lot more complex hence you can be "conned" (or let yourself be conned) if you don't understand how the market works.

Eg, how many have considered this aspect of GLD (from my latest comments at the Martensen thread):

"GLD will always reflect OTC prices as that is what it is arbitraged to (GLD's metal is 400oz bars in London, not 100oz bars in COMEX). GLD is really the price of gold in London and not the price of gold in NY, even though it is a US listed product.

If there was a real problem getting gold between UK and US (lets say gold exports are banned) or distrust in COMEX leading to its prices discounting, but the London OTC market was still operating and trusted, you would see GLD trading at a "fair" or much higher price to COMEX."

Louis Cypher said...

The more I learn the less I know. (Socrates ?)

Whoever said it was a wise man. It's much easier to be absolutely righteous and clueless.

"The path of the righteous man is beset on all sides by the inequities of the selfish and the tyranny of evil men. Bless it is he who in the name of charity and good will, shepards the weak through the valley of darkness for he is truly his brothers keeper and the finder of lost children. And I will strike down upon thee with great vengance and furious anger those who attempt to poison and destroy my brothers. And you will know my name is the lord, when I lay my vengance upon you!"

Interesting that Munger, Bill Gates and a lot of anti gold rhetoric is pooping up whereas the last few months have been the opposite as you observed.

Loved "The Prestige" BTW.

somanyroadsinvesting said...

Interesting that Munger, Bill Gates and a lot of anti gold rhetoric is pooping up whereas the last few months have been the opposite as you observed.

What did you mean the last few have been the opposite?

Good quotes. Yeah loved the Prestige.

I really have fallen out of love with Buffett and the whole clan there. I used to really admire them. I feel his analysis is incomplete on so many issues and he just gives his lemmings his conclusions without explaining the reasoning and his followers just follow him. I guess it took me a while to see the light.

Louis Cypher said...

The rhetoric and propoganda runs in circles and swings back and forth IMHO. Both sides play fast and loose with the truth. It wasn't that long ago Sprott was telling everyone he couldn't get any silver as a prime example . Or just look through a few months of articles here.

Just take a look at ZH right now and you can see the familiar memes being trotted out to counter the familiar memes and animated corpses with smiling rictus being trotted out by CNBC.

"Well I don't know why I came here tonight,
I got the feeling that something ain't right,
I'm so scared in case I fall off my chair,
And I'm wondering how I'll get down the stairs,
Clowns to the left of me,
Jokers to the right, here I am,
Stuck in the middle with you."

mr pinnion said...

I smell a Quentin Tarantino fan.
This is how that passage should be read.


Louis Cypher said...

You got me Ozzy (movie fan). Movies replaced the written words place in pop culture a long time ago and a lot was lost.. However, for some guys it's a boon as we can now have whole conversations using nothing but movie quotes.
Speaking of which (to go off on another tangent) but "The Avengers" is a great movie. A must see on the big screen.

KJ said...

I've only skimmed through Erik's opening post and looking forward to skimming through all the posts.

I've been under the assumption Harvey does not have any ulterior motive but that he himself is relying on the incorrect information of others ie. sprott/butler, etc.

In short, if I were to guess, I would suggest Harvey was a converted true believer long ago, and those, like Sprott, have been able to harness the force that is Harvey (honest, trustworthy, 'independent', etc.) to further their own agendas.

All the meanwhile, Harvey remains blind. I would guess if Harvey were to respond to the request for 'facts' or 'evidence', he would cite Butler & whoever else he has based his 'facts' on.

Anyways, could very well be wrong, but in the meantime, look forward to skimming. Thanks for the link.

KJ said...

btw, it's probably been pointed out at some time or another, but who are these mid-level silver guru types with you tube channels ie. BrotherJohn? And then there's these lower level guru's such as SRSrocco...

and who are these guys? Disciples of Butler? Following the silver markets like hawks in their basements? Anyways, perhaps there's some history on these characters out there but always found it odd when blogs such as SGS/TFMR stick up videos/reports and we already know what will be said, regurgitating the status quo.

somanyroadsinvesting said...

I guess its all a matter of perspective. How many guy are there pitching stocks on TV, blogs, newspapers etc its probably 5x in orders of magnitude greater than any metal commentary.

Dr Durden said...

Trust in the BroJF. Love the BroJF. He said $100 silver by the end of 2011 in mamy of his past videos. I will give him credit for doing some fairly in-depth research on supply side fundos, but he's just blind he can't see past his own prejudice.

I've been permabant from his as well as every other silverbug's forum on the intraweb - SGS, Silver Doctor's, more - for not taking nonsense and regurgitation for an answer. Not banned from Turd's; just don't care to log on anymore because when I did ask the real questions it was more of a *cricket* response than the typical "you bankster shill!" bullshit.