GRAND FRAUD OF EXCHANGE TRADED FUNDS
A spectacular fraud has been heaped upon the gold & silver investments. The same cartel members have executed it, led by JPMorgan and Barclays, but few in the precious metals community seem aware. It is unclear why the old veterans of the gold wars have been duped so thoroughly. This report attempts to provide an update with many details, certain hypotheses, and net effects of their initiative. So far, the evil cartel has succeeded in providing lazy PM investors more paper to chase.
STREET TRACKS GOLD ETF
◄ More serious criticism comes to the controversial ETF funds. My position has been clear for three years. When the StreetTracks GLD gold fund was launched, when the Barclays SLV silver fund was launched, my suspicion was noted. A few months after their launches, my condemnation was stated. They are managed each by gold & silver cartel players, established criminals in the precious metals fraud and suppression game. Imagine a mutual fund managed by the mafia claiming to be fair and a great investment! Utterly ridiculous, especially after they robbed your home and business! What is even more shocking is the broad acceptance of trust certain analysts give them, like Adam Hamilton of Zeal and Bob Moriarty of 321Gold. These men are not paid shills, but smart savvy guys. Broad exposure and criticism of these ETF funds is long overdue. The main source of competent in-depth criticism has been James Turk, editor of GoldMoney. His ongoing excellent chronicles of criticism have been covered in this newsletter, such as in the spring of 2007.
Richard Greene of Thunder Capital Mgmt has been extremely vocal lately on this topic, and negatively so. He has a published article, which makes certain sharply critical points. See “Sell Gold Stocks & Buy ETFs?” (click here). He advises strongly NOT to do so, since they are almost certainly shams that hurt the gold & silver prices. Greene immediately casts suspicion on the funds, due to the fact that their managers are the same criminal conmen who have kept the gold & silver prices down. This is a nobrainer conclusion to me. The rest is predictable in detail of the congame, a basic fraud very typical for Wall Street. A very important point must be made at the start. The GLD gold fund and SLV silver fund are managed by the US/London gold cartel criminals. The several other ETF funds with 95% likelihood are clean. The fraud kings are from the United States and England, central locus of the Fascist Business Model rogues. Other ETF funds in Canada and elsewhere are probably as solid as bullion. Here are two main points Greene makes in his indictment of the New York and London master thieves. He does not delve into the entire arena of disclosure, certification, short positions, and so on. It is a good thing to shine a spotlight on a crime scene from a multitude of angles.
SAME CRIMINAL MANAGERS: “I have heard from many investors inquiring if they should sell their gold stocks and just buy the gold and silver ETFs. The first thing they should understand is that doing so would prolong the time they must wait for gold and silver to reach their true market levels which are much higher. The gold and silver ETFs were created by such financial giants as JP Morgan and Barclays Bank that also serve as custodians and sub-custodians. These are the very firms that have been involved in the process of short selling gold and silver in huge quantities. That they would be involved in creating the ETFs had to be considered as most unlikely unless they had nefarious purposes.”
ETF FUNDS DENY OWNERSHIP: “If you can understand that the current economic and financial environment screams for protection through ownership of gold and silver, please stop shooting yourself in the foot by thinking that the ETFs will do anything but delay and muffle the rise of gold and silver, and leave the ultimate holders with nothing but worthless paper at exactly the moment you will need gold and silver for your financial survival. Nothing compares with having the gold and silver in your own possession and the gold and silver ETFs are way down the list as far as safety goes, and far below even gold and silver stocks.”
PRICES, DIVERSION & CONFISCATION
The price quoted for ETF funds looks suspicious, and not consistent with the bullion prices. The GLD fund for instance is priced at the value of one tenth of a gold ounce. Greene points out that the gold and GLD prices were incompatible on January 21. GLD was set at 87.05 but the spot gold price was 881.0 with 882.0 for the nearby futures contract price. Either the StreetTracks GLD fund was losing $11 to $12 per ounce it bought, or else the fund is cheating sellers out of $11 to $12 per ounce sold. Possibly an elaborate scheme has been in place, tying sales of their bullion at the lower price with futures contracts. Suspicion has been ripe that StreetTracks and Barclays have lent their bullion for shorting purposes, and the vehicles are futures contracts. The bottom line on price here is that if the GLD fund were legitimately buying gold bullion, and storing it in vaults, and managing the certification process, then the GLD price would routinely be $5 to $10 higher than the spot gold price. Something is badly awry.
Greene raises the idea that the ETF funds are designed to leave citizen investors with nothing, no metal in possession, precisely when the crisis peaks. The gold cartel faced a grand problem a few years ago. If physical demand for gold & silver grew continuously, the inherent shortages would result in a fast rising price for each metal. So they devised yet another paper lure to serve as a clever solution to satisfy demand with paper. The cartel knew they did not possess enough physical metal to satisfy that demand, and the demand was growing fast. They wanted to provide American investors with a corrupt ETF fund before someone else did so with an honest fund. In the process, over 800 tonnes of gold bullion demand were diverted to the Exchange Traded Funds, the largest being the GLD fund. In particular, the fraudulent GLD fund has been satisfied with paper in all likelihood, as in promises to secure gold or guarantees of gold certificates or silly promises.
Stock investors have been duped into taking a convenient route, buying gold like a stock under the symbol of “GLD” and “SLV” for silver. Convenience is not a benefit here, but a trick by the cartel to take advantage of that perceived convenience. The disclosure and transparency of StreetTracks also is miserable and an embarrassment. All informal investigations have failed to prove their legitimacy, yet they continue. Regulators are totally asleep on the matter, probably part of the fraud. The other shock to me is that the gold community seems not to care about the criticism, not to delve deeper into the issue, not to harbor suspicions, and to accept this sham as legitimate. Investors in our community do not seem to give this fund its proper label of FRAUD. They do not seem to care that disclosure is nonexistent, that audits have not been conducted, that documents are not filed as required by the Securities & Exchange Commission, that inspections of vaults are not permitted, that promises to secure bullion are used instead of actual bullion purchase.
THE COMPLEX REALITY OF THE FRAUDULENT StreetTracks “GLD” ETF FUND IS TWO-FOLD. 1) IT HAS SUCCESSFULLY DIVERTED DEMAND FROM LEGITIMATE PHYSICAL GOLD AND MINING STOCKS. 2) A FULL SCALE ABANDONMENT OF THE “GLD” FUND UPON REVELATION OF ITS FRAUD MIGHT BRING ABOUT SOME WILD WEEKS FOR GOLD. A collapse of the GLD fund might cause a significant amount of gold bullion to be sold, since they must hold some physical. That could push down the gold price temporarily until things settled down. However, a sudden liquidation of this incredibly devious GLD fund might force a magnificent short covering episode, since they are engaged in much sneaky illicit activity. They probably would scramble to phone their Daddy at JPMorgan, which would surely cover the Errant Son’s mess. The whole dissolution would be worth an admission ticket, but without doubt, volatility would accompany the controversial outcome.
◄ At least other ETF funds exist, like the IAU and Central Exchange Funds in Canada. Anything out of Canada has at least 20 times the likelihood of being legitimate versus any fund run by Americans or British. Now, a slew of new funds are coming. The State Bank of India plans an ETF fund in 2008 based upon gold. The London-based group World Gold Council plans a gold ETF fund in Dubai, which investors should be highly suspicious of. In August 2007, the Osaka Securities Exchange in Japan launched a gold-linked bond for smaller investors. Lastly, the Hong Kong Exchanges & Clearing plans to list several investment products including a gold ETF fund. The most radical gold trade vehicle is out of the Shanghai Futures Exchange. They plan to trade over the internet small blocks of 1 kilogram physical gold with margins of 9% of the contract value, resulting in a minimum of $2700 for the purchase. My hope is that the legitimate ETF funds overwhelm the fraudulent ones (GLD & SLV) in such a way as to inflict heavy damage on the evil cartel fund managers. Let them suffer from covered shorts in much the same way as corrupted large miners who sold grandiose hedge books.
TURK & BARCLAYS SILVER ETF
◄ In April 2007, James Turk wrote a comprehensive scathing article that cast harsh doubt on the SLV fund in London, managed by Barclays. They blocked his every attempt to see the vaulted silver, to examine the certificates, to review the documents, anything, during his inspection attempt. He was stonewalled totally, enough to conclude the entire fund was a false front of fraudulent activity. He and John Rubino slammed the SLV fund completely back in “Unanswered Questions About the Silver ETF” (click here).
Deep questions were raised almost a year ago on the fund’s legitimacy after careful examination of its prospectus. All double quoted items that follow indicate probably fraudulent, if not criminal, activity. Their “third party cash settlements” imply derivative transactions, obviously forbidden. They admit an investment “similar” to silver, incredibly. Are funds backed by silver or assets in the trust, like futures contracts? Do they “contemplate” owning silver, or are they required to own silver? Redemptions can be suspended if the custodian has no silver, plainly stated. Unanticipated difficulties related to illiquidity might imply inadequate physical silver for redemptions. They admit that assets are “expected” to be silver, incredibly. References are made to “allocated” silver rather than owned physical silver. They actually say that custodian JPMorgan “may substitute other Bullion for Bullion held in the Allocated Account” which might be a smoking gun indicating other bullion to mean paper certificates or the infamous deep storage silver (in hills not yet mined). They grant JPMorgan loopholes such as sufficient notice before proving physical silver actually is held. They give license to sub-custodians in a manner reminiscent of Mahonia, the illicit special purpose entity hiding fraudulent assets for Enron, also assisted by JPMorgan. They give themselves permission to back-date incorrect balance sheet account entries, an audacious license to commit accounting fraud. See the Hat Trick Letter Gold & Energy Report from last April for more details. To be clear with no minced words, their prospectus dissected expertly by Turk stinks to high heaven of fraud. Any precious metals advocate would be hard pressed to defend the above admitted practices. They not only fail the smell test, they absolutely reek with festering putrid decomposition of rotting flesh spiced with aging feces.
Turk wrote a recent update article “More Questions About the Silver ETF” in late January (click here). Turk did not revisit old ground, but instead decries the SLV exchange traded fund for its inconsistent handling of silver bullion. He points out that 19.8 million ounces were added on December 31 but then 17.9 million ounces were removed the next day on January 1. This seems on its face to be blatant lies, with paper accounting used to conceal their games in fraudulent holdings. Year-end window dressing was the likely motive. The extra cost of moving that much silver, 555 metric tonnes, is prohibitive in any actual shuffling maneuver. It could be that exactly 555 tonnes were illicitly devoted to short silver positions upon leases, and Barclays wanted to give the proper appearance in year-end accounting. So the next day, poof, back went the short position, with some other entity lending them silver bullion for a single day. Turk disputes the entire concept of “bar lists” in the SLV website, which are admittedly tied to “allocated” silver. A thinking person would suspect that meant paper silver again, allocated by means of a silver futures contract, the stock & trade of the cartel.
EFFECT & CONCLUSION
◄ In my view, the ETF funds are the biggest reason why the precious metal mining stocks have performed poorly, the result of much thought in the last two months. Sure, mining firm costs have risen. Sure, risky investments are not favored. Sure, margin calls have pressed investors to sell good assets. Sure, assets have deflated, urging investors to hold off on further doubled up purchases. But imagine what would have happened if a sizeable portion of the 800 tonnes of gold bullion had not been bought. Word that differently. Imagine if the money had not been handed to the gold cartel for further participation in the gold & silver price suppression game, but instead had chased both physical gold & silver and mining stocks, large and small??? My guess is the gold & silver prices would be 10% higher at least, the HUI stock index would be 25% higher at least, and junior mining stocks would be priced 50% to 100% higher at least.
Not only have the American-British ETF funds been successful in diverting funds from physical bullion and mining stocks, but other financial instruments have assisted in the diversion. Refer to the Goldman Sachs GDX exchange traded fund, which tracks major precious metals mining stocks, rather than metals. What better avenue to short the entire mining sector than with a special fund managed by the kingpin of diabolical schemes on Wall Street, a firm with a proven record of playing vile games. See their game to bring down the gasoline price in time for the midterm US Congress elections in 2006, by reducing from 9% to 2% the weight of gasoline in the GSax Commodity Index. The gold cartel has suppressed the metals for certain, and might also have mining stocks held down. David Schectman made a post on Midas on the GATA website. He concluded that the GLD and GDX funds are “probably the most important key to the very bad smell which currently surrounds the miners. It is clear these central bankers are bright and have spent a lot of time and effort working this all out. That is called long range planning.”
Furthermore, if the USGovt and UKGovt decide to confiscate ETF funds for their precious metals bullion, an easy avenue has been created. Since the managers of both the GLD and SLV funds are insiders loyal to the cartel, they will fully cooperate at the time of confiscation. Investors will be given money in cash, not bullion metal. They will forfeit the right to gains in value, and might even forfeit their entire investments. My position has been firm though, in that any attempt by the increasingly fascist USGovt to confiscate gold would trigger unforeseen problems. In this electronic age, gold would be purchased quickly and shipped quickly via phone calls, bank wires, and electronic movements. Another gimmick might be at the ready by the same cartel managing the ETF funds. If exposure of the corrupted nature of the GLD and SLV funds is made public, even intentionally sabotaged by their own managers, in leaked reports or documents, a massive sale would occur. A dangerous decline in price for gold & silver would ensue, rather predictably. So if confiscation is not the plan, perhaps a bomb of the gold price comes from a planned flood of sell orders in its dissolution. Moreover, sales would free up in whatever gold & silver bullion is actually held, with metal suddenly available to meet forward future contract orders in the balance.