http://albertpeia.com//notbondsgold.htm
‘The following is an excerpt from a
recent issue of Private
Wealth Advisory.
We are reprinting it here because no one is addressing the real reason why
Europe is such a huge problem for the financial system. You need to know this.
If you’ve looking for investment
ideas on how to profit from this collapse (the gains will be even bigger than
those produced during the 2008 Crash) Private Wealth Advisory can show you how. We already have a handful of EU
Crisis Trades open, all of which are up.
To find out more about Private Wealth Advisory and how it can help you navigate the coming crisis… Click Here Now!!!
Last week I outlined the issue of
collateral and how it is the most critical issue in the financial
system today. For a review of that article,
click here now.
If you want further evidence that the
financial elites are already preparing for a default from Spain and a
collateral crunch, you should consider that the large clearing houses (ICE, CEM
and LCH which oversee the trading of the $700+ trillion derivatives market)
have ALL begun accepting Gold as collateral.
Gold as Collateral Acceptable for
Margin Cover Purposes
From 28 August 2012 unallocated Gold
(Loco London) will be accepted by LCH.Clearnet Limited (LCH.Clearnet) as
collateral for margin cover purposes.
This addition to acceptable margin
collateral will be subject to the following criteria;
Available for members clearing OTC
precious metals forwards (LCH EnClear Precious Metals division) or precious
metals contracts on the Hong Kong Mercantile Exchange. Acceptable to cover
margin requirements for all markets cleared on both House and ‘Segregated’ omnibus
Client accounts.
http://www.lchclearnet.com/member_notices/circulars/2012-08-21.asp
CME Clearing Europe to Accept Gold
as Collateral on Demand
CME Clearing Europe will accept physical
gold as collateral, extending the list of assets it’s prepared to receive as
regulators globally push more derivatives trading through clearing houses.
CME Group Inc. (CME)’s European clearing
house, based in London, appointed Deutsche Bank AG (DBK), HSBC Holdings Plc and
JPMorgan Chase & Co. as gold depositaries. There will be a 15 percent
charge on the market value of gold deposits and a limit of $200 million or 20
percent of the overall initial margin requirement per clearing member based on
whichever is lower, Andrew Lamb, chief executive officer of CME Clearing
Europe, said today.
“We started with a narrow range of
government securities and are now extending that,” Lamb said in an interview
today. “We recognize there will be a massive demand for collateral as a
result of the clearing mandate. This is part of our attempt to
maintain the risk management standard and to offer greater flexibility to
clearing members and end clients.”
Is it coincidence that this began ONLY
when the possibility of a sovereign default from Greece or Spain began? Nope.
This actions show that the large clearinghouses see the writing on the wall
(that defaults are coming accompanied by a mad scramble for collateral) and so
are moving away from paper (sovereign bonds) into hard money.
The reason?
They know that when Spain defaults the
system will be rocked even harder than it was with Lehman in 2008. And they are
doing everything they can get access to real collateral (Gold) when
paper collateral (Spanish bonds) becomes worthless.
Remember, history has shown us time and
again that defaults come in waves. So when Spain defaults, it will be only a
matter of time before the rest of the PIIGS, the UK, Japan, and then the US do
as well.
However, for now Spain is the biggest
issue. As a result of this, Treasuries, Japanese bonds, German bunds and even
French sovereign bonds remain attractive to the big banks as collateral… for
now.
Indeed, it is the search for high grade
collateral that has caused such periodic spikes in Treasuries, German Bunds,
French sovereign bonds, and Japanese bonds (all of these have yielded 0% or
even negative yields in the last five years). Big banks are moving away from
PIIGS bonds into safer havens.
This is also why the Fed isn’t
touching Treasuries with QE3 and why it won’t touch short-term Treasuries with
Operation Twist 2 (this program sees the Fed selling short-term Treasuries to
buy long-term Treasuries): the Fed wants to keep as much good quality
collateral in the system as possible (long-term Treasuries are problematic
because institutions know it’s highly likely the US will default within the
next 30 years).
However, even this move is problematic
because much of the Treasury market is locked up with governments both foreign
and domestic.
|
Total US Sovereign Debt |
$16 trillion |
|
Foreign Nation holdings |
$5 trillion |
|
Intergovernmental
holdings |
$4.8 trillion |
|
US Federal Reserve |
$1.5 trillion |
|
Remaining |
$4.7 trillion |
Again, this is why clearinghouses (which
oversee the derivatives markets) are now allowing Gold as collateral: they know
that eventually sovereign bonds will be worth less or even worthless. And they
want access to their clients’ Gold for when this happens.
This is why I’ve been warning that 2008
was just the warm-up. What is coming will be far far worse.
If you’re looking for someone who can
help you navigate and even profit from this mess, I’m your man. My clients made money in 2008. And we’ve been playing the Euro Crisis to
perfection, with our portfolio returning 34% between July 31 2011 and July 31
2012 (compared to a 2% return for the S&P 500).
Indeed, during that entire time we saw 73 winning trades and only
one single loser. We’re
now positioning ourselves for the next round of the Crisis with several
targeted investments that will explode higher as the EU crumbles. Already three
of our picks are up more than 5% in the last week.
To find out what they are, and take steps
to protect your portfolio from the inevitable collapse…
Graham Summers ‘