Metals Miscellany

Posted On Oct 16, 2012 By Addison Wiggin

October 16, 2012

  • Mysterious silver traders (or a guy on a laptop in his boxers) promise big silver move and $50 by year-end
  • Weak hands: the numbers that help explain gold’s recent tumble
  • A ground-floor investment locale, or close to it: Chris Mayer in “the Cuba of the East”
  • New fronts in “The War on You”: Pre-written traffic tickets, getting labeled a “terrorist” for wondering why your county commissioners are blowing money on surveillance cameras
  • Young foreclosure entrepreneur on her way to reality TV… the real warning coming from Iran… real-world refi tales from owners of rental property… and more!

  Silver is starting the day at $32.84. But a mysterious group of traders billing themselves as “Wynter Benton” is promising to move it big during the next six trading days… on the way to $50 before year-end.

“The Leader wishes to inform our followers that the group will be demonstrating our ability to move the price of silver between Oct. 16 to Oct. 23, 2012,” according to a post on a Yahoo! Finance message board. “We will be updating our moves in real-time during this period.”

Yes, we’re getting deep into the conspiratorial weeds here. But in the midst of contemplating the crimes of politicians and central bankers, to say nothing of “The War on You”, we need an amusing diversion now and then.

  “Wynter Benton” purports to be a group of former J.P. Morgan Chase commodities traders who say that JPM engineered the meltdown of MF Global a year ago because the traders were trying to take delivery on a huge amount of physical silver. (How that was supposed to work, we’re not sure, but it’s fun to play along…)

The traders — or the lone fantasist posting in his underwear, depending — made several prescient calls in the silver market in early 2011, but disappeared from view after the MF Global episode.

Wynter Benton reappeared a month ago, promising silver will trade above $50 before Dec. 31, 2012. And last week, he/they promised the demonstration of his/their ability to move the silver price, starting today.

In all likelihood, nothing will come of it. But in case it does, we have it on the record. Heh…

  Meanwhile, hedge funds and other big players have upped their gold positions to the highest levels in more than a year.

The weekly Commitments of Traders Report issued by the Commodity Futures Trading Commission showed that holdings of gold-backed ETFs grew by 282,000 ounces last week. That’s the 11th-straight week of inflows.

“Many new positions in both exchange-traded funds and futures have been established in recent weeks,” says Saxo Bank vice president Ole Hansen, “especially short-term leveraged investors who are not married to their positions in the same sense as long-term ETF investors.”

100  That short-term leverage likely goes far to explain gold’s tumble since Friday. This morning, the price is starting to recover a bit at $1,742.

  Stock traders are carrying over yesterday’s jubilation into today. With sunny earnings reports from Goldman Sachs, Coca-Cola and Johnson & Johnson, the Dow has pushed past 13,500.

The big economic number of the day is consumer prices — up 0.6% last month thanks to rising gasoline prices. The year-over-year increase works out to 2.0%; ditto for the “core” rate that excludes food and energy because they’re “volatile.”

With this morning’s numbers, Social Security’s annual cost-of-living adjustment next year will be 1.7%. Any resemblance to your own cost of living is purely coincidental.

  “Sweating through rattling taxi rides without air conditioning,” writes Chris Mayer from Myanmar, “I met with the country’s largest private oil tycoon and its largest property development company.”

It’s still early in the modern-day Burma story. “In the 50 years of military rule, there has been practically no development here at all. It is a city trapped in time, a kind of Havana of the East.

“The Burmese are poor, no doubt. But it is not a desperate poverty. Yangon gives at least the surface appearance of normality. I saw plenty of seemingly prosperous little shops. I was not approached by any beggars, as one is when in India.

“Mayer!” in front of the Shwedagon Pagoda at sunset. “You can’t go in midday

because you must walk barefoot and the heat is beyond oppressive…”

“The place has its charms. There are no McDonald’s or Wal-Marts — thankfully. I met an expat that moved here recently after a stint in Saigon. She told me that it was the little things you miss. There isn’t a good coffee shop in Yangon, she said, and finding a good cup of coffee is difficult. There isn’t the night life you find in a typical big city. The number of good restaurants is relatively small.

“But all this will change pretty soon. That’s the opportunity, of course. There is already a pressing need for hotels, which are expensive and not so readily available at the upper end. There is already a shortage of apartments, too. As business opens up, as the investment dollars flow in and as the cranes go up, the old Yangon will change forever.”

The process is already gathering speed. Hillary Clinton’s top deputy at the State Department is visiting this week. Look for the Western sanctions to continue easing. And for full access to all of Chris’ recommendations gleaned from his travels across six continents, look here.

  “Who knows how many of these tickets they’re giving to people?” Shirley Simmons asked about Houston PD’s recent traffic ticket flub. Unfortunately, we’re not deficient in material for our growing “War on You” pile… this being today’s addition.

“When she got home,” the Houston Chronicle reports, “put on her glasses and closely read the ticket, she discovered two incorrect charges: failure to display a valid Texas driver’s license and lack of insurance.”

After inquiry about how this could happen, the Houston police admit that some officers load the most common violations in advance. To keep stops brief, they say. Uh-huh.

“That’s just really bad practice because the potential for error is great,” traffic ticket attorney Scott Markowitz said. “It’s contrary to common sense.”

Not only does it fail logic, it also pushes the responsibility onto you, the ticketed motorist, to look carefully at the ticket, make sure you weren’t cited for more than was noted by the officer…and go through the effort of challenging it.

Otherwise, it’s a nice little bump for the city, no?

Besides having to pay more than you should…there’s other risk of failing to spot an officer’s mistake. If you pay the ticket, you accept the charge…even if unwitting.

For the unintentionally guilty, “There is significant damage done to their driving record,” Markowitz told the paper. “There are legal procedures to undo the conviction…but the [Texas Department of Public Safety] surcharges could stick.”

  Tread softly, though. You don’t want to question authority… too much. Ask 55-year-old disabled veteran Don Pippin, a camera-toting “terrorist”…if you ask Commissioner Kurt Schlegel in Elbert County, Colo., that is.

Mr. Pippin, an Elbert County resident, was seen taking pictures of the security cameras of the administration building and reported him for suspicious activity.

“After the commissioners met on the issue,” the Denver Post reports, “Schlegel asked for and received a temporary court order barring Pippin from the building, saying the back of his hair stood up when he saw what he says was footage of Pippin ‘casing’ the building for a possible attack.”

Jump to the most extreme conclusion much, Commissioner?

Schlegel used the term “terrorist” while attempting to secure a permanent protection order against Mr. Pippin, but a sensible Elbert County judge threw the request out.

Where did Kurt Schlegel get the idea that Pippin could be a terrorist? It could’ve been the 2011 Department of Homeland Security PSA, where anyone with a camera is a potential terrorist lurking the streets.

In a recent U.S. Army training document, anyone “frustrated with mainstream ideologies,” is classifiable as a possible terrorist.

Vicious Terrorist Group in New York.

And another DHS-funded study in the hop and skip away University of Maryland identifies Americans who are “suspicious of centralized federal authority” as “extreme right-wing” terrorists.

[Editor’s Note: If you haven’t already, check out this frightening report we’ve compiled about “The War on You.“]

 “Remember the 14-Year-Old Who Bought a House?” reads a headline at NPR’s website. “She Just Bought Another One.”

Those who were hanging around The 5 in March will remember we spotted 14-year-old real estate early-bird Willow Tufano when she bought her first home for $12,000…$88,000 less than its peak-boom price tag.

Today Willow is a year older and wiser and just bought a second home for $17,500.

Since her first home story broke, she’s become somewhat of a celebrity… she’s been featured on Ellen, received calls from Good Morning America, Anderson Cooper, a show in Korea…and was even invited to give a talk at a college in Alabama.

What’s Willow’s next step? Why the only thing that makes sense… reality TV.

“We are in the process of pitching a sizzle reel,” Willow told NPR. “Clips of me. Little highlights.

“I don’t want to be fake,” she says. “I’m going to be one of those people that loves their fans. If I have any.”

Some would say all the attention has gone to her head, but you can’t deny she’s an opportunist.

  “I wish that our folks in Washington and at the Fed would hear this loud and clear,” a commenter writes at our Forbes blogpost about inflation in Iran, estimated by Johns Hopkins economist Steve Hanke at 70% a month.

“We aren’t at the stage of Iran, but we are surely working toward it by continually increasing the money supply. If it’s not withdrawn, even the money that has already been injected will be disastrous to our economy when it takes full effect.

“Think that cannot happen? The Great Depression would have been just another year to year and a half business cycle if Hoover and FDR had not decided that inflation was the way to get out of depression. And the money injected under Hoover and FDR was a tiny fraction of what has been injected under Bush and Obama.”

  “I always made my payments on time for my 13-unit building,” writes the first of several emails from owners of rental property, carrying on a thread started last week.

“I refinanced twice before with the same bank. When the loan was due for the third time, they demanded I bring $100,000 cash to the table. I didn’t have it, and the building was subsequently sold on the courthouse steps a month later. Where is my bailout, presidents Bush and Obama?”

  “Regarding the apartment owner required to have 40% equity upon attempting a refi, I don’t doubt it,” writes another.

“If there is no definition of ‘nonqualifying loan,’ even well-meaning bankers don’t want to be among those who help learn the definition the hard way. I agree 40% is likely high, but if the regulator can show area banks lost money on loan amounts greater than 60% of appraised value, then ‘reasonable’ gets redefined by your friendly government official.

“New disclosure requirements don’t help any borrower, but they do harm many. Higher compliance costs and expensive software upgrades and retraining staff all get passed along. Heck, the government now tells us what interest rate we can charge. If the home loan is really small, or the risk rating a bit high, those loans don’t get funded, because they would be unprofitable. One result will be massive consolidations (a trend already in place) that will give us more of what we don’t need — banks that are too big to fail.

“These 19 or so banks were the real cause of the 2008 meltdown, but none of the outrage and new rules even come close to dealing with the root problems at these institutions. Our government used the housing meltdown, and the perception that all banks are abusive to their clients, as an excuse to foist Dodd-Frank on us all.

“Thanks for the interesting material you provide every day — keeps us thinking.”

The 5: Thank you for reading.

  “I never understood how loan underwriting works,” writes another. “First, they give a loan to anyone who breathes. Now they do not lend to people who really qualify.

“My house was underwater, and last year I wanted to refi to get a lower interest rate. I had a credit score of 780 and net worth over 15 times of the value of the loan. My refi was declined. My sin is that I had retired and cannot show ‘steady’ income, even though I have net cash flow of $120,000 annually from investments. My 2009 and 2010 tax returns show little taxable income (I’m one of Romney’s 47%) because of losses I harvested at the end of 2008 and large MLP investments. (Thanks to The 5 for helping me navigate the market cycle.)

“Well, I did the unthinkable — one that I taught my children never to do; in fact, they do not know what I’ve done — I strategically defaulted (actually, a short sale). I figure as my home lost 40% of its value, as did comparable houses. I needed to downsize anyway, with an empty nest. I went from an old 4,000-square-foot home to a brand-new 2,800-square-foot home by paying cash from the brokerage account held in the same bank. I pulled the rest of my deposits from that bank and moved them to two community banks.

“The bank wrote off $185,000 of the loan. I lost about $220,000 of the down payment and improvement on the house. I saved $45,000 from the time I stop paying mortgage to the time the short sale closed. The bank paid me $3,000 as ‘incentive’ and lost $2 million in deposits and brokerage assets. I think I am even with the bank. Ironically, I own shares of this bank — one of the biggies whose earnings beat the Street last week.

“The downside — my credit is now ruined. I don’t care now, as I do not need loans at my age. Never did, anyway.

“Sorry for the lengthy piece.”

The 5: Yeah, what do we know from lengthy pieces?

“To close,” our gratuitous correspondent concludes, “I want to thank The 5 and Chris Mayer’s Capital & Crisis. I read about strategic default first at The 5 (not that you are promoting it; it got me thinking). Then the encouragement on real estate investment earlier this year in C&C. I bought my new home in May based on your articles. It since has a paper gain. The sales office reports very good sales the last few months and has raised prices by 8% in five months. They cannot build fast enough. Many are cash sales to the Asians — mostly Chinese and some Indians and Vietnamese.”

The 5: Go figure.

Otherwise, if you’re inclined to continue on the theme, you may wish to know that Doug French, the other recovering banker on our team, actively encourages strategic default. You might even say he wrote the book on it.


Addison Wiggin

The 5 Min. Forecast

P.S. So far this year, the aforementioned Chris Mayer has ventured to Myanmar, Mongolia, Chile, and Peru in search of the world’s best investments.

His earlier travels have taken him to China, India, Dubai, Brazil, Colombia, Nicaragua, South Africa, Cambodia, Vietnam… and undoubtedly a few places we’ve forgotten.

But it’s all chronicled in his book World Right Side Up: Investing Across Six Continents.

“This is the best adventure investing book,” writes Canadian farmland investor Brad Farquhar, “since Jim Rogers’ Adventure Capitalist.

World Right Side Up“, says U.S. Global Investors chief Frank Holmes, “takes us on a journey to far-flung locations from Colombia to Cambodia, mixing enthusiastic curiosity with analytical acumen to unearth exceptional opportunities for his readers.”

Chris “keeps his eyes and ears open,” Bill Bonner writes in the foreword. “You’ll enjoy reading about, and perhaps profiting from, what he has uncovered.”

If you don’t have your own copy yet, we’ve bundled it up in a package deal that’s unbeatable.

P.P.S. Before you watch the debate tonight, you must consider this point of view. We believe it’s vital to your health, wealth and well-being.

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