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The Single-Celled Option

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Published : January 09th, 2012
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Category : Market Analysis





Wow, there is a lot going on in the world, and it's ALL BAD!


The second I finish a RANT, such as yesterday's, which took 5-6 hours to write, I am IMMEDIATELY confronted with scads of new articles to comment on.  It is like a non-stop raging river spewing debris left and right, and it NEVER STOPS.  This is why I have woken at 4:00 AM every day since starting at Miles Franklin in October, with no hope of changing my schedule until the Cartel is finally broken, at which time, I'll likely wake at 3:00 AM. 


Oh well, at least I'm in the Mountain time zone, as if it were EST I'd we waking precisely to the first gold smash of the day.  As you can see, the 3:00 AM smash tactic was utilized on each of the past three days, even Tuesday (in muted form) when the net result was a $40/ounce UP day.



Yesterday was a very impressive up day for gold, coming as close to a "key upside reversal" as the Cartel will allow.  As you can see by the green line above, gold yet again rose in Asia until EXACTLY 3:00 AM EST, when it suddenly plummeted for the third straight day.  We then watched yet another WATERFALL DECLINE at EXACTLY the 8:20 AM EST COMEX open, with the puppet media initially attributing gold's decline to "better than expected" jobless claims, which as I noted yesterday was a load of bull, and subsequently "European debt worries," as the Euro went into FREEFALL while French and Italian financials plummeted. 


You know, the same "heads I win, tails you lose" idiocy of gold falling due to a "strengthening economy" (facetious) and, simultaneously, a "weakening economy."  And remember, for ten years running, the economy only "strengthens" and "weakens" at EXACTLY 3:00 AM EST, 8:20 AM EST, 10:00 AM EST, and 12:00 PM EST!


Yes, this is the same brain-dead media that totally ignores the U.S. government breaching debt ceiling levels $1 TRILLION higher than the level it spent every drop of its ink writing about just four months ago, even as we literally are on the brink of default TODAY.


Here We Go Again: US $25 Million Away From Debt Ceiling Breach


Thank god, I found ONE ARTICLE about the topic from the Los Angeles Times, a well-written description of how Congress just passed a $1 trillion omnibus, deficit spending bill, so what's the point of even pretending they aim to reduce the deficit?  It looks like crybaby Boehner will have to go back to his GOP "war room" to plan his next hypocritical attack on the Democrats, trying to pretend Republicans are "conservative" when it was the administration of his own fearless leader, George W. Bush, that initiated the endless war campaign in Iraq (under false pretenses, which I called out on DAY ONE) and developed the concept of "too big to fail." 


Debt ceiling: Queuing up another (purely symbolic) vote


As for the aforementioned "war room," no different than the Democrats' den of illicit, criminal conspiring, it is where ideas like the one described below are concocted, to make sure Ron Paul doesn't win.  Remember, the Wall Street money is firmly behind Mitt Romney, just as it was behind GW Bush in both 2000 and 2004 and Obama in 2008.  Thus, Romney WILL win unless the PPT/Cartel cannot perform their duties of preventing the markets from reflecting reality, and thus creating widespread panic before the November elections. 


Establishment GOP Insider Admitted to Plan to Subvert Iowa Caucus In Order to Prevent Ron Paul's Win


Rick Santorum, really? 


As you can see below, his betting odds of winning the Republican nomination were just 4% before the Iowa Caucus, "spiking to 8%" afterwards, before falling back to 4% already.  Romney's odds NEVER changed at 81%, so anyone believing Santorum received those votes "fair and square" likely ate some "funny mushrooms" for dinner last night.


Santorum's Moment in the Sun


Remember Michelle Bachman's August "victory" in the Ames, Iowa "Straw Poll?"  You know, the one where she paid people to attend, and Randy Travis to perform for them?  If you do, I'm sure you realize it was as much a sham as Santorum's 25% showing Tuesday.  Bachman predicted a "miracle" win in the Iowa Caucus Monday night, but her prayers were answered with a nearly last-place finish and subsequent end to her campaign, just days after her long-time campaign manager defected to join Ron Paul's camp.  Yes, America, politics - and stupidity - as usual.


Not to mention, what happened to "front runner" Rick Perry?  Or "front runner" Herman Cain"?  Or front runner "Newt Gingrich"?  Only Ron Paul and Romney have received real votes, even if some of Romney's were fraudulent, as noted above.  Perry, Bachman, Cain, Santorum and Gingrich are just "patsies" - straw men set up by Wall Street to be taken down one by one, until only Romney is standing.


In the final analysis, it's "Romney or bust," although the odds of "bust" are growing larger each day.  And "bust" has a name attached to it - RON PAUL!


RIP Michele Bachmann campaign. Now can we kill the Ames Straw Poll, too? (VIDEO)


Sorry to RANT about politics, and for the millionth time I hate Democrats as much as Republicans, but I had to get this electioneering BS off my chest, as it is so sickening.  Only comedian Jon Stewart gets the news correct, and if that doesn't tell you what's wrong with society, I don't know what does.  Each day I look to him for what's really going on, as opposed to the mainstream news, which more each day resembles V for Vendetta, in which the "Voice of London," Lewis Prothero, brainwashes the people with government propaganda.


Lewis Prothero Speech (V for Vendetta)


BUT FEAR NOT, READERS, AS WE SHALL EVENTUALLY HAVE OUR DAY!  I have no idea when, but I do know it is inevitable.


V For Vendetta Dominoes Scene (complete)


Back to gold, the Cartel is desperately sitting on the 200 DMA, currently at $1,627/ounce.  I told you it wouldn't stay below that ridiculous level for long, as sub-$1,600/oz gold today represents the most oversold level - from a combined fundamental, technical, and sentimental standpoint - of the ENTIRE 12-year bull market.  The only good thing about last month's "OPERATIONS PM ANNIHILATION II," which commenced December 8th with the likely fraudulent "gold sale headline," was that it pushed gold to this severely oversold level, enabling new buyers to initiate positions, and to mute the typical early January "OPERATION EARLY YEAR PM ANNIHILATION" initiatives we have seen in each of the past three years.



Buying at this oversold level has thus far overwhelmed the early January Cartel attack pattern, even during NFP employment report week, which clearly is being telegraphed as likely to be upwardly fudged to spiritual levels.  Yesterday's ridiculous 325,000 increase in the ADP employment report is worthless given its beyond abysmal predictive value of NFP payrolls, in my opinion.  However, given the extreme level of jobless claims manipulation, acceleration of the European debt crisis, and commencement of the 2012 Presidential election campaign, it is hard to believe today's report - and all subsequent jobs reports - won't be massively cooked to the upside, damn the facts.


For that matter, the PPT's money-printing, Dow-supporting efforts will likely be upgraded from parabolic to hyperbolic as the year wears on, as proven yesterday by yet another market saving rally amidst an IMPLOSION of European stocks and bonds, as well as the Euro itself!



Unicredit, Italy's largest bank and one of the ten largest in Europe, is perhaps weeks from extinction, as is the nation of Greece, and yesterday saw the failure of a French bond auction and downgrade of Hungary's credit rating to "junk" status.  Thus, I reiterate the #1 prediction from last week's RANT, "2012 EXPECTATIONS," that the European crisis will dramatically deteriorate in the coming months.


Unicredit Lost 30% Of Its Market Cap In Two Days


French Debt Costs Rise at Bond Sale as AAA Decision Looms


CMA Now Officially Assumes 20% Recovery In Greek Default - Time To Change Sovereign Debt Risk Management Defaults?


Fitch Downgrades Hungary To BB+, Negative Outlook


However, for the THIRD STRAIGHT DAY, not only did European stocks outperform bonds, but miraculously the entire market reversed upwards as soon as Europe closed, at which point the PPT was able to take over with unlimited money printing and futures buying.  Kind of like the Cartel waiting until the PHYSICAL markets are closed, so they can maximize the impact of their PAPER attacks.


European Close Prompts Rally For 3rd Day


And how about this beauty of misdirection, the "rumor" that Washington was planning a MASS HOME REFINANCING initiative, i.e. MONEY PRINTING to bail out underwater homeowners and the criminal banks that lent to them.  On this "rumor," America's largest bank - and largest soon-to-be nationalization, Bank of America, surged above $6/share, although of course the "rumor" was subsequently denied.  No matter, the PPT had already done its thing, to make sure the nation's richest man, Warren Buffett, is made whole while the entire public suffers.


Mass Home Refinancing Rumor Rejected, And Why Even If It Was True It Would Not Help BAC


But who cares about the public, right?  It is only the "elites" that matter, and if you can rig markets, votes, and the money supply, screw em'!


30 Statistics That Show The Middle Class Is Dying Right In Front Of Our Eyes As We Enter 2012


Such unadulterated money printing has essentially brought ALL the world's toxic assets under the auspices of Central Bank balance sheets, creating the most insolvent, cancerous financial entities of ALL TIME.  Only further MONEY PRINTING will keep them alive, at EXPONENTIAL growth rates, lest the entire "Tower of Babel" comes crashing down.  That is, if HYPERINFLATION doesn't destroy it first!


Top Three Central Banks Account For Up To 25% Of Developed World GDP


Yes, Central Banks such as the Fed, ECB, BOE, and BOJ now own an astounding 22% of the world's "assets," accounting for 25% of the world's "GDP."  Yes, collecting interest on your own, insolvent, plummeting bonds is now considered "GDP," and, of course, no one calculates the massive CAPITAL LOSSES engendered by plunging sovereign bonds into these calculations. 


No problem as long as the PPT/Cartel are in control of the markets, and the media asleep at the wheel. 


Bearish Investor Sentiment Nears Record Lows


Ah, But for how long?



Back to the moronic media, I need to bring up my good friend "Tyler Durden" of Zero Hedge, who ironically unsubscribed from the RANTING ANDY email distribution list yesterday.  I am shocked he remained on it for so long, but after last week's RANT, "ZERO HEDGE SUCKS - YEAH YOU, TYLER DURDEN," he must have been seething, with yesterday's follow-up commentary finally putting him over the edge. 


Oh well, in the words of Jack Nicholson, he can't "handle the truth," at least not in the taboo world of gold manipulation where few dare to tread.  Which is EXACTLY why Zero Hedge published two of his most brain-dead articles yet on the topic yesterday, starting with the below drivel about "gold outpacing oil YTD." 




He actually thinks there is something material to conclude from "gold outpacing oil" for THREE BUSINESS DAYS, particularly after it was viciously attacked for an ENTIRE MONTH?


Gold Outpacing Oil YTD As Stocks Disconnect Again


Even better, how about this idiocy about gold falling due to the "MF Global bankruptcy, a "rising dollar," and "tax-loss selling."  No, it has nothing to do with an all-out PAPER attack on gold to prevent it from taking out $1,750/oz and putting it in position to challenge August RECORD HIGHS, to the point that, after an incredible 21 unsuccessful attempts to take out that level over a week's time, the Cartel was forced to trot out a fraudulent "BIS/BOE/Fed in market selling gold" headline MINUTES after the ECB confirmed its hyperinflationary bent by cutting interest rates to 1.0%.


Not to mention, with COMEX open interest continuing to decline, and with it the "commercial" gold and silver short positions, how can one conclude that "MF Global liquidations" caused PMs to decline.  Not to mention, why was it ONLY gold and silver that plummeted?  Last time I looked, MF Global customers held positions in ALL commodities, including crude oil - which has recently surged - as well as copper, corn, soybeans, and a slew of products that have just done fine. 


And how can ANYONE still believe the "dollar is rising," when all that is occurring is a rush out of Euros on fears it might be DISSOLVED, i.e. the most blatantly PM-bullish news imaginable?  Following YEARS of gold having essentially ZERO correlation with the "dollar index" (to the point that I literally don't watch it anymore), you'd think even "top analysts" might start to write intelligently.


Absolutely ridiculous, "Tyler."


Guest Post: Why Has Gold Been Down?


When I went to bed last night, gold was above $1,625/oz, yet again within a few bucks of its 200 DMA of $1,627/oz.  When I awoke, my initial instinct was to write about the overnight activity without looking at it.  I was 100% sure it was again capped at 3:00 AM EST somewhere around the 200 DMA, and of course I was correct, per below.  That said, with the NFP fudge report due out in the morning, gold is often left alone by Cartel traders to lull them into a false sense of security.  The Cartel's only real concern was the same parabolic surge risk they face each day, particularly with so many "black boxes" focused on gold's 200 DMA.  As I write, just 10 minutes before the COMEX open and 20 before the NFP report, gold is sitting in the low $1,620s and silver the $29.30s.


I don't believe the NFP report matters one whit to the markets, even if it is a big "upside surprise." I believe last month's "OPERATION PM ANNIHILATION II," coupled with the spiritual acceleration of PPT support activities, have entirely decoupled market movements from reality, removing essentiallyall "causation" between the stock market, PAPER PM prices, and news flow.  Thankfully, the PM sector is violently oversold, and thus I am hard-pressed to believe the downside here is material, although trust me the Cartel will attempt to scare PAPER PM longs!


Even the mainstream media is regularly reporting market manipulation, even if the core of such operations - the PPT, ESF, and gold Cartel - have thus far avoided the spotlight.  Central bank money printing to support stocks, bonds, and currencies has finally become "common knowledge," and it's only a matter of time before it is understood that ALL markets are rigged, including GOLD AND SILVER!



Heck, even the Federal Reserve itself is revealing its secrets, such as ex-Fed governor Kevin Warsh, who for the second time this year allowed a degree of "passive aggression" toward his former employer to subtly expose it.  There can be no doubt his comments intimate the Fed and other central banks are manipulating gold, particularly in light of comments he sent to GATA about gold swaps several months back.


But walk away, media, there is nothing to see here!


Ex-Fed Governor Warsh again confirms gold price suppression


BREAKING NEWS:  As I expected, the NFP number was "better than expected" at 200,000 vs. the 150,000 consensus.  This misleading news is likely based solely on "seasonal adjustments" and part-time holiday hiring, as well as the aforementioned "fudge patrol" that will accelerate until the November elections, such as reporting yet another "unexpected" drop in the unemployment rate due to falling labor force participation. 


NFP Payrolls At 200K, Expected At 155K; Unemployment Rate Drops To 8.5%, Labor Force Participation At Lowest Since 1984


And what's this? 


What a shock, not a "massive beat" at all, due to the very same "seasonal factors" I have cited for several weeks.


Massive Beat? Not So Fast - Morgan Stanley Warns 42,000 "Jobs" Bogus Due To Seasonal Quirk


Real Jobless Rate Is 11.4% With Realistic Labor Force Participation Rate


Also as I expected, the immediate impact on gold was muted.  I see the beginnings of the typical Cartel ploy of letting gold initially rise a few bucks to draw in a few suckers before a big paper slam, EXACTLY what we've observed for years and EXACTLY what Andrew McGuire reported to the CFTC regarding Cartel "signals" of imminent post-NFP report PM slams.  However, in light of the EXTREMELY oversold levels the Cartel took PAPER gold and silver to during last month's "OPERATION PM ANNIHILATION II," I am hard pressed to believe additional attacks while have significant staying power.


A London trader walks the CFTC through a silver manipulation in advance


Before I move to my RANT topic, a few tidbits to add regarding gold and silver. 


I'm not sure why I'm even giving him print space, as he is such a waste of a human being, if I'm to be so generous as affording him peer status.  Dennis Gartman is the biggest jerk in the newsletter community, a Cartel-paid shill on the level of Jeff Christian and Jon Nadler, who has been as WRONG about his gold calls as anytrader in history.  By the way, I'm not kidding - he has really been that bad.


Moreover, he is a pathological liar and serial misleader, and anyone that listens to his "advice," or better yet PAYS for it, deserves the losses they will certainly engender, particularly if they invest in the horribly underperforming "Horizons Gartman ETF."


Gartman Flip Flops Again, Now Sees Bull Market For Gold: Time To Sell Everything?


Next, a bit of heartwarming analysis from the antithesis of Dennis Gartman, one of the true "smart, good guys," James Turk, who compares silver's bull market to the early stages of Apple Computer's meteoric rise.  Once silver breaks its downtrend at the $35-$37/ounce level, he states, the universally panned, yet decade-long outperforming white metal could surge to $70/ounce within three months. 


I have not a care, nor trust in, such technical analysis, but I couldn't agree more with the possibility of this occurring later in 2012!


James Turk - Gold is Great, But Silver is the Next Apple


And finally, keep your eyes on the Sprott Physical Silver Bullion Trust (ticker PSLV), whose premium to Net Asset Value (NAV) has gone berserk in the past three weeks, EXPLODING from mid-December's 15%  level to nearly 29% yesterday, blowing significantly past the fund's ALL-TIME HIGH of 26%, per the tables in the link below.  I'm not yet sure what the market is saying about PSLV, a fund I have eminent trust in, but it is certainly something BULLISH!


Keep your eyes on gold's 200 DMA at $1,627/oz, the ONLY thing the Cartel is focused on right now.  Ignore the "jobs report", the European Crisis, and EVERYTHING else.  The battlefields are currently at $1,627/oz for gold and the VERY KEY ROUND NUMBER of $30/ounce for silver!




Options are like Amoebas.


At least, they were in 1973 when the "derivatives" business was single-celled, a simple zygote prior to mitosis.  Not a naturally-produced zygote, but a synthesized, contagious "test tube baby," genetically altered with "financial Ebola" to poison global markets, destroy cultures, and inflict DEATH via bankruptcy.


Oh the simple days of college, when a naïve, ambitious, 20-year old RANTING ANDY was taught the "Black-Scholes" option pricing model, utilizing a stupid formula to attempt the transformation of living, breathing objects like stocks into rigid automatons.


Attempting to "value" options with a formula is akin to defining the primary enigmas of classic philosophy - LIFE, LOVE, and TRUTH.  In other words, there is no way to shoehorn option valuation into a formula, as such value can only be determined by the beholder.  Yes, you can "value" the time left on an option, but time value has the same fatal flaw as most cash flow analysis.  That is, the "discount rate" is completely and utterly dependent on arbitrary assumptions amidst fluid market conditions.


Statistically, the odds of  profiting from a long options position are about the same as that of a typical Wall Street M&A deal being a success; FAR BELOW 50%!.  The reason, of course, is BOTH mergers AND options contracts were created by CRIMINAL Wall Street banks, with the sole purpose of stealing your money.  At least in Las Vegas, chance occasionally works in your favor, but in challenging the Wall Street-rigged markets, you will ALWAYS lose.


By now, it should be painfully clear the world rewards fraud, amorality, and sloth, particularly in New York City and London, the two cities most responsible for the GLOBAL financial catastrophe unfolding before our eyes.  TBTF banks are bailed out and criminal politicians re-elected, while the growing "welfare society" frowns on those supplying its needs, but embraces the rights of the worthless.  Just like Atlas Shrugged, but in REAL LIFE.


Black and Scholes were given Nobel Prizes for this formula, which more than any in the global economic realm has caused misery, pain, and losses for the unsuspecting public, at the hands of ruthless sociopaths running Goldman Sachs, JP Morgan, and the like.  When retail traders lose their life's savings in rigged markets they are left penniless, while Goldman Sachs and JP Morgan are bailed out from their mistakes with freshly printed, tax-payer funded capital, the reward for channeling years of illicit profits into campaign contributions.


The Black-Scholes model was immediately embraced by salivating New York mafia dons, and immediately after its 1973 publication, Wall Street created the Options Clearing Corp, or OCC, enabling the spin-off of the Chicago Board Options Exchange, or CBOE, from the Chicago Board of Trade.  Back then, option contracts on just 16 stocks were traded, rising to a still modest 68 stocks in 1980.


The options business remained nascent, but when the stock market's 20 year stagnancy ended in 1981, simultaneous with the emerging "Computer Age," Wall Street smelled fresh blood.  At that point, the cancerous "financial engineering" cult was born, with its first victim the SINGLE-CELLED OPTION.  Thus, in 1983 the first "second derivative security" was born, the Index Option.  Now investors could bet on financial indices themselves, which in turn were bets on the cumulative direction of their individual components.  Back then, just three options exchanges existed - in Chicago, Philadelphia, and New York - and essentially all options business was left to "professionals" trading with house money.  Betting incorrectly might cost you your job, but not your personal finances.  The house could always absorb the losses, which were limited by the then small market size.


However, as the 1981-1999 bull markets gained steam, and Wall Street more powerful, new classes of investors were born, particularly MUTUAL FUNDS that relied on equity and fixed income indices to limit "alpha," and thus seek protection in numbers.  Hedge funds also joined the party, yielding exploding interest in index investing, and with the growing size of such investment pools came increased acceptance of index options to "hedge risk."


Index options were so successful, particularly calls as they became tremendously profitable during the 18-year bull market, that Wall Street grew far richer and stronger, hungry for "fresh meat" to satisfy its fee-generating appetite.  Consequently, in 1990 "LEAPs", Long-Term Equity AnticiPation Securities, were introduced, yielding larger premiums due to their longer-terms, and thus higher Wall Street fees.  I suspect millions in LEAP contracts became worthless in the early 1990s mini-bear market, billions in the early 2000s "Tech Wreck," and trillions since Global Meltdown I commenced in mid-2008.


Unfortunately, the first 20 years were just a prelude to the CATASTROPHIC financial damage of the next 20, when Wall Street commandeered the U.S. government and mastered the art of pilfering the public.  By 1996, the Federal Reserve-led equity bull experienced meteoric growth in online investing, driven, of course, by the rapidly expanding tech bubble.  Cab drivers became self-professed experts on Cisco, Intel, and Microsoft, while savvy money managers became aware of the terms "B2B" and the "internet."  Schwab, Ameritrade, and E-trade became household names, yielding the dawn of "day-trading" and similar risky financial activities amongst the naïve public.


Wall Street utilized the combination of rising stock prices and public market participation to create its own trading platforms, far more expensive than "discount brokers" but potentially more lucrative, offering hundreds, then thousands of exotic trading alternatives, including a broad swath of "derivative" securities such as stock options, index options, and LEAPs.  The tech bubble fueled this growth like kerosene on a fire, and by the year 2000 "derivative contracts" became ubiquitous in both the retail and institutional realms, with millions of option-derived contracts trading on thousands of equity, fixed income, and other securities.


Enter the Glass-Steagal repeal.


By 1999, Alan Greenspan's mad scientist experiment in the emerging field of "hyper-monetary policy" had created a tech bubble so large that Wall Street became rich enough to literally take over the world.  And I should know, as I spent that time working as a sell-side analyst at Salomon Smith Barney in New York City.  Cumulatively, Wall Street profits grew so large, it was inevitable they'd use them to purchase political favor, if not cabinet positions themselves.  In hindsight, Bill Clinton's appointment of Robert Rubin as Treasury Secretary in 1995 was the "shot heard round the world" in the annals of banker/politician commingling.  


In reality, Ronald Reagan started this trend in 1981 when he hired Donald Regan as Treasury Secretary, directly from his CEO position at Merrill Lynch.  But Wall Street was not rich and powerful in 1980; to the contrary, it struggled through the throes of a vicious recession and decades of stagnant stock prices.  Conversely, in 1995 Wall Street was on the rise, and Clinton's hiring of Goldman Sachs' CEO harkened a dangerous era in which powerful sociopaths, with an agenda directly in conflict to its constituents, had taken power.


Immediately, Rubin spearheaded an effort (behind the scenes, of course) to bolster the power of his "peeps" in New York, clearing the way for repeal of the Glass-Steagall Act in 1999.  Glass-Steagall, one of the best laws EVER created by Congress, emerged from the Great Depression, prohibiting the commingling of investment and commercial banking activities.  A root cause of the 1929 crash and 1930s Depression was bank profligacy with depositor funds, and Glass-Steagall's raison d'etre was the removal of such blatant conflicts of interest.  Thus, when it was repealed in 1999, it was like issuing Wall Street a "license to kill."


By then, the SINGLE-CELLED OPTION had divided several times, becoming significantly more complex and differentiated.  Not only was it growing, but thanks to the exponential learning curve of Wall Street's "financial engineers," was being injected with "derivative steroids" in increasingly large doses.  Options were exciting "games" for small investors, but futures were more lucrative because they could be used to manipulate entire markets.  Not surprisingly, today's covert, virulent Gold Cartel (as opposed to the more overt, benign version of the 1960s London Gold Pool) was born, as were numerous manipulative organizations, particularly an amped-up, omnipresent incarnation of the "President's Working Group on Capital Markets." 


In other words, Wall Street learned that REAL profits were not earned by successful trading markets, even with the leverage afforded by futures and options, but to manipulate the markets themselves with multi-layered derivative instruments.  Now that Wall Street has successfully bought its first President, George W. Bush, the sky was the limit as far as the capital - political and financial alike - that could be committed to such endeavors.


Top Contributors to George W. Bush


Around that time, "over-the-counter" derivatives were dreamt up by the cleverest, yet most amoral, of the financial wizards.  Not only could markets be manipulated with second and third derivative financial products such as exchange-listed "options on futures", but via unlisted, off-exchange products traded by "dark pools," i.e. unregulated, opaque, virtually untraceable funds with ambiguous sources of funds and equally ambiguous agendas.


Thus, the birth of "Weapons of Mass Financial Destruction," the very same "derivatives" that plaster the news pages each day when referring to the root causes of today's GLOBAL financial collapse.  To this day, fewer than a handful of people, including those that use such products, have any idea how such "derivatives" function, much less the daisy chain ramifications of their failure. 


The table below depicts the meteoric growth of "OTC derivatives" from the time Glass-Steagall was repealed until 2008, when the market rose from virtually nothing to more than $600 TRILLION in notional value.  Current estimates suggest this market is somewhere between $800 TRILLION and $1 QUADRILLION, but it is difficult to generate a truly accurate figure due to the lack of transparency, particularly in attempting to "net" the myriad cross-exposures of various banks.



Despite this "business" being proved to be outright, lethally dangerous FRAUD by the all-out collapse of the world's largest OTC derivative guarantor, AIG, it continues to grow, estimated to have grown by 15% in just the first half of 2011 alone (2H 2011 figures have yet to be released).  U.S. taxpayers funded the "derivative bailout" through inflation, as the insolvent Federal Reserve was forced to print trillions of dollars to make whole the counterparties to failed derivative contracts with AIG, Fannie Mae/Freddie Mac, Lehman Brothers, and others, both on and off the radar screen, and is obviously be the "buyer of last resort" for any and all future failures.


Once Wall Street had fully poisoned the U.S. financial markets, it expanded its reach into municipalities such as Jefferson County, Alabama, which recently filed the largest ever Chapter 9 bankruptcy filing thanks to toxic derivative contracts sold to it by JP Morgan, and ultimately the U.S. government itself, via the Federal Reserve.  Consequently, the Fed no longer utilizes "standard monetary policy" such as daily repurchase agreements through its New York office, but complex, "off balance sheet" swap and lease activities that all but a tiny handful of "elites" on earth are cognizant of.


Finally, after it had cast its evil, irreversible spell on the entirety of America, Wall Street injected its financial cancer overseas, luring unsuspecting countries into the derivatives trap with promises of "free profits" and "financial independence," much as it did to Jefferson County, Alabama.  The earliest adopters were naïve "rubes" such as Iceland and Greece, but ultimately ALL of Europe was sucked in, and thanks to the unbreakable chains of interdependence, there is NO WAY to free oneself outside of outright default, yielding higher interest rates, hyperinflation, political upheaval, and ultimately, WAR. 


THIS is the current state of the world, and NOTHING will fix it - EVER.  The inevitable result is catastrophic, unmitigated collapse of the largest financial HOUSE OF CARDS in global history.  Only EXPONENTIAL money printing growth will keep it alive, but the more toilet paper that enters circulation, the quicker the onset of HYPERINFLATION.  Once this contagion is unleashed, which I now believe will go GLOBAL - even in China - it will be clear to ALL sentient beings that ONLY a gold standard will enable the financial world to be reborn, and ultimately saved.


In today's dollars, my price target for gold is, at a minimum, $15,000-$20,000/ounce to simply account for OVERT money printing in the United States alone, and for silver, a ratio to gold of no more than 1:15.  However, today's dollars are depreciating rapidly, yielding a real, growing possibility of hyperinflation, in which circumstance the "price" of Precious Metals will be immaterial compared to the necessity of simply OWNING them.


Since the unnatural fertilization of the SINGLE-CELLED OPTION in 1973, nearly to the year Nixon abandoned the gold standard in 1971, the derivatives business has essentially grown infinitely.  Fortunately, it now feeds SOLELY on PRINTED MONEY, which is becoming "scarce" due to increasingly rapid devaluation.  In the ultimate "Catch-22" dilemma, the more fuel it consumes, the less energy it receives, until eventually the fuel no longer sustains life.


Thus, the "derivatives monster" has become too large and unwieldy to survive, thus rapidly nearing its death, and with it the current global financial system.  They say it is impossible to remember one's experience within the womb.  Fortunately for future generations, the experience of the initial SINGLE-CELLED OPTION is forever preserved for posterity.





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Gold and Silver Prices for these countries : Hungary | All
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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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