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« Does Gold’s Correlation with Stocks Mean that it’s No Longer a Safe Haven? | Main | A Big Uranium Deposit, and a Big Debate on Mining It »

Clearing Houses Are The Mechanism Of All Markets


Jim Sinclair

The following is a missive that we received from Jim Sinclair this morning, who is the host of a web site called Jim Sinclair's Mineset. Its an interesting and a tad scarey read, so its well worth the time spent on reading what he has to say. The above link will take to his site and his updates via email are free so you have nothing to lose by signing up for them.

Here we go: 

We all know bank's balance sheets are cartoons due to FASB's capitulation on the fair market value issue, that the euro financial leaders do not deserve the title leader, and that the Fed is the source of liquidity for Euroland in unlimited cheap dollar swaps, but there is more.

That more is the first failure of a major clearing house.

Clearing is the mechanism of all markets.
It is the guts of the system.
It is the engine under the hood of finance.
It is the pulleys that turn inside the watch.
It is basic to finance for without clearing trades cannot close.

Without faith in the clearing house system where is faith that what your account statement says means anything whatsoever?

Unless MF clients are made whole in every way, the system is broken. It is as if the heads blew off the engine of finance. Where can you keep your money and investments if a clearinghouse is allowed for whatever reason to go broke, therein leaving the clients to suffer?

Are you safe even in a custodial account if the clearing mechanism can erase assets across the board as a product of insolvency for any reason?

The system is in a critical seizure.

It may take some time, but even the financial sheeple are going to worry about their own funds. God help you if you hit gold right on a paper exchange with the wrong clearing facility.

You are wholly dependent on the ability of the clearing house to pay into your account the winnings by deducting those funds from the loser. You are wholly dependent on the ability of the clearing house to guarantee the safety and security (are T Bills securities?) beyond SIPC levels. SIPC is underfunded but would be made whole by funny paper.

God help all the exchange traded funds that are nothing more than houses of derivative paper requiring a sound clearing system to have even an excuse for existing.

If the clearing system fails then you have nothing whatsoever. God help you if you are a farmer hedging your crop or livestock if you the farmer have nothing whatsoever due to a broken clearing house. You are insolvent regardless of the fact that your hedge may have been perfect for the needs of your operation.

Unless MF clients are made whole in every way the system is broken.

People did not realize then and some even now that the failure of Lehman broke the technical procedures (mechanism) for the functioning of the OTC derivative and for that reason broke the Western world's financial system for which we are paying dearly today.

MF is a Lehman Brothers, but worse. OTC derivatives have always been a fraud but could have, before Lehman failed, been globally netted to practically zero.

The lack of faith in the clearing house system breaks the mechanism of the marketplace, even for legitimate transactions. This leaves gold in your possession as the asset of last resort. This is quietly driving the gold price towards Alf's objective of $4500.

For your sake immediately take delivery of your gold and silver.
For your sake immediately take paper delivery of your gold and silver shares from those very few companies still willing to facilitate that kind of transaction.
For your sake immediately make your general securities positions "direct registration" as a second best method of protection the asset against failure of your clearing facility.

You all have clearing facility dependence even if you do not know it. Unless MF clients are made whole in every way, the system is broken.

This is no time to take any unnecessary risk.
This is no time to be lazy.

If you do not know how to do direct registration, get paper securities or take delivery of paper gold and silver, ask me.


Regarding We have closed two trades just recently and updated the charts accordingly.

Our model portfolio is up 403.55% since inception

An annualized return of 101.86%

Average return per trade of 39.37%

89 completed trades, 84 closed at a profit

A success rate of 94.38%

Average trade open for 47.07 days



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Reader Comments (2)

I agree with you,the problem is that in many South American countries(were I live) it is not easy to get delivery of physical PM,so the choice is to buy gold paper like GLD,or buy gold through Gold Vault for instance.Is the latest a viable and secure way to own gold??

December 3, 2011 | Unregistered Commenterangel

I would never buy GLD or Gold Vaults! I am only selling Gold-put leaps, maturing in 2015-16.
I am strongly convinced, that all gold derivatives are empty paper at the end of the day! Nobody controls the real
gold amount inside these vaults! According to human nature, they will be stolen sooner or later anyway......

December 16, 2011 | Unregistered CommenterGerry Shark

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