Manipulation in Markets

by | Jul 29, 2001 | Archives

A message about Gold from eClub member George hits the nail on the head but is unclear of the concept.

Here is a message from a reader named George in response to our currency terror messages.

	"Dear  Gary:
Inquire about what is included in the USA and Britain's official
inflation indices.
What is not included in the index should be enlightening.
If you inquire and think about it a minute I believe you will agree
that the stated inflation is too low over the last several years and today.
Gold cannot move up unless there is a reduction in gold forward
sales by institutions and mining companies or there is a major disruption
caused by fear, war, or just loss of confidence. Fluctuations and spikes
always occur because of human emotions. But a stable new price level needs
different underpinning than currently exists. A war, for example in the
middleeast could change everything instantly. Panic is say, Argentina and
Brazil where locals begin massive exchanging of local currency for US
can also cause a sudden upset. Because of previous events in Brazil and
Argentina this could easily happen even this year if one of the nations
Manufacturing continues to decline in Asia and in the USA. Units
shipped of discretionary goods are down for the 9th consecutive month
officially. My contacts say it is not 11 months of slow drift down. The
percentage of non performing loans in Asia is almost as high as in the
after the crash in 1997 right now.
So worse conditions elsewhere may cause more disruptions which barring
political stupidity or mass fear in the USA should scare money out of worse
places to the US currency but not necessarily to the USA.
Gold is artificially held down by Central Banks and those to whom they
rented their gold.
Silver should rise but its high price relative to some countries where
ancient customs caused silver to be hoarded is keeping supplies high and
slowing of industry has reduced demand. The hoards are slowly shrinking.
The economy will recover increasing demand. Several groups I have close
contact with have warehoused more than a year's world demand for silver at
current rates because its current price is below the cost of production of
their mining interests where silver is a by product. There are no notes and
no debts on the warehoused silver so it cannot
be cancelled like was done to the Hunt Brothers silver contracrs. This
silver is owned and paid for out of available cash.
So silver and gold prices are maniplulated.
Beware of the same in other commodities.
Check what is not included in the index.


George is totally correct but the message is unclear of a more important concept. The point is all markets are manipulated, from time to time, Wall Street, Nasdaq, Gold, Silver, other commodities etc. All the statistics are skewed and continue to be skewed as much as politicians can get away with when it suits their own purposes. We have all heard the joke there are three types of lies, lies, damn lies and statistics! I hope all my readers know that.

The point in this is the greater the manipulation, the more audacious the statistical fraud, the greater the opportunity. Gold investors and Richard Nixon learned this in the 70s when the dollar, after being manipulated for decades, crashed.

The key to successful investing is to see through the fraud and invest in the distortions created by the illusions the deception creates with the masses that invest by following the numbers. The last three messages on currencies showed that the numbers now make no sense. When this happens, eventually even the dumbest investors catch on and the distortion corrects.

The reality we can see now, through the numbers, is that the dollar remains strong despite very weak fundamentals. This indicates the system is rotten, riddled with corruption and that at some time this standard will be exposed and the entire dimension will fall. Is there anything new here? I think not.

A new currency paradigm will begin and when it does those who have shifted in advance will reap rich rewards. When will this shift take place? If I told you I knew, I would be lying just like all the statisticians, politicians, and market riggers. All we can do is see general trends, prepare and take our positions when we think or feel the market is ready to move.

Then if we get lucky and shift just before the trend change our challenge is to realize that we were probably more lucky than smart. We can never really know what is going on. Markets are not and will never be totally transparent so we can never truly see all. There will always be surprises! So until next message good global investing, business and good luck!