Discussion Topic

Bullion Bandits and SIlver Pirates – The Brethren

September 22, 2020


The Bandits and the Pirates as I have named them have been in the news for a very long time. All for the wrong reasons of course. Testimony recently from a junior trader at DB that his bosses taught him how to spoof the precious market is not only not surprising its only part of the shenanigans they are up to. Let’s get to that later.

Since the pandemic became clearly a big issue both socially and economically the markets have been volatile, nervous, exuberant, right, wrong, crazy, illogical and silly. Sometimes all in the same session.

Economics 101 has general rules that asset classes should follow in various economic circumstances. These rules have been followed at times since the start of the year but scarily they haven’t as well. This alone was a massive red flag to me that things were going pear shaped. Sure, central banks have been “printing” money and throwing cash at the problems, but arguably this has caused more issues than it has solved.

The Feb/Mar sell off in the US stock market shouldn’t have surprised anyone. The rally back to where it came from should have though. One would have kept hearing the term “free” money. This concept unleashed what I call the “WOO HOO” crew. Since then we have seen the crew ignore every underlying issue, whether an economic or medical one and just go “WOO HOO” free money. A train wreck waiting to happen. There have been a few bingles along the way but no derailment yet…but it will.

All these crazy issues come on top of what was an already precarious global economic situation, headlined by the mounting debt issue. Across the board from Sovereign to corporate and down to small businesses and individuals growing debt burdens were ballooning to levels that had boffins very nervous.  This has not got any better and the boffins, and you, should be getting more nervous.

Now back to the Bandits and Pirates, hereafter collectively known as the brethren.   From spoofing to plain manipulation, they have had a field day for years whilst simultaneously flipping the bird at the regulators. The regulators (and I include the exchanges in that) have been a toothless tiger through the whole thing. Either unwilling or unable to really deal with it,  the brethren have operated with impunity. The odd multi million dollar fine is chicken feed and the brethren simply got that out of petty cash, paid it and continued on.

Spoofing is one thing but it is the manipulation of prices, or more specifically forcing prices to where they shouldn’t or don’t want to be that is the real issue, simply because this activity directly affects other market participants. The regulators need to more base their response to manipulation on the damage done to other investors and not the illegal profits attained by the brethren. The real travesty here is just that, while they “F” around with the price, whether it be to spoof, gain illegal profits, or simply protect their hedge, they do untold damage to the markets credibility and cost honest, rule following investors money.

The bottom line is it will only stop when they decide to. The powers to be can’t or don’t want to stop them. They are cornered and they are hurting but most just don’t realise how deep the big boys’ pockets are. Their pain threshold is immense. Ours isn’t.