Did Anyone Actually Read Don Quixote?
For the last 17 years there is a website that has used a picture of Don Quixote atop a horse lance in hand ready to do battle with all the evil in the world.
But I have always wondered, do they understand as little about Don Quixote as they do about commodity trading? I went to a good high school in Fort Worth in the 1960s. We were required to read The Ingenious Gentleman Don Quixote of La Mancha and to do a report on it. I don't think anyone at GATA ever read the book because if they had, they would understand that Bill Murphy astride a horse carrying a lance is a perfect analog for Don Quixote.
Here is what Wikipedia has to say about Don Quixote:
Lest Murphy's sidekick, Chris Powell, not recognize himself as the perfect Sancho Panza to Murphy's Don Quixote, here is what Wikipedia has to say about him: "Sancho is illiterate and proud of it but by influence of his new master he develops considerable knowledge about some books."
I'm not sure how many people in the gold community actually understand that Bill Murphy anointing himself as head of the gold community is probably not a good idea considering his background. You see Murphy's agenda is to get even with the CFTC for having the audacity to throw him out of the business on a permanent basis.
Today you can take your pick of fake news. The Washington Post does it, The New York Times does it, and CNN is a world-class leader. But what those of us in the alternative media also need to recognize that because someone claims to represent gold, maybe that isn't their real objective. Maybe they are nothing more than fake news providers themselves.
I've got a giant bone to pick with GATA for two simple reasons. With their constant barrage of misinformation such as Naked Short Selling, Comex Defaults, Gold Derivatives Time Bomb, Commercial Signal Failures and all the other BS they have touted for the last 17 years, they make investing in precious metals look like the act of a fool, not a rational investment that everyone should at least consider. Murphy and the clowns who surround him have turned more people off the idea of owning gold than anyone I can think of.
Think about it for just a minute, "You should buy gold because the price is suppressed by governments, Central Banks and all the Bullion Banks." Are they kidding? You should buy gold because it's suppressed?
They were touting gold price suppression all the way from $252 to $1923 and only a fool would believe that. If gold was being manipulated from $252 to $1923, it was being manipulated up, not suppressed.
Silver went from $4 to near $50 and they were telling the same story. "Silver is being suppressed and when it breaks its' bonds it's going to $2000 an ounce." Or any other stupid number you want to believe. Are they kidding, every major institution in the world is suppressing gold and silver and you should buy it? Do they think all of their followers are stupid?
But more importantly than just touting a constant diet of fake news, when silver went to $50 and gold went to $1923 GATA was breathlessly proclaiming that silver and gold were about to break out, the shorts were on the run and the metals were going to the moon.
Well, I hate to break the bad news to you but silver going from $4 to $50 was a moonshot and anyone with any sense should have been warning people that a crash was impending. GATA probably has cost those who hang on their every word hundreds of millions of dollars. Because at $50 silver and $1923 gold they were still claiming that you should buy, the price was being suppressed, the Cartel bastards were on the run and about to get their clocks cleaned.
GATA and Powell in particular have chosen to attack everyone with an alternative viewpoint that does not tally with the GATA party line. I wrote a timely piece in October reiterating my belief that we were in a perfectly normal correction such as happens in every market. That was enough to make Powell climb aboard his jackass and tilt at the nearest windmill. That happened to be me.
I said in my piece, "Comex can't default; there are provisions in every commodity market for cash settlement."
Powell said in response , "Yet legal as it may be, "cash settlement" is exactly what many people mean by a default -- the failure of a counterparty to deliver what was promised and expected."
Sorry Chris. If Murphy had been sober enough in the last seventeen years to explain to you how the commodity markets work, 99% of buyers and 99% of sellers invest for the simple reason they want a cash settlement. The sellers don't have and don't want to deliver, the buyers can't afford and don't need delivery. It's true in corn, it's true in oil, it's true in the S&P futures and it's true in the metals. Cash settlement isn't the exception. It's the rule.
In the few cases where there was actually a run on a commodity such as silver in January of 1980 and palladium in January of 2001, it's wasn't the sellers who lost money, it was the buyers. Bunker Hunt and his buddies actually did manage to corner silver in 1980 so the CFTC just changed the rules. You could sell silver contracts but you couldn't open new buy orders. Bunker Hunt got the biggest fine in CFTC history. Bill Murphy's fine for 192 cases of fraud in 1992 was only the 2nd biggest fine in CFTC history at the time.
When Ford made a perfectly legal purchase of 5 million ounces of palladium in the months leading up to January of 2001 driving the price to about $1100 while platinum was a mere $650, the CFTC required those holding long positions to put up 125% of the mark-to-market price of palladium. That drove the speculators out of the market entirely and the price plummeted.
In my piece I said, "If there were no provisions for cash settlement anyone with pockets deep enough could force every commodity market into failure."
Powell responded by saying, "Indeed, and anyone with pockets deep enough can control any commodity futures market. But Moriarty has not the slightest curiosity about the surreptitious intervention by governments and central banks -- which have the deepest pockets -- in the commodity futures markets, intervention documented by filings with the U.S. Commodity Futures Trading Commission and the Securities and Exchange Commission."
Here Powell is revealing his total ignorance of how commodity markets work. The vast majority of investors who fail to understand the one giant difference between stocks and commodities share his lack of knowledge. With stock markets, you can literally print share certificates and sell them, in electronic form of course. It's called Naked Short Selling. It exists. It's illegal and it happens.
But commodities are a zero sum market unlike the stock market. Yes, you can go out and short 10,000 contracts of something and it will drive the price down. But for every single commodity contract, there is someone on the other side. It's a zero sum game with one buyer and one seller for each contract.
If you short a contract of corn, you either have to deliver the corn or close the contract by buying a contract of corn. If someone, anyone, cartel card carrying member or not, runs out and shorts 10,000 contracts of gold today, eventually they have to buy it back. Shorting futures contracts is nothing more than an offset of buying those same futures contracts in the long run.
If you make the gold market go down $20 by shorting into it, when you buy those same contracts back, you are going to make the market go up $20. It simply doesn't matter if the Bullion Banks or the Cartel or Billy the Kid shorts gold and silver; sooner or later they have to purchase exactly the same number of contracts. If this intervention as Powell calls it was so obvious it would show up in the open interest and volume and it does not.
I said in my piece that, "We hear about how the shorts are into 'naked short selling' one more time even though there is no such thing."
Powell got really cute here. He never addressed my blunt and direct statement that is either true or not. Naked Short Selling either exists or it does not. It was a term never used in any commodity text ever written until GATA came along and started with their fake news about gold and silver and some mysterious group called the Cartel.
Here's what Powell had to say about Naked Short Selling, "Yet even the lowliest trader working out of his parents' basement can open a commodity futures trading account and, having posted a certain amount of earnest money, sell a contract for a commodity he doesn't and may never own."
Powell, that's exactly how commodity markets work and always have worked for 5,000 years. A trader can work out of his parents' basement can open a futures trading account and after posting the required margin can sell a contract for a commodity he doesn't and may never own.
As long as people play by the rules and in spite of all of GATA's hot air, they have never shown any real conspiracy or illegal activity that doesn't take place in every financial market. Saying that a financial market is manipulated is like saying wheels are round and the sun rises in the east. It's both perfectly true and perfectly meaningless at the same time. All financial markets are manipulated and even GATA has claimed to have successfully manipulated gold higher in the past.
If investors seriously want to make money, they need to understand the rules by which markets work. It's not enough to say that a market is manipulated or to create entirely new concepts such as Naked Short Selling or Comex Defaults.
GATA is nothing more than another fake news network run by a guy who was a con man before and hasn't changed his stripes. What is so interesting to me is that nothing about Murphy's background is particularly hidden. All those people who got into bed with him with his brand of fake news either understood he was a con man or they should have known. For all I care everyone can hand GATA all the money they own and can be part of Murphy's tilting at the CFTC to get even with them for exposing him.
Powell knows all about Murphy's background and simply doesn't care. He will attack everyone else he disagrees with but you will never hear a word about the dog he's in bed with and where he collected all those fleas. Murphy is an embarrassment to the entire industry. He goes to gold shows and gets so drunk that he needs to pee in the potted plants in the lobby of five star hotels before he speaks the next day.
Murphy needs an intervention and to sober up. Powell just needs to learn a little bit more about how markets really work before he jumps up and starts tilting at more windmills.
Bill Murphy does not represent me and probably shouldn't be presenting himself as representing serious gold investors. If you want your fantasies filled certainly Don Quixote is in an alternative universe and experienced in tilting at windmills. So is GATA. You should invest to make money, not to have your fantasies filled.
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April 8th, 2020
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