I have previously offered an explanation that would rationalize this (apparent) conflict of interest: GLD is nothing but a leveraged sham used to fund HSBC's massive shorting operations. My reasoning here is very straightforward. HSBC has two massive positions/obligations in the gold market: it's in-house short position and its role as (long) custodian for GLD. However, only one of these two positions is ever audited. It would be a classic "shell game" except, instead of using three shells, HSBC only needs two.
Immediately the conflict of interest disappears. Instead of sabotaging its own multi-billion dollar short position and subsidizing small investors, it would be using those small investors as chumps -- to fund the massive shorting operations that undermine their own (long) investments.
Which model is more plausible to readers: HSBC acting as a gold philanthropist, and subsidizing small investors against its own (massive) financial interests; or HSBC acting as a gold-predator, using the money of small investors against themselves?
In eerie, disturbing symmetry; the scenario is identical in the silver market -- with JP Morgan (JPM) penciled in instead of HSBC -- except for one significant difference: global silver inventories/stockpiles have collapsed. With no (known) large, national stockpiles of silver we have JP Morgan claiming to have possession of both of the world's two largest holdings of silver.Here we have multiple layers of (apparent) illegitimacy. Along with the same conflict of interest with SLV that HSBC faces in the gold market, we have the sheer, grossly excessive size of these holdings. In a world starved for silver, JP Morgan claims to be holding a long and short position, both of which are more than twice as large as the Hunt Brothers' position in the silver market -- when they were charged and convicted with attempting to corner the market. The major difference between JP Morgan's massive concentration(s) in the silver market today and that of the Hunt Brothers is that back at the end of the 1970s when the Hunt Brothers made their effort at cornering the market, global silver inventories were more than 10 times larger. This makes it much less plausible that a single entity could be in possession of both of the world's two largest stockpiles of silver.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV