A Physically Better Idea Than The COMEX

Are you feeling lucky and you want to play a game of chance? Well, there just happens to be a seat open at the Crimax poker table. It's just like regular poker, but the Crimax has one rule that is unusual. Your bankster opponents have unlimited capital to bet, and they will bet more than you have on every hand. At the Crimax, you must fold your hand when you do not have enough funds to call the high bankster bets, and the banksters win every hand. It is not lucky to play against the banksters at the Crimax.

Instead of losing to the rigged Crimax poker game, you might decide to buy precious metals on the Comex. You think that must be a sure winner for you since the dollar is being debased every day by massive fiat printing and "borrowing" that will never be repaid. Unfortunately, betting on the Comex is only a little less risky than Crimax poker. The Comex also has banksters with unlimited capital to bet against you, and the Comex also has an unusual rule that allows the banksters to sell an unlimited amount of precious metals they do not have by simply selling short Comex futures contracts. People who buy because metals should be much more expensive than they are currently priced on the Comex soon learn that the banksters license to print an unlimited quantity of short futures contracts gives the banksters the ability to drive metals prices lower whenever they want to do so.

You will be happy to hear that this commentary is not a futile call for position limits to control bankster abuses on the Comex. The Optimist believes that since 2011, the Comex is intended to control the prices of precious metals as a way to keep up pretenses that the dollar is a good currency. Powerful agencies in Washington (including the FED, Treasury, etc.) have no desire to limit the banksters from doing the precious metals price deflating manipulation work that those agencies want done. The Comex is fundamentally incapable of correcting the bankster abuses, and the banksters are free to continue selling massively more paper shorts than real metal they can access. Instead of hoping that the Comex will reform, we now learn that new exchange agreements with China will enable Comex banksters to use their unlimited ability to print short paper futures to drive prices lower on the Shanghai Gold Exchange too.

If you feel discouraged as an investor, imagine how sad the miners must be because pricing metals by the Comex prevents the miners from receiving a fair return from their mining activity. The bankster control of Comex prices threats miners as if they are milk cows that are allowed to earn only enough to continue producing metals, but with no hope of profits from properly rising prices on the Comex. Miners use skill and hard work to produce and sell a limited amount of real physical metals. It makes no sense to have those physical metals priced by banksters who can "produce" (with neither skill nor hard work) an unlimited quantity of paper short sales. Miners (and investors in mining stocks) need an alternative to the Comex for setting the prices on the metals they mine.

This commentary proposes that the miners establish a new physical exchange that is fundamentally different than the Comex. A key new rule of the physical exchange is that short selling is prohibited. Miners (and anyone with physical metal available) can sell as usual, but players who do not have physical metal are prohibited from selling metal they do not have. Investors with money can buy, in just the same way that Mints and industry that consumes metals can, with prices determined by the interplay of selling and buying real metal.

Investors can still bet that prices will increase by buying metals at lower prices and then selling later some of the metals they previously bought, hopefully at higher prices. Alternatively, investors who think prices will go lower can sell metal they have, and plan to buy more at lower prices. The new physical exchange would also offer options based on real physical metal in possession of the sellers. Investors would provide ample liquidity to the new physical exchange without needing paper short sellers. Some leverage would be available to investors in the form of margin loans, much like the margin used for stock purchases. Investors who want to wager on metals would quickly migrate from the paper pushing Comex and its similarly damaged ETFs to the new physical exchange. The new physical exchange would provide a mechanism for tracking purchases and sales to insure that future sales are permitted only for real physical metals that miners or investors have. Part of that mechanism could be a new application for blockchain technology. I am unable to define the details of the exchange, but I am an Optimist who believes that miners can do it. The physical exchange I envision would work for much more than precious metals. Base metals miners (and any other group that is plagued by short sellers) would also be helped by inclusion in the physical exchange.

All investors in mining shares should forward this proposal to the miners and encourage them to work on this ASAP. It is long past time for the miners to break free from the milk cow mode they are currently trapped into, and return to proper fundamentals that provide an appropriate profit for the risks in their endeavors.

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This commentary presents only the viewpoints of the Optimist, and it is intended only for perspective and entertainment.  Please do not interpret any portion of this work as investment advice.  If any of the concepts discussed here appeal to you, then you must do the work to decide if and when and how you should invest.  The Optimist does not ask for any profits you make, and he cannot be liable for any losses incurred as a result of your investment decisions.  The Optimist wishes you the best of luck in whatever you decide to do or not to do. 

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