Sunday, November 13, 2011

CME - What and who is putting a gun to their heads...

The reality of life, especially corporate life, is that no one spends money unless there is something in it for them. Corporations either spend big money when its clear that they can make a lot or that they could lose a lot more if they did not spend preemptively. That appears the be the case with the CME which spent $300 million of their reserve fund designed for internal FCM obligation defaults to other FCM’s or risk entities. The CME has an obligation to its members NOT to their end clients. The posturing is that $300 million was offered to the MF Global Bankruptcy Trustee as a gesture of goodwill - a "helping hand" if you will. Nothing could possibly be further from the truth. NO ONE GIVES AWAY $300 MILLION DOLLARS TO BE HELPFUL OR NICE when they have ZERO obligation to do so…they only do it when there is some sort of a gun to their head…in this case, I am left wondering what is going on that could scare the CME so much? Obviously, it has to be something much bigger than $300 million, since that is what they are giving away without so much as getting any reward or upside. So, the R/R does not look good here - unless there is a far bigger problem lurking in the wings. What is it that is on the other side of this very generous and supremely nice/kind offer?

Well, I think we can see some of clues in the currencies. I am posting the Dollar index components chart which I have occasionally produced in the past and watch everyday. With the exception of the parallel upward trend channels drawn on the index itself, none of the labels or patterns have been substantially changed from how I placed them in June…things have played out rather well, indeed. Somewhere in these patterns there lies something that must be related to the issue that is scaring the CME so damned much…and this is likely why the Dollar index has such substantial targets.

See for youself…things do not look good for the inflationist currency debasement and real asset prophets. Sprott and Bass and most of the assorted gold and silver extremists will likely not enjoy what is about to happen. Mind you that in the beginning phases of these currency moves, Gold and Silver will likely be looked at a safe havens and may enjoy a brief throwover…until people are forced to look at them for what they are: assets that are collateral to be sold to service obligations elsewhere.

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