On Sat, 20 Jul 2013 17:53:08 -0500, Ignoramus8648
wrote:

On 2013-07-20, Ed Huntress wrote:
So, Golden Sacks is driving aluminum from one warehouse to another,
and then back again, to drive up prices for "warehousing" it.

Meantime, JPMorgan bought up more than half of the copper warehoused
for the US market, planning to do the same thing.

As EA says, it's time to bend over:

http://www.nytimes.com/2013/07/21/bu...anted=all&_r=0


I read the article with great attention and, while it is intelligently
written, I do not "get it". I do not see why an industrial consumer of
aluminum needs to buy it from those warehouses. They can go straight
to any aluminum producer or wholesalers.

Two points: Golden Sacks now controls 25% of the aluminum in the US,
and that's enough power to drive up the spot price for everyone else.
If you ignore G-S's stock, that would mean 100% of the market was
chasing 75% of the supply -- kaBOOM! go prices.


My best understanding of the story is that the storage costs are
imposed on commodity speculators who own metal and use it as
collateral, but do not hold it themselves. My heart does not really
hurt for them.

They're running a scam, Iggy. They're exploiting a London Metals
Exchange rule that allows them to lard billions of dollars on top of
the commodity price, for "warehousing" it.

They're not allowed to keep it in a warehouse for very long under
those rules, so they load up a truck and cart it off to *another* of
their warehouses. Then the truck returns to the first warehouse with
aluminum from the second warehouse.

They're skimming off billions of dollars, and it's all legal.

Isn't it great when you set the rules that control your own business?
g

--
Ed Huntress