Wednesday, February 1, 2012

"Not My Problem" - More Positive Gold news?

Today, the gold and silver news is that Jim Sinclair is warning of a monetary event involving all Greek debt holders.

The gist of the interview with Ellis Martin is that the ISDA (International Swap Dealers Association) will not deem a 70% haircut for bondholders of Greek debt as a default (go figure). This will let them off the hook for the billions they would need to pay out to bondholders who own insurance on these debt derivatives. So the ISDA, owned by big banks, will not pay out but cut the bondholders (other large European banks) loose and let them deal with the consequences.

How will the market react to this?

Here is Turd Ferguson's summary of the possibilities of this move by the ISDA.

"If I understand this right, here is what Santa is saying:

In 2008, AIG had sold CDS on CDOs. CDOs defaulted and AIG had to pay. AIG went broke. The counterparties to the CDS were GS, JPM et al and had to be made whole on their losses that they thought were insured by AIG.
US Govt funnels TARP cash thru AIG to GS, JPM et al to cover losses
IN 2012, Greece is about to default, just like the CDOs of 2008.
ISDA (run by Big 5 banks) declares that 70% haircut on Greek bonds is not a default.
Therefore, Big 5 do not have to pay off on CDOs bought by Greek bondholders. Big 5 off the hook.
Greek bondholders who thought they had principal insurance are now screwed and left holding the bag.
Greek bondholders (big Euro banks, big Euro govts, big hedge funds) will now be insolvent.
Greek bondholders will need massive capital injection.
Short term euro negative/dollar positive.
Regardless, lots and lots of money printing to save Greek bondholders."

Gold in New Zealand dollars: $2103.83 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $40.26 per oz
Previous all-time high: $59.19
per oz (30 Apr, 2011)

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