Silver

Silver Prices: Market Loses $90 Million to Ponzi Scheme

Silver prices this week dipped after U.S. Federal Reserve Chairman Ben Bernanke failed to confirm that more economic stimulus is on the way. Silver prices hovered below $29 an ounce Friday.

Meanwhile, millions of dollars that would have been invested in physical silver it turns out were instead held in a $90 million Ponzi scheme orchestrated in South Carolina.

The Commodity Futures Trading Commission (CTFC) reported Thursday it charged Ronnie Gene Wilson and Atlantic Bullion & Coin, Inc., both of Easley, S.C., with offering contracts on silver sales, but never actually purchasing any metal.

The CTFC maintains in a filing Thursday in U.S. District Court in South Carolina that Wilson and Atlantic Bullion & Coin violated the Commodity Exchange Act and CFTC regulations by operated a Ponzi scheme dating back over a decade and continuing through Feb. 29 of this year.
Wilson and Atlantic Bullion & Coin fraudulently obtained at least $90.1 million from some 945 investors, the CTFC alleges.

The CFTC received jurisdiction over the entities from Aug. 15, 2011, to Feb. 29. During that time, Wilson and Atlantic Bullion & Co are accused of deceptively obtaining at least $11.53 million from at least 237 investors in 16 states under contracts of sales to buy silver, without buying or delivering the white metal.

According to the CTFC charges, Wilson and Atlantic Bullion issued fake account statements to unknowing investors who believed they had invested in silver.

The CFTC is after compensation for scammed investors, a return of illegal gains, civil monetary penalties, trading and registration bars, and permanent injunctions against further violations of the federal commodities laws if successful in its suit.

Cases like this are why choosing where to buy silver is a decision requiring research - which we've done for you in our special report, "How to Buy Silver."

However you choose to buy physical silver, gold or other precious metals, the most important rule is to deal only with reputable dealers who have proven experience in the business and clearly stated policies and warranties - especially if you're purchasing by phone or online.

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The Greatest Episodes of Market Manipulation…Is Silver Next?

Market manipulation has a long and storied history.

From the Tulip Mania of the 1600s all the way to the recent housing bubble, market manipulators have employed a wide range of tactics to lighten the wallets of unsuspecting investors.

And even though market manipulation is prohibited in the U.S. under a section of the Securities Exchange Act of 1934 - it's as American as apple pie.

Everyone from high-ranking government officials to investment bankers have been caught with their hands in the cookie jar.

The list includes scofflaws like Ivan Boesky, Michael Milken, and Jack Abramoff.

Jim Cramer, the host of CNBC's "Mad Money," said he regularly manipulated the market when he ran his hedge fund, calling it "a fun...and lucrative game."

Not surprisingly, a recent study found that those closest to the information loop -corporate insiders, brokers, underwriters, large shareholders and market makers - are most likely to be the perpetrators.

To give you an idea of how things work, here are three notorious examples of market manipulation.

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Five Savvy Ways to Conquer the Wall of Worry


If you like extreme risk and consider living on the edge to be "normal," today's column isn't for you.

Today I'm writing to the millions of investors who are completely terrified by the prospect of what's next and who simply want their faith restored - not to mention their investments.

To all of them I would say: You are not alone and you're not wrong to be apprehensive.

Our political situation is an embarrassing train wreck, our national debt looks like a one way trip to financial hell, housing remains in the dungeon, unemployment is unacceptably high and Europe...oh Europe.

It's nothing short of a gigantic wall of worry.

Plus, there have been so many attempts to "fix" things that I've lost count. Throwing good money after bad is a fool's game and one that will have very real and inevitable consequences.

So what should investors do?

The Fed's War on Capitalism

Here's how I see things. The "Whitewash Ministry" has basically five options:

  1. Repression
  2. Devaluation
  3. Austerity
  4. Deflation
  5. Inflation
You can forget the double "d's" - devaluation and deflation.

Even though both would be the proper way for free markets to bleed out the excesses of the past, they are essentially political nukes and nobody has the willpower to touch either one of them.

The third, austerity, is being tried but only halfheartedly. Our leaders have no idea what this actually means. Since they remain completely unaccountable, there is no true incentive.

Besides, large numbers of people have figured out it's easier to be on the dole than it is to actually work, so this is another disincentive for meaningful cuts in spending.

As for inflation, this too is officially a non-starter as long as interest rates are held near zero. Unofficially, it's a different story. Most investors I know are feeling the heat of 12% to 15% a year in their wallets.

That leaves option number one - repression.

You can call it what you want, but repression is really a fancy way of saying that our government is conducting punitive monetary policy.

While they mouth off about how they want to create jobs and take care of the middle class, in reality they're eviscerating it.

How?

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Why I’m Taking Gold Double-Eagles on My Next Trip to Utah

Federal Reserve Chairman Ben Bernanke may think he has everything under control, but the truth is the monetary ground is literally shifting beneath our feet.

That's why his loose monetary policy has some U.S. states looking to get into the gold coin business.

As I'll explain later, it's why my Gold Double-Eagles are becoming even more valuable.

Because while the U.S. Constitution bans states from printing their own paper money, it does allow states to make "gold and silver Coin a Tender in Payment of Debts."

Now no fewer than 13 states are seeking approval from their state legislatures, either to issue their own currency or to explore it as an option as the Fed's printing presses spin out of control.

So why is there this big rush by states to move into gold as an alternative currency?

It's simple really.

The Trouble with Fiat Money

Fiat money, created by central banks, possesses no intrinsic value. Paper money only works as long as governments don't create too much of it.

For pieces of paper to have value, we all have to believe there won't be too many of them and that the authority creating them has the preservation of their value as its top priority.

When that confidence vanishes, the fiat currency returns to being just paper - as it did famously in Weimar Germany in 1923. Or even more catastrophically in post-war Hungary, where the last stable symbol of value, the 1931 gold pengo, became worth 1.5 octillion 1946 paper pengos.

Of course, central banks do occasionally compete for foreign depositors by offering paper currencies with more stability.

In fact, before 2000, the U.S. dollar benefited from these flows that came from all over the world, including Europe.

Now, apart from the eccentrics who swear by the Japanese yen or the Chinese yuan, flight capital is largely confined to the Swiss Franc.

Since Switzerland is a small economy, the Swiss National Bank has drawn a hard line. It refuses to allow the franc to rise above 1.20 against the euro, so even that refuge has been made less attractive.

The Attractiveness of Gold

As you would expect, the private sector and some governments have begun to look further afield, and are beginning to focus on gold in particular.

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We're Closing In On a 70% Dividend

Lately, it seems billionaire precious metals investor Eric Sprott is grabbing headlines almost daily.

Sprott believes in silver and gold as money, and he has little faith in paper currencies.

That explains his recent acquisition of a chain of currency exchange outlets, which he aims to gradually build into the safest kind of bank - one that makes no loans, and could eventually offer gold- and silver-backed checking accounts.

Leave it to Sprott to flip a long established business model on its head.

And now he's at it again.

Ever the investing activist, Sprott's latest move involves a "call to action" for silver producers, challenging a business practice typical of most - saving in cash.

Sprott has sent a letter to silver producers, suggesting that they reinvest some 25% of their earnings back into silver, rather than in cash at the bank.

On the surface, it doesn't look like such a dramatic step.

But after deeper analysis, it's clear such a move will accomplish two significant things for shareholders:

  • It will heighten exposure to a commodity that the investor initially bought those shares for.
  • And it will protect the investor from the risk of devaluing currencies the company would have held instead.
In fact, the move is brilliant.

And as I keep digging, I realize that the implications go well beyond these two shareholder advantages.



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Silver Shines

With it's price at 21%, silver outshines gold for investors. Keith Fitz-Gerald, Chief Investment Strategist for Money Map Press joins Fox Business' Varney & Co. to explain whether everyday investors should put their money into this precious metal, and what choices are available.

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2011 Investing Strategies: Readers Turn to Silver, Avoid U.S. Dollar in the New Year

After a year of rocky economic recovery and a mixed bag of U.S. data, market strategists are waxing optimistic about the profit prospects in 2011.

"There is still an awful lot of pain out there for sure, but if you get this creeping confidence to accelerate a little bit, it's surprising how fast things can turn," Sandy Lincoln, chief investment strategist at M&I Investment Management, told MarketWatch.

A year plagued by Europe's debt contagion, the May 6 market "flash crash" and constant fears of a double-dip recession caused many investors to keep money parked on the sidelines.

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You Heard it Here First: Silver's 30-Year High is Just the Beginning

The price of silver today (Monday) surged above $30 an ounce for the first time since 1980, after U.S. Federal Reserve Chairman Ben Bernanke indicated that further quantitative easing (QE) could be on the way.

Silver futures have gained almost 70% since August, when expectations of more QE were first discussed. Since then, the Federal Reserve has set about purchasing $600 billion of U.S. Treasuries and the Fed Chairman said on Sunday that more debt purchases are "certainly possible."

The result was a rally in precious metals, which played host to investors looking to preserve their wealth against further depreciation. The price of silver topped $30 for the first time since 1980, soaring as high as $30.09 an ounce in afternoon trading.

But that's just the beginning.

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Money Morning Mailbag: Soaring Gold and Silver Prices Point to Profits in Equipment & Drilling Industries

Gold yesterday (Thursday) continued a four-day rise soaring as high as $1,399.70 an ounce as the dollar fell for a second consecutive day.

"Gold is up primarily on dollar weakness and economic optimism," Adam Klopfenstein, a senior market strategist for Lind-Waldock, told Bloomberg. "This is very positive for gold on the future inflation front."

This week Money Morning Contributing Editor Peter Krauth showed why gold and silver are still headed for gains in the New Year, following a 2010 surge.

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Question of the Week: Midterm Elections Leave Investors Wary, Turning to Silver and Gold

The hotly contested midterm elections ended last week, and now U.S. voters will watch to see if newly elected officials will deliver on promises to lift the nation out of its economic morass.

Many voters made their decisions out of frustration with current economic conditions, such as excessive government spending, ineffective stimulus measures and stubborn unemployment. And given the potential for change in U.S. economic policy, investors will likely be eager to see what the stock-and-bond markets will do in the months to come.

Although there is unlikely to be any quick decision making in Washington, investors will hope for the status quo in at least one area - a continued market rally, which is the norm for midterm election years.

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CFTC Investigates JPMorgan, HSBC as Firms Sued for Silver Market Manipulation

JPMorgan Chase & Co. (NYSE: JPM) and HSBC Holdings Plc (NYSE ADR: HBC) were hit with two lawsuits Wednesday by investors alleging the companies conspired to drive down silver prices and gain hundreds of millions of dollars on short positions.

Two traders, Brian Beatty and Peter Laskaris, are accusing the big banks of attempting to manipulate the market for silver futures and options contracts since 2008. The complaints allege the defendants gained millions "if not billions of dollars in profits" by suppressing silver futures and making their short positions on the metal more lucrative.

The plaintiffs said they traded COMEX silver futures and options contracts and lost money due to the manipulation. Laskaris alleges that the banks informed each other of large trades and flooded the market with a disproportionate number of orders, according to Forbes.

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Money Morning Mailbag: When Investing in Precious Metals, 'Physical Metal' Isn't Always Better

If there's one thing that I've discovered in my careers as a hedge-fund manager, investment advisor and financial columnist, it's this: Whenever you pitch a stock that has something to do with mining or metals, you'll always hear the argument that "physical metal is better."

As my experience has demonstrated, however, that's not necessarily true.

Wealth protection in hard economic times is driven by asset diversification. In good times, an investor should concentrate their investment bets on profitable enterprises, in hard times you want to diversify your assets across different asset classes. You will lose some money, but if you choose wisely, you will have real assets and value on the other side.

That's not always the case when you concentrate your assets during a period in which there's substantial market risk.

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