LQD Monthly

One chart GBN.V investors should be mindful about is the LQD monthly chart. GBN.V has traded strongly inversely correlated with increasing vigour with the LQD monthly closes in aggregate since the 'no down-tick' rule was abolished.

What that means when you say 'no down-tick rule' is that you can first sell equity shares into the market against the bid (or any asset, really) and with the money raised in this fashion, you can parry against the rising trend of treasury bond prices in the futures market.

Clients of banks will leverage up and buy contracts that pay slightly more than their obligations, exposing the entire banking sector to immense risks, as the entire structure is dependant on leverage, rather than growth, or hard assets.

These leveraged assets, or derivatives, or corporate bonds, whichever you prefer, are based on swaps that carry the obligations to buy back all of the shares should the tide reverse itself.

What that has resulted in is a very short term naked shorting frenzy in the markets short selling gold mining shares, as they are all basically a stupid swindle, bar none. These types of assets have multiplied and removed any restriction from engaging in what was considered corporate fraud, up until last year.

Look at the inverse correlation of GBN.V shares with the LQD market, and you will see that capricious pricing in GBN.V shares are as a result of this activity in the markets as people overwhelmingly choose banking sector paper assets over the mining sector. Captain Hook put it very nicely as follows:

"Fast foreword to today (December 3rd) and unfortunately its the same old story. The excessively greedy speculators continue to buy calls on all varieties of derivatives across the sector, where by and large the shares are becoming increasingly ignored. If you want to know why precious metals shares cannot put on a lasting rally - you have your reason."

http://www.safehaven.com/article/27909/bye-bye-miss-american-pie

A strong inverse correlation that has not backed off since late August says that people are still banging down the doors to buy these derivatives-based contracts(and options on those contracts, forsooth), called 'covered bonds' in Canada. They were previously known as Asset Backed Commercial Paper before they blew up.

The 'swap of a swap' is probably to buy the mining shares.

supersize:

http://www.flickr.com/photos/11747277@N07/8260577021/sizes/l/in/photostream/

http://scharts.co/YTPywf

-F6