Tsingsham paper loss stood at $8 billion on Monday before the LME suspended trading in Nickel.
Tsingshan's founder, Xiang Guangda, told Chinese media outlet that "relevant government departments and leaders are all very supportive of Tsingshan.Tsingshan is a solid Chinese enterprise and our positions and operations do not have problems."
The main issue with the COMEX is that, on average, they allow sales of 200x daily production almost every day. The COMEX was setup to allow hedging of production. You know, you are a wheat farmer and you want to hedge your production. Well, for most commodities, this is 125% daily production. Yesterday, you saw price go up $2, then smacked down $2 on approximately NINE HUNDRED DAYS PRODUCTION "UP FOR SALE" IN A DAY.
Why the silver longs, and Eric Sprott, can defeat the silver shorts – an education in 4D chess
Worldwide silver shortage. Bullion stores sold out for weeks, if not months. No one selling their product to them for spot price. Bullion priced $10-$13 over spot. Silver deficit of mine supply of 350 million ounces.
And of course, you expect to wake up at silver $2 less than a day before. Actually – I did, many of you did not. The price is actually in "contango", where the futures price the last time I checked is wayyyyy above spot. I know how they play this game. At issue here is the disconnect between the REAL physical price and the "paper" price.
When you see a contango like this, you can, in essence, sell a futures contract, then go to the spot market and buy silver. You can then deliver the product on the futures contract. This contango was $.75 a few minutes ago, per ounce. For a contract of $5,000 ounces, that is $3,750 you can pocket on this deal. Of issue, NO ONE will do this, because anyone trying to buy on the spot market may get months of delays to get product.
Yet, prices are falling because we obviously have all of this supply!!!
In our article, we explain that Agarwal has made about $500m in gross profits on the trade. BUT, that is before the substantial costs required to service the instruments involved in making the stake happen. Coupon costs alone will have totalled about $300m since he first put on the two legs of the trade.
And we've learned that Agarwal is likely to reveal that he is up about $100m from the overall project. We assume that means a hefty chunk of the remaining $100m will be headed to the folks at JPMorgan.
Agarwal's trade strongly resembles an equity collar, which DD's Rob Smith and Arash Massoudi explained last year has become a hot money spinner for Wall Street banks looking to make money from deep pocketed clients. In short: collars do not come cheap.
In short:
Agarwal just spent an insane amount of time and energy to correctly pick a stock that soared 80 per cent in two years, but due to the use of an exotic structure may have only made profits equal to his bank fees . . . yikes!
