friday, page-120

Voltaire,

I hadn't bothered to think about ETF's but the very idea that you suggested was exposed in the gold and silver markets on a monumental scale a couple of months ago. One of the players was even recorded admitting 9even though he thought that the situation was fine!) that the leverage for physical gold to gold contracts was in the order of 100:1. God bugs obviously are excited at the prospect of the worlds biggest ever short cover rally when JPM etc have to cover all the contracts that they've been selling. IMO it won't work out that way and they'll just defaut. Bound to be a pretty big upset either way... bullion dealers all base their prices on the London and US paper market so if the value of the contracts drops to zero following a default spontaneous markets for the real metal are bound to break out all over the place.