Notes From Underground: The Exciting Game Without Any Rules

Well, the apocalypse has fallen upon the financial markets much as we have discussed at NOTES FROM UNDERGROUND on February 2. The onset of the DEMAND SHOCK has unleashed the fears of a deflationary spiral. My readers have been WAY AHEAD of the CNBC crowd in analyzing the potential outcomes and predicting quality trades as the PANIC IN NEEDLE PARK fostered by the central banks was/is beginning to unfold. Any person who thinks any economic release has market value raise your hand but keep it six feet away as you are likely contagious.

But this is what we know: TEGWAR, the card game played in Bang the Drum Slowly. The FED has decreed to the world that there are NO RULES. When the guardian of the world’s reserve currency (that is, the medium of exchange and a STORE OF VALUE) declares all previous held beliefs NULL AND VOID we are adrift on a massive sea of liquidity with the only safe harbor being HARD ASSETS OF HISTORICAL SIGNIFICANCE.

There were rumors around the world that there is now a shortage of GOLD and SILVER, which has sent cash market prices soaring ahead of futures before Tuesday’s massive metals rally. (As a sitting CME GROUP director I cannot speak to certain issues so please to not ask or go conspiratorial.) We have discussed that GOLD‘s relevance has been as a hedge against central banks losing all credibility and as all rules have been suspended the GOLD/CURRENCIES have become the nexus of sanity.

NOTES FROM UNDERGROUND IS NOT A GOLD BUG. It analyzes the global macro situation and looks for relative value across the globe and finds the best relative value trades. When the world’s RESERVE CURRENCY throws the rule book away it will mean that the DOLLAR WILL NOT LONGER SERVE AS A BEACON OF FINANCIAL RECTITUDE. A currency is meant to be a medium of exchange and a STORE OF VALUE. The question for all has the TREASURY and the FOMC abandoned its role?

It is early to make a definitive judgement but investors must begin entertaining the seriousness of that question. Look around the world and the best positioned central bank is the Russian institution as it has been DUMPING U.S. TREASURIES and HOARDING GOLD FOR SEVERAL YEARS. Keep your ears open for RUSSIA/PUTIN to become even more disruptive as a global actor. It’s fragile times like these that embolden VLADIMIR. Again, welcome to TEGWAR.

For a brief moment, let us entertain the idea that the shortage of physical gold rumored to be driving markets is possibly the RUSSIAN SOVEREIGN WEALTH FUND hoarding the barbarous relic. Well Bernanke claimed to not understand GOLD while understanding BITCOIN. Ben may want to dust off Jacque Reuff’s “Monetary Sin of the West.” Let’s see if he has that courage to act. TEGWAR YOU HAVE BEEN ALERTED.

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43 Responses to “Notes From Underground: The Exciting Game Without Any Rules”

  1. Robert Myron Says:

    Maybe as a CME director you can address the outrageous gold and silver manipulation totally ignored by the CFTC and the CME. Before you dismiss my allegation please note I ran the biggest gold and silver arbs and was in the IMM gold pit in the late 70’s.

    • yraharris Says:

      Bob–as one of my all time favorites I can attest to the veracity of that which you write—thanks for being a long time reader and your contributions are greatly appreciated

  2. Dante Federighi Says:


    Great article today! I have been wondering for the past two weeks about who is benefitting from the virus. I think you and I agree it’s Russia: oil war with Saudis, political instability ahead of the election in the US, finger pointing at the Chinese, very few corona cases (despite bordering 14 different countries) and loads of gold. No one is even discussing these things. Could it even be possible Russia engineered the coronavirus and spread it around the world as the ultimate germ weapon? Putin’s ultimate plan to be the richest and most powerful person in the world — the real Dr. Evil?


    • yraharris Says:

      Dante–thanks .It seems that one of the Federighi will be skillful with helicopter drops.I won’t entertain the conspiracies but Putin will be a player here as both you and I believe–amazing they have not moved to lift the Russian sanctions for a cut in oil production

      • David Richards Says:

        > “amazing they have not moved to lift the Russian sanctions for a cut in oil production”

        Yra, not really I think. As we briefly discussed before, germane to the issue of Russia not cutting oil production, there exists a strong strategic partnership between Russia and China built on six solid years of mutual benefit and trust, things lacking in Trump’s alliances. The game is afoot.

      • David Richards Says:


        I don’t think sanctions relief is Putin’s objective. As Pompeo et al have proactively ramped tensions, the stakes are higher now. Instead, Putin and Xi in their friendly and strategic partnership are focused on Job One of killing the foundation of American strength, the dollar status. When that ends, US influence and capability end with it (and you can’t wage or win a war if you’re unable to finance it). So US sanctions, trade, embargoes, etc, are all secondary to killing the dollar. The energy markets and precious metals are weapons to that end. Russia can live with $30 oil, its proven ally China likes it, but highly-leveraged US energy is destroyed by it. That set the US dominoes falling in its debt-leveraged “everything bubble” at a moment of vulnerability (with a noteworthy but exaggerated assist from coronavirus), causing the US to engage reckless policies which will eventually destroy the dollar, devastate the US, and catapult the precious metals that Russia and China (and Chinese people) are loaded with. Then per the golden rule, he who has the gold will make the rules. New rules, new order. Fourth turning stuff. So why would Putin halt that process now, merely for some short-term sanctions relief?

      • yraharris Says:

        Dave–don’t disagree as to the BIG GAME but the move in the Russia/Saudi “dispute ” was a ploy in my opinion—Putin needs a victory and the sanctions removal would be one which would also help his financial empire/oligarchs—the FED is doing its best to destroy the role of the Dollar so now it is just a game of patience—-Calling Thomas Enders

      • David Richards Says:

        Indeed patience, as more than ever, time seems to be on the side of the Russians and Chinese.

        And good point about the Russian oligarchs, who after all like to get some lunch money. As both Putin and Xi seem possibly vulnerable from within, I think, perhaps especially Xi right now. But I know nothing – and even if I did, I’d not publish it publicly, lol.

  3. asherz Says:

    Bernanke claiming ignorance of the yellow metal goes with the job of Fed chairman.
    In 1966 Alan Greenspan. then a Gold Bug. said the following:
    ” An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.”

    In 2017 he said:
    “I view gold as the primary global currency. It is the only currency, along with silver, that does not require a counterparty signature.”

    In between as Master of the Universe he became the Alchemist par excellance. The rhythmic clanking of the printing presses were now heard, controlled from the leader’s perch in the Eccles Building.

    As to your reader’s being ahead of the CNBC crowd, here is what one of them wrote on this blog on February 9 with the market at its historic high:

    “The markets have been treating the Coronavirus with a certain amount of complacency. It is using the SARS outbreak of 2003 as its touchstone. Then 8000 people were affected with 700 deaths and about $60 billion in damages and faded away. But there was another example of a pandemic a century ago, the Spanish Influenza. 500 million people were affected, one third of the world’s population with over 50 million deaths. A fraction of that would see monetary policy, ZIRP or the Yra formula not inoculating the markets.”

    We and the markets are all in desperate need of a credible inoculation. Six trillion won’t restore the rapidly deflating bubbles created by those who were ignorant of the importance of gold, starting in 1971.

    • David Richards Says:

      Asherz, further to those Fed Chair quotes, here’s another from the Vice less than four weeks ago:

      “The economy and our policy are in a good place.”
      Richard Clarida, Fed Vice Chair
      26 Feb 2020

  4. Michael Temple Says:

    Bang The Drum Slowly…..Starring a young Robt De Niro and a then Aspiring actor, Danny Aiello.

    TEGWAR is a fabulous description of the Fed’s playbook right now.

    Fed is going to have to buy a “sheet load” of MBS and CMBS to unfreeze those chaotic markets.

    A fellow who is far more astute than I, Scott Minerd of Guggenheim, foresees the Fed balance sheet zooming to $9 Trillion by year end.

    Is it any wonder that gold woke up Monday after Powell said he would go LIMITLESS on QE.

    Never a good look when another market breaks, like gold did today.

    Only this broken market is broken on the upside, not the downside.

    To Robert Myron…..
    I am with you. I hope the rat bastards who have been carpet bombing Comex with “limitless” paper campaigns get screwed to the wall.

    Yra….I know you can’t comment. But, Reuters ran a piece tonight that force majeure was basically declared as not enough “good” gold bars are available against the outstanding April longs.

    I hope they all suffer grievously. Karma can be a bitch.

    Next up…..Silver squeeze?

    • yraharris Says:

      Mike–thanks as usual as your regular comment along with Asherz,Dave,Bigman,Waspi,Trader1—the list goes on and on have made this site beyond relevant—–wonder when metal procurers are going to awake to the precious metal attraction of Platinum—hmmmm

    • David Richards Says:

      > ‘not enough “good” gold bars are available’

      Hey Michael, no worries about that. They have plenty more gold-plated 400 ozt tungsten bars, once inspected from a distance by no less than the Queen to create the illusion they were “good”. If that’s insufficient, there’s another stash of tungsten in Fort Knox. LOL

  5. Alex Says:

    What are your thoughts on Bitcoin? Is it more than just a portal to move money?

    • yraharris Says:

      Alex–I will restate what I have held to for five years—the technology of blockchain interest me far more then bitcoin—my premise is that sovereign governments cannot tolerate competition for its currency

      • Alex Says:

        Yra, the technology IS Bitcoin, not the other way around.

        Blockchain is only good for one thing and that’s money. A solid database will do for pretty much everything else.

        Fine art, buying 1/10,000th of the Empire State Building etc doesn’t need a blockchain because all sorts of complications are added, eg, what happens to your 1/10,000th if you lose your keys? Is it gone forever.

        Give it 100 years and nobody will own 50% of the building as 50% of owners will either have lost their keys or similar (computer virus, getting hit by a bus and not telling anyone their passwords etc).

        Blockchains are problems, even for Bitcoin, but at least if/when people lose their Bitcoin private keys it’s only their problem.

      • David Richards Says:

        According to network architect / entrepreneur turned family office HF mgr Erik Townsend (also of Macrovoices), there’s no future for bitcoin and blockchain. It’s already obsolete in favor of new emerging distributed ledger technology. These technologies are Erik’s original core area of expertise, upon which he built his companies until selling to one of the biggest techs, cashing out and moving to become a permanent resident taxfree in Hong Kong, from where he now broadcasts great financial interviews and some occasional side topics like SARS-CoV2 and this good one on the future of Digital Currency, Blockchain & Distributed Ledger Technology:

  6. kevinwaspi Says:

    Interesting (and sad) to see the financialization of metals meet reality. The reason to own any ‘Real’ asset is to possess and be able to use it if you want to. Oil, gold, silver, corn, beans, or beef, paper claims don’t really hold up well when the earth loses its gravity.
    We are without gravity, so tread carefully and not without possession. Mike, I’m with you on Karma, but I’m starting to believe that I’ll see it well after I come back as a cockroach.
    Thank you all for your experience, reason, and memories of markets.

  7. Adam Says:

    Another great post and the 2d in a row I have understood better the more I read.

    Great comments as well add to the learning. Thanks all for that.

    Yra – do you ever thing we will return to a gold standard? Why does the Fed always stay away from it or claim ignorance? It’s been a standard of value from the beginning of time.

  8. thomas david Kinsman Says:

    Gloves are off but it’s dark and I can’t see the guys I’m fighting…dangerous times. There must be a plan, right? Well said Yra, T. K.

    On Tue, Mar 24, 2020 at 5:17 PM Notes From Underground wrote:

    > Yra posted: “Well, the apocalypse has fallen upon the financial markets > much as we have discussed at NOTES FROM UNDERGROUND on February 2. The > onset of the DEMAND SHOCK has unleashed the fears of a deflationary spiral. > My readers have been WAY AHEAD of the CNBC crowd ” >

  9. Rob Syp Says:

    This article walks through the gold story

  10. Michael Temple Says:

    Platinum….I thought only Mrs Watanabe valued it as a precious metal. My understanding is that there is an industrial surplus right now, and with global auto industry heading down the tank, that imbalance may yet remain.

    I will stick with my silver thoughts/positions, which are ALL WET for now…But, at least I think more investment pros consider silver vs gold more than they consider platinum vs gold.

    But, at nearly a $1000 discount to gold, platinum sure looks like it is not just on the mat, but is somewhere way below ground. Perhaps in the 3rd Ring of Dante’s Hell.

    As for gold, I will say this again.

    Never has the outlook for gold been so good as since the late 1960s/early 1970s.

    And now that physical gold seems to be quite difficult to procure, gold miners should ABSOLUTELY EXPLODE

    At its most fundamental level, what is a gold mine if not gold that
    is “stored” in a very deep vault. Yes, it takes a lot to refine all those
    tons of granite into the precious gold. But, as I have said repeatedly, those margins have exploded by roughly 15% as energy costs have
    plummeted this year.

    If you are a Big institutional investor and you want to buy millions of physical gold because you finally “get it”, are you really going to pay
    up huge premiums for physical when you can buy gold at a discount via the shares of such industry heavyweights as NEM and GOLD

    Why do I say discounts?

    Because both stocks are still trading below their recent highs and are both dramatically lower than their all time highs.



    • David Richards Says:

      …and also Michael, as I understand it, it’s outside the mandate of most institutional investors to be able to buy physical precious metals.

    • TraderB Says:

      I recently bought some 10oz Credit Suisse Platinum Bars. There was also Platinum available in other form. Physical gold available too.

      If these mines are closed or short staffed because of the virus, that must be very recent.

      None of these dealers have physical right now and cannot secure inventory or a price from AMARK. As Yra cautioned, there are lots of frauds out there.

      This gold, platinum and palladium inventory shortage was created by a recent uptick in demand. Who bought up all the physical?

      Is it possible it was the FED that bought it all up?

      Are we in a fight against governments to secure the physical?

      Is it safe to use GLD or GC Futures as a placeholder until more physical gold becomes available?

      • David Richards Says:

        TraderB, the GC and GLD are really advantageous and suitable only for short-term trading. Not a substitute for the security of physical gold. Gold futures and ETFs are fully exposed to all the risks of the financial system including solvency, counterparty, force majeure, etc. Plus they’re settled in cash and tied to the paper price rather than the physical price, which could diverge massively in a real crisis. Short-term trading minimizes those risks however, so the paper trading vehicles might suit your needs if you’re concerned prices will rise until you can get physical metal from your preferred supplier.

        I see today that large amounts of many types of physical gold & silver are back in stock at BullionStar in Singapore, including new gold & silver eagles & maples in 1-oz or others ($1784 for the gold coins and $26 for the silver coins) so prices have fallen since earlier this week during the rush). They can ship or vault in Singapore (there are no taxes and no tax/asset reporting in Singapore, except for a 6% sales tax which doesn’t apply to precious metals).

        They also have a Bullion Savings Program for gold, silver and platinum in which you can buy metal by the gram that’s allocated to you and stored there for 0.09% per year calculated daily, that can be bought/sold/trade or exchanged anytime online for a physical bar. Similar to GoldMoney founded by James Turk at the start of the last gold bull twenty years ago. But I closed and avoid GoldMoney since it was sold and moved from Jersey to Canada. it’s prudent to not hold physical gold or silver in North America or Europe. BullionStar does not report any of your holdings to any government under any circumstances. You’re not required to disclose your physical gold held offshore to uncle sam and offshore gold was excluded from his last confiscation because that’s where the rich, influential people hold it. Different rules apply for rich versus everyone else, as we’ve seen with the latest round of bailouts/handouts. Nothing changes.

        A hybrid alternative is the physical metal ETF’s. Best ones like PHYS, PSLV, SGOL, CEF… These are backed by physical gold in their possession and ETF units can be exchanged for metal bars, but only in a very large quantity. Read the prospectus in advance. These are superior to GLD but still suffer the dangers of holding in a brokerage account which defeats the systemic security feature of possessing physical metal.

        Finally, yes the mine and refinery closures are recent occurrences this month but temporary. It’s sporadic as some mines remain operational depending on location. I question how much impact this has, as the loss of production is tiny compared to the total amount of investment gold & silver outstanding in the world, most of which is presumably available for the right price. Rather, I think the physical shortage was caused by the demand spike driven by the Central Banks nuclear operations and the story about mine/refinery closures, pumped by the metal dealers to stir the animal spirits as they regularly try to do.

    • yraharris Says:

      Mike–here is my question in regards to Platinum—precious metals are desired and if Platinum is subject to what is your high quality analysis then explain it via Palladium?

  11. Bosko Kacarevic Says:


    I love the gold talk on NOTES FROM UNDERGROUND. The Gold in Motion paradigm shift we have discussed many times is afoot. Soon the physical gold hoarders will actually realize what the golden rule is all about and begin financing their hoard, to “make the rules.” Who needs investment bankers when an educated gold bug realizes the TRUE POWER of the metal. It’s up to the private market to take over the financing of main street, the central bankers and Wall Street have failed us. There is no need for anyone to actually sell their gold, they just have to finance it to help the economy recover. Think of all the physical gold held in private storage across America… when that gold is set in motion, it will become unstoppable. By default this will create a quasi-gold standard on main street, outside the banking system.
    “Gold, like a key, is a phenomenal instrument that can unlock vast riches for those who know how to use it, otherwise it’s just a piece of metal.”

    Bosko Kacarevic

    • yraharris Says:

      Bosko—you have set up the right business for the right times.I wish you nothing but great success as you put your engineering mind to work to do what you do best—solve problems.

  12. David Richards Says:

    Talk about a new “game without any rules”, I found it interesting and outrageous that Boeing, most famous for having knowingly sold faulty aircraft built by clowns supervised by monkeys, is now DEMANDING a taxpayer-funded $60B bailout AND the terms under which it will be bailed out.

    Specifically, Boeing execs refuse to give up equity of any measure or type to those having the privilege of bailing it out. “We have other options” (firing its employees without cause, illegally selling its best technology to US adversaries, holding the US military ransom, etc).

    Can’t imagine that Joe Average can be pleased about bailing out a gangsta op like this and all the corps who borrowed massively to boost their share price and especially to enrich the executive class.

    Epsilon theory on some of that last year:

  13. Bob Zimmerman Says:

    Come Senators, Congressmen
    Please heed the call
    Don’t stand in the doorway
    Don’t block up the hall
    For he who has stalled
    The battle outside ragin
    Will soon shake your windows
    And rattle your walls
    “For The Times They Are A-Changin”

    • yraharris Says:

      BOB Z—always coming to the fore with relevance—now about those Subteranean Homesick Blues—For Johnny is in the basement mixing up the medicine

      • Bob Zimmerman Says:

        Thank you Yra!

        To the 1% on your Senate Bill.

        “Must Be Santa”
        Bob Dylan

  14. The Bigman Says:

    And it’s a hard, and it’s a hard, it’s a hard, it’s a hard
    And it’s a hard rain’s a-gonna fall

    And the sign flashed out its warning
    In the words that it was forming
    And the sign said, “The words of the prophets
    Are written on the Notes blog
    And tenement halls”
    And whisper’d in the sounds of silence
    (Apologies to Paul Simon)

  15. Michael Temple Says:


    Platinum. Surplus inventories

    Palladium. Deficit inventories

    A Tale of Two Cities….Best and Worst Of Times.

    Platinum and Silver will continue to take a back seat to gold

    Even better than gold are the miners.

    At its most elementary level


    In some cases/companies, the amount of gold “in storage” are tens of millions of ounces. Wait until FOMO kicks in once gold crosses above its all time high of $1900.

    How high will future price projections be? 3000? 4000?

    I will make this bold/but not so bold proclamation.

    The move from $2000 gold to $4000 will be far easier and faster than the 12 year run from 1000 in 2008 to 2000 sometime in 2020.

    Are you kidding me that the geniuses at Goldman think gold is a buy, as the last currency standing after the Fed actions, but with just a $1800 target? That is the same as saying “I have this great stock til for you..It is going to go from $16.30 to $18”

    None of the gold stocks are priced for $1800 gold, let alone $2000.

    Yet, I think $2000 gold could be here easily by the 4th of July.

    If Plaza 2.0 is in the cards in the weeks ahead, then I think gold could hit $2000 within 1-2 weeks after that move.

    The Exciting Game Without Any Rules

    TEGWAR, indeed.

    In one scene, I think DeNiro had a full house and lost to a guy who pulled a “Kansas City Deuce”.

    Michael Moriarty also put in a good performance


  16. yraharris Says:

    Tomorrow at 7 a.m.Chicago time the G20 is holding a video conference with the leaders of twenty nations and some extra invited guests.The Saudis will be hosting the video conference and there seems to be a few key topics.The most important theme will be efforts to contain the Covid-19 scourge by harnessing the capabilities of the entire world.Hopefully,all nations will put the politics aside and stick to the critical issue at hand.The G20 has far more importance then the atavistic G7 as the strongest of the emerging market economies are involved in the discussion—India,China ,Russia,Mexico,Brazil be in attendance.There are rumors that the U.S. will press for Saudi Arabia and Russia to reach some type of accommodation over oil—what do you have to barter President Trump.The Saudis are as dependent on the Russian military as the U.S. to keep peace in the region.Will the US be willing to lift the sanctions on the Russians?Now that is a genuine negotiating stance.Also listen for any conversation about allowing and promoting a depreciation of the US DOLLAR.Some media outlets were suggesting that the IMF/World Bank would be favoring the introduction of some moderate forms of currency controls to alleviate the depreciation of emerging market currencies—this is a slippery slope in a world of hyper speed globalization—better to let the US unilaterally intervene to push the dollar lower.Read and listen to and try to grasp the context and nuance coming out of this now important meeting.As Adam Tooze wrote in the NYT on March 20th:”The crisis is still unfolding .The outflow from the emerging markets in recent weeks has been more rapid than ever before in history.To stop furtherlosses,it may be necessary to adjust the swap line system.That will require imagination–and if not political cover from the White House and Congress,then at least forbearance .Doing so is crucial:The faltering effort to respond to the pandemic must not be hampered by a crisis of the dollar-based financial system.”

  17. Pierre Chapuis Says:

    Correct me if I’m wrong, please.
    As far as my research takes me, the yuan is still pegged to the dollar. (within a range)
    If this is true…..
    Wouldn’t breaking the peg solve everything?
    (I know that we are NOT completely innocent, we have spent and borrowed over the amount the surplus countries have reinvested here)

    Upon your recommendation, I have been diligently studying “The Bill From the China shop.
    From what I gather the devalued yuan has been the albatross around our neck. Creating surpluses in Asia and inflating bubbles here. The Asian Tigers, to stay competitive with China have also been forced to keep their currencies devalued.
    The book was written in 2005, not sure if this info is still relevant.
    But, IF it is. Hypothetically speaking could the US break the peg from our end?

    If I have seen further than others, it is by standing upon shoulders of giants.
    I. Newton

    • yraharris Says:

      Pierre–reread the Charles Dumas book last night—some of what you say is point spot on–even Dumas does not make the point that the January 1994 devaluation was in response to NAFTA—the devaluation created the Mexican crisis as well as the 1997/8 Asian contagion—and they have let the currency appreciate as he suggested in 2005—–it is a soft Peg as it does move around a bit–like now it is depreciating as the Chinese are trying to restart but it is a longer road then most realize and the debt burden grows.No the US could not really break the PEG without doing major damage to the global economy but the US can move to weaken the DOLLAR versus all currencies as I have suggested for five weeks —you give us all a compliment and thank you for that

      • Pierre Chapuis Says:

        Thank you for your response and shared insight. It is much appreciated.

  18. jdogdog Says:

    silly question but can you explain the acronym TEGWAR

  19. kevinwaspi Says:

    The Exciting Game Without Any Rules
    See for a partial example.

    • yraharris Says:

      Thanks—Professor goes to the chalk board again—also go to you tube and pull up Bang the Drum Slowly with the TEGWAR acronym

  20. kevinwaspi Says:

    author Mark Harris related?

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