Housekeeping: Previously posted as Special: BiS Cap and Accumulate Scheme but “Cap and Trade” is more appropriate. Here’s why:
The Cap1 applies to anything you do not want to go higher, like emissions. The trade part is where you let the market sort it all out. Cap and trade has one publicly stated use—carbon emissions—but many implicit applications2.
Caps come in many forms:
Capital controls- China
Margin hikes- US Futures Exchanges
Delayed openings- Stocks
Tech outages- stocks, crypto
Spoofing- marketmakers who foment the impression of sell side panic at opportune moments
LBMA Slams- Indiscriminate rehypothecation used to keep price in line at opportune moments
The question is why?
The answer always is, so someone else can buy. Usually someone who is short the market and deemed too important to fail. 3
The idea behind cap and trade is, deeper pockets will prevail overtime4. This curtails speculation and ideally keeps those who really want the asset holding positions in that asset. But as we all know, it can be abused to pad the profits of players implementing the approach or smart traders who simply understand the bearish asymmetry it creates and exploit it.
But what if the deeper pocket is the buyer, as now may be the case in gold. What if the “Capper” (for Gold that is the Fed/BiS) is now up against someone (PBOC/BRICS) of similar monetary might?
That is what the China Hunt Brother Takes On JPMorgan and Wins was an example of.
Bonus: BCA doesn’t trust the Gold rally
