Friday, May 13, 2011

Warehouse Financing Scam in China Unwinding

Silver speculators take a bath
Which brings us to a "warehouse financing" scam in China which now appears to be unwinding, forcing speculators to liquidate their real estate and commodities positions. Behind the scenes Beijing is furious with the speculators.

Essentially, the scam involves speculators getting loans which are supposed to be for buying base metals such as copper. Instead, they buy land then sell it before they have to settle on the commodity purchase.

It works like this. You are a property developer in China. You are already over your gearing limits and can't get more finance at home. You can't get the approvals to borrow offshore either. So, you use trade credit finance to fund your real estate deal. An associate then buys a stake to give you cash to pay for your copper. Later, the loan is repaid with the development proceeds.

A rising market hides all kinds of flaws. And fraud. Lots of fraud.


jesse said...

Cornering commodities markets has made savvy investors laugh for generations on end. My suggestion is to move all the silver to Fukushima and irradiate it, rendering it unusable and your own supply that more valuable on world markets.

Unless the Bond market stops you, that is LOL

veej said...

And we eagerly welcome the corrupt little fuckers who have no intention in assimilating, contributing to anything or even learning 6 words of english for Christ sake. They suck the life out of our free education and health care while paying only property taxes and not reporting global assets or income. Soon enough our sell out politicians will be voted out and replaced with asians, its happening already.