Stocks and Precious Metals Charts - La Belle Aurore - We'll Always Have Paris

 

"You might think that parking your money in a big bank like JP Morgan Chase would insulate you from fraud.  It’s just the opposite.  The big banks are the biggest perpetrators of financial fraud – fraud that affects millions of us, either directly or indirectly, on an ongoing basis.  While they are wrist slaps when properly scaled, you can see the list of 'settlements' made between the government and the big banks here.  These 'settlements,' the aftermath of Wall Street's near production of a second Great Depression, entailed not a single criminal indictment.  The top two repositories of banksters, based on the number of settlements, are Bank of America and JP Morgan Chase.

The banks engage in fraud for two reasons.  First, they profit from swindling the public.  Second, they can get away with it via a simple technique.  They buy off the regulators with promises of enormously lucrative jobs when they leave government service, and they buy off the politicians with huge direct and indirect campaign contributions."

Laurence Kotlikoff, When Banksters Buy Regulators and Prosecutors, Forbes, October 21, 2014


"It’s bad enough that two trial lawyers have written a book [cited above] comparing Dimon’s leadership of the bank to the Gambino crime family, and Bloomberg News spilling the secrets coming out of the Chicago precious metals trial, but now Dimon is likely to see new headlines linking his name to questionable payments to Tony Blair and unknown others."

Pam and Russ Martens, JPM Whistleblower Cites Payments to Tony Blair, Wall Street on Parade, August 3, 2022


“Berlin.  I used to love this old city.  But that was before it had caught sight of its own reflection and taken to wearing corsets laced so tight that it could hardly breathe.  I loved the easy, carefree philosophies, the cheap jazz, the vulgar cabarets and all of the other cultural excesses that characterized the Weimar years, and made Berlin seem like one of the most exciting cities in the world.”

Philip Kerr, Berlin Noir: March Violets


“We'll always have Paris.”

Howard Koch, screenwriter, Casablanca

 

Stocks were in risk on mode today, for whatever reason one wishes to imagine in order to rationalize its irrationality.

The Dollar was up marginally.

Gold and silver were hit lower again as is customary ahead of a non-farm payrolls report.

The amount of criminality and corruption in the US financial system should never be underestimated.

Why the American people allow themselves to be so easily distracted by divisive social controversies while being robbed blind by the kleptocracy is almost amazing.  

But there is historical precedent.  We know it, but we just cannot see it in ourselves, yet.

We are canning tomatoes tonight, and I did the blanching and peeling on eight quarts of San Marzanos.

Even with all the lack of rain, a proper drought in the past month, the garden is doing very well.

I have a huge pot of green beans that I am making 'West Virginia style.'  My wife's maternal grandmother was from there and she always called them that.    

Basically you fry bacon and saute an onion in a big pot and then steam the green beans down into them all, cooking out the liquid so that the beans are sauteed as well.   Its very good especially if you have more mature beans that are not suitable for steaming.  Try to pull off the strings before cooking.

My mind kept returning to Paris today.   The last time I was there was in 1992, when I was attending a graduate business seminar at ESSEC concerning the proposed European Union.  I think the slogan at the time was 'EU 92.'

The queen was tagging along on this trip and had a grand time, although she never went on a business trip again with me, as leaving the newly born young man with her parents was jarring for her.

Daisy gave the young man his first face licks today  He was beaming.

Have a pleasant evening.

Stocks and Precious Metals Charts - Jobs Lite - Markets Rebounding on Hopes for Continuing Fed Dovishness

 

The Jobs Report came in significantly weaker than expected, and certainly well short of the expansion implied by the ADP Report.

But the BLS reports are a funny old thing.

And so stocks and the Metals rebounded sharply, and the Dollar took a give back towards the 90 handle.

I really do not have a feel for the metals here, and am sticking with the sidelines for now.

They are attempting to break out, but are meeting some stubborn resistance.

It appears that JPM is in the middle of this.

Have a pleasant weekend.

 

Stocks and Precious Metals Charts - JP Morgan Metals Desk a 'Criminal Enterprise' - FOMC This Wednesday

"U.S. prosecutors took an unusually aggressive turn in their investigation of price fixing at JPMorgan Chase & Co., describing its precious metals trading desk as a criminal enterprise operating inside the bank for nearly a decade.

The prosecutors charged the head of JPMorgan’s global precious metals trading operation and two others on Monday, accusing them of “conspiracy to conduct the affairs of an enterprise involved in interstate or foreign commerce through a pattern of racketeering activity.”

Tom Schoenberg and David Voreacos, JPMorgan’s Metals Desk Was a Criminal Enterprise


"From the very beginning of the year to the last two days of 2013, JPMorgan has dominated and controlled the price of silver and gold.

JPMorgan’s short market corners at the start of 2013 amounted to a 21% net share of the entire COMEX gold futures market (minus spreads) and an astounding (but typical) 35% of the entire COMEX silver market.  No single entity had ever held such outsized and anti-competitive shares of any important regulated futures market.  It is unreasonable not to associate such extreme market corners with what followed in price."

Ted Butler, 3 January 2014


"Holder doubtless seriously believed at first that in a time of financial crisis, he was doing the right thing in constructing new forms of justice for banks, where nobody but the shareholders actually had to pay for crime.  You've heard of victimless crimes; Holder created the victimless punishment.

But in the end, it was pretty convenient, wasn't it, that 'the right thing' also happened to be the strategy that preserved Democratic Party relationships with big-dollar donors, kept the client base at Holder's old firm nice and fat, made the influential rich immeasurably richer and allowed Eric Holder himself to crash-land into a giant pile of money upon resignation.  What a coincidence!"

Matt Taibbi, Eric Holder, Wall Street Double Agent


"Und der Haifisch, der hat Zähne
und die trägt er im Gesicht
und Macheath, der hat ein Messer
doch das Messer sieht man nicht."

Berthold Brecht, Die Moritat von Mackie Messer, 1928

Today was more 'risk off' than the major stock indices might have demonstrated.

Both the Dollar the the precious metals rose.

Oil was substantially higher on the attack on the Saudi oil fields that is being blamed on the Yemen Houthi, and by association and supply of weapons, Iran.

The US announced that three traders at JPM were being charged with criminal manipulation of the precious metals markets.

Indeed, the prosecutors used racketeering and criminal enterprise language that suggested the possible application of RICO statute to the Bank.

Let's see if anything genuine comes of this. It has not done so in the past.

And the usual stiffs and hacks will say that this is just a few traders gaming some deals. Nothing to see here. Move along. We like things the way they are.

After all we have seen in so many markets, how anyone can just dismiss this as just a few bad apples seems to be almost incredible.  

They have no good judgement and no shame.  They have blinded themselves with their egos, their greed, and the love of the familiar favor of corruption.  It is best to see things as they are and judge accordingly.

It is important to note that this criminal activity occurred over a long period of time, during the Obama Administration.

Eric Holder and Gary Gensler had an awful, chronically negligent, and inexcusable track record of upholding the law when it came to the Banks, and with their friends and donors on Wall Street.

The Fed, that other chronically negligent and shockingly conflicted and compromised regulatory body will announce their rate decision on Wednesday. The Fed is expected to cut 25 bps.

We will see the September stock market option expiration on Friday.

The revelations are just beginning. There is so much more.

Have a pleasant evening.

Taibbi: The $9 Billion Witness - The Deal Manager That JPM Did Not Wish to Tell Her Story

"Corruption is why we win."

Danny Dalton, Syriana


"It was like watching an old lady get mugged on the street. I thought, 'I can't sit by any longer'... Every time I had a chance to talk, something always got in the way... I could be sued into bankruptcy. I could lose my license to practice law. I could lose everything.

But if we don't start speaking up, then this really is all we're going to get: the biggest financial cover-up in history."

Alayne Fleischmann, quoted in The $9 Billion Witness

It's nice to see Matt writing again about financial shenanigans.

Isn't it amazing how the sports editor at Rolling Stone magazine, and small blogs on the internet, keep coming up with amazing scoops and stories about financial corruption that are completely missed or glossed over by the mainstream media?

Confidence!  

Best markets, financial system, and news media, ever.   If you are a member of the one percent.

The $9 Billion Witness
By Matt Taibbi
November 6, 2014

Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking

...Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations.

Thanks to a confidentiality agreement, she's kept her mouth shut since then...

Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her....

Read the entire article at Rolling Stone.

Martens: Ghouls of Wall Street - JP Morgan Bets BillIons On the Death of its Workers

"Plunderers of the world, when nothing remains on the lands to which they have laid waste by wanton thievery, they search out across the seas. The wealth of another region excites their greed; and if it is weak, their lust for power. Nothing from the rising to the setting of the sun is enough for them. Among all others only they are compelled to attack the poor as well as the rich. Robbery, rape, and slaughter they falsely call empire; and where they create a desolate wasteland, they call it peace."

Tacitus, Agricola

IF the Banks are self-insured, and IF they are offering death related benefits to the employees for which this employee insurance is strictly a hedge, then this might make some moral and legal sense. But it does not appear to be the case.

And certainly for years companies have taken out life insurance on key employees, whose loss would be a blow to the company, as the article acknowledges.  But they go on to point out that this program is not related to key employees, but is widespread, and continues on even after they leave their employment with that firm.

It seems that there is some perverse loophole in the tax laws and insurance calculations that makes it profitable for a corporation to 'bet' on the deaths of its employees, for its own profit, as this article implies, and not as any hedge against the loss of their talent. And if they are doing the insurance and reinsurance through subsidies, they may be moving any losses from book to book in order to further game the tax laws, similar to the methods by which multinationals create 'income' in subsidiaries located in tax havens offshore.

The point is not that this is nefarious, but that it epitomizes the kinds of government subsidies for non-public-beneficial activities that corporations exploit. 

The failure of the Fed and the Regulators in general is in not aligning the interests of the Banks with the success of Main Street.  Banks are not making loans that encourage capital investment in sound projects and activities.  Instead the Banks are incented to game the system, play the markets, and invest their innovation and energy into the financialisation of nearly everything, including the deaths of their own employees.

In some other news  analysis of the day, What is Wrong with American Capitalism, it has been pointed out that US corporations are busily engaged in buying their own stock to improve their quarterly earnings and stock option returns for executives, rather than investing in infrastructure, rather than in research, innovation, and employee development and training.  This is another subsidy and distortion promoted by the government in service of corporations.

As the article below by Martins reminds us, Senator Carl Levin said that JPMorgan has 'the lowest loan-to-deposit ratio of the big banks, lending just 61 percent of its deposits out in loans.' Apparently, said Levin, 'it was too busy betting on derivatives to issue the loans needed to speed economic recovery.'

And gaming the markets as well, Senator, as well as all sorts of other extracurricular activities other than serving Main Street and efficiently allocating capital. 

And you can place a large portion of that blame on those in Washington who are only too eager to take soft bribe money in the form of large campaign contributions and other perks and revolving door payoffs from the Banks, Super PACs, and corporate interests.

I am aware that not only JPM does this, or even started this practice. I remember the stories about Walmart doing this as well some years ago. Their abuse of this prompted legal action and a thorough public shaming.

Generally speaking, Code section 101(a) of the US Tax Code makes the receipt of insurance proceeds nontaxable. Wal-Mart was insuring the lives of its employees for $50,000 or thereabouts and collecting the money if the employee died. Its employees apparently were not aware of this, and Wal-Mart was making money on this insurance 'program' free of income tax without providing any benefit to the employee or their heirs.

A new tax provision 101(j)in 2006 made insurance proceeds in excess of premiums paid taxable as income to the employer unless the employee consents in writing before the issuance of the insurance contract. The notice must state affirmatively that the employer may continue the insurance coverage even after the employee is no longer employed.

There is an income tax form (Form 8925) that a company must file and sign indicating if the employee has affirmatively consented.

If memory serves Walmart was shamed into discontinuing this practice by the publicity. Apparently JPM and the TBTF Banks have turned it into a sizable line of business, after having been bailed out by the Fed, and the taxpayers, with billions in subsidized dollars and forgiveness for their gambling losses and frauds. 

And therein is the point. JPM and the other Banks are only nominally Banks, and therefore do not deserve the protections, exemptions, and subsidies extended to them by the government for banking and depository activity, which is becoming a smaller portion of their overall activity.  The Volcker Rule was intended to change this, and given the London Whale and other abuses, including some not yet come to light, it is not working.

Corporate capitalism is turning ghoulish, and it is not just the western Banks and corporations that are joining in on the feast, but their political associates here and abroad who are enabling the death of whole countries for profit. Neo-Liberalism As Social Necrophilia: The Case of Greece.

'And what rough beast, its hour come round at last, slouches towards Bethlehem to be born?'

JPMorgan Chase Bets $10.4 Billion on the Early Death of Workers
By Pam Martens and Russ Martens
March 24, 2014

Families of young JPMorgan Chase workers who have experienced tragic deaths over the past four months, have been kept in the dark on many details, including the fact that the bank most likely held a life insurance policy on their loved one – payable to itself.  Banks in the U.S., as well as other corporations, are allowed to make multi-billion dollar wagers that their profits from life insurance policies on employees will outstrip the cost of paying premiums and other fees. Early deaths help those wagers pay off.

According to the December 31, 2013 financial filing known as the Call Report that JPMorgan made with Federal regulators, it has tied up $10.4 billion in illiquid, long term bets on the death of a large segment of its employees.

The program is known among regulators as Bank Owned Life Insurance or BOLI. Federal regulators specifically exempted BOLI in passing the final version of the Volcker Rule in December of last year which disallowed most proprietary trading or betting for the house. Regulators stated in the rule that “Rather, these accounts permit the banking entity to effectively hedge and cover costs of providing benefits to employees through insurance policies related to key employees.” We have italicized the word “key” because regulators know very well from financial filings that the country’s mega banks are not just insuring key employees but a broad-base of their employees.

Just four of the largest U.S. banks, JPMorgan Chase, Bank of America, Wells Fargo and Citigroup hold over $53 billion in investments in BOLI according to 2013 year-end Call Reports. Death benefits from life insurance is purchased at a multiple to the amount of the investments, meaning that $53 billion is easily enough to buy $1 million life insurance policies on 159,000 employees, and potentially a great deal more. Industry experts estimate that the total face amount of life insurance held by all banks in the U.S. on their employees now exceeds half a trillion dollars.

When the General Accountability Office (GAO) looked into the matter for Congress in 2003 and 2004, it found the insidious practice of continuing the life insurance even after the employee had left the company – nullifying any ability to consider him or her a “key” to the business. The GAO wrote: “Unless prohibited by state law, businesses can retain ownership of these policies regardless of whether the employment relationship has ended.” The GAO found that multiple companies held life insurance policies on the same individual...

One reason banks are enamored with taking out policies on other people’s lives and keeping the practice as hush-hush as possible with the willing consent of regulators is that the gullible U.S. taxpayer who bailed out the banks to the tune of trillions of dollars from 2008 to 2010 and is now subsidizing too-big-to-fail through an implied permanent Federal backstop, is also subsidizing these death wagers. Both the buildup in the cash value of the policy over time and the payment of the death benefit are tax-free income to the bank; the more workers they insure, the more tax-free income they receive to help their bottom line; and the less corporations pay in their share of Federal income taxes, shifting more and more of the burden to the struggling middle class.

Banks have also exploited other tricks with the billions invested in these policies. JPMorgan is the assignee for Patent number 5,806,042 at the U.S. Patent and Trademark Office, titled “System for Designing and Implementing Bank Owned Life Insurance (BOLI) With a Reinsurance Option...”

Read the entire article here.

Ted Butler: J. P. Morgan And Precious Metal Price Manipulation On the Comex

I am no legal expert, and therefore have no idea of the merits of this as a prospective case.  The law involves things like intent, opportunity, evidentiary proof, and so forth. Apparently one can sue another entity for just about anything, but that does not mean that the case has any merit.   And I certainly could not advance such a case based on even industry knowledge. That strikes to the heart of my own issue.

My primary concern is a lack of transparency. And that lack of transparency in these markets is not conducive to market efficiency.  It allows for gaming the system, either occasionally or, as we have seen, systematically.

I cannot tell if these markets are manipulated because so much of what is being done is hidden.  And it does not help that the CFTC conducted a five year long study into the subject, and then quietly killed it without ever having issued any information about their findings.

Some have shown evidence they say that proves that it is the tech funds that set price, and that JPM is just 'making a market.' If this is true, then additional transparency on the part of JPM and the other market makers would be perfectly reasonable to allay any doubts about the honesty and fairness of the markets for precious metals.  This is why the people have established, and paid for, regulators.  So they do not have to resort to lawsuits in order to achieve justice and equity in their transactions.

Considering the widespread rigging of key benchmarks and prices, I think to just dismiss these concerns with a sneer and a snigger is unreasonable, requiring people to maintain an almost slavish belief in the integrity of the Banks, trading desks, and the system.  Given the amount of abuse that has been exposed already along these same lines, that does not seem to be a thing that a thinking person would ask.

The major objection to transparency, by the way, is that it would diminish the profits of those in the position of market makers.  Well, market making is intended to be a utility function, with a small but regular return.  It is not appropriate for market making to be in the hands of those who are also major market players.  It is a certain invitation to corruption.

One of the more general things that struck home in this commentary by Ted is the concern that the Comex is becoming like a bucket shop, a betting parlor that is at arms length from the markets for which they are presumably setting prices.   The lack of delivery and the ability to create large amounts of contracts to receive or deliver on the fly, and then to transact them at whatever price you wish without seeming constraint if you are big enough, with deep enough pockets and enough advantageous information, is tantamount to setting up a con game, and then trusting in men to be angels.

Relying on self-regulation, under the discipline of private lawsuits, merely reinforces our increasingly bifurcated society, in which a small minority have ease and rights and freedom and even justice, because they can afford it.  And those many who rely on the justice provided by government will be faced with an upward facing and unresponsive bureaucracy, and with that, hard times.  Like quality Healthcare, there will be Justice, for some.

As you know I am no longer hopeful of change in the short term, given the nature of the credibility trap that has encompassed the political party process and the mainstream media. To paraphrase the discouragement pessimism of Czech author and political figure Václav Havel:

“No attempt at reform could ever hope to set up even a minimum of resonance in the rest of society, because that society is ‘soporific,’ submerged in a consumer rat race... Even if reform were possible, however, it would remain the solitary gesture of a few isolated individuals, and they would be opposed not only by a gigantic apparatus of national (and supranational) power, but also by the very society in whose name they were mounting their reform in the first place.”

It is no accident that the nascent movements for financial reform were either ruthlessly crushed, as in the case of the almost rudderless Occupy Wall Street, or co-opted by money and politics, as unfortunately happened with the Tea Party. Co-opt if you can, crush if you must.

Ted presents some of the facts in the contrary case, and I found them to be interesting.  It is hard to believe that the London Fix is so corrupt, but the Comex, which is the major pricing platform, is pristine, since the players are playing across all global markets.

Suing JPMorgan and the COMEX
Theodore Butler|
March 21, 2014

I’ve had some recent conversations with attorneys who were considering class-action lawsuits regarding a gold price manipulation stemming from reports about the London Gold Fix. I told them that while there is no doubt that gold and, particularly, silver are manipulated in price, I didn’t see how the manipulation stemmed from the London Fix. I wished them well and hoped that they may prevail (the enemy of my enemy is my friend), because you never know – if the lawyers dig deep enough they might find the real source of the gold and silver manipulation, namely, the COMEX (owned by the CME Group) and JPMorgan.

So I thought it might be constructive to lay out what I thought a successful lawsuit might look like, although I’m speaking as a precious metals analyst and not as a lawyer. I’ll try to put the whole thing into proper perspective, including the premise and scope of the manipulation as well as the parties involved...

Read the entire article for free here.

Margin Call: Ted Butler Wonders About the Real Cause of Bear Stearns' Collapse

Ted Butler has put one of his newsletters into the public domain.

It raises some interesting points.  As you may recall Bear was suffering losses in a number of financial instruments at the time.  But there has not been serious discussion about their precious metal positions.

At the time of the MF Global collapse it appeared that JPM had their fingerprints all over the squeeze and margin call that put them down.   JPM, In the City of London, With a Margin Call.

But I had never thought about it happening in the case of Bear Stearns.

Goldman may be the vampire squid, but JPM may be Mack the Knife.

And is MF Global Jenny Towler, and Bear Stearns Schmul Meier?   And if so, who then is Tiger Brown?

Mackie, what price did you pay?

Times may change, but the song remains the same.

What Really Happened To Bear Stearns?
By Theodore Butler
February 17, 2014

Six years ago the well-known investment bank Bear Stearns imploded. In February 2008, Bear Stearns stock traded as high as $93; by mid-March the insolvent company agreed to be taken over by JPMorgan for $2 a share (later raised to $10 after class-action lawsuits). In the annals of Wall Street, there was hardly a more sudden demise than the fall of Bear Stearns. The cause was said to be a run on the bank as nervous investors pulled assets from the firm. Bear Stearns was said to be levered by 35 times, meaning it had equity of $11 billion and total assets of $395 billion. This is a very small cushion if something negative suddenly appears.

Something negative did hit Bear Stearns in the first quarter of 2008; although there are remarkably few details of what went wrong. Since Bear had a significant presence in sub-prime mortgages and that market was in distress, it is assumed the fall of the firm was mortgage related. That may be true, but there was no general stress in the stock market through mid-March 2008 reflecting a credit crisis. Was there instead some specific trigger behind the company’s sudden collapse?

I believe that sudden and massive losses and margin calls of more than $2.5 billion on tens of thousands of short COMEX gold and silver contracts were the specific triggers that killed Bear Stearns. Let’s face it – Bear was so leveraged that a sudden demand of more than $2.5 billion in immediate payment for any reason could have put them under. Bear Stearns’ excessive gold and silver shorts on the COMEX are the most plausible reason for the sudden demise.

Bear Stearns did fail and due to a sudden cash crunch was acquired by JPMorgan for a fraction of what it was worth two months earlier. Bear Stearns was the largest short in COMEX gold and silver at the time. The day of Bear Stearns’ demise coincides precisely with the day of the historic high price points in gold and silver. That is also the same day the biggest COMEX gold and silver short would experience maximum loss and a cumulative demand for upwards of $2.5 billion in cash deposits for margin. It was no coincidence the music stopped for Bear Stearns that same day...

Read the entire article here.

Gold Daily and Silver Weekly Charts - Signs of the Times

"Ne respondeas stulto iuxta stultitiam suam ne efficiaris ei similis."

Prov 26:4

This is a Non-Farm Payrolls week, and it is a heavy delivery month, although as Rik Green notes the contracts standing are quite a bit less than at this time last year. Still, given the thin deliverables at these prices it should prove to be interesting.

Gold is moving from West to East, of this there is little doubt. Well, some can doubt it, but those who repeatedly deny it, or tend to dismiss it, may be saying more about themselves than they do about the market.

The more interesting question is what the markets are saying to us, and what the price, demand, and supply action are indicating with regard to the future, and the sustainability of certain noticeable trends.

The action on the Comex is interesting, but the real game is broader globally. There is a huge change underway, but unfolding slowly, in the international currency markets. If someone does not get this, then they really do not understand what is happening. There is no fault in that, because so few really understand money, and the lack of transparency is clouding, even moreso by the fog of war.

There was some movement of bullion into warehouse storage at HSBC yesterday, but otherwise little activity.  JPM seems to have the whip hand on the Comex and in the precious metals derivatives markets, but not so much in the physical markets which seem to be wiggling through the fingers of the bullion banks, and perhaps much to their dismay. 

As Ted Butler noted in his weekly review on Saturday:

"Quite literally, what JPMorgan does or doesn’t do determines the price of gold and silver. It’s easy to lose track of the big picture when one focuses on all the details. But when you step back a bit, JPMorgan is dominant in just about every detail."

Ted does an exceptionally good job of analyzing the Comex market, and I appreciate his efforts.  I do not need to agree with someone to gain significant benefit from what they have to say, provided their reasoning is based on some identifiable data and information.  Sources like this are a blessing.

I am rather reluctant to lay any wagers on JPM's motives based on this information however. It is not clear to me where their ultimate interests, as well as profits, may lie in this matter.  And for whom they may be acting, even as they seemingly take positions for their own accounts.

Unfortunately, this is the nature of the game, in times of currency wars.   Some of the TBTF Banks act as instruments of policy for their respective governments from time to time, and are certainly beholden to them.  Everything is not always as it may seem.  And so we must place our confidence where we can, and with some care.

Have a pleasant evening.

Wm. K. Black: JP Morgan's Frauds Are Epic, Unprecedented, NSA Scandal a PR Disaster

"It turns out we were not just spying on terrorists, we were spying on the general population of the world...They decided they had to do something politically to curtail this because they are getting terrible publicity, and they’re getting terrible publicity not just in the United States...This turned into disaster in terms of public relations for the United States and in terms of diplomatic relations...

CEO Jamie Dimon has presided over the largest financial crime spree in world history. . . . It depends on how you count it, but it is more than a dozen, and more in the range of 15 major felonies that either the United States investigators have found, state investigators have found or foreign governments have found...JP Morgan’s frauds are epic in scale, unprecedented in world history...

The system is ungovernable... It has already largely imploded.”

William K. Black

Read the excerpts and see original interview here.

It is not that the system is ungovernable. It is that the system is ungovernable by morally ambivalent politicians, all of whom are caught in a credibility trap.

And the world is watching.

JP Morgan 'House Account Only' Trading in Comex Deliveries for 2013

"Are the hedge funds, HFT’s and algos currently having a field day with this worn out trade paying any attention to the steady drain of physical gold on which their speculations are based? As is usually the case in a temporarily successful momentum trade where almost the entire universe is aboard, the answer is probably not."

John Hathaway, The Big Picture in Gold

Here is a chart that I was able to construct from CME data that shows JP Morgan's Comex Gold Delivery activity for their 'house account' only.

I have marked the nominal price of gold on the chart for this year. The last data is as of December 10, 2013.

The months marked with boxes are 'active months' for the delivery process. December is also an active month.

They seem to have had quite a good year for themselves so far. 

For those who would like some color commentary, JPM came into February issuing deliveries to beat the band.  They were quiet in the inactive month and then back swinging hard and delivering in size during April.

In August JPM stopped or took delivery on quite a chunk of gold bullion and the price recovered a bit from its first half of the year pounding.  I can conceptualize this as 'covering' what they have issued in the first half of the year.

Since then the gold price slumped back down into November.   JPM started taking deliveries (stopping) again very heavily in December.   I hear they are stopping something over 90% of warrants issued.

However for the year, and for the year only, their net position is still about 7,600 more contracts issued than stopped in their house account.   This is down from a high of 14,600 contract net issued which they maintained from about April through July. 

I have just added a second chart that shows just the rolling 'net position' for their house account with regard to deliveries for the year.   Just for the sake of tracking their notional position for the year I am going to refer to this as their 'short' although they could just be selling from any inventory which they had somewhere or from the prior year.   And please bear in mind that while this chart show a position that is all negative for the year,  I wanted to be able to plot it against the price of gold, so I inverted the Y axis.

Whether this represents an actual short position or not depends on their opening inventory of gold bullion owned by them, how much of the gold delivered was rehypothecated or leased, and how those contracts were actually settled, be it in equivalent instruments, cash, or actual bullion from whatever sources.

I know this is not all the data we would like to see, and does not begin to address their offsetting positions in other transactions and markets like derivatives.  

And of course I am sure that this is all 'just a hedge' being done in the CTO risk management area, just like the London whale.

Speaking of gold market antics, GATA just sent out this delightful presentation from the Banque de France entitled Managing Gold as a Central Bank.

And here is The Big Picture In Gold by John Hathaway which I recommend that you read.

And the band played on.

Have a pleasant weekend.

How the Gold Market Was Crashed - But Most Importantly, Why? Leveraged Default? And Silver?

Many are still sorting through the data to try and figure out what happened, but it is hard to look at the available data and the market action and conclude that the recent 'flash crash' in gold was anything but a calculated takedown.

Some big players had been trying to work the market price of bullion down in stair step fashion for some time.  Their tracks on the tape were big enough to be hard to miss, and any number of people who watch the market structure as it develops were seeing them, and a few were reporting what they saw.

But it just wasn't enough.  The pressures were building, and something had to be done. 

A plan for a market operation to relieve the pressure was made, and then executed ahead of the upcoming option expiration on the Comex on April 25th.  The word was quietly spread so the important monied interests would not make a fuss about losses when the time came, as in the case of MF Global and Cyprus.

And then Goldman gave the signal to the market with their 'short gold' call.

As I said at the time, I was not sure if this was done to try and avert a disaster, or to cover up some longer term corruption. Or perhaps a bit of both.  Motives are never easy to discern where leverage and opaque trading pools are involved.

This could be in advance of a major announcement out of Europe with regard to the Eurozone and also their monetary policy following along the lines of Japan.  Perhaps it is even something regarding US policy.  Obviously one has to have an open mind about that.

But there were persistent rumours of a potential default situation at both the LBMA and the Comex. Well, one has to take those with a skeptical eye.  But there are some data that point to the LBMA in particular, although the drawdown of bullion from the two exchanges could have been more general. 

Linked just below is a report that includes more data and it well worth reading. It tends to concentrate on the Comex.

How the Gold Market Was Crashed.

It seems that the word has gone out to the media and the stories are being spun to protect the system.   And the parrots dutifully pick up the chatter, without knowing why.

The story being spun that there was a speculative excess in gold being held by pension funds that panicked.   Foolish people, outsiders really, got over their heads and caused this regrettable incident.

There is probably a grain of truth in that, but I think it is more likely that they were forced out of their positions by a market operation designed to do just that.  And market insider knew exactly what they were holding.

Price declines caused by legitimate selling and panicked longs are not marked by increasing open interest. That is the hallmark of short selling with a purpose.

This is a big deal, and it was writ large across the media.  And that suggests that there is an equally big problem that had to be dealt with quickly and brutally.  Ordinarily market operations are more adept and protracted.

Something was close to breaking, and it most likely still is. 

And if it broke, it would prove to be embarrassing to quite a few very important people.  At least, that is what this situation suggests to me. 

Even the endlessly levitating stock markets seem a bit 'edgy' with a tension on the tape.

I cannot possibly know what is at the root of this.  Can't find Germany's gold, and can't buy enough at the LBMA to deliver it, because the market is leveraged 100 to 1?

Maybe not that but something of that magnitude.  A major TBTF tottering on the brink of a derivatives domino collapse? There are rumours out of Switzerland about Italy and France.

Most eyes are on the States, but how quickly we forget that ABN/Amro declared a force majeure and stopped all physical delivery of bullion, forcing settlement in cash.  The soft default of a major bullion bank is no joke, especially when it appears they could not obtain suitable goods at any price. 

This tends to point towards problems in Europe and the LBMA.  And one of the big sources of LBMA 400 oz. qualified gold is the big SPDR Gold ETF, GLD which is stored by HSBC in London.  I have included a chart of who tends to use 400 oz. bars below.  The COMEX does not.

As you may recall, Andrew Maguire reported early on that there were indications of problems on the LBMA with regard to gold inventory.  It is said to be leveraged 100 to 1.

“Entities went to the LBMA and said, ‘We don’t trust anybody anymore. We want our physical metal.’ They were told they would be cash settled instead by a bullion bank. The Western governments have been trying to plug holes, and the reason for it has to do with the default that was taking place at the LBMA.

This is why this smash has been orchestrated because of the run that has been taking place on physical metal. So Western governments had to do this because of an imminent run on the unallocated LBMA system. The LBMA bullion banks had become so mismatched at one point on their trading positions vs real world demand that they had to orchestrate this smash."

The 'entities' in question are again just rumour, but they are most likely to be from the Mideast or Asia.    They could be a central bank, or even an ETF for that matter.  But the size was said to have been substantial, and untenable for withdrawal without a severe market disruption given the leverage on which the LBMA operates.  100 to 1 leverage is no joke when the drawdown is physical and available supplies are tight.

If you have not picked it up, the implication in this theory is that the big price declines allowed some non-allocated repositories, like GLD for example, to disgorge delivery ready bullion to the LBMA for delivery to the entity that had demanded delivery.

And something like this might not be a singular event.  People talk, and if one entity got nervous and took delivery that information cannot be kept from other sizable players in the same circles.  And so others step up and ask, and there is the threat of a run.  And it could be happening in more than one place, ie not just the LBMA.  Hence the decline in inventories at the Comex referenced above.

JP Morgan holds enormous derivatives positions in the precious metals not reported anywhere in detail except occasionally in the OCC report.  If something were to perturb the markets, it would almost certainly affect them. 

And recall that the outrageous excesses of the 'London Whale' were not uncovered by regulators, but rather by market participants who reported JPM to be distorting the market because of the size of their position.  And the OCC is having a bit of recent notoriety from overlooking irregularities (some say crimes) to protect the banks.  So keep that in mind.

Changing the subject, if you wish to get a bit more baroque, gold may have been a necessary misdirection with the real target being silver, which hardly anyone is talking about, even the house economists and spokesmodels for the status quo. 

Keep an eye on stocks and the markets.  The big money always moves first, because they get to know what is happening first.

But I have to remind you, your guess is as good as mine.   It is an opaque market, and it has gotten worse and not better, despite all the show of 'reform.'

When the tide goes out, you not only get to see who is naked, you see who they are naked with.  And so the smokescreens go up.

I suspect that this is going to get ugly.

Related: Update to the Update: The Attack On Gold - Paul Craig Roberts (this gets more into the general government-business-as-usual theory rather than something that was incidentally related, ie a major impending default.  As I pointed out I think those sort of antics tend to be a more elegantly executed and gradual.  The recent gold/silver smack down was sheer brute force.  Could have been shock and awe but it really was over the top and probably called far too much attention to itself to have been a 'policy thing.')

MF Global: Follow the Customer Money - The Economics of Demagogues

One of the key facts, which ought to have been apparent in the first week or so after its collapse given the tracking mechanism of wire transfers, is 'who got the customer money' and 'who received a preferential return of funds in the last weeks when the brokerage was failing?'

That we still do not know who 'got the money,' although recent admissions show that JPM did in fact receive about $768 million or so which they have recently and quietly returned, claiming that they were just waiting for someone in authority to ask for it back. MF Global's Banker Returns $600 Million - WSJ 6/1/12

It raises serious questions about what the Trustees are not disclosing and why. But since JPM has voluntarily returned the 600 million at this late date, after having earlier returned $168 million, shows that these disclosures may be forthcoming. MF Global is the poster child for asymmetry of information and insider dealing, that flies in the face of any claims and fantasies about the natural efficiency and honesty of self-regulation of the markets.

I get it. I understand why people who are well paid to say these things and promote these public policies, or who directly benefit from this kind of unequal insider privilege, might oppose and seek to dilute and weaken effective regulation and push for more and larger free style fraud.  It is a transaction and their integrity is for sale.

And this becomes a particular problem in times and places where there are no real penalities for deceit.  That is the definition of 'moral hazard.'

What I don't fully understand is how some of the victims of this type of predatory arrangement can get carried away in supporting their own oppression and the ruin of their families, and are so easily led to parrot slogans specifically designed to lead them to destruction and despair.  

I have read about it in history, and have seen it in my own life, but I still do not understand it except to say that sometimes when faced with problems that are confusing and troubling it is easier to think what someone tells you to think, particularly something that touches a deep and dark nerve in your nature, rather than carry the burden and ambiguity of struggling with the facts and thinking for yourself.  Repeating a party line is a shorthand way of avoiding real thought.  And the predators are always there to take advantage of it.  They welcome trouble and often foment crisis in order to advance their agendas.

"The undeserving maintain power by promoting hysteria."

Frank Herbert

Anyone can be misled by a clever person, and no one likes to readily admit that they have been had.  It is a sign of character and maturity to realize this, and admit your were deceived, and to demand change and reform. But some people cannot do this, even when the facts of the deception are revealed.  It seems as though the more incorrect that the truth shows them to be, the louder and more strident they become in shouting down and denying the reality of the situation.   And anyone who denies their perspective becomes 'the other,' someone to be feared and hated, shunned and eliminated, one way or the other.

Although competition and even tribalism are a natural and sometimes surprising force in many aspects of society, as anyone who has attended grammar school atheletics can attest, they become difficult and conter-productive in their excess.  The more extremely held the views, left or right, the more ardent the self-deception and loss of individual identity.  Because at the extremes, it is no longer about justice, but about the objectification and irrelevance of the individual, and the dehumanisation and demonisation of 'the other.' 

"He who makes a beast of himself, gets rid of the pain of being a man."

Samuel Johnson

For whatever reason, extremists cannot easily let go of the lie, because it seems to give them a substance which they fear they cannot provide for themselves, because they cannot bear the uncertainty and loss of purpose.  Their very identity becomes intermingled with the lie.  This is the essence of the cult, and the stuff of demagogues, and the phenomenon of mass suicides and self-destruction when the lies come to an end: the bunker mentality.

I would hope that these disclosures shed some light on this aspect of the MF Global collapse that raises serious questions about the integrity of the regulators, the CME, and any pretensions to fairness on Wall Street.

"But perhaps the most stunning piece of news we're getting in the wake of the MF Global collapse is in the clients of the firm who managed to get away scot-free, with no freezing of accounts or capital -- particularly the accounts of the mega-cap independent oil company Koch Industries, run by the politically active Koch brothers.

A recent report in Reuters has described the billions of dollars of client accounts that were withdrawn from MF Global in the last few weeks before their collapse, including 8 accounts from Koch industries engaged in oil trade that were transferred to Mizuho Securities after years of a steady and profitable relationship with MF. The Reuters piece concentrates on the possibilities of legal "clawback" of client money if the bankruptcy does not allow remaining client accounts to be made whole.

The Reuters piece misses the point.

Both the Commodity Futures Trading Commission and the Chicago Mercantile Exchange were charged with overseeing MF Global, their clearing member. If we are to believe them, they had no idea of any difficulties within the firm before customer accounts went missing just a few days before the collapse. But someone clearly knew of the cratering positions and imminent collapse of MF Global, as billions of dollars of accounts were "coincidentally" withdrawn. And what do the Koch brothers say was the reason for these withdrawals? There's been no comment."

Daniel Dicker, MF Global and the Koch Brothers: Friends to the End, Huffington Post, Nov. 11, 2011

Francine McKenna raises this issue in this interview, and in particular, the large amount of money that were wired at the same time that customers were being denied wire transfer access to their funds.

Chris Whalen: Will Jamie Dimon Tell the Truth, Because He Hasn't Done So Yet

"Of all forms of tyranny the least attractive and the most vulgar is the tyranny of mere wealth, the tyranny of plutocracy."

John Pierpont Morgan

Oh you must mean the vaporized money...

Chris Whalen makes some interesting observations and cuts to the heart of the matter, although he sometimes falls into the morality of the income statement.

The reactions of the CNBC spokesmodels and Andrew Ross Sorkin are worth watching.

Still I give them credit for having these sorts of discussions at CNBC, as compared to Bloomberg TV which has become an extended, often arrogantly frivolous, infomercial bordering on propaganda for the one percent. At least the print version of Bloomberg maintains solid journalistic standards.

It is interesting that the argument keeps coming back to the defense that Wall Street firms 'write off big losses all the time.'

It is not so much the size of the balance sheet, but rather the leverage and risks that are stacked against those assets, and the likely outcomes of cascading losses in a deeply intertwined financial system.

The bank has come far from when its founder, J. P. Morgan, did business with a person based on their integrity and character, and not on the size of their balance sheet or cleverness of their accountants, lawyers, and attorneys.

Asked: "Is not commercial credit based primarily upon money or property?"
"No sir," replied Morgan. "The first thing is character."
"Before money or property?"
"Before money or anything else. Money cannot buy it...Because a man I do not trust could not get money from me on all the bonds in Christendom."

John Pierpont Morgan

We do not know if Jamie Dimon will tell the whole truth his testimony, but there is little doubt in my mind that he will at least partially hide behind the CEO defense, claiming ignorance of the situation which he helped to create and from which he profited enormously. He may apologize for it, but he will not own it. And it was his doing in order to circumvent the impending Volcker Rule, of this I have barely a doubt.

It seems that JPM was mispresenting and mispricing their risks, egregiously to the point of making false statements to the press, the public, and probably the regulators, and they were doing so with public funds and government guaranteed deposits in the pursuit of outsized income for their traders and management. And it may involve regulatory capture and accounting misrepresentations executed by offshoring portions of their trade book, and perhaps fraud.

There seems to be a pattern of behaviour here, of a firm taking very large positions in the markets and rationalizing them as 'hedges' in order to take undisclosed risks for short term profits and thereby presenting systemic risk.

This is precisely the genre of problems that led to the collapse of Lehman Brothers.

We ought not to forget that JPM was also sitting on over $600 million in stolen MF Global customer money for many months, and quietly returned it over a weekend not so long ago.

And that they have claimed that 'hedging' is the rationale for their enormously large and leveraged short positions in the silver market, although I doubt that the truth of that will ever be allowed to come to light with any consequence.

Have we learned nothing?

When a people declare that 'greed is good' is their overweening motto and principle of action, then they have already forsaken their liberty, and ensured themselves and their children nothing more than a miserable and despicable decline.

The Banks must be restrained, and the financial system reformed, with balance restored to the economy, before there can be any sustained growth and recovery.

James Koutoulas Says JP Morgan Is Still Hiding Large Amount of MF Global Customer Money

I do not agree with Rick Santelli's throwaway line in the beginning that there was probably no illegality involved in JPM's trades in London, and certainly not with regard to Facebook where it appears that there was blatantly selective leaking of undisclosed negative financial information ahead of the IPO. And the corollary suggestion that any investigations there are a waste of time.

The trades themselves *may not* have been illegal, but as in most things, the felony is in the coverup and the deception for actions that may or may not themselves have broken but merely bent the law. After all, Watergate was all about 'a third rate burglary.'

Although I have been critical of Louis Freeh in the past for his stonewalling of financial information from MF Global claiming attorney client privilege, withholding it even from Federal investigators and regulators, I thought it was a bit unfair to criticize him for his $25 million in fees for managing the Chapter 11, without mentioning that James Giddens is also billing substantial fees for the MF Global bankruptcy for the brokerage portion of it.

Mr. Giddens billed $170 million for Lehman's bankruptcy for example. His fees for MF Global are not yet disclosed because he asked for an extension for filing them with the court to June 8. Bankruptcies, tort claims, and divorces are often rewarding ventures for the lawyers.

Interviews with Mr. Koutoulas are so rare that any deserve to be shared, even if the interviewer steps all over the interview with selective outrage. The extended corporate infomercial is what passes for financial journalism in the States these days, and in much of the 'straight news' as well unfortunately.

I enjoyed the suggestion that almost $800 million in customer money was transferred late in the game to JPM in London to satisfy margin calls. This was the personal conclusion I put forward about two weeks after the incident.

I also believe that JPM had deep knowledge of MF Global's finanical leverage, condition, and exposure as their banker, which they used before and after the fact.

And I agree that Obama's track record on Wall Street reform is shameful, and a continuation of the Bush policies without real reform. But the idea that Romney will somehow change that is, alas, a terrible fantasy. The torch of corruption is being passed from administration to administration now without regard to party affiliation. That is how bad it has become.

How about JPM's positions in the silver market Rick? Think we need an independent investigator there too in the face of four years of stone-walling by the CFTC? Or do we demand justice only where it might be embarrassing to the Democrats without really hurting Wall Street?

But as I have said before, my goal is to just get the MF Global customer money back for them. I have given up any hopes that justice will be done. So I am grateful for Mr. Santelli's attention. There is far too little of it being given to these gross injustices and violations of trust.

It seems as though ordinary people have few friends or champions these days, just various packs of vultures picking over their bones with fees, scams, and snares.