SP 500 and NDX Futures Daily Charts

The real economic news is fairly dismal.

But corporate profits are good, even if revenues are coming in a bit light.

Except for Google which beat on revs and missed earnings, and Microsoft did the opposite.

Dodgy financial paper is still the major US export and most powerful domestic enterprise.

Or as the Master of Wall Street puts it:

"It rubs the lotion on its skin, or else it gets the hose again."

Resistance is futile. lol.

Tim Noah: The Great Divergence

I think what interests me most about this growing economic inequality in the States, worse than at any time since the Great Depression, is the phenomenon of 'alienation.'

People forget that a nominally free society is based to a great part on voluntary association and the conforming of behaviour and resources for a system and the greater good.

That is, a democratic republic is a government of, by, and for the people.

But if the structural makeup of society becomes a rigged game, where the outcome does not matter because most if not all of the gains will go to the top, and most of the work and pain will be sent rolling downhill, people become alienated from that system once they realize its a no win game.

It reminds me of a striking insight that a normally bright eyed quant had one day, some twenty years ago. Speaking of the massive corporation for which we both worked he said, "This place has become all stick and no carrot."

And he was right. The management of this corporation was so intent on serving itself that it no longer cared about the people who worked for it. They only spoke with themselves, rewarded themselves (handsomely I should add), and made increasingly self-serving decisions for the company to benefit not the company itself but themselves.

Perhaps I will write more on this some day, but suffice to say the 'brain drain' out of that company became a torrent, and within five years the accumulated bad decisions of management over the years drove it into bankruptcy, made palatable only by a takeover by another firm that allowed it to save face.

This is the sort of phenomenon I see in the States today. And it matters because if anything is too big to fail, gracefully at least, it is the last remaining superpower.

"You're right to start with the most elementary question: Why should we care about income inequality? A century ago, the answer (at least for the ruling class) was, "Because if we don't, there will be a violent socialist revolution." Today we don't have to worry about that so much, for some reason, so we need to address the question more directly.
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Let me start by conceding a point that conservatives often make: Yes, a certain amount of income inequality is necessary in a capitalist system. You have to let the market reward effort and skill. But a system in which inequality of incomes constantly increases over time is worrisome.

Why is it necessary to reward so much more today than in 1979 the effort and skill (and dumb luck) that gets you into the top 1 percent of incomes (i.e., above about $350,000)? In 1979 the top 1 percent consumed about 10 percent of the nation’s collective income. In 2010 it consumed about 20 percent. (That includes capital gains.) Sure, the economy was in lousy shape in 1979. But the top 1 percent contented itself with 9-12 percent of the nation’s collective income for three decades prior to 1979, during the great post-World War II economic boom. Indeed, income share for the top 1 percent fell a little during that period. From the early 1930s through the late 1970s incomes in America didn’t become more unequal; they became more equal. So clearly the top earners can get by on much less without undermining capitalism.

So that’s why growing inequality isn’t necessary. Why is it worrisome?

Because it creates alienation. I worry less about the 99 percent (which, let’s face it, includes a lot of pretty affluent people) than about the bottom 60 or 50 percent. Income earners at the median have not shared in America’s prosperity. They’ve actually seen their incomes go down (after inflation) during the past decade, and over the past three decades their increases seem pitiful compared both with people earning top incomes (and here I mean not just the top 1 percent but the top 10 and even 20 percent) and with people at the median during the postwar era. For a long time economists said: Wait until productivity rebounds. Then working families will get their share. But when productivity rebounded like crazy in the aughts, working families saw no reward.

What this means is that if you’re at the median you have no positive reason to care how the economy does. Your only motivation is fear—if the economy does really badly you may lose your job. But there’s no upside.

I think this situation has a lot to do with why there’s so much suspicion of institutions that knit the country together—Congress, the media, etc. Logically the suspicion should be directed at the rich, but nobody knows what Lloyd Blankfein looks like. Everybody knows what Barack Obama and John Boehner look like. So people rage against Washington, and government, and you get both the Tea Party and Occupy Wall Street. These groups are quite different in their political orientation, but both groups express contempt for democratic processes.

I also think that the social deterioration of the working class described in Charles Murray’s recent book Coming Apart—out-of-wedlock births, dwindling church attendance, etc.—is largely attributable to the Great Divergence. Murray perversely insists that it’s entirely cultural, but if you ignore that then his book does a pretty good job describing what happens to a society in which people lose their sense of common purpose."

Tim Noah in a dialogue with Matt Yglesias in Slate.

Chris Hedges: Brace Yourself, the American Empire Is Over

Hedges offers an interesting interpretation of events that one rarely hears in the mainstream media.

Gold Daily and Silver Weekly Chart - The Old Shell Game

SP 500 and NDX Futures Daily Charts - Sluggish Rally On Light Volume

Qualcomm missed earnings and revenues and guided down.

IBM hit their earnings but missed revenue.

With the business largely concentrated in services, the 'movement' and costs and earnings makes their accounting very flexible, somewhat deceptively so.

This rally looks tired, but there is such light participation in the market that nothing is going to happen until the trend is struck, and the momentum monkeys pile on to it.

Gold Daily and Silver Weekly Charts - Pretty Much Meaningless

This is the fog of currency war.

The Anglo-american banking cartel has a huge vested interest in maintaining the status quo of the US dollar reserve currency.

Gold, and to a somewhat lesser extent silver, are benchmarks that show the true health of the fiat monetary system if they are left for the market to freely decide their value.

So the Banks do not leave gold and silver alone, but rather take consistent efforts to attempt to control their increasing prices and manage the perceptions, for the sake of the currency in the case of the central banks, and for their own ill-gotten profits in the case of the private Wall Street banks.

It is very similar to LIBOR, but more prolonged and further reaching. This is not about mortgage or car loan rates; this is the reserve currency of the world, and affects all.

SP 500 and NDX Futures Daily Charts - Slowing Volume, Creeping Economy

This is what they call a 'dull market.'

INTC and CSX after the bell seem to confirm that the economy is slowing, but corporate profits remain sound due to accounting gimmicks and government loopholes.

Wynn Resorts disappointed all around, with grow light in Macau.

Yahoo missed revenue beat earnings. Its an accounting thing.

Gold Daily and Silver Weekly Charts - Capping

As boring days in the summer trade go this was right up there.

Bernanke speaks tomorrow.

These markets are not going to go anywhere unless 'something happens.'

US fired on a ship off coast of the UAE today, retail sales are weak, and the banks continue to suck the life out of the real economy.

SP 500 and NDX Futures Daily Charts - Lackluster Trade

Retail sales continued to show very weak demand.

Bernanke speaks tomorrow and Goldman reports its earnings in the morning.

Read This Book: Predator Nation by Charles Ferguson

Chapter 1 (an excerpt)

WHERE WE ARE NOW

MANY BOOKS HAVE ALREADY been written about the financial crisis, but there are two reasons why I decided that it was still important to write this one.

The first reason is that the bad guys got away with it, and there has been stunningly little public debate about this fact. When I received the Oscar for best documentary in 2011, I said: “Three years after a horrific financial crisis caused by massive fraud, not a single financial executive has gone to jail. And that’s wrong.” When asked afterward about the absence of prosecutions, senior Obama administration officials gave evasive nonanswers, suggesting that nothing illegal occurred, or that investigations were continuing. None of the major Republican presidential candidates have raised the issue at all.

As of early 2012 there has still not been a single criminal prosecution of a senior financial executive related to the financial crisis. Nor has there been any serious attempt by the federal government to use civil suits, asset seizures, or restraining orders to extract fines or restitution from the people responsible for plunging the world economy into recession. This is not because we have no evidence of criminal behavior. Since the release of my film, a large amount of new material has emerged, especially from private lawsuits, that reveals, through e-mail trails and other evidence, that many bankers, including senior management, knew exactly what was going on, and that it was highly fraudulent.

But even leaving this crisis aside, there is now abundant evidence of widespread, unpunished criminal behavior in the financial sector. Later in this book, I go through the list of what we already know, which is a lot. In addition to the behavior that caused the crisis, major U.S. and European banks have been caught assisting corporate fraud by Enron and others, laundering money for drug cartels and the Iranian military, aiding tax evasion, hiding the assets of corrupt dictators, colluding in order to fix prices, and committing many forms of financial fraud. The evidence is now overwhelming that over the last thirty years, the U.S. financial sector has become a rogue industry. As its wealth and power grew, it subverted America’s political system (including both political parties), government, and academic institutions in order to free itself from regulation. As deregulation progressed, the industry became ever more unethical and dangerous, producing ever larger financial crises and ever more blatant criminality. Since the 1990s, its power has been sufficient to insulate bankers not only from effective regulation but even from criminal law enforcement. The financial sector is now a parasitic and destabilizing industry that constitutes a major drag on American economic growth.

This means that criminal prosecution is not just a matter of vengeance or even justice. Real punishment for large-scale financial criminality is a vital element of the financial re-regulation that is, in turn, essential to America’s (and the world’s) economic health and stability. Regulation is nice, but the threat of prison focuses the mind. A noted expert, the gangster Al Capone, once said, “You can get much further in life with a kind word and a gun than with a kind word alone.” If financial executives know that they will go to jail if they commit major frauds that endanger the world economy, and that their illegal wealth will be confiscated, then they will be considerably less likely to commit such frauds and cause global financial crises. So one reason for writing this book is to lay out in painfully clear detail the case for criminal prosecutions. In this book, I demonstrate that much of the behavior underlying the bubble and crisis was quite literally criminal, and that the lack of prosecution is nearly as outrageous as the financial sector’s original conduct.

The second reason that I decided to write this book is that the rise of predatory finance is both a cause and a symptom of an even broader, and even more disturbing, change in America’s economy and political system. The financial sector is the core of a new oligarchy that has risen to power over the past thirty years, and that has profoundly changed American life. The later chapters of this book are devoted to analyzing how this happened and what it means.

From:  Predator Nation: Corporate Criminals, Political Corruption, and the Hijacking of America by Charles H. Ferguson

Weekend Viewing: Terror, Robespierre, and the French Revolution

One of the more interesting things in history which I have considered for some time is that contrast between the American and the French Revolutions.

Here is a video that is worth watching, with the caveat that like most short documentaries it does have its point of view, and that is reflected in the compression and emphasis of facts and details. 

It is perhaps understandable that Americans are accustomed to looking at European history through the eyes of the English, which creates its own set of perspectives, political assumptions and justifications for secular actions and expediences.

My own thinking is this.

First, a caution. One must not be triumphalist in comparing short term outcomes, and think that the American Revolution was a 'success' and the French Revolution a 'failure.'

Certainly they were different, and  in their time and circumstance are operating within very different historical contexts and political and social contingencies. And yet they were philosophically intertwined. The American founding fathers were inspired by much of the writing of the French thinkers in particular, and the French people were inspired by the achievement of the Americans in freeing themselves from the English monarchy.

Although one has to say that by resulting in the Terror and then Napoleon, the French Revolution can be said to have fallen into a great diversion from its original intent. But most importantly, neither the American nor the French experience is yet complete.

Despite its great early success, the American Revolution culminated in the bloody Civil War, and the American Empire of the 20th century.  And even today, this story continues to unfold.

The major difference between them, as concisely stated as possible, is that in the American Revolution the Declaration of Independence was followed by the creation of a Constitution, that by its nature and the existing political organization of the country guaranteed individual rights and the dispersion of centralized power amongst thirteen colonies with importantly distinct agendas. There was no Committee of Public Safety, there was no Robespierre.

And there was not an Oliver Cromwell for that matter, and the excesses of the Glorious Revolution of 1688 in England that in its own way helped to shape the American experience that followed. Or a Stalin, as the sad culmination of the Russian popular revolution.

Every country has its  high and low moments, except perhaps in their official legends and self-written history books of the moment.

The broadening perspective is perhaps why history seems to improve with distance and time, with the limitation of decreasing access to source material and factual references considered.

The American Revolution, as embodied in the Constitution, was first and foremost a practical matter of governance, although deeply embedded in philosophical first principles, and not particularly as given to broadly idealistic and Utopian change as was the French.  In other words, it was carefully and thoughtfully limited.

The French Revolution was much more expansive, as if the American Revolution, the War of 1812, and the great Civil War, and the rise of the Imperial Presidency were combined into one short period of history, without the definition of a stable and well-defined government of the people with God given rights and an overarching natural law first being established as a cultural icon.

Idealistic theories, such as the natural perfection of capital markets, and a growing centralized power jealous of its prerogatives, if not greedy for more of them, are a dangerous combination when confronted by limitations and threats to that power.

This reminds me very much of the modern Anglo-American financial system, which seeks to promote and hold on to theories and methods that have been proven false, but which support the enormously influential but unsustainble status quo.  And so society falls into a sort of cognitive dissonance, and official psychosis.

But again, the caution. This is a complex chapter in history, and it is still being written.

La Fête Nationale

"The longer we dwell on our misfortunes the greater is their power to harm us."

Voltaire

The representatives of the French people, organized as a National Assembly, believing that the ignorance, neglect, or contempt of the rights of man are the sole cause of public calamities and of the corruption of governments, have determined to set forth in a solemn declaration the natural, unalienable, and sacred rights of man, in order that this declaration, being constantly before all the members of the Social body, shall remind them continually of their rights and duties; in order that the acts of the legislative power, as well as those of the executive power, may be compared at any moment with the objects and purposes of all political institutions and may thus be more respected, and, lastly, in order that the grievances of the citizens, based hereafter upon simple and incontestable principles, shall tend to the maintenance of the constitution and redound to the happiness of all. Therefore the National Assembly recognizes and proclaims, in the presence and under the auspices of the Supreme Being, the following rights of man and of the citizen:

Articles:

1. Men are born and remain free and equal in rights. Social distinctions may be founded only upon the general good.

2. The aim of all political association is the preservation of the natural and imprescriptible rights of man. These rights are liberty, property, security, and resistance to oppression.

3. The principle of all sovereignty resides essentially in the nation. No body nor individual may exercise any authority which does not proceed directly from the nation.

4. Liberty consists in the freedom to do everything which injures no one else; hence the exercise of the natural rights of each man has no limits except those which assure to the other members of the society the enjoyment of the same rights. These limits can only be determined by law.

5. Law can only prohibit such actions as are hurtful to society. Nothing may be prevented which is not forbidden by law, and no one may be forced to do anything not provided for by law.

6. Law is the expression of the general will. Every citizen has a right to participate personally, or through his representative, in its foundation. It must be the same for all, whether it protects or punishes. All citizens, being equal in the eyes of the law, are equally eligible to all dignities and to all public positions and occupations, according to their abilities, and without distinction except that of their virtues and talents.

7. No person shall be accused, arrested, or imprisoned except in the cases and according to the forms prescribed by law. Any one soliciting, transmitting, executing, or causing to be executed, any arbitrary order, shall be punished. But any citizen summoned or arrested in virtue of the law shall submit without delay, as resistance constitutes an offense.

8. The law shall provide for such punishments only as are strictly and obviously necessary, and no one shall suffer punishment except it be legally inflicted in virtue of a law passed and promulgated before the commission of the offense.

9. As all persons are held innocent until they shall have been declared guilty, if arrest shall be deemed indispensable, all harshness not essential to the securing of the prisoner's person shall be severely repressed by law.

10. No one shall be disquieted on account of his opinions, including his religious views, provided their manifestation does not disturb the public order established by law.

11. The free communication of ideas and opinions is one of the most precious of the rights of man. Every citizen may, accordingly, speak, write, and print with freedom, but shall be responsible for such abuses of this freedom as shall be defined by law.

12. The security of the rights of man and of the citizen requires public military forces. These forces are, therefore, established for the good of all and not for the personal advantage of those to whom they shall be intrusted.

13. A common contribution is essential for the maintenance of the public forces and for the cost of administration. This should be equitably distributed among all the citizens in proportion to their means.

14. All the citizens have a right to decide, either personally or by their representatives, as to the necessity of the public contribution; to grant this freely; to know to what uses it is put; and to fix the proportion, the mode of assessment and of collection and the duration of the taxes.

15. Society has the right to require of every public agent an account of his administration.

16. A society in which the observance of the law is not assured, nor the separation of powers defined, has no constitution at all.

17. Since property is an inviolable and sacred right, no one shall be deprived thereof except where public necessity, legally determined, shall clearly demand it, and then only on condition that the owner shall have been previously and equitably indemnified.

How Jamie Dimon and 'Flexible Accounting' Hid JPM's London Whale Loss

"I am making an enemy here when I say something like this, but the Fed should replace Jaime Dimon. They should replace him for utter failure of corporate governance and telling the truth too slowly.”

Janet Tavakoli

They will not get rid of him, they will continue to support him, even idolize him, because he is their partner in le vaste contrée mythique du papier, a grand, mythical kingdom made of paper.

As I said when the earnings results came out, before I even looked at the numbers in detail, JPM raided their loss reserves, along with a few other accounting tricks outlined below, to make the London Whale loss go away and achieve their forecast earnings number to the penny.

When a major event occurs and a company can hit forecast to the penny there are only so many ways to accomplish this, and most of them involve creative accounting. The same goes for companies who make the number exactly, or even more arrogantly plus one penny, quarter after quarter after quarter.

Those are 'managed earnings.' And that is a euphemism for the kind of accounting that belies a papier-mâché balance sheet, a scripted income statement, and troubles yet to come when the strong winds of global change start to blow again.

CNN/Fortune
How Jamie Dimon hid the $6 billion loss
By Stephen Gandel, senior editor
July 13, 2012

A mixture of accounting moves and rosy assumptions appear to have masked JPMorgan's London Whale loss.


FORTUNE -- Here is perhaps the most amazing thing about JPMorgan Chase's (JPM) $5.8 billion trading loss: Take a look at the firm's overall results, and it's like the London Whale's misstep, one of the largest flubs in the history of Wall Street, never happened.

Back in mid-April, about two weeks before talk of the trading losses emerged, JPMorgan was expected to earn $1.21 a share in its second quarter. On Friday, JPMorgan reported that it had, Whale and all, earned exactly that.

How the bank appears to have offset the huge trading loss is a prime example of how complex and malleable bank profits actually are, and how much they should be believed. JPMorgan's quarter should give fodder for accountants to talk about for some time.

"Yes, I have seen these results, but I have also seen how the sausage is made and I am worried that I might get food poisoning in the future," Mike Mayo of Credit Agricole Securities and author of the book Exile on Wall Street told Dimon in a meeting with analysts following the bank's earnings release.

Sure some of JPMorgan's businesses were strong. Profits in its mortgage operations, helped by falling interest rates, rose by nearly $1.3 billion. But a good deal of JPMorgan's earnings came from some shifting of losses and an assumption that things for the bank, and the economy in general, are about to get a good deal better. That assumption might prove right, but it could also add to losses in the future.

So how do you make a nearly $6 billion loss go away?

First stop taxes. The bank said that the London Whale's blunder cost the bank $4.4 billion in the second quarter alone. But that's before taxes. After it pays taxes, though, JPMorgan says the loss will shrink to just over $2.7 billion, which means the bank plans to take a $1.7 billion write off from Uncle Sam. Like any loss, banks are allowed to use trading blunders to offset taxable profits elsewhere in the bank. The question is the rate. At $1.7 billion, JPMorgan is writing off roughly 38% of the loss. That's not that out of line with the U.S. corporate tax rate, but it's a far larger percentage of profits than most companies actually pay. Nonetheless, on taxes alone, the bank was able to shrink the London Whale's wake to $4.1 billion.

We haven't left the firm's vaunted chief investment office yet. CEO Jamie Dimon has long said the portfolio is safe and that if he were to liquidate it today he could produce an $8 billion gain for the bank. In the second quarter, he dipped into some of that. London Whale aside, the CIO took a $630 million gain. Now we're down to $3.5 billion.

Next stop loan losses. Banks have to put money away for loans they believe are going to go bad. But banks can lower their expenses by putting away less money for future loan losses. In the second quarter, the bank put away just over $200 million for future loan losses. That was not only the lowest amount the bank had set aside in any three month period since the start of the financial crisis, it was the lowest by far. A year ago, the loan loss provision was $1.8 billion.

What's more, not only did the bank put away less money for future loans, it also pulled back money it had put away in the past. And any money you take out of your loan loss reserves the accountants let you send right to your bottom line. It appears $1.3 billion, or about 28% of the company's total second quarter profit, came from this move, which is again only real earnings to accountants....

Read the rest here.

Tavakoli: JPM's Risky Business

Gold Daily and Silver Weekly Charts - Up Again, Up Again, Jiggity Jig

Running Free, Pigman Knew He Was a Master of the Universe

To market, to market, to buy a fat pig,
Home again, home again, jiggety-jig.

To market, to market, to buy a fat hog,
Home again, home again, jiggety-jog.

To market, to market, to buy a plum bun,
Home again, home again, market is done.

Gold and silver remain resilient despite the concerted campaign to push them down and dampen interest in the alternative stores of wealth.

I would not mind fast forwarding a few hundred years to see what the future makes of this episode in human history.

Will it be a great turning point, a high moment, as we might like to think, full of sound and fury? Or are we just a comedic footnote, an frivolous episode in life, with very little that is lasting or even new?

It is hard to say. But I am almost certain that our great grandchildren will ask themselves, "What were they thinking?"

See you Sunday evening.

SP 500 and NDX Futures Daily Charts - Excelsior

There is intraday commentary that may be worth reading, which you can scroll down to see.

The financials led the US equity markets higher today led by JP Morgan.

Apparently the markets were relieved that JPM seems to be able to put their CIO losses behind them, and shift money from their loss reserves to achieve the appearance of vitality.

As one of the spokemodels on financial television said, JPM can get back to printing money.   All is well, right?  Well perhaps, but perhaps not so, while the severe mispricing of risk is upheld by the credibility trap.

There is a bull market in bloodsuckers and bootlickers. I hear that there are thirty-seven different financial sector ETF's alone. Talk about saturation.

A sour note are the numerous warnings coming from companies that are involved in the real economy. Consumer demand is flagging badly, as the median wage staggers under the burden of supporting the unsustainable greed and corruption of the one percent.

Have a pleasant weekend.

Spain Has Its 'Let Them Eat Cake' Moment - Another Milestone Reached

Technically the pampered princess of Spain's elite said, 'screw them all' rather than 'let them eat cake.' She is only saying what most of the Western elite are thinking about 'the problem of the hoi polloi.'

After the brazen theft of customer money by a well-connected financier, I said I was waiting for another shoe to drop, another milestone to be reached on this cycle of history.

I should add that a single instance of something obviously does not make a trend.  It is the trend that is of significance.  Do the perpetrators become emboldened, or does a horror of recognition bring things back into balance?  No one wakes up one morning and decides, "I think I shall become a monster." Evil is a process of abnormality with which one becomes increasingly familiar, accepting,-- comfortable.

The next step in the rise of statism is capital controls, media suppression, and the increased repression of dissent by physical means and censorship. After that is the singling out of certain ethnic and religious groups for 'special treatment,' and campaigns to establish the 'otherness' of select targets. This could also be related to some age or class group, or even the disabled.

And then murder, first occasional and then systematic. It may take the form of starvation, denial of medical treatment, non-elective abortion, or euthanasia at first. Hopefully we will not progress as far on the cycle as any of these latter stage developments.

Here is a note from a friend about a news item that has not penetrated the Anglo-American news media yet.

Spain is implementing its latest austerity package. Spanish PM Mariano Rajoy Raises VAT 3pc in Shock U-Turn

When the Prime Minister Rajoy said to their National Assembly that they must cut benefits to Spain's unemployed, Miss Fabra was apparently caught on video shouting, "Screw them all."

The damage control groups are now trying to explain that Miss Fabra was not saying 'screw them' to the unemployed, who the Prime Minister was talking about, but rather 'the Socialists,' who favor things like benefits for the unemployed.

This is sparking quite a bit of anger in Spain, as one might imagine, which is suffering under very high levels of unemployment and facing further austerity cuts.

Spain's oligarchy appears to be a bit backward and thuggish. Rather than clumsily rigging lotteries and construction projects, they would be better off forming a banking cartel, rigging market prices, and stealing a little from everyone, every day, on every transaction. Then you can be a Very Important Person, dress well, have Congressmen publicly kiss your ring, and still gorge yourself at the trough of public corruption without marring your cufflinks.

In every one of these troubled countries that I examine, although the blame tends to fall on the 'lazy and foolish' many, if one scratches beneath the surface they find a corrupt core of greedy insiders, oligarchs, who have been inflicting economic distortions and pain on the public in the service of their own sense of entitlement.

"It should come as no surprise to anyone that major commercial banks manipulate Libor submissions for their own benefit. The OTC derivatives markets was designed by the big banks, for the big banks, to ensure that as they set up their own private securities exchanges - away from regulatory scrutiny - they could control the interest rate settings. Money center commercial banks did not want the "truth" of market prices to determine their loan rates. Rather, they wanted an oligopolistically controlled subjective survey rate to be the basis for their lending businesses."

David Zervos
Jefferies & Co

That is sophisticated financial corruption. That is progress.

From an erudite friend in Europe:

"Yesterday, after PM Rajoy announced that the government was going to cut the benefits the unemployed receive, a PP congresswoman, Andrea Fabra, daughter of Carlos Fabra, was caught on camera applauding and shouting "Que se jodan" - which translates roughly to screw them all.

Miss Fabra was appointed Parliamentary Advisor at the age of 24, straight out of university. Her father has "won" the lottery at least 7 times, and is under multiple investigations for corruption.

'Qu’ils mangent de la brioche.' France, late 18th century

'Que se jodan!' Spain, early 21st century

At least, back then, they had better manners."

Guide to the Confused: SP 500 Futures Intraday - 'Technical Trade'

When I talk about the 'technical trade,' I mean that fairly literally.

The market, in the absence of a major exogenous event, is running on autopilot, with the algorithmic computers and trend following traders driving it back and forth within pre-programmed levels of support and resistance.

There is always some reason that can be used to justify a big up or down day. In this case market action creates market commentary. Today it is the 'good numbers' from JPM. No mention of the raiding of loss reserves and other gimmicks that banks today use to paint their pretty pictures on rotten paper.

The SP 500 futures are just an example. This same market rigging thing takes place in many other markets including important world markets such as metals, energy, and foodstuffs.

In low volume environments with no important exterior factors in the short term, the technical game tends to have a bias higher, because in this type of paper market there is no upward limit, and one wishes to draw in the 'suckers.'  The word goes out in the pit that the trading desks 'want to try to take it up.' This is how the 'pools' operated in the 1920's.

The drops tend to come quickly and pass even faster, since that is the reaping, not the planting and growing of the scam.

And because of their collocation and speed, the computer trading algos can front run almost every transaction and skim a small percentage off it, and absent real volume use wash trades to drive the price where they will. And in the aggregate at least, their market positioning allows them to 'see what is in your hand, what cards you are holding.'

If there is any change, the well-capitalized professionals with very high priced, high speed collocated computers and departments of brainy quants are driving the smaller scamsters to the sidelines, and sometimes into the ranks of the pundits and hangers-on. The price of computers, politicians, media, and regulators provides an effective barrier to entry against competition.

Yes there is always corruption in markets, despite what the naturally efficient markets theorists from the monied interests' bastions of intellectual folly and deception might maintain. But at certain times in history the distortions in the markets become so great, so predominant, so extreme, that they crowd out much of the productive and creative investment activity.  In the resulting outcome, the inevitable return to normalcy,  society in general can suffer greatly for the greed of the few.

And if anyone should ever warn about manipulation in the markets, one responds, 'oh no, they would never allow that!  Who could be so low?' And then some mouth a few appropriate slogans supplied by the market manipulators using comic book views of the world from Ayn Rand, for example.

People deny what they cannot bear to admit. And one denial leads to another, and another, until the truth becomes not only unspeakable, but almost unthinkable. And so one deflects to another thought, a diversion and distraction, a person or group, and finally another reality. That is the way to madness, that is the credibility trap.

The LIBOR scandal, and the trainwreck of revelations about market corruption which I forecast would happen, are making the true believers a little hesitant, uneasy. But the hard core are resilient, faithful to the myth, to the end.

It's a lucrative business, and if unforeseen events intrude, you can always have the public cover your losses.

"Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out."

Andrew Jackson

What a wonderful world we have created with the gifts that have been given to us.

De trop pour l'éternité. Enjoy.

NFA Ignored Warning Signs On PFGBest. What a Surprise!

The National Futures Association (NFA) is the private industry association that directly self-regulates the Futures Broker industry.

I would imagine that the NFA had not taken any of the tips or warning signs about PFGBest too seriously. Up until last week, Mr. Wasendorf, the CEO of PFGBest, was prominently listed as a member of their advisory board.

And as you may recall, a few days ago I posted an article from Atlas Ratings that had placed PFGBest in their lowest 5% of brokers because of their odd financials.

PFGBest had just been given a clean bill of health by NFA in January, in the so-called rigorous industry review inspired by the spectacular failure of MF Global in November.

From their website:

"National Futures Association (NFA) is the industrywide, self-regulatory organization for the U.S. futures industry. We strive every day to develop rules, programs and services that safeguard market integrity, protect investors and help our Members meet their regulatory responsibilities.

Managing risk by trading futures and options on futures contracts is a vital component of the global economy. Every business day tens of millions of futures contracts are traded on an increasingly broad spectrum of products, including agricultural commodities, oil, precious metals, equities, treasury bonds, financial indexes and foreign currencies.

Investor confidence is crucial to the success of the futures markets, and the best way to gain investor confidence is to ensure that the highest levels of integrity are demanded of all market participants and intermediaries.

Membership in NFA is mandatory, assuring that everyone conducting business with the public on the U.S. futures exchanges-more than 4,200 firms and 55,000 associates-must adhere to the same high standards of professional conduct.

NFA is an independent regulatory organization with no ties to any specific marketplace. We operate at no cost to the taxpayer. We are financed exclusively from membership dues and from assessment fees paid by the users of the futures markets."

And in related news, Customer Dodged Bullet, Tranferred Account From MF Global Just Before It Collapsed (wait for it) and put it into PFGBest, where it is now being liquidated/frozen.

I genuine feel sorry for anyone who is taken in by these crooks.  It is a terrible thing to see.  The markets are rigged against the private investor from top to bottom by the big Banks and trading desks.  And if you do occasionally win, the money and assets are squandered and embezzled by sociopathic insiders.

Regulations?  We don't need no stinking regulations.  Let's strike them all down, and let the devil have his day.

Do you think Wall Street is trying to send you a message?    G-E-T  O-U-T!

NYTimes
At Peregrine Financial, Signs of Trouble Seemingly Missed for Years
BY AZAM AHMED AND PETER LATTMAN

CEDAR FALLS, Iowa —...

As the founder Russell Wasendorf lies in critical condition in an Iowa City hospital, Peregrine’s angry customers are asking, How could futures industry regulators have missed another potential fraud? The scandal comes just months after MF Global , the defunct futures brokerage firm, lost more than $1 billion in clients’ money.

It now appears that regulators missed the red flags for years.

In 2004, a Peregrine client sent a letter to the National Futures Association, the firm’s primary regulator, and the C.F.T.C., asking it to intervene to prevent it from misusing customer money, according to a person with knowledge of the correspondence and a copy of the letter obtained by The New York Times. Five years later, a tipster wrote to the N.F.A. asking it to review Peregrine’s bank account information for accuracy, according to people briefed on the matter who spoke on the condition of anonymity because the investigation was private. The tip was anonymous, and it is unclear how serious the N.F.A. took it.

The auditor for Peregrine was a one-person shop run out of the accountant’s home in Glendale Heights, Ill., a Chicago suburb. As part of its investigation, the C.F.T.C. is looking into the role that the individual played, according to a person with knowledge of the case.

After the collapse of MF Global, the C.F.T.C. ordered a review of all futures firms to ensure the safety of customer money. The N.F.A. gave Peregrine a clean bill of health in January.

Government regulators are examining whether Mr. Wasendorf doctored bank statements provided to the N.F.A., according to people briefed on the matter who were not authorized to speak publicly because of the investigation. Authorities are also expected to question officials at U.S. Bank, which held the client’s money.

“The entire industry is outraged that it happened the first time, let alone a second time,” said Michael V. Dunn, a former commission of the C.F.T.C., referring to the collapse of two brokerages. “We need to do something about this.”

The N.F.A. declined to comment. Calls to Peregrine’s auditor were not immediately returned...

Read the entire article here.

CBC: For Past 30 Years Most Economic Gains Have Gone to Top One Percent

"Over the past 30 years, the benefits of economic growth in Canada, the US and much of the rest of the world, have gone increasingly to the top one percent of the population. For the majority of families, however, incomes have stagnated. This rise in inequality coincided with a sea change in government policy. Beginning in the 1980s, governments in much of the English-speaking world embarked on what has been called the neoliberal revolution - deregulation, privatization and tax cuts, aimed at liberating markets and stimulating the economy. The rising tide was supposed to lift all boats, but it didn't. Jill Eisen explores what happened."

Left Behind was originally broadcast on Ideas in January 2012 and broadcast on Ideas in the Afternoon in May 2012. The 3-part series is being re-broadcast on July 11, 18 & 25.


Click here to go to the broadcast page and listen.