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.

Celebrating Policy Errors And Corruption With Bogus Milestones in The Recovery™

Or Why Is Unemployment Falling Along With the Labour Participation Rate?

The pat answer from learned economists is that this is 'the new normal,' and 'structural.'    It is all part of an aging population gracefully moving into their comfortable retirement.   They say this even though people are working in great numbers into older age because they have little savings and pension security, and the real median income continues to stagnate.   And while corporations and the one percent reap rich profits and increases in income from the Fed's trickle down monetary stimulus.

So many odds things occurring.  We have a bear market in the price of gold, even while the physical supply of it is disappearing, and major benchmarks have been found to have been manipulated by the financial system.  Curiouser and curiouser.

The answer is that the government and their corporate partners are painting pictures of a recovery, and placing them along the highways and byways, in order to convince us that things are getting better.  In this Wonderland where nothing is real, perception is everything, and everything is its image.

This is why I first called this 'The Potemkin Economy' some time ago.

Ralph Dillon from Global Financial Data passed this along, and I thought this was interesting. The commentary is his.

If unemployment benefits were extended indefinitely would this chart look any different? Is the decline in labor participation due to the extension of federal unemployment benefits? Would we continue to see the duration of unemployment keep trending higher if it was?

This chart is amazing in many regards. First, the duration of consecutive weeks of unemployment has never been over the overall labor participation rate in 45 years of recorded statistics. Second, the parabolic increase in the duration of those unemployed is staggering starting in 2009. Third, we have never seen the two series in lock step as they currently are.

And finally, is the decline in how long someone is unemployed correlated to the drop in those who are actually employed? Shouldn’t the participation rate go up if the duration of those unemployed is improving? What will this chart look like in say 10 years?

I continue to be fascinated with employment in this country. It seems the importance of decade’s worth important economic statistics have been turned upside down. Further, they are being looked upon differently according to what message you are trying to send.

For example, the Federal Government has had a target of 6.5% unemployment. Four years ago this was considered a milestone of achievement for a broken economy. Yet yesterday, in testimony before congress, Fed Chair Janet Yellen, indicated that the unemployment target having been reached, is no longer a goal. It had been a goal since the unemployment rate reached its highs after the 2008 financial crisis.  If we reached that goal, then things must be going well, right?

Not if you look at this chart it doesn’t. The 45 year average of the duration of unemployment is 101 weeks. Today we are at 200 weeks! Since the crisis started, we have doubled the duration of time that those are unemployed stay unemployed. Not very good. But what about the improving economy we keep hearing about? More jobs right?

Wrong. The overall civilian labor force participation rate is at the lowest level in over 3 decades yet we are at 6.5% unemployment. What then are we going to set as our next goal?

If we keep setting goals that are meaningless then why are we setting them at all? If the economy is so good, then why are we continuing the Quantitative Easing program? Sure it’s been scaled back a bit, my inclination is that the easing is skewing the traditional statistics that we have been using to measure the economy for decades.

If something is truly broken, like the labor market, why not set out and fix it instead of making it worse and celebrating its bogus milestones that are truly failures. Who does Quantitative Easing help anyway. They say Main Street, but many feel Wall Street.

They say that facts and numbers do not lie. Only politicians do.

(and those who work in the service of power and the status quo, such as mainstream media pundits, academic and professional economists, and other Very Serious People of titles and great consequence. They like to use terms like 'the new normal' to prepare people for being economically abused and repressed until exhaustion and collapse. - Jesse.)

"Robbery, rape, and slaughter they falsely call empire; and where they create a desert, they call it peace."

Tacitus, Calgacus' Speech from Agricola

Gold Daily and Silver Weekly Charts - Bucket Shops - Hidden Pricing In Electronic Bond Sales

"Because so few of the world’s real producers, consumers and investors deal on the COMEX, the exchange has developed into a 'bucket shop' or a private betting parlor exclusively comprised of speculators. Again, this is an intentional development as much more trading volume is generated by speculative High Frequency Trading (HFT) than by legitimate hedgers (like miners) transferring risk to speculators.

Legitimate hedgers don’t day trade. It is no exaggeration to say that the COMEX has been captured by speculators and abandoned by legitimate hedgers."

Ted Butler, Butler Research LLC, March 19, 2014

You may wish to keep what Ted Butler has said in mind.

I find it difficult to understand how so many otherwise intelligent people are willing to blind themselves to what is going on in so many  markets and key benchmarks, often with a sense of false sophistication and snide superiority. 'Oh yes of course there is price rigging, insider trading, and corruption in the markets. But that is only for the little people, who really deserve to be cheated. It is not for people like us. We know better.'

Bloomberg
SEC Said Examining Hidden Electronic Bond Trading Prices
By Lisa Abramowicz Mar 20, 2014

"The U.S. Securities and Exchange Commission is examining how electronic bond-trading platforms allow dealers to give clients different prices on the same securities in the $40 trillion market, potentially hurting smaller investors.

SEC regulators want to understand why brokers sometimes block their rivals and clients from seeing some of their prices for municipal, corporate and other bonds, according to a person with direct knowledge of the examination. They’re concerned that being able to turn quotes on and off may allow market manipulation, and that smaller buyers may not get the best prices, the person said..."

Have a pleasant evening.

SP 500 and NDX Futures Daily Charts - Better Than Expected - A Faithful Companion

“Some animals are more equal than others.”

George Orwell

The economic news this morning was 'better than expected.'

A frog in a pot full of water on the stove can think that being in the pot is better than being in the fire underneath.

Tomorrow is a triple witch stock option expiration.

Have a pleasant evening.

Gold Daily and Silver Weekly Charts - Another Triumphant FOMC Day

There was intraday commentary on the Fed Statement here, and some comments on the nature of the Fed's policy error in the US equity charts and review here.

There is an option expiration for stocks on Friday, and I suspect that call option owners of the mining companies and various related metals products got quite a ride today.

Have a pleasant evening.

Postscript:   Here is an interesting chart from Median Macro.   I like its presentation format which is easy to read and compactly informative.   However, notice that they are showing the change in the price of gold for the entire week.  I would have preferred to have seen the change in the price of gold from the day before the FOMC meeting to the day after the announcement. 

But I included this because it was interesting that there was no change in the months in which there were no meetings.  They should consider going back a year or two at least to obtain more observations, say at least to the beginning of QE since the hypothesis is that the Fed is engaging in perception management.

Source: Meridian Macro (h/t ZH)

SP 500 and NDX Futures Daily Charts - FOMC Day - Fed's Policy Error In One Chart

The Fed continued its taper on the bond purchasing at a pace designed to end the program sometime this year.

But it is important to remember that they continue to roll everything over, so their Balance Sheet will continue to expand.

I fully expect them to do another quantitative easing program after this one.

The first chart below shows the nature of their policy error in one slide. A special thanks to those free thinkers at GMU for the chart.

Their economic projections for 2015 recovery should have little credibility, considering they could not see a second massive bubble which they created, and then one of the worst financial crashes since the Great Depression.   These were not acts of God, but events which they themselves helped to create and abetted,  as both policy maker and regulator. 

The Emperor is not naked. The Emperor is barking mad. 

Have a pleasant evening.