SP 500 Daily Chart Looking Toppy, Regulators Looking Sloppy

The SP 500 Chart is looking rather 'toppy' here as the rally extends higher, running on monetary inflation and technical trading, squeezing the shorts.

Make no mistake, if enough specs try to front run this to the short side the hedge funds and Wall Street Banks like JPM can run it higher, since selling volume has not yet picked up. And the government and the Fed are only too happy to facilitate a reflating of a stock bubble as a means of 'soft' market intervention.

This is a factor in how the Banks are making their substantial trading revenues these days, in a return to leverage and subsidized regulatory and monetary easing. Although the example presented here is with regard to commodities and ETFs, the principle applies very well to stock index ETFs.

"Much of this happens because the government is too stupid to see the inherent conflict of interest in what a broker-dealer does. Regulation will not stop gaming the law. Ethics do, and not everybody has ethics. So best you can do is prevent situations of conflict of interest, like the existence of Broker-dealer type entities. Either you trade for yourself, or you trade for others. Period...

You can never know intentions, and no one is bigger than the market, but the consequences of a lack of transparency and the free reign in which banks can tell half-truths to investors is a big factor in enabling strong hands to fleece weak hands with little market risk. It’s all a con game."

In defense of the stupidity of government, quite a few economists, analysts, and even bloggers do not 'get' the inherent conflict of interests involved in the current structure of the broker dealers, or do not care to see it for a variety of personal reasons. Stupidity can often be willfully obtained, bu always for a price. Some of the arguments against financial reform that I have seen appear to be similar to arguments that would be in favor of armed robbery because it stimulates the velocity of money.

The inherent problem with the dealer playing his own hand at the same table with the players, using the house bankroll, and looking at the cards as he deals them, would seem to be pretty much common sense, unless the casino is staffed with very restrained and scrupulous individuals, and some uncommonly good regulators equipped with the right equipment and a willingness to use effective deterrents.

But Wall Street banking is about as bad as it gets when it comes to ethical considerations and self-restraint. The regulators are too busy surfing porn, and the top politicians like Rahm Emmanual are compromised by free wheeling financiers and outrageously weak campaign contributions laws. That is why these lunatics need a strait-jacket like Glass-Steagall. The culture of greed is epidemic and overcomes all other considerations.

So for an opportunity to short this market, wait for it.

And as for serious financial reform, the Republicans are as bad or even worse than the Democrats. Mitch McConnell makes Chris Dodd look like Mahatma Ghandi, so don't hold your breath.

Several ProSharest ETFs Are Going to Have Reverse Splits This Week

The 'deflation trade' has been a tough row to hoe for the past year or so, compliments of the Fed's Balance Sheet.

It has been SO bad, that nine Proshares funds including several of the 'short ETFs' are going to have substantial reverse splits this week.

ProShares announced that it will execute reverse share splits on nine ProShares ETFs.



The splits take effect after the close on April 14. Here's the reason for doing the reverse splits according to ProShares:

For funds with lower nominal prices, bid-ask spreads represent a higher percentage of the transaction price than for higher-priced funds, increasing both costs and volatility — even when the spread is tight.

ProShares believes the reverse splits will adjust the share prices to a more cost-efficient level for the Funds' shareholders and that commissions charged by brokers who assess their clients on a per-share basis may be smaller, as investors will need to buy or sell fewer shares.

Read the rest of this article here.

Danger On the Horizon: The Systemic Pollution of The Big Banks

There are times for genuine concern in life, but the antics of Wall Street may be of less necessity than they would like us to imagine.

Goldman Sachs has not nearly enough societal value to balance its social pollution. They need to be cut off immediately from all government subsidy and restrained in their ability to game the system.

Excessive size and leverage breeds interdependent fraud, political corruption and inefficiency, and pseudo-scientific rationales for the ridiculous from domesticated economists.

Take the big Wall Street Banks apart into self-sufficient components, save the depositors, and start worrying about the things that really matter.



(h/t qqqbear and paine)

SP Futures Reach Apex of Fraud As Earnings Season Arrives and Bank Accounting Dodgy as Ever, Doing God's Work

"At what point shall we expect the approach of danger? By what means shall we fortify against it? Shall we expect some transatlantic military giant, to step the Ocean, and crush us at a blow?

Never! All the armies of Europe, Asia and Africa combined, with all the treasure of the earth in their military chest; with a Bonaparte for a commander, could not by force, take a drink from the Ohio, or make a track on the Blue Ridge, in a trial of a thousand years.

At what point, then, is the approach of danger to be expected? I answer, if it ever reach us it must spring up amongst us. It cannot come from abroad. If destruction be our lot, we must ourselves be its author and finisher. As a nation of freemen, we must live through all time, or die by suicide." Abraham Lincoln

Earnings season begins again this week in the States.

Investors remain skittish despite rosy predictions for earnings. This may be because of the suspicion that there are continuing misrepresentations of the true financial picture being permitted by the regulators, the ratings agencies, and the accountants.

For example, Bloomberg reports that if Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo were taking the appropriate reserves against loan losses, it would virtually wipe out all their expected profits for 2010. And I suggest that this loss estimate is likely to be conservative. But of course this is not going to happen in the land of 'extend and pretend.'

Reserves against losses? We don't need no stinking reserve, not while we have the Federal Reserve.

So don't get all short this market just yet, and provide grist for the mill as it might just grind higher. The good guys don't win until they get on their horses and do something. Wait for a key breakdown, probably triggered by some disclosures.

Misrepresentation of the facts and figures abounds. Through the years I noticed a common denominator amongst the kleptocracy and slippery sons of privilege: when the going gets tough, they cheat, even more than usual. And they become righteously indignant if you call them on it. As one pampered son said to me, "If the professors are not smart enough to stop me, why should you care?"

That is how they got through university, and how they get through life. They cheat on their taxes, on their wives, their community, their civic obligations, their business dealings, their friends, and even themselves. And they spend a lot of time and money stuffing the hole in their being with possessions, both things and people, to create the illusion of substance and self-worth. And so often they have learned this from their parents either through abuse or example. There must surely be a special place in hell for anyone who twists such a pathetic half-life out of the gift of a child.

Someone sent me the series currently playing on HBO, "The Pacific." They knew I would be interested because my father was one of those kids who, right after high school graduation, took their first trip away from home, from Cherry Point to Tokyo via hell. Its a brutal series, but worth watching if you want a less romanticized version of what war is like, without the self-indulgence excess of the anti-war movies. I enjoyed the exposure they give to John Basilone, the only NCO to win both the Medal of Honor, and the Navy Cross posthumously, in WWII. I used to attend the church in his hometown of Raritan, NJ where they still have a parade in his memory every year.

That experience and the Great Depression made all our fathers and uncles as tough as nails, reminiscent of the character in the movie Gran Torino. My father wasn't pretty. He was rather rough around the edges with a hard shell, did not suffer fools gladly, and had a truly remarkable command of rough language, as I understand is the custom among Marine Corps sergeants. But he always stood his ground, and did the right thing even when it hurt, out of a sense of duty, honor and pride. And he made sure that I knew that being honest, and honorable and truthful was the right thing, the only thing, to do. And I thank him for it. I am glad he is no longer around to see this triumph of the privileged, and the submission of the many, in a country that he loved. Semper Fi, dad.

Bloomberg
Bank Profits Dimmed by Prospect of Home-Equity Losses
By Dakin Campbell and David Henry

April 12 (Bloomberg) -- Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. may have to set aside an additional $30 billion to cover possible losses on home-equity loans, an amount almost equal to analysts’ estimates of profit at the three banks this year.

The cost of these reserves was calculated by CreditSights Inc., a New York-based research firm whose prediction almost four years ago proved prescient after banks reported unprecedented mortgage-related writedowns. Recognizing the home- equity loan losses is unfinished business from the housing bubble, CreditSights said in a March 29 report.

Potential writedowns on the loans are casting a shadow over earnings, as analysts try to determine how much, and how quickly, loan-loss expenses will decline from the industrywide peak reached in June 2009. Banks led by New York-based JPMorgan begin reporting first-quarter results this week....

NY Post: Trader Blows Whistle On Gold and Silver Price Manipulation

"Every society gets the kind of criminal it deserves. What is equally true is that every community gets the kind of law enforcement it insists on." Robert Kennedy

The CFTC hearing in Washington was about safeguards against, and limits on, naked short selling at the COMEX. The LBMA in London is a 'cash market' and while short selling is accepted, large leverage and blatant naked short selling is not. The crux of the scandal is that the Banks and hedge funds have been selling what they do not have in order to manipulate the price and cheat investors, in this market as they have been shown repeatedly to have done in other markets.

The story gets sticky in the States because, as disclosed in the motions in a New Orleans trial, the players filed a motion claiming immunity because they were acting in partnership with the Treasury and the Federal Reserve, and other central banks who were not within the Court's jurisdiction.

Watch this story unfold, and then make up your own minds. But be prepared for smears, diversions, misconceptions, and false denials. The accused parties will consistently try to ignore this, and change the subject. The attempts to pressure the media to ignore tihs altogether are a 'tell' if there ever was one.

I am shocked at the extent to which the Banks influence and control the American media. This was testimony at a public hearing, and it has been largely squashed. Judging by history, this is going to get ugly.

Thanks to the NY Post for breaking ranks with the mainstream media. Despite some significant behind the scenes pressure, the Post is actually publishing some words that the Banks do not wish the American people to hear. And many Americans to not wish to hear it, because it shakes their faith in the system, and threatens them with the unknown. And too many, including economists and even bloggers, are only too willing to 'go along to get along' and be invited to the posh gatherings of the famous, and receive some sinecure from the monied interests.

I do not know if this is true or not, or what the truth may be. But I do have a strong passion for bringing the light of day to shine on this, and for these markets to be much more transparent, as a reform, to prevent frauds which we do know have occurred and most likely are still occurring. For me the light of day is not smearing the messenger and making their life dangerously miserable, but that is what too often passes for journalism in the US today, as is seen in the case of other whistleblowers, most famously in the Plame affair.

Naked short selling in size is a cancer in the financial markets. And the way in which the Banks are obstinately fighting against any and all reforms that attempt to limit naked short selling shows the objective observer that they are firmly committed to a status quo that is designed to distort the markets and the real economy for their short term advantage.

Let's be clear about this: naked short selling in size is not a trading strategy, it is a means to a fraud.

This may be the Madoff ponzi scheme writ large, the heart of the darkness in the financial fraud that is the US financial system. The crowning achievement of the financial engineers at the Fed, who have built a Ponzi economy and an empire of fraud.

NY Post
Metal$ are in the pits
By MICHAEL GRAY
4:33 AM, April 11, 2010

Trader blows whistle on gold & silver price manipulation

There is no silver lining to the activities of JPMorgan Chase and HSBC in the precious-metals market here and in London, says a 40-year veteran of the metal pits.

The banks, which do the Federal Reserve's bidding in the metals markets, have long been the government's lead actors in keeping down the prices of gold and silver, according to a former Goldman Sachs trader working at the London Bullion Market Association.

Maguire was scheduled to testify last week before the Commodities Futures Trade Commission, which is looking into the activities of large banks in the metals market, but was knocked off the list at the last moment. So, he went public.

Maguire -- in an exclusive interview with The Post -- explained JPMorgan's role in the metals pits in both London and here, and how they can generate a profit either way the market moves.

"JPMorgan acts as an agent for the Federal Reserve; they act to halt the rise of gold and silver against the US dollar. JPMorgan is insulated from potential losses [on their short positions] by the Fed and/or the US taxpayer," Maguire said.

In the gold pits, Maguire sees HSBC betting against the precious metal's price without having any skin in the game in the form of a naked short.

"HSBC conducts an ongoing manipulative concentrated naked short position in gold. Silver is much easier to manipulate due to its much smaller [market] size," Maguire added.

"No one at JPMorgan is familiar with Andrew Maguire," said Brian Marchiony, a company spokesman. HSBC declined to comment. (Maguire seems to be creeping into the corporate consciousness. Earlier, JPM tried to deny that he even existed. Now they admit he exists but no one there knows him, despite his have traded alongside them for 40 years, and traded at a sister firm, Goldman. HSBC has at least enough conscience to simply sulk. - Jesse)

Also during the CFTC hearing, Jeff Christian, founder of the commodities firm CPM Group, said that the LBMA, the physical delivery market for gold and silver in the UK, has been using leverage, which is another way to depress the price of gold and silver.

Christian said that the LBMA -- the same market Maguire trades in -- has leverage of about 100-1 on the gold bars settled on the exchange. In layman's terms, that means if 100 clients requested their bullion bars be delivered, the exchange could only give one client the precious metal. (Note: the LBMA is not a 'futures' market like the COMEX where naked short selling is an accepted, if not entirely explicit, practice. The CFTC hearing was essentially about safeguards against and limits on naked short selling on the COMEX, despite the noise and distractions surrounding it. - Jesse)

The remaining requests would have to be settled for cash equivalent. "That is tantamount to a default on the trade," says Bill Murphy, chairman of the Gold Antitrust Action committee...

Read the rest here.

Weekly Charts

SP 500 Weekly Chart



SP 500 Sentiment Indicators



Gold



Silver



US Dollar

Ohio Judge Tells Residents to 'Arm Themselves'

When asked what advice he would give to residents of Ashtabula County Ohio because of cutbacks in official law enforcement budgets, Judge Alfred Mackey said they should:

"arm themselves. Be very careful, be vigilant, get in touch with your neighbors, because we're going to have to look after each other."

WKYC
Ashtabula County Judge Tells Ohio Residents to "Arm themselves"
April 9, 2010

JEFFERSON -- In the ongoing financial crisis in Ashtabula County, the Sheriff's Department has been cut from 112 to 49 deputies. With deputies assigned to transport prisoners, serve warrants and other duties, only one patrol car is assigned to patrol the entire county of 720 square miles.

"I did the best with what they (the county commissioners) gave me. If it wasn't enough, don't blame me, don't blame this department," said Sheriff Billy Johnson.

Johnson said he is suing the commissioners to get a determination of whether he should use his limited budget to carry out obligations defined by law or put more patrol cars on the streets.

"I just can't do it anymore," he said. "I have to have the court explain to the commissioners and to me what my statutory duties are."

The Ashtabula County Jail has confined as many as 140 prisoners. It now houses only 30 because of reductions in the staff of corrections officers.

All told, 700 accused criminals are on a waiting list to serve time in the jail.

Are there dangerous people free among the 700 who cannot be locked up?

"There probably are," Sheriff Johnson said, "but I'm telling you, any known violent criminal, we're housing them. We've got murderers in there."

Ashtabula County is the largest county in Ohio by land area.

Ashtabula County Common Pleas Judge Alfred Mackey was asked what residents should do to protect themselves and their families with the severe cutback in law enforcement.

"Arm themselves," the judge said. "Be very careful, be vigilant, get in touch with your neighbors, because we're going to have to look after each other."

Ashtabula County gun dealers and firearms instructors tell WKYC their business has really picked up since the Sheriff's Department cutbacks began some months ago.

"That's exactly why they are coming, so that they can protect themselves," says Tracy Williams, a certified firearms instructor in Jefferson. "They don't feel that they are protected. They want to be able to protect themselves."

Williams says interest in his classes has doubled recently, and many of those coming are people who he would not normally expect to have interest in obtaining a concealed carry permit.

"And as far as him (Judge Mackey) telling you to arm yourselves and protect yourselves, you don't have any other option," Williams told WKYC. "We don't have the law enforcement out here to handle it right now..."

Most Wall Street Banks Using Lehman Style Accounting Trickery Enabled by the Fed to Hide Their Risk

"Progress is a nice word. But change is its motivator. And change has its enemies.” Robert F. Kennedy

This analysis from the Wall Street Journal indicates that most of the big US Banks are engaging in the same kind of repo accounting at the end of the quarter that Lehman Brothers was doing to hide their financial instability until deteriorating credit conditions and liquidity problems made them precipitously collapse, as all ponzi schemes and financial frauds do when the truth becomes known.

The basic exercise is to hold big leverage and dodgy debt, but swap it off your books with the Fed at the end of each quarter for a short period of time when you have to report your holdings.

This could easily be corrected by requiring banks to report four week averages of their holdings for example, rather than a snapshot when they can hide their true risk profiles so easily, compliments of that protector of consumers and investors, the Fed.

This is nothing new to us. Many of us have noted this sort of accounting trickery and market manipulation at key events especially at end of quarter.

It is facilitated by the Federal Reserve, and FASB, and the agencies.

"Their Fraud doth rarely falter, and is subsidized, instead,
for none dare call it bank fraud, if it's sanctioned by the Fed."
(apologies to Ovid)

The US is Lehman Brothers on a scale writ large. And when it is exposed by some series of events, the implosion could be more sudden than any can imagine. But in the meantime the US is still the 'superpower' of the world's financial system, through its currency, its banks, and its ratings agencies.

WSJ
Big Banks Mask Risk Levels
By KATE KELLY, TOM MCGINTY and DAN FITZPATRICK
April 9, 2010

Quarter-End Loan Figures Sit 42% Below Peak, Then Rise as New Period Progresses; SEC Review

Major banks have masked their risk levels in the past five quarters by temporarily lowering their debt just before reporting it to the public, according to data from the Federal Reserve Bank of New York.

A group of 18 banks—which includes Goldman Sachs Group Inc., Morgan Stanley, J.P. Morgan Chase & Co., Bank of America Corp. and Citigroup Inc.—understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the data show. The banks, which publicly release debt data each quarter, then boosted the debt levels in the middle of successive quarters.

Excessive borrowing by banks was one of the major causes of the financial crisis, leading to catastrophic bank runs in 2008 at firms including Bear Stearns Cos. and Lehman Brothers. Since then, banks have become more sensitive about showing high levels of debt and risk, worried that their stocks and credit ratings could be punished.

That practice, while legal, can give investors a skewed impression of the level of risk that financial firms are taking the vast majority of the time.

You want your leverage to look better at quarter-end than it actually was during the quarter, to suggest that you're taking less risk," says William Tanona, a former Goldman analyst who now heads U.S. financials research at Collins Stewart, a U.K. investment bank.

Though some banks privately confirm that they temporarily reduce their borrowings at quarter's end, representatives at Goldman, Morgan Stanley, J.P. Morgan and Citigroup declined to comment specifically on the New York Fed data. Some noted that their firm's financial filings include language saying borrowing levels can fluctuate during the quarter.

"The efforts to manage the size of our balance sheet are appropriate and our policies are consistent with all applicable accounting and legal requirements," a Bank of America spokesman said.

The data highlight the banks' levels of short-term financing in the repurchase, or "repo," market. Financial firms use cash from the loans to buy securities, then use the purchased securities as collateral for other loans, and buy more securities. The loans boost the firms' trading power, or "leverage," allowing them to make big trades without putting up big money. This amplifies gains—and losses, which were disastrous in 2008.

According to the data, the banks' outstanding net repo borrowings at the end of each of the past five quarters were on average 42% below their peak in net borrowings in the same quarters. Though the repo market represents just a slice of banks' overall activities, it provides a window into the risks that financial institutions take to trade...

Read the rest here.

Here is an interactive visualization of the accounting deception.

The Intra-Day Pattern in Gold Trading

Nick Laird at sharelynx.com was kind enough to share this chart with us.

It shows the average pattern of gold trading intraday.

Nick has an amazing array of current and historic charts at his site, including many vintage charts from a variety of markets.

The pattern here seems a big regular. I have found it to be useful in picking entry points in certain positions.