http://harveyorgan.blogspot.com/2013/06/another-price-fixing-scandal-on-foreign.html
Wednesday, June 12, 2013
Another price fixing scandal on foreign exchange/Comex gold inventories fall on both dealer and customer accounts/JPMorgan's account remains constant/
Good evening Ladies and Gentlemen:
Gold closed up by $14.80 to $1391.80 (comex closing time). Silver rose by 15 cents to $21.79 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1388.20.
silver: $21.78
At the Comex, the open interest in silver fell by only 301 contracts to 147,175 contracts with silver's fall in price yesterday by 28 cents. We lost a little fluff today but still, the silver OI is holding firm at elevated levels. The bankers will desperately try and remove some of these stubborn longs before the big July month rolls around.
The open interest on the entire gold comex contracts fell by 2799 contracts to 373,844 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month is 932,500 or 29.00 tonnes.The number of silver ounces standing in this non active month of June rose by 65,000 oz to 605,000 oz.
Tonight, the Comex registered or dealer inventory of gold falls to 1.441 million oz or 44.83 tonnes. This is getting dangerously low. The total of all gold at the comex fell again and now it is well below the 8 million oz mark at 7.707 million oz or 239.7 tonnes of gold.
JPMorgan's customer inventory shows no change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The GLD reported that we have no gain or loss in inventory. The SLV inventory of silver also remained firm with no losses or gains in inventory.
Today we have two extremely important commentaries from Bill Holter
i) on signs that signal trouble
ii on what the rise in USA interest rates mean.
In his first commentary he emphasizes the huge fall in gold inventory at JPMorgan..
and the second commentary deals with the huge risk to all economies of the world if interest rates were to rise quickly due to massive derivative losses to the banks.
You do not want to miss reading both of these two important articles.
In other physical news, we have a great interview with James Turk with Eric King of Kingworld news.
Jessie from Jessie's American cafe brings us a story that the Obama is removing Gary Gensler due to his strong views on swaps.
On the paper side of things, the big story is another price fixing scandal on foreign exchange. Bloomberg and zero hedge weigh in on this huge story.
We will go over these and many other stories but first.....................
Let us now head over to the comex and assess trading over there today.
Here are the details:
The total gold comex open interest fell by 2799 contracts from 376,643 back down to 373,844 with gold falling by $10.00 yesterday. The front active month of June saw it's OI fall by 262 contracts from 1734 down to 1472. We had 195 contracts served upon our longs yesterday. We thus lost 67 contracts or 6700 oz that will not stand this month. The next delivery month is the non active July contract and here the OI rose by 87 contracts up to 573. The next active delivery month for gold is August and here the OI fell by 1560 contracts from 215,088 down to 213,528. The estimated volume today was poor at 108,974 contracts. The confirmed volume yesterday was a little better at 159,096 contracts. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.
The total silver Comex OI also retreated as silver fell in price by 18 cents yesterday. It's OI fell by a tiny 301 contracts to 147,175.The longs in silver remain resolute willing to take on the criminal bankers. The front non active June silver contract month shows a gain in OI contracts of 11 contracts. We had 2 notices filed yesterday so in essence we gained 13 contracts or an additional 65,000 silver ounces will stand for metal for the June contract month. The estimated volume today was fair, coming in at 36,370 contracts. The confirmed volume yesterday was extremely good at 62,949. I guess the bankers will try and throw everything possible at the silver longs including the kitchen sink, the bathtub and you name it in an attempt to dislodge the longs from their positions.
We again had 0 customer deposits today
total customer deposit: nil oz
It is very strange that in a big delivery month, we are witnessing no gold enter the dealer or even the customer.
Yesterday we reported to you that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
Today, we have one customer withdrawal and the vault was Brinks:
i) Out of Brinks: 6172.80 oz
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
Last Tuesday, we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of last night 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
In summary on the customer side of things for JPMorgan:
Last Wednesday we had 333 notices served upon by JPMorgan's customer side.
Thursday morning we received notice that we had 826 notices served upon of which 725 contracts were issued by JPMorgan's customer account and 10 notices from their house or dealer account.
Friday morning, 318 notices were filed and of that total 317 notices were issued by JPMorgan and all of these were on their client or customer account.
7871 contracts x 100 oz per contract or 787,100 oz served upon + 1454 contracts or 145,400 oz (left to be served upon) = 932,500 oz or 29.00 tonnes of gold.
We lost 67 contracts or 6700 oz of gold which will not stand for the June contract month.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 151.30% of that total production.
Ladies and Gentlemen: we have a two-fold problem:
i) the total dealer inventory of gold falls to a level of only 44.83 tonnes and none of the 9.5 tonnes delivery notices from May and the 29 tonnes from June have been removed from inventory as of yet. the dealer has seen zero oz enter any vault.
ii) a) JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz
total customer withdrawal :nil oz
end
Gold closed up by $14.80 to $1391.80 (comex closing time). Silver rose by 15 cents to $21.79 (comex closing time)
In the access market at 5:00 pm, gold and silver finished trading at the following prices :
gold: 1388.20.
silver: $21.78
At the Comex, the open interest in silver fell by only 301 contracts to 147,175 contracts with silver's fall in price yesterday by 28 cents. We lost a little fluff today but still, the silver OI is holding firm at elevated levels. The bankers will desperately try and remove some of these stubborn longs before the big July month rolls around.
The open interest on the entire gold comex contracts fell by 2799 contracts to 373,844 which is still extremely low. There is no question that all of the weak speculators in gold have now departed. The number of ounces which is standing for gold in this June delivery month is 932,500 or 29.00 tonnes.The number of silver ounces standing in this non active month of June rose by 65,000 oz to 605,000 oz.
Tonight, the Comex registered or dealer inventory of gold falls to 1.441 million oz or 44.83 tonnes. This is getting dangerously low. The total of all gold at the comex fell again and now it is well below the 8 million oz mark at 7.707 million oz or 239.7 tonnes of gold.
JPMorgan's customer inventory shows no change and rests tonight at its nadir of 136,380.611 oz or 4.24 tonnes. Its dealer inventory remains at 413,526.284 oz but it still must settle upon contracts issued in the June delivery month which far exceeds its inventory.
The GLD reported that we have no gain or loss in inventory. The SLV inventory of silver also remained firm with no losses or gains in inventory.
Today we have two extremely important commentaries from Bill Holter
i) on signs that signal trouble
ii on what the rise in USA interest rates mean.
In his first commentary he emphasizes the huge fall in gold inventory at JPMorgan..
and the second commentary deals with the huge risk to all economies of the world if interest rates were to rise quickly due to massive derivative losses to the banks.
You do not want to miss reading both of these two important articles.
In other physical news, we have a great interview with James Turk with Eric King of Kingworld news.
Jessie from Jessie's American cafe brings us a story that the Obama is removing Gary Gensler due to his strong views on swaps.
On the paper side of things, the big story is another price fixing scandal on foreign exchange. Bloomberg and zero hedge weigh in on this huge story.
We will go over these and many other stories but first.....................
Here are the details:
The total gold comex open interest fell by 2799 contracts from 376,643 back down to 373,844 with gold falling by $10.00 yesterday. The front active month of June saw it's OI fall by 262 contracts from 1734 down to 1472. We had 195 contracts served upon our longs yesterday. We thus lost 67 contracts or 6700 oz that will not stand this month. The next delivery month is the non active July contract and here the OI rose by 87 contracts up to 573. The next active delivery month for gold is August and here the OI fell by 1560 contracts from 215,088 down to 213,528. The estimated volume today was poor at 108,974 contracts. The confirmed volume yesterday was a little better at 159,096 contracts. It seems that the many now realize that the Comex is a crooked game so investors are seeking other means to acquire gold.
The total silver Comex OI also retreated as silver fell in price by 18 cents yesterday. It's OI fell by a tiny 301 contracts to 147,175.The longs in silver remain resolute willing to take on the criminal bankers. The front non active June silver contract month shows a gain in OI contracts of 11 contracts. We had 2 notices filed yesterday so in essence we gained 13 contracts or an additional 65,000 silver ounces will stand for metal for the June contract month. The estimated volume today was fair, coming in at 36,370 contracts. The confirmed volume yesterday was extremely good at 62,949. I guess the bankers will try and throw everything possible at the silver longs including the kitchen sink, the bathtub and you name it in an attempt to dislodge the longs from their positions.
Comex gold/May contract month:
June 12/2013
the June contract month:
the June contract month:
Ounces
| |
Withdrawals from Dealers Inventory in oz
|
39.199.19 (Brinks)
|
Withdrawals from Customer Inventory in oz
|
6172.80 (Brinks)
|
Deposits to the Dealer Inventory in oz
|
nil
|
Deposits to the Customer Inventory, in oz
| 64.30 (Brinks) oz |
No of oz served (contracts) today
|
18 (1800 oz)
|
No of oz to be served (notices)
|
1454 (145,400 oz
|
Total monthly oz gold served (contracts) so far this month
|
7871 (787,100 oz)
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
78,856.579oz
|
Total accumulative withdrawal of gold from the Customer inventory this month
| 258,950.53 oz |
We again had some activity at the gold vaults
The dealer again had 0 deposits but did have 1 dealer withdrawal.
i) Out of Brinks: 39,199.19 oz was withdrawn
i) Out of Brinks: 39,199.19 oz was withdrawn
We again had 0 customer deposits today
total customer deposit: nil oz
It is very strange that in a big delivery month, we are witnessing no gold enter the dealer or even the customer.
Yesterday we reported to you that JPMorgan withdrew a huge amount of gold from its customer account:
Out of JPMorgan: 217,844.96 oz.
Today, we have one customer withdrawal and the vault was Brinks:
i) Out of Brinks: 6172.80 oz
If you will recall, we needed to see 100,000 oz of gold removed from JPMorgan's customer account. (1000 contracts served upon our longs in mid May).
Last Tuesday, we had 15,416.93 oz removed from the JPM's customer account. No doubt that this gold was part of the 1000 contracts issued by JPMorgan customer account and thus we calculated that as of last night 28,389.579 oz was settled upon, leaving 71,611.00 oz still left to arrive in the settling process.
In summary on the customer side of things for JPMorgan:
Last Wednesday we had 333 notices served upon by JPMorgan's customer side.
Thursday morning we received notice that we had 826 notices served upon of which 725 contracts were issued by JPMorgan's customer account and 10 notices from their house or dealer account.
Friday morning, 318 notices were filed and of that total 317 notices were issued by JPMorgan and all of these were on their client or customer account.
Monday, 132 notices were filed (all from JPMorgan) of which 131 notices were issued from JPMorgan's customer account and one notice from the dealer side.
Yesterday, of the 195 notices issued for today, 136 notices were issued from JPMorgan and all of these came from its customer account.
Today, the CME reported that 18 customer notices were filed for delivery and all were issued from JPMorgan's customer side.
If we add the 71,611.00 oz that was owed last week, together with the following notices converted into oz: (we do not include the 136 and 18 notices as these will be settled later in the week or next week), we have the following in oz settled:
i) 333 notices equals 33300 oz
ii) 725 notices equals 72500 oz
iii 317 notices equals 31700 oz
plus the above 71,611.00 oz
we have 209,111 oz of gold to be settled upon. Yesterday's 217,844.96 oz withdrawn from JPMorgan's customer account, no doubt satisfied these claims and were settled upon.
We still have 154 notices or 15,400 oz that need to be withdrawn from JPMorgan's customer account.
We had one adjustment.
i) out of HSBC: we have 95.4 oz was adjusted out of the customer and back into the dealer at HSBC.
Thus tonight we have the following closing inventory figures for JPMorgan:
i) dealer account: 413,526.284 oz
ii) customer account drops to 136,380.611 oz. (or only 4.2 tonnes of gold)
Now for JPMorgan's dealer side and what the inventory should be:
Last Tuesday night we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall a week ago on Saturday and again last Monday night, I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side at 413,526.284 oz where it sits tonight.
On the dealer side Thursday we had 10 notices issued on JPMorgan's dealer account.
On Friday: zero
Today, the CME reported that 18 customer notices were filed for delivery and all were issued from JPMorgan's customer side.
If we add the 71,611.00 oz that was owed last week, together with the following notices converted into oz: (we do not include the 136 and 18 notices as these will be settled later in the week or next week), we have the following in oz settled:
i) 333 notices equals 33300 oz
ii) 725 notices equals 72500 oz
iii 317 notices equals 31700 oz
plus the above 71,611.00 oz
we have 209,111 oz of gold to be settled upon. Yesterday's 217,844.96 oz withdrawn from JPMorgan's customer account, no doubt satisfied these claims and were settled upon.
We still have 154 notices or 15,400 oz that need to be withdrawn from JPMorgan's customer account.
We had one adjustment.
i) out of HSBC: we have 95.4 oz was adjusted out of the customer and back into the dealer at HSBC.
Thus tonight we have the following closing inventory figures for JPMorgan:
i) dealer account: 413,526.284 oz
ii) customer account drops to 136,380.611 oz. (or only 4.2 tonnes of gold)
Now for JPMorgan's dealer side and what the inventory should be:
Last Tuesday night we reported that 4935 contracts have been issued by JPMorgan's house account since first day notice and not yet subtracted out of inventory
You will also recall a week ago on Saturday and again last Monday night, I reported that JPMorgan had 470,322.102 oz in it's dealer account. From that day until now, 58,795.82 oz was either withdrawn or adjusted out, leaving the dealer side at 413,526.284 oz where it sits tonight.
On the dealer side Thursday we had 10 notices issued on JPMorgan's dealer account.
On Friday: zero
On Monday: 1
On Tuesday: 0
On Wednesday (today): 0
Thus, 4946 contracts have been issued so far for 494,600 oz and these
ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz
somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time.
How will JPMorgan satisfy this shortfall??
With yesterday's huge withdrawal from the JPMorgan customer account, JPMorgan does not have enough gold in its vaults to satisfy claims upon it. And we still have over 153,900 oz left to be settled upon. JPMorgan generally handles 80% of all issuance.
On Wednesday (today): 0
Thus, 4946 contracts have been issued so far for 494,600 oz and these
ounces have yet to settle from JPMorgan's dealer side.
JPMorgan's dealer vault registers tonight 413,526.284 oz
somehow we have a huge negative balance as i) the gold has not left JPMorgan's dealer account and has yet to settle
and
ii) it is now deficient by 81,074 oz (413,526 inventory - 494,600 oz issued = 81,074 oz)
In other words, the entire 413,526 must be first transferred out of Morgan's dealer category ( in the same format as in the customer category) leaving it with zero, plus the 81,074 of additional gold
JPMorgan has not had any deposits in gold in quite some time.
How will JPMorgan satisfy this shortfall??
With yesterday's huge withdrawal from the JPMorgan customer account, JPMorgan does not have enough gold in its vaults to satisfy claims upon it. And we still have over 153,900 oz left to be settled upon. JPMorgan generally handles 80% of all issuance.
Tonight the total dealer inventory falls badly to a low of 1.441 million oz (44.83) tonnes of gold. The total of all gold falls as well, resting tonight at 7.7069 million oz or 239.71 tonnes.
Today we had 18 notices served upon our longs for 1800 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1472) and subtract out today's notices (18) which leaves us with 1454 contracts or 145,400 oz left to be served upon our longs.
Today we had 18 notices served upon our longs for 1800 oz of gold. In order to calculate what I believe will stand for delivery in June, I take the OI standing for June (1472) and subtract out today's notices (18) which leaves us with 1454 contracts or 145,400 oz left to be served upon our longs.
Thus we have the following gold ounces standing for metal in June:
7871 contracts x 100 oz per contract or 787,100 oz served upon + 1454 contracts or 145,400 oz (left to be served upon) = 932,500 oz or 29.00 tonnes of gold.
We lost 67 contracts or 6700 oz of gold which will not stand for the June contract month.
We now have the official USA production of gold last year and it registered 230 tonnes. Thus approximately 19.16 tonnes of gold is produced by all mines in the USA per month. Thus the amount standing for gold this month represents 151.30% of that total production.
Ladies and Gentlemen: we have a two-fold problem:
i) the total dealer inventory of gold falls to a level of only 44.83 tonnes and none of the 9.5 tonnes delivery notices from May and the 29 tonnes from June have been removed from inventory as of yet. the dealer has seen zero oz enter any vault.
ii) a) JPMorgan's customer inventory remains at an extremely low 136,380 oz.
If you are a customer of JPMorgan and have your gold in its vault, I think it is best to remove it before we have another fiasco like MFGlobal.
ii b) JPMorgan's dealer account rests tonight at 413,000 oz. However all of this gold has been spoken for plus an additional 81,000 oz
end
now let us head over and see what is new with silver:
now let us head over and see what is new with silver:
Silver:
June 12.2013: June silver contract month:
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | nil |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | 99,690.80 oz(Brinks) |
| No of oz served (contracts) | 55 (275,000 oz) |
| No of oz to be served (notices) | 31 (155,000 oz) |
| Total monthly oz silver served (contracts) | 90 (455,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | 982,955.47 oz |
| Total accumulative withdrawal of silver from the Customer inventory this month | 2,951,374.2 oz |
Today, we had good activity inside the silver vaults.
we had 0 dealer deposits and 0 dealer withdrawals.
We had 1 customer deposit:
i) Into Brinks; 99,690.80 oz
total customer deposit; 99,690.80 oz
We had 0 customer withdrawals:
We had 1 customer deposit:
i) Into Brinks; 99,690.80 oz
total customer deposit; 99,690.80 oz
We had 0 customer withdrawals:
total customer withdrawal :nil oz
we had 0 adjustments today
Registered silver at : 41.758 million oz
total of all silver: 164.484 million oz.
The CME reported that we had 55 notices filed for 275,000 oz today. In order to calculate what we believe will stand in the month of June, I take the Oi standing for June (86) and subtract out today's notices (55) which leaves us with 31 notices or 155,000 oz.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
90 contracts x 5000 oz per contract (served) = 450,000 oz + 31 contracts x 5000 oz or 155,000 oz left to be served upon = 605,000 oz
we gained back 65,000 oz of silver today at the Comex silver.
Thus the total number of silver ounces standing in this non active delivery month of June is as follows:
90 contracts x 5000 oz per contract (served) = 450,000 oz + 31 contracts x 5000 oz or 155,000 oz left to be served upon = 605,000 oz
we gained back 65,000 oz of silver today at the Comex silver.
end
Now let us check on gold inventories at the GLD first: flat once again today and all of this week !
Jan 12/ 2013:
Jan 11.2013:
June 10.2013:
Jan 12/ 2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.8682 billion
Jan 11.2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.592 billion
June 10.2013:
Tonnes1,009.85
Ounces32,467,579.48
Value US$44.885 billion
* * *
News and views ....
Bill Holter..... " Signs "
"Signs" |
As I mentioned in my earlier piece, there are now many "signs" that we are going terminal both globally and systemically. Economies are slowing and or contracting and yes this includes China. You can clearly see that the numbers here in the U.S. are thoroughly cooked. If you look at "private" numbers such as "miles driven" or even something as simple as carloads of garbage hauled by the freight system it is clear that we are not growing. If you look at the pricing for sea shipments and volumes you will see that international trade is contracting. You can also look at unemployment numbers housing and food assistance numbers here in the U.S and abroad and you will get confirmation of the above, treading water at best and likely systemic contraction.
Looking at the central banks of the West, they are all monetizing...because they have to. They have to because there are few other buyers for sovereign debt that must be sold to rollover past debt, fund current "programs" and pay interest. One might say "but the stock market is up so everything must be OK". Well, margin debt has never been higher than it is now, insiders are selling at a furious pace and short interest is down substantially. We will see how this works out but I highly doubt that "optimally" will be the description.
Currency markets are experiencing unprecedented volatility. How can trade work between Japan and the U.S. if their currencies are trading up or down 2% or even 3% in one trading day? In the old days, 3% was a huge move in a months time, now it can happen on an opening trade! And yes, as mentioned in my earlier piece, interest rates are beginning to rise. It is only a matter of time in my opinion before one nation or even entire region has their back up against the interest rate wall assuming that hedge funds or even investment banks themselves don't get blown up sooner by the derivative time bombs they are all sitting on.
Another "sign" (or should I say sign's' plural) that sticks out in my mind but certainly not by the mainstream press are the scandals. We've seen scandal after scandal in Europe, a scandal with the IMF's Christine LaGarde and of course the recent 24/7 storm here in the U.S.. Coincidence that all of this dirty laundry is coming out in concentrated fashion? Is there "infighting" amongst the elites because they are losing control? (Before I forget, there has been a rash of resignations of banking CEO's and high officials in the Middle East over the last 2-3 months, what's up with this ?)
I'd like to add one more sign to the mix and also break it down a bit for you. Zerohedge posted this last night http://www.zerohedge.com/news/
But wait, if you thought it couldn't get any better...it does. If you look at the what has so far been issued this month it amounts to 4,946 contracts, this is 494,600 ounces yet JP Morgan claims to have only 413,525 ounces in their dealer account. This means they have a negative 81,074 ounces of Gold for delivery? I bring this up because so far this year I don't believe that they have added ANY Gold to their dealer account. Harvey Organ went back and checked each and every day this year and sees none, zero, not one single ounce added to the dealer side. What's up with this? Is this a default? They also "owe" over 81,000 ounces that was to be delivered by May 31st from the customer side due to a 1,000 contract issuance, today is June 12th...am I missing something here ?
I bring this last bit up as just another "sign" that may or may not go hand in hand with the rest. However, if you are a fan of connecting the dots does this not look like people want their Gold and they want it now? What if you were one of the owners of part of this remaining 136,000 ounces? Would you maybe want to get your hands on it now...while they say that it's there?
Regards, Bill H.
Bill Holter " Interest rates are going up because .. "
Bill's second paper deals with the rise in USA interest rates. The pundits will make you believe that the rise is because the economy is performing well. That is nonsense.
Bill Holter tackles this important development and this is an extremely important piece for you to read
(courtesy Bill Holter/Miles Franklin)
Interest rates are going up because...
The bullish case is that interest rates are going up because the economy is recovering...well, no it is not. In fact, if you look at the numbers the economy is stalling from its QE aided lower plateau and about to plumb new lows. Just look under the hood of some of the reported numbers, last week for example the non farm payrolls supposedly rose 175,000 jobs. If you look into it, some 75% were lower paying and non skilled jobs...plus 205,000 jobs were "magically" created by the BLS. Without this monthly "fudge factor" the real number would have been a negative 30,000 jobs...which is what the economy actually feels and smells like.
But talking about bogus reporting is not what I'd like to write about, the important (and scary) thing is that rates ARE rising. Rising interest rates (even though they never should have gotten to these low levels in the first place) will cause all sorts of problems. Before I go any further I'd like to point out that with the exception of Japan (during the '90's and '00's), global interest rates are lower than they have been in some 400 years since bond markets began to exist. We live in a world where interest rates are lower than they ever have been AND in a world that is more leveraged and has less unencumbered collateral than at any point in recorded history.
So what "problems" could there be? Higher interest rates will obviously put a dent in consumer purchases since much of this is done on credit. Housing across the globe will deflate as incomes will pay for "less house" at higher interest rates. This is also true of farm, commercial, industrial and "skyscraper" real estate. Bond prices (you know, what everyone has scampered unknowingly into for safety) will get crushed as will the owners of bonds such as banks, brokers and insurance companies. Derivatives of all sorts whether direct bets on interest rates or contango/carry trades will also get blown up. (The problem here is "size"). And it won't matter whether you are a winner or a loser because winners will become losers when they do not get "paid" by a bankrupt and insolvent loser.
Lastly and unfortunately (for the citizens), another set of losers with increasing interest rates are central banks and sovereign treasuries themselves. Central banks (the Fed lost $115 billion just last month alone) who have monetized debt will lose on their portfolios stuffed with bonds. They will lose and lose and then print and print more to stay solvent which will continue to debase their currency while Mother Nature presses for even higher interest rates. Then of course you have the sovereign governments themselves. The U.S. for example will be forced to payout every single Dollar of tax revenue to pay interest alone once interest rates hit the "sky high" level of just 5%! Higher interest rates at this point are no longer a policy option to contain inflation because the "remedy" is also the poison that will kill the Golden Goose.
I titled this piece "Interest rates are going up because...". The "because" part is because the central banks have been forced into the role of "buyer of last resort". They are buying up large proportions of new issuance but "leakage" is happening as existing bond owners see the writing on the wall and have turned into sellers. It is this additional "supply" that is forcing interest rates higher, NOT a stronger economy. Are there some sellers of bonds because they don't want to "miss the boat" (the Titanic) of rising stock markets? I am sure that this is also so but the stock markets had risen in the first place as a bet on weaker currencies and thus higher inflation.
Lower interest rates were supposed to be the "cure". It had always, ALWAYS worked in the past but not this time. Not this time because the amount of debt and the lack of unencumbered collateral was far too large and not nearly enough to "reflate" the system. Currently there are many different "signs" that the end of the road is finally arriving, higher interest rates being just one of many. I will send another piece shortly after this one to wrap the many "signs" together with one piece of news that speaks volumes.
Regards, Bill H.
The bullish case is that interest rates are going up because the economy is recovering...well, no it is not. In fact, if you look at the numbers the economy is stalling from its QE aided lower plateau and about to plumb new lows. Just look under the hood of some of the reported numbers, last week for example the non farm payrolls supposedly rose 175,000 jobs. If you look into it, some 75% were lower paying and non skilled jobs...plus 205,000 jobs were "magically" created by the BLS. Without this monthly "fudge factor" the real number would have been a negative 30,000 jobs...which is what the economy actually feels and smells like.
But talking about bogus reporting is not what I'd like to write about, the important (and scary) thing is that rates ARE rising. Rising interest rates (even though they never should have gotten to these low levels in the first place) will cause all sorts of problems. Before I go any further I'd like to point out that with the exception of Japan (during the '90's and '00's), global interest rates are lower than they have been in some 400 years since bond markets began to exist. We live in a world where interest rates are lower than they ever have been AND in a world that is more leveraged and has less unencumbered collateral than at any point in recorded history.
So what "problems" could there be? Higher interest rates will obviously put a dent in consumer purchases since much of this is done on credit. Housing across the globe will deflate as incomes will pay for "less house" at higher interest rates. This is also true of farm, commercial, industrial and "skyscraper" real estate. Bond prices (you know, what everyone has scampered unknowingly into for safety) will get crushed as will the owners of bonds such as banks, brokers and insurance companies. Derivatives of all sorts whether direct bets on interest rates or contango/carry trades will also get blown up. (The problem here is "size"). And it won't matter whether you are a winner or a loser because winners will become losers when they do not get "paid" by a bankrupt and insolvent loser.
Lastly and unfortunately (for the citizens), another set of losers with increasing interest rates are central banks and sovereign treasuries themselves. Central banks (the Fed lost $115 billion just last month alone) who have monetized debt will lose on their portfolios stuffed with bonds. They will lose and lose and then print and print more to stay solvent which will continue to debase their currency while Mother Nature presses for even higher interest rates. Then of course you have the sovereign governments themselves. The U.S. for example will be forced to payout every single Dollar of tax revenue to pay interest alone once interest rates hit the "sky high" level of just 5%! Higher interest rates at this point are no longer a policy option to contain inflation because the "remedy" is also the poison that will kill the Golden Goose.
I titled this piece "Interest rates are going up because...". The "because" part is because the central banks have been forced into the role of "buyer of last resort". They are buying up large proportions of new issuance but "leakage" is happening as existing bond owners see the writing on the wall and have turned into sellers. It is this additional "supply" that is forcing interest rates higher, NOT a stronger economy. Are there some sellers of bonds because they don't want to "miss the boat" (the Titanic) of rising stock markets? I am sure that this is also so but the stock markets had risen in the first place as a bet on weaker currencies and thus higher inflation.
Lower interest rates were supposed to be the "cure". It had always, ALWAYS worked in the past but not this time. Not this time because the amount of debt and the lack of unencumbered collateral was far too large and not nearly enough to "reflate" the system. Currently there are many different "signs" that the end of the road is finally arriving, higher interest rates being just one of many. I will send another piece shortly after this one to wrap the many "signs" together with one piece of news that speaks volumes.
Regards, Bill H.
The big story of the day..another price fixing scandal:
(courtesy Bloomberg)
Big banks manipulate currency markets, Bloomberg News investigation finds
Submitted by cpowell on Wed, 2013-06-12 01:52. Section: Daily Dispatches
Traders Said to Rig Currency Rates to Profit Off Clients
By Liam Vaughan, Gavin Finch, and Ambereen Choudhury
Bloomberg News
Tuesday, June 11, 2013
Bloomberg News
Tuesday, June 11, 2013
Traders at some of the world's biggest banks manipulated benchmark foreign-exchange rates used to set the value of trillions of dollars of investments, according to five dealers with knowledge of the practice.
Employees have been front-running client orders and rigging WM/Reuters rates by pushing through trades before and during the 60-second windows when the benchmarks are set, said the current and former traders, who requested anonymity because the practice is controversial. Dealers colluded with counterparts to boost chances of moving the rates, said two of the people, who worked in the industry for a total of more than 20 years.
The behavior occurred daily in the spot foreign-exchange market and has been going on for at least a decade, affecting the value of funds and derivatives, the two traders said. The Financial Conduct Authority, Britain's markets supervisor, is considering opening a probe into potential manipulation of the rates, according to a person briefed on the matter.
"The FX market is like the Wild West," said James McGeehan, who spent 12 years at banks before co-founding Framingham, Massachusetts-based FX Transparency LLC, which advises companies on foreign-exchange trading, in 2009. "It's buyer beware."
The $4.7-trillion-a-day currency market, the biggest in the financial system, is one of the least regulated. The inherent conflict banks face between executing client orders and profiting from their own trades is exacerbated because most currency trading takes place away from exchanges.
The WM/Reuters rates are used by fund managers to compute the day-to-day value of their holdings and by index providers such as FTSE Group and MSCI Inc. that track stocks and bonds in multiple countries. While the rates aren't followed by most investors, even small movements can affect the value of what Morningstar Inc. (MORN) estimates is $3.6 trillion in funds including pension and savings accounts that track global indexes.
One of Europe's largest money managers has complained about possible manipulation to British regulators within the past 12 months, according to a person with knowledge of the matter who asked that neither he nor the firm be identified because he wasn't authorized to speak publicly.
The FCA already is working with regulators worldwide to review the integrity of benchmarks, including those used in valuing derivatives and commodities, after three lenders were fined about $2.5 billion for rigging the London interbank offered rate, or Libor. Regulators also are investigating benchmarks for the crude-oil and swaps markets.
"The FCA is aware of these allegations and has been speaking to the relevant parties," Chris Hamilton, a spokesman for the agency, said of the WM/Reuters rates.
It may be difficult to prosecute traders for market manipulation, as spot foreign exchange, the trading of one currency with another at the current price for delivery within two days, isn't classified as a financial instrument by regulators, said Arun Srivastava, a partner at law firm Baker & McKenzie LLP in London.
The WM/Reuters rates data are collected and distributed by World Markets Co., a unit of Boston-based State Street Corp. (STT), and Thomson Reuters Corp. (TRI). Bloomberg LP, the parent company of Bloomberg News, competes with New York-based Thomson Reuters in providing news and information, as well as currency-trading systems and pricing data. Bloomberg LP also distributes the WM/Reuters rates on Bloomberg terminals.
State Street hasn't been alerted to any allegations of wrongdoing involving the rate, said a person with knowledge of the matter.
"The process for capturing this information and calculating the spot fixings is automated and anonymous, and the rates are monitored for quality and accuracy," State Street said in an e-mailed statement. The data are derived from "multiple execution venues through a streaming rather than solicitation process," it said.
World Markets states in the methodology posted online that it doesn't guarantee the accuracy of its rates.
State Street hired London-based Freshfields Bruckhaus Deringer LLP to ensure that the rates comply with the set of draft principles for financial benchmarks published in April by global regulators following the Libor scandal, according to a person briefed on the matter.
Nick Parker, a spokesman for Freshfields, declined to comment. Thomson Reuters referred inquiries to State Street.
Introduced in 1994, the WM/Reuters rates provide standardized benchmarks allowing fund managers to value holdings and assess performance. The rates also are used in forwards and other contracts that require an exchange rate at settlement.
"The price mechanism is the anchor of our entire economic system," said Tom Kirchmaier, a fellow in the financial-markets group at the London School of Economics. "Any rigging of the price mechanism leads to a misallocation of capital and is extremely costly to society."
The rates are published hourly for 160 currencies and half-hourly for 21 of them. For the 21 -- major currencies from the British pound to the South African rand -- the benchmarks are the median of all trades in a minute-long period starting 30 seconds before the beginning of each half-hour.
If there aren't enough transactions between a pair of currencies during the reference period, the rate is based on the median of traders' orders, which are offers to sell or bids to buy. Rates for the other, less-widely traded currencies are calculated using quotes during a two-minute window.
The benchmarks are based on actual trades or quotes, rather than the bank estimates used to calculate Libor. Still, they're susceptible to rigging, according to the five traders, who said they had engaged in or witnessed the practice.
While hundreds of firms participate in the foreign-exchange market, four banks dominate, with a combined share of more than 50 percent, according to a May survey by Euromoney Institutional Investor Plc. Deutsche Bank AG, based in Frankfurt, is No. 1, with a 15.2 percent share, followed by New York-based Citigroup Inc. with 14.9 percent, London-based Barclays Plc with 10.2 percent, and Zurich-based UBS AG with 10.1 percent.
The traders interviewed by Bloomberg News declined to identify which banks engaged in manipulative practices and didn't specifically allege that any of the top four firms were involved. Spokesmen for Deutsche Bank, Citigroup, Barclays, and UBS declined to comment.
As market-makers, banks execute orders to buy and sell for clients as well as trade on their own accounts.
Companies and asset managers typically ask banks to buy or sell currencies at a specified WM/Reuters fix later in the day, most commonly the 4 p.m. London close. That arrangement is open to abuse, as it gives traders a window in which they can adjust their own positions and try to move the benchmark to boost their profit, three of the dealers said.
Customers often wait until the hour before the 4 p.m. close to place large orders to minimize the opportunity for banks to trade against them, one investor and a trader said.
Index funds, which track baskets of securities from around the world each day, are particularly vulnerable because they need to place hundreds of foreign-exchange trades with banks using WM/Reuters rates, according to two money managers. The funds buy securities to match their holdings to the indexes they are required to track. The issue is most acute at the end of the month, when index-tracker funds invest new money from clients.
By concentrating orders in the moments before and during the 60-second window, traders can push the rate up or down, a process known as "banging the close," four dealers said.
Three said that when they received a large order they would adjust their own positions knowing that their client's trade could move the market. If they didn't do so, they said, they risked losing money for their banks.
One trader with more than a decade of experience said that if he received an order at 3:30 p.m. to sell 1 billion euros ($1.3 billion) in exchange for Swiss francs at the 4 p.m. fix, he would have two objectives: to sell his own euros at the highest price and to move the rate lower so that at 4 p.m. he could buy the currency from his client at a lower price.
He would profit from the difference between the reference rate and the higher price at which he sold his own euros, he said. A move in the benchmark of 2 basis points, or 0.02 percent, would be worth 200,000 francs ($216,000), he said.
To maximize profit, dealers would buy or sell client orders in installments during the 60-second window to exert the most pressure possible on the published rate, three traders said. Because the benchmark is based on the median of transactions during the period, placing a number of smaller trades could have a greater impact than one big deal, one dealer said.
Traders would share details of orders with brokers and counterparts at banks through instant messages to align their strategies, two of them said. They also would seek to glean information about impending trades to improve their chances of getting the desired move in the benchmark, they said.
The tactic is most effective with less-traded currencies, the traders said. It could still backfire if another dealer with a larger position bets in the other direction or if market-moving news breaks during the 60-second window, one of them said.
A former dealer characterized it as a risky strategy that he attempted only when he had a high degree of knowledge of other banks' positions and a particularly large client order. Typically, that would need to exceed 200 million euros to have a chance of moving the rate, two of the traders estimated.
Because the market is so large and competitive, it would be difficult for traders to influence rates, said Andy Naranjo, a finance professor at the University of Florida in Gainesville who specializes in foreign-exchange markets.
"I'm skeptical of the ability of traders to manipulate the major currencies in a meaningful way given the massive size of this market," Naranjo said. "Governments themselves often have a difficult time moving foreign-exchange markets through their interventions, yet they have the additional ability to create fiat money and alter both monetary and fiscal policies."
Some fund managers say they prefer to use the WM/Reuters rates even if they can be rigged because it's more convenient and often cheaper than seeking quotes from individual banks, according to two investors. Dealers who agree to trade at the benchmark rate offer a service by taking on the risk that the market moves against them between the time the order is placed and the fix, they said.
Bloomberg News contacted foreign-exchange traders and investors after some market participants expressed concern that the WM/Reuters rates were vulnerable to manipulation. The traders and investors said they expected their market would be the next to be scrutinized.
In attempting to rig Libor, traders at Barclays, Royal Bank of Scotland Group Plc, and UBS misstated their firms' cost of borrowing and colluded with counterparts at other banks to profit from bets on derivatives, regulators found.
Libor is one of at least three benchmarks under investigation. The European Commission is probing companies including Royal Dutch Shell Plc, BP Plc and Platts, an oil-pricing and news agency, for potential manipulation of the $3.4 trillion-a-year crude-oil market. The firms have said they are cooperating with the probe. U.S. regulators are investigating the ISDAfix rate, the benchmark used for the swaps market.
While U.K. regulators require dealers to act with integrity and avoid conflicts, there are no specific rules or agencies governing spot foreign-exchange trading in Britain or the U.S. That may make it harder to bring prosecutions for market abuse, according to Srivastava, the Baker & McKenzie partner.
Spot foreign-exchange transactions aren't considered financial instruments in the same way as stocks and bonds. They fall outside the European Union's Markets in Financial Instruments Directive, or Mifid, which requires dealers to take all reasonable steps to ensure the best possible results for their clients. They're also exempt from the Dodd-Frank Act, which seeks to regulate over-the-counter derivatives in the U.S.
"Just because Mifid doesn't apply, the spot FX market shouldn't be a free-for-all for banks,' said Ash Saluja, a partner at CMS Cameron McKenna LLP in London. "Whenever you have a client relationship, there is a duty there.
Sixteen of the largest banks, including Barclays, JPMorgan Chase & Co. (JPM) and Deutsche Bank (DBK), signed a voluntary code of conduct for foreign-exchange and money-market dealers in 2001 that was later included as an annex to guidelines issued by the Bank of England in November 2011.
The BOE's Non-Investment Products Code, which some banks use in contracts with clients, states "caution should be taken so that customers' interests are not exploited when financial intermediaries trade for their own accounts." It also says that "manipulative practices by banks with each other or with clients constitute unacceptable trading behavior."
That only goes so far, according to Saluja.
"The thing about the code is it is a voluntary code," the lawyer said. "It may be that compliance with that has almost been seen as optional."
Looks to us that Obama is going to remove Gary Gensler because he was too tough on the banks with respect to the new legislation. The banks do not like the new terms dealing with swaps especially gold:
(courtesy Jessie/Jessie's American cafe)
Obama Quietly Firing the CFTC's Gary Gensler For Pressuring Banks on Swaps
It appears that President Obama is bidding adieu to CFTC Chairman Gary Gensler, purportedly for being 'too aggressive' with the Banks over their antics in the markets, with special emphasis on swaps and derivatives activity offshore.
I wonder who put the word in President Barry's ear? It is best to tread lightly around those treasured havens for financial piracy.
I discount any speculation that this is in reaction to a major breaking scandal on the metals exchanges. That would be too good.
The replacement is reported to be a Amanda Renteria, the former chief of staff to Senate Agriculture Committee Chairwoman Debbie Stabenow, Democrat of Michigan. Renteria was the first Latina chief of staff in the Senate.
She is the daughter of Mexican immigrant workers, studied at Harvard Business School, and spent most of her career in public service. However, after graduating she worked briefly at Goldman Sachs & Co.
She might turn out to be a highly effective regulator despite her lack of practical experience in financial regulation. That would be a nice change of pace for a generally docile and Big Finance compliant administration. Let's see what she has to say. But I am not hopeful given the Obama crew's abysmal track record in financial reform and 'change you can believe in.'
Here is a link to Renteria's bio.
Here is the story as it was carried by The Huffington Post.
Ouster is a gain for big bankers advocating lax oversight
The Obama Administration is quietly firing Commodity Futures Trading Commission head Gary Gensler, who ran afoul of big banks by pushing for greater government oversight.
The ouster comes in the midst of controversy over a proposed CFTF rule, strongly supported by Gensler, that would extend U.S. regulation to swaps--a kind of derivative exhange--involving firms founded or doing business in the United States. This means that foreign banks and hedge funds would face the same regulations as U.S. ones when trading in swaps with U.S. parties...
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