Archive - Mar 15, 2013

The stock market has now been up for ten straight days. Many on Wall Street are singing “Happy Days Are Here Again.” For them, that is probably the case. They finally have something to sell that will bring the rubes back into the markets. We are not in Kansas anymore. Fear is ebbing and greed is coming back. Those on the outside looking in are rounding up cash so that they don’t get left behind. The shills assist them with their pictures of economic recovery, new era crap and whatever other nonsense they can peddle successfully. So the cycle goes, as it has since the New York Stock Exchange came into existence. We are in another game of musical chairs where the music is playing joyfully. As in all such events, there are too few chairs to accommodate the participants when the music stops. And it always does!

 
10:23a HKT Thursday, March 14, 2013

Dear Friend of GATA and Gold:

Your secretary/treasurer was interviewed today on "Squawk Box Asia" with Bernie Lo on CNBC Asia in Hong Kong. The interview, seven minutes long, may be notable less for anything your secretary/treasurer said than for Lo's acknowledgement that the gold investment world has been mostly turned into paper and hallucination. So word does seem to be getting around.

Over a decade ago, it was moms and pops downing tools and picking up mice to day-trade the latest and greatest dot-com wunder-stock from their home-office/kitchen table. Now, as equities perch atop a pile of rotten Federal Reserve effluent, it is tweens and below that are sought for their stock market prowess. Forget Rachel Fox - the 16 year old actress-cum-Jesse-Livermore, now we have 11-year-old Rachel Kelly from Naperville who is touted as an example of the greatness of our education system by CNBC because, "because people are going to need to trade stocks long after we're gone... it's inspiration for other 11-year-olds out there." Indeed we are.

The Securities and Exchange Commission today announced that Stamford, Conn.-based hedge fund advisory firm CR Intrinsic Investors has agreed to pay more than $600 million to settle SEC charges that it participated in an insider trading scheme involving a clinical trial for an Alzheimer’s drug being jointly developed by two pharmaceutical companies.   The settlement filed today in federal court in Manhattan is the largest ever in an insider trading case, requiring CR Intrinsic – an affiliate of S.A.C. Capital Advisors – to pay $274,972,541 in disgorgement, $51,802,381.22 in prejudgment interest, and a $274,972,541 penalty. “The historic monetary sanctions against CR Intrinsic and its affiliates are sharp warning that the SEC will hold hedge fund advisory firms and their funds accountable when employees break the law to benefit the firm,” said George S. Canellos, Acting Director of the SEC’s Division of Enforcement. The settlement is subject to the approval of Judge Victor Marrero of the U.S. District Court for the Southern District of New York. The settlement would resolve the SEC’s charges against CR Intrinsic and the relief defendants relating to the trades in the securities of Elan and Wyeth between July 21 and July 30, 2008. The settling parties neither admit nor deny the charges

On April 13, 2012 Jamie Dimon described the situation at the CIO as massively overblown and said it was just "a tempest in a teapot." A few days later, the head CIO trader, Javier Martin-Artajo, when speaking to the former JPM Chief Investment Officer, Ina Drew, had a less sanguine description: "and, and, you know, things like this, it's like the twin towers falling down." Let's agree to disagree and just compromise on "tempest in a towering inferno." But that's not the point of this post. The point is in the same transcript we learn that it was none other than Ina Drew who told Artejo that "it would be helpful, if appropriate, to get, to start getting a little bit of that mark back" and instructed the Spaniard to go ahead and "tweak" the daily P&L on the CIO portfolio by "an extra basis point." Nothing like your supervisor telling you to fudge marks just to demonstrate that the "curve is starting to trend."

The US has been lying to all of us for decades now.We’re not talking about some kooky conspiracy theory… we’re talking about something that affects every man woman and child in the US.

EURUSD - which was active around the US day session all week and dead otherwise - popped up to take out stops at 1.31 today before fading to end the wek marginally higher. Broadly speaking the European 'Dow' was higher on the week but the individual nation stock indices faded quite notably today with Spain and Italy the worst. European credit markets did not play along at all - with financials especially weak. It does seem like European financial stocks are playin catch down to European credit but the pump remains. In other news, the market's 'old' fulcrum security (and perhaps renewed again) - Spanish bond spreads - had their worst week in the last 4 and surged 23bps (when the rest of the market was practically unchanged). Their is a lot simmering under the surface in Europe, but for now, stocks remain cognitively dissonant thanks to the 'promise' even as Italian and Spanish debt levels push top new all-time highs (ahh the austerity of it all).

On October 2, 2012, news hit that Barry Zubrow, JPM's Chief Risk Officer from November 2007 to January 2012 (in other words, key supervisor of the risk onboarded by the CIO, aka JPM's prop trading desk, for the biggest part of its existence), and then briefly head of corporate and regulatory affairs, would retire from JPMorgan. As Bloomberg reported then, "Now is the right time in my life" to retire, Zubrow, 59, wrote to colleagues in a note today. "We have learned from the mistakes of our recent trading losses." We wonder, if the time was "right" for Zubrow's retirement because the firm realized that the Senate was in possession of the following email sent from Zubrow on April 12, a day before the first fateful Q1 earnings preview conference call in which Jamie Dimon, responding to media reports of Iksil's blow up, said the whole situation was a "tempest in a teapot", in which the Chief Risk Officer essentially told the firm's executives: Braunstein and Dimon, to lie to the public and shareholders?

For those curious about the timeline of the world's biggest prop-desk blow up, here it is day by day and, pardon the pun, blow by blow.

Here's a Cheat Sheet to Read While You're Listening to JP Morgan's "Whale" of a Tale Testimony to Congress

I've got that whiff of rotten eggs again.

'Too Big To Jail' and 'Too Big To Fail' appears to pay extremely well... It seems it pays to lie - especially compared to your peers.

This, too, is why Jamie Dimon is richer than you...

Retail investors are piling into the stock market again in the false belief that the worst of the economic crisis is over. Alas, those who are not properly diversified may again be in for a rude awakening.

Presented with no comment...