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Goldman, JP Morgan Have Now Become A Commodity Cartel As They Slowly Recreate De Beers' Diamond Monopoly

Tyler Durden's picture




 

About a month ago we reported on an inquiry launched into JPM's "anti-competitive" and "monopolistic" practices on the LME which have resulted in artificially high prices for a series of commodities which had been hoarded by the Too Big To Fail bank. Today, the WSJ continues this investigation into a practice that is not insular to JPM but also includes Goldman Sachs and "other owners of large metals warehouses" which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process. Specifically, "Goldman, through its Metro International Trade Services unit, owns the biggest warehouse complex in the LME system, a series of 19 buildings in Detroit that house about a quarter of the aluminum stored in LME facilities. Coca-Cola and other consumers say that Metro in particular is allowing the minimum amount of aluminum allowed by the LME—1,500 metric tons a day—to leave its facilities, and that Metro could remove much more, erasing supply bottlenecks and lowering premiums for physical delivery in the process. Coca-Cola, which has complained to the LME, says it can take months to get the metal the company needs, even though warehouses are allowing aluminum to come in much more quickly. Warehouses, meantime, collect rent and other fees." It is not only Goldman's Metro operations, but includes JP Morgan's Henry Bath division, and naturally commodities behemoth Glencore, all of which are taking advantage of the LME's guidelines and rules which make the imposition of a pseudo-monopoly an easy task. The primary driver of this anti-competitive behavior is the fact that GS, JPM and Glencore now control virtually the entire inventory bottlenecking pathways: "In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street. The LME has licensed about 600 warehouses around the world. The transformation has raised questions about whether the investment banks, which also have big commodity-trading arms, are able to use their position as owners of warehouses to manipulate prices to their advantage."And since the outcome of this anti-competitive delayed tolling collusion ends up having quite an inflationary impact on end prices, the respective administrations are more than happy to turn a blind eye to this market dominant behavior which buffers the impact of deflation on input costs. We may have seen the end of the OPEC cartel. Alas, it has been replaced with a far more vicious one - this one having Goldman Sachs and JP Morgan as its two key members.

WSJ explains further:

The warehousing issue alarmed one trader enough to seek government intervention. Anthony Lipmann, managing director of metals trader Lipmann Walton & Co. Ltd., gave evidence to the U.K. House of Commons Select Committee in May 2011, raising concern about large banks and trading houses owning facilities that store other people's metal.

The U.K.'s Office of Fair Trading dismissed concerns that ownership of warehouses gives certain market players an unfair advantage, saying on Tuesday that there were no "obvious competition issues that would merit further investigation at this stage."

Goldman's Detroit warehouse holds about 1.15 million tons out of a total 4.62 million tons in LME-approved warehouses.

Since Goldman bought Metro early last year, the wait time for aluminum delivery in Detroit has increased to about seven months.

Metro charges its customers 42 cents a day for storing one metric ton of aluminum in Detroit, which is about the industry average. At 900,000 tons in the warehouses, Goldman is earning $378,000 a day on rental costs, or about $79 million in seven months.

"Warehouses are making a lot more money," said Jorge Vazquez, managing director of aluminum at Harbor Commodity Research. Goldman is "really the winner clearly, because if you want to take metal away from the location, you have to wait up to 10 months to get your metal out, and in the meantime you're paying rent."

While the obvious purpose of "warehousing" is nothing short of artificially bottlenecking primary supply, these same warehouses have no problem with acquiring all the product created by primary producers in real time, and not releasing it into general circulation: once again, a tactic used by De Beers for decades to keep the price of diamonds artificially high. But unlike De Beers, Goldman also gets to charge rental fees once demand delivery instructions are sent out. The rent ends up being substantial due to the firm's unwillingness to release handily available product to the market in due course:

Metro, meantime, is taking in metal. Metro also offers cash incentives to producers like Rio Tinto Alcan to store their metal in Metro's sheds for contracted periods, sometimes as much as $150 a ton, according to traders.

Once the metal is in the warehouse, the producers sell ownership to this metal on the open market. The new owner can't collect his metal for seven months because of the bottleneck. For that period, the new owner is stuck paying rent to Metro.

"The system is set up like a funnel, so you can dump large amounts of metal in the front end and only get a little out at the back end," said David Wilson, director of metals research at Société Générale SA. "It enables a situation where the rules of the warehousing system are taken advantage of."

Another beneficiary of this monopoly behavior of course are the actual metal producers, which benefit from this illegal and conflicted "middleman" intervention:

Aside from warehouses, producers of the metal are benefiting, because they are able to charge more for their metal. Klaus Kleinfeld, chief executive of Alcoa Inc., said in an interview that supply-and-demand factors are leading prices higher.

Yet it is not even Goldman or JPM's fault: after all they are merely following the guidelines set up by the LME:

"You can't blame the warehouses," Mr. Kleinfeld said.

U.S. aluminum sheet maker Novelis sent a letter to the LME in May "expressing concerns" about the warehousing situation, a company spokesman said.

The complaints led the LME to commission an independent study into the issue last July. That study recommended a sliding scale be adopted, rather than the fixed minimum of 1,500 tons a day. That would result in larger warehouse complexes being required to release more metal.

It effectively doubles the minimum amount required to be relinquished by Metro each day. The ruling would go into effect in April. The LME board on Thursday, however, failed to reach a consensus on the recommendations.

While warehousing used to be a last resort market at inception, it has now become, courtesy of the economies of scale of the middlemen, the "go-to" market, which makes any normal market clearing impossible.

Because should true market clearing be allowed, the prices for everything from aluminum to copper would plunge immediately:

The situation is made more aggravating for metal consumers because supply has far outweighed demand for most of the last decade, and there is more than 4.5 million metric tons of surplus metal stored in LME's warehouse system.

Alas as pointed out previously, with the exchanges ultimately merely conforming to the bidding of their host ponzi scheme governments, which will happily allow even further consolidation of warehousing facilities by the trio in order to artificially boost inflation ever higher, the final product is a vicious loop in which everyone benefits...Everyone but the end consumer of course, who is faced with an anti-competitive system controlled by a handful of Fed-funded players.

And with China unlikely to open up sales of its own warehouses (especially since Chinese vendors are now well-known to use physical copper in storage to write letters of credit against for speculative purposes) to the market, the system will persevere until such time as global inflationary powers are finally destroyed and there is a scramble to dump inventories. Like what happened in the fall of 2008. At that point just as the status quo drives prices higher, so the unwind will result in a massive undershoot of prices from fair values. Which in turn will allow those insatiable importers of commoditized product such as China to feel like your typical mortgage-free living American at a K-mart blue light special. But of course we don't have to worry about that, because the central planners will never allow the system to implode like it did in 2008. After all that would defeat the whole purpose of central planning...

In the meantime, good luck to anyone who wishes to break the cartel's monopoly in the aluminum, copper or any other commodity.

 

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Fri, 06/17/2011 - 00:06 | 1376672 Yen Cross
Yen Cross's picture

 Z/H you are getting hacked big time. My IT and ISP people are sending me red alerts!

Fri, 06/17/2011 - 00:19 | 1376689 whatsinaname
whatsinaname's picture

Speaking of getting hacked, Vancouver took a big hacking from its own hockey fans (changed my perspective of Canadian folks) OR is it pent up frustrations of the sheeple coming to the fore ?

http://news.nationalpost.com/2011/06/16/photos-riots-fire-destruction-after-vancouvers-loss/

Fri, 06/17/2011 - 01:25 | 1376756 greased up deaf guy
greased up deaf guy's picture

same thing happened in vancouver in '94 when the rangers beat the can(adian schm)ucks in the finals. only difference here is we riot when we win (re the lakers).

Fri, 06/17/2011 - 01:39 | 1376772 Ahmeexnal
Ahmeexnal's picture

And on the topic of Canada and the collapse of civilization....Canada Post has ceased operations:

 

The accelerating decline in mail volumes and revenue combined with the inability to deliver mail on a timely and safe basis has left Canada Post with no choice but to make this decision.

 

http://clients.infopost.ca/en/2011/06/canada-post-forced-to-shut-down-ur...

 

First it's the postal service, then other delivery services. When food is no longer delivered to your local Walmart, will you start to panic then?

Fri, 06/17/2011 - 05:13 | 1376891 Michael
Michael's picture

Here's the problem.

High Heels & Hand Bags.

How's that supposed to impress that man your trying to pick up with the high heels and hand bag made by a man who lives on another continuant?

Does she have a thing for those men living on other continents?

Why have we not heard from womens groups on how they feel about how the economy is being managed? 

Why don't they want the men living on the same continent with them making High Heels and Hand Bags, made by the men they are trying to attract with those things?

It would give them something to do here and there making high heels and hand bags, thus getting the men out of their hair for a while.

Can someone help me out with this? I'm confused.

 

Fri, 06/17/2011 - 07:28 | 1376982 Monedas
Monedas's picture

Help ? 1. You need to track down one of those bitches with imported accessories and get yourself a piece of that special something that lies behind the handbad and above the high heels ! 2. Push away from that crack pipe ! "Just say no !"....N. Reagan. Monedas 2011  

Fri, 06/17/2011 - 08:53 | 1377178 ZeroPower
ZeroPower's picture

I lost you.

Fri, 06/17/2011 - 04:03 | 1376863 New World Chaos
New World Chaos's picture

So that were the LAN outage and the page virus scan screen came from.  Tighten your tinfoil hats, folks.  Hide your bitcoins and don't click any buttons except Ctl-Alt-Del.

Fri, 06/17/2011 - 00:08 | 1376675 macholatte
macholatte's picture

 

I think it's wrong that only one company makes the game Monopoly.
Steven Wright

Fri, 06/17/2011 - 00:17 | 1376680 flacon
flacon's picture

Did you see they now have "Electronic Monopoly" using "bank-cards"? Who the hell are they kidding?!
http://www.productwiki.com/upload/images/monopoly_electronic_banking_edi...

 

"Play now with millions on your card!" -> yeah... it used to be that $1 was worth something and a $100 was worth a lot. Now they need "millions" to convince people that paper (oops, sorry, 'electronic') is worth anything. Even Monopoly has succumbed to inflation!

 

"Cards, not cash!" -> LOL!!!! They are SCREAMING at us: MORE DEBT IS GOOD!!!!

 

Fri, 06/17/2011 - 00:05 | 1376678 flacon
flacon's picture

The only way is for you, me and our friends to DRAIN THE WAREHOUSES. Keep on stacking! SLV only has 300 million ounces. If I buy a thousand ounces, it will only take three stadium's full of people like myself in order to drain it. 

 

But.... on second thoughts, SLV isn't even audited... so.... in the land of the blind the one-eyed is king... 

 

Fri, 06/17/2011 - 00:07 | 1376679 lizzy36
lizzy36's picture

Who needs prop desks?

The payout on the storage facilities is around 9 months.

Plus they are owners of physical products (metals, crude and nattie).

In a world where physical matters, prop is so 2005.

Fri, 06/17/2011 - 00:23 | 1376701 RockyRacoon
RockyRacoon's picture

Add some mining, refining, truck/rail facilities, and some wholesalers and you got a business!   Are we sure they don't own any of those things as well?

Fri, 06/17/2011 - 01:10 | 1376738 suckapump
suckapump's picture

What really chaps my ass is that these fools shouldn't own anything. Their assets should have been sold at auction sometime in 2009.

Maybe we (the people) should "condemn" the warehouses and confiscate the contents. It seems only fair.

Fri, 06/17/2011 - 01:44 | 1376777 Yen Cross
Yen Cross's picture

 Don't make me pump ya up "SUCKA".

Fri, 06/17/2011 - 06:28 | 1376915 Sudden Debt
Sudden Debt's picture

I wouldn't be surprised. A few TRILLION dollars in TAXMONEY still buys a lot of things these days.

And as a thank you note for the taxmoney, they BRING YOU INFLATION TO TAKE THE REST OF YOUR MONEY!!

 

ALL HEIL OBAMA!!! ALL HEIL TO THE NEW FUHRER!!

 

I don't hear any heels clicking gentlemen! I SAID ALL HEIL TO THE NEW FUHRER!!

 

Fri, 06/17/2011 - 06:56 | 1376939 Tim White
Tim White's picture

Still? Whoa!

Fri, 06/17/2011 - 00:08 | 1376682 adeptus
adeptus's picture

Just what you suggesting Tyler, that they break their 400 day "no losses" trading streak?

Fri, 06/17/2011 - 00:10 | 1376683 AgShaman
AgShaman's picture

When JPM took over the Henry Bath properties via their RBS Siempra purchase...was around the same time that Blythe issued the "Don't Worry....It's No Big Deal/Not Panic Time" statements....as well as showing some employees the door and claiming they left under their own volition. Truly a strange time for the precious metals....soon after is when the small speculators concocted their scheme to extort a premium from the Bullion Banks vs. taking actual delivery of the metals on their Comex trades. Didn't seem to last that long....the ETF paper back-up threw up a "cock block"

Fri, 06/17/2011 - 00:13 | 1376686 sterman7
sterman7's picture

Could the CME CTFC FED and bullion banks be a bigger bunch of shysters?  The sad reality is most folks have no idea that they should be outraged by this kind of stuff.

Fri, 06/17/2011 - 03:01 | 1376831 Conax
Conax's picture

"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."
- - -Henry Ford

Revolution? How about just taking delivery, stick it to them good.

That can't be too much to ask.

Fri, 06/17/2011 - 00:23 | 1376694 TheGoodDoctor
TheGoodDoctor's picture

I wonder if people in Detroit read the WSJ?

Fri, 06/17/2011 - 00:23 | 1376695 slewie the pi-rat
slewie the pi-rat's picture

in case of fire, break glass

in case of hostilities, call a LME bankster for metal, ok? 

Fri, 06/17/2011 - 01:26 | 1376750 Yen Cross
Yen Cross's picture

 A man of reason! Someone hit my synaptics.   Truth.

 

   +1

Fri, 06/17/2011 - 00:25 | 1376698 PulauHantu29
PulauHantu29's picture

"Why Steal less, when you can Steal more?"

Wall Street's Mantra

Fri, 06/17/2011 - 00:25 | 1376705 gwar5
gwar5's picture

Next it will be food staples and antibiotics.

I can see where this is going. With enough essentials stuff they can use them as collateral for letters of credit in a cruel, cruel world.

Fri, 06/17/2011 - 00:32 | 1376708 TruthInSunshine
TruthInSunshine's picture

Don't forget about drinking water!

Fri, 06/17/2011 - 00:31 | 1376707 TruthInSunshine
TruthInSunshine's picture

So legalities (illegalities) aside, who is going to try and stop this clearly anti-competitive practice and clear collusion, which massively inflates end user and consumer prices?

Anyone?

It's a big tell that Coca-Cola is brushed off as a piss ant when it tries to stand up to Goldman & JP Morgan, no?

It should tell anyone in modern day Amerika who owns and runs the joint, no?

Fri, 06/17/2011 - 01:04 | 1376736 Raymond Reason
Raymond Reason's picture

The Fed has got to go.  Then the banks will fail and this kind of BS will not be possible. 

Fri, 06/17/2011 - 01:05 | 1376737 Canaduh
Canaduh's picture

Pepsi?

Fri, 06/17/2011 - 01:22 | 1376759 Yen Cross
Yen Cross's picture

 That was good!

Fri, 06/17/2011 - 10:28 | 1377457 Thisson
Thisson's picture

If there was any truth to this matter a legal complaint would already have been filed, since antitrust cases yield triple damages when successful.

Coca-Cola certainly has the resources to bring such a case.

Fri, 06/17/2011 - 01:02 | 1376732 Troy Ounce
Troy Ounce's picture

 

This feels like a nightmare.

 

Pinch myself. Can't be true. We can't go on like this.

Fri, 06/17/2011 - 01:13 | 1376741 TruthInSunshine
TruthInSunshine's picture

http://www.metroftz.com/

 

Metro International Trade Services LLC Metro International Trade Services LLC           Headquarters:              6850 Middlebelt Rd.,              Romulus, MI 48174 USA              t: +1 734 721 3334      

   f: +1 734 721 3963

 

Metro is a leading global warehouse operator, specializing in the storage of non-ferrous metals for the London Metal Exchange.

Products stored:
Aluminum, Aluminum Alloy, Copper, Lead, Nickel, Plastic, Steel, Tin, Zinc, Plastic Resin & Steel Billet.

    
Fri, 06/17/2011 - 01:08 | 1376742 Yen Cross
Yen Cross's picture

 Blood Diamonds?

Fri, 06/17/2011 - 01:12 | 1376743 Coldfire
Coldfire's picture

Obviously, if you run money and credit, you can buy anything, including the so-called regulators, judges and politicians, ie., the Potemkin village idiots.

Fri, 06/17/2011 - 02:58 | 1376833 traderjoe
traderjoe's picture

Print money for free, loan it out at interest - collateralized by productive assets. Create cycles of inflation and deflation. Bingo - you own everything.

Fri, 06/17/2011 - 07:21 | 1376961 ToNYC
ToNYC's picture

 

In Bingo, you don't get to call out your own numbers. Banko is way better, until the people lose the illusion that they are owners rather than dispossessed rentiers who have not the capacity to buy any part of the everything they don't already have.

Fri, 06/17/2011 - 13:20 | 1378055 wisefool
wisefool's picture

You forgot the Tax Code. The thing that makes sure the mob thinks the game is a good idea. Or atleast keeps them so confused or scared that they conform.

Hello Sheep! You deserve to be in a $600k house. We are going to give you a mortgage interest deduction, and force the banks to lower lending standards through the community re-investment act, or we'll cream them on thier taxes.

Already have a house? Builder Buy another one! Farmland is for dumb farmers. Open spaces are for hippes who like to ride bikes and such.  2000 sq ft houses are for old people who can't clean to much bigger of a house. Apartments are for kids. Grow up!

Fri, 06/17/2011 - 01:14 | 1376746 Yen Cross
Yen Cross's picture

 Nice try, comma   payback is MUCH WORSE!

Fri, 06/17/2011 - 01:18 | 1376751 TruthInSunshine
TruthInSunshine's picture

I'm fairly certain they have 19 warehouses in Detroit since there was a ton of very inexpensive and perfectly good (and massive) warehouse units to be had there, given the shrinkage of the automotive sector.

It also may have something to do with the relationship between the Sherman-Antitrust Act and federal preemption of state laws that may conflict with it (Michigan law on such matters would have to parsed - see Rice v. Norman Williams Co., 458 U.S. 654 [1982]).

 

RICE V. NORMAN WILLIAMS CO., 458 U. S. 654 :: Volume 458 :: 1982
Fri, 06/17/2011 - 01:47 | 1376775 TruthInSunshine
TruthInSunshine's picture

Not on all fours legally speaking, but this is a case that touches on Sherman AT Act vs. Clayton Act (does not involve warehousing scheme to limit supply, as this situation ostensibly does):

Southwire Co. v. J.P. Morgan Chase & Co.

 

Fri, 06/17/2011 - 01:21 | 1376757 Yen Cross
Yen Cross's picture

 Tools welcome.  Blow out my (ISP) any time (dot)

Fri, 06/17/2011 - 01:27 | 1376762 baby_BLYTHE
baby_BLYTHE's picture

Buy Gold and hold.

Don't bother with equities.

The dollar is the Titanic headed for collision course

Fri, 06/17/2011 - 01:32 | 1376769 Yen Cross
Yen Cross's picture

 Double hulled tankers!

Fri, 06/17/2011 - 01:40 | 1376773 baby_BLYTHE
baby_BLYTHE's picture

80% of my meager wealth is stored in PMs.

Gold & Silver is written in the Constitution. Good enough for me.

Fri, 06/17/2011 - 01:46 | 1376782 Yen Cross
Yen Cross's picture

U r (sorta getting) IT.

Fri, 06/17/2011 - 01:29 | 1376766 Laddie
Laddie's picture

Ben Bernanke, Andrew Fastow, Maurice Greenberg, Alan Greenspan, Michael Milken, Marc Rich, Myron Scholes, George Soros, the list goes on and on...

Now the Banksters, well they got several TRILLION Taxpayer $$ and they've done well, speculating in Tel Aviv real estate for instance, now this little scheme that Tyler is sharing with the readers of ZH.

The governments of the world aren't reigning in these Rothschild bankers. Just the opposite is happening. We are watching the outright takeover of all world governments by the Zionist bankers and the consolidation of their power.

Fri, 06/17/2011 - 01:37 | 1376771 Yen Cross
Yen Cross's picture

 The Milken  " Wants ta Tute"  Am I pissed off?

Fri, 06/17/2011 - 02:18 | 1376810 Ponzi Unit
Ponzi Unit's picture

You're not supposed to say such things just because such remarks happen to be factual. You might offend someone, and we would hate to injure the sensibilities of those who are merely doing their best to enslave us and steal our futures. Please make an effort to engage in civil discourse.

Fri, 06/17/2011 - 02:32 | 1376822 Laddie
Laddie's picture

You see, the money changers and other self-proclaimed 'elite' of the planet believe they are going to survive the destruction. They have their bunkers and seed vaults all prepared. They have their laws and goon squads in place to keep the herd at bay while they make their escape. It all looks pretty grim as far as Justice goes.

Fri, 06/17/2011 - 03:49 | 1376845 zhandax
zhandax's picture

You're not supposed to say such things just because such remarks happen to be factual. You might offend someone, and we would hate to injure the sensibilities of those who are merely doing their best to enslave us and steal our futures. Please make an effort to engage in civil discourse.

You left off the /sarc.  Or, if not, fuck you, the horse you rode in on, and everyone else who thinks like you. 

Fri, 06/17/2011 - 02:05 | 1376800 f16hoser
f16hoser's picture

"Conflict Silver?"

Fri, 06/17/2011 - 03:52 | 1376852 CH1
CH1's picture

"Treason Silver" Undermining the legitimacy of the US dollar!

Fri, 06/17/2011 - 02:02 | 1376802 TruthInSunshine
TruthInSunshine's picture

A final point for now - unlike DeBeers, this activity, whether it will be investigated by U.S. authorities, and even ultimately deemed to give rise to any cause(s) of action under the Sherman Antitrust Act or whether it violates any other federal or state statutes or common law provisions, is being done on U.S. soil.

 

Fri, 06/17/2011 - 02:26 | 1376819 Transformer
Transformer's picture

Which, means what?  Oh, I get it.  We'll just have them investigated by the authorities, like the CFTC, or the SEC, or maybe the Justice Department.  Why of course, our government will stop this outrageous behavior.

Fri, 06/17/2011 - 02:36 | 1376823 TruthInSunshine
TruthInSunshine's picture

No, they won't.

And from a sterile and cold legal analysis, this is more of a 'collusion' type activity, to limit ready supply, if some of the core assertions made are true, rather violative of antitrust law, on its face - price rigging through bottlenecking supply, rather than an attempt to become exclusive suppliers through pure monopolistic activity, if you will.

But no. I do not expect any action from Eric PlaceHolder or President "we need to crack down on speculators" Obama, especially since Obama will be more reliant than ever on fat checks from Wall Street BSDs to cue his re-election run.

It doesn't help that our "friends" across the pond at the LME have literally sanctioned this incredible bullshit, either.

Fri, 06/17/2011 - 10:55 | 1377558 MachoMan
MachoMan's picture

Why do you need the government to step in when it would seem private causes of action exist...  seems like to me that if you charge storage fees based upon how long a commodity is stored at your warehouse and then hinder the removal of the commodity, in bad faith (to be proven through statistical analysis or, if available, testimony), then I do not believe, as a general matter, the customer has to pay the marginal difference in storage fees (the difference between what the market would have done if acting on its own, i.e. normal lag time).  No need to invoke the sherman act or anything else...  just basic contract law.

Fri, 06/17/2011 - 11:16 | 1377600 TruthInSunshine
TruthInSunshine's picture

Private party suits, as you know, under the Sherman or Clayton Acts, require standing, which would entail being able to claim that one's direct pecuniary interests were injured as a result of the alleged illegal activity.

So, yes, Coca-Cola or another user could bring suit, but consumers would have to rely on the good graces of Eric PlaceHolder, in order to see anything done about what could amount to a price-fixing scheme, arguably violative of many federal and/or state statutes, or their states' AGs, in order to be able attempt to obtain any injunctive relief.

Finally, assuming what the WSJ reported is roughly accurate, the price fixing in this set of circumstances is the result of the fact that the LME only licenses 600 warehouse worldwide, and that Goldman & JPM have purchased a significant number of these, with Goldman having 19 alone in the metro Detroit area, and could arguably be signficantly impacting the price of stored metals by collusively agreeing to only release the minimum amounts required under LME regulation (and the LME is in England, obviously).

Fri, 06/17/2011 - 11:29 | 1377658 MachoMan
MachoMan's picture

you don't have to invoke the sherman act...  you have a warehousing contract directly with the owner or its representative(s)...  you drag your feet, you breach the duty of good faith and fair dealing implied in every contract...  further, as a general matter, you cannot contract away your duty to behave reasonably...  obviously they can give themselves "discretion", but it would ultimately have to be used in good faith (which gets thrown out the window when pecuniary gain is at stake).

Have a class action if you want...

All you'll do is nip at some of the warehousing fees gained, not get a bite at the big cookie, but sometimes low hanging fruit is all you get.

Fri, 06/17/2011 - 13:13 | 1378042 TruthInSunshine
TruthInSunshine's picture

I stated precisely that this is not a Sherman Antitrust Act case, but rather a 'price fixing' (i.e. through necessary collusion) one.

A rough analogy would be the actions of suppliers of lysine, used to fatten chickens, including ADM, to coordinate a rigged/fixed price, back in the 90s.

If producers or suppliers of products, including commodities such as industrial metals, even meet with the intent of developing a system to fix prices, a conspiracy to violate the law is born.

If they implement such a system, many laws are violated.

Given that there are 3 large players (call them oligarchs) within the context of LME licensed warehousing of metals, who control a majority of the storehousing and release of these metals, a case could certainly be made - given additional facts and evidence - that they have the ability to artificially 'fix' the price of particular metals, and that they have implemented a system to do so (i.e. bottlenecking release of limited amounts - that it complies with LME regulations is irrelevant; delaying the release of orders for extended periods of time; paying monies to producers to store their metals in their warehouses, which is a reverse-storage fee, etc.).

 

Fri, 06/17/2011 - 14:04 | 1378172 MachoMan
MachoMan's picture

The entire point is that as an affected party, you do not need to wait on the government to bring a case...  your cause of action is on the contract you signed...  you need not invoke any other convoluted cause of action.  This is to address the notion that our government will do nothing to stop the problem...  that's fine, you don't need them to...  you can do it yourself as an affected party.

My guess is the reason this has not happened yet is because each individual case is small enough that they couldn't even pony up the expert witness fees...  let alone pay for discovery.  However, a class action among all persons having stored their commodities in these warehouses might be a different thing altogether (my guess is all their contracts are the same).

Fri, 06/17/2011 - 02:07 | 1376806 Ponzi Unit
Ponzi Unit's picture

 George Carlin got it right. In case you have not seen this one, here is Carlin at his best:

http://www.youtube.com/watch?v=hYIC0eZYEtI&feature=related.

Sharpen the guillotine!

Fri, 06/17/2011 - 02:56 | 1376830 Yen Cross
Yen Cross's picture

 George Carlin  ROCKS.

Fri, 06/17/2011 - 02:24 | 1376818 HangSorosHigh
HangSorosHigh's picture

which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as aluminum, courtesy of warehousing massive excess supply, artificially low market distribution of the final product, while collecting exorbitant rents in the process

This is the old "crime" (sic) of "hoarding" common in communist countries.

Fri, 06/17/2011 - 03:51 | 1376851 London Banker
London Banker's picture

LME rules are set by the owners and members.  JPM and GS have committee chairs on most of the relevant rule-making boards, and in any event, have informal veto against rule changes they don't like.  To a great extent, manipulation of markets is the end result of two decades of de-mutualisation of exchanges.  Exchanges used by "public goods" providing central liquidity and price discovery for investors and traders.  Now they are just the private tools of market manipulators who buy up the infrastructure, change the rules, and rape the investors and traders.

Time to rethink why society needs markets and how those markets can best serve society.

Fri, 06/17/2011 - 04:23 | 1376867 CH1
CH1's picture

People need markets alright... but real ones.

Fri, 06/17/2011 - 05:04 | 1376887 ratso
ratso's picture

London - Criminal, monopolistic conspiracies to control commodities need more than rethinking.  They need tough new regulations at national and international to avoid new inflationary pressures by market controlling investment banks.  Turns out the invetment banks are really criminal enterprises - who would have guessed.

BRING OUT THE CAKE!

Fri, 06/17/2011 - 03:55 | 1376857 bentaxle
bentaxle's picture

Wonder if they could corner the market in vacuums, filter out and compress the oxygen from the atmosphere, store it in these sheds and only release it in accordance with the rules? I reckon not even that would provoke the sheeple into wanting to BTFD. (Mind you blowing up stored O2 would make a hellava big explosion!)

Fri, 06/17/2011 - 04:55 | 1376881 Mediocritas
Mediocritas's picture

I've maintained from the start that (most of) this commodity rally was bogus. Artificially constrained supply due to hoarding throughout the system, just like we see in every housing boom. Talk of shortages justifying a rally that turns out to all be bullshit when the rally tops out and a whole lot of shadow inventory suddenly makes an appearance.

Claims that commodity hoarding is justified as inflation protection are pretty lame. Let said commodities be USED by businesses and invest in those businesses to see a much higher, value-added return on investment. This is a justification for using huge short positions to artificially suppress commodity prices, losses are more than offset by investment in the business cheap prices enable. Why is Goldman not playing ball?

Can't remember who to attribute this quote to but "a bet on commodities is a bet against the economy". By deliberately constraining commodity supply, hoarders are actively undercutting GDP, aka blackmailing the economy, aka financial terrorism. 

So why isn't Guantanamo Bay overflowing with banksters?

Fri, 06/17/2011 - 05:26 | 1376894 Urban Redneck
Urban Redneck's picture

Let said commodities be USED by businesses and invest in those businesses to see a much higher, value-added return on investment. This is a justification for using huge short positions to artificially suppress commodity prices, losses are more than offset by investment in the business cheap prices enable.

 

Extracting and refining a commodity is a legitimate business- artificially supressing commodity prices hurts those legitimate businesses.  I could care less about the GS and JPM crooks, especially since their entire role within commodities sector is unnecessary and they have banking licenses, and will therefore be bailed out endlessly by the elected politicians.  However, when I see shit like this, it makes me wish Glencore withholds production at the source just to bring karmic justice to the "corruption is fine, as long as I benefit from it crowd."

 

Fri, 06/17/2011 - 06:26 | 1376914 Soul Train
Soul Train's picture

So why isn't Guantanamo Bay overflowing with banksters?

We all know the answer. Because they are hand in hand with the power elite.

Government by the elite and for the elite.

Think about it - Al Qaeda targeted Wall Street symbolism (Twin Towers) and the Federal government military empire (Pentagon and the White House). And the sheople give their lives willingly to fight All Qaeda.

Get it? If not, think some more. If you don't get it still, then you are sheople.

Fri, 06/17/2011 - 05:39 | 1376899 writingsonthewall
writingsonthewall's picture

Anti-competitive? - what we need is regula....oh wait a minute, that destroys free markets.

 

Oh dear - whacha gonna do eh?

 

It's called a contradiction - and Capitalism is rife with them. Do any free market supporters have any answers to this eternal question?

How do you prevent market manipulation without resorting to regulation? Shall we all stop buying diamonds - and how will the public ever find out what's really happening so they can make an informed decision?

 

You might argue that the participants - on average - make good and rational decisions...but when those that don't are able to bring the system down...and at a cost to the rational participants - then you're sort of back in the mire.

 

Hazy days of Capitalism eh? Those pesky Governments - always sticking their oar in when we ask them to protect us!

Fri, 06/17/2011 - 10:57 | 1377566 snowball777
snowball777's picture

Short answer: TB is both a symptom and a modus for manipulation.

If they were a reasonable size, they wouldn't be able to pull these shenanigans, and certainly not with mom and pop's moolah, should we return to Glass-Steagall.

http://www.youtube.com/watch?v=_5CWCFIG7ZY

Does the illegit diamond mining industry act as a support for research in cruelty-free pretty rocks? Does that collapse if we give up diamonds entirely or flourish?

Fri, 06/17/2011 - 05:42 | 1376900 Franken_Stein
Franken_Stein's picture

 

Präsidentschaftskandidat zweifelt an US-Goldreserven

Presidential candidate doubts US gold reserves

 

In der Trutzburg Fort Knox lagern seit 1937 die Goldbarren der US-Notenbank. Behauptet sie. Der Republikaner Ron Paul fordert eine unabhängige Untersuchung.

Since 1937 the Federal Reserve's gold bullions are stored in the fortress Fort Knox. That's what they claim. The republican Ron Paul demands an independent investigation.

 

http://www.ftd.de/finanzen/maerkte/anleihen-devisen/:fort-knox-praesiden...

 

Fri, 06/17/2011 - 05:52 | 1376903 BlackholeDivestment
BlackholeDivestment's picture

...you got love in it's palce, in it's own time and space....

http://www.youtube.com/watch?v=sNvsbPOESeA&NR=1

Fri, 06/17/2011 - 06:24 | 1376905 hamurobby
hamurobby's picture

When starting out a new supply business of epic proportions, you must build inventory. They are simply trying to build inventory (HAH, while being long futures). Once they reach their price target, (and the warehouses are full), they will simply open the doors and let it flow (at that time already be short futures). They will show a loss in the storage business and make it up 10,000 times in the futures markets. Those stupid green curtains with gold tassels fool just about everyone.

You do know Dorthy was supposed to have silver slippers.

Fri, 06/17/2011 - 06:05 | 1376907 Bokkenrijder
Bokkenrijder's picture

"...which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as..."

Wait a minute! JPM is now accused of keeping commodity prices high?

I thought they were naked short selling commodities in order to drive down prices?!?

I thinks somebody is getting their conspiracy theories mixed up here...

Fri, 06/17/2011 - 06:13 | 1376908 BlackholeDivestment
BlackholeDivestment's picture

...what? You do not understand the profit of divesting as a market maker?

http://www.youtube.com/watch?v=vy-QmgdUVTI

 

 

Fri, 06/17/2011 - 06:33 | 1376917 Franken_Stein
Franken_Stein's picture

 

They are short only two "commodities" which in the rest of the world are referred to as MONEY, which is gold and silver.

 

To keep the impression of fiat paper money being valuable alive.

 

But they are long every other commodity, which is NOT regarded as money, but can be used to extort China, which is dependent on low commodity prices.

 

Talk of economic warfare.

Dimon and Blankfein are worthless human beings and criminal assholes, there's no doubt about it.

 

Why these two carbohydrate units were born at all,

when their whole purpose in life,

the whole purpose of their pathetic existence is to rob and steal

and to put millions into the poorhouse,

is beyond me.

 

Talk of human garbage.

 

Fri, 06/17/2011 - 08:57 | 1377188 ZeroPower
ZeroPower's picture

lol. I guess you must be the Head of Commodities at the place to speak so confidently of its positions, huh.

Fri, 06/17/2011 - 13:16 | 1378054 TruthInSunshine
TruthInSunshine's picture
by Bokkenrijder
on Fri, 06/17/2011 - 06:05
#1376907

 

"...which can simplistically be characterized as a De Beers-like attempt to artificially keep prices high for commodities such as..."

Wait a minute! JPM is now accused of keeping commodity prices high?

I thought they were naked short selling commodities in order to drive down prices?!? I thinks somebody is getting their conspiracy theories mixed up here...

 

The issue with JPM, from the perspective of some, has to do with silver.

This article and issue has nothing to do with industrial and base metals, and nothing to do with silver.

 


Fri, 06/17/2011 - 20:44 | 1379253 Xavier Doe
Xavier Doe's picture

"Wait a minute! JPM is now accused of keeping commodity^H^H^H^H^H^H^H^H^H copper prices high?"

Yes, genius.  As you may recall, JPM is allegedly *long* copper.  So what's not to understand?

"I thought they were naked short selling commodities^H^H^H^H^H^H^H^H^H^H^H silver in order to drive down prices?!?

Yes, genius.  As you may recall, JPM is allegedly *short* silver.  So, what's not to understand?

"I thinks [sic] somebody is getting their conspiracy theories mixed up here..."

How so?

Fri, 06/17/2011 - 06:21 | 1376910 Soul Train
Soul Train's picture

so what prevents Coca Cola from entering the market and buying their own licensed LME warehouses? They certainly have the capital. And if it truly is affecting them, time for KO to get tough.

Fri, 06/17/2011 - 06:26 | 1376912 Franken_Stein
Franken_Stein's picture

 

Shorting Facebook after its IPO should be the trade of a lifetime.

Thanks for the windall profits.

 

Fri, 06/17/2011 - 06:38 | 1376921 Sudden Debt
Sudden Debt's picture

The fact they earn their money from manipulating the world and not their basics, this only shows how it will end for them.

 

Fri, 06/17/2011 - 06:39 | 1376927 BlackholeDivestment
BlackholeDivestment's picture

...ha ha haa haa. What a consistent lead-in http://www.youtube.com/watch?v=lIViqPgEtrw

Francis Bacon ain't got nothing on Zero Hedge.

Fri, 06/17/2011 - 06:52 | 1376935 BigDuke6
BigDuke6's picture

I'm beginning to feel like a peasant in the medieval times.

Bloody revolution may be at hand but lets look at canada to see how not to do it.

http://www.telegraph.co.uk/news/worldnews/northamerica/canada/8581091/He...

Fri, 06/17/2011 - 06:55 | 1376938 BlackholeDivestment
BlackholeDivestment's picture

...what is this? ...a Black Sabbath Morning? http://www.youtube.com/watch?v=qq5Ejw42Yog&feature=related

Fri, 06/17/2011 - 07:07 | 1376945 BigDuke6
Fri, 06/17/2011 - 07:11 | 1376950 BlackholeDivestment
BlackholeDivestment's picture

...is it just me? ...or do you smell a pig on fire? http://www.youtube.com/watch?v=CTtaflRXBCg

Fri, 06/17/2011 - 07:50 | 1377023 BigDuke6
BigDuke6's picture

just read LS's story in wikipedia.  Amazing.

But out here in the fields I fight for my meals

I get my back into my living.

I don't need to fight to prove I'm right

I don't need to be forgiven.

This an axeman.  And a story.

http://www.youtube.com/watch?v=hKUBTX9kKEo


Fri, 06/17/2011 - 08:05 | 1377047 BlackholeDivestment
BlackholeDivestment's picture

 I'm a Christian ...so it's cool to listen to Sabbath, I'm forgiven (needed it, I'm a killer). Come on, tell me who are you? http://www.youtube.com/watch?v=1WJrVxMuYSo&feature=related

...ah ha ha haa

 

Fri, 06/17/2011 - 07:57 | 1377037 BigDuke6
BigDuke6's picture

Man, these girls on these pop up dating sites are so desperate they have joined most of them. So lonely...and babelicious.


Fri, 06/17/2011 - 07:40 | 1377007 Downtoolong
Downtoolong's picture

How in this day and age could it possibly require 10 months to move a basic commodity through a warehouse, or from any point A to another point B on earth for that matter? Call UPS or Wallmart you jackasses.

That’s Goldman for you, always squeezing profits from their clients, since they know they don’t have anything of real value to offer in exchange. Oh well, I take back what I previously said about the TBTF banks not caring about the physical mainstream economy. They clearly do, but, only to the extent they can control and manipulate it to support their financial kingdom.

Fri, 06/17/2011 - 07:51 | 1377032 Monedas
Monedas's picture

Private enterprise is at it's worst when it seeks to imitate government monopoly models which we accept as "necessary" for the public good ! The "Space Shuttle" was every bit the monopoly as these aluminum banksters ! The postal service, etc. ad nauseum ? Monedas 2011 How dare business imitate government !

Fri, 06/17/2011 - 08:20 | 1377093 Coke and Hookers
Coke and Hookers's picture

Two years ago or so I had a meeting with a bigshot at a big primary aluminum manufacturer. We were discussing one of their smelters. We took a break and went outside for coffee and smokes. We started chatting about aluminum prices and what was keeping them up in the middle of a recession. The guy said: "These are strange times. I'm not supposed to tell you this but currently, this plant's biggest consumer is (a bank - I'm witholding the name). It's been like that for some time. The ingots are shipped to warehouses in (a certain country) and stored there."

He didn't tell me the how much the bank had bought but I got the impression it was a lot. I was pretty surprised since it costs money to store stuff and aluminum takes a lot of space. At the time I looked at it as a part of a metal hedge plan by the bank but imagine if many banks - and the Chinese -  were doing the same thing. The effect on price has to have been pretty significant.

Fri, 06/17/2011 - 10:53 | 1377537 snowball777
snowball777's picture

That's it boys. Stack it up nice. We'll be back for it later.

Fri, 06/17/2011 - 11:24 | 1377644 Imminent Collapse
Imminent Collapse's picture

Of course the banks are using it to manipulate the market.  More market rigging and monopolization.  Bastards!  Too bad they have apparently bought off the regulators or maybe something could be done about it. 

Fri, 06/17/2011 - 11:56 | 1377743 camoes
camoes's picture

Long Silver/Short Copper anyone? Bueller? Anyone?

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