While the FT promptly retracted an article on precisely the topic of gold manipulation from earlier this week (recorded for posterity here), Bloomberg appears to not have had the same "editorial" concerns and pressures, and today released an article once again slamming the final conspiracy theory that while every other asset class is manipulated, gold is in a pristine class of its own, untouched by close-banging, price fixing traders or central bankers, and reports that "the London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say." And the punchline: "Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found."
And just like that the Chinese yuan devaluation has shifted away from the merely "orderly." In the past few hours of trading, China, which as we reported two days ago has started intervening aggressively in the Yuan market, has seen its currency crash by nearly 0.9%, which may not seem like much, but is in fact the largest drop since December of 2008, and at last check was trading at around 6.18, even as the PBOC fixed the CNY reference rate 0.02% higher from the last official close to 6.1214, erasing pivot support point at 6.1346 and 6.1408. Naturally this means that the obverse, the CNYUSD, has crashed to as low as 0.1620. Should this move sustain without reverting, this will be the biggest weekly loss ever! The dramatic move is shown on the chart below.
Gold declined from $1,900 in September 2011 to $1,188 on December, 19, 2013. Silver declined from $48.50 to $18.50 over approximately the same time frame. Precious metal equities declined by approximately 70% over this period. This move down played out exactly as was scripted. However, let us review the causes of this decline. We start out with the most important words ever written by a regulator: BaFin, the German equivalent of the SEC, said that precious metals prices were manipulated worse than LIBOR. What are we to read into this, particularly the word “worse”? Obviously, worse than LIBOR could not mean that more money was fraudulently earned since the LIBOR markets are many orders of magnitude larger than the precious metals markets. Then it must mean that the egregiousness of the pricing dysfunction was materially larger in precious metals.
The seemingly incessant strengthening trend of the Chinese Yuan (much as with the seemingly inexorable rise of US equities or home prices) has encouraged huge amounts of structured products to be created over the past few years enabling traders to position for more of the same in increasingly levered ways. That was all going great until the last few weeks which has seen China enter the currency wars (as we explained here). The problem, among many facing China, is that these structured products will face major losses and as Morgan Stanley warns "real pain will come if CNY stays above these levels," leading to further capital withdrawal, illiquidity, and a potential vicious circle as it appears the PBOC is trying to break the virtuous carry trade that has fueled so much of its bubble economy.
Tesla has just announced it intends to issue a $1.6 billion convertible note offering "for the development of a "Gigafactory" and a "Gen III" vehicle." While not that unusual - and of course, why not take advantage of low cost financing and a surging momentum in your stock - what we did find at least intriguing was the underwriters included Morgan Stanley. This is the same firm (though we would be very sure that Chinese walls ensured total lack of knowledge) that doubled their price target (from $153 to $320) for TSLA yesterday (following the analyst's now almost clairvoyant questions during the earnings conference call). Paging Henry Blodgett?
The dismal trail of dead bankers continues. As The Journal Star reports, a successful Lincoln businessman and member of a prominent local family died last week. Former National Bank of Commerce CEO James Stuart Jr. was found dead in Scottsdale, Ariz., the morning of Feb. 19. A family spokesman did not say what caused the death. This brings the total of banker deaths in recent weeks to 9 as Stuart is sadly survived by three sons and four daughters.
- Ukraine Seeks $35 Billion as Yanukovych Warrant Is Issued (BBG)
- Ukraine's fugitive president wanted for mass murder (Reuters)
- Polar Vortex to Bring More Snow on Return to U.S. This Week (BBG)
- China property prices continue to rise (FT)
- Microsoft Said to Cut Windows Price 70% to Counter Rivals (BBG)
- Pentagon to propose shrinking Army, scrapping some jets (Reuters)
- Hedge Funds Turn Bearish on S&P 500 as VIX Advances (BBG)
- Draghi’s Data Jigsaw Takes Shape as ECB Readies Showdown (BBG)
- China, eyeing Japan, seeks WW2 focus for Xi during Germany visit (Reuters)
Global gold prices may have been manipulated on 50% of occasions between January 2010 and December 2013, according to analysis by Fideres, a consultancy. Pension funds, hedge funds, commodity trading advisers, futures traders and ordinary investors are likely to have suffered losses as a result. Many of these groups were "definitely ready" to file lawsuits.
The answer may surprise you.
What are we to make of this sudden rash of banker suicides? Does this trail of dead bankers lead somewhere? Or could it be just a coincidence that so many bankers have died in such close proximity? We will be perfectly honest and admit that we do not know what is going on. But there are some common themes that seem to link at least some of these deaths together.
The banker suicide wave that started in late January has now become an epidemic, and it seems to be focusing on one bank: JP Morgan. After the first suicide that took place in JPM's London headquarters, ending the life of 39 year old Gabriel Magee, a vice president in the investment bank’s technology department, next it was 37 year old Ryan Crane, an executive director in the firm's program trading division, who died under still unknown circumstances. Moments ago a third JPMorgan banker committed suicide, this time at the JPMorgan Charter House Asia headquarters in central Hong Kong, where a 33 year old man who was said to have been an FX trader for JPM, just jumped to his death.
- Carl Icahn wins again: Actavis to Buy Forest Labs for $25 Billion (WSJ)
- ECB governing council member attacks German court ruling on OMT (FT)
- China Tackles $1 Trillion Data Gap as Xi Changes Metrics (BBG)
- FX Traders Facing Extinction as Computers Replace Humans (BBG)
- BOJ Boost to Loan Programs Signals Room for More Easing (BBG) - actually no it doesn't as it was "factored in"
- Four killed in Thai clashes; PM to face charges over rice scheme (Reuters)
- Goodbye unsterilized SMP: Bundesbank Backs Measure to Boost Funds in Banking System (WSJ)
- Iranian Hacking to Test NSA Nominee Michael Rogers (WSJ)
- Ukraine Clashes Leave Dozens Wounded as Putin Resumes Bailout (BBG)
The Inteligencia Financiera Global blog (Global Financial Intelligence Blog) is honored to present another exclusive interview now with GATA’s Bill Murphy.
As Deutsche Bank revealed in a note overnight, the GCC may have, quite deliberately, opened a Pandora's Box with its decision which according to Europe's largest bank, and the one whose derivatives exposure makes that of JPM pale by comparison, (i) made it clear it regards OMT as exceeding the competences granted to the ECB by the European Treaty and that (ii) would not consider itself bound by a positive ruling of the European Court of Justice. And while in DB's opinion this action does not have any immediate market consequences, the report's authors think that it "alters substantially the level of insurance we could expect from the ECB against any return of sovereign turmoil."