This page has been archived and commenting is disabled.
Bloodletting
A short story
London has always been the center for the Euro dollar deposit market, but most banks had NY operations that also made markets in Euro depos. For a time, I sat on one of those desks. This was way before the Internet and live-streaming prices. Brokers communicated market prices over squawk boxes that were piled up on every desk. There was constant drone of background noise. I can still hear the voices :
I’m 7/8th bid sixes, looking for an offer
I’m an 1/8th around the figure 4 on threes. Looking to do business in the middle.
Last at three daughters (3/4%) on the offer in twos, buyer wants to build.
I have size spot-next to go, looking for a bid.
Looking for 3 large spot a week.
I have balances to go in threes and fours, I need balances over sixes.
Anyone have an offer on a year?
Now several eighths (1/4%) bid in nines, who wants to dance?
I need a bid in “Tom-next”, somebody please, talk to me.
.
Mostly we just called the players in the market and told them where we were bidding/offering strong. We even sent out faxes and telexes (I was in charge of the faxes). One day the desk got short six-month money and had to pay up to get it back. So the calls (and my faxes) went out. About an hour later the “Big Boss” comes out to the desk and says:
I heard that you are bidding ¼ over the Libor fix for six-month money. What the fuck is that about?
Someone mentions that there was demand and that the Libor “fix” was not the price that cleared the demand, so we had to pay a higher price. The boss responds:
That’s your fucking problem. Don’t make it mine. Don’t show prices to the street that are over the fixing. It makes us look stupid or desperate.
The only thing interesting about this story is that it’s 30++ years old. People have been sandbagging Libor quotes since the concept of Libor was originated.
I don’t believe that there is a money pro on either the buy or sell side over the past thirty years who didn’t understand that the Libor Fixing was “fixed”. If they claim to be “shocked” today, they are either lying or stupid. The same goes for every central banker and treasury official that knows the way to the bathroom.
As far as any consumers who took out a Libor based loan are concerned; they have no claim at all. If Libor hadn’t been “fixed” all these years they would have paid substantially more on those loans. Libor has always been jimmied down, not up.
The world has been looking for an excuse to hang some bankers (and a few regulators). Liborgate looks like it could be the opportunity for the bloodletting. I’m convinced that this is the wrong issue to bring out the nooses.
.
»
- advertisements -
Before giving advice over the internet, I'll just point here:
http://www.zerohedge.com/news/disclaimer
Thanks Jim - We have enough savings to "play around" with $50K or so - longer term plays are fine with me - good point about taxes (I do have a severance and have already applied for Unemployment bennies).
I promise Tyler that I won't turn into an "Xbox 360 employee". I'll keep an eye out for Tyler's periodic reco's.
Foodman. These thoughts are scattered, but I hope you they can help you determine a strategy.
1. Remember that ALL markets are distorted. Central bank manipulation has destroyed true price discovery. In an environment like that how can you possibly know which "asset" is a good buy and which is overvalued?
2. Keep in mind Richard Russell's argument that in times of economic depression, and we ARE in a depression, he/she who preserves the most wealth wins. In an environment like this you will retain more wealth by saving and putting your cash into tangible assets. Stocks are NOT tangible assets. I recommend you watch on You Tube some of the arguments that Peter Schiff made in 2007 about the fact that the paper value of assets is not true wealth. Laugh with glee as he destroys the facile arguments of Laffer and has been vindicated in years since.
3. If you have any debt, mortgage, car payments, revolving debt, I'm guessing you will generate a greater return on your "investment" by paying off that before you put a dime in the markets. After all, the 4%-8% in interest you would have paid on the debt is now money in your pocket.
4. If you absolutely MUST buy stocks, wait until the Fed gives some kind of tangible signal that QE3 or nominal GDP targeting is coming. I think most ZHers would agree that some kind of easing is ahead of us, but until it actually manifests, none of us know when it is coming.
5. If you do not already own gold or silver bullion, you might want to get some and store it outside of the system. Doing a little research will reveal that precious metals are being sucked out of the western banks in massive quantities and with more MF Global/PFG fraud events coming you can be assured that allocated gold holdings will be "vaporized".
Good luck.
Speaking of which - sucks when bonds speak to the truth while stocks speak to hope + prayed for short term manipulation. Would love to be short, but the keepers of the current system seem completely desparate to preserve it at any cost.
Mainly, I get where your head is at right now completely. You just lost your job and you feel like you need to hunt immediately, and the market seems like a quick way to make a buck and validate your manhood. This is a biological response and it is very strong. I ran into the exact same situation two years ago. I lost $200K and a 9 year marriage in the process. DO NOT MAKE THE SAME MISTAKE I DID, PLEASE!
"bonds speak to the truth"
They sure the fuck don't speak any truth at all. Bonds are just as speculative as stocks. You are entering a casino when you choose to trade these markets. Be absolutely sure you understand this before you risk any money at all. It would probably help to ask yourself how much money you'd be willing to "play" with if you were going to an actual Las Vegas Casino. If it isn't the $50K you stated above, adjust accordingly. Is it $5K? Would you spend no more than $500 at a casino? If so, then that is how much money you should maximally invest in the markets. Trust that many of us here made the mistake of ignoring that advice and ended up with a broken bank account/broken marriages.
The craps table is as good a bet as any to give some direction as to your next investment stratagy. Follow the dice has replaced follow the money.
Can I hope (I know about hope) that this is the straw that breaks their camel's back? I actually like camels, but the banksters can go f*ck themselves.
I guess I understand that any one straw can be deflected and buried and - sadly - perhaps LIEborgate will be no different. It's the pattern and numerous and varied incindences that ought to get them - RICO maybe - but then that would require prosecutors with guts - and bomb proof suits.
Pete
Nothing will happen.
The weak point is prosecution. No law enforcement = no law + no problem for the Financial Elite.
Holder is sucking and stroking Wall St dick behind closed doors, because he wants a job there in future. A disgusting sell-out, hand-picked by our current Sell-out In Chief.
Bruce, I love the market price squawk box "poetry". I might have to steal that.
Just because there has always been hush hush price-fixing doesn't makes it unpunishable or ok. Perhaps this will be the start to investigations into other crooked bank schemes. I'm doing allright with my credit union. They don't seem to want to stick it to me.
Ok. Bruce. But while it may be the wrong issue to bring out the nooses, it would be a good start to scare the bejeesus out of the manipulaters who are so adamantly proclaiming free market slogans while profiting from ripping off producers and savers. A good example or two would go a long way to restore confidence.
At some point there has to be accountability, or a society worth living in breaks down and turns into a hell hole of slaves at the complete mercy of the greedy and ruthless. Nobody should be above the law, especially not the leaders.
Libor is an index. The three highest and lowest quotes are eliminated. After that, it is an average.
There is no law broken. I don't think there are any "laws" about it.
http://en.wikipedia.org/wiki/Sherman_Antitrust_Act
What does the Sherman Anti Trust Act have to do with a rate setting process in London?
If there was collusion in the submission of prices, that is unlawful. It's another to submit good faith "guesstimates" - it's another entirely to collude with the other 15 banks in their submission.
Collusion is the SOP. Check out how milk and cheeses prices are determined:
www.themilkweed.com/Feature_10_May.pdf
Situation Normal.....
Too much sadness and sadism in that graphic of Mickey Mouse hanging by a noose -
Hanging is an extremely cruel way to kill someone. Death is by slow strangulation, though in many hangings there is a long 'drop' which breaks the person's neck, and puts the victim in a coma, but the victim still dies slowly.
15 minutes to an hour to die.
And in many hangings in the world today, the drop is not used, or fails to break the neck, and the person very slowly strangles, like when Iran hangs people from cranes, where apparently it has become clear that hanged women suffer and struggle much longer. The last hanging in New Zealand in the 1950s was a slow strangulation 'botched' hanging.
The USA still hanged two people in the 1990s, in Joe Biden's Delaware, and in Washington State down the highway from Bill Gates' Microsoft.
As bloody as the guillotine was in our Continental countries, it was a merciful way to die, as are the firing squad of several shooters or a bullet to the back of the head.
The French Revolution gave every poor person the aristocrat's quick merciful death, whereas the Anglo countries, Britain and the USA and everyone else, continued the death by strangulation torture. Queen Elizabeth II approved the hangings of a few people in England, including an abused woman and an 18 year old boy who did not kill anyone, before Britain and Canada ended it in the early 1960s.
Hanging is a horrid practice of torture, and it is an utter human rights crime it still exists in the world ... even continuing in an otherwise modern country like Japan.
Not sure it should be a theme of humour and jokes.
Bullshit.
Compress the carotids and you'll be unconscious in 3 seconds. Don't believe me? Ask a jiu-jitsu practitioner to do it for you. Absolutely painless, just a feeling of fullness in the head. And you dance, the limbs twitch and kick uncontrollably, but painlessly.
Your post is nonsense.
Yep, that was the game they played in the 7th grade. You hyperventilate a few and someone picks you up from behind and out you pass. Waking up later with the birdies and stars. Funny until someone doesn't wake up.
Strange with your avatar that you are endorsing capital punishment for
banksters.
Glad the principle is agreed,and we are just haggling over minor details.
I think you're looking for a different website. The Greenpeace website is about three doors over. The Street has always had gallows humor. Ever read "Liar's Poker"? Many have lived that life or at least lived around it. If your skin is this thin, find some other sandbox to play in.
Wow.
The very foundation modern banking stands on is corrupt to the bone, but you're right we should focus on other things.
What's the 'right' issue?
Yeah, Bruce, so you are advocating a slap on the wrist and a lot of tongue in cheek rethoric by the 'regulators', and then it's back to the same old? What do you recommend happens here??
How can $500 gazillion dollars of derivatives be priced on a rate that has been "fixed" for 30 years???
You have a dozen banks, all with an axe to grind, setting phoney levels every day. What kind of system is that? The honors system? There is no honor when there is money to be made.
LIBOR was always a stupid, manipulated benchmark. It should have been replaced with a system that is dependenant on market rates. T-bills etc. years ago.
Fine. But let's not make the pursuit of a perfect prosecution the enemy of a good one. These guys were committing fraud. Prosecute 'em.
"LIBOR was always a stupid, manipulated benchmark"
For those that breath the rarified criminal air of High Finance, that may be true. But did the losers know Libor was a manipulated rate ? Of course not.
Who lost in this? Did you? How?
Anyone with money in a Money Market Fund, which loaned money out at Libor + a spread, lost in this. That includes a lot of moms, pops, and average joes.
We ALL lost, Bruce. Don't you get it?
You need to read Fekete's papers on how an ever-falling policy (ZIRP) destroys capital as all existing loans are more expensive than new ones, with the surplus going to the financial industry. And if they manage to refi? Well, they've just started the process over (paying fees to boot), while the former owner of the loan loses a profitable revenue stream (that is IMPOSSIBLE to replace, as rates are now lower).
It's nothing more than a hollowing out of the productive capacity of the capitalist society created by SAVINGS (not debt). BTW, those savers are at the very top of the list of losers.
I'd argue that all of those people did not need "cheap" loans which only caused them to inflate the prices of the assets they're borrowing to acquire. Add to that the accompanying increase in property taxes, and you can hardly see a benefit for the people who responded to false "market" signals.
ZIRP is a policy of the Federal Reserve. Libor is a rate setting process in London. ZIRP drives Libor, not the other way around.
Well said, N/A.
Lots of municipalities say they lost in this. http://finance.fortune.cnn.com/2012/07/11/libor-sucker-hometowns/. If my city lost, I as a taxpayer ultimately pay for it and Jamie Fucking Dimon keeps the profit. Again. So I guess I got fucked too.
So your point is that fraud is okay so long as everyone benefits at some level? Go fuck yourself Bruce.
I think the LIBOR fraud is directly attributable to anthropogenic global warming. What say you, Bruce?
Grandma who needed interest from her savings account to pay the bills was the loser.
Greece.
You are dead right, Bruce. The LIBOR "scandal" is a "fix" of its own!
IMO, the plan is to bring down the banks before introducing a new single-currency system. The plan is for just one central monetary authority. They have made this clear often enough. What better way to achieve that, than by bringing the big banks and central banks into disrepute while avoiding any real retribution for the guys who will head up that new authority?
As soon as there is a single global currency and single monetary authority, there is no longer a need for national central banks or retail banks ... or bankers! All control is at the centre and in the hands of a Politburo and their central computer.
There will be no more foreign exchange markets if there is no more "foreign" currency to exchange.
There will be no more competition between banks for borrowing or lending rates if there is just one central planning monetary authority.
There will be no more private bank accounts if all monetary distribution is via electronic top-up of personal chips from a massive central computing system.
Just as there has been an ongoing deliberate process of discrediting "incompetent and corrupt" national governments -- in order to pave the way for a "solution" of a single "fair" global government -- so now we are witnessing the beginning of a campaign to discredit "incompetent and corrupt" banks, both private and central, in order to pave the way for a "solution" of a single "fair" centralised monetary system. Problem...Reaction...Solution.
Unfortunately for 'them', the collapse of the central planning European Dream is doing more to discredit central planning itself than it is the vagaries of national governments -- but that won't stop TPTB from continuing to discredit national bodies and competitive banking/currencies.
NOBODY in the main stream has thought of getting rid of central governments and implementing local control over local lives and local problems! Nobody seems to like innovation through competition any more....
This LIBOR "scandal" -- with no real victims (who got lower rates and who got higher rates?) and no distinct bad guys (was it just certain traders, or certain banks, or all traders at all banks?) -- simply discredits the banking system in the eyes of the gullible public without penalising the boys in the background.
Welcome to the NWO! Goodbye to jobs in a finance industry!
What's not to like? ... Big Brother loves you!
Jim Rickards brought up a VERY interesting point on this subject in a KWN interview (he has approximately 50 over there averaging 20 minutes each spanning the two or so years before his book "Currency Wars" published).
Essentially he said that a "single world currency" has to have "deep and liquid debt markets" so that trade surplus creditors have a place to invest their profits. This implies trade deficit debtors have a place to market their debt. I hope I didn't screw up his comments, there is no way I can source it right now.
Because markets with these numbers (billions minimum) are big, they require a lot of infrastructure you just can't "flip on" over night. These kinds of markets take years to build up, get all the clearning in place, all the plumbing in place.
So, he argued, it is increasingly likely that a near term collapse would result in monetary chaos, rather than an evil SDR type plan to take over the world.
I believe this was the interview where he talked about the four possible outcomes of a major global financial collapse:
He did not put numbers/odds on any of that, just that SDRs were least likely.
At least, that is how I remember it.
Regards,
Cooter
I suggest you read some more about Triffin's Dilemna. Then you won't need Jim Rickards to explain it to you.
I beg to differ with the [venerable] Mr. Rickards! In a centrally planned global economy, there is no place for locally independent decision making or private "investing". Think communist Russia and the Politburo's total control over what was produced, by whom and where ... from Berlin to the Bering Strait!
When a communist economy was in competition with external capitalist economies for certain resources, it was doomed to fail. But when that central planning is carried out by a global Politburo, finance is simply a matter of 1's and 0's being shuffled on their central computer. People will do what they are told and when they are told, or not get their chip topped up!
The concepts of "trade surpluses", "raising capital" and "distributing profits" are simply alien to a global Politburo. So, too, is the concept of private "savings". Those only exist where there are competing national or local communities and an opportunity to acquire private property.
I've learned more about LIEBOR today than the truth will ever tell.
how about we just go after the fed since they are the significant rate fixers.
Hi Bruce , eveything is fixed and only solution i can see is to go back to the Gold standard.
"You have a dozen banks, all with an axe to grind, setting phoney levels every day. What kind of system is that?"
The gold market?
"LIBOR was always a stupid, manipulated benchmark"
And T-bills are not?
"PAPER_PUSHING was always stupid" - fixed it for you Bruce. You mention "market prices" LMFAO!!! There is no fucking "market" so long as there is no fucking rule of law and no real consequences for bad behavior. Are you fucking kidding me Bruce?
Atlas is shrugging my friend and "ignorant farmers" like myself have had enough. Time to re-define "wealth" for humanity... ...again.
Atlas isn't shrugging. He's setting the Libor rate and laughing all the way to his private bank.
I'm not upset, just disappointed.
After what has now become daily evidence market manipulation, the cry comes for "free" markets setting interest rates. Fine. The problem? The basic premise is nonsense with "free" being a totally subjective definition. Even if rates were set by some new standard that would still mean someone would need to make sure the rules were enforced. Funny definition of the word.
Drop the naivete and mythology, let's get back to grown man business.
There is no honor when there is money to be printed.
Fixed it.
Hmmm...perhaps that's why Bernanke's fly is always rusty and Geithner smells like a diaper.