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JPMorgan Takes Offense At Argentina's Fabricated Reserves Data

Tyler Durden's picture




 

As we noted previously there is a race to the bottom between the Argentine currency and its central bank's reserve balance as day by day both slide seemingly unceasingly. However, as JPMorgan notes in a rather aggressive note, a local press article sheds doubts over Argentina's 'honest' reporting of international reserves. Though long used to the lies about inflation (that ended up with the economy minster being fired and it being deemed 'illegal' to tell the truth), JPMorgan blasts that during a balance of payments crisis - as Argentina is undergoing - such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime and is "a very very bad idea". Simply put, Argentina is over-stating its reserves... considerably.

Which hits the bottom of the chart first?

 

Via JPMorgan,

Prior to the week of peso devaluation (Jan 23) the reporting discrepancy (first print minus final report) was running at an average daily -$0.02 billion (and of no interest to investors), during the week of devaluation it jumped to +$0.15 billion and the week following devaluation it increased further to +$0.29 billion. On Jan 30th (last comparable report) the discrepancy was +$0.45 billion.

Authorities have provided no explanation for the initial over-statement of reserves this implies, thus, inviting markets concern over reliability of reserve reporting. Note that the discrepancy between first print and final report does not necessarily imply that the quality of final reserve reporting is deteriorated (only that of the same-day estimate). But by tainting the reliability of first print it will raise market concern over potential lack of reliability of final reporting too.

While first print is preliminary and subject to revision, the size of recent discrepancies have no precedent. This suggest that the government may be attempting to manage expectations by temporarily fudging the "estimate " of reserve numbers (first print) while not compromising "actual" final reported numbers. If this is so, it is a dangerous game to play and one likely to back-fire.

During a balance of payments crisis - as Argentina is undergoing - such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime.

Note that informal same-day estimates from market participants about that Central Bank intervention have been higher than same-day reporting of that intervention by authorities lately. With this backdrop in mind, the growing over-statement in same-day reserve level reporting will also lead to suspicion that same-day reporting of FX intervention in spot market by Central Bank is understated.

And as a gentle reminder of the mirage of currency devaluation/hyperinflation on stock returns (cough Japan cough) - here is Argentina's MERVAL index adjusted for its currency (official and black market) - not the outperformer it was heralded...

Coming to a Develped Market near us soon?

 

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Tue, 02/04/2014 - 15:09 | 4400979 idea_hamster
idea_hamster's picture

Well, if anyone knows a bullshit asset-side of the balance sheet....

Tue, 02/04/2014 - 15:10 | 4400988 wee-weed up
wee-weed up's picture

Pot, meet kettle.

Tue, 02/04/2014 - 15:25 | 4401041 El Oregonian
El Oregonian's picture

"Don't lie for me Argentina!"

 

Tue, 02/04/2014 - 15:26 | 4401046 redpill
redpill's picture

In other words, don't bullshit a bullshitter Kirchner!

Tue, 02/04/2014 - 16:28 | 4401324 knukles
knukles's picture

Fudging, lying, misrepresenting aside, sure is comforting to know that the Argies have no idea of how much reserves they got.

BTW, where's yer gold held?
How much of it do you think you own?
Have ya done a vault check recently?

No?

Sheeeeeeeeit.....

Tue, 02/04/2014 - 15:14 | 4401009 Canadian Dirtlump
Canadian Dirtlump's picture

no kidding. This is like a guy with a 400 pound wife talking shit about a guy's 200 pound wife.

Tue, 02/04/2014 - 15:11 | 4400985 nope-1004
nope-1004's picture

Hypocrisy at its finest.

 

Let's talk commodities charts and falsified inventory, shall we?

 

Tue, 02/04/2014 - 17:09 | 4401513 pods
pods's picture

I would try to look at this analytically, but I just can't.

JPM is the fount of falsified reserves, cough-gold-cough.

I am going to start smacking people whenever I heard them speak of JPM in anything other than a severe negative way.

Lucky for me nobody in RL gives a flying shit that they are fucked by them on a daily basis.

pods

 

Tue, 02/04/2014 - 15:10 | 4400987 Randoom Thought
Randoom Thought's picture

If Argentina was a bank then it would take all of its debt off balance sheet and then create money out of thin air, which it would lend to a special purpose entitiy which would then purchase all of the debt. Argentina would have a cough, cough "fortress balance sheet" and lots and lots of cash to spend buying up assets.

Pot, Kettle, Black.

JPM should simply be ignored as irrelevant.

Tue, 02/04/2014 - 15:10 | 4400992 fijisailor
fijisailor's picture

What a dilemma.  Trust the words of a corrupt insolvent bank or a corrupt insolvent country.

Tue, 02/04/2014 - 15:12 | 4400994 666
666's picture

Doesn't the USSA do the same? The federal budget deficit doesn't include the $trillions in mortgage and other securities that are worthless. Mark-to-market, anyone?

Tue, 02/04/2014 - 15:11 | 4400996 i_call_you_my_base
i_call_you_my_base's picture

They are piling on. It's clear that the US is purposefully sinking EMs.

Tue, 02/04/2014 - 15:17 | 4401019 Occident Mortal
Occident Mortal's picture

Whose oil is it now? Bitch.

Behold the mighty dollar.

Tue, 02/04/2014 - 16:47 | 4401395 ParkAveFlasher
ParkAveFlasher's picture

+1000.  Isn't all so clear, how it unfolds?

Tue, 02/04/2014 - 15:13 | 4401001 youngman
youngman's picture

Jamie probably has a ranch down there or something

Tue, 02/04/2014 - 15:29 | 4401048 HyBrasilian
HyBrasilian's picture

Afghan "POPPY'S" en route to be transplanted as we speak... It's a cash crop dontcha kno?

Tue, 02/04/2014 - 16:00 | 4401184 negative rates
negative rates's picture

Prolly, or something.

Tue, 02/04/2014 - 15:17 | 4401002 Number 156
Number 156's picture

You guys should of broke out the Captain Renault pic. 

I'm shocked, shocked to find that gambling is going on in here!

Tue, 02/04/2014 - 15:15 | 4401005 NOTaREALmerican
NOTaREALmerican's picture

The Argentine stock market is "reflecting" the "truth". 

Tue, 02/04/2014 - 15:27 | 4401017 Dr. Engali
Dr. Engali's picture

I take offense at JP Morgan.

Authorities have provided no explanation for the initial over-statement of reserves this implies, thus, inviting markets concern over reliability of reserve reporting.

 

The hypocrcricy is stunning. There is nothing that the morgue or th U.S reports which is accurate. Markets indeed...

Tue, 02/04/2014 - 16:01 | 4401043 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

This suggest that the government may be attempting to manage expectations by temporarily fudging the "estimate " of reserve numbers (first print) while not compromising "actual" final reported numbers. If this is so, it is a dangerous game to play and one likely to back-fire.

During a balance of payments crisis - as Argentina is undergoing - such manipulation of official statistics (and one so critical for market sentiment) is detrimental to the needed confidence building around the transition in the FX regime.

 

You would think they are talking about gold and the USD aka the trainsition in the FX regime part here....

Tue, 02/04/2014 - 20:07 | 4402079 Offthebeach
Offthebeach's picture

The Argentineans should hire Turbo Timmah.

Tue, 02/04/2014 - 15:31 | 4401056 Confundido
Confundido's picture

This has a disturbing similarity to gold here....not that I imply anything of course, but did you realize that the more nominal peso rates are raised, the faster reserves fall and that the true number is hidden and that there is a growing premium on physical, US dollar bills in hand vs. paper US dollar bill, also known as "dólar oficial"?....Disturbingly similar...indeed...Question is....when will nominal rates spike here as much as there???

Tue, 02/04/2014 - 15:37 | 4401081 They Tried to S...
They Tried to Steal My Gold's picture

NOW THIS IS COMEDY !!!

 

what will they say about the FED & THE BLS ?!?!?!?!?!?!?!?!

Tue, 02/04/2014 - 15:43 | 4401105 Lux Fiat
Lux Fiat's picture

+1,000,000,000

(Don't forget CBO, OMB, and a list of officials too long to mention, etc.)

Tue, 02/04/2014 - 15:37 | 4401084 Lux Fiat
Lux Fiat's picture

This suggest that the government may be attempting to manage expectations by temporarily fudging the "estimate " of reserve numbers (first print) while not compromising "actual" final reported numbers.

Don't worry, they'll start fudging the "actual" final reported numbers soon enough - Voila!  mean old discrepancy eliminated. Problem solved.

Tue, 02/04/2014 - 15:43 | 4401100 RaceToTheBottom
RaceToTheBottom's picture

JP Morgan:
"Wait, we are the only ones that should be able to fuck up numbers...."

Tue, 02/04/2014 - 15:51 | 4401131 AurorusBorealus
AurorusBorealus's picture

   It is beyond doubt that the financial media, i.e. the Mouth of Wall Street, has had it in for Argentina for some years now.  Such is the punishment for anyone who dares to give the finger to Wall Street, who dares to restrict USD and the ability of the global financial elite to pillage their country, who dares to try to extract themselves from the corrupt global financial system in which global finance reaps all the rewards and the people suffer.  The financial media has deliberately overstated the rate of inflation in Argentina for years (I live here... I know damn well what the rate of inflaton was).

  They have used the blue rate for over two years as a measure of inflation and the devaluation of the Peso, which is just ridiculuous and a transparent lie. The blue rate is a black market, where prices for dollars are artificially high because of the currency controls and the artificially limited supply of dollars.

   What is truly sad, however, is that Argentina could have pulled this off and pulled out of the global financial system.  We have most of the resources that we need here.  We do not import much except electronics from China and pay for that with soy.  The Kirschner government just did not have the courage to end the excesses of the welfare state here, paying every single mother for every child, for example (the result of which is that half the 16-year-old girls one encounters are pregnant).

   Now you will all be taught the wrong lessons from this... import-export tariffs are bad.  You have to open up your markets so that international capital privateers can loot the assets of your country with funny-money from the Fed or the ECB... etc...  .  The reality is... if Argentina had just had the courage to end the excesses of its welfare state, handled the ensuing unrest in an orderly and humane way as possible, it could have freed itself... sad... sad times indeed for my adopted country.

 

Tue, 02/04/2014 - 15:49 | 4401136 Toolshed
Toolshed's picture

JPM will not tolerate any competition in their key markets - deception and manipulation.

Tue, 02/04/2014 - 15:55 | 4401144 ziggy59
ziggy59's picture

Pot; meet kettle...

Sorry..I see this line used below.

Tue, 02/04/2014 - 15:59 | 4401176 BanksterSlayer
BanksterSlayer's picture

Has the Bundesbank even thought of looking for its missing gold ... in Argentina?

Tue, 02/04/2014 - 17:30 | 4401620 Cacete de Ouro
Cacete de Ouro's picture

Anyone know anything about Argentina's supposed 61 tonnes of gold reserves? I suspect the 61 tonnes are 'invested, in perpetually rolling gold deposits of 3-12 months with the LBMA bullion banking cartel (like most Sth American gimp central banks) but it would be nice to know the details exactly, and which handful of banks currently 'have' the gold liability to the Argy Bargies?

Tue, 02/04/2014 - 16:01 | 4401191 DetectiveStern
DetectiveStern's picture

There's more to this than it seems. Just gotta follow the money. Things usually happen because certain people stand to gain immensely. The con that these events are random is the real trick.

Tue, 02/04/2014 - 16:27 | 4401321 AurorusBorealus
AurorusBorealus's picture

Of course there is more to this.  Argentina has oil, land (with an enormous cattle herd... I know because trucks filled with cattle pass my house all day), unmined gold in the Western part of the country, and all sorts of other goodies and resources.  The object of the game is to get as much collateral and interest as possible when Argentina comes seeking international financing to repair its foreign reserve holdings after the run on those holdings that JPMorgan induced with their bogus reporting about blue market rates and their relation to inflation and devaluation of the Peso.

 

Tue, 02/04/2014 - 16:01 | 4401194 DetectiveStern
DetectiveStern's picture

There's more to this than it seems. Just gotta follow the money. Things usually happen because certain people stand to gain immensely. The con that these events are random is the real trick.

Tue, 02/04/2014 - 16:14 | 4401257 Spectre
Spectre's picture

Screw Argentina, they are inconsequential. 

Tue, 02/04/2014 - 16:52 | 4401417 RottenAlpha
RottenAlpha's picture

Read this Forbes Article on Emerging Markets....its translated but it makes the point

http://www.google.com/translate?hl=en&ie=UTF8&sl=es&tl=en&u=http%3A%2F%2...

Tue, 02/04/2014 - 17:03 | 4401488 A. Magnus
A. Magnus's picture

JP Morgan complaining about shitty accounting is like a pedophile complaining about the sex crimes of a rapist...

Tue, 02/04/2014 - 17:29 | 4401623 tocointhephrase
tocointhephrase's picture

You deserve each other

Tue, 02/04/2014 - 17:38 | 4401646 Hongcha
Hongcha's picture

What's the age of consent in Argentina :0) ?  Just asking.

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