We have discussed RINs a number of times in the past year - pointing out the surge in the price of these ethanol credit-related derivatives and how they are the gas-market's four-letter word. As we explain below, the NY Times notes that the recent surge in the price of this little-known financial instrument - which was in large part responsible for the rise in the price of gas at the pump - could have been manipulated by JPMorgan's alleged stockpiling. As they note, the market in ethanol credits is exactly the kind Wall Street loves: opaque, lightly regulated and potentially very lucrative; and the ability for a major player to build a stockpile of these credits (effectively cornering the market) is relatively straightforward given the lack of detailed regulation. As Senator Thomas A. Coburn, Republican of Oklahoma, notes "When you see something change as rapidly as this, somebody’s hoarding them, somebody’s buying them, somebody’s making big bucks."
Gold and silver futures surged 2.1% and 3.6% respectively and the dollar fell on the open in Asia prior to determined selling which again capped precious metal prices. Analysts and media attributed the price gains on the withdrawal of Larry Summers from the race to be the new Fed Chairman, leaving Janet Yellen as the new frontrunner.
The most important event of the "coming" week was unexpected, and did not even take place during the week, but the weekend. So with Summers unexpectedly, and uncharacteristically out, here is what else is in store.
- Syrian Rebels Hurt by Delay (WSJ), U.S. seeks quick proof Syria ready to abandon chemical weapons (Reuters)
- Lavrov Brings Acerbic Pragmatism to Syria Meet With Kerry (BBG)
- Five years after Lehman, risk moves into the shadows (Reuters)
- U.S. shares raw intelligence data with Israel, leaked document shows (LA Times)
- Japan to raise sales tax, launch $50 bln stimulus (AFP) - so 1) lower debt by sales tax, then 2) raise debt through stimulus.
- Blackstone’s Hilton Files for $1.25 Billion U.S. Initial Offer (BBG)
- Second Life Bankers Thrive in Dubai as Boutiques Boost Fees (BBG)
- Brussels probes multinationals’ tax deals (FT)
- Wall Street's Top Cop: SEC Tries to Rebuild Its Reputation (WSJ) ... and fails
- Tablet sales set to overtake PCs (FT)
- The end of angst? Prosperous Germans in no mood for change (Reuters)
- Obama Shrinking Second-Term Hastened by Syria Opposition (BBG)
- Obama says Russian proposal on Syria a potential 'breakthrough' (Reuters)
- Poll Finds Support Fading for Syria Attack (WSJ)
- France to Introduce Resolution Aimed at Dismantling Syria's Chemical Arsenal (WSJ)
- Apple to Unveil IPhones Seeking End to Year of Struggles (BBG)
- Verizon Plans Largest Debt Sale Ever: Proceeds From Deal, Expected to Raise $20 Billion, Would Fund Venture Buyout (WSJ)
- Shipping Rates Seen at 2010 High on Record Ore to China (BBG)
- Ads coming to Twitter: Twitter makes its largest acquisition, a mobile ad company (FT)
- Houses on fire as fighting erupts in southern Philippines (Reuters)
- Banks Seen at Risk Five Years After Lehman Collapse (BBG)
For the second day in a row, better than expected Chinese "data" set sentiment across the board when following an improvement in its trade data (even as crude oil imports dropped to an 11 month low), last night China reported a better than expected August Industrial Production print of 10.4%, compared to 9.7% for July, and higher than the 9.9% expected. This was driven by a pick up in Chinese M2, which rose from 14.5% to 14.7% Y/Y, as the PBOC has once again resuming what it does best, injecting liquidity into the system, even if said liquidity no longer makes its way into the proper channels, as new CNY loans missed the expected CNY730bn, rising to 711.3bn for August. Elsewhere, not all was good on the Industrial Production front, following a French miss of -0.6% on expectations of a rebound to +0.5%, as well as a miss in mfg production of -0.7%, down from -0.4% and below the expected 0.7%. This, in parallel with Moscovici once again saying the 2013 deficit will be "slightly higher than 3.7%" means that just like in 2012, and with German economic metrics continuing to contract, as the periphery stages a modest rebound it is the core that threatens Europe's stability once again. Finally, and since in Europe everything is ultimately funded by current account positive Germany either directly or via TARGET2, the recent Italian economic strength, which also means a bounce in imports, meant that Italian TARGET2 liabilities (through which Germany indirectly funds Italy's current account deficit) are once again back at a 4 month high. And so the cycle repeats.
- UN Insecptors to leave Syria early, by Saturday morning (Reuters)
- Yellen Plays Down Chances of Getting Fed Job (WSJ)
- JPMorgan Bribe Probe Said to Expand in Asia as Spreadsheet Is Found (BBG)
- No Section 8 for you: Wall Street’s Rental Bet Brings Quandary Housing Poor (BBG)
- Euro zone, IMF to press Greece for foreign agency to sell assets (Reuters)
- Brothels in Nevada Suffer as Web Disrupts Oldest Trade (BBG)
- U.S., U.K. Face Delays in Push to Strike Syria (WSJ); U.S., U.K. Pressure for Action on Syria Hits UN Hurdle (BBG)
- Renault Operating Chief Carlos Tavares Steps Down (WSJ)
- Vodafone in talks with Verizon to sell out of U.S. venture (Reuters)
- Dollar Seen Casting Off Euro Shackles as Fed Tapers (BBG)
"Banging the close," is hardly a new 'event' but the ubiquity with which it is occurring around 4pm GMT (when major FX market benchmarks known as 'WM/Reuters rates' are set) is prompting authorities to investigate potential abuse of these benchmarks by the major banks. From Libor to ISDAFix and from base-and-precious metals to energy markets, adding the largest markets in the world - foreign exchange - to the banks' pernicious manipulations does not seem like a stretch. Critically, benchmark providers base daily valuations of indexes spanning different currencies on the 4 p.m. WM/Reuters rates (which in turn drives derivative settlements and triggers). Stunningly, the same pattern - a sudden surge minutes before 4pm in London on the last trading day of the month, followed by a quick reversal - occurred 31% of the time across 14 FX pairs over 2 years, according to data compiled by Bloomberg. For the most frequently traded pairs, such as EURUSD, it happened about half the time! U.S. regulators have sanctioned firms for banging the close in other markets; we await the results of the current probe...
“Is the gold market manipulated?” This is one of those extremely dodgy questions that has left both investors and economists very divided. By arguing whether or not gold manipulation exists, we may find that we are wasting our brain cells on the question. A better question, and one that we might choose to monitor on a regular basis, might be, “To what degree is successful manipulation taking place?” We might then use the on-going answer as a guide, to inform our reasoning going forward, as to what impact any perceived manipulation is likely to have with regard to our precious metals investment.
Overnight equity markets are getting a lift from headline-making beats for Chinese exports and (more importantly) imports. A 10.9% YoY rise in imports (compared to a +1.0% expectation) and a surge in copper 'demand' has the media calling the turn on the global economy (even as China's trade balance at $17.82bn missed expectations of $26.9bn by the most in 4 months and for the second month in a row). But... one glance below the surface of this 5.5 Sigma beat for imports and the other absurdities discrepancies are glaring...
- Libor Settlements Said to Ease CFTC’s Path in Rate-Swaps Probe (BBG)
- Manhattan Homes Under $3 Million Never Harder to Buy (BBG)
- Just two years late: Abe Pledges Government Help to Stem Fukushima Water Leaks (BBG)
- Chesapeake drops energy leases in fracking-shy New York (Reuters)
- Hedge Fund Magnetar Won't Face Charges Tied to Mortgages (WSJ)
- U.S. envoy leaves Cairo after talks declared over (Reuters)
- Credit-Crisis Oracle Rajan to Head India’s Central Bank (BBG)
- Bank of England Changes Policy Tack (WSJ)
There are lot of similarities between the 1920s and today. In fact Livermore’s quote says it all: “There is never anything new on Wall Street, because speculation is as old as the hills.” 1924-1929 bull market was rigged by stock manipulators. Ninety-some years later the market is still (or at least is perceived to be) rigged by ...
Given that the demand for physical gold among private investors has remained strong throughout 2013, the significant price declines in recent months took many investors by surprise. Attempting to make sense out of this situation, speculation has arisen that the so-called 'bullion banks' (the mostly "Too Big to Fail" institutions that are known to work closely with the central banks) have lent out, or even sold, gold on a fractional basis, far in excess of what is supposedly held in their vaults. The result would have been to multiply greatly the amount of 'apparent' gold in the market and thereby depress prices. Such an action would provide needed cover for the embarrassment of currency depreciating central banks' policies.
Any backwardation in gold at all is serious. Recently, a related phenomenon has occurred: the GOFO rate has gone negative.
Facts are treasonous and dangerous in an empire of lies, fraud and propaganda. It is maddening to watch the country spiral downward, driven to ruin by a psychotic predator class, while the plebs choose to remain willfully ignorant of reality and distracted by their lust for cheap Chinese crap and addicted to the cult of techno-narcissism. We are a country running on heaping doses of cognitive dissonance and normalcy bias, an irrational belief in our national exceptionalism, an absurd trust in the same banking class that destroyed the finances of the country, and a delusionary belief that with just another trillion dollars of debt we’ll be back on the exponential growth track. The American empire has been built on a foundation of cheap easily accessible oil, cheap easily accessible credit, the most powerful military machine in human history, and the purposeful transformation of citizens into consumers through the use of relentless media propaganda and a persistent decades long dumbing down of the masses through the government education system. This national insanity is not a new phenomenon. Friedrich Nietzsche observed the same spectacle in the 19th century: “In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule.”