So simple the underwear gnomes could do it:
- Create a cartel
- Corner and manipulate the market
And that's why they (and Jamie Dimon) are richer than you.
- MOAR: BOJ Said to See Significant Room for More Bond Purchases (BBG)
- Meltdown Averted, Bernanke Struggled to Stoke Growth (Hilsenrath)
- New Mortgages to Get Pricier Next Year (WSJ)
- Republicans to Seek Concessions From Obama on Debt Limit (BBG)
- Hunting for U.S. arms technology, China enlists a legion of amateurs (Reuters)
- Jury Begins Deliberating in Case of SAC Portfolio Manager (WSJ)
- BP to Write Off $1 Billion on Failed Well (WSJ)
- Rajan Unexpectedly Keeps India Rates Unchanged to Support Growth (BBG)
- Thai protesters say they will rally to hound PM from office (Reuters)
- SEC Brings Fewer Enforcement Actions, Slows Early-Stage Probes (WSJ)
A month ago, regulators in Europe began their investigation into manipulation of the "London gold fixing" (and we explained the methods here). While the complete history of gold manipulation goes a lot deeper than just banging the close on this crucial benchmark (which goes back to first world war); the decision by Germany's financial regulator (BaFin) to probe Deutsche Bank signals greater concerns over the precious metals markets. As The FT reports, BaFin has demanded emails and documents from Deutsche Bank as part of an investigation into potential manipulation of gold and silver prices.
It has been another session of overnight weakness, in which, to quote Deutsche Bank, "something has changed" as ES algos no longer track every tick of the EURJPY (or other JPY pair variants). Usually in such transition periods where the robots are not sure how to trade risk based on highly leveraged inputs, things go bump in the night, and they did just that with the E-Mini trading just off its overnight lows, despite a notable rise in the EURJPY from yesterday's close. Keep a close eye on the now traditional pre-market ramp in the EURJPY - if unaccompanied by an increase in the E-mini, it may be time to quietly exit stage left.
Despite being found guilty of and fined for manipulations of every other market in the world (from FX to rates to energy), investors small and large continue to play the markets on the basis that they are fair and balanced. Aside from high-profile insider trades; day after day, the oddly high correlations, the obvious spikes, blips, and front-running are ignored... until now. In this brief documentary, CBC asks the critical question "are the world's stock markets rigged?" Amanda Lang concludes "there’s a sense among the general public that nobody seems to be maintaining the integrity of the system." as she highlights case after case "as though everything is rigged!" Conspiracy theory evolves once again into conspiracy fact as the system that's supposed to benefit many, but actually enriches a few.
The US data flow is relatively light which is typical of a post-payrolls week but it’s worth noting wholesale inventories on Tuesday and retail sales on Thursday. Importantly US House and senate negotiators are supposed to come to an agreement on a budget before the December 13th deadline. A lot of optimism has been expressed thus far from members of congress, and there are reports that a budget deal will be unveiled this week.
See why the Fed is unlikely to taper in December, but Q1 14 is much more likely. Read a preview of the highlights from the week ahead.
*Statement is subject to standard terms and conditions and is not necessarily reflective of any evidence. Government entities are excluded from inclusion based on the fact that we can't really do anything about them and anyway; they could put us out of business; and it would make things really, really bad for them. Also, bullion banks are not covered under this statement because we were told to turn a blind eye; but individual investors are, and we can categorically confirm that, to the best of our knowledge, no individuals are manipulating the precious metals markets (at this time).
- Deutsche Bank gets biggest combined penalty of €725.4mln.
- SocGen fined €445.9mln for Euribor manipulation.
- RBS agrees to pay €391mln in cartels
- JPMorgan fined €79.9mln in JPY LIBOR case.
- R.P. Martin Holdings Ltd fined €247,000
- UBS and Barclays escape fines as EU whistle-blowers.
- EU Fines Financial Institutions Over Fixing Key Benchmarks (Reuters)
- Euro-Area Economic Growth Slows as Exports, Consumption Cool (BBG) - someone has a very loose definition of growth
- Ukraine Officials Scour Globe for Cash as Protests Build (BBG)
- Oops: Franklin Boosted Ukraine Bet to $6 Billion as Selloff Began (BBG)
- Japan Plans 18.6 Trillion Yen Economic Package to Support Growth (BBG) - or about 2 months of POMO
- How Peugeot and France ran out of gas (Reuters)
- Iran threatens to trigger oil price war (FT)
- Abe Vows to Pass Secrecy Law That Hurts Cabinet’s Popularity (BBG)
- Brazil economy turns in worst quarter for 5 years (FT)
- Australia’s Slowdown Suggests RBA May Need to Do More (BBG)
- Biden calls for trust with China amid airspace dispute (Reuters)
While there was a plethora of macro data (starting with some ugly numbers out of Australia which clobbered AUD pairs overnight), China HSBC Services PMI dipping slighlty from 52.6 to 52.5, Final Eurozone PMI Services (printing at 51.2 up from 50.9 and beating expectations of the same on an increase in German PMI numbers from 54.5 to 55.7 and a decline in French PMI from 48.8 to 48.0), Eurozone retail sales declining by 0.2%, on expectations of an unchanged print, and much more (see below), perhaps the most important news of the day came from Japan which many expect will be the source of much more easing in the coming months and thus serve as marginal lever to push global fungible markets higher. However, not only did various BOJ officials for the first time in a while talk down expectations of a QE boost, but the head of the Japan GPIF said that it doesn't need to sell JGBs right now as it would "rock markets" and that instead can achieve its targeted 52% weighing as bonds mature, that it may buy foreign bonds instead to raise weighting to core target (as the Fed buys Japan bonds?), and that it will be very difficult for Japan to hit the BOJ's inflation target in 2 years. Is Japan already getting cold feet on rumors of more QE and did it realize there are only so many assets it can monetize. If so, watch out below on the EURJPY which has now priced in about 700 pips of expected BOJ QE boosting in early 2014.
- So much for the euphoria: Stores open early on Thanksgiving but shoppers in no rush (Reuters)
- Get to work Mr. Chairwoman: Do-Nothing Congress Dithers on Budget as Deadline Nears (BBG)
- FX to Libor Probes Leave U.K. Traders Looking for Lawyers (BBG)
- Protesters Briefly Storm Thai Army Headquarters (WSJ)
- Berlusconi accused of bribing witnesses in prostitution trial (Reuters)
- Japan Price Gauge Rises Most Since ’98 in Boost to Abe (BBG)
- S&P downgrades Netherlands’ AAA credit rating (FT)
- GrainCorp Verdict Clouds Australia Open-For-Business Pledge (BBG)
- Hertz Fix in Dollar Thrifty Deal Fails as Insider Warned (BBG)
- Narrow Budget Agreement Comes Into View (WSJ)
It would likely also deal another blow to the U.S property market and the fragile U.S economy. JP Morgan, Bank of America and Wells Fargo appear to be most exposed - meaning that either taxpayers will again be asked to bail out banks or more likely the coming bail-in regime will confiscate cash from depositors.
The Economist found, rather sadly, despite all the glad-handing and happy-talk, that 53% of financial services executives believed that strict adherence to ethical conduct would make career progression difficult. As this former Wall Street trader told The Guardian, "a precedent needs to be set, to slow down Wall Street's wild behavior. A reminder that rules are there to be followed, not exploited." The reason, among others, is summed up by the following, "if a customer wants a red suit, you sell them a red suit. If that customer is Japanese, you charge him twice what it costs."
Goldman Reveals "Top Trade" Recommendation #2 For 2014: Go Long Of 5 Year EONIA In 5 Year Treasury TermsSubmitted by Tyler Durden on 11/26/2013 08:27 -0400
If yesterday Goldman was pitching going long of the S&P in AUD terms (the world renowned Goldman newsletter may cost $29.95 but is only paid in soft dollars) as its first revealed Top Trade of 2014, today's follow up exposes Top Trade #2: which is to "Go long 5-year EONIA vs. short 5-year US Treasuries." Goldman adds: "The yield differential between these two financial instruments is currently -61bp, and we expect it to reach around -130bp. On the forwards, the differential is priced at around -95bp at the end of 2014 at the time of writing. We have set the stop-loss on the trade at a spread of -35bp. The choice of Treasuries over OIS or LIBOR on the short leg is motivated by the fact that yields on the former could underperform more than they have already in relative space as the Fed scales down its asset purchase program."