Market Manipulation

A quarter after Goldman reported the highest per employee comp since the record bonus period just after the Lehman bankruptcy, when the average employee of the firm's then 31,700 workers made $431,956, the firm which once ruled the world proudly with tentacles running every important global central bank, was forced to slash employee comp by a whopping 35%, from $3.7 billion, a comp margin of 44% in Q3 2012 and roughly the same last quarter, to a tiny $2.4 billion, or a comp margin of just 35.4%, resulting in average trailing 12 month per employee (of which it had 32,600 in Q3 2013) accrued compensation of just $380,368, the lowest since Q2 2012.

Q. How worried are you that one morning the bond market has moved against the United States?

A. It’s virtually assured, the question is when and how. I don't know if it will be two years of five years but it will happen. It is a matter of time, the United States can’t borrow indefinitely. Over hundred years bankruptcies of country after country who thought they could get away with it because they had the reserve currency and the military power of the world. We are going to have fiscal discipline. It’s imposed upon us or we do the right thing and do it to ourselves the right way.... America knows the way, it doesn't have the will.

A few days ago many were shocked when JPM disclosed for the first time that in less than four years, or since 2010, Jamie Dimon's den of alleged criminals has reserved a mindblowing $28 billion toward legal expenses.  In light of recent developments, investors may just want to round that number to a good, clean $30 billion, because as the WSJ just revealed, yet another JPMorgan market manipulator has emerged in a seemingly endless line of people whose shortcut to success at 270 Park Avenue has been to manipulate assorted markets, be it Libor, Credit Derivatives, Electricity, Aluminum, or Equities. We can now add FX to that, following news that one Richard "Dick" Usher, until 2010 at RBS, and since then JPM's London-based head of G10 spot trading, has been implicated in the infamous RBS FX London closing fax manipulation "chat sessions."

60% of Americans Want a Third Party Candidate for 2016

Five years later, while some are congratulating themselves on avoiding another depression, no one in Europe or the United States can claim that prosperity has returned. The financial system may be more stable than it was five years ago, but that is a low bar – back then, it was teetering on the edge of a precipice. Those in government and the financial sector who congratulate themselves on banks’ return to profitability and mild – though hard-won – regulatory improvements should focus on what still needs to be done. Some are pleased that the economy may have bottomed out. But, in any meaningful sense, an economy in which most people’s incomes are below their pre-2008 levels is still in recession. An The glass is, at most, only one-quarter full; for most people, it is three-quarters empty.

It just keeps getting worse and worse for Bill Ackman. A few weeks after the epic humiliation, not to mention even more epic losses, he suffered on his now defunct JCP long position (despite ample warnings by the likes of Zero Hedge who said long ago JCP is merely a melting icecube and fast-track Chapter 11/7 candidate) all those who predicted (such as Zero Hedge back in January) that an epic HLF short squeeze would result in the aftermath of Ackman's Herbalife short announcement leading to Ackman's ultimate capitulation, have been proven correct. Moments ago, in a letter to investors, Bill Ackman just announced that he has covered over 40% of his Herbalife short position, with his forced buy-in explaining the endless move higher in Herbalife stock in recent weeks. The explanation of being forced out of nearly half of his position is amusing: "we minimize the risk of so-called short squeezes or other technical attempts by market manipulators to force us to cover our position." So Ackman is forced out by his Prime Brokers so as not to be forced out by market manipulators? That's an interesting explanation for what is a far simple situation: booking your paper losses.

Silver continues to see strong store of value demand In India, the U.S. and elsewhere as buyers view the metal as cheap versus gold. 

Silver’s fundamentals remain very sound, with a very small finite supply of above ground, investment grade silver coins and bars and robust and increasing industrial and store of value demand - particularly in Asia.

We continue to believe silver will rise to its real record high or inflation adjusted high of $140/oz in the coming years.

It is somehow fitting that on the day when even more undisputed evidence is revealed, surrounding the most brazen market manipulation scheme in history - one involving the "unmanipulable" Libor benchmark rate which serves as the foundation for hundreds of trillions in interest rate sensitive instruments - that the CFTC would also come out moments ago, and announce that in its long-running investigation of alleged manipulation in the silver market... there is absolutely nothing wrong.

Two hours prior to the Federal Open Market Committee (FOMC) release, gold was trading below $1,300/oz but started to gradually tick higher prior to surging higher on heavy volume, minutes prior to the release of the FOMC statement. 

FX markets, stock, bond and commodity markets did not see similar large moves.

Even as JPMorgan seems set to put its London Whale troubles behind it with a nearly $1 billion imminent settlement, while at the same time throwing two mid-level traders at NY prosecutors and washing its hands of the whole tempest in a teapot affair, a curious snag has appeared. The CFTC, which in the past has never had a problem with promptly settling any market manipulation abuse with any bank in exchange for a small cash-greased slap on the hand, is suddenly a sticking point in JPM's ability to just walk away from the biggest prop trading Snafu in history. As WSJ reports, "the CFTC is focusing on the bank's increasingly aggressive trades made over several months early last year, when it added tens of billions of dollars to its derivatives positions—contracts tied to investment-grade corporate bonds, these people say. The CFTC is likely to use new powers granted by the Dodd-Frank law that allow it to charge firms for recklessly manipulating markets, say people familiar with the agency's thinking."

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Production of cannabis in Afghanistan has increased again according to estimates that have been published for 2012 and the business is now worth $65 million a year

There was a time when, if selling a sizable amount of a security, one tried to get the best execution price and not alert the buyers comprising the bid stack that there is (substantial) volume for sale. Of course, there was and always has been a time when one tried to manipulate prices by slamming the bid until it was fully taken out, usually just before close of trading, an illegal practice known as "banging the close." It appears that when it comes to gold, the former is long gone history, and the latter is perfectly legal. As the two charts below from Nanex demonstrate, overnight just before 3 am Eastern, a block of just 2000 GC gold futures contracts slammed the price of gold, on no news as usual, sending it lower by $10/oz. However, that is not new: such slamdowns happen every day in the gold market, and the CFTC constantly turns a blind eye. What was different about last night's slam however, is that this time whoever was doing the forced, manipulation selling, just happened to also break the market. Indeed: following the hit, the entire gold market was NASDARKed for 20 seconds after a circuit breaker halted trading!

It is somewhat ironic that none other than CNBC is reporting the news (which was suggested here months ago in "Will JPMorgan's "Enron" Be The End Of Blythe Masters?") that as part of its divestment of its physical commodities unit announced previously, JPMorgan may also seek to cover up any trace of market manipulation in the division recently embroiled in the aluminum cartel scandal (which we reported on in June 2011 and which story recently rose to prominence as a result of follow up reporting by the NYT) by getting rid of none other than Blythe Masters.