Market Manipulation

EB heads to TV...and reflects on predictions from 2009's "A Grand Unified Theory of Market Manipulation"

My revelations in European banks have resulted in two top level "unexpected" resignations (Irish Central Bank head, RBS CEO). Here I'm shooting for a 3rd at Bank of Ireland!

Earlier this month, in an article for “Project Syndicate” famous American economist Nouriel Roubini joined the chorus of those who declare that the multi-year run up in the gold price was just an almighty bubble, that that bubble has now popped and that it will continue to deflate. Gold is now in a bear market, a multi-year bear market, and Roubini gives six reasons (he himself helpfully counts them down for us) for why gold is a bad investment. His arguments for a continued bear market in gold range from the indisputably accurate to the questionable and contradictory to the simply false and outright bizarre. But what is most worrying, and most disturbing, is Roubini’s pathetic attempt to label gold bugs political extremists. It is evident from Roubini’s essay that he not only considers the gold bugs to be wrong and foolish, they also annoy him profoundly. They anger him. Why? – Because he thinks they also have a “political agenda”. Gold bugs are destructive. They are misguided and even dangerous people.

Following last night's revelation that FX trading is the latest addition to the "rigged" column, here is a summary of the known market manipulation scandals (because it can be problematic keeping track of all by now):

• Libor - interest rates (link)
• ISDAfix - swaps (link)
• Platts - oil prices (link)
• WM/Reuters - FX (link)
• High-Frequency Trading - equities (link)

We also know that the Fed and world central banks are engaged in a full blown (and unprecedented) Treasury curve modeling exercise courtesy of both ZIRP (short-end) and QE (long-end), and that courtesy of some $12 trillion in extra liquidity in the past 5 years, stocks are at an artificial "weath effect" sugar high. We can therefore deduce that, following the process of elimination, gold and silver are the only markets that are unmanipulated and where transparent price discovery is allowed to take place without intervention from key players.

Chevron, we have a problem.

There are times when some people bite their own nose of just to spite their face. According to a report that has just been published by the Chartered Institute of Personnel and Development (CIPD), the people working in the financial sector in 120 different countries in the world think in the overriding majority of cases that they are paid far too much for what they do. Were they serious?

America may be a service economy but for the sake of tomorrow's NFP let's pretend it isn't. Because if the employment component of the Non-manufacturing (i.e., Services) ISM, which at least in the pre-centrally planned times correlated with the NFP number with an R² of about 0.9, is indicative of what to expect, one can kiss any hopes of a recovery goodbye. Which, of course, is great news! It means the Fed will never pull out and never realize that it is the Fed's central planning and market manipulation that is responsible for the every deeper global economic depression which benefits only stock holders (and traders).

Turd Ferguson, of the TF Metals Report, does superb work and commentary on the precious metals markets. His latest analysis on Friday’s Commitment of Traders Report caught my attention for a number of reasons, in addition to it being so well done.

At the height of the financial crisis (i.e. 2008) it was easy to despise just the bankers for their serial and colossal ineptitude and rank hypocrisy. Now, five years into one of history’s most alarming bubbles, it’s easy to despise just about everyone in a position of financial or political authority, and for the same reasons. The real black comedy lies in the manipulation of market prices that is now endemic throughout the global financial system. As Japan is now showing, even with the unrestrained commitment of a central bank and its magical powers to create money out of nothing, there are practical limits to market rigging activity. Last week’s price action within the Japanese government bond market and stock market suggests that both of these markets are in the early stages of shaking themselves to pieces. The fallout of unintended (counter-intended ?) consequences from massive market manipulation will be awesome.

Corruption thrives when good people do nothing. Societies rebound when good people do something. Isn't it time to make democratic capitalism happen. Democratic capitalism is about worthwhile production and exchange by communities of people who give a damn. It is expressly not about either crony-driven concentration of wealth or government redistribution.

It has just been released that the UK came within 6 hours of seeing itself deprived of its eggs and bacon as gas supplies across the entire country depleted to danger levels on March 22nd.

Unless there's a shock to the system when people start seeking safety, there's not much upside momentum for gold.

Silver’s recovery yesterday from being 10% lower at one stage to recouping these losses and then rising over 2% was very positive technically. The key reversal is leading some to postulate that we may have seen the bottom or are close to a bottom. 

There are some strange things happening right now in the oil market worth mentioning.

European Union Launches Investigation Into Manipulation of Oil Prices Since 2002