Mega-Bank Juice Earning Numbers and Cartel Market Manipulations
Companies / Market Manipulation Aug 08, 2009 - 01:01 PMBy: DeepCaster_LLC
“…what's bad for America is good for Goldman Sachs…
Indeed, as one of the biggest primary dealers of US Treasuries, Goldman Sachs has a huge vested interest in the United States digging a deeper and deeper hole…
By Goldman's own estimates, the US will borrow a record $3.25 trillion in the current fiscal year -- almost four times as much as in 2008…
…a “debt tsunami” that will lift Goldman's fortunes going forward.
To put it bluntly, Goldman Sachs is a play on the bankrupting of America -- the more we borrow, the more they make…
…but the American public should know this side of the Goldman profit miracle…
…profits of $3.44 billion in the latest quarter, while the company has set aside $11.4 billion this year to compensate its employees…so soon after Uncle Sam bailed them out with $10 billion of TARP money -- and millions more through AIG, all paid for by taxpayers.
It also did so by benefiting nicely from the Washington borrowing binge that was triggered in part by the banking crisis that started in Wall Street's own backyard.”
Good For Goldman, Bad For America
Terry Keenan, New York Post, July 19, 2009
Indeed, the Banking Crisis not only “started in Wall Street’s own backyard”, but it was, to speak politely, catalyzed in Wall Street’s own backyard.
Understandably, Ms. Keenan underestimates the magnitude of the Funds transferred courtesy of the U.S. Taxpayer. In addition to the $10 billion in TARP Money, Goldman received $11.9 billion via the AIG Bailout our sources indicate.
But it is not “merely” the Magnitude of Megabanks Profits, Courtesy of the U.S. Taxpayer that is disturbing (see Deepcaster’s “Opportunities & Threats in Derivatives Shocker” (05/29/2009) for discussion of $13 Trillions in Mega-Bank Profits in the last 6 Months of 2008 -- see ‘Articles by Deepcaster’ at www.deepcaster.com); it is the character of the ongoing Interventional Regime in which key Megabanks are intimately involved, which so greatly disadvantages U.S. Taxpayers and Investors Worldwide.
For those readers newly introduced to topic, there is clear and convincing evidence that a Fed-led Cartel* of key Central Bankers and Favored Financial Institutions regularly overtly and covertly manipulate Precious Metals, Equities and Strategic Commodities prices much to the detriment of Investors/Citizens around the world.
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*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the “Latest Letter” Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”
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Regarding Cartel* Market Interventions, most revealing is Rob Kirby’s (kirbyanalytics.com) recent expose of J.P. Morgan’s “book”. J.P. Morgan is a key Primary Dealer for the private for-profit U.S. Federal Reserve.
Consider
“As per their call reports filed with the Comptroller of the Currency’s Office, we know J.P. Morgan’s derivatives book grew by a cancerous 12 Trillion from June 07 to Sept. 07. The OCC’s Quarterly Derivatives Report serves as the public’s only peek into the opaque and murky world of derivatives-flim-flammery…
Flim Flammery is the understatement of the century. In fact, dealer notionals have EXPLODED parabolic-ally in recent years while END USER demand has been static and virtually non-existent…
J.P. Morgan’s derivatives book is epitomized by the chart above (Ed. Note: Chart Shows “End-User Demand as ”Non-Existent” but Dealer Notionals of over $120 Trillion by end-2007); it clearly serves no observable or commercially productive purpose, it’s pyramidal in structure and its elephant-sized interest rates derivative composition exerts pressure on the global interest rate complex…
Let’s look at the composition of their book:
(Ed Note: Table Shows J.P. Morgan holding over $61 Trillion in Interest Rate Swaps (IRS) as of September 20, 2007.)
We’re shown that 65%, or, 61.5 Trillion of the total is IRS [on page 22 of 32]…
As demonstrated, Interest Rate Swaps create demand for bonds because bond trades are implicitly embedded in these transactions. Without end user demand for the product – trading for “trading sake” creates ARTIFICIAL demand for bonds. This manipulates rates lower than they otherwise would be…
I learned these basics – first hand - over 15 years as a broker in Capital Markets…
So, in the latest quarter it took 41.4 billion in bonds per day JUST TO SATISFY HEDGING OF THE GROWTH in their SWAP BOOK…
Assume a conservative average maturity of 18 months [6 quarters] then one sixth of 33.8 Trillion, or 5.63 Trillion worth of Swaps roll off and need to be replaced every 3 months…
… another 30.3 billion bonds required per day…
So, In Aggregate: J.P. Morgan required more than 71.7 billion worth of bonds each business day – from Jun. 30 to Sept. 30 / 07 - JUST FOR THEIR SWAP BOOK – if it is hedged…
According to the U.S. Treasury:
“During the July – September 2007 quarter, Treasury borrowed $105 billion of net marketable debt….”
J.P. Morgan is but one of 20 primary dealers of U.S. treasury securities…
Treasury also tells us foreign participation in U.S. bond auctions typically tops 20 %. So you’re now left with 40 Billion in “net new” U.S. Treasury Securities – suitable for hedges - to distribute among all domestic players for an entire quarter. The growth component of J.P. Morgan’s book alone, if it’s hedged, requires more than 1.4 billion more than this amount every day…
Bonds required to hedge the growth in Morgan’s Swap book are 1.4 billion more in one day than what is mathematically available to the entire domestic bond market for a whole quarter…
This interest rate swap book is not hedged. J.P. Morgan is the FED…
If you believe the yeomen’s work of John Williams of Shadow Gov’t Stats – this helps explain how we get bogus inflation reports from officialdom in the 2 % range when in reality it is running “double-digits”…
Historically, bond vigilantes would have spotted the ruse and sold bonds raising rates of interest to levels commensurate with real inflation rates at 10 % plus the historic premium of 250 points or 12 – 14 % nominal market rates…
If you’re wondering where the bond vigilantes have gone:
They have all lost their jobs. Long ago, the last of the true bond vigilantes sold bonds – intuitively correct I would argue – not realizing that J.P. Morgan’s Swap Book was a “black hole” of stealth artificial demand. They lost their shirts along with their jobs…
Nowadays – bond traders who have chosen to remain employed – resemble trained monkeys and play the game the way their masters intend them to:
Monetary authorities have long been pursuing expansionary monetary policies while attempting to cloak their actions by suppressing rising interest rates and other natural market reactions…
This has completely perverted our whole banking and monetary system…
This is why false values have been assigned to a host of financial instruments…
This explains why the gold price has been suppressed. It’s another canary in the coal mine that was vigorously and nefariously silenced…” (emphasis added)
The Elephant In the Room: More Pieces of the Puzzle
Rob Kirby, Kirbyanalytics, from GoldSeek.com, August 4, 2009
Awareness of Pervasive Cartel Markets Manipulation is Increasingly Widespread. Consider:
The Gold Report newsletter today interviewed Sprott Asset Management's chief investment strategist, John Embry…
"If you look at the short positions that the commercials, that is the bullion banks -- which are the agents of the U.S. government -- are running, it's a complete fraud," Embry says. "Because they couldn't possibly deliver on their paper promises if they were called by the people on the other side of the trade. The gold isn't there to deliver."
That is, the world's gold is, to put it politely, grossly oversubscribed…
GATA,” The paper gold marketer is afraid to look in the vault”
June 13, 2009
So, in the face of the Power of the Mega-Banks, what are investors around the world to do?
We Precious Metals, Honest Money, and Honest Government Partisans have made significant Progress toward defeating The Cartel since Deepcaster published “Defeating The Cartel…with Profit” – I, just over 18 months ago. (See “Defeating the Cartel... With Profit”, 03/28/2008 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com) But we still have a considerable way to go.
While the Guidelines for Profit and Protection offered in that article are still as Good as Gold today, as we have progressed in the last two years we have learned, (and occasionally reemphasized) more about defeating The Cartel and Profiting while doing it.
Thus we offer the following new, (and a few reemphasized) Guidelines and Observations useful for Defeating The Cartel with Profit.
- The Cartel is still Potent but not omnipotent.
Those Precious Metals Partisans (including Deepcaster) who would like to see The Cartel defeated should not allow Desire to obscure Reality.
Although, thanks to GATA, Rep. Ron Paul and many others, The Cartel is under increasing pressure, it is also by no means defeated. That is, it is not likely to be defeated any week soon, though the large open interest already in the August, 2009 Gold Contract could indicate an interesting Summer if a significant number of these folks decide to take delivery and personal possession of Physical Gold.
Consider that, although the Fundamentals for Gold have rarely been more Bullish, it is still below its all-time high and still suffers from periodic Cartel Takedowns. [The Cartel’s Motivation for these Takedowns is clear. To maintain its power and profit The Cartel must prevent increasing legitimacy for Gold and Silver as The Ultimate Stores and Measures of Value lest their Fiat Currencies and Treasury Securities be further delegitimized.]
We thus ask those who argue that The Cartel has “lost control” of the Gold price, the following question: if The Cartel had “lost control” given Gold’s ragingly bullish fundamentals, would not Gold have already attained, and even surpassed, its all time inflation–adjusted high, which would be at least $2,300/oz?
Indeed, recent evidence strongly indicates that The Cartel is using U.S. Taxpayer – provided TARP funds to sell paper Gold to suppress its price! Outrageous!
Nonetheless, employing the Strategy set forth in “Defeating The Cartel with Profit” – I (03/28/2008 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com) makes it possible to achieve considerable insulation from Cartel Takedowns of the Precious Metals, plus Profit and an increasing core position of Gold and Silver, along the way.
That said, The Cartel is under increasing pressure. While their market rigging operation is still potent, the politicians are starting to increase the heat in response to justifiable public Outrage over the Mega-Bank Bailouts. Thus…
- The Justifiable Outrage at multi-hundred billion dollar Bailouts of the Mega-Banks (certain of which are members of The Cartel’s Inner Circle) has Generated Political Action.
A Majority of the U.S. House of Representatives has already signed on to Ron Paul’s (excellent, if one may say so) ‘Audit The Fed’ bill (H.R. 1207) and a companion bill (S. 604) has been introduced in the Senate, where it will have tougher going. Of course, the sell-outs have introduced watered down versions to take the heat off. Rep. Paul has also commendably introduced an ‘Abolish The Fed’ bill, which is gaining increasing support. Both bills are commendably supported by the nonprofit organization Carrying Capacity Network at www.carryingcapacity.org.
And a House Committee has finally had the guts to issue a Subpoena to The private for-profit Fed to produce documents and emails relating to the AIG matter. AIG was used as a funnel to channel billions of U.S. Taxpayer provided Funds to the Mega-Banks (e.g. $11.9 billion to Goldman Sachs) (See “Opportunities & Threats in Derivatives Shocker”, 5/29/09 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com), some of whom are likely shareholders of the private for-profit Fed.
In light of all the foregoing, The Obama Administration’s Plan to make The private for-profit Fed The Systemic Risk Regulator would have disastrous consequences for Investor/Citizens around the world! See Deepcaster’s “The Fox Wants More Of Our Chickens” (04/04/2008) and “Coping with the Superpower-Cartel Threat!” (01/30/2009) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
An Honest Audit of the private for-profit Fed would likely result in its demise, and thus mortally wound The Cartel – All those who are outraged should contact your Senators and Representatives. Enough said.
- In the meantime, The Cartel continues its Takedown Actions (using select Primary Dealers as vehicles) as the $21.30 Friday, June 12 Takedown of August Gold to close at $940.70 manifested.
- The Cartel likes to run “Under the Radar” since a wider knowledge of its Market Rigging operation is not in its interest.
One of its main techniques is to Use and/or Create Technical Patterns to get Investors and Traders Offsides.
As we write (August 7, 2009) Gold has created a beautiful Reverse Head and Shoulders pattern with an upside target of about $1,300/oz. It will be most interesting to see whether, on its next up move, Gold will hit $1,300, or whether, as in times past, The Cartel will use that TA pattern to lure in Precious Metals longs, only to savage them with a Takedown. Deepcaster has issued a Forecast for impending Gold and Silver Price Movements available in the ‘Alerts Cache’ at www.deepcaster.com.
- Perhaps to inflict maximum financial pain, The Cartel has a habit of making Major Moves around Option Expiration time. Thus heightened awareness and caution is the watchword as these Expirys approach.
- One must also consider the increasingly important and Controversial issue of whether Major Gold and Silver Exchange Traded Funds (ETFs) actually have the Gold and Silver they say they do. It has been alleged that certain ones do not, and that, therefore these “have nots” are mainly vehicles used by The Cartel to further its Manipulation Regime.
For example, if these certain ETFs have not the Precious Metals they say they do, they thus de facto siphon off money from Investors who think they are buying Real Physical Gold and Silver.
We do not claim any particular knowledge of these ETF’s or whether they actually have, or do not have, physical possession of all the Metal they claim.
Rather, we simply suggest that Investors consider whether these ETF’s have a rigorous and reliable mechanism for auditing their supposed holdings and fully disclosing their findings to the public, or, at least, to Investors who invest in them. Insist on seeing their most recent audit results before investing.
In this regard, the GLD and SLV ETFs and the Perth Mint bear examining very closely.
- Monitoring “Communications Policies”, to use Chairman Bernanke's term, seems to us more important than ever.
Why oh why do the Major Media outlets black out the increasingly convincing findings of GATA, for example, unless they are complicit in a cover-up of The Cartel’s Market Rigging Operation? Perhaps the owners of Big Media are also shareholders in the Megabanks which own the private for-profit U.S. Federal Reserve.
- And why do Official Sources continue to issue Bogus Statistics when the Real ones are easily available. Shadowstats.com makes a convincing case that Consumer Price Inflation is still a 6% annualized (July 15, 2009 report), M3 is still at about 6.5% (July 17, 2009 report), that Real Unemployment is about 20.6% (August 7, 2009 report), contrary to the gimmicked official number of 9.4% and U.S. GDP is a negative 6% (July 31, 2009 report).
Indeed, regarding the August 7, 2009 Official “Unemployment Announcement” Shadowstats.com says:
“Underlying economic series, shy of the related seasonal distortions in new claims for unemployment and the ISM manufacturing index, are consistent with a monthly July jobs loss in excess of 600,000, and a further increase in the unemployment rate…
The July 2009 seasonally-adjusted U.3 unemployment rate showed a statistically-insignificant decrease, to 9.36% 0.23% (95% confidence interval), from 9.51% in June. Unadjusted U.3 held at 9.7% in July. The broader June U.6 unemployment rate eased to an adjusted 16.3% (16.8% unadjusted), from 16.5% (16.8% unadjusted) in June.
During the Clinton Administration, "discouraged workers" — those who had given up looking for a job because there were no jobs to be had — were redefined so as to be counted only if they had been "discouraged" for less than a year. This time qualification defined away the long-term discouraged workers. Adding them back into the total unemployed, unemployment in line with common experience — as estimated by the SGS-Alternate Unemployment Measure — held at about 20.6% in July.”
John Williams’ Shadow Government Statistics, Flash Update, August 7, 2009
- Follow the Money. The Profit Potential (or Reality?) of Market Manipulation is Truly Staggering. Deepcaster recently noted, for example, that, according to the Central Bankers’ Bank itself – the Bank for International Settlements – unnamed Major Financial Institutions increased the Market Value of their OTC Derivatives by $13 Trillion (yes Trillion) in the six months from June to December, 2008, when Trillions were being lost in the Fall, 2008 Crash of the Equities Markets (See “Opportunities & Threats in Derivatives Shocker” 05/29/2009 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com).
- The latest Megabank Machination Technique, which greatly disadvantages all other Investors is High Frequency Trading (HFT) aka Flash Trading.
To oversimplify, The Megabanks use their vastly larger financial Assets (typically bolstered by U.S. Taxpayers) to lure in Investors and Traders by creating key Technical signals (e.g. a breakout of a Trend Channel). Then, after others are lured in, massively reverse direction (from buying to selling, or selling to buying) to force the others to cover, making huge profits along the way. HFT is implemented via high-speed computer programs, which allow the Megabanks to “get the jump” on others.
(We ask whether this automatically positions them to “frontrun” some of their own client?!)
Couple HFT Capacity with Private Markets Trading (see Deepcaster’s article “Protecting Profits from "Dark Liquidity" & Other Systemic Risks” 04/06/2007 in the ‘Articles by Deepcaster’ cache at www.deepcaster.com) and the Megabanks have a real Advantages.
Deepcaster copes with this reality in a variety of ways (some mentioned above), but (to oversimplify again) particularly by selecting Investments and Trades for the Intermediate Term, i.e. for a few weeks to a few months. Typically the effects of HFT are diminished over the intermediate term, though one must be willing to tolerate volatility and positions “in the red”, in the interim.
- Deepcaster’s Strategy, laid out in “Defeating the Cartel... With Profit” 03/28/2008 has shown potential to protect against Cartel Takedowns (specifically, for Gold and Silver) and in so doing enabling profit, and an increasing Precious Metals core position whether Gold and Silver are rising or falling.
- The Interventional Regime is as active and broad-based as ever, as is most recently summarized in Deepcaster’s July, 2009 Letter available in the “Latest Letter” cache at www.deepcaster.com.
- If, at the Interim bottom of Cartel Takedowns, Investors wish to increase their position of Gold and Silver, they should by all means do it by buying the Physical Metal – either coins or bullion – and taking personal possession of it!
“Here is a nice phrase for fraud: The world's gold may be "grossly oversubscribed."
Does anyone recall the 1970s Black Watch Farms Angus scandal? Lots of investors thought they owned a cow critter. Came as a shock when more than 100% of each animal was owned by several people. That is "oversubscribed."“
A Deepcaster Reader
June 14, 2009
And in case you do not sufficiently respect the efforts of The MegaBankers, consider that as of an August 4, 2009 CNBC Financial Report only 9% of Modification-Eligible Home loans had actually been modified!
Best regards,
By DEEPCASTER LLC
www.deepcaster.com
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© 2009 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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