Once you start quantitative easing, such as we have, $17 trillion, how in the world do you pull back from it? How do you stop without having everything collapse behind you? Truth be known, Bernanke didn’t have a choice. If Bernanke did not do QE, this place would look like the day after (the movie) ‘Mad Max.’ - Jim Sinclair, link belowHappy Friday everyone! I only wanted to link the Sinclair interview on King World News but I decided it was important to blog about what JP Morgan is doing.
To begin with, they reported earnings today and all the media fell in love JPM's reported bottom line. The expected number was $1.17, they reported $1.31. HOWEVER, if you strip out the 28 cents they recorded by reducing their loan loss reserve, they actually did $1.03, and missed big time. This is not a valid decreasing of their loan loss reserve a) because we know the housing market is plunging again and JPM will soon have to write down a lot more mortgage debt, b) their non-performing loan disclosure showed that their non-performing loans increased by $600 million to $10.6 billion and c) we know the economy is tanking again so JPM will likely suffer big loan write-downs across all of its lending lines.
But then again, if you know that the President will sign off on using Taxpayer money to bail you out, it's a wonder they don't take their loan loss reserve to zero and really show some paper GAAP b.s. earnings per share!
It turns out Blythe Masters, JPM's head of commodities trading, lied her ass off on CNBC last week when she explained on CNBC that JPM's trading business is client-driven (most of knew she was full of shit). But I thought everyone on Wall Street told the truth when they were on TV (wink wink). Here's the report that explains how JPM has simply moved its proprietary (the in-house hedge fund aka "prop trading") functions into the office of the CIO. This maneuver was done in order to move the risk-based capital trading out of the securities unit and into the bank holding unit. Why? Twofold: 1) it removes the proprietary trading away from the eyeballs of the securities regulators and the Volker Rule AND 2) it shifts this risky trading into a business unit that would be covered by the FDIC. It's what Bank of America did when it moved something like $52 trillion in gross derivative positions from its Merrill Lynch securities unit to its holding company.
Here's the report: LINK That article only mentions currency trading in passing but I would bet BOTH of my testicles that the CIO prop positions include a heavy does of gold and silver COMEX short positions. In fact, I recall about 18 months ago JPM announced that it would be moving its precious metals prop positions up to its bank holding company. You can google it to verify that I am correct.
Finally, in connection with the above quote from Jim Sinclair, every single person reading this, if they don't read anything else today or this weekend, NEEDS to read this brief interview with Sinclair on Eric King's King World News blog: LINK I agree with every single word and punctuation mark in the interview, except that he didn't predict QE to infinity before anyone. Myself and many of my colleagues understood that this is how things would unfold in the U.S. and globally right around the same time Sinclair started ranting about it.
Have a great weekend.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/sp_en_6.gif)
Question:
ReplyDeleteIf JPM pproprietary metals trading has been shifted over to their bank holding company, how can you ever be bullish on gold stocks? If they have the ability to take positions with the belief that any trading losses will be born by the tax payer, why would they not continue to increase their short positions on gold stocks, when they can do so without borrowing the stock? It's a no risk trade. They never have to cover in fear of higher prices; they just short more. There is a self-limiting factor with the actual metal, due to the international demand and the limited supply. That does not seem to be true of the stocks which basically have a North American following and the ability to short to zero. What am I missing here?
I enjoy your work a great deal.
takeovers? dividends? an honest regulator?(well that seems like an oxymoron) maybe the gold companies get creative and do something with a country friendly to higher prices?
DeleteWith this kind of prosperity maybe people demand honest markets?
Americans Can't Wait For Their Tax Refunds... To Immediately File For Bankruptcy
In yet another sad reflection on the state of the Schrodinger-economy, USA Today notes that over 200,000 households will use their tax rebate this year to pay for (drum roll please) a bankruptcy filing and associated legal fees.
http://www.zerohedge.com/news/americans-cant-wait-their-tax-refunds-immediately-file-bankruptcy?
THanks for the feeback! I specifically remember when JPM announced that they were moving their gold/silver positions to the bank holding company. it was right before the consumer finance protection act w/the volker was signed.
ReplyDeleteDon't you love the way msm glosses over corrosive realities...?
ReplyDeleteJPMorgan Looks Like a Keeper
In buying shares of JPMorgan, investors are getting a company that is in the midst of a dramatic recovery from a bleak fourth-quarter across many of its business lines.
Though the first-quarter earnings were 3% lower than a year earlier, those bank's results were an improvement over the last three months of 2011.
http://online.barrons.com/article/SB50001424053111904857404577341852857487514.html
Dave:
ReplyDeleteI believe you. My question is simply, "Why invest in gold stocks if they can be shorted to zero, despite their economic value?" I have not wanted to look at the $HUI today, but I have no doubt that it is much lower than the breakout level it was showing yesterday. Mr. Sinclair would not answer a direct question today for a price prediction on the $HUI for this year of 650, just 30 points higher than where it was in September at it's high. I am sick of this, which I am sure is the result that the firm shorting the stocks wants to create. So...when does this end, does it end, and why should I be investing in gold stocks?
Thanks again for making your site a place I visit each day.
The good mining stocks can't be shorted to zero. At some point big money will come in and load the boat on them because it's a way to buy very very cheap gold/silver. There's some silver stocks with big proved 43-101 resources AND with money being generated from production that are trading at levels which value the silver in the ground at less than 50 cents/ounce. AUMN is one.
DeleteAlso, no risk/no return. A true goldbug would tell you move all of your money into physical that you keep heavily guarded under your bed in a fire-proof/bomb proof nuclear fallout shelter. Don't use the internet and always wear 2000 SPF when you are exposed to sunlight. Life's too short for me to live for survival and longevity. I want to enjoy what's left to enjoy. You can make plans for the future but you have to live for the moment.
Fed Access for All !
ReplyDeleteWhy should just banks have all the fun? Former FDIC Chair Sheila Bair proposes EVERYONE get access to the Fed window for free loans and 0% money.
Her gleeful take:
“Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)
Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years.”
http://www.ritholtz.com/blog/2012/04/fed-access-for-all/
...why not it pays for a lot of Hampton Real Estate, no?
Sometimes I feel like Mel here...anyone else?
ReplyDeleteSBSS. 18 Silver Manipulation Part 1
http://sgtreport.com/2012/04/sbss-18-silver-manipulation-part-1/
SBSS 19. Silver Manipulation Part 2
Deletehttp://sgtreport.com/2012/04/sbss-19-silver-manipulation-part-2/
Suspicious $1.5 Billion Gold Dump & Bank Runs
ReplyDeleteHere is what Caesar had to say about the situation: “We had been having a recovery in the price of gold recently, but then gold was taken down around 1:15 pm today. There was quite significant volume in the last 15 minutes, before the COMEX closed.”
Caesar Bryan continues:
“There were 10,000 contracts traded, which is something like $1.5 billion, and gold fell precipitously, from about $1,665 to about $1,650. This is very odd trading on a Friday afternoon when there was no other discernible movement in other markets.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/4/13_Caesar_Bryan_-_Suspicious_$1.5_Billion_Gold_Dump_%26_Bank_Runs.html
Waddell and Reed has a Mexican office?lol
ReplyDeleteMexico IPC Plunge Caused by ‘Systems Error,’ Bulltick Says
The late-day plunge in Mexico’s benchmark IPC index that shaved 700 points off the gauge was caused by a “systems error,” said Alejandro Creixell, a managing partner at Bulltick Capital Markets in Mexico City.
The IPC sank 2 percent in less than five minutes at about 2:45 p.m. local time today, before ending the day down 2.3 percent from yesterday at 38,444.01. Bulltick executed more sell orders by volume than any other Mexican brokerage today. In the past month, it’s been the 19th most active seller, according to data compiled by Bloomberg.
“It was a systems error, a systems problem,” Creixell, head of Bulltick Casa de Bolsa in Mexico City, said in a brief telephone interview.
http://www.bloomberg.com/news/2012-04-13/mexico-ipc-plunge-was-caused-by-systems-error-bulltick-says.html
You don't have to be a "hard money socialist" gold bug to advocate for the ownership of physical gold. It advocates for itself with an average annualized 19% return since its lows well over a decade ago.
ReplyDeleteI have invested in mining shares for many a year, but, with few exceptions, they have not delivered anything like what they should have given the steady rise of physical. This will likely continue to be the case as mining shares will, in the main, continue to disappoint. Having said that, I think it's worth noting, since Jim Sinclair is someone whose perspective Dave appears to have respect for, that Mr. Sinclair has long maintained that gold will be part of the solution to the present terminal case that is the global dollar reserve system. I happen to agree with Mr. Sinclair, but will specify that it is physical gold that will act in that capacity as it is revalued to extinguish debt and recapitalize the system. Paper gold holders will not participate in the revaluation as the fractional gold market will collapse as part of the transition to a system where physical gold replaces sovereign debt as the recognized place for savers to store their surplus wealth. For those who own mining shares that do perform well, they can expect their profits to be windfall taxed as that will be the path of least resistance for governments to take their cut from the revaluation of physical gold.
then why would they mine it? They will be the new banks.
Delete@ Edwardo: I agree. Mines will either be: super-taxed or completely nationalized. This is why I sold all my mining shares and went 100% physical.
Delete"Invest in gold mines, will you? Notice how quick the Australian CB hinted at taking "gold in the ground" if needed. This was said after their sale! The nature of the coming crisis will make the taking of investor property a piece of cake. You see, because gold is a commodity, you will be compensated at the commodity price of return + a fair profit, of course." (Another Thoughts, Oct. 19, 1997)
Why couldn't a mine become like a reit and dividend out their cash flow?...and in that case are they going to nationalize all the real estate trusts? I mean I know the academics have a hard on for anything real in their fantasy intangible model world see faceschnook valuation but how far they going to push it? to the point of chaos?in every country? in every state? wouldn't the mining states want to create jobs?
DeleteIn Friend of Another’s (FOA) Gold Trail, he once said,
ReplyDelete“My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationist get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! (smile) Worthless dollars, of course, but no deflation in dollar terms! (bigger smile)”
-April 2001
Also, no risk/no return. A true goldbug would tell you move all of your money into physical that you keep heavily guarded under your bed in a fire-proof/bomb proof nuclear fallout shelter. Don't use the internet and always wear 2000 SPF when you are exposed to sunlight. Life's too short for me to live for survival and longevity. I want to enjoy what's left to enjoy. You can make plans for the future but you have to live for the moment.
ReplyDelete---------------------------------------------------
No truer words Spoken Dave. I am still a buyer of Gold as a Chaos hedge and Dollar cost average these days, the accumulation phase for me has narrowed down considerably. I am more into a Buffet plate of everything guy these days and live for today and screw tomorrow.
Life is short....live it and enjoy it.
Thanks for all you do Dave.
Because they'll still make a profit.
ReplyDeleteI'm very suspicious of J Sinclair and his contacts and background.
ReplyDeleteOnce again in your comment above he paints Bernanke as being really a "good guy" without a choice.
Agree to disagree on Sinclair. I'm not sure where you interpreted that Sinclair thinks of Bernanke as a good guy. Who knows, maybe on a personal level over a cup of coffee, Bernanke is a personable guy.
DeleteSinclair's mission is to expose the truth behind what's going on. The truth is that if the Government cut back spending and Bernanke stopped printing, out system globally would absolute collapse and it would be the day afer Mad Max.
Sinclair's view is not unique or original there. Myself and my colleagues predicted a "Mad Max" scenario eventually back in 2002/2003, before housing collapsed.
Eventually even the printing won't stop the collapse from happening. See: the law of diminishing marginal returns.
But since I read "The Road" three years ago, I've decided that the world will be at war before the real collapse occurs.
By the way, I have no doubt that Sinclair has the contacts he says he has. It's commonly known that he made a fortune trading this sector in the 70's. His father is Bert Seligman. Google that name.
I know all of Sinclair's family history. They were heavily in bed with the Rothschilds and they founded Goldman Sachs. When you sup with the Devil always use a very long spoon.
DeleteYo bro, you need to stop surfing conspiracy sites. Here's the history of Goldman Sachs, per wikipedia and per my recollection of the history from when I worked there in the late 1980s:
DeleteGoldman Sachs was founded in New York in 1869 by the German-born Marcus Goldman.[2][3] In 1882, Goldman's son-in-law Samuel Sachs joined the firm.[4] In 1885, Goldman took his son Henry and his son-in-law Ludwig Dreyfuss into the business and the firm adopted its present name, Goldman Sachs & Co.[5] The company made a name for itself pioneering the use of commercial paper for entrepreneurs and was invited to join the New York Stock Exchange (NYSE) in 1896.
People who try to connect all Jewish bankers/traders with the Rothschilds, and connect the Rotschild's with all things evil in the banking system, are anti-Semitic jerk-offs
The world debt system and currency exchange, as we have known it will implode and leave little room for political maneuvering.
DeleteANOTHER (THOUGHTS!)
Date: Sun Apr 19 1998
-Sicilian Gold
Max Keiser on Mott Street with the Exorcism of Blythe Masters
ReplyDeleteMax covers some important issues including fraud in the markets, Wall Street, the role of collateral, Jamie Dimon, JP Morgan, crap deals of JPM, congress, Goldman Sachs, fraud, ECB, IMF, Greece, Spain, Ireland, Germany, derivatives, financial terrorism, global raping-destruction of nation states, toxic securities, credit default swaps, and silver. This video is both entertaining and important.
http://youtu.be/Wlmry45eI3g
It was in the local news last week "Man holds up Chase Bank and flees with money collected" Could our villain be a disgruntled physical silver holder who's been watching JP Morgan Chase & Co.perform the same style act that he decided to mimic ?
ReplyDeleteAfter all what is so different from a robber holding up a bank and Jamie Dimon and Blythe Masters taking billions of dollars that clearly don't belong to them through their many creative schemes?
These two robber barons are on top of the heap of many who should be behind bars today. It has become painfully obvious that until a group from the pool of "officials" that make Washington their home , namely from the CFTC , grow a pair of BRASS ONES , we as a country will find our true wealth shriveling up !
Artful Dodgers
ReplyDeleteThe 6 countries where everyone runs the other way when the tax man comes knockimg
At over $300 billion, the lost tax revenue from the U.S. shadow economy exceeds the total funding allocated for Medicaid in 2010. According to Murphy, lax regulation of corporations is the main culprit in the United States.
"Ordinarily people are expected to bear the burden of debt repayment, a burden that in Ireland is just beyond imagination," he says. He predicts more tax-boycotts like those in Ireland, and riots, like those in Greece, in the months to come. "I believe we're coming to a tipping point," he says.
http://www.foreignpolicy.com/articles/2012/04/13/artful_dodgers?page=full
Jim Sinclair
ReplyDeletehttp://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2012/4/15_Jim_Sinclair.html
This is very screwed up...the takeover is nearly complete...gives new meaning to serfs up!
ReplyDeleteRoyal Canadian Mint to Trade Coins for Digital Currency “MintChip”
Canada is looking to trade in traditional coin currency for a digital version that can be exchanged using devices like smartphones, and it’s looking for some help from software developers.
The Royal Canadian Mint is looking to axe its coin business, which it has had for over 100 years. Instead, it wants to use a digital currency called MintChip.
MintChip is a secure microchip that would allow people to pay for small transactions using technology like smartphones, tablets, USB sticks, computers and clouds. However, like cash, the transactions would be anonymous.
“There’s been a very huge growing digital economy that is really going to be fueled by smartphones and mobile being the next big thing,” said Marc Brûlé, the Royal Canadian Mint’s chief financial officer.
http://sgtreport.com/2012/04/royal-canadian-mint-to-trade-coins-for-digital-currency-mintchip/#comment-16783
The Wall Street is thundering in
ReplyDeleteIt's loaded with hubris and sin
It's full steal ahead
'Till justice is dead
And liberty's struck on the chin
The Limerick King
http://www.zerohedge.com/contributed/2012-15-14/titanic-sinks?
It's an illusion that all debts can be repaid...
ReplyDeleteMichael Hudson: Debt: The Politics and Economics of Restructuring
http://jessescrossroadscafe.blogspot.com/2012/04/michael-hudson-debt-politics-and.html
Enjoyed your blog for quite sometime now...times are tough for some of us, thanks for making this free!
ReplyDeleteVote all you want: The flight plan doesn’t change
ReplyDeleteFascism, the overtaking of government by corporations, is hidden behind euphoric, glorious terms; Free markets, free trade, globalism and the world economy. Most who subscribe to this pitch appear to be fearful of being cut out of the action, maybe not getting a piece of the global pie or at least a piece as big as they thought they should get. Socialism, the plan for the common people, will see many fall never to rise again.
The Flight plan
The plan has been for many decades to totally deconstruct the sovereign United States, reducing us to third world status so that no matter how hard we have worked in the past, or how hard we work in the future we will never regain our former stature. We will never be as free or empowered as a population as we once were.
The coming presidential election means nothing. Mit Romney, who does not stand a remote chance of even coming anywhere close to winning the election has now been assured the Republican nomination. This only affirms what I have said in the past: No one wants Obama re-elected more than the GOP does.
What better way to make sure Obama is re-elected than to run what possibly is the most lack-luster, uninspiring, unpopular candidate possible? The really frightening part of this is that with the exception of Ron Paul, the other candidates that came and went; Gingrich, Santorum, Trump, to name a few, were bordering on lunacy or gross immorality. And these were the best the GOP could come up with? And they want to win the presidential election? Really? Then why didn’t they support Ron Paul?
http://ppjg.me/2012/04/12/vote-all-you-want-the-flight-plan-doesnt-change/
Codelco purchases copper to meet contracts: FT
ReplyDelete(Reuters) - The world's top copper producer, Chile's Codelco CODEL.UL bought copper from outside sources earlier this year to meet its deliveries to customers, the Financial Times reported on Sunday.
The newspaper cited traders with direct knowledge of the transactions as saying Codelco bought the metal on the spot market from unnamed miners and traders.
The purchases are described as "unusual" by the FT as Codelco generally leaves itself plenty of leeway to cope with unexpected production problems when it signs annual contracts.
It has not run short of metal for several years, according to people familiar with the company, cited in the article.
Codelco, which accounts for one-third of global supply, has struggled to lift output despite record prices. Production in the 12 months to February is the lowest since 2004, the FT said.
http://www.reuters.com/article/2012/04/15/us-chile-codelco-idUSBRE83E0JY20120415?
First Majestic CEO: “I’m a Triple Digit Silver Guy, so I think we’re going back to a ratio of silver to gold in the 20 range.”
ReplyDeleteKeith Neumeyer, CEO of First Majestic Silver Corp., Exclusive Radio Interview With BullRun of SilverDoctors.com.
When asked on his views of the future of the metal….
I am comfortable with investing part of our revenue or part of our earnings into the metal.
We did invest $10 million in the PSLV which is Sprott’s ETF. We are the only mining company that actually invested in that fund. Quite surprisingly to me, I communicated with I think 5 other silver mining companies’ CEOs over a period of week prior to that offering by Sprott. I told them that First Majestic would participate in the offering and I asked them to participate as well. Not one of them did to my surprise. We are happy to do it, but it was a bit surprising that other miners did not participate.
http://www.silverdoctors.com/first-majestic-ceo-keith-neumeyer-i-am-a-triple-digit-silver-guy-so-i-think-we-are-going-back-to-a-ratio-of-silver-to-gold-in-the-20-range/
Tim Geithner Glitch In The Matrix Special: Will America Become Greece In Two Years - "No Risk Of That"
ReplyDeleteBut the absolute kicker, and here we flashback to April 2011 when Timmy said there was "No risk" of a US downgrade, was Geithner using his favorite catchphrase, this time in response to whether the US may become Greece in two years: "No risk."
http://www.zerohedge.com/news/tim-geithner-glitch-matrix-special-will-america-become-greece-two-years-no-risk
See... http://www.youtube.com/watch?v=u95E__3TSN0
Utah Governor Signs House Bill 157 Allowing People to Make Purchases With Silver & Gold!
ReplyDeleteWatch as customers make purchases with Silver at the event where Governor Herbert of the state of Utah, signs House Bill 157 Currency Amendment. Further legislation is in motion to advance the use of Silver and Gold as a competing currency with the US Dollar.
http://www.youtube.com/watch?v=WCbrOzhwkXc
Colonel Douglas Macgregor on Two Failed Wars and Why He Supports Ron Paul for President
ReplyDeleteDaily Bell: What was key to your realization that the US military was not what you thought it was?
Colonel Douglas Macgregor: The key to realizing that was seeing the various people in the chain of command operate, the various senior officers. I describe it in great detail in my book, Warrior's Rage, which describes the largest tank battle the US Army fought since the end of the Second World War. It describes the enemy and it describes the generals and their failure to come to terms with the weakness of the Iraqi enemy, and the opportunities that were presented, because they really weren't interested in fighting at all. To sum it up briefly, they were much more worried about losing the fight than they were about winning it. So their objective was to emerge without having lost as opposed to having won anything. And that's the mentality that continues to this day. We've seen it again and again in Afghanistan and Iraq and the consequences have been destructive and disastrous for the American people and the American taxpayer.
Daily Bell: What is it?
Colonel Douglas Macgregor: I think it's a self-licking ice cream cone. The generals are not oriented on waging war; they're pre-occupied with maintaining the bureaucratic status quo. Remember, depending on at what level you retire, the higher obviously the better, you can make a great deal of money in the defense industry. The defense industry hires you not because you know anything or you are a particular expert; they hire you because you can call your friends on active duty and tell them to buy things or do things in return for which when they retire, they too will be rewarded with handsome retirements inside the defense industry. This extends to Congress; it's kind of a form of what I would call legalized corruption.
Daily Bell: Is it a danger to the US republic?
Colonel Douglas Macgregor: Very much so but there are a couple of things to keep in mind. I think your readers will appreciate this. We are on the threshold of budgetary Armageddon. There are people, of course, in Washington – in fact, the majority at this point – who don't seem to think that matters. They seem to think we can borrow money in perpetuity at 2% interest, that the world is so dependant on this enormous American consumption machine that people will lend us money regardless of the circumstances.
I don't happen to share that view. My view is quite the opposite. Debt matters. It's always mattered and it's going to crush us. The United States within the next two to three years is going to be in a position very similar to Greece, Italy and Spain. And long before that occurs, of course, we are going to watch the Eurozone collapse along with London, I suspect, and the British economy and then it will reach us and Japan. The Chinese, who are already in the throws of a downturn, if you will, is going to have an effect on them and on us, in ways that today no one really appreciates.
http://thedailybell.com/3791/Anthony-Wile-Colonel-Douglas-Macgregor-on
Iceland's President Explains Why The World Needs To Rethink Its Addiction To Finance
ReplyDeleteAs everybody knows now, we did not pump public money into the failed banks. We treated them like private companies that went bankrupt, and we let them fail. Some people say we did it because we didn’t have any other option, there is clearly something in that argument, but it does not change the fact that it turned out to be a wise move or whatever reason. Whereas in many other countries, the prevailing orthodoxy is you pump public money into banks and you make taxpayers responsible for the banks in the long run, and somehow treat the banks as if they are holier institutions in the economy than manufacturing companies, commercial companies, IT companies, or whatever. And I have never really understood the argument: why a private bank or financial fund is somehow holier for the well being and future of the economy than the industrial sector, the IT sector, the creative sector, or the manufacturing sector.
Read more: http://www.businessinsider.com/olafur-ragnur-grimsson-iceland-2012-4?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=Business%20Insider%20Select%202012-04-13#ixzz1sCp1nns6
HFT Pirates And Their Academic Friends
ReplyDeleteDoes every HFT defender simply reference the same old tired talking points? There must be an app somewhere that spits out these standard lines. While Professor Donefer stuck to script and hit all the talking points that the FIA/PTG would have liked him to hit, he has overlooked most of the structural issues that allow HFT to extract near risk free rents from the markets. He does not address:
-the fact that there are two separate quotes (the fast one that HFT calculates, and the slow one that the SIP provides)
-why are there 13 different stock exchanges
-the maker/taker model and the payment for order flow which has distorted asset pricing
-the conflicted order types like hide/slide and Day ISO
-the conflicted smart order routers
-the IOI’s that dark pools send to each other
-the poorly crafted regulations like Reg ATS and Reg NMS which helped create today’s fragmented market
Professor, these are the real issues.
http://www.ritholtz.com/blog/2012/04/hft-pirates-and-their-academic-friends/
Prime Brokerages Consolidate After 'Big Bang'
ReplyDeleteThe shift comes as prime brokerages are facing increasing challenges. New capital regulations are raising costs, while low interest rates, reduced use of leverage and less hedge fund activity pressure revenues.
That shift is likely to hurt the smaller primes that flourished after the crisis and are now seeing their offerings increasingly commoditized, while entrenching the leadership of the top-tier players such as Morgan Stanley, Goldman Sachs Group Inc and JPMorgan Chase & Co.
It is also likely to lead to a rise in funding costs for the hedge fund industry, particularly when certain shorting strategies are less lucrative for the broker.
"What it's doing is segmenting the industry and making an industry where the top-tier players again are controlling the big market share and the industry is going back to having few providers in the prime brokerage space," said Matt Simon, a senior analyst at Tabb Group, who monitors prime brokerages.
That will also mean that funding costs for hedge funds are likely to increase, says Suber.
"With Basel III coming, the expenses to run a prime brokerage business and do financing on certain asset classes are increasing," he said. "So we are seeing as an industry where many prime brokers are calling hedge funds and increasing rates on margin financing on less liquid securities, anywhere from 2 to 7 basis points."
Basel III will impose stricter regulations on reserve capital requirements for banks. This means prime brokerages are less willing to finance clients if the returns are not big enough. That has even led to primes politely showing smaller clients the door.
"With the new regulation, balance sheets become a bit more precious," said Lou Lebedin, global head of prime brokerage at JP Morgan. "In those situations, where clients have a very tight spread and are using a lot of the balance sheet, it is not uncommon for us to go back to them and explain to them how the economics look from our perspective."
http://www.cnbc.com//id/47057628
Can anyone verify these ideas ie the smelter capacity.
ReplyDeletefrom 4-16-12 Q&A:
Do you have a link to the giant smelters coming on line? And is there currently a smelter shortage, so unrefined ore is piling up somewhere? First I've heard of either of these, but you're usually right....
There’s no link. Just talk to some mining companies.
The problem is so bad that Impact Silver missed their quarter b/c of a lack of smelt capacity. It will surprise all the tin foil hatters when they see what a 50% increase in supply does to the price of silver. I’d be worried much more worried about supply than JPM….lol
regarding silver supply/demand, you mentioned a few giant smelters about to come on line. I'm guessing at least one of them is associated with the giant copper mine in Mongolia... is that correct? And what about the other one(s)? Do you have a rough idea what fraction of global supply they represent?
I don’t know of any silver smelters from Mongolia (though that doesn’t mean that it won’t happen as Mongolia is VERY rich in silver). What happens to the cost of silver when the smelt cost drops from $2-$5, back to $50c-$1.00 as the bottleneck goes away?? I’d suspect that a whole lot more marginal supply comes online. It will simply shock guys. Only reason I didn’t sell my silver in the $40s is that I wasn’t sure what else to buy and I was too lazy to take all my bars to the dealer (they’re damn heavy).
Thanks for your enjoyable,interesting blog.I was wondering if you could point me in the right direction on doing research on the large amount of silver that is going to hit the market and the large smelters that are going to open.Thanks.Keep up the good work.
There’s a billion sites on the web that track this stuff. Just look at what penoles is doing in terms of new smelt capacity. Look at how many guys are now doing secondary silver recovery circuits when a few years back they didn’t even bother to recover any silver at all. Then look at supply from the silver institute. It seems pretty well documented that there is a crushing glut of silver coming. Will demand from the tin-foil-hatters offset it?? That's the key question. But it's not a bet I want to make.
http://adventuresincapitalism.com/askkuppy.aspx
Unrefined ore isn't piling up. South African gold mine output hit like a 55 yr low last month. Mine output globally is in decline. It has been for a few years now. Cash for gold has sucked a lot of junk gold/silver out of the system already.
DeleteI'd be more worried about the supply of processed ore, not smelting capacity. You need to have input to create throughput.
Why Has the American Economic System Failed, and What Are We Going To Do About It?
ReplyDelete"We always want to keep in mind what the function, the purpose, of the economy is. The purpose of an economy is not producing GDP. It is increasing the welfare of citizens, and it is increasing the welfare of most citizens. And the American economic system has failed, and failed very badly. Most Americans today are worse off, most American households have lower real income adjusted for inflation than they had fifteen years ago."
http://jessescrossroadscafe.blogspot.com/2012/04/why-has-american-economic-system-failed.html
A little old...
ReplyDeletePA Judges Plead Guilty to Selling Child Prisoners
Ciavarella wrote in a letter to the court,
“Your statement that I have disgraced my judgeship is true. My actions have destroyed everything I worked to accomplish and I have only myself to blame.”
The two judges face up to seven years in prison under a plea agreement made with the state.
The companies in question paid the two judges more than $2.6 million dollars to send children to detention. The companies receive a stipend from the government for each inmate they house. So as more children were sentenced to the detention center, PA Childcare and Western PA Childcare received more money from the government, prosecutors said.
This nightmare scenario has long been the cry of those trying to end the practice of privatizing prisons in the United States.
http://www.inquisitr.com/211740/u-s-judges-admit-to-jailing-children-for-money/
Buffett Rule Hypocrisy
ReplyDeleteOther companies Mr. Buffett invested in or owns include: American Express, Goldman Sachs, General Electric, JP Morgan, Wells Fargo and US Bankcorp. All of these companies have or continue to get financial help from taxpayers. If the government would not have stepped in and bailed out these companies (and others), Mr. Buffett’s Berkshire Hathaway fund would have been decimated! Had there been no bailouts, no zero percent interest rates and no government sanctioned accounting fraud with the suspension of “mark to market” accounting by FASB in 2009, I’ll bet it would be difficult for Mr. Buffet to still be called the “Oracle of Omaha.” Party on, Mr. Buffett. Party on at the taxpayer expense. I think this is exactly what is meant by “privatize the profits and socialize the losses.” Of course, no one on financial TV would ever call Mr. Buffett out on this shame called the “Buffett Rule.”
http://usawatchdog.com/buffett-rule-hypocrisy/
Its a Wonderful Life MF Global, Mole, DOJ, Adam Smith's Pink Slime of Finance
ReplyDeleteWhat if you woke up one day only to find that your pension, brokerage, or bank went bust! Your Savings and Loan (MF Global) did not have enough money to return to its customers because all the assets it managed on your behalf were locked into illiquid speculations. In the depression world of "Its a Wonderful Life" all the collateral was in the form of illiquid real estate.
http://youtu.be/qu2uJWSZkck
In the modern world all the collateral times one thousand has been locked up in the form of fraudulent financial instruments called derivatives. Your bank got its credit from an even larger bank (Potter in its a Wonderful Life, and JP Morgan in regards to MF Global) Potter (JP Morgan) could demand payment at any time in the form of a margin call and it was in his financial interests to do so.
Thus George's (Jimmy Stewart's) small "Savings in Loan" in "Its A Wonderful Life" experienced a bank run; where it had to shut its doors. MF Global had to close its door through the bankruptcy process.
Potter then offers Savings and Loan Customers fifty cents on the dollar. MF Global customers are at the mercy of a trustee who has so far paid them seventy two cents on the dollar.
http://youtu.be/L_m3LKi3KNo
The Three Ways 'Old Money' Holds on to Its Riches
ReplyDeleteWhen one inquires of family members and representatives as to what it takes to preserve wealth over centuries and not just cycles, the frequent reply is "a third, a third, and a third." This is shorthand for dividing one's wealth into one-third land, one-third gold, and one-third fine art. Obviously some liquidity is needed for day-to-day expenses and some room can be made for a speculative portfolio, but the basic idea that land, gold, and art outlast and outperform riskier assets such as stocks, bonds, and cash seems sound when viewed from the perspective of centuries and not just years or decades.
http://finance.yahoo.com/news/three-ways-old-money-holds-183211924.html?l=1