Profit, Protection Despite Cartel Intervention -- Update
"Is the gold price being manipulated? There are those who say no
, while others say yes - notably The Gold Anti Trust Association (GATA) - and on balance it looks to an impartial observer (relatively) that the answer is probably in the affirmative. But perhaps no more so than any other commodities and some stock prices. There is a whole mammoth industry out there - the big banks, hedge funds etc. - whose whole purpose is to make money from money and the more you have in the first place the easier it is to do. Not by producing anything useful, but through manipulation of prices through short selling in huge volumes to drive prices down, buying on the turn, allowing prices to rise back up, taking profits, then more short selling to drive prices down again and the cycle continues. This works better in a bull market, which gold has been in for the past ten years or so.
The amount of money that can be devoted to such exercises is almost beyond belief - and the regulators turn a blind eye to such blatant manipulation that works strongly against the small or even medium-sized investor in favour of the really big ones. If there is anything that may bring the capitalist system crashing down it is, perhaps, the power of big money to rule all our lives...
Sometimes they get it wrong as happened with the subprime mortgage fiasco (basically another financial institutions' manipulation affair). But do the people who caused the problem in the first place suffer - for the most part no."
"Opinion: Gold price manipulation - probably. Conspiracy - a matter of semantics!"
Lawrence Williams, Mineweb.com, 6/29/10
"We have had a Fed engineered serial bubble, that has created the appearance of wealth, that has caused people to consume beyond their means through borrowing, and that has flushed the income and wealth of our society up to the top, as a result of the Fed turning the financial markets into a casino. These are pure casinos, they are not capital markets, they are not adding to the productive capacity of our economy, they simply are a bunch of robots trading with each other by the millisecond as a result of the Fed giving them zero cost overnight money, and giving them all kinds of hand signals on what to front-run.
The Fed is destroying prosperity by funding demand that we can't support with earnings and productions causing massive current accounts deficits and the flow of funds overseas and the build up in China, OPEC and Korea of massive dollar reserves which is a totally unsustainable, unsupportable system, and we are coming near the edge of where that can continue to remain stable."
David Stockman, Former Reagan OMB Director, December, 2010
"This report (Q1 2010 Bank Derivatives report ed.) contains more evidence that a flood of paper gold and silver instruments are being used to divert investor capital away from the purchase of the actual physical metals in order to suppress prices...
Two bullion banks, JPM and HSBC, continue to dominate the precious metals derivatives market with positions that are outrageously oversized compared to the underlying metals markets..."
"Manipulative Gold & Silver Derivative Positions Continue to Grow!"
Adrian Douglas, Marketforceanalysis.com, 6/26/10
"Going through recent bullion bank shorting information, Adrian Douglas has stumbled across a nugget that may explain the sudden willingness of JPM to admit to the FT, via proxies as obviously the bank would never expose itself to even remote market manipulation claims, that it has collapsed its silver short. The reason: even as US bank silver (and gold) shorts by US banks have been gradually declining, those positions established by non-US bank, and thus entities not under the CFTC's control, have seen their silver shorts surge, increasing by orders of magnitude over the past several months. Is there a stealthy transfer of precious metals market manipulation taking place, one that exonerates the domestic, and therefore regulatable, suspects, while making foreign banks carry the burden of suppressing silver and gold prices? The reason: hand over the silver shorts to entities that would not be subject to the CFTC's upcoming size limit rules. Per Douglas:
"The sudden and massive increase in their short positions in both metals is conspicuous when compared with historical trading patterns. The fact that it occurs at a time when the US banks that are mega-short appear to be covering makes it doubly intriguing. It looks like a strategy to shift suppression and manipulation of the market to banks that are not under the direct supervision of the CFTC. Will these non-US banks be expecting to receive an exemption to position limits where US banks might not be successful?" We hope to get an answer to all these questions soon - Douglas has sent out the following letter to the only honest man at the CFTC, Bart Chilton, which explains Douglas' findings, and demands an inquiry into just who these foreign banks are that are suddenly shorting silver and gold on the margin at alarming rates."
"Is JP Morgan Shifting Its Silver And Gold Shorts To Non-US Domiciled, And Thus Unregulatable, Banks?"
Tyler Durden, Zerohedge.com, 12/20/10
"Banana Ben, like his equally pernicious predecessor, Easy Al, is trying to paper
over declining US living standards by orchestrating asset bubbles. Ironically, Ben has driven the public into bonds and his QE 2.0 is now bursting the mother of all bubbles, the bond market.
Soon Ben will be at his Rubicon. He must then either monetize everything or
allow short rates to explode higher. This of course would precipitate the dreaded debt deflation that solons have tried to avert."
Bob Chapman, International Forecaster, 12/18/10
"Charlie and I are of one mind in how we feel about derivatives and the trading activities that go with them: we view them as time bombs, both for the parties that deal in them and the economic system."
Warren Buffet, February 21, 2003
"...All told, the Fed has bought $20 billion worth of Treasuries in this fashion, $11.15 of which it purchased last week alone. With this kind of weekly money pumping in place, Bernanke and pals don't need to continue their "behind the scenes" games (like the options expiration week money pumps).
Or do they?
Unbeknownst to most investors, last week Ben Bernanke pumped an additional $11.05 BILLION into the system ON TOP of the $11.15 pumped via the POMOs. In plain terms, the Fed juiced the system by $20+ billion in a single week, bringing its liquidity pumps RIGHT BACK to QE 1 LEVELS.
If you want to know why stocks have rallied in the last month (September, 2010; Ed.) this is THE reason. The economy isn't improving and the European Crisis isn't over. Nothing has improved. All that has happened is the Fed funneled money into the Primary Dealers who ramped the market.
This is also the reason why the latest rally has almost entirely consisted of gap ups: the Primary Dealers ramp the market and then the computer trading programs take care of the rest.
In plain terms, the market is being juiced higher, plain and simple. There is no fundamental reason for stocks to be rallying. Moreover, we have numerous signs of a top forming (mutual fund cash levels, insider selling to buying ratios, negative divergence, etc). Those who choose to buy into the farce of a rally are going to get what's coming to them. And when they do, it won't be pretty.
"The Only Reason Stocks Have Rallied This Month"
Graham Summers, Seeking Alpha, 9/28/10
"Today's POMO has closed, with Brian Sack monetizing $6.8 billion of bond. This is a 3.5x Submitted to Accepted ratio as PDs realize various blogs are on their POMO funding needs and thus moderate their Submission amount. Yet what is simply surreal is that the second most monetized bond was PJ3, due 11/30/2015 [1]. This is the same issue that was just auctioned off by the Treasury last week! There is no longer even a pretense of avoiding direct monetization. It is time for Bernanke to go out and just buy bonds at auction. A one week turnaround is nothing less than criminal fraud which if anything is unnecessary and pads the PDs pockets. The result was so stunning it was not even included in last week's frontrunning guide [2]as nobody had a clue that the Fed could be so brazen in its flaunting of direct monetization. For just holding the bond a whopping 168 hours, PDs made a few million dollars. This is criminal. But who cares. Eric Holder has still to prove that he is anything besides an organ donor." (Ed. Note PD=Primary Dealer) (Ed Note #2 Which of these Primary Dealers are also Shareholders of the private for-profit Fed?)
"6.8 Billion POMO Closes: Brian Sack Monetizes $1.1 Billion Of Bonds Issued Last Week"
Tyler Durden, zerohedge.com, 11/30/10
Near the end of the Fall, 2008 Equities Market Crash (i.e. as of December 2008) there were about U.S. $548 Trillion in Notional OTC (i.e. Dark, Not Exchange Traded; thus traded mainly by Mega-Banks) Derivatives still outstanding worldwide.
Yet one and one-half years later (as of June 2010 the most recently reported figures) that total was at about $582 Trillion which approaches the all-time pre-Crash (June, 2008) High of $684 Trillion, according to the Central Banker's Bank, the Bank for International Settlements (www.bis.org, path: Statistics>Derivatives>Table 19).
Clearly, a Conclusion that Systemic Risk (generated by Derivatives Exposure which existed, e.g., at AIG) has somehow been substantially lessened by the actions of the private for-profit Fed, the European Central Bank, the U.S. Congress, or any other source, is wrongheaded.
Given the Massive Size and Impact of the $600+ Trillion in Dark OTC Derivatives, Investing or Trading without addressing the issue of likely Cartel* Market Interventions is a recipe for disaster.
Thus, we offer the following Overview and Update regarding The Interventional Universe to provide a Springboard for the Profits and Protection Strategy which we describe below. And in our January, 2011 Letter, we also offer a Buy Recommendation designed to profit from one of our Forecast Mega-Moves.
As our regular readers know there is clear and convincing evidence that The Fed leads a Cartel* of key Central Bankers and favored Mega-Financial Institutions in an ongoing Regime of Overt and Covert Manipulation of the Precious Metals, Equities, Strategic Commodities and other Markets, as we demonstrate below.
*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, 2009, Special Alert containing a summary overview of Intervention entitled "Forecasts and December, 2009 Special Alert: Profiting From The Cartel's Dark Interventions - III" and Deepcaster's July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the 'Alerts Cache' and 'Latest Letter' Cache at Deepcaster's website. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, 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 Deepcaster's website have been facilitated by attention to these "Interventionals." Attention to The Interventionals facilitated Deepcaster's recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
This December 22, 2010 Article is the eleventh in a series of Deepcaster's work originally entitled "Juiced Numbers". It provides an Updated Overview and Summary of Market Intervention and Data Manipulation. It reflects Analysis of key recent Releases from (and actions of) the BIS (Bank for International Settlements The Central Banker's Bank), BLS (Bureau of Labor Statistics) and The U.S. Federal Reserve, as well as Highlights of recent Interventions, and updates regarding The Cartel* "End Game." For the sake of Brevity, we refer to our earlier articles in this series.
Bailouts and Stimuli have afforded The Cartel a whole panoply of additional tools for Market Intervention which they did not possess three years ago. These tools make tracking "The Interventionals" ever more challenging. In sum, this report provides even more evidence of continuing Risk of Systemic Collapse, and of the beginning of the attempted implementation of The Cartels Nefarious "End Game."
Moreover, it provides evidence that the private for-profit Fed's and its allied Mega-Banks' Policies and Actions are the Primary Cause of the Economic and Financial Crises from which we suffer today.
Indeed, the OTC Derivatives figures through June, 2010 released recently by the BIS indicate that even greater Markets Turmoil and Systemic Risk are likely in 2011 as Deepcaster earlier Forecast. They also indicate that The Cartel* and its Favored Financial Institutions showed nearly $15 Trillion in Gains while Investors lost Trillions in the Fall, 2008 Market Crash. (See BIS data referenced below.)
Therefore, Deepcaster suggests below a Systemic Solution and a Strategy for profiting and protecting from the Interventional Regime's actions and policies, and coping with its 'End Game' Strategy.
The Covert Interventional Context -- Overview
Deepcaster is periodically asked to explain, and provide evidence for, our view that a U.S. Federal Reserve-led Cartel* (apparently composed of the U.S. Federal Reserve, Major Central Bankers and key Primary Dealers manipulates a wide variety of markets. [Apparently one "Operational Vehicle" through which The Cartel works is called "The Working Group on Financial Markets" established after the 1987 crash, and which is often informally and widely referred to as "The Plunge Protection Team" or PPT.]
Essential to maximizing profits and to avoiding losses is to recognize that the Fed-led Cartel* manages two complementary Interventional Regimes - - one quite public, and the other dark one, at least as powerful, covert. Thus, a critical key to profit and loss is tracking the "Dark Interventionals" (which leave "Tracks" so to speak) as best one can, as well as the public ones.
Moreover, whether an Intervention is Overt or Covert is often a matter of degree. Overt Intervention often has a Covert aspect (e.g. how was that TARP Bailout Money used and who received it?), and Covert ones are often difficult to detect, but nonetheless can often be tracked using publicly available information. Consider for example, the Graham Summers Quote above.
It is important to note also that by "Cartel Intervention" we do not (usually) mean that the Cartel totally controls prices in any particular market, at all times. Various markets are affected in varying degrees, at varying times, by Cartel manipulation attempts.
In markets such as the (relatively) Small Cap markets for Gold and Silver Bullion and especially Securities, Cartel manipulation attempts can have much more impact and are, at times, and for certain time periods, tantamount to control. But the Cartel's ability to manipulate certain of these Markets has been significantly weakened in recent months for reasons we explain in our Spring, 2010 and later, Letters, Articles and Alerts (e.g. "Profit from a Weakening Cartel, July, 2010 Letter"). Here we do not focus on the Overt Interventions since they are described at length in various mainstream financial publications.
COVERT DIRECT INTERVENTION
Covert Direct Intervention to manipulate a variety of markets appears to be accomplished primarily via three categories of vehicles:
1)"Repo" Injections from The Fed (TOMO's & POMO's though POMO injection have become more widely reported recently)
2)Over The Counter (OTC) Derivatives (reported at www.bis.org, see below)
3)"Bailout" monies and Authorizations which Congress unwisely gave the Fed without requiring full disclosure or Oversight and, in particular, the TARP and TSLF (Term Securities Lending Facility) injections by The Fed, and other Vehicles such as the Primary Dealer Credit Facility (PDCF).
[For fuller Explanation, see Deepcaster's Article "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description" (12/23/09) in the 'Articles by Deepcaster' Cache at Deepcaster's website and for details regarding Cartel use of Repos, Derivatives, Bailout Monies and other Vehicles see the July, 2009 Letter.]
The Challenge: Determining the Impact of The Interventionals
The challenge for Investors and Forecasters is to determine where (i.e. in what Sector/s) and how (immediately, in increments, etc.) the Repo-backed funds and/or TARP/TSLF/Bailout Funds and/or OTC Derivatives (Interventional Funds) etc. will be employed. Deepcaster and those very few others, who monitor the Interventional Funding (and related Cartel and Allies' actions) to the extent that is feasible, make educated Forecasts of where and how such funds are likely to be used based on patterns, tendencies, and judgments virtually all of which can be gleaned or inferred from publically reported information. But no outsider can know for sure.
Those who doubt whether the Cartel has the capacity to manipulate the markets (and especially the larger markets like the multi-trillion dollar currency and bond markets) are invited to inform themselves about the U.S. $70 Trillion plus of OTC Derivatives at Fed Primary Dealer J.P. Morgan Chase, or U.S. $40 Trillion plus (each!) at Fed Primary Dealer Goldman Sachs and Fed Primary Dealer Citibank.
Indeed both Opportunities for and Threats to Investors are generated by Cartel Policies and the Massive OTC Derivatives positions. Consider:
"With Key Mega-Financial Institutions around the World claiming in 2008 that they risked collapse if they were not bailed out, one must ask which ones benefited from the $15 Trillion plus Increase in Gross Market Value of their OTC Derivatives in the six months between June, 2008 and December, 2008 when the Equities Markets were crashing and Investors around the world were losing trillions? A logical Conclusion: Key Central Bankers and Favored Financial Institutions of The Fed-led Cartel*, quite possibly including the shareholders of the private for-profit U.S. Federal Reserve". (cf. BIS Table 19 cited above)
Deepcaster, May 29, 2009
To read the complete article go to www.deepcaster.com and click on the 'Articles by Deepcaster' Cache.
by: Deepcaster LLC
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