Tag Archives: market manipulation

Steve Cohen To Leave Trading, Says Vanity Fair

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Well, well, well. It looks like Patrick Byrne, Judd Bagley, Mark Mitchell and the rest of the estimable team at Deep Capture are having more than some effect.

Not only have the Germans and Austrians banned naked short- selling, Vanity Fair, our least favorite low-class, high-gloss magazine of the DC twitterati, tells us that Steve Cohen is closing up shop as a trader. Sith Lord Cohen doesn’t like the spotlight, it seems.  Maybe he remembers all too well what he was up to in the 1980s……even if Reuters wants to keep it buried.

Vanity Fair:

In the July issue of Vanity Fair, legendary hedge-fund billionaire Steve Cohen tells special correspondent Bryan Burrough that he might be ready to walk away from active trading. How big would that be? Well, says Burrough, it’s “a little like saying that God is ready to walk away from Earth.” In this video, Burrough takes the measure of Cohen’s controversial careeer—and offers his theory on why the reclusive banker granted the second in-depth interview of his 30-year career to Vanity Fair.

9-11 Related Stock Fraudster Elgindy Tipped Off By SEC Officers

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Dow Jones

“Two U.S. Securities and Exchange enforcement officers released nonpublic SEC information to a Federal Bureau of Investigation agent and a short seller who were convicted of securities fraud and conspiracy in 2005, an SEC watchdog’s report said Tuesday. One SEC officer on several occasions talked with the FBI special agent about the progress of agency probes of companies, Inspector General David Kotz said in his semi Continue reading →

Where In The World Is Iraq’s Gold?

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A thought occurred to me late at night. Do you remember these stories from the Iraq war?

WASHINGTON (CNN) –For the second time in a week, U.S. troops have discovered what appears to be a cache of gold bars hidden in a truck, which could be worth just less than a quarter of a billion dollars, according to a Pentagon official. Continue reading →

Rahm And The Killer Hedgie

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Yves Smith has a piece at naked capitalism related to the extended Pro Publica (http://www.propublica.org/special/the-timeline-of-magnetars-deals) report by Jake Bernstein, Jesse Eisinger, and Krista Kjellman Schmidt that describes how hedgies manipulated subprime CDOs:

“Magnetar

1) A neutron star with an intense magnetic field, capable of emitting toxic radiation across galaxies
2) A hedge fund, the single market player most responsible for the severity of the 2008 financial crisis, through the toxic instruments it created Continue reading →

Hanky-Panky At The Counting House

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I thought I’d repost a piece that I wrote in Dissident Voice, way back in 2006. It helps give some background to the JP Morgan manipulation story.

And it also adds some background to the ongoing re-valorization of the once discredited IMF. Along with that re-valorization, is the hyping of anyone supporting even further central regulation, although the financial crisis occurred in all sorts of places that have plenty of it.

All this centralization and global government is supposedly for the welfare of the world – but there is no “welfare of the world” that can be safely accepted as gospel from the mouths of the financial industry and its political and media allies.

Note the date of the piece below – back on June 6, 2006, when, dare I say it, most of the financial talking- heads and blogs now being treated as the only legitimate interpreters of reality were doing…well, they weren’t reading GATA or supporting its work, I’m pretty sure. To have done so then would have made them persona non grata in the very same liberal media that is now embracing this research and that GATA, in turn, seems to be endorsing….for its own reasons..

Check it out for yourself.

Here’s an excerpt from the piece: “Hanky-Panky at the Counting House” (June 6, 2006)

Also, at Dissident Voice, you can find “Was The IMF Involved in Gold Price Manipulation” (June 8, 2006) which was also posted at Daily Reckoning and on one of the gold sites.  I think it’s been taken off Daily Reckoning since.

“The unofficial theory is naturally a lot juicier, although described by even sworn enemies of paper currency as conspiratorial. Still, it’s managed to rear its head in the Wall Street Journal, so it can’t be all wet. Here is what widely respected libertarian Congressman Ron Paul had to say on Feb 14, 2002:

While the Treasury denies it is dealing in gold, the Gold Anti-Trust Action Committee (GATA) has uncovered evidence suggesting that the Federal Reserve and the Treasury, operating through the Exchange-Stabilization Fund and in cooperation with major banks and the International Monetary Fund, have been interfering in the gold market with the goal of lowering the price of gold. The purpose of this policy has been to disguise the true effects of the monetary bubble responsible for the artificial prosperity of the 1990s, and to protect the politically-powerful banks that are heavy invested in gold derivatives. GATA believes federal actions to drive down the price of gold help protect the profits of these banks at the expense of investors, consumers, and taxpayers around the world.

GATA has also produced evidence that American officials are involved in gold transactions. Alan Greenspan himself referred to the federal government’s power to manipulate the price of gold at hearings before the House Banking Committee and the Senate Agricultural Committee in July, 1998: Nor can private counterparts restrict supplies of gold, another commodity whose derivatives are often traded over-the-counter, where central banks stand ready to lease gold in increasing quantities should the price rise. [Emphasis added] (3)

More specifically:

Gold is borrowed by Morgan Chase from the Bank of England at 1 percent interest and then Morgan Chase sells the gold on the open market, then reinvests the proceeds into interest-bearing vehicles at maybe 6 percent.

At some point, though, Morgan Chase must return the borrowed gold to the Bank of England, and if the price of gold were significantly to increase during any point in this process, it would make it prohibitive and potentially ruinous to repay the gold. (4)

In plain English, the strong dollar policy that put the sizzle in the stock market under Clinton was made possible only by manipulating the gold market to keep prices low. The low interest rates which kept the economy on the boil went hand in hand with low gold prices. Investment banks used the low rates to borrow gold from the central banks and sold them short (short selling being the technique of selling assets you don’t actually own in the hope of buying back at a cheaper price because you anticipate a fall in the price). This allowed the banks to make billions from a market rigged to take the risk out of their shorting. And it kept the dollar pumped up. And who was the architect of this strong dollar policy? Why, none other than Robert Rubin of Goldman Sachs — one of the bullion banks most implicated in the gold fixing scenarios.

So, the appearance of another Gold-man at this critical moment is all the proof the gold cartel theorists need that more manipulation is in store to keep the dollar up, gold down, and the bullion banks from losing their . . . er . . .  shorts. (5)

And if this seems conspiratorial, consider what Paul Mylchreest, investment analyst at Cheuvreux, top ranked for its research in Western Europe and part of Credit Agricole, the largest bank in France says today, “Central banks have 10-15,000 tonnes of gold less than their officially reported reserves of 31,000. This gold has been lent to bullion banks and their counterparties and has already been sold for jewellery, etc. Non-gold producers account for most and may be unable to cover shorts without causing a spike in the gold price…” (6)

Or what the Wall Street Journal itself wrote about what took place in the seventies:

Worried the falling dollar was undermining its anti-inflation efforts, the Carter administration announced a multi-part support package on Nov. 1, 1978: The Treasury would use gold sales and foreign borrowing and draw on its reserves with the International Monetary Fund to defend the dollar. At the same time the Federal Reserve raised its discount rate a full point. (7)

And that was in the ’70s, when there was no credible alternative to the dollar, India and China were sleeping giants, Russia was still the Soviet Union, and the United States was not threatening to nuke the Middle East.

How bad is the situation?

[A]s of June 2000, J.P. Morgan reported nearly $30 billion of gold derivatives and Chase Manhattan Corp., although merged with J.P. Morgan, still reported separately in 2000 that it had $35 billion in gold derivatives. Analysts agree that the derivatives have exploded at this bank and that both positions are enormous relative to the capital of the bank and the size of the gold market.

It gets worse. J.P. Morgan’s total derivatives position reportedly now stands at nearly $29 trillion, or three times the U.S. annual gross domestic product. Wall Street insiders speculate that if the gold market were to rise, Morgan Chase could be in serious financial difficulty because of its “short positions” in gold. In other words, if the price of gold were to increase substantially, Morgan Chase and other bullion banks that are highly leveraged in gold would have trouble covering their liabilities. (8)

That was 2000. This is 2006.

So long as gold remains a mere relic . . . a yellow reminder of what used to be money . . . no harm done. Unless something absurd happens, that is. Something absurd like, say, gold doubling to $573 an ounce inside 5 years. If that happened, then the “carry trade” of borrowing gold to invest in paper could become a very expensive way to bankrupt the entire global financial system. (9)

This spring gold hit over $700. And that’s why the hanky-panky is likely to begin in earnest now.

Lila Rajiva is a freelance writer in Baltimore, and the author of the must-read book The Language of Empire: Abu Ghraib and the US Media (Monthly Review Press, 2005) She can be reached at: lrajiva@hotmail.com. Copyright (c) 2006 by Lila Rajiva

NOTES

(1) “Good as Goldman: Bush drafts Hank to bat third,” Daniel Gross, Slate, Tuesday, May 30, 2006.

(2) “Please, Sir, I Want Some More. How Goldman Sachs is carving up its $11 billion money pie,” Duff Mcdonald, New York Metro, Dec 21, 2005.

(3) Speech of Congressman Ron Paul, U.S. House of Representatives, February 14, 2002, www.house.gov/paul

(4) “All That Glitters Is Not Gold,” Kelly Patricia O’Meara, Insight Magazine, March 4, 2000.

(5) According to GATA, the cartel includes J.P. Morgan Chase, Deutsche Bank, Citigroup, Goldman Sachs, Bank for International Settlements (BIS), the U.S. Treasury, and the Federal Reserve

(6) “How Central Banks Have Kept Gold Down,” Adrian Ash, Money Week, February 9, 2006.


(7) “As Dollar Weakens, Hidden Strengths May Stave off Crisis,” Wall Street Journal, January 17 2005.


(8) See Note 4.

(9) See Note 6.

Whistleblower Reports Precious Metals Manipulation By JP Morgan

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Bill Murphy, chairman of The Gold Anti-Trust Action Committee (GATA) reports that on March 23,2010, GATA director, Adrian Douglas, was contacted by a London metals trader, Andrew Maguire, who had been told directly by JP Morgan traders how they manipulate the precious metals (PM) markets on non farm payroll data release, COMEX contracts rollover, and similar recurring occasions, to make money.

Maguire had previously contacted the enforcement division of the CFTC (Commodity Futures Trading Commission) to report this. On February 3, 2010, he gave a two-day advance warning of PM manipulation on the release of the non-farm payroll data on February 5 that took place as predicted.

Read more at GATA.

Checking Back On Old Posts

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Delving into the archives is a lot of fun. It´s uncanny, how things turned out…

Check this post from October 9, 2008:

(Mind you, I hadn´t come across Deep Capture at that point. I started reading it in the spring of this year. I think I came across a link to it on Doug Boggs´blog – The Banterer)

October, 2009 2008

Do Statistics Back Claims of Complete Credit Freeze?

“Many commentators claim, however, that virtually no transactions are occurring in this market. These claims are completely false. For the week that ended October 1, which is the most recent week currently reported, total commercial paper outstanding amounted to $1,607 billion. Yes, this amount was down from the $1,702 billion reported for the previous week, but is a 5.6 percent drop a good reason to panic? If we go back to March 2008, when nobody was talking excitedly about the commercial market’s “freezing up,” we find that the total amount outstanding, on average, was $1,822 billion, or only 13 percent more than last week. In March, the market was working fine; now it’s “locked up.” This sort of hyperbole, with which we are being bombarded hourly around the clock, is totally without a basis in the facts…..”

Robert Higgs, suggesting that some people are fomenting panic. He asks why.

Comment:

The answer lies in asking yourself:

Who has benefited so far? How? What do they want to happen?

Paulson Plan Premeditated?

Here’s Bill Engdahl tying up the loose ends of my piece on Paulson on how Paulson’s plan benefits the three new super banks, Goldman, JPMorgan Chase, and Citi and how they would be used to dominate global, especially European, banking.

Interbank Wars – Latest

The latest in Citi’s fight with Wells Fargo is that Citi has terminated negotiations and is planning to pursue breach of contract against Wells, so Wells is going ahead with its deal. Citi has Goldman Sachs connections: Rubin, Clinton’s Treasury Secretary and a former Goldman chief is a director.

Meanwhile, with regard to Bear’s demise, here is a piece arguing that JPMorgan was involved in gold price manipulation under cover of their bail out of Bear this spring. JPMorgan chief Jamie Dimon sits on the Board of the NY Federal Reserve and as such was privy to the NY Fed’s actions re Bear Stearns.

Media Trix

Bill O’Reilly, not usually my favorite person, has been pretty good on standing up to the bail-out. This evening, he had a clip from an NBC skit on the sale of subprime mortgages to Wachovia by a couple, the Sandlers. It mocks Barney Frank’s role in eliminating oversight of Fannie and Freddie. Apparently the video was edited to remove the reference to Frank. The Sandlers had a long list of progressive groups they donated to (including Move On.org).

O’Reilly’s tack seems to be that the positions of those groups is undermined by the funding. That part is far-fetched, but it is time someone pointed out that not everyone affected by the decline in housing prices is an innocent. Many people made fortunes during the boom and are making more money from the bust.

Update – Market Moves Or CyberWars?

Another amazing day. I walked out of the house for 2 hours to buy a laptop for traveling, since my old one had mysteriously lost its internet connectivity. When I came back, the market was closing with a sell off, down 7% (679 points).

It began in the morning when
Paulson announced that insurance companies were in for trouble. That set off the selling in the bank and insurance stocks, including regional bank funds.

The whole thing was compounded by the fact that today was the day the ban on short-selling around 1000 financial and finance related stocks was lifted, so short-sellers were pouncing.

[Companies on the SEC’s list slid 18 percent on average during the ban, compared with 24 percent drop for all financial companies in the Standard & Poor’s 500 Index].

Then, General Motors had a bad day: Standard &Poor threatened to downgrade it (as well as Ford) to junk. GM shares got beaten down under $5; Ford was down over 20% too.

You had to wonder at the timing.

1) It’s the Jewish holiday, Yom Kippur, today. Recall that the selling began the evening of Rosh Hashanah. Remember that old saw – sell Rosh Hashanah, buy Yom Kippur? Markets are weaker at the time…

2) The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It’s the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent.

3) The decline is 7 years from 9/11

Anyway, when I got back the damage had been done.

[I ended up buying my computer at a shop that sold refurbished electronics in a rather shady side of town. A cop car was pulling away just as I walked in. But having just been a spectator to one of the biggest bank heists in history, I suddenly found the grungy looking characters hanging around rather harmless].

James Altucher, a trader, has this to say at The Street:

“The single biggest reason the stock market has fallen in the past five days is hedge fund liquidations. Of the top 20 hedge funds in the world, something like 18 are down 20% or more this year. They are getting redemptions, they are liquidating, they are selling stocks with reckless abandon to raise cash. Our job as good investors is to give them liquidity and take their bargain-basement merchandise off of their hands. Let’s get their selling over with so we can make money.”

Well, that’s evident. There was big selling, especially at the end, the kind from sell signals going off in program trading.

Morton Kondracke on FOX News in the evening was telling us sagely that it’s not a liquidity issue, it’s a confidence issue, and (get this) the answer is to create a global central bank. Right. The solution to a confidence problem is to give the markets to the confidence-men.

A note on cyberwarfare might be apposite hear [sic]. I dig it up from an old article I wrote that references Laurent Murawiec’s now notorious power-point presentation in 2002 advocating seizing Saudi oil fields. Murawiec is connected to Donald Rumsfeld’s Revolution in Military Affairs (RMA) which makes InfoWars central to the battle ground.

“In all these cases, IW involves creating phantom cyber-images, which can include phantasms of nonexistent trains, airplanes, stock market orders, and bank transfers; false impressions of the enemy’s troop strength and one’s own, of supplies and movements, of fake attacks and all-too-real defenses; and phantom images of the enemy’s leaders doing evil things on screen because one has video-morphed images of them doing them so.

“Information warfare is not about machines or even electrons. It is about people’s minds, society’s functions, and armies’ strategies. Cyberspace endows us — and our enemies — with new and extraordinary means with which to achieve our respective aims. “We have only begun to cyber-fight….”

More at “Tom Tancredo Takes Out Mecca: The Cyber Wars Playing Near You” (Dissident Voice, August 8, 2007)

Mark to “Markit” Manipulation

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From Deep Capture:

“Another line of inquiry has not been pursued, however, though it is of equal, and perhaps greater, significance. That line of inquiry concerns the way in which the prices of credit default swaps effect [sic] the perceived value of all forms of debt — corporate bonds, commercial mortgages, home mortgages, and collateralized debt obligations — and as a result, the ability of hedge funds manipulators to use credit default swaps to enhance their bear raids on public companies.

If short sellers can manipulate the price of credit default swaps, they can disrupt those companies whose debt is insured by the credit default swaps whose prices are manipulated.  The game plan runs as follows: find a company that relies on a layer of debt that is both permanent, and which rolls over frequently (most financial firms fit this description). Short sell that company’s stock. Then manipulate the price of the CDS upwards, preferably into a spike, as you spread the news of the skyrocketing CDS price (perhaps with the cooperation of compliant journalists at, say, CNBC).

Because the CDS is, in essence, an insurance policy on the debt of the company, the spiking CDS pricing will cause the company’s lenders to panic and cut off access to credit. As this happens, the company’s stock will nosedive, thereby cutting off access to equity capital. Thus suddenly deprived of credit and equity, the firm collapses, and the hedge fund collects on its short bets.

Moreover, credit default swap prices are the primary inputs for important indices (such as the CMBX and the ABX) measuring the movement of the overall market for commercial and home mortgages.  In the months leading up to the financial crisis of 2008, short sellers pointed to these indices in order to argue  that investment banks – most notably Bear Stearns and Lehman Brothers – had overvalued the mortgage debt and property on their books. Meanwhile, several hedge funds made billions in profits betting that those indexes would drop.

It should therefore be a matter of some concern that credit default swap “prices” and the indexes derived from them are determined almost entirely by a little company with zero transparency and, it appears probable, a high exposure to influence from market manipulators. The company is called Markit Group, and there is every reason to believe that its CDS-driven indices (the CMBX, the ABX, and several others) are inaccurate, while the credit default swap “prices” that they publish  and which rock the market are in fact  nowhere close to the prices at which credit default swaps actually trade.

Last year, the media reported that New York Attorney General Andrew Cuomo had sent subpoenas to Markit Group as part of an investigation into possible manipulation of credit default swap prices by short sellers. This investigation, like Mr. Cuomo’s other investigations into market manipulation, have yielded no prosecutions.

The Department of Justice is reportedly investigating Markit Group for anti-trust violations. This investigation (which is reportedly focused on how Markit Group packages and sells its information) seems to acknowledge that Market Group has near-monopolistic control of information about credit default swap prices. However, if the press reports are correct, the DOJ has not considered the possible appeal of this monopolistic control to market manipulation.

“

My Comment

This isn’t the first time that Markit has been fingered.  Pam Martens wrote a detailed piece last year at Counterpunch called “How Wall Street Blew Itself Up” that blew Markit´s cover.

Now I´ve always suspected the indices (including Libor) are manipulated.  The fundamental problem in our markets is corruption..and that´s directly related to size and monopoly. That´s why you do need certain kinds of  “level playing field” or procedural types of regulation (not substantive regulation) to take care of the problem. I think this should also take care of Olagues’ caveat. The Deep Capture team isn’t confining its investigation to simply naked shortselling in the technical sense, but is expanding its work to the entire range of strategies involved in rigging the markets – insider trading, short-selling of all kinds, and the manipulation of indices. (Correction: I am referring to uncovered short sales, where there is no intent to deliver)