Monday, May 14, 2012

Still no word on whether Greece buys out Norwegian funds/Spanish 10 yr yields at 6.23%/Italian bonds at 5.75% Red ink in all bourses throughout the globe

Good evening Ladies and Gentlemen:

Gold closed down 23.00 to $1560. 60.  Silver fell by 53 cents to $28.52.  The markets have digested the news from JPMorgan and now conclude that the 2 billion dollar loss is just a tip of the iceberg.  Most of the good guys have now concluded that JPMorgan has underwritten massive quantities of corporate debt via credit default swaps.  They then stated that these were hedges when in reality they were one sided bets that corporate debt will remain strong and nobody goes belly up.  The sharks as soon as they found out about the trade,  they smelled  blood gashing from JPMorgan's wounds.  The hedge funds are taking the opposite side of Morgan's bets and driving the IG9 index wider again today.  JPMorgan would have to announce probably another 3.4 billion dollars of losses.  Please do not forget that these crooks also have the dominant share of interest rate swaps and also huge numbers of credit default swaps on sovereigns.  If JPMorgan blows up the world will have no counterparty to pay off their offside bets.  Trillions will be printed to bail out all the banks.
The price of gold and silver fell today and yet we see no liquidation of actual metals.  Strangely , the OI on gold rose as demand was increasing.  Please remember that the bozos can whack paper gold and paper silver but cannot sell huge quantities of physical metal for it is difficult to locate a large enough quantity.
We will be going over many of these points but first: let us head over to the comex and assess the criminal activity today.

The entire gold comex open interest surprised our CME folk to no end as the OI rose by 2220 contracts despite the raid.  The total OI rose from 417252 to 419472 as some of our players took advantage of the lower price and added to their positions.  The raid was suppose to cause a fall in OI.  I guess their plan did not work.  The May delivery month saw its OI remain constant at 36 contracts.  We had zero deliveries on Friday so we neither gained nor lost any gold on the delivery front.  The next delivery month for gold will be June and I am very keen to see how this plays out.  The OI fell by 5037 contracts from 188,884 to 183,847 as all of these players rolled into August or December. The estimated volume at the gold comex today despite the raid and many rollovers was only 170,640 contracts.  The confirmed volume on Friday was slightly better at 186,623.  It seems that the Comex is attracting far less players as they seek metal in other jurisdictions.

The total silver comex as promised still remains in this narrow channel of around 111000 to 113,000.
Today the OI dropped only 165 contracts to rest tonight at 112,393 from Friday's level of 112,558.
The bankers or shorters are trying their best to force the silver longs to relinquish some of their leaves from the silver tree but to no avail.  The front delivery month of May saw its OI fall from 376 to 325 for a loss of 51 contracts.  We had 47 delivery notices on Friday so we lost 4 contracts or 20,000 oz of silver.  We may have had cash settlements here or 4 contracts just had enough and bailed instead of waiting to be serviced.
The next big delivery month is July and here the OI fell marginally by 457 contracts from 60,215 to 59,758.
The estimated volume today is certainly of concern to our CME.  It came in at a very weak 33,565.  The confirmed volume yesterday was slightly better at 38,509 contracts.  The CME is witnessing business flowing to Shanghai and London.  Pretty soon they will be out of business and a marginal player in silver.

May 14.2012


Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
14,657.22 (Brinks)
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in
4103.07 (Scotia)
No of oz served (contracts) today
(0)  zilch
No of oz to be served (notices)
  36  (3600)
Total monthly oz gold served (contracts) so far this month
(466) 46,600
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month

Not much activity in the gold vaults especially when we witnessed such a fall in gold during these past
few trading days.
We had only one deposit and that was a customer deposit into Delaware of 4,103.07 oz

We had only one withdrawal of gold by the customer of 14,657.22 at the Brinks vault.
We had no adjustment.
The dealer or registered inventory rests at 2.424 million oz or 75.4 tonnes of gold.

The CME notified us that we had zero notices filed and thus the total number of notices
remain the same at 466 for 46,600 oz.

To obtain what is left, I take the OI standing for May (36) and subtract out today's delivery
notices  (0) which leaves me with 36 notices or 3600 oz left to be served upon.

Thus the total number of gold oz standing in this non official delivery month of May is as follows:

46,600 oz (served) +  3600 oz (to be served upon)  =    50,200 oz or  1.56 tonnes of gold
identical to Friday.


May 13.2012:

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory97,264.99 (Delaware,Brinks,)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory4949.60 ,(Scotia)
No of oz served (contracts)7 (35,000)
No of oz to be served (notices) 318  (1,590,000)
Total monthly oz silver served (contracts)2158 (10,790,000)
Total accumulative withdrawal of silver from the Dealers inventory this month583,065.04 oz
Total accumulative withdrawal of silver from the Customer inventory this month 3,316,192.2
 The movements into and out of the silver vaults were very quiet today.
We had no dealer activity whatsoever.

We had one one tiny deposit into Scotia of 4949.60 oz
We had two small withdrawals of silver:

1. Out of Brinks;  95,197.79 oz
2. Out of Delaware:  2067.20 Brinks.

total withdrawal:  97,264.99 oz

There were no adjustments.
Thus the registered inventory remains at 35.726 million oz
The total of all silver remains at 140.49 million oz.
It is interesting that all our inventory levels have remained relatively constant this month and yet we have 12.4 million oz delivered. The total withdrawals have been 3.9 million oz so what happened to this inventory?  Probably a good question to ask of our trolls.

The CME reported that only 7 notices were filed for a total of 35,000 oz.  The total number of silver
notices filed so far this month total:  2158 for 10,790,000 oz.  To obtain what is left to be served upon,
I take the Oi standing for May (325) and subtract out today's delivery notices (7) which leaves us with 318 notices or 1,590,000 oz to service the outstanding longs.

Thus the total number of silver ounces standing in this delivery month of May is as follows:

10,790,000 oz (served)  +  1,590,000 (oz to be served upon)  =  12,380,000 oz
we lost 20,000 oz of physical silver standing.


Let us now proceed to our ETF's SLV and GLD and then our physical gold and silver funds:

Sprott and Central Fund of Canada.

The two ETF's that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.
There is now evidence that the GLD and SLV are paper settling on the comex.

Thus a default at either of the LBMA, or Comex will trigger a catastrophic event.

May 14. 2012:

Total Gold in Trust



Value US$:63,955,176,280.60

May 12.2012




Value US$:64,963,271,386.58

MAY 10.2012




Value US$:65,600,415,285.36

WE NEITHER GAINED NOR LOST ANY GOLD AT THE GLD today. Amazing that we have had a 100 dollar drop in the price of gold during the past two sessions and yet no gold liquidation from the GLD and little gold withdrawn at the comex.


And now for silver May 14/2012:

Ounces of Silver in Trust304,309,376.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,465.08

may 12.2012:

Ounces of Silver in Trust304,309,376.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,465.0

May 10.2012

Ounces of Silver in Trust304,309,376.700
Tonnes of Silver in Trust Tonnes of Silver in Trust9,465.08

 we have no change in silver inventory.  Surprisingly we have had over a $1 drop in silver these past 2 days and yet no physical liquidation.  And the comex silver vaults were quiet as well today.

And now for our premiums to NAV for the funds I follow:

1. Central Fund of Canada: traded to a positive .5 percent to NAV in usa funds and a positive .4%  to NAV for Cdn funds. ( May 14,.2012)

2. Sprott silver fund (PSLV): Premium to NAV  lowered   to  4.18% to NAV  May 14.2012 :
3. Sprott gold fund (PHYS): premium to NAV lowered to  1.48% positive to NAV May 14 2012). 


If there is anybody in the world that knows when they should buy gold it will be the IMF.  They know the house of cards is crumbling.  They wish to buy 2 billion dollars in gold or approximately 40 tonnes of gold.
Didn't these guys "sell" 400 tonnes recently?  maybe it just a paper transfer.  Now they need the real stuff:

(courtesy GATA and

After years of selling it, IMF plans to buy $2 billion in gold



Section: From Commodity Online
Ahmedabad, India
Monday, May 14, 2012

NEW YORK -- The International Monetary Fund is planning to purchase more than $2 billion worth of gold on account of rising global risks. The IMF currently holds around 2,800 tonnes of gold at various depositories
"The Fund is facing increased credit risk in light of a surge in program lending in the context of the global crisis. While the Fund has a multi-layered framework for managing credit risks, including the strength of its lending policies and its preferred creditor status, there is a need to increase the Fund's reserves in order to help mitigate the elevated credit risks," Bloomberg quotes a report by an IMF staff while also adding that a $2.3 billion gold purchase is in the planning.
The IMF's borrowers include Eurozone countries like Greece and Portugal. Greece is IMF's biggest borrower and the nation is currently caught in a political deadlock that seems bent on denying itself the much needed bailout fund.
Countries like Spain are also officially in recession after first-quarter GDP contracted. Other nations in the Eurozone region are also showing increased signs of slow manufacturing activity and economic growth.
In such a risky financial environment, the IMF's move could be considered wise and can be seen as an indication of how much trust the mainstream financial community now has on precious metals like gold.


Oh! this is a going to be interesting!!!

(courtesy Reuters/GATA and Lars Schall ...our many in Germany)

German Parliament wants accounting of gold reserves; Bundesbank resisting Submitted by cpowell on Mon, 2012-05-14 18:34. Section: Daily Dispatches
German Bundestag Examines Assesment of Gold Reserves
From Reuters
via Die Welt, Berlin
Monday, May 14, 2012
Translation by Lars Schall
The German parliament, the Bundestag, is looking at the accounting of German gold reserves at the Bundesbank. Parliament’s Budget Committee has requested, in opposition to the Bundesbank, a critical report by the Federal Audit Office, the newspaper Bild reports.
"The decision has been unanimous," the paper quoted the Christian Social Union budget expert Herbert Frankenhauser. The newspaper report alleged "account cheating" regarding the German gold reserves.
According to the Bild report, the federal auditing office complained of "inadequate dilegence of the accounting of the gold reserves, which are stored in some foreign countries. Repatriation of the gold reserves is encouraged. The German gold reserves are in part held at foreign central banks.
The federal audit office wants to weaken the report in regard to the security of other countries and provide to the parliament a shorter summary that could be read only in the secret shelter of the Bundestag.
The head of the Bundesbank, Jens Weidmann, was trying to convice the leadership of the Christian Democratic Union and Christian Social Union to request such a requirement for the report.
Germany has with 3,400 tons of gold, the world’s second largest gold reserves. They are managed by the Bundesbank and are part of the country’s currency reserves.

 Here is another story out there on our physical metals.  This paper by Kupperman will no doubt interest you as he talks about China's insatiable demand for gold:

Frontrunning China's Insatiable Demand For Gold....

-- Posted Monday, 14 May 2012 | Share this article | Source:
By Harris Kupperman

I like investing in commodities because they’re very simple to understand—it’s all about supply and demand. Naturally, I take a very strong interest in the increasing demand for gold coming out of China. You see, in the short run, the paper markets (leveraged traders) rule the day. In the longer run, the physical market is all that matters. In the past few months, we’ve seen some very important changes in the physical market for gold—China is hungry.
Chinese Gold Imports
Monthly Chinese Gold Imports (excludes March's 63 Tons)
In this year’s first quarter, Chinese gold production hit a record around 80 tons, but that’s only part of the story. The real story is on the import side, where China imported 135.5 tons (up from 19.7 tons last year). In total, China is now consuming almost 30% of the world’s gold production. India is no longer the price setter—China is. Even more interestingly, gold imports are starting to rise rapidly, 32,948kg in January, 39,668kg in February and 62,913kg in March. If there is one true lesson from the past decade, it is to watch what China needs. When their internal production can no longer fill the need and they resort to imports, watch out!! Import demand starts small and grows forever.
Chinese Pandas
If you’ve been paying attention to recent earnings from the mining sector, you will know that almost everyone missed their targets. Where growth did exist, other mines had shortfalls. There is minimal production growth from the industry. I don’t see substantial growth in gold production for at least a number of years. What happens when demand increases and supply cannot keep up?
Despite what the tin-foil-hatters may want you to think, in the end, gold is just another commodity where the majority of production still goes into jewelry, dental and industrial applications. At the margin, guys hoarding coins and central bank buying has mattered, but basic demand has really set the trend. Gold isn’t valued at much more than the marginal cost of bringing on new production. If you want to see big production increases, you need for the price to go substantially higher. Given the massive headache of operating a gold mine, you need to make at least a 20% return on capital to even consider it. We need much higher prices for new mines to earn those sorts of returns.
I mention all of this because I am watching as gold is in free-fall. Sentiment is at multi-year lows. Everyone thinks that gold is going lower. Yet, demand is ramping up while supply is stable.
chinese gold
The Chinese have finally found an asset class that they can put their money into and feel secure. Their current options are bank deposits with negative real yields at insolvent banks, fraudulent Chinese stock exchange companies or real estate in a real estate bubble. Gold is the answer that the whole country has been looking for. 63 tons of buying in March is a tiny number. It’s a mere $3 billion. Wait until a billion people decide to make the shift in allocations.
I’ve been long gold for almost a decade. There have been stunningly brutal selloffs in the past. This is another one of them. I think we are near the final legs of this sell-off. A few days back, I sold some of my miners to reduce my exposure as they weren’t “acting right.” Instead, I’m buying gold. I don’t have to worry about all the headaches of mining. This is a large position that I’m making larger. I want to own what China wants to own.
Harris Kupperman


Finally Jim Sinclair and his pep talk to calm our emotions;

Your Greatest Enemy Is Your Emotions

My Dear Extended Family,
Your greatest enemy now is your emotions. In fact it is the only tool that can be used against you.
If you have not taken margin your worst case scenario is the pain of quoting. I have suggested at various times since $248 gold that you dig a hole, jump in and pull a rock over your head. Each time I did I was derided thoroughly by the shorts. Each time I did the price of gold went significantly higher.
The price of gold is going much higher. The problems that give gold its reason to go higher are growing, not waning.
The entire thesis for gold is illustrated by the three Skiers posted on the weekend.
There is no political will for the results of an EU break up. There is no way the Fed is going austere as the austerity is exploding in the face of Europe politically.
There has been no decline in the amount of notional value of OTC derivatives outstanding. If you think Morgan is the only derivative problem out there you are quite wrong.
Stay the course, stop looking every few minutes, and quiet your emotions. Gold will trade at and above $2111 after this reaction is completed.


Let us now head over to the main stories of the day and JPMorgan dominates again:

We now have a handle on what JPMorgan's IG9 index trading represented.  On Saturday, Harry Watson with the UK Telegraph actually took JPMorgan for its word as he thought that JPMorgan BOUGHT credit default swaps as a hedge against its balance sheet of corporate debt.  We also know from the BIS that JPMorgan is the largest underwriter of credit default swaps in the USA and they dominate the interest rate swaps arena.  Watson was wrong as JPMorgan has lied to congress, lied to the press etc as in reality they have not hedged their corporate debt but instead have UNDERWRITTEN the credit default swaps for corporate debt and thus creating their profit (sold the credit default swap).  If JPMorgan's credit default swap underwritting fails, they have the Fed printing trillions upon trillions of paper money to the winning side, bringing the entire financial world to vaporize.

In the following zero hedge commentary we finally learn the basics of their IG9 fiasco.  The JPM doorknobs have underwritten credit default swaps on not only sovereigns but also over 100 billion of dollars on corporate debt.  The trade was so one sided that the real value of risk was tiny compared to reality.  The hedge funds saw what was going on and bet the other side.  Can JPMorgan escape the losing trade by buying back? Not a chance!!

JPMorgan has tried to control interest rates threw huge interest rate swaps; they have underwrote  massive sovereign debt keeping the fiat game alive, and now massive corporate credit default swaps.  The nerve of these guys to lie and state that all of their positions are hedged.  This is an outright lie!!!

(courtesy zero hedge) 

Has JPMorgan Already Unwound Its Losing Trade?

Tyler Durden's picture

On Thursday night, after it became clear that JPM has lost at least $2 billion on what is most likely an IG9 Index skew (Index less Intrinsics) trade gone horribly wrong, we first predicted(and promptly were piggybacked on by other various financial blogs) that based on various factors, there is about $3 billion more in the pain trade coming in JPM's general direction, once IG9 blows out to catch up to a fair value not supported by JPM(artingale's) infinitely backstopped prop desk. Sure enough, by closing on Friday, IG9 (and the entire IG curve), had blown out wider, by a whopping 10 basis points: one of the biggest intraday moves in nearly a year. In P&L terms, by close of Friday, all else equal, JPM had lost another $2-3 billion on the same trade it had lost over $2 billion since the beginning of April. We expect to hear confirmation of this shortly. Which however brings another question: has JPM closed out its losing trade, or is the entire move in the index (and to a far less extent in the intrinsics) due to hedge funds who have piggybacked on the "crush JPM" trade? The truth is we don't know, and until we get the latest weekly DTCC data on CDS notional outstanding we won't know. However, our gut feeling is that it would have been virtually impossible for JPM to lift every single offer in unwinding a $100+ billion notional position without sending the entire IG curve multiples wider. Which is why keep a close eye on the IG9 10 Year skew - this is where, as ZH first noted, the action is. If the skew soars, it is likely that the runaway train will keep going and going, until JPM issues a formal announcement that the firm is fully out of the trade, together with a final tally of its losses, which will probably be double the reported loss as of Thursday. At which point IG9/18 will see an epic ripfest as those short risk will scramble to cover.
As the chart below shows, as of Friday, the index was still 7 bps rich to intrinsic, however the spread collapsed by nearly 50% from the day before. If and when the skew goes positive, would be our all clear to get out of dodge. Until then, JPM will likely see far more pain, even if, technically, it won't, following rumors its entire London CIO desk may be now in jeopardy, meaning it will be up to the middle office to unwind, at an even greater loss to the firm. And compounding the issue will be the general risk off nature in capital markets over the next few days, following a plethora of European sovereign bonds, and, oh, the little issue of the Eurozone potentially falling apart in a few weeks. All of which will likely see the continued widening in various IG points, until JPM issues at least some more color on its current involvement in the trade.
IG9 - 10 Year Skew: ripfest, but still a ways to go:
Someone else who believes that the trade is now over, is Peter Tchir. We don't quite agree, but we do believe IG9 (and 18 by proxy) longs should be careful - very soon covering an IG long CDS position may well be the pain trade.


Already this morning, the ICG 10 Y vehicle is wider by a huge 25 basis points from the low of last week.  If the loss by JPMorgan last week was 2 billion dollars you can tack on another 3.4 billion to their losses.  This will no doubt bring the entire global financial world to its knees.

(courtesy zero hedge)

JPM Blowtorching Continues As IG Surge Refuses To End

Tyler Durden's picture

As first pointed out here last week, IG9 10Y credit risk has pushed nothing but wider since the JPM news broke. Between the size, common-knowledge, and technical richness of the position, liquidity is providing its helping hand as the legacy credit index is now 25bps worse than last week's lows (and 17bps worse than when JPM announced) - while the on-the-run IG18 is only 10bps wider over this period. Extrapolating the $200mm DV01 we assumed from the initial announced loss and spread movement, this is potentially an additional $3.4bn loss for JPM already (who we can only assume have been trying to unwind). Until the skew (the spread between the index and its components) narrows further - which it is today (though momentum will take over at some point in the index itself) - it is likely that the runaway train will keep going and going, until JPM issues a formal announcement that the firm is fully out of the trade, together with a final tally of its losses, which will probably be double the reported loss as of Thursday. 

Here is the good news: we are 100.4% certain JPM was the ONLY prop trading bank to be massively, massively short IG9-18 into this epic blow out. Because if other had suffered billion dollar losses, they would all pull a Jamie Dimon and fess up. Right?


 The Dodds/Frank legislation was orchestrated to stop Proprietary trading by banks using customer deposits.   The outlawing of this type of trading was known as the Volcker rule.
It seems that JPMorgan were totally oblivious to the rule and carried on with reckless abandon!!


Banks Amass $211 Trillion In Derivatives, JP Morgan Loses $2 Billion And Volcher Rule Debates Continue

The goal of the Volcker Rule, which became law under the Dodd-Frank Act was to restrict speculative trading activity in risky derivatives by the Too Big To Fail Banks.  The ban on proprietary bank trading was proposed by former Federal Reserve Chairman Paul Volcker who believed that one of the primary causes of the 2008 financial meltdown was a result of speculative trading activity by banks.
Volcker argued that the use of depositor money back by FDIC deposit insurance to engage in risky speculation created systemic risk to the U.S. financial system.  In addition, Volcker said that banks holding massive positions in derivatives to allegedly control risk were, in fact, creating even greater risk to the financial system.
Under the Dodd-Frank Act, the Volcker Rule’s provisions were scheduled to be implemented by July 21, 2012.  During the two years since the Volcker Rule became law, regulators, bankers, legislators and lobbyists have been in a non stop battle over how the rule should be implemented and can’t even agree on what date the Volcker Rule regulations should become effective.
Meanwhile, the biggest banks in the country have built up massive speculative positions in derivatives.  The Too Big To Fail Banks, by engaging in activities more suited to hedge funds and casinos, have added an element of instability and risk to the financial system that was supposed to be eliminated by the Volcker Rule.
Evidence of the fact that the Too Big To Fail Banks have not taken the Volcker Rule seriously can be seen in the latest numbers published by the FDIC.  As of December 31, 2011, the 7 largest banks in the country held an astonishing $211.2 trillion in derivative contracts.  By way of comparison, the entire gross domestic product of the United States is only about $15 trillion.

Source: FDIC
The composition of the $211.2 trillion of derivatives is primarily related to bets on interest rates.
Another reminder of the huge risks that banks are taking by making risky trades with FDIC insured deposits was the announcement by JP Morgan that $2 billion dollars was lost on speculative trading bets.
JP Morgan Chief Executive Officer Jamie Dimon said the firm suffered a $2 billion trading loss after an “egregious” failure in a unit managing risks, jeopardizing Wall Street banks’ efforts to loosen a federal ban on bets with their own money.
The firm’s chief investment office, run by Ina Drew, 55, took flawed positions on synthetic credit securities that remain volatile and may cost an additional $1 billion this quarter or next, Dimon told analysts yesterday. Losses mounted as JPMorgan tried to mitigate transactions designed to hedge credit exposure.
“There were many errors, sloppiness and bad judgment,” Dimon said as the company’s stock fell in extended trading. “These were grievous mistakes, they were self-inflicted.”
The chief investment office was thrust into the debate over U.S. efforts to ban proprietary trading when Bloomberg News reported last month that the unit had taken bets so big that JPMorgan, the largest and most profitable U.S. bank, probably couldn’t unwind them without losing money or roiling financial markets. Dimon, 56, had transformed the unit in recent years to make bigger and riskier speculative trades with the bank’s money, five former employees said.
Dimon had defended the unit as a “sophisticated” guardian of the bank’s funds on an April 13 conference call, calling news coverage “a complete tempest in a teapot.” On May 2, he led fellow Wall Street CEOs in a closed-door meeting to lobby the Federal Reserve about softening proposed U.S. reforms that might crimp their profits.

‘Egg on His Face’

Yesterday, he said the timing of the trading blunders “plays right into the hands of a bunch of pundits out there” who are pushing for a strict version of the proprietary trading ban named for former Federal Reserve Chairman Paul Volcker.
“It’s a major event that confirms a lot of investors’ worst fears about bank risk,” said Frank Partnoy, a former derivatives trader who’s now a law and finance professor at the University of San Diego. Concern is “that at a large, supposedly sophisticated institution, even something called a ‘hedge’ can contain all kinds of hidden risks that the senior people don’t understand.”
It is painfully obvious that the thousands of pages of laws and regulations of the Dodd-Frank Act have done little to reduce the size, complexity or systemic risk of the Too Big To Fail Banks.


From the NY Times and how our crooks sought a loophole in the Volcker rule:

(courtesy New York Times)

JPMorgan Sought Loophole on Risky Trading
By Edward Wyatt
May 12, 2012

WASHINGTON — Soon after lawmakers finished work on the nation’s new financial regulatory law, a team of JPMorgan Chase lobbyists descended on Washington. Their goal was to obtain special breaks that would allow banks to make big bets in their portfolios, including some of the types of trading that led to the $2 billion loss now rocking the bank.

Several visits over months by the bank’s well-connected chief executive, Jamie Dimon, and his top aides were aimed at persuading regulators to create a loophole in the law, known as the Volcker Rule. The rule was designed by Congress to limit the very kind of proprietary trading that JPMorgan was seeking.

Even after the official draft of the Volcker Rule regulations was released last October, JPMorgan and other banks continued their full-court press to avoid limits.

In early February, a group of JPMorgan executives met with Federal Reserve officials and warned that anything but a loose interpretation of the trading ban would hurt the bank’s hedging activities, according to a person with knowledge of the meeting. In the past, the bank argued that it needed to hedge risk stemming from its large retail banking business, but it has also said that it supported portions of the Volcker Rule.

In the February meeting was Ina Drew, the head of JPMorgan’s chief investment office, the unit that suffered the $2 billion loss...

JPMorgan wasn’t the only large institution making a special plea, but it stood out because of Mr. Dimon’s prominence as a skilled Washington operator and because of his bank’s nearly unblemished record during the financial crisis.

"JPMorgan was the one that made the strongest arguments to allow hedging, and specifically to allow this type of portfolio hedging," said a former Treasury official who was present during the Dodd-Frank debates.

Those efforts produced "a big enough loophole that a Mack truck could drive right through it," Senator Carl Levin, the Michigan Democrat who co-wrote the legislation that led to the Volcker Rule, said Friday after the disclosure of the JPMorgan loss.

The loophole is known as portfolio hedging, a strategy that essentially allows banks to view an investment portfolio as a whole and take actions to offset the risks of the entire portfolio. That contrasts with the traditional definition of hedging, which matches an individual security or trading position with an inversely related investment — so when one goes up, the other goes down.

Portfolio hedging "is a license to do pretty much anything," Mr. Levin said. He and Senator Jeff Merkley, an Oregon Democrat who worked on the law with Mr. Levin, sent a letter to regulators in February, making clear that hedging on that scale was not their intention.

"There is no statutory basis to support the proposed portfolio hedging language," they wrote, "nor is there anything in the legislative history to suggest that it should be allowed."

While the banks lobbied furiously, they were in some ways pushing on an open door.Officials at the Treasury Department and the Federal Reserve, the main overseer of the banks, as well as the Comptroller of the Currency, also wanted a loose set of restrictions, according to people who took part in the drafting of the Volcker Rule who spoke on the condition of anonymity because no regulatory agencies would officially talk about the rule on Friday.

The Fed and the Treasury’s views prevailed in the face of opposition from both the Securities and Exchange Commission and the Commodity Futures Trading Commission,which regulate markets and companies’ reporting of their financial positions. Both commissions and the Federal Deposit Insurance Corporation, which insures bank deposits, pushed for tighter restrictions, the people said...

Read the rest 


Here is more background on how the JPMorgan fortress was breached and what it means; it outlines the derivative trade and how JPMorgan amassed over 100 billion dollars of derivative
 corporate debt by underwriting credit default swaps.  As I highlighted earlier JPMorgan totally lied stating that they were hedging their corporate debt. They were doing no such thing.

(courtesy Bloomberg)

Dimon Fortress Breached as Push From Hedging to Betting Blows Up

David Olson, a former head of credit trading in JPMorgan Chase & Co. (JPM)’s chief investment office, learned about risk as a U.S. Navy nuclear submarine pilot.
When he joined the bank in 2006, his new commander, Chief Executive Officer Jamie Dimon, was transforming the once- conservative unit from a risk manager to a profit center.

“We want to ramp up the ability to generate profit for the firm,” Olson, 43, recalled being told by two executives. “This is Jamie’s new vision for the company.”
That drive has now shattered JPMorgan’s cultivated reputation for policing risk and undermined Dimon’s authority as a critic of regulatory efforts to curb speculation by too-big- to-fail banks. It also may cost Chief Investment Officer Ina R. Drew, one of the most powerful women on Wall Street, her job. As U.S. and U.K. investigators descend on the firm following Dimon’s announcement last week of a $2 billion trading loss, lawmakers are pointing to the breakdown at the largest U.S. bank as evidence that tougher rules are needed.
Dimon pushed Drew’s unit, which invests deposits the bank hasn’t loaned, to seek profit by speculating on higher-yielding assets such as credit derivatives, according to five former executives. The CEO suggested positions, a current executive said. Profits surged over the next five years as assets quadrupled to $356 billion and employees were given proprietary- trading accounts, current and former executives said.

‘Wall Street Hubris’

Dimon said on May 10 that the unit made “egregious mistakes” by taking flawed positions on synthetic credit securities and that New York-based JPMorgan could lose an additional $1 billion or more as it winds down the position. The U.S. Securities and Exchange Commission, the Federal Reserve and the Commodity Futures Trading Commission are investigating, according to people familiar with the probes.
The loss was particularly surprising for JPMorgan, the bank whose $2.32 trillion balance sheet makes it the largest in the U.S. and whose traders were the first in the mid-1990s to create credit derivatives, which let firms and investors insure themselves against losses on debt. It was also a blow to Dimon, 56, who has been the most outspoken critic of the Volcker rule, meant to restrict banks from betting their own money.
“It’s classic Wall Street hubris, which we’ve seen so many times before,” said Simon Johnson, a former chief economist at the International Monetary Fund who teaches at the Massachusetts Institute of Technology. “What’s particularly ironic here is that Jamie presents himself, and is believed by others to be, the king of risk management.”

Fannie Mae Loss

It wasn’t the first 10-digit hit for JPMorgan’s chief investment office. In 2008, it lost $1 billion onFannie Mae and Freddie Mac preferred securities when the government-backed mortgage agencies were put into conservatorship. Olson, who ran the unit’s U.S. credit trading until December, said the only reason he wasn’t fired at the time was because Dimon had been “intimately familiar with those positions.”
Drew, 55, earned about $1.2 million a month over the past two years. She spent three decades at the firm and its predecessors, surviving mergers and changes at the top. She played a critical role steering the company through rocky markets, such as the Russian debt crisis and the collapse of hedge fund Long Term Capital Management in 1998, disruptions from the World Trade Center attacks and the more recent financial crisis, said Lesley Daniels Webster, JPMorgan’s head of market risk. She worked with Drew for more than a decade.

Drew’s Ascension

In 2005, the year Dimon became CEO, Drew was named the bank’s chief investment officer, reporting directly to him. He gave her traders the green light to make investments in riskier products, including asset-backed securities, credit derivatives, sovereign debt and equities -- securities Drew and her staff had less experience with, according to a former senior executive who asked not to be identified because he wasn’t authorized to discuss the matter.
“Her position over the years has always been around hedging, but hedging for profit as opposed to hedging just to counter losses,” said Dina Dublon, a former JPMorgan chief financial officer who worked with Drew for 22 years before leaving in 2004 and now teaches at Harvard Business School. “She’s always been in a for-profit operation, even when she was managing a smaller domain.”
Until recently, Drew did well with her investments, with the corporate division under which she reports earning a peak of $3.7 billion in 2009, up from $1.5 billion a year earlier. The bank doesn’t break out results for the chief investment office.

‘High Performer’

“She did an excellent job and was considered a very high performer in the bank,” said Don Layton, incoming CEO of Freddie Mac and Drew’s boss from 1992 until 2002.
The bank rewarded her with a $15 million pay package for 2010 and $14 million for her performance last year, according to regulatory filings. Drew may resign as soon as this week, said a person familiar with the situation. JPMorgan, like other banks, has adopted so-called clawback provisions for top executives, including Drew, to retrieve bonus pay for poor performance or “conduct that causes material financial or reputational harm,” according to its most recent proxy statement.
“Ina was one of the first senior executives at JPMorgan who quickly earned Jamie’s respect and ear,” said Austin Adams, a former chief information officer who sat on the bank’s 14- member operating committee with the two. “I found her to be very straightforward, someone I could trust. She didn’t suffer fools lightly.”

Shifting Role

Dimon nurtured the office’s shift from its role mitigating lending risks, such as interest-rate and currency movements, to becoming a profit center, former executives said. Drew, who declined to be interviewed, hired Achilles Macris, 50, in 2006 to oversee trading in London. Macris, with Dimon and Drew’s blessings, led an expansion into corporate and mortgage-debt investments with a mandate to generate profits, three former employees said.
When the 2008 financial crisis highlighted the bank’s need to hedge its exposure to corporate loans and bonds it held on its books, Drew’s office expanded into credit derivatives and other risky instruments, according to a former senior officer. Those trades were tightly controlled and monitored at first, the former executive said.
Macris’s mandate drove the bank into riskier products and a less disciplined approach to investing, according to two former CIO executives. The shift provoked an exodus in 2008 of traders who specialized in more-liquid markets where risk was easier to measure, such as interest-rate products and foreign exchange, these people said. Macris didn’t respond to an e-mail or a call.

London Whale

While Drew liked generating profit, she did so in a controlled way, placing strict limits on how much an investment could lose or gain, former colleagues and employees said. Traders were required to exit positions if losses exceeded $20 million, according to one former CIO manager in London. Those limits were scrapped under Macris.
The London team amassed a portfolio of as much as $200 billion, booking a profit of $5 billion in 2010 alone -- more than a quarter of JPMorgan’s net income that year, one senior executive said.
The CIO’s increased size and market power have made it an important customer to Wall Street’s trading desks and a market influence watched by hedge funds and other investors, the former employees said. Bloomberg News was the first to report, on April 5, that Bruno Iksil, a trader in the CIO’s London office, had amassed positions in securities linked to the financial health of corporations that were so large he was driving price moves in the $10 trillion market. Some market participants dubbed him the “London whale.” Others referred to him as “Voldemort,” after the villain of the Harry Potter series who’s so powerful he can’t be called by name.

Hard to Unwind

A Bloomberg News story on April 13 reported that Dimon was responsible for transforming the CIO and increasing the size of its speculative bets. Some in London were so big they probably couldn’t be unwound without causing losses, the article cited former executives as saying. That day, on a conference call to announce quarterly reports, Dimon called news about the London trades a “complete tempest in a teapot.”
Dimon said when he announced the losses last week that he didn’t know how bad things were until after the company reported its first-quarter earnings on April 13. Dimon reviews the profit-and-loss reports every day on large positions in the CIO, according to a senior JPMorgan executive. Before the quarter ended, he and Drew were both led to believe that the losses were erratic, and the reports showed that the position swung daily between losses and gains, the executive said.

Mounting Losses

Less than a week after earnings were released, the losses in the daily reports started piling up more frequently and in larger sums -- $80 million, $100 million, $120 million -- this person said. Even Drew was caught unaware, he said.
JPMorgan is now investigating whether the London office intentionally hid the magnitude of its errors, the executive said. While there isn’t evidence that’s the case, the office doesn’t appear to have fully understood the trade itself, this person said. Every time New York executives asked the London team questions, it responded with more questions, infuriating Dimon, the person said.
Drew offered to resign several times last week, and her entire team in London is at risk of dismissal, according to the person. Macris is among executives who may leave this week, the Wall Street Journal reported, citing unidentified people.
While JPMorgan has refused to describe the trades by Iksil and the London-based CIO team, market participants from hedge- fund managers to credit brokers have tried to piece together the bets from market movements and volumes. The traders say Iksil started amassing positions last year in an older, less active version of a credit-default-swaps benchmark known as the Markit CDX North America Investment Grade Index, which investors use to speculate on the creditworthiness of companies from retailer Wal-Mart Stores Inc. to aluminum producer Alcoa Inc.

Series 9

As European leaders struggled earlier this year to navigate the region’s sovereign-debt crisis and mounting concerns that Spain may be too big to save, market participants focused on the burgeoning impact of Iksil’s trading. Some calculated that he may have built a position totaling as much as $100 billion in contracts in one index. By the bank’s own math, the positions amounted to tens of billions of dollars, a person familiar with its view said early last month.
JPMorgan sold protection on Series 9 of the index in the form of credit-default swaps and through more leveraged wagers using contracts called tranches, the traders said. The firm collected premiums, and in exchange promised to cover losses if companies in the index defaulted. Market participants surmise that Iksil’s trades weren’t one-way bets.

Offsetting Risk

He may have offset the risk of index contracts expiring in December 2017 by buying similar protection using contracts that mature this December, traders said. In such a strategy, the firm effectively would be paid the difference between those two trades, an amount that for the full index was about $41,000 for every $10 million of protection at the end of March, according to prices from data provider CMA. As the gap narrows, the market value of the trade gains. As it widens, the value declines.
The gap on the full index widened to $51,800 per $10 million on May 10 and jumped even more to $65,800 the day after JPMorgan’s disclosure, prices from CMA show. Iksil didn’t respond to an e-mail seeking comment.
The losses have mounted since they were revealed last week, according to one person with knowledge of the bank’s internal deliberations. The firm’s investment bank is now managing the money-losing trades to minimize risk, and the leadership is still confident the maximum downside is about $1 billion more than the $2 billion loss disclosed last week, this person said, speaking on the condition of anonymity because he wasn’t authorized to speak for the company.

Stunned Leadership

Inside JPMorgan, leadership is stunned by the situation, according to two senior executives. The firm’s top managers are less concerned about the financial impact of the trades, because the bank has surplus capital, than they are about the damage the losses inflict on the bank’s reputation, the executives said.
While the firm has layers of safeguards in place in its investment bank to protect against concentrated trading errors, Drew’s chief investment office wasn’t constrained by such controls, according to current and former executives.
JPMorgan can stick with the positions that produced the losses if it needs to and isn’t compelled to sell, insiders said. The bank may have to book more mark-to-market losses as prices move against it, in part because JPMorgan’s predicament is now publicly known and traders at hedge funds and others firms are seeking to exploit that by betting against the bank’s positions, one of these people said.

Bacon, America

Weeks before the announcement, the bank asked Daniel Pinto, co-head of fixed-income trading based in London, to manage Iksil’s positions in an effort to minimize losses, according to a former member of JPMorgan’s executive and operating committees who was briefed on the developments. Guy America, a Dutchman based in London who is head of European credit trading, and Ashley Bacon, a senior executive in market risk, are also helping to sort through the trade.
Dimon has led the banking industry in pushing back against measures in the Dodd-Frank Act that would restrict proprietary trading by institutions that take depositors’ money. On Feb. 2, Drew and five JPMorgan colleagues met with Federal Reserve staff to discuss the rule, a copy of the central bank’s meeting summary shows. The JPMorgan bankers recommended that the final rule be modified so that the chief investment office’s positions “not be included as prohibited proprietary trading,” according to the summary.

‘Little Halo’

The bank’s loss will make it harder for Dimon to maintain that role said Paul Miller, an analyst with FBR Capital Markets in Arlington, Virginia, and a former examiner with the Federal Reserve Bank of Philadelphia.
“JPMorgan had a little halo around them, and that thing just got knocked off,” Miller said.
In an interview two days before the disclosure of the loss, Olson, the former head of U.S. credit trading, said the failure of Fannie Mae and Freddie Mac taught him a lesson.
“That’s a perfect demonstration there’s always risk out there that you just can’t control,” he said. “And you just can’t see coming.”
To contact the reporters on this story: Dawn Kopecki in New York at; Max Abelson in New York at
To contact the editor responsible for this story: David Scheer at


This is even being reported in the Mainstream Media:


How about this one!!!!!.  Moody is going to downgrade the ratings of over 100 banks due to the impact of the JPM trading loss? As I state;  the loss is far reaching!!

07:29 Moody's said to delay its plans to downgrade over 100 banks due to assessment of impact of JPM's trading losses -- Bloomberg
The article cites an unnamed Moody's official as saying that the plans to downgrade the banks are being delayed in order to gauge the impact of JPM's trading losses and an increased possibility of a breakup of the euro
Moody's had said in Apr that it would begin downgrading banks in early May 
* * * * *

Ina Drew is out and Matt Zames takes over as CIO.  Matt Zames came from Treasury.
The Fed is behind everything now that JPMorgan is exposed:

(courtesy zero hedge)

JPM "Retires" Ina Drew, Appoints Former LTCM Trader And Chairman Of Treasury Borrowing Advisory Committee As CIO Head

Tyler Durden's picture

As reported yesterday, here it is officially:
Good bye Ina: we are sure that you will voluntarily claw back your $15 million bonus from 2011 one day ahead of the JPM shareholder meeting.
Now... Matt Zames... Matt Zames... where have we heard that name before... OH YES: he just happens to be the Chairman of the Treasury Borrowing Advisory Committee, aka the TBAC, aka the Superommittee that Really Runs America. The Matt Zames who... "previously worked at hedge fund Long-Term Capital Management LP, may have benefited as the collapse of Lehman Brothers Holdings Inc. and JPMorgan’s takeover of Bear Stearns Cos. left companies and hedge funds with fewer trading partners in the private derivatives markets." In other words, the US Treasury is now firmly behind JPM.

Jamie Dimon just pulled out the trump card: we survive or the Treasury gets it.
And some more on Matt Zames: 
Matt Zames is one of the contenders to take over from Jamie Dimon at JP Morgan. Why? Because he makes money for the bank. That's why. Or rather, the traders who work under him on the bank's OTC fixed income derivatives trading desk which has made money when the rest of the bank was going close to the wall. If your desk is the only one making serious money, you get to call a lot of the shots, and Zames, an ex-LTCM employee was promoted rapidly in the last 5 years to the executive committee.

Bully for him, but with power comes responsibility and Zames may come under a lot of scrutiny because of a court filing from the trustee charged with recovering money for Mr Madoff’s victims.

John Hogan, a senior risk officer at JPMorgan’s investment bank and a member of the company’s executive committee, voiced concerns about Mr Madoff’s firm to colleagues in 2007, according to a new version of the 114-page complaint. The allegation is part of a $6.4bn lawsuit filed against the bank by the trustee, Irving Picard. Mr Hogan is said to have learnt of Mr Madoff’s Ponzi scheme Zames.

“For whatever it’s worth, I am sitting at lunch with Matt Zames who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme,” Mr Hogan allegedly said on June 15 2007, nearly 18 months before Mr Madoff’s Ponzi scheme was revealed.

Of course Zames' concerns went no further. How much he really knew, how much he disclosed and how much he acted on his suspicions to his own benefit may have a significant bearing on his career

Reggie Middleton now believes that JPMorgan's huge big derivative will bust as they have underwritten the world's largest share of credit default swaps via the sovereign route and the corporate route.  We are the number one holder of interest rate swaps.  In total they hold 70 trillion in notional derivatives at risk.

(courtesy Reggie Middleton/ BoonBustBlog)

What Was The Ultimate Cause Of JP Morgan's Big Derivative Bust? The Shocker - Ben Bernanke!!!

Reggie Middleton's picture

S&P and Fitch finally downgrade JP Morgan, 3 years after my initial multimedia warnings (see Listen Carefully...  for the details). Unfortunately, despite threats and ruminations, these rating agencies again act in retrospect, failing to do anything but remind stakeholders of the losses they have already taken rather than assisting them in avoiding losses.
So, what are the rating agencies missing?  They're missing the fact that nearly all of the big money center banks are doing exactly what JPM was doing and they have no one to rely upon but themselves when things go awry from a counterparty perspective. Bennie Bernanke has instituted perpetual ZIRP, and as such has basically broken the banking business in his attempt to save it. Through ZIRP, banks simply cannot make money doing things that traditional banks do, ex. profit from lending. As such, they reach for yield, and that's just the conservative ones. The big boys take baseball bats swinging for home runs, either consciously or subconsciously sanguine in the protection of the Bernanke flavored taxpayer put under their respective businesses. With such protection, already historically proven, bank managers are getting progressively more aggressive and increasingly less aware of the term "RISK adjusted reward" as they simply seek rewards. Alas, I'm getting ahead of myself, let me explain...
The JPM prop desk that held the losses which generated headlines earlier this week was marketed as a hedging operation when we all know it was anything but. What it was was a concerted grasp for yield and profit in a ZIRP environment where JPM (one of the world's largest congregations of interest bearing assets) was bearing effectively no interest.
Banks need to make money too, hence when there's no money to be made in traditional FI yields, the banks start reaching, and they tend to start reaching farther as desperation to make the next quarter mounts in the face of BoomBustBlog reading investors who may be able to see past earnings stuffing stemming from less than prudent reserve releases consistent underprovisioning.
 The BoomBustBlog subscriber document JPM Q1 2011 Review & Analysis illustrates the point of JPM's waning ability to make money by making loans and holding debt with perfect clarity, and did so a year in advance....

So, what do you do if you're a bank but you can't make money lending? You gamble, that's what you do! It's not like JPM hasn't gambled before, and it's not like they haven't lost money gambling...
I put out what I consider to be some of the best predictive research available. I also put an inordinate amount of info out for absolutely free, particularly in the case of those big names as in the employer of Voldemort. For those who have not read my seminal piece on Dimon's house of Morgan, file iconJPM Public Excerpt of Forensic Analysis Subscription published nearly three years ago, allow me to take the liberty to excerpt it for you...

 Michael Synder of the Economic Collapse:

The 2 Billion Dollar Loss By JP Morgan Is Just A Preview Of The Coming Collapse Of The Derivatives Market
Michael Synder
The Economic Collapse
May 12, 2012

When news broke of a 2 billion dollar trading loss by JP Morgan, much of the financial world was absolutely stunned. But the truth is that this is just the beginning. This is just a very small preview of what is going to happen when we see the collapse of the worldwide derivatives market. When most Americans think of Wall Street, they think of a bunch of stuffy bankers trading stocks and bonds. But over the past couple of decades it has evolved into much more than that. Today, Wall Street is the biggest casino in the entire world. When the "too big to fail" banks make good bets, they can make a lot of money. When they make bad bets, they can lose a lot of money, and that is exactly what just happened to JP Morgan. Their Chief Investment Office made a series of trades which turned out horribly, and it resulted in a loss of over 2 billion dollars over the past 40 days. But 2 billion dollars is small potatoes compared to the vast size of the global derivatives market. It has been estimated that the the notional value of all the derivatives in the world is somewhere between 600 trillion dollars and 1.5 quadrillion dollars. Nobody really knows the real amount, but when this derivatives bubble finally bursts there is not going to be nearly enough money on the entire planet to fix things.

Sadly, a lot of mainstream news reports are not even using the word "derivatives" when they discuss what just happened at JP Morgan. This morning I listened carefully as one reporter described the 2 billion dollar loss as simply a "bad bet".

And perhaps that is easier for the American people to understand. JP Morgan made a series of really bad bets and during a conference call last night CEO Jamie Dimon admitted that the strategy was "flawed, complex, poorly reviewed, poorly executed and poorly monitored".

The funny thing is that JP Morgan is considered to be much more "risk averse" than most other major Wall Street financial institutions are.

So if this kind of stuff is happening at JP Morgan, then what in the world is going on at some of these other places?

That is a really good question.

For those interested in the technical details of the 2 billion dollar loss, an article posted on CNBC described exactly how this loss happened….
The failed hedge likely involved a bet on the flattening of a credit derivative curve, part of the CDX family of investment grade credit indices, said two sources with knowledge of the industry, but not directly involved in the matter. JPMorgan was then caught by sharp moves at the long end of the bet, they said. The CDX index gives traders exposure to credit risk across a range of assets, and gets its value from a basket of individual credit derivatives.

In essence, JP Morgan made a series of bets which turned out very, very badly. This loss was so huge that it even caused members of Congress to take note. The following is from a statement that U.S. Senator Carl Levin issued a few hours after this news first broke….

"The enormous loss JPMorgan announced today is just the latest evidence that what banks call ‘hedges’ are often risky bets that so-called ‘too big to fail’ banks have no business making."

Unfortunately, the losses from this trade may not be over yet. In fact, if things go very, very badly the losses could end up being much larger as a recent Zero Hedge article detailed….

Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least "net" is not "gross" and we know, just know, that the SEC will get involved and make sure something like this never happens again.

And yes, the SEC has announced an "investigation" into this 2 billion dollar loss. But we all know that the SEC is basically useless. In recent years SEC employees have become known more for watching pornography in their Washington D.C. offices than for regulating Wall Street.

But what has become abundantly clear is that Wall Street is completely incapable of policing itself. This point was underscored in a recent commentary by Henry Blodget of Business Insider….

Wall Street can’t be trusted to manage—or even correctly assess—its own risks.

This is in part because, time and again, Wall Street has demonstrated that it doesn’t even KNOW what risks it is taking.

In short, Wall Street bankers are just a bunch of kids playing with dynamite.

There are two reasons for this, neither of which boil down to "stupidity."

The first reason is that the gambling instruments the banks now use are mind-bogglingly complicated. Warren Buffett once described derivatives as "weapons of mass destruction." And those weapons have gotten a lot more complex in the past few years.

The second reason is that Wall Street’s incentive structure is fundamentally flawed:Bankers get all of the upside for winning bets, and someone else—the government or shareholders—covers the downside.

The second reason is particularly insidious. The worst thing that can happen to a trader who blows a huge bet and demolishes his firm—literally the worst thing—is that he will get fired. Then he will immediately go get a job at a hedge fund and make more than he was making before he blew up the firm.
We never learned one of the basic lessons that we should have learned from the financial crisis of 2008.
Wall Street bankers take huge risks because the risk/reward ratio is all messed up.

If the bankers make huge bets and they win, then they win big.

If the bankers make huge bets and they lose, then the federal government uses taxpayer money to clean up the mess.

Under those kind of conditions, why not bet the farm?

Sadly, most Americans do not even know what derivatives are.

Most Americans have no idea that we are rapidly approaching a horrific derivatives crisis that is going to make 2008 look like a Sunday picnic.
According to the Comptroller of the Currency, the "too big to fail" banks have exposure to derivatives that is absolutely mind blowing. Just check out the following numbers from an official U.S. government report….

JPMorgan Chase – $70.1 Trillion
Citibank – $52.1 Trillion
Bank of America – $50.1 Trillion
Goldman Sachs – $44.2 Trillion

So a 2 billion dollar loss for JP Morgan is nothing compared to their total exposure of over 70 trillion dollars.

Overall, the 9 largest U.S. banks have a total of more than 200 trillion dollars of exposure to derivatives. That is approximately 3 times the size of the entire global economy.

It is hard for the average person on the street to begin to comprehend how immense this derivatives bubble is.

So let’s not make too much out of this 2 billion dollar loss by JP Morgan.

This is just chicken feed.

This is just a preview of coming attractions.

Soon enough the real problems with derivatives will begin, and when that happens it will shake the entire global financial system to the core.

and finally this from Kingworldnews and John Embry:

(courtesy Kingworldnews/John Embry)

JPM's derivatives blowup vindicates Sinclair, Embry tells King World News

1:45p ET Monday, May 14, 2012
Dear Friend of GATA and Gold:
Sprott Asset Management's John Embry today tells King World News that Jim Sinclair's prediction of "quantitative easing to infinity" is "one of the greatest statements of all time," and that the derivatives blowup at JPMorganChase is likely a sign of Sinclair's vindication. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

Here is an overnight summary of events from Europe early this morning which really set the pace for red ink on all of bourses courtesy of zero hedge:

 In point form:  

1.  USA 10 yr treasury fell below the magical 1.8% level signalling that all the financial underpinnings are becoming unglued.

2. Spanish credit default swaps hit a record 526 basis points.
3.  Spanish 10 yr bond yield opened this morning at 6.26%
4.  Spain has borrowed another 36 billion euros from the ECB.
     Spain has now borrowed 264 billion euros so far.  At Dec 31.2011, the total was 119 billion

5.  Greece:  no deal on a coaliton government which means that they go back to the polls in June.

6.  No decision on the English law Greek bonds due tomorrow.
7.  Euro/USA cross tumbled:  128.4 to 1.

(courtesy zero hedge)

Overnight Summary: Perfect Storm Rising

Tyler Durden's picture

The only good news spin this morning was that the Greek, pardon Spanish contagion, has not reached Italy, after the boot-shaped country sold €5.25 in bonds this morning at rates that did not indicate a meltdown just yet. It sold its three-year benchmark at an average 3.91 percent yield, the highest since January but below market levels of around 4 percent at the time of the auction. It also sold three lines due in 2020, 2022 and 2025 which it has stopped issuing on a regular basis. And this was the good news. The bad news was the not only has the Spanish contagion reached, well, Spain, but that everything else is now coming unglued, as confirmed first and foremost by the US 10 Year which just hit a new 2012 low of 1.777%. Spain also is getting hammered with CDS hitting a record wide of 526 bps overnight, and its 10 Year hitting 6.26% after the country sold 364 and 518-Day Bills at rates much higher rates than on April 17 (2.985% vs 2.623%, and 3.302% vs 3.11%). But the highlight of the day was the Banco de Espana release of the Spanish bank borrowings from the ECB, which to nobody's surprise soared by €36 billion in one month to €263.5 billion, more than doubling in 2012 from the €119 billion at December 31.
That this happened even as the Spanish government is now serially nationalizing banks is probably the nail in the coffin of Spain, and means the market can now sit back and watch as the Greek events unfold one at a time a few thousand kilometers west. Finally, and going back to Greece, nothing has been resolved on the election front where Syriza has pointedly refused to meet with the president at 7:30 pm local time in a last ditch attempt to avoid a second parliamentary election. But probably the one headline that bears the most watching is that Greek government spokesman Kaspsi has said that the Greek government has not taken a decision on its May 15 bonds yet. Well, with just a few hours left in the day, they better decide soon. As a reminder, this is the fulcrum issue identified first by Zero Hedge, that is a non-member of the PSI consortium and has non-Greek law covenants, and whose non-payment will push Greece into full out bankruptcy.
Altogether a perfect storm day in the making, which has sent the EURUSD tumbling, gold red on the year, various "safehaven" bonds to new record low yields, and futures imploding in what is now certainly a preparation day for THE NEW QETM, especially since German GDP data released tomorrow now appears set to confirm that even Europe's largest economy has double dipped. With China already commencing a new easing episode, it only means it is just a matter of time before the Fed now joins the rest of the world in a desperate attempt to once again prove Einstein was 100% correct.


Here we find that the taxpayer bailout of Spain's 4th largest bank, Bankia will require  7 to 10 billion euros.  I guess the question arises as to how this will be funded.

Here is a complete anatomy of how the banking system in Spain is failing!!:

(courtesy zero hedge)

The Canary In Spain's Coalmine - On Bankia's Downfall

Tyler Durden's picture

Submitted by J. Luis Martín, director of
Bankia: Responsibility Matters
Last week, the Spanish government carried out the biggest financial bailout since the outbreak of the economic crisis. BFA-Bankia (BKIA), the giant which resulted from the merger of seven savings banks only a year and a half ago, was nationalized by Prime Minister Mariano Rajoy’s government through the conversion of a 4.5 billion euro holding of preferential shares into equity. 
As part of the bailout, and as part of a more comprehensive effort to reform the country’s ailing financial sector announced on Friday, the bank will need to provision additional taxpayers’ money (7-10 billion), which will come in the form of contingency bonds (CoCos).
Bankia has put Spain’s financial system under scrutiny from investors and analysts worldwide who worry about the country’s capacity to strengthen its banks while adopting harsh fiscal consolidation policies in the midst of a recession. However, among the many questions raised by Bankia’s nationalization in extremis, there is one that cannot go unanswered: who is responsible?
This should not be a rhetorical question, since the answer reveals much about the causes of Spain’s current state of economic affairs.
Too intimate a relationship
The Spanish savings banks (cajas de ahorro) became a cause for serious concern in the aftermath of the bursting of the property bubble and the economic downturn in 2008. De-regulation and increased political mingling has turned this 150-year-old fixture in the Spanish financial system into the epitome of incestuous relationships between government and finance.
Managed by boards composed of regional politicians, the Spanish savings banks became a precious instrument of political power, which, during the years of the housing boom, were subject to further abuse by the reckless granting of loans to local builders and the financing of the most pork-barreled public infrastructure projects.
The Caja de Ahorros del Mediterráneo (CAM) stands as the poster child for the politically-controlled savings banks’ credit feasting. Its failed transactions can be found as far as Mexico.
Considering that 80% of the banking system in Spain is managed by unions and politicians, the above should not come as a surprise, however.
Going systemic
Precious time was wasted during the first years of the crisis when the government - and the Bank of Spain - insisted on praising the exemplary solvency of the Spanish banking sector rather than forcing financial institutions to clean up their balance sheets and letting insolvent entities fail. When the problem could no longer be ignored, the Socialist-led government by José Luis Rodríguez Zapatero (with the support of the now ruling center-right Popular Party) opted for the worst possible alternative: to “consolidate” Spain’s banking sector by fusing the cajas.
Indeed, Bankia’s founding savings banks, Caja Madrid and BanCaja (both controlled by Partido Popular politicians in the Madrid and Valencia regions), merged a troubled bank with another even more troubled bank. Once Caja de Canarias, Caixa Laietana, Caja de La Rioja, Caja Ávila y Caja Segovia joined, Bankia became Spain’s fourth-largest bank (the first in terms of domestic business volume): 10 million clients and an estimated 37 billion euros in toxic real estate assets.
The new bank, led by Rajoy’s own Popular Party politician Rodrigo Rato (Spain’s Minister of the Economy during the Aznar Administration, and former IMF Manager Director), became a de facto systemic threat.
Perhaps a more disturbing element in the caja’s hangover is the inability to fully account for the damage so far. In March of last year, Spain’s central bank declared that the financial system required an additional 16.1 billion euro to recapitalize and strengthen its solvency. Now the government is asking banks to set aside an additional 30 billion euro in provisions for loans not deemed as problematic.
In an attempt to shed more light on the problem and to build confidence in Spain’s fourth banking reform in three years, the government will now hire independent auditors to review the banks’ balance sheets and to appraise toxic assets. Once the audit is completed, the financial institutions’ non-performing real estate assets will be transferred to separate entities.
“Bankia is solvent, the state is fully behind it” – Luis de Guindos
As Spaniards are told that their country’s economic woes are due to their “living beyond their means”, and that implacable austerity measures must be enforced in order to avoid an even more disastrous scenario - even risking euro membership - the bailing out of a politicians’ bank at the taxpayer’s expense only adds insult to injury.
For a government that supposedly defends free market ideals and whose economic policies are designed by a self-declared Austrian School economist, Spain’s Finance Minister Luis de Guindos, Bankia’s nationalization stands as yet another broken anathema, which brings the country a step closer to requesting financial assistance from Brussels.
“[The bailout] will not cost anything to the taxpayers,” stressed De Guindos during last Friday’s Cabinet press conference. When referring to the estimated 15 billion euro the government will end up loaning to troubled banks, the minister said that the state will actually make a profit, as CoCos will yield a 10% interest rate. Ultimately, the government will likely be forced to take a higher stake in the Spanish banking system, as it did with Bankia.
Responsibility matters
De Guindos was specifically asked about the government’s plans to investigate and identify those responsible for Bankia’s downfall and subsequent nationalization. His poker-faced response was: we have not identified any responsibility.”
The lack of accountability in the Bankia disaster goes in hand with our politician’s long tradition of not having to recognize their mistakes - and the public accepting such behaviour. Tellingly, in the four months since Rajoy took office as prime minister, the only time socialists and conservatives appeared to have shared a common voice was last week, and it was to support Bankia’s bailout.
Last year, when discussing the causes of the financial crisis,Hernando de Soto, one of the world's leading economists, told me, “one of the disadvantages of the communist countries was that they constantly disguised their failures, so there was no way to fix the system.” And this is exactly what has happened in Spain’s banking crisis.
Like failure, accountability is an essential principle for the survival of a free-market capitalist system. It is quite dangerous for the political class to continue to hide its mistakes at the public’s expense. If markets are not forgiving when trust is gone, the people, as Greece reminds us, are even less so.


The Spanish 10 yr bond yield today.


Add to Portfolio


6.227000.22000 3.66%


From  BBC Europe, we learn that Merkel was dealt a heavy blow in Sunday's election in North Rhine-Westphalia, the heart of Germany's industrial belt.  This is the Christian Democrats worst result ever in the state.  This does not bode well for Merkel in her election bid in 2013:

(courtesy  BBC Europe)

State election deals blow to Germany's Merkel

Chancellor Angela Merkel's conservatives have suffered heavy losses in an election in Germany's most populous state.
Support for the Christian Democrats dropped from 35% to 26% in North Rhine-Westphalia, with the Social Democrats set to return to power with the Greens.
It is the Christian Democrats' worst result in the state.
Analysts say many voters rejected Mrs Merkel's tough line on fiscal discipline as a cure for state debt.
Voters in Greece, France and Italy also recently rejected austerity policies.
In another development, Germany's Pirate Party won seats in North Rhine-Westphalia, making it their fourth state parliament.
The Pirate Party has grown in strength recently with its calls for transparency and internet freedom.
Nationally, Sunday's election will not change the balance of power, whatever the outcome, but opposition leaders warn it may send an important signal ahead of national elections expected in late 2013.
Left out
Official results give the Social Democrats (SPD) 39.1%, the Christian Democrats (CDU) 26.3%, the Greens 11.3%, the Free Democrats (FDP) 8.6%, the Pirates 7.8% and the Left, 2.5%, reported AP news agency.

The FDP, the CDU's national coalition partner, performed better than expected, increasing their vote by nearly two percentage points and thereby giving the lie to speculation that they might fail to win seats.
The Left, which won 11 seats at the last election in 2010, failed to pass the 5% threshold and are out of the state parliament.
When the CDU and FDP recently lost elections in the northern state of Schleswig-Holstein, Mrs Merkel's party scored its lowest tally there for 50 years.
North Rhine-Westphalia has a history of influencing national politics.
An early election was called in March after the minority SPD-Green government narrowly failed to get a budget passed.
During the election campaign, state premier and SPD candidate Hannelore Kraft emphasised strengthening indebted local communities, investing in education and boosting the state's business appeal.
Her CDU rival, Norbert Roettgen, who is also Mrs Merkel's environment minister, accused the SPD of financial irresponsibility, and held rallies dominated by a huge inflatable "debt mountain", to emphasise the state's problems.
He provoked controversy early in the campaign by refusing to commit to being a full-time opposition leader if he lost. Such a move would cost him his job in Berlin.


 Today we  find that Greece's cash positions are running dangerously low.  If they make a payment on those English law bonds, they will not have any more funds to pay for pensions and federal employees.
Once the cash ends, Greece defaults.  A disorderly default will prove catastrophic:

(courtesy zero hedge)

Greece Virtually Out Of Cash One Day Before Critical Bond Maturity

Tyler Durden's picture

Curious why the topic of tomorrow's €430 million non-Greek law bond maturity payment (which we first pointed out as a D-Day type of cash outflow for the Greek people) is particularly touchy? Simple: if Greece makes the payment it will see its already in the red cash balance drop by another 30% to a sub redline €1 billion. Which would mean the country will likely not pass go and go straight into looting mode once the people realize that some evil, evil hedge fund hold outs (who are doing precisely what they are contractually entitled to, and what we said back in January would be the event that breaks the bank, i.e., holding out) have been paid in full despite the Greek restructuring, while there is no money to pay anything else... Because as Bloomberg points out, "the level of funds in Greece’s state coffers has fallen below 1.5 billion euros ($1.9 billion), Imerisia reported, citing “reliable information.” If the state doesn’t receive predicted revenue for the rest of this month, it will find it difficult to pay for social services, pensions and public-sector wages, the newspaper said." Translation: when the money runs out, it's game over. But it will also be game over if and when Greece either does not want to or does not have the cash to pay tomorrow.
Things are moving fast now.

With Syriza gaining in popularity we witness that there is no deal for a coalition government.
Syriza is counting on the extra 50 seats for the largest percentage holder in the new parliament.
They will go to the polls in June.;

(Courtesy Bloomberg)

Greek Elections Loom as Key Bailout Opponent Defies Unity

Greece’s political deadlock went into a second week as President Karolos Papoulias failed to secure agreement on a unity government and avert new elections with the country heading toward a possible exit from the euro area.
Greece’s biggest anti-bailout party, Syriza, defied overtures to join the government yesterday, deepening the impasse. Leader Alexis Tsipras won’t attend a meeting called by Papoulias today at 7:30 p.m. Athens time, the party said in an e-mailed statement.
“Syriza won’t betray the Greek people,” Tsipras said in statements televised on NET TV after meeting with Papoulias and the leaders of the New Democracy and Pasok parties. “We are being asked to agree to the destruction of Greek society.”
Papoulias spent yesterday trying to coax the country’s three biggest parties into a coalition after a week of talks failed to deliver a government. If Papoulias’s efforts fail, new elections will need to be called. Today’s meeting will be with the leaders of two of the three biggest parties, and the head of the smaller Democratic Left party, state-run NET TV said.

Another Vote

Greece’s political impasse since the inconclusive May 6 election has raised the possibility another vote will have to be held as early as next month, with polls showing that could boost anti-bailout Syriza to the top spot. The standoff has reignited concern the country will renege on pledges to cut spending as required by the terms of its two bailouts negotiated since May 2010, and, ultimately, leave the euro area.
Pasok, New Democracy and Democratic Left agreed last week on a government that would last until 2014 and be committed to keeping the country in the euro region and renegotiating bailout conditions from the International Monetary Fund and European Union to boost growth. Syriza’s Tsipras turned down the approach on May 11 as the first opinion polls since the elections showed he was gaining support.
Democratic Left has said that Syriza, the second-biggest party, must be part of its proposed unity government, or give it tacit support at least, if the government is to succeed. The position has been adopted by Pasok and New Democracy.

Proposal ‘Failed’

“The president told me that we have no agreement on this proposal of ours as yet,” Fotis Kouvelis, the head of the Democratic Left party, said after meeting with Papoulias. “I regret that this proposal has failed.”
The ASE Index (ASE) dropped 3.7 percent to 589.42 at 12:10 p.m. in Athens, its lowest level since November 1992. The benchmark measure fell 11 percent last week. National Bank of Greece SA fell 4.7 percent as Greek banks led declines. Opap SA, Europe’s largest listed gambling company, plunged 14 percent to 5.05 euros ($6.50), its biggest drop in over seven months.
The euro dipped 0.3 percent to 1.2872 as of 10:09 a.m. inLondon, its lowest level in four months, before euro-area finance ministers convene in Brussels today.
Tsipras won’t attend “selective meetings” called by the president, the party said today. He may attend a meeting of all parties, excluding ultra-nationalist Golden Dawn, or talk privately with the president, it said.
Yesterday, Tsipras challenged the three pro-bailout parties to go ahead with forming a government, saying they would lack legitimacy.
“The three parties that have agreed on the policy framework for a two-year government to implement the memorandum have 168 lawmakers in the new parliament,” which has 300 deputies, he said. “They have the majority so let them proceed. Their demand for Syriza to join their planned agreement is illogical.”

Syriza Poll Lead

Syriza would come in first, though short of an outright majority, with 20.5 percent of the vote, if elections were held again, according to a Kapa Research poll for the newspaper To Vima, released May 12. It got 16.8 percent in the May 6 election. Support for New Democracy would fall to 18.1 percent from 18.9 percent and Pasok would drop to 12.2 percent from 13.2 percent, according to the survey.
“It’s not about arithmetic,” Evangelos Venizelos, the socialist Pasok leader said after yesterday’s meeting. “If someone wants to drag the country to elections again to find ourselves in the same process and possibly the same dead end, with slightly different and better terms for some, then they must assume that responsibility.”
The Kapa poll showed 78 percent of Greeks want the government to do whatever possible to keep Greece in the euro area and that 72 percent want political parties to make concessions to form a coalition, compared with 22.9 percent who want new elections. Kapa surveyed 1,007 Greeks May 9 and 10. The poll had a margin of error of 3.1 percentage points.

Two Seats Shy

The May 6 election resulted in New Democracy and Pasok, the two parties that supported the international rescue in an interim government this year, being two deputies short of the 151 seats needed for a majority in Parliament.
Tsipras failed to reach an accord with other leaders after giving them an ultimatum to renounce support for the EU-led rescue in order to enter the government. Both Antonis Samaras, the leader of New Democracy, and Venizelos, rejected the request.
Samaras, whose party finished first, gave up trying to forge a coalition after six hours of talks on May 7.
A Greek departure from the euro could be “technically” managed yet would damage confidence in the monetary union, European Central Bank Governing Council member Patrick Honohansaid May 12.
“It is not necessarily fatal, but it is not attractive,” Honohan told a conference in the Estonian capital, Tallinn.

Out of Cash

Greece will run out of cash by early July if partners decide to withhold their next aid payment. The European Financial Stability Facility on May 9 confirmed that a 5.2 billion-euro tranche will be released by the end of June, with 4.2 billion euros already disbursed May 10. The remaining 1 billion euros will be released depending on Greece’s financing needs.
Leaders said they were given a note on the state of the economy by interim Prime MinisterLucas Papademos yesterday. Some Greek political leaders, such as Independent Greeks headPanos Kammenos, said they would refuse to read it unless it is published.
Ta Nea reported that the letter underlined the state will find it difficult to cover payments in June due to the political impasse and the holding back of the 1 billion euros. The newspaper didn’t say how it got the information.

More Cuts Needed

Under the terms of the bailout, a new government will need to spell out how it will save 11 billion euros next month.
“While last week’s election was largely about budget cuts, the next one will be entirely about the euro,” Erik Nielsen, chief economist at Unicredit Bank AG, said in a note. “But I don’t know what share of the 70 percent of Greeks in favor of the euro will fully appreciate the connection between reforms and using the euro.”
To contact the reporters on this story: Maria Petrakis in Athens at; Natalie Weeks in Athens at; Marcus Bensasson in Athens
To contact the editors responsible for this story: Craig Stirling at Tim Quinson at


The long bond of Greece has just dropped to 13 cents per 1 dollar bond. It has plunged 43% since the beginning of the new PSI bond trading after transfer.  These bonds plunged today with the realization of a potential bankruptcy tomorrow as the cash strapped Greeks default on those English law Greek bonds.

(courtesy zero hedge)

"No-Brainer Trade Of The Year" Plummets As Bondholders Duck Ahead Of Possible Greek Bankruptcy Tomorrow

Tyler Durden's picture

Was it only two weeks ago that the smartest investors in the room were calling 'buying Greek bonds' as the no-brainer trade-of-the-year? Sad to say that for such power-houses of intellectual prowess as Greylock (who if you remember could not get enough media coverage during the PSI discussions) have once again grabbed that falling knife with 3 hands and lost a finger, thumb and perhaps even their toes. Longer-dated Greek bonds have dropped to an all-time low price of 13.75 cents on the Euro (a magnificent 27% drop in 2 weeks since the NYT ran the buy it now or you're a big loser article). These bonds are down over 43% since the PSI deal and have plunged in price in the last few days as the reality of a potential bankruptcy of absolutely cash-strapped Greece comes to bear tomorrow with the EUR430mm bond due.
Perhaps instead of paying 2-and-20 to listen to nothing but glorified knife-catching heads-I-win-tails-its-your-money-we-lose funds, investors should heed digital dick-weeds for back in January we described in detail exactly how to trade Europe this year; and those non-Greek-law bonds have returned 31% (or 135% annualized since that time).
...and while we know that these bonds were/are illiquid, this BVAL chart fits with the chatter we hear from desks where there is little trading now (obviously) as those in the know hold and those not in the know remain in the dark.
Chart: Bloomberg

Monti of Italy is warning the world that Italy is being torn apart by the austerity measures with considerable social unrest. The country is witnessing suicides as citizens just cannot make payments as well as letters bombs to the tax collection agencies:

(courtesy Bloomberg)

Monti warns of tears in Italy's social fabric

ROME (Reuters) - Italy's social fabric is being torn by recession and tensions are growing among its citizens, Prime Minister Mario Monti said on Sunday.
Speaking to a group of students in the central Italian town of Arezzo, Monti urged Italians to stick to Monti's technocrat government which has imposed painful austerity measures since taking office last year, and in recent days ministers have responded to calls from politicians and the media to show more compassion for the plight of ordinary Italians.
"The country is now marked by profound social tensions," Monti said. "It's inevitable that social unease is increasing, that job insecurity fuels a sense of suffering, that there are serious signs of tears in social cohesion."
A wave of highly publicised suicides in the last few weeks, especially among debt-stricken entrepreneurs, has highlighted the human cost of the crisis.
The public tax collection agency, Equitalia, has been the target of a string of letter bomb and petrol bomb attacks, taking the brunt of citizens anger in the face of a credit squeeze and 24 billion euros of tax hikes this year.
Monti said the government was trying to ensure that sacrifices are shared fairly and warned that the economic crisis could become a "cultural" one if Italians failed to show tolerance and solidarity towards one another.
On Thursday Industry Minister Corrado Passera also said he was increasingly concerned by threats to social cohesion posed by the recession.
Monti's popularity has fallen sharply this year and the parties supporting him in parliament have become increasingly critical.
His approval rating plunged six percentage points in a week to 38 percent, a poll by the SWG agency published on Friday showed. That compares with a high of 71 percent in November, just after he took office.
(Reporting By Gavin Jones Editing by Maria Golovnina)
Copyright © 2012 Reutersogether and "not give up" in the face of a shrinking economy and rising unemployment.


At 4:30 pm est Moody's downgrades 26 Italian banks.

(courtesy zero hedge)

Moody's Downgrades 26 Italian Banks: Full Report

Tyler Durden's picture

Just because it is never boring after hours:
EURUSD sliding... even more. But that's ok: at some point tomorrow Europe will close and all shall be fixed, only to break shortly thereafter. And now.... Margin Stanley's $10 billion collateral-call inducing 3 notch downgrade is on deck.
Complete pre and post rating grid for italian banks:
Full report below:

The Italian 10 yr bond close:

Italy Govt Bonds 10 Year Gross Yield

 Add to Portfolio


5.697000.18800 3.41%
As of 12:01:00 ET on 05/14/2012.

Credit default swaps just skyrocketed.  JPMorgan is not in good shape this morning as they are big underwriters of sovereign credit default swaps.

(courtesy zero hedge)

CDS Rerack: Whooosh

Tyler Durden's picture

Ze CDS sovereign rerack... It's baaaaaaack. And it's not happy.
                            5Y                         10Y                5/10's                         
ITALY            480/488  +26             457/477            -24/-14                        
PORTUGAL           31.75/33.25 +0.25     36.25/38.75           4/6                           
IRELAND               612/627  +19            534.5/604.5        -90/-10                         
GREECE              #Ref!
BELGIUM            253/261  +16              257/277              5/15


as we mentioned,  Italian 10 yr bond yields rose to 5.75% and the Spanish 10 yr bond yield surpassed 6.25% early this morning .  Spain is now talking about taking over the regional government finances and well as nationalize many of the banks.  The author wonders where will the money come from to pay for all of this:

(Mark Grant/Out of the Box and Onto Wall Street)

"I Ain't Gonna Work On Angie's Farm No More" - Bob Dylanopoulos

Tyler Durden's picture

From Mark Grant, author of Out of the Box
Ain't Gonna Work On Angie's Farm No More

“The wind is rushing after us, and the clouds are flying after us, and the moon is plunging after us, and the whole wild night is in pursuit of us; but, so far we are pursued by nothing else.”
                 -Charles Dickens, The Tale of Two Cities
I have left St. John’s Newfoundland and I will be three days at sea now heading for Reykjavik, Iceland. The seas are up, the wind is cold and icy, the sky is that grey color of mid-winter in the arctic north and it is all reminiscent of what is taking place in Europe as the seams come undone and as bleak depression is the mood on the Continent. Aside from the politics I remark that “can kicking” has its consequences. It may move the crisis down the road some but with the accumulation of ever more debt to pay off past obligations the day of the inevitable reckoning worsens and we are quickly approaching that day, those days, as the grand experiment unravels due to national ambitions, a game badly played by the political elite in Europe and simple arithmetic working in Greece, Spain and Italy.  Contingent liabilities are counted on the balance sheets of corporations for a reason, a very good reason, which is that the “contingent” often become the “actual” which is exactly what is happening in Europe. The misguided fabrication of the European Union to not count guarantees, promises to pay and contingencies as part of their debt to GDP ratios or as part of anyone’s obligations is a page torn Grimm’s Fairy Tales and make-believe is always an ingredient promising to breed disaster when penned into anyone’s balance sheets; corporate or sovereign.
"You know, my dear, it isn't safe for a little girl to walk through these woods alone."
                       -The Wolf, Little Red Riding Hood
It should be noted that one government after another has fallen in Europe. Mrs. Merkel’s party fared the worst at German elections over the weekend since shortly after World War II. Spain is now talking of bailing out their regional governments, bailing out their banks and they just do not have the capital for all of this making a turn for funding to the EU/ECB/IMF virtually inevitable. The Italian 10 year is at 5.75% this morning and the Spanish 10 year is at 6.25% leaving the Italian and Spanish banks in worse shape after utilizing much of their LTRO money to buy their sovereign debt which is now at appreciable losses. Europe is losing the bet as the entire Continent besides Germany is in recession and without growth or significant Inflation; the long walk down the Road to Perdition continues. It must be candidly said that all of the German imposed austerity measures not only did not solve any of the problems but that they made matters much worse. The punishment did not fit the crime.
"I ain't gonna work on Angie's farm no more."
                              -Bob Dylanopoulos
I am asked, from time-to-time, why I write about Europe with such frequency. The answer is quite simple; there is nothing more important, nothing that will have a greater impact upon the world’s financial system, nothing that will impact any and all markets more than what is transpiring on the Continent. It is a grand experiment gone bad, a Federalist’s dream floundering in the dust, a vision of Heaven that is being dragged through the narrow gates of Hades and there is no longer any painless way home if home is to be found at all. The notion that there is some sort of decoupling in the marketplace between America and Europe is an adage quoted by the village idiots for the fools listening in the town’s square; nothing more than that. 
In the Coming Days
He stood there, stoic, gleaming in his silvery armor; the Germanic Prince. Without emotion he unsheathed his sword and cleaved the Hellenic head from its neck. He was positive that he knew what would happen. He knew in his heart and in his mind that the awkward, whimpering creature before him should now transform into a dazzling, beautiful Princess made wise by her hardship.
This is not what is going to happen.


This next piece from Ambrose Evans Pritchard is certainly something that we must be watchful of:
 that is a hard landing in China:

(courtesy Ambrose Evans Pritchard)

World edges closer to deflationary slump as money contracts in China

All key indicators of China's money supply are flashing warning signs. The broader measures have slumped to stagnation levels not seen since the late 1990s.

Narrow M1 data for April is the weakest since modern records began. Real M1 deposits – a leading indicator of economic growth six months or so ahead – have contracted since November.
They are shrinking faster that at any time during the 2008-2009 crisis, and faster than in Spain right now, according to Simon Ward at Henderson Global Investors.
If China were a normal country, it would be hurtling into a brick wall. A "hard-landing" later this year would already be baked into the pie.
Whether this hybrid system of market Leninism – with banks run by Party bosses – conforms to Western monetary theory is a hotly contested point. The issue will be settled one way or the other soon.
What seems clear is that China's economy did not bottom out as expected in the first quarter. It is flirting with real trouble. Yao Wei from Societe Generale says a blizzard of awful data "screams out for easing".
China's electricity output – watched religiously by bears – slumped in April. It is up just 0.7pc over the last year. State investment in railways has fallen 44pc, with an accelerating downward lurch over recent months. Highway construction has dropped 2.7pc. "The data shows extreme weakness in the Chinese economy," said Alistair Thornton from IHS Global Insight in Beijing.
The Yangtze shipyards tell the tale. Caixin magazine said eight of the 10 largest builders in the country have not received a single new order this year. "A wave of closures in the shipbuilding industry has yet to begin. A hurricane is approaching," said one official.
Housing sales slumped 25pc in the first quarter, testimony to the zeal of regulators. This has since fed into a drastic fall in new building. Mr Thornton said floor place under construction fell 28.3pc in April.
This is hardly a sideshow. The sector employs 10pc of the Chinese work-force, and a further 20pc indirectly. Land sales provide 70pc of tax revenue to local authorities and 30pc to the central government. It is the "fair weather" financing illusion, as
we saw in Ireland. China's scope for fiscal stimulus may be constrained if property goes into a long slump.
The property correction is deemed benign because it is planned. Premier Wen Jiabao wishes to forces down prices as a social welfare policy. Yet did the Fed not slam on the brakes in 1928 to choke an asset boom? Did the Bank of Japan not do likewise in 1990, only to find that boom-bust deflation has its own fiendish momentum? Once you let credit rise by 100pc of GDP in five years – as China has, more than in those US or Japanese episodes – you are at the mercy of powerful forces.
Something odd is now happening. The People's Bank said new loans fell from $160bn (£99.5bn) in March to $108bn in April. Non-conventional lending seized up altogether. Trust lending fell by 96pc, bankers' acceptance bills by 90pc. This is astonishing data.
It may not be as easy for Beijing to turn the tap back on again. Loan demand has been falling for months. Banks are offering credit. Companies are refusing to take it. This is the old Japanese story of pushing on a string, or the European story today.
"China is in deflation," says Charles Dumas from Lombard Street Research. Yes, consumer price inflation is 3.4pc – though falling – but consumption is a third of GDP. Fixed investment is 46pc, and here prices have dropped 3.5pc in six months. Export prices have dropped 6.6pc.
The authorities have belatedly responded, cutting the reserve ratio by 50 points to 20pc over the weekend. It is thin gruel. Are we to conclude that the People's Bank is bent on breaking excess capacity in a cathartic Schumpeterian purge, or that leadership battles have paralysed the Party? Hard to tell.
All the BRICs need watching. India's industrial output fell 3.5pc in March. The country seems caught in a 1970s stagflation vice. Brazil has softened too, with car sales down 15pc and industrial production contracting in March. The bad loans of the banks have reached 10.3pc, higher than post-Lehman.
The bubble has probably popped already, but hoteliers in Rio are hanging on. The European Parliament has pulled out of the UN's Rio forum on sustainable development in June because the rooms are exorbitant. "We are short the vastly over-vaunted and over-owned BRICs," says hedge fund contrarian Hugh Hendry.
My fear has always been that the credit cycle in the Rising World would blow itself out before the Old World has safely recovered, or reached "escape velocity" to use the term in vogue.
Europe will slide further into 1930s self-destruction until it equips itself with a lender of last resort and takes all risk of EMU sovereign default off the table, though that may come too late. The US has functioning institutions at least but growth is barely above stall speed. Ben Bernanke's "massive fiscal cliff" looms this autumn. The Economic Cycle Research Institute (ECRI) has not yet withdrawn its US recession call.
The BRICS helped save us in 2008-2009. If we now face a global crisis on all fronts – and such an outcome can still be avoided – it will test the mettle of world leaders. Interest rates in the G10 are mostly zero already, and budgets are frighteningly stretched.
Sensing what is coming, Citigroup's chief economist Willem Buiter says global central banks have not yet exhausted their arsenal. They can "and should" crank up quantitative easing (QE), buy everything under the sun, and do "helicopter money drops".
I would go even further. sovereign central banks have the means to defeat any depression thrown at them by launching mass purchases of assets outside the banking system, working through the classic Hawtrey-Cassel quantity of money mechanism until nominal GDP is restored to its trend line.
The problem is not scientific. A world slump is preventable if leaders act with enough panache. The hindrance is that the Euro Tower still haunted by Hayekians, and most G10 citizens – and Telegraph readers from my painful experience – view such notions as Weimar debauchery, or plain Devil worship. Economists cannot command a democratic consent for monetary stimulus any more easily today than in 1932.
One can only pray that helicopter drops do not become necessary in the chilly winter of 2012-2013.

Here is news from the USA where 230,000 souls will lose their benefits:

( courtesy Jim Sinclair’s Commentary)
Here is the strategy by the sitting administration to reduce the unemployment numbers. The MOPE on this one will be interesting.
Report says 230,000 unemployed losing benefits over weekend 

By Vicki Needham – 05/13/12 06:24 PM ET

More than 230,000 unemployed workers will lose their jobless benefits this weekend as portions of federal programs expire across several states.
All told, 409,300 long-term unemployed Americans in 27 states will have lost upward of 20 weeks of federal unemployment benefits by this past Saturday, even as the many state jobless rates remain high, according to a new analysis by the National Employment Law Project (NELP).
The latest batch of cuts affects 236,300 unemployed people in eight states — California (11%), Texas (7%) Pennsylvania (7.5%), Florida (9%), Illinois (8.8%) North Carolina (9.7%) Colorado (7.8%) and Connecticut (7.7%) — half of which have jobless rates above the 8.1 percent national average posted in April.
"A growing number of long-term unemployed workers are being left behind," said Christine Owens, executive director of the NELP.
"Job openings are not taking the place of these cuts,” Owens said.
A tier of 13 to 20 weeks of federal jobless benefits, used by the long-term unemployed, are expiring because of legislation Congress passed in February that gradually cuts federal benefits to 79 weeks from 99. That figure includes up to 26 weeks of state-level insurance.

Here is a great video showing how the short term treasury bills are being bought:

(courtesy Jim Bianco/Charles Biderman)

Biderman And Bianco Bury Bernanke's Bond Bull Market Backbone

Tyler Durden's picture

Digging into the details of the Fed's balance sheet can sometimes be a thankless task but  Charles Biderman and Jim Bianco have some fascinating insights into where the real money is being hidden. The stability of the Fed's balance sheet post-QE2, given we are borrowing-and-spending over $100bn per month is all down to Operation Twist and the Fed's creation of demand at the short-end (via telling banks that rates will be low forever and 'guaranteeing' positive carry returns on rolling overnight repo) and using this 'cash' to almost entirely fund longer-term borrowing. In a simple primer of the Fed's implicit risk-free carry trade, the two chaps note that the only downside is too much growth or inflation which would cause a massive unwind of these positions (leading only to further bailouts). Critically though, they explain the fact thatOperation Twist (and its implicit off-balance-sheet funding of this risk-free carry trade) is nothing more than the Fed's version of the ECB's LTRO - as the banks are 'encouraged' to buy short-term government debt with risk-free-carry expectations - implying the Fed's balance sheet could in fact be considerably larger than it appears. Yet more ponzinomics explained in a simple way - that surely eventually will trickle down to the masses who will question the emperor's clothing.

Your rating: None

I will leave you tonight with this Greg Hunter piece on JPMorgan.
His views echo mine:

(courtesy Greg Hunter

JP Morgan Black Swan?

14 May 2012 No Comment
By Greg Hunter’s
The surprise announcement by JP Morgan that it lost $2 billion in trading derivatives was portrayed in some mainstream media outlets as no big deal.  The Associated Press reported Friday, “Bank stocks were hammered in Britain and the United States on Friday, partly because of fear that a surprise $2 billion trading loss by JPMorgan Chase would lead to tougher regulation of financial institutions. . . .”The portfolio has proved to be riskier, more volatile and less effective as an economic hedge than we thought,” CEO Jamie Dimon told reporters on Thursday. “There were many errors, sloppiness and bad judgment.”   (Click here to read the complete AP story.) 
I think the market thinks this $2 billion surprise loss is much more than fear of “tougher regulation,” or that it was just “sloppiness and bad judgment.”  Remember MF Global and its bankruptcy on Halloween last year?  It, too, was trading in risky derivatives, and it lost $6 billion that wiped out the firm along with $1.6 billion in segregated customer cash.  In the aftermath, we still do not know where the customer money is, but we did find out MF Global was leveraged 40 to 1.  It would be hard to believe other big banks were not leveraged in risky derivative trades the same way.  This is why traders on CNBC were hitting the panic button last week.  Joe Terranova said, “I will dump my Bank of America on this news.”  Other traders on the show were equally scared.  “I can almost guarantee it’s not just JPMorgan,’ added trader Guy Adami.  ‘JPMorgan looks like it’s going to bring down the entire space,’ said Steve Grasso.”  (Click here for the complete CNBC story.)  
The only way JP Morgan could “bring down the entire space” is if the entire space was leveraged in ways similar to JP Morgan.  Of course, no U.S. bank has more derivative exposure than JP Morgan.  According to the Comptroller of the Currency, JP Morgan has a little more than $70 trillion in total derivative exposure. (4th quarter 2011 OCC report)  The next 4 banks have a combined $150 trillion (approximate) in total derivative exposure.  I am sure the banks will tell you that this is all hedged (bilaterally netted) to minimize any losses, but we all know how well that strategy worked with AIG, Lehman and MF Global.
I am not the only one worrying about JP Morgan’s $2 billion dollar surprise trading loss.  Friday, one of the big debt ratings companies downgraded the troubled bank’s debt.  CNN reported, “The closing bell brought no relief for JPMorgan Chase on Friday, as a major credit rating agency moved to downgrade its debt almost exactly 24 hours after the bank revealed a $2 billion trading loss.  Fitch Ratings downgraded both JPMorgan’s short-term and long-term debt, with the latter falling to A+ from AA-. The bank, the country’s largest by assets, was also placed on ratings watch negative.  Fitch said it views the $2 billion loss as “manageable” but added that “the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity.”  (Click here for the complete story.) 
With the “ratings watch negative,” it doesn’t appear that JP Morgan’s derivative troubles are over, does it?  Renowned money manager and investor Rick Rule thinks what happened to JP Morgan could not just bring down the bank but the entire financial system in a replay of the 2008 meltdown.  In an interview Friday with King World News, Rule said, “There would seem to be a mismatch of some amount of money in the $100 billion range between credit default swaps.  They seem to have been net sellers or providers of about $100 billion in unhedged credit default swaps.  When I say seems, these are extremely complex instruments.  Investors should be aware that derivatives such as these can bring down the entire banking system. . . . It’s just an example of the potential black swans that exist in a very, very leveraged banking environment.”  (Click here to read and hear the complete KWN interview with Rick Rule.)
I am not saying that JP Morgan is going out of business anytime soon, but if the bank does get in to more trouble and there are more losses, how much will it cost to save them?   What if the other big banks are in the same spot?  Does there come a time when the big banks are no longer too big to fail but too leveraged to save?  Did JP Morgan just turn into a black swan?


I guess that about does it for tonight

I will see you tomorrow night



Anonymous said...

Gold, Silver, Platinum are crashing because JP Morgan has lost a lot of money. People are retreating to the safety of paper money. If you think this is the reason why you are a moron. Keep buying gold funky monkey. A Hole.

FunkyMonkeyBoy said...

What the f**k have you directed that post at me for, i haven't posted anything!

Anyway, If you want to know why gold/silver prices are 'crashing/slumping', it is very simple, there are too many on the 'long' side of the trade thanks to all the gold/silver celebrity sites springing up left, right and center over the past few years pump the metals with their self-reinforced unproven nonsense...

... they led the lambs to the slaughter. Happens in all markets, the majority always get slaughtered, no matter how illogical it is for that to happen (just check out bonds).

The best thing for the gold/silver price now would be for all the gold/silver celebrity webshites and blogs to pack up and take the naive fools who bought in to PMs with them.

That way, the few strong PM holders left can quietly ride the bull again.

The gold/silver celebrities should be damn well ashamed of the pumping they did (especially on silver), which has nearly lost half it's value in year! Those suckers now need the silver price to nearly double just to break-even, and that doesn't including selling fees/cost!

Anonymous said...

I know just cause your an A-Hole I listened to you and stopped buying.
Now I have nothing.

FunkyMonkeyBoy said...


Care to phrase that in English that is understandable?

Anonymous said...

I bought JPM and now I lost cause you said it was a lie and JPM is the one who was on the short side with you. You A-HOLE

Anonymous said...

A-Hole shut your dirty mouth so I can make the right decision this time. A-HOLE FUCKY Monkey. I am going back to gold and silver and platinum you A-Hole

FunkyMonkeyBoy said...


I think you're confusing me with someone else, i buy PMs and have done for quite a while, not shares (especially not mining shares!).

JPM's shareprice was in the $20s last year, so if you bought then, you've done well. If you bought silver last year, then you're pissing blood.

If JPM are on the short side of PMs, then they have made a sh*t load of money over the past year fleecing the sheep that Harvey, and other gold/silver celebrities, have led to the slaughter...

David R. said...

"Monti said the government was trying to ensure that sacrifices are shared fairly and warned that the economic crisis could become a "cultural" one if Italians failed to show tolerance and solidarity towards one another."
Ha! He means tolerance towards the government.

croc987 said...

Thanks Harvey for all your efforts and hard work!

Are we not beyond the discussion of USD prices of gold and silver? The current system is imploding before our eyes. We had damn well better buy and squirrel away tangible assets including gold & silver, because digital assets could be worth zilch.

Anonymous said...

I just switched to JPM a month ago it is you. YOU!!!!

David R. said...

By the way, the goal of a troll is not to be right, it is to make people angry. They are known to argue among themselves just to provide turmoil.

Anonymous said...


FunkyMonkeyBoy said...

David R.

I take it that post is directed at me?

Well, please point out which part that i've posted is factually incorrect.

... i know how the gold/silver celebrity sheep hate it when facts are stated and not hopium fairy dust 'silver to $500', 'gold has bottomed, uncle f**king santa said so.', blah, blah...

... notice how the 'calls' of the gold/silver celebrities are constantly wrong? hmmmm.

Anonymous said...

Harvey asks...

"Thus the registered inventory remains at 35.726 million oz
The total of all silver remains at 140.49 million oz.
It is interesting that all our inventory levels have remained relatively constant this month and yet we have 12.4 million oz delivered. The total withdrawals have been 3.9 million oz so what happened to this inventory? Probably a good question to ask of our trolls."

Oh, goodness, Harvey. If you don't know the answer to this one then you truly do have no business writing a precious metals blog.

Why don't you call your "big broker" JB Slear and he can explain it to you. If he can't figure out the simple answer maybe he'll have to call PFGBest, his clearing broker.

Anonymous said...

How about someone make it clear to me because I'm fkkn confused... do we continue stacking or what??? Also why the hell does silver (and gold but I own silver) continue to drop if the financial world is "imploding?" Can someone respond in laymans terms instead of all of the bullshit speak - please. How about you FMB, I actually think you know more than most of these people. Do I continue to buy when I can (I cant afford gold so I'm talking silver) or do I sit tight on what I have? Shoot it to me straight.

Thank you. TFV

FunkyMonkeyBoy said...


Basically, it's a 50/50 gamble no matter what these gold/silver celebrities say.

If you think gold/silver are going higher, buy on weakness.

If you think gold/silver are going lower, sell out gradually on strength.

Don't listen to these gold/silver celebrities, they are clueless and have proven that time and time again. They are scam merchants selling their wares. How the hell that Turd F fella can even give an opinion on PMs i do not know. He's so bad, he's a contrarian, and he plays with leverage.

Personally, i buy PMs because i think the government are the closest thing to evil on this planet, and the monetary slave system makes me want to vomit... but does that mean buying PMs will make us 'good guys' winners... er, no... when has history shown that the good actually guys win? And don't give me all that World war II crap, the more you look at things in depth, the more that all is not as it seems. Evil has always triumphed.

At present, i'd say stick with PMs until brighter days, as you'd be selling in weakness if you sold. No physically commodity with be worth zero... even mud/soil is sold for a price.

SOME GOOD NEWS FOR YA: Have a look at the gold RSI on a 3 year chart. Gold is the most 'oversold' it has ever been in that period. It should see a rise soon, albeit potentially temporary, on short covering/profit taking alone... i think we'll see market 'stability' until the Facebook offering is concluded and launched friday.

Anonymous said...

Interesting class of people following this blog!

Mark said...


You posted the SLV data before they updated it. SLV actually added 1.65 million ounces today. I don't see why you think it is "amazing" that the GLD and SLV aren't losing any metal. As you have stated yourself many times, these "sell-offs" are just caused by the bankster selling of PAPER contracts. As prices get cheaper, people buy more physical, and that is what is showing up in the ETFs.

Anonymous said...

I saw that Obama was on the tv show The View today saying that JP Morgan Chase was a viable and good bank.
There's your sign !!!!

Like I would believe anything that guy would say much less all of the clowns who make up that circus show.

paladin said...

well what do we have here..

are some people pissed off because all there powder is spend..LOL

all my powder is dry..looking

Anonymous said...

Hey Porky - not to worry. Got plenty of dry powder for taking full advantage as a result of all the lies flying around which prop up great opportunities for fantastic metal prices...keep that lipstick on !

paladin said...

hey Harvey...
sorry for the BS post..

I just spotted who our hacks

it is sad who they are..

sad indeed


Anonymous said...

@anon @ 7:14 whole heartily on your page........
Dry powder as well. One monster box on it's way. Reserves for 2 more.
Thanks Harvey & Steve.... Truly appreciate your resolve to post despite the trolls. Everyone needs to separate fact from fiction and Steve & Harvey continue to provide the light at the end of the tunnel. There's an on coming train & you better be ready......Be prepared, the shrills will be coming out in numbers to HIDE the truth.

Anonymous said...

Great info on your site, Harvey.
I think I can understand about three quarters of it. I'm heavy in gold stocks so just got creamed pretty good. I'm not sure if I'm going to sit it out or not. Should I be switching from gld stocks to the real stuff? Funkie's suggestion seems good too.

Regards, Mcgillicuttie

Anonymous said...

Celebrities are actors. The gold and silver blogs that I go to are run by people who buy metal. They believe what they are saying and so do I. Since you want to be known as a boy I won't expect you to act like a man and leave a comment when silver hits a hundred.

Anonymous said...

Mcgillicuttie - If you can't hold it you don't own it.

Anonymous said...

Can you recommend articles, links that would explain why real metals are needed and why mining will be insolvent in a crash. Thanks...


Commodity Exchange said...

Gold and Silver prices are not stable, these are going upwards and downwards, hopefully the gold will be down for some time, so its better to sell this. For short term you can even hold it.

Anonymous said...


One word...manipulation.
Is that clear enough?
Continue stacking.

Anonymous said...


'Personally, I buy PMs because i think the government are the closest thing to evil on this planet, and the monetary slave system makes me want to vomit'...

Agreed! By buying physical you take your money out of the 'system'. This is the right thing morally and for human endeavour.

Sure we are all in agreeance here but why do you have to be such a knob about it?

We are all ONE and all want the same thing albeit some don't recognise, yes?. Not too hard to understand given the current day circumstances.

Walk in another man's shoes.

To your demise you don't get the simple fact. Read and learn some more please.

Anonymous said...

Yes but just what is a "swap" ?

Anonymous said...

It's coming Blythe...can you feel it? Here comes the pain...hehe

Anonymous said...

anon 6:06: You are a moron. Are you obsessed with Blythe or something. Its under $30 fuckstick, what now? oh wait a sec! it under $29... I guess we have the pleasure of reading the same lame shit from you when it hits $28 (oh it did this morning! Your little comments are very irritating, to say the least. How about grow up ad state something meaningful.

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David R. said...

Dear FMB,

Of course it was directed at you, among others (which are probably also you). Yet it was not for you.

Anonymous said...

Where it the famed "Silver shortage"???

ROTFLMAO at Harvey's Poodles. SUCKERS.

Anonymous said...

BIG NEWS! Jamie Dimon loses $2B and says
"I'm sorry" to the stockholders and they vote him a $23M pay package. Obammy gets on TV and states how Jamie Dimon is the "smartest banker in the world" but he still managed to lose $2b dollars. Of course I'm certain Obammy's coffers will swell with new JPM donations. Its no wonder JPM can manipulate the PM markets with no worry of retribution with Obammy in their pocket.

Anonymous said...

... and silver is still dropping like a fkkn rock but hey people, buy them goddamned dips ya hear!

GEE-ZUS-CHRIST! I'm just slowly watching my savings disappear ad cant do a fkkn thing about it. Yeah, buy, buy, buy - Boy THAT was a bright fkkn idea!

Anonymous said...

Only in America can a CEO lose $2B and not only NOT get fired but gets 91% of the vote for a $23M pay package. lol... Thank God he didnt lose $20B!!!

Of course he did apologize and stated "the buck always stops with me!" Tell that to Ina Drew! lol...

FunkyMonkeyBoy said...

The worst thing that ever happened for the gold and silver price was for all these clueless, arrogant, pump-and-dump silver/gold celebrity blog sites to pop-up over the past few years...

... they led the lambs to the slaughter, theres no way 'JPM' could smash the PM prices down so easily if it weren't for all the lambs who went long thanks to the gold/silver celebrities and their PM pumping.

How the f**k that Turd F at can claim to know anything about PMs, price charting, etc i don't know, and even have the cheek to ask for donations/subscriptions.

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