Saturday, March 16, 2013

JPMorgan "whale testimony" in Congress/USA empire index down/Michigan Confidence index down/

Good morning Ladies and Gentlemen:

Gold closed up by $1.90 to $1592.50 (comex closing time).  Silver rose by 5 cents to $28.82.

Gold initially was hit in the wee hours of the morning right after the London fix, which is generally the modus operandi of our crooked banks.  However it recovered quite quickly as demand for physical surfaced, driving gold close to the resistance level of $1600.  Silver was noticeably slower in its climb as the bankers weighed in on gold's cousin.  Gold and silver equity shares were also in the doldrums despite gold's rise suggesting another attack is imminent next week. Gold settled the day up $1.90 with silver up only 5 cents.

Here are the final access closing of gold and silver:

gold:  $1592.90
silver: $28.77

In physical news at the comex, again we witnessed a large delivery of gold. In a non active (non delivery) month of March the amount of gold standing is a remarkable 10.47 tonnes  (see below)

In paper news, we see that the Fed Balance sheet has now reached $3.21 billion as the Fed continues with their 85 billion USA purchases.  Italian debt now exceeds 2.02 trillion euros as their debt/GDP rises close to 130%.  (In 2011 the sovereign debt of Italy was 1.9 trillion euros)

The big news of the day was the JPMorgan whale testimony in Congress. 
It is quite clear that JPMorgan were not engaged in hedging but trading with depositors money--a clear violation of the Volcker rule.  JPMorgan has always stated to the CFTC regulators that they are "hedging" silver and gold.

The USA empire index is down again last month.  Also the USA Michigan confidence number is also down.  We will go over these and other stories but first.....

let us head over to the comex and see how trading fared today:

The total gold comex open interest fell by 1971 contracts falling from 454,483 down to 452,512.    The non active front month of March saw it's OI fall by 252 contracts from 434 down to 182.  We had 382 notices filed on Thursday so in essence we gained 130 contracts or 13,000 oz of additional gold will stand for March delivery.  The next big active delivery month is April which is a little more than 2 weeks away from first day notice.  Here the OI fell by 8690 contracts from  204,825 down to 196,135.  The estimated volume Friday was weak at 94,123.  The confirmed volume Thursday was a lot better at 171,501.

The total silver open interest rose by 824 contracts from 149,945 up to 150,769.
The active front month of March saw it's OI fall by 36 contracts from 418 down to 382. We had 37 delivery delivery notice filed on Thursday so in essence we gained 1 contract or an additional 5,000 oz of silver will stand for the March contract. The non active April contract rose by 8 contracts up to 351.  The next big active delivery month contract for silver is May and here the OI rose by 580 contracts from 78,975  up to 79,555.  The estimated volume on Friday was weak at 21,252.   The confirmed volume on Thursday was good at 46,790 contracts. 

Comex gold/March contract month:
March 15.2013    

Withdrawals from Dealers Inventory in oz
Withdrawals from Customer Inventory in oz
Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz
No of oz served (contracts) today
 125   (12,500  oz)
No of oz to be served (notices)
57 (5700) oz
Total monthly oz gold served (contracts) so far this month
3309  (330,900 oz) 
Total accumulative withdrawal of gold from the Dealers inventory this month
Total accumulative withdrawal of gold from the Customer inventory this month


We had no activity at the gold vaults.
The dealer had 0 deposits and 0   withdrawals.

We had no   customer deposits:

total deposit: nil   oz

We had 0  customer withdrawals :

We had 1 adjustment:

i) out of HSBC vault: 1,502.919 oz was adjusted out of the dealer account and into the customer account at HSBC.
No doubt this was used in the delivery process today.

Thus the dealer inventory rests tonight at 2.600 million oz (80.87) tonnes of gold.

The CME reported that we had 125 notices filed for 12,500 oz of gold Friday.   The total number of notices so far this month is thus 3309 contracts x 100 oz per contract or 330,900 oz of gold.  To determine how much will stand for March,  I take the OI standing for March (182) and subtract out today's notices (125) which leaves me with 57 notices or 5700 oz left to be served upon our longs.

Thus the total number of gold ounces standing in this non  active month of March is as follows:

330,900 oz (served ) + 5700 oz (to be served upon) = 336,600 oz or 10.47  Tonnes.

we gained another 130 contracts or 13,000 additional gold ounces will stand in March.  The amount standing is extremely large for a non active delivery month.


March 15.2013:   The March silver contract month

Withdrawals from Dealers Inventorynil
Withdrawals from Customer Inventory 662,141.64  oz (Brinks,CNT,Delaware,Scotia)
Deposits to the Dealer Inventorynil
Deposits to the Customer Inventory  1,222,874.14 (Brinks,JPM)
No of oz served (contracts)3  (15,000 oz)  
No of oz to be served (notices)379  (1,895,000  oz) 
Total monthly oz silver served (contracts) 1769  (8,845,000  oz) 
Total accumulative withdrawal of silver from the Dealers inventory this monthxxxxx
Total accumulative withdrawal of silver from the Customer inventory this monthxxxxx

Friday, we  had good activity  inside the silver vaults.

 we had 0 dealer deposits and 0 dealer withdrawal.

We had 2 customer deposits of silver:

i) Into Brinks:  601,533.84 oz
ii) Into JPM:  621,290.30 oz

 total customer deposit: 1,222,824.14  oz

we had 4  customer withdrawals:

i) out of Delaware: 3991.37  oz
ii) Out of Scotia: 397,296.05 oz
iii) Out of Brinks:  258,972.69
iv) Out of CNT:  1881.53

total customer withdrawal:  662,141.64 oz

we had 0 adjustments:

Registered silver remains Friday at :  42.476 million oz
total of all silver:  163.588 million oz.

The CME reported that we had 3 notices filed for 15,000 oz of silver for the March active contract month. To obtain what is left to be served upon our longs, I take the OI standing for March (382) and subtract out today's notices (3) which leaves us with  379 notices or 1,895,000 oz left to be served upon our longs. 

Thus the total number of silver ounces standing for delivery in silver is as follows:

8,845,000 oz (served)  +  1,895,000 oz (to be served upon)  =  10,740,000 oz

we gained 5,000 oz of additional silver standing.

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.

Now let us check on gold inventories at the GLD first:

March 15/2013:



Value US$63.232  billion

March 14.2013:



Value US$63.025   billion

March 13.2013:



Value US$63.155  billion

March 12.2013:



Value US$63.345 billion

we  lost 3.31 tonnes of gold at the GLD Friday night.

And now for silver:

March 15.2013:

Ounces of Silver in Trust345,095,059.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,733.66

Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60

March 13.2013:

Ounces of Silver in Trust344,128,591.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,703.60

March 12.2013:

Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48

March 11.2013:
Ounces of Silver in Trust342,292,222.100
Tonnes of Silver in Trust Tonnes of Silver in Trust10,646.48

 Today the inventory at the SLV gained 967,000 oz of silver.

Please note the difference between gold and silver.  The gold inventory drops and the silver inventory rises.


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

Sprott and Central Fund of Canada. 

(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)

1. Central Fund of Canada: traded to a  negative 0.2 percent to NAV in usa funds and a negative 0.2%  to NAV for Cdn funds. ( March 15 2013)   

2. Sprott silver fund (PSLV): Premium to NAV rose to 1.94% NAV  March 15/2013
3. Sprott gold fund (PHYS): premium to NAV  rose to 1.19% positive to NAV March 15/ 2013.


At 3:30 the CME released the COT report which shows position levels of our major players.
Let us head over to the gold COT as see what we can glean from it:

Gold COT Report - Futures
Large Speculators
Change from Prior Reporting Period

Small Speculators

Open Interest



non reportable positions
Change from the previous reporting period

COT Gold Report - Positions as of
Tuesday, March 12, 2013

Our large speculators:

Our large specs that have been long in gold, added a huge 6369 contracts to their long side.
Our large specs that have been short in gold covered only a very tiny 551 contracts and they together the entire large specs remain very short.

Our commercials:

Those commercials that have been long in gold and are close to the physical scene pitched a tiny 903 contracts from their long side.

Those commercials that have been short in gold, added a monstrous 7420 contracts to their short side and they did this as lower gold prices.
These guys are adamant to suppress the price of gold.
Our small specs:

Those small specs that have been long in gold, added a small 620 contracts to their long side.
Those small specs that have been short in gold covered 783 contracts from their short side.



hugely bearish as the commercials went net short by a huge 8323 contracts.

And now for our silver COT:

Silver COT Report: Futures
Large Speculators
Small Speculators
Open Interest
non reportable positions
Positions as of:

Tuesday, March 12, 2013

Silver COT Report: Futures
Large Speculators

Our large speculators:

Those large specs that have been long in silver added another 188 contracts to their long side
Those large specs that have been short in silver covered 605 contracts from their short side.

Our commercials:

Those commercials that have been long in silver pitched a small 845 contracts from their long side.
Those commercials that have been short in silver covered a tiny 605 contracts from their short side.

Our small specs;

Those small specs that have been long in silver added a tiny 43 contracts to their long side.
Those small specs that have been short in silver covered 692 contracts from their short side.


a little bearish as the commercials went net short by 240 contracts.

And now for the major physical stories we faced today:

An audio of Chris Powell of GATA on Hong Kong's radio station 3:

Audio of GATA secretary's interview on Hong Kong radio is posted

10:55a HKT Friday, March 15, 2013
Dear Friend of GATA and Gold:
Audio of your secretary/treasurer's interview today on the "Money for Nothing" program on Radio Television Hong Kong's Radio 3 station has been posted in the 8:20 section of the program's page on the RTHK Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Manipulation raised at Goldcore's Internet seminar.

(courtesy David Morgan/GATA/Goldcore)

Manipulation, confiscation raised in Goldcore's Internet seminar with's Morgan

2:30p HKT Friday, March 15, 2013
Dear Friend of GATA and Gold:
Market manipulation and metal confiscation were among questions put this week to silver market analyst and newsletter writer David Morgan of in an Internet seminar arranged by Goldcore. You can hear it at GoldCore's Internet site here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
And now your early morning sentiment as we see how markets reacted to events from Asia and Europe.


Hedge funds are at record levels of shorts in gold.

(Kingworldnews/Dan Norcini)

Hedge funds shorter in gold than ever, Norcini tells King World News

2:18p HKT Friday, March 15, 2013
Dear Friend of GATA and Gold:
Hedge funds are now shorter in gold than ever and are vulnerable to buying by far larger gold tranders, central banks, futures market analyst Dan Norcini tells King World News today. An excerpt from the interview is posted at the King World News blog here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


An important commentary from Chris Powell of GATA

(courtesy GATA)

So what if all markets are manipulated? This is what

12:40p HKT Friday, March 15, 2013
Dear Friend of GATA and Gold:
Our pal D.M. conveys the following disparagement from a friend -- call him Doofus -- and asks for a reply:
"Central banks manipulate far more than just gold -- interest rates, stock markets, housing markets, etc. That's what they do. And so what? The gold price has gone up for the last 12 years, despite the 'manipulation.' So I don't see what's the issue. Even if Western central banks try to sell gold down, Eastern central banks are only too happy to accumulate at lower prices."
Contrast Doofus' "so what?" argument with the contemptuous and yet ridiculous denial given to CNBC yesterday by CPM Group Managing Director Jeffrey Christian that there is anything surreptitious or questionable going on in the gold market:
CNBC reported ( "Jeffrey Christian, founder and managing director of commodities research firm CPM Group, was a lot more blunt about GATA, saying, 'I think they're outright liars. ... Pretty much what they do is nonsense.' Christian added that he believed there was no conspiracy among global central banks to collude over gold prices and that central banks are 'very transparent' about their monetary gold reserves."
Doofus says that what GATA trumpets is only obvious. But Christian not only denies what Doofus calls obvious but, in denying it, is considered an industry expert by financial news organizations.
So are central banks manipulating the gold market and other markets or not? Before disparaging GATA Doofus might try putting the question to Federal Reserve Chairman Ben Bernanke. If Doofus gets an acknowledgment of market manipulation, it will be international news.
Then consider whether, in democracies, governments should be lying to and misleading their people quite so comprehensively and whether it's really a matter of indifference even to Doofus himself whether any democracy or the world has free markets.
Yes, rigging markets is indeed what central banks do these days. That's what a high school graduate told GATA's Washington conference five years ago:
"Gold is only part of it. For market intervention is exactly why central banking was invented. Intervening in markets is what central banks do. They have no other purpose. (See
But is this intervention right? And will the propriety of it ever be judged if the intervention itself is covered up or denied as supposed industry experts like Christian deny it?
If this manipulation of markets is really no big deal, then why are central banks so damned secret about it? Why do they have to be sued to provide ordinary documentation? (See
Obviously this stuff is a lot bigger deal to the central banks than it is to Doofus. What are the central banks afraid of? Could it be that deception of markets and whole populations has become a major policy tool of central banks, a tool they are desperate not to lose?
And while, as Doofus notes, gold has gone up from $250 to $1,600 in the 13 or so years GATA has been complaining about market manipulation, how fair is this when, in a free and transparent market, gold well might be priced at 10 times$1,600?
Besides, as that high school graduate said, gold is only part of the problem -- the central part but a rather small part. The much bigger part is the undemocratic allocation of political power and wealth in the world and the West's loss of the free markets that helped make it great and propelled the ascent of man.
GATA couldn't care less whether Doofus or anyone else invests in gold. We're pursuing far bigger things: democracy; free and transparent markets; and limited, accountable government, which encompasses Doofus' right to be a selfish and irrelevant nihilist.
So what? That's what.
As for Christian, why do so many gold market followers get so agitated about him?
In the first place, GATA has struck no blow exposing gold market manipulation stronger than the one Christian himself struck with his testimony at the March 25, 2010, hearing of the U.S. Commodity Futures Trading Commission, when he stated that the leverage in gold trading in the London physical bullion market -- the ratio between metal traded and metal actually existing -- was as much as 100 to 1 and that the so-called physical market really isn't so physical at all.
And second, note what Christian, whose firm has many central bank clients, was reduced to in his comments to CNBC: reduced to asserting that central banks are "very transparent" about their gold reserves. Good grief -- even the pillar of the Western financial establishment, the Financial Times, acknowledged a few weeks ago that central banks have been far from transparent about their gold:
Has Christian lately gotten a tour of Fort Knox, which hasn't been opened to the public for decades? Has he been allowed to review the gold trading books of the Federal Reserve, Bank of England, Bundesbank, and Bank for International Settlements? Have those central banks given him a current list of their gold swaps and leases? Has he been invited to attend any of the meetings of the G-10 Gold and Foreign Exchange Committee, a committee whose very purpose is central bank collusion about gold? If Christian has such information, will he, in pursuit of the transparency he proclaims, share it with the world?
Of course not. But Christian's unsupported and plainly ridiculous profession of transparency is apparently the only defense that can be made of central banking here, making him the Wizard of Oz of the gold world: "Pay no attention to that man behind the curtain." How painful this might be for anyone who wasn't already on central banking's payroll.
Christian isn't the challenge. The challenge is to embolden financial news organizations to try committing journalism to expose central banking's many deceptions. Emboldening such journalism is a slow process, but Christian performs another great service for that process when he demonstrates that, with gold, central banking has no defense at all.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


Dr Paul Craig Roberts on gold and the Desperate Fed:

(courtesy Kingworldnews/Roberts)

Former US Treasury Official – Fed Desperate To Avoid Collapse

Courtesy of
Dear CIGAs,
Today a former Assistant Secretary of the US Treasury told King World News, “… the dollar is the vulnerable spot in the Fed’s policy management, and the popping of the bubble is likely to come from the dollar.”  Former Assistant of the US Treasury, Dr. Paul Craig Roberts, also warned  King World News that a financial collapse is coming, and the Fed is desperately manipulating the gold price in an attempt to avoid the collapse.
Here is what Dr. Roberts had to say in this extraordinary and exclusive interview:  “A lot of people just can’t imagine that the government would fix the gold price.  And yet, in full view, the government fixes the bond price, and the banks fix the LIBOR rate.  So why is it people can’t comprehend that the government would fix the price of gold (laughter ensues)?”
Dr. Paul Craig Roberts continues…
“And you have to ask yourself, who would short gold in a rising gold market?  In the physical gold market the demand for gold rises consistently.  Investors would ride the rise in gold.  Do investors go in and short a bull market in stocks?  Not unless they want to get wiped out.  So why would they short a rising gold market unless the purpose is to stop the rise?
So it’s obvious that they are fixing the price of gold because we hear every day that there is more physical demand for people who actually want the metal….


Kingworld interviews Bill Murphy, Eric Sprott and the above Paul Craig Roberts:

(courtesy Kingworld news)

Interviews with Bill Murphy, Eric Sprott, and Paul Craig Roberts

12:40p HKT Saturday, March 16, 2013
Dear Friend of GATA and Gold:
Here are three gold- and market manipulation-related interviews for weekend reading.
-- GATA Chairman Bill Murphy is interviewed by Kevin Michael Grace at Resources Wire:
-- Sprott Asset Management CEO Eric Sprott is interviewed by King World News:
-- Also at King World News, former Assistant Treasury Secretary Paul Craig Roberts:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


And here is Kerry Lutz speaking to me:

Here's the link to our interview.

(courtesy Kerry Lutz/financialsurvivalnetwork)


And now for our more important paper stories which will have an influence on gold and silver.

First, let us see how early market sentiment from Asia and Europe affected our markets:

Your early morning market sentiment.

Major points:

1. From Bank of America:    "equity markets may have lost some of its ability to reflect economic trends in exchange for an important role in the policy fight to support spending." ...i.e. no growth discounting mechanism and thus just a monetary policy vehicle.

2.  Fed Balance sheet now at 3.21 trillion USA dollars.
3.  Italian debt rises to 2.02 trillion euros.
4.  Spanish public sector debt rises to 885 billion euros.  Debt to GDP rises from 69.3% to 84.1%.  If you add in the regional governments debt and other guarantees you exceed 145% debt to GDP.
5. Spanish house prices fall 12.8% in the last quarter, after sliding 15.1% in the 3rd quarter. This will put the Spanish banks holding hugely discounted collateral.
6.  Discussions from Europe courtesy of Bloomberg/Jim Reid of Deutsche Bank.

(courtesy zero hedge)

Today's Pre-Ramp Preview

Tyler Durden's picture

"Equity prices in the US and Europe have been hovering at multi-year highs. To the extent that this reflects powerful policy easing, equity markets may have lost some of its ability to reflect economic trends in exchange for an important role in the policy fight to support spending." This is a statement from a Bank of America report overnight in which the bailed out bank confirms what has been said here since the launch of QE1 - there is no "market", there is no economic growth discounting mechanism, there is merely a monetary policy vehicle. To those, therefore, who can "forecast" what this vehicle does based on the whims of a few good central planners, we congratulate them. Because, explicitly, there is no actual forecasting involved. The only question is how long does the "career trade", in which everyone must be herded into the same trades or else risk loss of a bonus or job, go on for before mean reversion finally strikes. One thing that is clear is that since news is market positive, irrelevant of whether it is good or bad, virtually everything that has happened overnight, or will happen today, does not matter, and all stock watchers have to look forward to is another low volume grind higher, as has been the case for the past two weeks.
Some of the overnight news, which no longer reflect in risk prices:
  • Fed balance sheet assets rose $25.3 billion to a record $3.21 trillion
  • Italian government debt rose to a record €2.02 trillion, in January.
  • Spanish Public sector debt rose to a record €884.4 billion, debt to GDP rises tom 84.1% in Q4 from 69.3% a year earlier
  • Italy carried out €2.85 billion bond buyback in reverse auction
  • Schauble said markets must be kept stable and risks mitigated - as we said: markets are nothing but a policy vehicle now
  • Spanish house prices fell 12.8 percent in the fourth quarter from a year ago, after sliding 15.2 percent in the third quarter. Labor costs declined 3.2 percent
    from a year ago, after slipping 0.1 percent in the third quarter.
  • Swiss producer and import prices advanced for a sixth month in February, rising 0.1 percent from a year earlier after climbing an annual 0.8 percent in January. Economists forecast a gain of 0.3 percent.
  • Dutch industrial production declined 3 percent in January from a year ago. The median estimate of economists surveyed was for a 2 percent gain.
Those curious what will be the "catalysts" goalseeked by algos to provide today's ramp launch points, we have plenty:  CPI and Empire Manufacturing at 8:30 am, Industrial production and Capacity Utilization at 9:15 am, UMich Consumer Confidence at 9:55 am - recall any news in these, good or bad, will be sufficient to push the DJIA to new record highs, and continue the ramp into its 11th day.
The most interesting, non-market moving event today, will be Senate hearing over the London Whale, scheduled to start at 9:30 am.
The only relevant "market-moving" event will be the $4.75 - $5.75 billion POMO starting at 10:15 am and concluding at 11 am. And don't forget to buy the 3:30 pm algo rip at approximately 3:29:59:999999 pm.
More bulletin highlights from Bloomberg:
  • Treasuries steady, with  5Y-30Y yields near high end of 11-month ranges; yen little changed vs. dollar, erasing overnight losses.
  • Kuroda was confirmed as BoJ governor today along with two deputies; former MoF official Sakakibara said Abe’s plan to beat deflation with money printing is bound to fail as the root causes are more structural
  • Goldman and JPMorgan, the world’s biggest trading firms, must submit new capital plans to regulators to address weaknesses the Fed found in their planning  processes
  • Bank of America, Wells Fargo, American Express, JPM, Citi and Capital One were among lender that said they’ll boost dividends or stock buybacks after Fed’s  stress tests
  • EU leaders endorsed “structural” budgetary assessments, using code for granting countries such as France, Spain and Portugal extra time to bring down deficits
  • Finance ministers will seek to agree on a rescue for Cyprus today as the euro area seeks progress toward a bailout that’s been batted about for nine months
  • A resurgence of the debt crisis that scarred the euro- area over the past 3 1/2 years is the biggest threat facing Germany in an election year, policy makers and leading economists said.
  • Jamie Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet and JPMorgan “mischaracterized high-risk trading as hedging,” according to a 301-page report by the Senate Permanent Subcommittee on Investigations
  • Obama said Iran is still “over a year or so” away from building a nuclear weapon and indicated the U.S. is ready to take military action if sanctions don’t force the regime to abandon its pursuit
  • BofAML Corporate Master Index OAS narrows to 144bps from 145bps as at least $5.5b priced yesterday. Markit IG narrows to new YTD low 78bps. High Yield Master II OAS narrows to 471bps, tighest since April 2011, from 476bps; $1b priced yesterday. CDX High Yield closed at 104.66, highest since Feb. 2011
  • EUR/USD gains, trading at 1.3062 after yesterday touching 1.2911, lowest since Dec. 10. Nikkei gains 1.5%, Shanghai Composite 0.4%. European equity  markets, U.S. index futures lower. Global sovereign yields mostly lower. Energy, precious metals higher
A more complete recap from Deutsche's Jim Reid
For US equities at least, it’s been a case of another day, another grind higher. Indeed yesterday the S&P 500 (+0.56%) inched another 8.7pts nearer to its record close of 1565.15 – finishing the day just 1.9pts away from the milestone. The Dow Jones, meanwhile, extended its streak to 11 straight days of gains. We should note however, that although the major US indices are above or close to the record highs, daily trading volumes have been steadily trending lower. Indeed the moving 15-day average volume for the S&P500 and the Dow are now the lowest since mid-January.
US jobless claims were identified as the catalyst for gains in equities yesterday. Claims continued to trend lower in early March, falling 10k to 332k (vs 350k expected). DB’s Joe LaVornga points out that the 4-week average has made a new, post-recession low (347k vs. 350k previously). If this level is held through the month, it would be consistent with further acceleration in the pace of nonfarm payroll gains, which have currently averaged 191k over the past three months. In other US data, the producer price index showed a headline increase in February (+0.7%) due to a sharp run-up in gas prices. The core PPI measure rose +0.2%, the same as in January.
Returning to markets, 10yr UST yields edged 1bp higher to 2.03% with earlier weakness seen after a lackluster 30yr treasury auction. According to Reuters, direct bidders accounted for only 4.9% of the purchases, the smallest share since Sept 2009. In other interesting market moves, US 10yr breakevens continued to edge higher and are now up 9 days out of the last twelve. Iron ore (China Import Fines 62%) fell 4.4% overnight to US$133/tonne, bringing its total retracement to -17% since its February peak.
After the US market closed yesterday, the Fed announced that it had approved the capital plans of 14 banks in the US in its Comprehensive Capital Analysis. In addition to that, the Fed stated that it didn’t object to the capital plans for Goldman Sachs or JPMorgan, but required the two institutions to submit new capital plans by Q3 to address “weaknesses in their capital planning processes”. Little time was wasted with at least 11 banks announcing stock repurchases and/or dividend increases in the hour following the Fed’s announcement. The Fed’s announcement came just after the US market close, so it will be interesting to see how the US banks trade today.
With the EU leader’s summit continuing today in Brussels, the news flow has so far been focused on the around the growth vs austerity debate. A draft conclusion prepared for the EU leaders summit appeared to offer some flexibility on budgets, saying there should be "an appropriate mix of expenditure and revenue measures, including short-term targeted measures to boost growth"
The thoughts were echoed ahead of the meeting by Francois Hollande who commented that "We need flexibility if we want to ensure that growth is the priority," adding that while he was committed to gradual budget consolidation, that did not mean that there was no room for manoeuvre. Merkel commented ahead of the meeting that the the growth pact passed by EU leaders last year “has to be filled with life” and should be used to "get the money to the people so young people in Europe get jobs".
On a separate but related topic, Mervyn King had some interesting comments on the UK economy in an interview aired on ITV. The outgoing BoE governor said that “there is momentum behind the recovery that’s coming” and “during the course of 2013 we will see the recovery come into sight”. On the currency, King added that the BOE isn't actively seeking to drive down the value of sterling to aid exporters. The sterling gained 20pips on the headline, but has trended downwards in overnight trading.
Turning to Asian markets, it has been a firmly positive session for the region’s equities overnight with gains being led by Japanese equities. The Nikkei (+1.3%) has hit a fresh 4.5yr year high on news that Haruhiko Kuroda has been approved as the new BoJ governor by Japan’s parliament, raising hopes that he will push ahead with more aggressive easing when current governor Shirakawa steps down next Tuesday. Also making headlines, domestic Japanese media are reporting that PM Abe will announce today that Japan intends to participate in talks to join the Trans-Pacific Partnership (Kyodo News). According to the Nikkei, joining the Trans-Pacific Partnership will add 0.66ppt to Japan’s GDP. The yen is largely flat against the dollar in overnight price action. Chinese equities have bounced from two-month lows (Shanghai Comp +1.5%), with strong gains seen in transportation and financials. Li Keqiang was officially confirmed as Premier following the confirmation of Xi Jin Ping as President yesterday.
In the context of the week so far, we have a relatively busier calendar today. The Italian parliament sits for its first session today after which formal  consultations with President Napolitano on forming a new coalition government can begin. The Lower Chamber convenes at 10:30am (local time) with the Senate following suit half-anhour later. The EU leaders’ summit continues in Brussels. In terms of data, Eurozone CPI (February) and labour costs (Q4) are the main highlights in the European timezone. In the US, today’s US CPI report will be worth watching in light of the strength in recent macro data. The consensus is for a 0.5% and 0.2% print in the headline and core measures respectively. The Empire manufacturing and University of Michigan consumer confidence surveys area due today, as well as February industrial production.

A discussion of events which influence the major currency crosses:

(courtesy Marc to Market)

Respect the Price Action, Better Opportunity Next Week to Resist

Marc To Market's picture

Market participants have little reason to fight the corrective pressures that emerged yesterday. The proximity of the weekend and new incentives next week, with among things the FOMC meeting, the BOE minutes and UK budget, the beginning of a new BOJ regime and euro area flash PMIs.
As is often the case, the correction was triggered by fundamental developments in technically stretched market. In other market conditions, we suspect the same news would not have prompted such price action. We are skeptical the strongest jobs growth in 13 years in Australia and that the Financial Times story yesterday about Qatar's interest to invest GBP10 bln in sterling in some unspecified time is truly driving sterling.
BOE Governor King, who wanted to resume the gilt purchases program, but was stopped by his own MPC, now sounds downright optimistic about the UK's economic outlook, would under other conditions been shrugged off as unfounded optimism.  We will learn next week whether King persisted in desire to resume QE.  Meanwhile, King asserted that if one takes away construction and North Sea production from the GDP calculations, the UK economy would have expanded.  It arguably was an interesting observation when we made a couple months ago, and even then it was made to illustrate the broad stagnation of the UK economy rather than the triple dip that had caught the imagination of the commentariat class, but now it stretches credibility
The idea that the MPC was not looking to push sterling lower is a bit of hair splitting as the public record clearly shows the MPC had previously complained about sterling strength and has welcomed it weakness.  In any event, the next target for the short squeeze in sterling is $1.5200-20. Note that if sterling finishes the North American session today above $1.5120, it would close above its 20-day moving average for the first time since January 2.
The euro has remained above the $1.30 level for the first time since March 5 and only the second time this month.  The next corrective target is in the $1.3100-30 area. The news stream is light.  There are two main talking points today. 
First, the EU Summit appears to be giving move space for public investment and this would seem to favor Italy and France, though it is not clear the EC will over rule the objection of some of the creditors, including Germany, to granting France another year to reach the 3% deficit/GDP target.  However, the EU movement seems to be a constructive development and one in which investors appear to have taken in stride and not punished the euro or the European sovereign bond market for what appears to be easing of the austerity drive. 
Second, the Italian parliament meets formally for the first time today to begin the laborious process of putting together the next government.  Besides the obvious difficulty given the 5-Star Movements posture of putting together a working majority in the Senate, the problem is this:  in order to set new elections, a new president has to be in place, but a new president cannot be selected unless a new parliament is in place.
The Japanese yen has barely budget this week.  The dollar has traded in a JPY95.45-JPY96.71 range over the course of the week and has been in a narrow 40 tick range today.  Earlier the upper house approved the new BOJ management team.  The previous regime steps down on March 20.  Japanese markets are closed on March 21 for the spring equinox.  There has been some talk that Kuroda will call an emergency meeting as early as March 22 to announce a more aggressive asset purchase plan..
The North American session sees a slew of US data which include CPI, industrial production, Empire survey and Univ of Michigan consumer confidence.  The dollar's ability to rally on strong economic data is being put to the test.  New cyclical (5-year) lows in weekly initial jobless claim failed to prevent the downside reversal to the greenback.  We do not expect whatever strength is reported in today's report will do much to stop the correction.


A terrific recap of why Europe is heading for a full blown economic depression:

(courtesy Michael Synder/the Economic Collapse Blog)

17 Signs Of A Full-Blown Economic Depression Raging In Southern Europe

Tyler Durden's picture

Submitted by Michael Snyder of The Economic Collapse blog,
When you get into too much debt, eventually really bad things start to happen.  This is a very painful lesson that southern Europe is learning right now, and it is a lesson that the United States will soon learn as well.  It simply is not possible to live way beyond your means forever.  You can do it for a while though, and politicians in the U.S. and in Europe keep trying to kick the can down the road and extend the party, but the truth is that debt is a very cruel master and at some point it inevitably catches up with you.  And when it catches up with you, the results can be absolutely devastating.
Greece, Italy, Spain and Portugal all tried to just slow down the rate at which their government debts were increasing, and look at what happened to their economies.  In each case, GDP is shrinking, unemployment is skyrocketing, credit is freezing up and manufacturing is declining.  And you know what?  None of those countries has even gotten close to a balanced budget yet.  They are all still going into even more debt.  Just imagine what would happen if they actually tried to only spend the money that they brought in?
I have always said that the next wave of the economic collapse would start in Europe and that is exactly what is happening.  So keep watching Europe.  What is happening to them will eventually happen to us.
The following are 17 signs that a full-blown economic depression is raging in southern Europe...
#1 The Italian economy is in the midst of a horrifying "credit crunch" that is causing thousands of companies to go bankrupt...
Confindustria, the business federation, said 29pc of Italian firms cannot meet "operational expenses" and are starved of liquidity. A "third phase of the credit crunch" is underway that matches the shocks in 2008-2009 and again in 2011.
In a research report the group said the economy was caught in a "vicious circle" where banks are too frightened to lend, driving more companies over the edge. A thousand are going bankrupt every day.
#2 During the 4th quarter of 2012, the unemployment rate in Greece was 26.4 percent.  That was 2.6 percent higher than the third quarter of 2012, and it was 5.7 percent higher than the fourth quarter of 2011.
#3 During the 4th quarter of 2012, the youth unemployment rate in Greece was 57.8 percent.
#4 The unemployment rate in Spain has reached 26 percent.
#5 In Spain there are 107 unemployed workers for every available job.
#6 The unemployment rate in Italy is now 11.7 percent.  That is the highest that it has been since Italy joined the euro.
#7 The youth unemployment rate in Italy has risen to a new all-time record high of 38.7 percent.
#8 Unemployment in the eurozone as a whole has reached a new all-time high of 11.9 percent.
#9 Italy's economy is starting to shrink at a frightening pace...
Data from Italy's national statistics institute ISTAT showed that the country's economy shrank by 0.9pc in the fourth quarter of last year and gross domestic product was down a revised 2.8pc year-on-year.
#10 The Greek economy is contracting even faster than the Italian economy is...
Greece also sank further into recession during the fourth quarter of 2012, with figures on Monday showing the economy contracted by 5.7pc year-on-year.
#11 Overall, the Greek economy has contracted by more than 20 percent since 2008.
#12 Manufacturing activity is declining just about everywhere in Europe except for Germany...
Research group Markit said its index of activity in UK manufacturing – where 50 is the cut off between growth and decline – sank from 50.5 in January to 47.9 in February. It left Britain on the brink of a third recession in five years after the economy shrank by 0.3 per cent in the final quarter of 2012.
Chris Williamson, chief economist at Markit, said: ‘This represents a major setback to hopes that the UK economy can return to growth in the first quarter and avoid a triple-dip recession.’
The eurozone manufacturing index also read 47.9. Germany scored 50.3 but Spain hit 46.8, Italy 45.8 and France 43.9.
#13 The percentage of bad loans in Italian banks has risen to12.2 percent.  Back in 2007, that number was sitting at just 4.5 percent.
#14 Bank deposits experienced significant declines all over Europe during the month of January.
#15 Private bond default rates are soaring all over southern Europe...
S&P said the default rate for Italian non-investment grade bonds jumped to 9.5pc last year from 5.7pc in 2012 as local banks shut off funding. It was even worse in Spain, doubling to 14.3pc.
The default rate in France rocketed from 0.8pc to 8.7pc, the latest in a blizzard of bad news from the country as the delayed effects of tax rises, fiscal tightening, and the strong euro do their worst.
#16 Lars Feld, a key economic adviser to German Chancellor Angela Merkel, recently said the following...
"The sustainability of Italian public finances is in jeopardy. The euro crisis will therefore return shortly with a vengeance."
#17 Things have gotten so bad in Greece that the Greek government plans to sell off 28 state-owned buildings - including the main police headquarters in Athens.
One of the few politicians in Europe that actually understands what is happening in Europe is Nigel Farage.  A video of one of his recent rants is posted below.  Farage believes that "the Eurozone has been a complete economic disaster" and that the worst is yet to come...
Most people believe that the eurozone has been "saved", but that is not even close to the truth.
In fact, it becomes more likely that we will see the eurozone break up with each passing day.
So who would leave first?
Well, recently there have been rumblings among some German politicians that Greece should be the first to leave.  The following is from a recent Reuters article...
Greece remains the biggest risk for the euro zone despite a calming of its economic and political crisis and may still have to leave the common currency, a senior conservative ally of German Chancellor Angela Merkel said.
But there is also a chance that Germany could eventually be the first nation that decides to leave the euro.  In fact, a new political party is forming in Germany that is committed to getting Germany out of the euro.  The following is a brief excerpt from a recent article by Ambrose Evans-Pritchard...
A new party led by economists, jurists, and Christian Democrat rebels will kick off this week, calling for the break-up of monetary union before it can do any more damage.
"An end to this euro," is the first line on the webpage of Alternative für Deutschland (AfD). "The introduction of the euro has proved to be a fatal mistake, that threatens the welfare of us all. The old parties are used up. They stubbornly refuse to admit their mistakes."
They propose German withdrawl from EMU and return to the D-Mark, or a breakaway currency with the Dutch, Austrians, Finns, and like-minded nations. The French are not among them. The borders run along the ancient line of cleavage dividing Latins from Germanic tribes.
However this all plays out, the reality is that things are about to get much more interesting in Europe.
No debt bubble lasts forever.  The Europeans are finding that out right now, and the U.S. won't be too far behind.
But for the moment, most Americans assume that everything is going to be okay because the Dow keeps setting new all-time record highs.
Well, enjoy this little bubble of debt-fueled false prosperity while you can, because it won't last for long.
A massive wake up call is coming, and it will be exceedingly painful for those that are not ready for it.
Greek Economic Riot - Photo by Ggia
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our early Friday morning currency crosses;  (8 am)

Friday morning we  see huge euro strength  against the dollar   from the close on Thursday, trading above  the key 1.30 mark at 1.3070. The yen this the morning  is a touch weaker  against  the dollar,   at 96.004 yen to the dollar.  This will eventually cause problems as Japanese citizens bail out of their bond/yen holdings because of inflation.    The pound, this morning is much stronger against the USA dollar climbing above  the 1.50 column at  1.5158. The Canadian dollar is stronger  against the dollar at 1.0197.   We have a  risk is off  situation  this morning with the major European bourses in the red  Gold and silver are higher  in the early morning, with gold trading at $1593.00 (up $2.40) and silver is $28.90 up 13 cents in early morning European trading.

The USA index is down 27 cents at 82.26.

Euro/USA    1.3070  up 0058
USA/yen  96.004  up .028
GBP/USA     1.5158 up .0070
USA/Can      1.0197 down .0023


And now your closing Spanish 10 year bond yield:

a very big rise of .06 in yield: 



4.920.06 1.24%
As of 03/15/2013.

 yesterday's yield



4.860.09 1.97%
As of 12:59:56 ET on 03/14/2013.

And now our Italian 10 year bond yield:  (a drop of .05%)

Italy Govt Bonds 10 Year Gross Yield


4.600.05 1.03%
As of 12:59:38 ET on 03/15/2013.

Your 5:00 pm closing Friday currency crosses:

The Euro remained constant on Friday afternoon at 1.3069. The yen strengthened considerably this afternoon  to finish at 95.28 . The pound sold off this afternoon finishing at 1.5103.  The Canadian dollar strengthened a little more against the dollar closing at 1.0190.

The USA index plummeted from the morning session with the final index number down 37 cents to 82.16. 

Euro/USA    1.3069 up  .0056
USA/Yen  95.28 down .66
GBP/USA     1.5103  up  .0150
USA/Can      1.0190  down  0030


Your closing figures from Europe and the USA:

red ink

i) England/FTSE down 39.71  or 0.61%

ii) Paris/CAC down 27.55 or 0.71% 

iii) German DAX:  down 15.52 or .19%

iv) Spanish ibex down 38.8 points  or  .45%

v) Italian bourse (MIB) down  69.90  points or .43%

and the Dow down 25.03 (.17%)


And now for some USA stories:

Friday, JPMorgan was put to task on their huge "whale losses" last year. The key important phrase to us is the fact that in this case, JPMorgan all along stated that they  were hedging. The evidence from emails and tapes suggests otherwise and thus they violated the law (the Volcker rule where a bank is not allowed to trade with depositors money unless they were hedging).Why is this important?  JPMorgan have always stated to our CFTC regulators that they are hedging gold and silver and that they are not really short.  If they lied in the "whale investment scheme" they lied in the supposed hedging of gold and silver.

Bloomberg reports on today's events with respect to JPMorgan;

(courtesy Bloomberg/Dawn Kopecki)

JPMorgan Report Piles Pressure on Dimon in Too-Big Debate

Levin, McCain on Senate Report on JPMorgan Losses

JPMorgan Chase & Co. (JPM)’s efforts to hide trading losses, outlined in a Senate report yesterday, probably will ignite debate over whether the largest U.S. bank is too big to manage and ratchet up pressure on Chief Executive Officer Jamie Dimon to surrender his role as chairman.
Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet, according to a 301-page report by the Senate Permanent Subcommittee on Investigations. The bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Managers manipulated risk models and pressured traders to overvalue their positions in an effort to hide growing losses.
“Too big to fail has been put back on the table -- not providing risk data, misleading shareholders -- this suggests that breaking up the banks is a viable idea,” said Mark T. Williams, a former Federal Reserve bank examiner who teaches risk management at Boston University. “This big trading loss reinforces the need for independence. It’s kind of hard to argue at this point that JPM would’ve been worse off if they had a separate chairman.”

Proprietary Trading

JPMorgan fell 2.8 percent to $49.57 at 9:48 a.m. in New York. The company has advanced 13 percent since Dec. 31.
After nine months of investigation, the panel concluded that JPMorgan had “a trading operation that piled on risk, ignored limits on risk taking, hid losses, dodged oversight and misinformed the public,” Chairman Carl Levin, a Michigan Democrat, told reporters yesterday. His team combed through 90,000 documents and interviewed dozens of current and former executives.
Former Chief Investment Officer Ina Drew, 56, among Wall Street’s most powerful women until she resigned in May four days after the bank disclosed the initial trading losses, will testify today at Levin’s hearing in her first public appearance since leaving the New York-based bank.
“Since my departure, I have learned of the deceptive conduct by members of the London team, and I was, and remain, deeply disappointed and saddened to learn of such conduct and the extent to which the London team let me, and the company, down,” she said in prepared remarks.
U.S. lawmakers have pushed banks to halt so-called proprietary trading, and regulators are weighing tightening exemptions for hedging. A panel of British lawmakers today urged regulators to “bear down” on prop trading and renew the case for an outright ban within three years.

Mistakes Acknowledged

JPMorgan, regarded on Wall Street as one of the best- managed banks in the world, lost more than $6.2 billion over nine months last year in a derivatives bet on companies’ creditworthiness.
The bank has “repeatedly acknowledged mistakes” in handling the loss, Mark Kornblau, a spokesman for the bank, said in an e-mail.
“Our senior management acted in good faith and never had any intent to mislead anyone,” Kornblau said. The bank cooperated with the investigation and has “already identified many of the issues cited in the report,” he said. “We have taken significant steps to remediate these issues and to learn from them.”
While JPMorgan won approval yesterday to raise its dividend27 percent to 38 cents a share and buy back $6 billion in shares, as part of a review of top U.S. banks, the Fed ordered the company to address weaknesses in its capital plan and resubmit a proposal by the end of the third quarter.

‘More Heat’

The derivative bets “caused regulators to rethink capital needs” for banks with large trading operations, said Charles Peabody, an analyst with Portales Partners LLC in New York. “Much more broadly, are we going to get more heat on the too- big-to fail, too-big-to jail, too-big-to-manage theme?”
Bloomberg News first reported on April 5 that U.K. trader Bruno Iksil, known as the London Whale, had built an illiquid book of derivatives in the chief investment office so large that it was distorting credit indexes.
The Senate report cited Bloomberg stories published last year disclosing that Dimon, 57, had transformed the CIO in the past five years from a conservative investment operation into a much larger, high-risk trading profit center, and that he exempted the office from rigorous scrutiny.
The report and its recommendations, issued jointly by the committee’s Democrats and Republicans, may increase pressure on regulators to tighten exemptions in the draft Volcker rule, which would restrict the kinds of trades permitted by banks holding deposits insured by taxpayers. Banks have lobbied against the Volcker rule, arguing that it will restrict market- making and other standard practices.

‘Shameful Demonstration’

“We’re going to continue to work very hard for a final rule that does not allow the kind of manipulation, the kind of concoctions that were created here by the bank to be accepted in the name of hedging,” Levin said.
John McCain of Arizona, the ranking Republican on the subcommittee, said the report offers a “shameful demonstration” of what goes on at federally insured banks and said JPMorgan and other institutions are not “too big to fail” or “too big to jail.”
JPMorgan’s credit portfolio more than tripled from a net notional size of $51 billion in late 2011 to $157 billion by the time trading was shut down in late March of last year, the report says. Iksil acquired more than $80 billion, or about 50 percent, of a thinly traded credit index, which made it difficult to find buyers, according to the subcommittee.

‘No Hope’

“There’s nothing that can be done, absolutely nothing that can be done. There is no hope,” Iksil said, according to a transcript of a March 16 call with junior trader Julien Grout. “The book continues to grow more and more monstrous.”
As losses ballooned, Iksil faced increasing pressure from manager Javier Martin-Artajo to report a higher value of his portfolio by marking it aggressively when compared with market prices, the report said.
“I can’t keep this going, we do a one-off at the end of the month to remain calm,” Iksil told Grout in discussing a price adjustment that the report said was apparently requested by Martin-Artajo.
The change would have valued the portfolio $400 million above market prices, the report said. “I don’t know where he wants to stop, but it’s getting idiotic,” Iksil said.

Model Changes

Iksil’s book breached all five of the CIO’s internal risk measures, and with increasing frequency from January through April, totaling more than 330 violations, the report said. Instead of investigating the cause or reducing its danger, traders, risk managers and executives criticized the metrics as inaccurate and “pushed for model changes that would portray credit derivative trading activities as less risky,” the report said.
On Jan. 30, 2012, the bank began using a new formula for so-called value at risk that cut Iksil’s estimated possible losses by about half. He had breached the limit under the prior model.
“The new VaR model not only ended the SCP’s breach, but also freed the CIO traders to add tens of billions of dollars in new credit derivatives to the SCP which, despite the supposedly lowered risk, led to additional massive losses,” the report said, referring to the synthetic credit portfolio. That model was later scrapped.

‘Too Late’

That wasn’t the only risk measure executives ignored. An internal report in February 2012 projected that Iksil’s portfolio could incur a yearly loss of $6.3 billion, an analysis that the CIO’s chief market risk officer at the time, Pete Weiland, dismissed as “garbage.” Drew also doubted the accuracy of the report, the investigation found. By the time she believed it, “it was too late,” the report said.
JPMorgan misled the public by hiding losses, mismarking trades, withholding information from the Office of the Comptroller of the Currency and “lying to investigators by saying that JPMorgan was fully transparent to regulators regarding the mounting losses when it was not,” McCain told reporters at a press briefing.
The CIO group e-mailed a presentation to Dimon and other executives on April 11 that showed the credit bets were no longer working to protect against losses, the Senate investigators said. It included a chart that showed the portfolio would lose money in a financial crisis.
JPMorgan executives made no mention of the presentation on an April 13 earnings call or that Iksil had already lost more than $1 billion. Dimon and then Chief Financial Officer Douglas Braunstein both knew some of his positions would take weeks or months to exit, the report said.

Untrue Statements

Dimon that day dismissed early press accounts of possible losses in Iksil’s book as a “tempest in a teapot” while Braunstein told investors the company was “very comfortable” with the positions.
“None of those statements made on April 13 to the public, to investors, to analysts were true,” Levin said. “The bank also neglected to disclose on that day that the portfolio had massive positions that were hard to exit, that they were violating in massive numbers key risk limits.”
Dimon “clearly can’t be both chairman and CEO,” said Josh Rosner, an analyst with independent research firm Graham Fisher & Co. in New York. Bank of America Corp., the second-largest U.S. bank, splits the roles of chairman and CEO. Lloyd Blankfein holds both posts at Goldman Sachs Group Inc.

‘Open Kimono’

“I don’t see how it’s feasibly possible for the executive to be expected to effectively oversee himself at the board level” at JPMorgan, Rosner said.
JPMorgan has an “open kimono” with regulators, Dimon told House lawmakers in June 2012. “We don’t hide reports from them,” he said at the time.
The Office of the Comptroller of the Currency noticed that JPMorgan stopped sending the investment bank’s daily profit-and- loss report, in late January or early February of last year, according to the panel. Dimon told executives to stop sending the data “because he believed it was too much information to provide to the OCC,” the report said, citing an interview with the OCC’s head JPMorgan examiner, Scott Waterhouse.
The bank also said there was a data breach that prompted the company to limit the disclosures. When Dimon found out that Braunstein agreed to resume the reports, the CEO “reportedly raised his voice in anger” the subcommittee said.

‘Stupid’ Examiners

JPMorgan frequently pushed back on the OCC, according to the report. Waterhouse “recalled one instance in which bank executives even yelled at OCC examiners and called them ‘stupid,’” according to the report.
While JPMorgan has a reputation for best-in-class risk management, “the Whale trades exposed a bank culture in which risk limit breaches were routinely disregarded, risk metrics were frequently criticized or downplayed, and risk evaluation models were targeted by bank personnel seeking to produce artificially lower capital requirements,” according to the report.
JPMorgan resisted OCC oversight as far back as 2010, when Drew spent 45 minutes “sternly” discussing with an examiner the regulator’s recommendation that her office needed to manage risk better and document changes in the portfolio, the report said.
Drew said the OCC was trying to “destroy” JPMorgan’s business and that investment decisions were made with Dimon’s full understanding, according to the regulator.
Drew was seeking to “invoke Dimon’s authority and reputation in order to avoid implementing formal documentation requirements,” the report said, citing Waterhouse.

‘Voodoo Magic’

Senate investigators said they found little evidence showing what the bets would have protected against. Dimon told senators last year that the wagers were intended to cushion losses on other holdings in the event of a credit crisis.
Drew said the credit derivatives were intended to hedge JPMorgan’s entire balance sheet, while others at the bank said they protected against losses on investments held by the CIO, according to the report.
Patrick Hagan, at one point the CIO’s senior quantitative analyst, told investigators that he was never asked to analyze the bank’s other assets, which would have been necessary to use the bets as a hedge, according to the report.
The credit bets were called a “make believe voodoo magic ‘composite hedge’” by an examiner at the OCC, according to the report.

Questions Raised

Statements and regulatory filings by the bank “raise questions about the timeliness, completeness and accuracy of information” given to investors, the committee said in a section on securities laws and their requirements about disclosing information. The Securities and Exchange Commission has been conducting its own investigation of the bank’s losses.
The evidence suggests the bank “initially mischaracterized or omitted mention” of the portfolio’s problems partly because it “likely understood the market would move against it if even more of those facts were known,” the report says.
Dimon and Drew were among bank managers who spoke with the panel’s investigators. Several ex-employees declined to be interviewed, including Iksil and Achilles Macris, who was chief investment officer of Europe, Middle East and Africa. The panel said it couldn’t require them to cooperate because they lived outside the U.S.
The lender awarded Macris, the trader behind the expansion into credit trading at the office, $31.8 million in the two years before the firm racked up the losses, more than his boss, Drew, and among the most at the bank.

Pay Clawbacks

Macris’s total compensation was $14.5 million for 2011 and about $17.3 million for 2010, according to a presentation in the report. Drew, the former chief investment officer who lost her job because of the bad trades, got $29 million for those two years.
“They were compensated at levels that were at the top range of, or better than, the best investment-bank employees,” the committee wrote.
Iksil, Macris and Martin-Artajo were all forced out of their jobs. The bank told the panel it clawed back the maximum amount permitted under its employment policies with them, or about two years of compensation. The bank canceled outstanding incentive compensation and obtained repayment of previous awards. Drew forfeited about two years’ pay.
Dimon’s pay for 2012 was cut 50 percent by the board of directors after an internal review found him partly responsible for the botched trades on credit derivatives.

Senate Testimony

Braunstein, who stepped down in January as CFO and is still at the bank, will join Drew before the panel today. Ashley Bacon, JPMorgan’s acting chief risk officer, and Michael Cavanagh, who led the internal review of the losses and is now co-CEO for the corporate and investment bank, also are scheduled to testify.
The report showed that on April 5, in responding to early press inquiries about Iksil’s trades, Joe Evangelisti, JPMorgan’s top spokesman, sent Dimon and other executives a list of talking points he wanted to make.
A revised list that took into account their feedback changed the statement, “we cooperate closely with our regulators, who are fully aware of our hedging activities” by removing the word “fully,” the report said.
To contact the reporters on this story: Dawn Kopecki in New York at; Hugh Son in New York at; Clea Benson in Washington


The New York empire index falls last month:

(courtesy Dow Jones newswires)

DJ N.Y. Fed Manufacturing Index Slips to 9.24 in MarchFri Mar 15 08:30:09 2013 EDT
New York manufacturing activity continues to improve "modestly," according to the Federal Reserve Bank of New York's Empire State Manufacturing Survey released Friday.
The Empire State's business conditions index fell slightly to 9.24 in March from 10.04 in February, which had been the first positive reading since July 2012. Some of the second-half weakness in 2012 reflected damage and business closings after Hurricane Sandy swept through the region. A reading above 0 indicates expansion.
Economists surveyed by Dow Jones Newswires had expected the latest index to be little changed at 10.0.
The New York Fed survey is the first factory report released by a regional Fed bank for March. Economists use the surveys as guideposts to forecast the health of the national industrial sector as captured in the monthly manufacturing report compiled by the Institute for Supply Management.
The Empire State subindexes almost all slowed but mainly remained expansionary.
The new orders index fell to 8.18 in March from 13.31 last month. The shipments index declined to 7.76 from 13.08.
Labor conditions were "sluggush," said the report. The employment index dropped to 3.23 in March from 8.08 in February, but the workweek index improved to 0 from -4.04.
New York area businesses face a larger profit squeeze this month. The prices paid index fell slightly to 25.81 from 26.26, but the prices received index dropped sharply to 2.15 from 8.08.
Optimism about the future improved this month.
The general business conditions expectations index for the next six months rose to a nearly year-high of 36.43 after jumping to 33.07 in February. The employee expectations index increased further to 19.35 after doubling to 15.15 in February from 7.53 in January.
In a series of special questions the New York Fed asked about financing capital spending, the majority, 58%, expect to use cash. Another 29% plan to borrow the money, 3% plan to tap into equity while 10% expect to lease the new equipment.


USA consumer prices rise higher than expected at .7% in February:

(courtesy Dow Jones newswires)

DJ U.S. Consumer Prices Rise 0.7% In February On Energy Costs

Fri Mar 15 08:30:23 2013 EDT
WASHINGTON--U.S. consumer prices rose the most in nearly four years in February as gasoline prices surged, temporarily increasing inflation pressures.
The seasonally adjusted index of consumer prices rose 0.7% last month, the biggest increase since June 2009, the Labor Department said Friday. The gasoline index alone surged 9.1%, which accounted for nearly three-fourths of the gain. Overall energy prices climbed 5.4% after declining the previous three months.
The so-called core prices, which don't take into account the volatile food and energy sectors, increased 0.2%.
Economists surveyed by Dow Jones Newswires forecast a 0.6% overall gain and a 0.2% advance for core prices.
The national average retail price of regular gas hit a four-month high of $3.784 a gallon toward the end of February, according to Energy Information Administration data, up almost 15% from the start of the year. However, prices have since eased a little, falling to $3.71 in the week ended Monday, the EIA said.
Food prices rose 0.1% in February as vegetables, fresh fruits, meats and eggs cost more.
Indexes for food, shelter, and medical care costs also increased. Those gains more than offset declines for new vehicles, clothing and airline fares.
Shelter costs, which account for nearly a third of the overall index, climbed 0.2%. Electricity rates were up 0.3% last month, while apparel prices fell 0.1%.
Higher prices could be a concern for consumers, many of whom are facing smaller paychecks after a tax cut expired earlier this year.
Low inflation gives the Federal Reserve more leeway to pursue economic stimulus. Following their January meeting, central bank officials continued easy money policies in hopes of stimulating faster job growth. Fed officials project overall inflation to stay between 1.3% and 2.0% in 2013. The central bank's policy committee will meet again March 19-20.
Year-over-year, consumer prices were up 2.0% and core prices rose 2.0%, matching the Fed's target for annual inflation.
A separate Labor report Friday showed Americans' real average weekly earnings fell 0.2% because the average workweek was longer but real hourly earnings declined.


Michigan Sentiment surprisingly falls to 71.8 from 77.6:

(courtesy Dow Jones newswires)

DJ Early-March Reuters/Michigan Sentiment Falls to 71.8 Vs 77.6 in End-February
Fri Mar 15 10:13:44 2013 EDT

U.S. consumers took on a darker view of economic conditions early this month, according to data released Friday.
The Thomson-Reuters/University of Michigan consumer sentiment index's preliminary-March reading declined to 71.8 from the final February reading of 77.6, according to an economist who has seen the report.
Economists surveyed by Dow Jones Newswires had expected the early-March index to increase to 78.0.
The current conditions index edged down to 87.5 from the final-February level of 89.0, while the expectations index dropped sharply to 61.7 from 70.2.
The sentiment index is the lowest since December 2011. The expectations index is the lowest since November 2011.
Consumers are being pushed and pulled by various economic factors. On the positive side, job growth picked up strongly in February, stock and home prices are rising, and gasoline prices have come down from the February highs.
But consumers seem to be focusing on the negatives: higher taxes are cutting into take-home pay and the dysfunction in Washington has triggered federal spending cuts that eventually will reduced government jobs and economic activity.
Despite the swings in gas prices consumers see little change in inflation. The one-year inflation expectations reading for early March remained at 3.3% in late February. The inflation expectations covering the next five to 10 years slipped to 2.9% from 3.0%.


-Well that about does it for today.
I will see you Monday night.

Have a safe and enjoyable weekend


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