EurAnalysis

http://www.bloomberg.com/news/2012-0...t-indexes.html

A JPMorgan Chase & Co. (JPM) trader of derivatives linked to the financial health of corporations has amassed positions so large that he’s driving price moves in the $10 trillion market, traders outside the firm said.

The trader is London-based Bruno Iksil, according to five counterparts at hedge funds and rival banks who requested anonymity because they’re not authorized to discuss the transactions. He specializes in credit-derivative indexes, a market that during the past decade has overtaken corporate bonds to become the biggest forum for investors betting on the likelihood of company defaults.

Enlarge image http://www.bloomberg.com/image/iKM2qbeC1org.jpg JPMorgan Tightens Grip on Bonds as Sales Surge






Investors complain that Iksil’s trades may be distorting prices, affecting bondholders who use the instruments to hedge hundreds of billions of dollars of fixed-income holdings. Analysts and economists also use the indexes to help gauge perceptions of risk in credit markets.

Though Iksil reveals little to other traders about his own positions, they say they’ve taken the opposite side of transactions and that his orders are the biggest they’ve encountered. Two hedge-fund traders said they have seen unusually large price swings when they were told by dealers that Iksil was in the market. At least some traders refer to Iksil as “the London whale,” according to one person in the business.

Joe Evangelisti, a spokesman for New York-based JPMorgan, declined to comment on Iksil’s specific transactions. Iksil didn’t respond to phone messages and e-mails seeking comment.

Close Supervision

Some traders have added positions in a bet that Iksil eventually will liquidate some holdings, moving prices in their favor, the people said.
Iksil, unlike JPMorgan traders who buy and sell securities on behalf of customers, works in the chief investment office. The unit is affiliated with the bank’s treasury, helping to control market risks and investing excess funds, according to the lender’s annual report.

“The chief investment office is responsible for managing and hedging the firm’s foreign-exchange, interest-rate and other structural risks,” Evangelisti said. It’s “focused on managing the long-term structural assets and liabilities of the firm and is not focused on short-term profits.”
Iksil probably traded under close supervision at JPMorgan, said Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia.

“The issue is how much capital they’re putting at risk,” said Miller, a former examiner for the Federal Reserve Bank of Philadelphia.

Volcker Rule

A U.S. curb on proprietary trading at banks, meant to reduce the odds they’ll make risky investments with their own capital, is supposed to take effect in July. Regulators are still determining how the so-called Volcker rule will make exceptions for instances where firms are hedging to curtail risk in their lending and trading businesses.

Wall Street banks including JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley have submitted comment letters and met with regulators to discuss their complaints about the rule.

“Several agencies claiming jurisdiction over the Volcker rule have proposed regulations of mind-numbing complexity,” JPMorgan Chief Executive Officer Jamie Dimon said in his annual letter to shareholders released this week. “Even senior regulators now recognize that the current proposed rules are unworkable and will be impossible to implement.”
Combined Revenue

JPMorgan had $4.14 billion of combined revenue last year from the chief investment office, treasury and private-equity investments, according to the annual report. The treasury and chief investment office held a combined $355.6 billion of investment securities as of December 2011, up 14 percent from a year earlier, according to a year-end earnings statement.

Chief Investment Officer Ina Drew, who runs the unit, was among JPMorgan’s highest-paid executives in 2011, earning $14 million, a 6.8 percent pay cut from 2010, the bank said in a regulatory filing this week. Drew referred a request for comment to Evangelisti.

Iksil has earned about $100 million a year for the chief investment office in recent years, the Wall Street Journal said in an article following Bloomberg News’s initial report, citing people familiar with the matter.

Trader’s Position

The French-born trader commutes to London each week from Paris and works from home most Fridays, the Journal article said, citing a person who worked with him.

The trader may have built a $100 billion position in contracts on Series 9 (IBOXUG09) of the Markit CDX North America Investment Grade Index, according to the people, who said they based their estimates on the trades and price movements they witnessed as well as their understanding of the size and structure of the markets.

The positions, by the bank’s calculations, amount to tens of billions of dollars and were built with the knowledge of Iksil’s superiors, a person familiar with the firm’s view said.

To contact the reporters on this story: Stephanie Ruhle in New York at [email protected]; Bradley Keoun in New York at [email protected]; Mary Childs in New York at [email protected]

Kno's Comments: Does Anyone see a pattern here ? MF Global still is missing One Billion Six Hundred Million In Client's Funds.

Everyday more and more secrets are being revealed. The public is getting more angry everyday. The cat has gotten out of the bag and H E L L will break out once more people realize what these CRIMINAL Central Banks and their Financial Buddies have done. Corrizine formerly the Governor of New Jersey and then the HEAD GAMBLER using OPM (Other Peoples Money) of MF Global will soon be the NEW BAD GUY to Join Madoff in Jail for a long long time.

Feedback welcome...

http://images.mises.org/6000/MathButterfly.jpg
http://mises.org/daily/6000/Wall-Street-Math

There's plenty of blame for the financial crisis being spread around. Those on the left say Wall Street wasn't regulated enough, while those on the right claim government mandates required lenders to make bad loans. The argument is made that the Federal Reserve was too loose, while the other side says Bernanke wasn't loose enough. Some blame greed. Others blame Wall Street's investment products. And then there's mathematics.

Wall Street has become a numbers game played at high speed by powerful computers trading complex derivatives utilizing even more complex mathematical modeling. Writing for the Huffington Post, Théo Le Bret asks the reader to

Take the Black-Scholes equation, used to estimate the value of a derivative: it is actually no more than a partial differential equation of the financial derivative's value, as a function of four variables, including time and "volatility" of the underlying asset (the derivative being a 'bet' on the future value of the asset). Differential equations are well-known to physicists, since such fundamental properties of nature as the wave equation or Schrodinger's equation for quantum mechanics are given in the form of differential equations, and in physics their solutions seem to be very reliable: so why is this not always the case in finance?

Mr. Le Bret quotes Albert Einstein for his answer: "as far as the laws of mathematics refer to reality, they are not certain; and as far as they are certain, they do not refer to reality."

Murray Rothbard put it another way:

In physics, the facts of nature are given to us. They may be broken down into their simple elements in the laboratory and their movements observed. On the other hand, we do not know the laws explaining the movements of physical particles; they are unmotivated.

Rothbard goes on to make the point that human action is motivated and thus economics is built on the basis of axioms. We can then deduce laws from these axioms, but, as Rothbard explains, "there are no simple elements of 'facts' in human action; the events of history are complex phenomena, which cannot 'test' anything."

Nobel Prize winners have played a big hand in the creation of derivatives. Milton Friedman's paper on the need for futures markets in currencies paved the way for that market in 1971. But as Moynihan points out, it was Nixon's shutting of the gold window that created the need to mitigate currency and inflation risk.

Nobel Laureate Myron Scholes was cocreator of the Black-Scholes-Merton option-pricing model. He and cowinner Robert Merton used their model to blow-up Long Term Capital Management.

But it was little-known economist David X. Li's paper in the Journal of Fixed Income that would provide the intellectual foundation for Wall Street's flurry into mortgages. "On Default Correlation: A Copula Function Approach" became "the academic study used to support Wall Street's turning subprime mortgage pools into AAA-rated securities," writes Moynihan. "By the time it was over, the Street would create 64,000 AAA-rated securities, even though only 12 companies in the world had that rating."

Robert Stowe England, in his book Black Box Casino: How Wall Street's Risky Shadow Banking Crashed Global Finance, says Li's model "relied on the price history of credit default swaps against a given asset to determine the degree of correlation rather than rely on historical loan performance data."

"People got very excited about the Gaussian copula because of its mathematical elegance," says Nassim Nicholas Taleb, "but the thing never worked." Taleb, the author of The Black Swan, claims any attempt to measure correlation based on past history to be "charlatanism."

Subprime mortgages were bundled to become collateralized mortgage obligations (CMOs), which are a form of collateralized debt obligation(CDO). CDOs weren't new; the first rated CDO was assembled by Michael Milken in 1987. But instead of a mixture of investment-grade and junk corporate bonds, in the housing bubble, CDOs were rated AAA based upon Li's work.

Mr. England wryly points out, "A cynic might say that the CDO was invented to create a place to dump lower credit quality or junk bonds and hide them among better credits."

England quotes Michael Lewis, author of The Big Short: "The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America." For Wall Street it was a machine that "turned lead into gold."

Wall Street's CDO mania served to pump up investment-bank leverage. England explains that if level-3 securities were included (level-3 assets, which include CDOs, cannot be valued by using observable measures, such as market prices and models) then Bear Stearns sported leverage of 262 to 1 just before the crash. Lehman was close behind at 225, Morgan Stanley at 222, Citigroup at 212, and Goldman Sachs was levered at 200 to 1.

Leverage like that requires either perfection or eventual government bailout for survival.

The CDO market created the need for a way to bet against the CDOs and the credit-default-swap (CDS) market was born. Bundling the CDS together created synthetic CDOs. "With synthetic CDOs, Wall Street crossed over to The Matrix," writes England, "a world where reality is simulated by computers."

It's England's view that the CDO market "was the casino where the bets were placed. Wall Street became bigger and chancier than Las Vegas and Atlantic City combined — and more." According to Richard Zabel, the total notional value of the entire CDS market was $45 trillion by the end of 2007, at the same time the bond and structured vehicle markets totaled only $25 trillion.

The panic of 2008 was the inevitable collapse of an increasingly rickety fiat-money and banking system — a system where the central bank attempts to direct and manipulate the nation's investment and production with an eye to maximize employment.

In a speech delivered to the Federal Reserve Bank of New York, Jim Grant told the central bankers that interest rates should convey information. "But the only information conveyed in a manipulated yield curve is what the Fed wants.
"
Wall Street's math wizards convinced the Masters of the Universe that their numbers don't lie, believing they could model the Federal Reserve's house-of-mirrors market. Maybe the numbers don't lie, but the assumptions do.

Advising about mathematical economics, Rothbard wrote, "ignore the fancy welter of equations and look for the assumptions underneath. Invariably they are few in number, simple, and wrong." The same could be said for Dr. Li's model and Scholes's model before him.

Until the era of unstable fiat-money regimes ends, the search for scapegoats will continue — because the crashes will never end.

Kno's Comments: You now know the TRUTH !!!

It gets worse as you will see by this article going back to 2008.

http://www.guardian.co.uk/business/2...street.banking

The woman who built financial 'weapon of mass destruction'

 

1. David Teather
2. The Guardian, Saturday 20 September 2008

This article was amended on Monday September 29 2008
In the article below we said that Blythe Masters of JP Morgan developed the credit derivatives which were at the heart of the current financial crisis. We apologise for unfairly failing to give her an adequate opportunity to respond and for making inaccurate personal references about her. The guide to which we referred was a general guide to credit derivatives and not just about those she created; she was 34, rather than 35, when she became chief financial officer of JP Morgan; and she was not working in hospital before having her baby, but viewing financial data to pass the time.


If Warren Buffett is to be believed in his verdict that derivatives are "financial weapons of mass destruction" then Blythe Masters is one of the destroyers of worlds.

British-born Masters is one of the most powerful women on Wall Street and is widely recognised as one of an elite group dubbed the "JP Morgan mafia" that fostered the creation of the complex credit derivatives at the heart of the current crisis ripping through Wall Street. Many of the highly qualified mathematicians and academics who worked on the credit derivatives market in the early days have gone on to run hedge funds and into high-powered jobs at other investment banks, but most of them started out at JP Morgan.

Masters sees things slightly differently. In a brief email exchange with the Guardian, she said: "I do believe CDSs [credit default swaps] have been miscast, much as poor workmen tend to blame their tools."

In 1997, she and a team developed many of the credit derivatives that were intended to remove risk from companies' balance sheets. The idea was to separate the default risk on loans from the loans themselves.

The risk would be moved into an off-balance sheet vehicle. The product was called Bistro, otherwise known as broad index secured trust offering.

In a guide to understanding the instruments she had created, Masters sung their praises: "In bypassing barriers between different classes, maturities, rating categories, debt seniority levels and so on, credit derivatives are creating enormous opportunities to exploit and profit from associated discontinuities in the pricing of credit risk."

Masters was raised in south-east England, where she attended the exclusive King's public school in Canterbury on a scholarship. She got a economics degree from Cambridge, and from the beginning had been attracted to the esoteric world of derivatives. In her spare time, she is a keen horsewoman.

She joined the JP Morgan commodities desk and worked her way up the organisation. At the age of 35 she was appointed chief financial officer of the investment bank, but for the past two years has been head of currencies and commodities. Her focus on the job reached almost comic levels when she famously took her wireless device into the hospital to get quotes on commodity derivatives as she was having a baby.

The banks argued that by trading credit derivatives of the kind pioneered by Masters, they had spread their risk elsewhere and therefore needed lower reserves to protect against loan defaults. Regulators rolled over and the banks loaned ever more. It was a huge success and the market for credit derivatives grew rapidly.

But the instruments might not have much longer. One of the fall-outs from the current crisis is the call that banks should carry their own risk.


Kno's Comments:

Now on April 5, 2012 http://www.benzinga.com/media/cnbc/1...lates-precious

Blythe Masters Returns On Behalf Of JP Morgan

On Thursday, Blythe Masters, the head of JP Morgan's commodities business, appeared on CNBC and refuted the allegations of manipulative trading. She also asserted that the firm does not make proprietary directional bets on precious metals prices.

Rather, all of JP Morgan's activity is related to its client business, according to Masters.

Here are some of the highlights of her CNBC interview.

"JPM's commodities business is not about betting on commodity prices but about assisting clients... it's about assisting clients in executing, managing, their risks and ensuring access to capital so they can make the kind of large long-term investments that are needed in the long run to expand the supply of commodities"...

"There's been a tremendous amount of speculation particularly in the blogosphere on this topic. I think the challenge is it represents a misunderstanding as the nature of our business. As i mentioned earlier, our business is a client-driven business where we execute on behalf of clients to achieve their financial and risk management objectives. The challenge is that commentators don't see that. So to give you a specific example, we store significant amount of commodities, for example, silver, on behalf of customers we operate vaults in New York City, Singapore and in London. And often when customers have that metal stored in our facilities, they hedge it on a forward basis through JPMorgan who in turn hedges itself in the commodity markets. If you see only the hedges and our activity in the futures market, but you aren't aware of the underlying client position that we're hedging, that would suggest inaccurately that we're running a large directional position.

In fact that's not the case at all."

"We have offsetting positions. We have no stake in whether prices rise or decline. Rather we're running a flat or relatively flat matched book."

"What is commonly out there is that JPMorgan is manipulating the metals market. It's not part of our business model. it would be wrong and we don't do it."

Financial blog ZeroHedge, which has been one of the loudest and most aggressive critics of JP Morgan's trading activity in precious metals, isn't buying her explanation.

Simply put, the numbers don't add up. In 2011, JP Morgan ranked first on Wall Street in commodities revenue. In fact, its trading revenues tripled to $2.8 billion. ZeroHedge argues that it is very difficult to comprehend how the group's revenues could have tripled without the firm making proprietary market bets with its own money.

From ZeroHedge: "Taken at face value, it would mean that all else being equal, JPMorgan transacted at least 3 times more in flow in 2011 than in 2010. Yet, everyone knows that trading volumes in 2011 slumped relative to 2010. So no, Blythe, we appreciate your explanation, but we would appreciate the truth even more."


Read more: http://www.benzinga.com/media/cnbc/1...#ixzz1rONJ5pOL

Kno's Comments: JP Morgan Once Again Shows It's Colors And It Is GREEN for them and RED for those Muppets !!!

http://www.prudentbear.com/index.php...w?art_id=10518

How Bernanke May Become von Havenstein

 

1. by Martin Hutchinson
2. March 21, 2011

At the Federal Open Market Committee meeting last week, policy remained unchanged, and the accompanying statement made the extraordinary claim that “measures of underlying inflation continue to be somewhat low, relative to levels that the Committee judges to be consistent, over the longer run, with its dual mandate.” The following day, the March Producer Price Index showed prices rising at 1.6% per month, equivalent to a rate of 21% per annum. Echoes of the German Weimar Republic inflation are getting louder, as do the chances for Ben Bernanke to turn into Reichsbank chairman Rudolf von Havenstein.

Von Havenstein took great pride in his work, bragging repeatedly about the Reichsbank’s success in gearing up physical note production to meet soaring market demand. Rather than practice or urge monetary restraint, he regarded the explosion of physical banknote production as a triumph of German efficiency. Such was the need for speed, in the fall of 1923 when prices were doubling every 3 days that he was forced to resort to airplanes to get the currency to the more distant economic centers. All he lacked was Ben Bernanke’s helicopter!

The conventional wisdom is that the worst the U.S. has to fear from Bernanke’s policies is a repeat of the 1970s. During that period, inflation proved impossible to contain, but it crept up gradually, with year-on-year inflation rising from 3.6% to 12.2% in 1973-74, then dropping back gradually to a low of 5% in December 1976. Even in the peak inflation year of 1980, year-on-year inflation topped out at only 14.6%, little higher than its level six years earlier. In that situation, while Bernanke might let inflation rise fairly rapidly as it had in 1973-74, there would be little chance of it getting out of control and the economic pain of the eventual Volcker-style squeeze would be manageable.

In such a situation, comparisons between Bernanke and von Havenstein would be ludicrous. I’m as fond of Bernanke-bashing as anyone, but if a period of inflation moderately above 10% were the worst we had to look forward to, I would disagree with the Bernankephile argument that his policies had on balance been worthwhile, but I would concede that they had considerable force. Bernanke himself, who grew up in the 1970s, probably restricts his moments of self-doubt to worrying whether the 1970s might return, which would make him look foolish but not catastrophic.

However, that is not the only possibility for the future track of U.S. inflation. It has to be remembered that both monetary and fiscal policies today are far more extreme than they were in the 1970s. Fiscally, the United States has run a deficit of more than 10% of GDP in both the year to September 2009 and the year to September 2011, while the country’s previous largest peacetime deficit was 6.3% of GDP in 1983. This is a bipartisan complaint; an administration that inherited a budget surplus and yet managed to end up running a substantial deficit even at the top of the next boom cannot claim fiscal rectitude.

Nevertheless, whoever is to blame, the result has been a deficit position that looks out of control even on the administration’s optimistic fiscal and economic projections. The actuarial deficit in social security is a genuine problem, made even worse by the dodgy “trust fund” accounting that has allowed the creation of a fictional trust fund whose assets consist of debt not counted in official statistics. The actuarial deficit in Medicare is less serious, because it principally rests on an assumption that medical cost increases will continue to outpace inflation ad infinitum, which won’t happen because it can’t. Nevertheless, the principal fiscal problem of the last few years, as distinct from that projected for the next decade, has been profligate domestic and international discretionary spending, a problem that is being tinkered with at the edges but appears increasingly unlikely to be addressed properly.

Bernanke cannot be blamed for U.S. fiscal follies, any more than von Havenstein could be blamed for the fiscal ineptitude of the Weimar governments of 1919-23. However monetary policy is his clear responsibility. In this context, the most alarming statistic is the monetary base, which has expended from $900 billion to $2.35 trillion in the 30 months since September 2008 and has been expanding at the extraordinary annual rate of 83% since December, as Bernanke’s QEII asset purchases have come into play. In this effort, the Fed’s balance sheet has swollen from $800 billion to $2.6 trillion, with $300 billion of that increase coming in the last four months through QEII purchases of Treasuries.

Bernanke’s problem is that the mix of gigantic deficits, interest rates below the rate of inflation and gigantic central bank purchases of government bonds is precisely that of the Weimar regime. Admittedly the Reichsbank by October 1923 was financing 99.9% of government spending and we haven’t got to that yet. Still the budget deficit represents more than 40% of government spending and during the QEII period the central bank is financing about 70% of the government deficit. That’s pretty close to the early Weimar period of 1919-22, when the Reichsbank was financing about 50% of the government’s expenditure compared to about 25% of expenditure in the United States today.

With both fiscal and monetary policy much more extreme than in the 1970s, there is no reason prices should merely creep up at 1970s rates. While the price indicator figures produced last week appeared fairly benign, with the CPI having risen only 2.1% over the past year, that relatively benign figure includes a significantly more rapid rise, at a 3.8% rate, in the last six months. What’s more, prices at an earlier stage of the production cycle have been rising much more rapidly, with the Producer Price Index rising at 10% in the last six months and import prices rising at 14.5% in the same period.

Keynesians would immediately claim that high unemployment dampens these price rises, and that a sharp rise in inflation is impossible while there is so much labor slack in the economy. However that view is belied by British experience in 1974-75 in which economic activity declined, unemployment rose and inflation rose to 25%. Unemployment is in any case well down on the last two years and the labor market in a state of mild expansion.

If Bernanke persists on his present course, there is thus a significant chance that consumer prices will join producer and import prices on their rapid upward trend, and that by the end of the year we shall be suffering from 10% consumer price inflation. Bernanke and his colleagues will at that stage be in state of deep denial, focusing on “core” consumer price inflation (distorted) or personal consumption expenditure inflation (available only several months after the event.) If by the end of 2011 inflation is running at rate of 10%, even though the year on year figure will not have reached this level, while Bernanke’s current monetary policies and the Obama administration fiscal policies have been little if at all modified, then the outcome is plainly clear: inflation won’t stop at 10%, as it did in the 1970s.

In that case, Bernanke’s chance of joining von Havenstein in the monetary Chamber of Horrors will be pretty high. The gap between interest rates and the inflation rate will be close to 10%; thus a 10% or more increase in interest rates will be needed to start getting inflation under control.

Naturally, any such increase will be anathema to Bernanke; it would represent a repudiation of everything he believed in. He will thus remain relatively inactive while inflation accelerates further. Far from corralling the inflationary monster, the Fed will be reduced to running ineffectually behind it as it galumphs off into the distance. You can expect Bernanke at that stage to start issuing press releases about the Fed’s immense technical achievement in printing and distributing enough notes to satisfy the public’s insatiable demand for money. The transformation of Ben Bernanke to Rudolf von Havenstien will be complete, although the trillion percent inflation figures will have to wait until 2014 or so.

Is this fate avoidable, for Bernanke and the rest of us? Certainly. But it will require the Fed at its next meeting April 27 to reverse policy entirely, to admit that inflation, far from being “somewhat low” is an imminent danger to the U.S. economy, to stop buying Treasuries and to put the Federal Funds rate up to at least 2%, with a view to raising it to 6-7% by the end of the summer. It is thus not impossible. But given Bernanke’s outlook and the present composition of the FOMC, it must be regarded as extremely unlikely.

The Bear’s Lair is a weekly column that is intended to appear each Monday, an appropriately gloomy day of the week. Its rationale is that the proportion of “sell” recommendations put out by Wall Street houses remains far below that of “buy” recommendations. Accordingly, investors have an excess of positive information and very little negative information. The column thus takes the ursine view of life and the market, in the hope that it may be usefully different from what investors see elsewhere.

Martin Hutchinson is the author of “Great Conservatives” (Academica Press, 2005) – details can be found on the website www.greatconservatives.com – and co-author with Professor Kevin Dowd of “Alchemists of Loss” (Wiley – 2010). Both are now available on Amazon.com, “Great Conservatives” only in a Kindle edition, "Alchemists of Loss” in both Kindle and print editions.

I saved your pic under "Funny Money"

No Link From Dollar Collapse - Thanks...

Not many people even realize it but now the US is actually a net exporter of oil for the first time since 1949.

http://www.dollarvigilante.com/stora...=1333771811696

The media propagandists in the US never mention this, of course, as that would take away the middle eastern oil sheiks as the "bad guys". And, it would just make it more obvious what the real cause of the "rise" in the price of gas is... the Federal Reserve.

http://www.dollarvigilante.com/stora...=1333771951610

Gas is still only $0.20 per gallon when the money system isn't under control of a communist fashioned central bank? Whoops.

http://goldscents.blogspot.co.uk/201...ng-of-end.html

I have mentioned before that often a long cycle will be followed by a short cycle. This being the case the current four year cycle should have bottomed in the fall of 2012. That process had begun last summer.

http://1.bp.blogspot.com/-gTwf9Jkq23...year+cycle.png

However, Central Banks around the world, in the futile attempt to avoid a global depression again cranked up the printing presses. The bear market that had begun in May was temporarily aborted. Amazingly I think we are going to see another stretched four year cycle. And this one is going to end just like the last one when the price of oil spiked far enough to collapse the global economy and create a market crash. The next economic downturn won't be a Great Recession, it will be a Great Depression.

http://4.bp.blogspot.com/-4PFkdBZGyY...re+spx+oil.png



At the moment the stock market is in a runaway move very similar to what unfolded out of the summer 2006 yearly cycle low. These runaway moves are characterized by uniform mild corrections all of similar magnitude and duration. For this particular rally the corrective size has been roughly 25-35 points. This could continue for weeks or months, but all runaway moves end in the same fashion, with a crash or semi crash that wipes out months of gains in a matter of days or even minutes.

Generally speaking, once a corrective move has run 20% beyond the normal correction size that is the signal that the move is over. Unfortunately, at that point you are usually already into the 'crash day'. This is why at some point one has to say enough is enough, and stand aside, or you risk getting caught in the crash.



http://3.bp.blogspot.com/-Aa0QCw05Dg...naway+move.png

When this runaway move comes to an end I'm pretty sure it will signal the beginning of the end for this cyclical bull market. That doesn't mean that we won't see a test or even a marginal break to new highs but I think we are clearly in the final phase of this liquidity driven rally that began in March of 2009.

We are now at the mercy of oil and the commodity markets. Bernanke's plan to print our way to prosperity is destined to failure. Ultimately he is just going to spike inflation and collapse the global economy, resulting in a worse downturn than what we saw in 2008/09.

Whether that breaking point is at $120 oil or $160 oil is anyone's guess.

Posted by Toby Connor at 8:43 AM

http://www.thedailysheeple.com/count...t-48000_042012

Greece For Sale On Ebay

Last Bid - $48,000 Euro's - COD Please...

I’m offering my country for sale. What is left of it anyway.

Slightly used, low wages, low pensions, low expectations. Lots of sunshine though, free at the moment.

Many natural resources, minerals etc that are still untouched. Bureaucracy at its best. Great bribe-to-do system, over 20 years of experience.

Obedience at the IMF, bankers and the Troika is guaranteed, no questions asked.

The buyer will get for free 300 politicians, highly trained at the University of Fine Arts of Scandals. And free Greek Bonds with extremely high international market value. For confetti.
I will provide the best possible certificate that you will ever imagine, maybe even a custom one that you’ll ask.

P.s.
No hard feelings.

It looks like GETCO or some crazy BATS algo has been unleashed on the auction. Either that, or Brian Sack has found a calm, quiet, non-extradition venue where he will not be bothered after June when he vacates the halls of Liberty 33, and is hell bent on taking delivery. Since posting the bid has soared to over $48,000.

http://www.zerohedge.com/sites/defau...20update_0.jpg

In what could be one of the better deals encountered on Ebay, one can submit a winning bid for none other than the country of Greece, currently going for the modest price of $1,550 (although with 6 more days left in the auction, there is a small chance Goldman will outbid and use it as LTRO 3 collateral). Of course, since the country is worth much less than the debt (all 7 subordinated classes of it) any new equity buyer would assume, this is a trick auction: our advice – settle for nothing less than getting paid as much as possible for “buying” the country.

http://news-aggregator.oanda.com/

http://fxisite.fxinstructorllc.netdn...urusddaily.jpg

By swibowo

April 7, 2012 8:21 AM GMT

http://img.ibtimes.com/www/data/sources_logos/34.png EURUSD: A Daily Chart Outlook

The EURUSD had a bearish momentum this week, but still unable to break below 1.3000 so far. While short term bias remains bearish, daily/weekly outlook shows a sideways condition, moving between 1.3484 – 1.3000 in the last ten weeks. The bullish momentum after bounced from 1.2625 in January found a good resistance at the EMA 200, keep the major/daily bearish outlook intact. For the upcoming week, 1.3000 is a key support. A clear break and weekly close below 1.3000 could trigger further bearish scenario testing 1.2625. On the upside, immediate resistance is seen around 1.3200 – 1.3240. A clear break back above that area would keep price inside the range area a little bit longer retesting the EMA 200. CCI just cross below -100 level suggests potential bearish view.

http://www.zerohedge.com/news/150-years-us-fiat



http://www.zerohedge.com/sites/defau...fiat%201_0.jpg

Many Americans during and after the Civil War believed the creation of a fiat currency was unconstitutional. The Constitution explicitly stated that only gold and silver could be considered legal tender. In 1871, in the case of Knox v. Lee, the Supreme Court settled the matter by declaring that making United States notes legal tender was indeed constitutional.

By this time, the greenback was at the center of a countrywide debate on monetary policy. When the post-Civil War economic boom ended in the panic and depression of 1873, many people, especially farmers, blamed the Treasury’s policy of contracting the currency -- that is, removing United States notes from circulation in an attempt to go back to the gold standard, which would require that a $1 note could be redeemed for $1 in gold.

As a consequence, there was a call for the expansion of United States note circulation or an inflation of the currency. This belief became joined with a political ideology that opposed big business and banking interests, resulting in the birth of the Greenback Party in 1874.

Opposing the Greenbackers were more conservative interests, sometimes known as "gold bugs,'' who found support in the Republican Party and in elements of the Democratic Party. Gold interests proved the stronger contestant in the debate and in 1878, the total circulation of United States notes was fixed at a little over $346 million and the notes eventually became redeemable in gold (at least until 1933, when this provision was removed).

During the 20th century, United States notes became ever less important in the nation’s money supply, though Congress supported their continued circulation. They were increasingly replaced by currency issued by the Federal Reserve System, which came to look almost identical to the United States note. The Federal Reserve note thus became the new greenback.

In 1966, Congress allowed the Treasury to start removing United States notes from circulation. The last delivery of the notes by the Bureau of Engraving and Printing to the Treasury was made in 1971. In 1994, the Riegle Community Development and Regulatory Improvement Act eliminated the issuance of the notes altogether.
So instead of real money, America has an impostor "which came to look almost identical to the United States note" with the full complicity of everyone in charge, just so that when needed, any and all untenable debt burdens can be inflated away. And while the latter is a topic of a whole different discussion, we present another chart which, unlike the 150th anniversary of fiat, should be something discussed far more broadly... Because in a fiat world superpower status is always relative.
http://www.zerohedge.com/sites/defau...Currency_0.png

http://gonzalolira.blogspot.ca/2012/...year.html#more

http://2.bp.blogspot.com/-QcskuKnHTm...kRAXhTPDHc.jpg

In the LiraSPG Scenario “When The Euro Breaks”, I discussed what would happen to the euro and the eurozone when those countries—unable to continue under their massive debt burdens—began exiting the European monetary union.

One of the assumptions I made was that one of the smaller nations of the eurozone would leave the monetary union first, thereby encouraging one of the bigger nations to follow their example and leave as well. I postulated that the small country would likely be Greece, and that the large country would probably be Spain.

From this exodus, I analyzed what would happen to the euro vis-à-vis gold and the rest of the world’s currencies—namely, that the euro would suffer a staggered loss of value against commodities and other currencies: An initial drop-and-recovery when the smaller nation exited the eurozone, followed by a sustained drop when the big nation exited the monetary union.

The Scenario was written and published on the LiraSPG site in May 2011.


Spain Will Exit The Eurozone First—This Year


Since then, I have changed my mind: I no longer think that a small country will exit the eurozone first, followed by one of the bigger countries.

I now think that Spain will exit the eurozone first—precipitously and without warning—and that the impact on the euro will be much more sudden and dramatic than I had earlier thought.

In this SPG Supplement, I will explain my thinking. First I will discuss the general European situation; then the Greek debacle, and how the European leadership has lost sight of what salvaging Greece was supposed to be about; then the current Spanish situation, how it is unsustainable, and how the new Fajoy government’s only escape—politically and economically—is to default and then exit the eurozone.

Plus Ça Change, Plus C’est La Même Chose

There has nominally been major changes in the European political situation since the Global Financial Crisis of 2008—which in fact have proven to be minor: To wit, the Italian, Spanish, Irish, Portuguese and Greek governments have been replaced by the opposition, and the French government of Nicolas Sarkozy looks like it will fall in this coming May’s elections. Of the replacement governments, the Italian, Greek and Portuguese are dominated by “technocrats”—that is, austerity hawks that will genuflect to Brussels’ and Frankfurt’s desire for the debtor countries to pay every last pfennig back to the bond holders.

Excuse me, did I say “pfennig”? I meant “euro cent”.

I can prove quite easily that the political “change” has been totally cosmetic because the economic prescriptions remain the same: On the one hand, austerity for the smaller countries (Greece, Portugal, Ireland), coupled with surreptitious bank bailouts by the European Central Bank (ECB) via Long Term Refinancing Operations (LTRO).

Keep on doing’ the same thing, you’re gonna get the same results: Since May 2011, Europe-wide unemployment has increased, to 10.8% across the eurozone; sovereign debt levels have increased both nominally, to €14.8 trillion ($18.35 trillion), and as a percentage of gross domestic product, to 113% of GDP; growth has slowed to a crawl in the big economies of the zone, with France projected to grow 0.7% in 2012 and Germany projected to grow 0.8%; while the economies of the smaller countries have been and will continue to shrink, with Italy projected to be flat in 2012 and Spain to shrink by 1.5% to 2.5%

Spain’s in Trouble

Spain’s GDP in 2011 was €1.05 trillion (US$1.33 trillion). In 2012, as previously mentioned, the general consensus is that it will shrink by between 1.5% and perhaps as much as 2.5%; a figure of –1.75% seems reasonable.

http://4.bp.blogspot.com/-F_AhfrPk5X...%2BProtest.jpgProtests in Spain.Unemployment in Spain is 24%. Youth unemployment (under 24 years old) is a shocking 53%. Both figures will rise during 2012 as the economy continues to contract. An unemployment of 30% by year’s end is within the realm of the possible. Hell, within the realm of the likely, even.

Total government debt is projected to be 79.8% of GDP in 2012—that is, €800 billion. Much more troublingly, the debt last year was “only” €680 billion—but that was still 21% higher than in 2010. So at this rate—assuming the status quo remains unchanged, and without factoring in the contraction of GDP—in 2013 the projected Spanish government debt could well rise to 90% of GDP.



Private debt is an additional 75% of GDP—and let’s not even start talking about the delinquency rates—while the banks have a capital shortfall estimated at a mere €78 billion.

On top of all this—as if “all this” weren’t bad enough—is the issue of the outstanding Spanish debt—

—the nub of the problem.

Spain has redemptions totalling €149 billion in 2012. It will issue a total of €186, with an eye to extend the maturity of the outstanding debt. But even with these concerted efforts, in 2012, the maturity of Spanish debt will in fact shrink from 6.4 years to 6.2 years. Add to that, in 2011, interest payments totaled €28.8 billion—up from €22.1 billion the year before. Why? Because of rising bond yields: Spain is considered riskier—due to the Troika’s inability to finally “fix” Greece and Spain’s own obvious domestic financial issues—and thus Spain has to pay more to borrow money.

In other words, Spain has fallen into the classic “borrowed-short-but-my-income-is-long-and-on-top-of-that-my-loans-are-getting-more-expensive” trap.

Last week, April 4, Spain’s Treasury held a bond auction—and f u c k-all was it nasty: Of the expected €2.5 to €3.6 billion, Spain barely managed to get bids for €2.6 billion—and the yield on the 10-year spiked to 5.85%, before settling at a still-way-high 5.75%.

Worldwide markets all got down on this auction—

—but here’s the thing: Spain has a lot more of these auctions coming up—on average one every two weeks.

They have to raise €186 billion in 2012.

And of the first of these, they had a quasi-failed auction.

One hundred eighty-six billion euros—in less than a year.

They’re not going to raise that kind of money—simple as that. The April 4 auction was not an outlier—it’s what’s in the post for all of the next 17 auctions.

And the Germans—being the passive-aggressive dicks that they are (my maternal grandmother is German-Danish—so I know whereof I speak)—will not allow the ECB to open the money spigot to Spain. Just like they did with Greece, Germany will dither, while all the while blocking money to Spain until it’s too late.

Germany is thinking—in its passive-aggressive way—that it can string Spain along (just like it did Greece), and then save Spain at the last minute (just like Greece was sort-of saved).

But there’s one difference: Spain is bigger—much bigger—than Greece. You can’t pull an all-nighter and save Spain like they did Greece. You want to save Greece, you better start now.

Of course, they’re not.

So This Is What Will Happen

The new Spanish government of Mariano Rajoy, who took office this past December, has entrusted the running of the country’s finances to a so-called “technocrat”, Luís de Guindos.

De Guindos is a technocrat—and he is doing everything in his power to keep Spain steady, like a good technocrat would. He has presented a budget that will shrink Spanish government social spending by 4.3%; he is moving aggressively to stabilize the Spanish banking sector, decreeing that all banks with assets of less than €80 billion under management will be “encouraged” to merge, in order to foster stability through size.

You know: Some German austerity coupled with some Geithnerite Too-Big-To-Fail-ism, like you’d expect a good technocrat would.

But de Guindos is not a europhile-technocrat-insider à la Mario Monti or Mario Draghi or Lucas Papademos or Cristine Lagarde: De Guindos is a private sector nationalist. He is Spanish—not European. Look at his résumé: The guy’s worked only in Spanish institutions when he’s done a public sector gig, and though his private sector jobs were with Lehman and PricewaterhouseCoopers—high-echelon international gigs—in both cases it was with their Spanish offices.

Coupled to that the fact that, ever since Franco’s time, Spain has never been fully accepted as “European” by the rest of the continent.

Now, de Guindos isn’t stupid. Rajoy isn’t stupid. An unemployment of 24%—and rising—coupled with a shrinking GDP is a recipe for political turmoil. That’s polite-speak for “political shit-storm in the making”.

There have been massive demonstrations in all the major cities in Spain—and there will be more, without question.

Rajoy and his Partido Popular currently enjoy absolute dominance in the Congress (186 of 350 seats), the Senate (165 of 266 seats), and the regional governments (13 of 19). But Rajoy knows the score: He ran in 2004 and 2008, losing both time. He’s under no illusions that the Partio Popular didn’t so much win in 2011: Rather, the Rodríguez Zapatero’s PSOE lost, because of popular discontent with the economy.

If there are another couple of failed auctions of Spanish bonds, and the message from the Troika is clearly that they won’t turn on the printing presses to save Spain—or worse, if the Troika telegraphs the message that Spain is going to have to get down on bended knee and beg and plead, while simultaneously squeezing its population ’til they scream—then rather than continue to cut services and social spending and appeasing the Troika, Mariano Rajoy will exit the euro.

“Don’t blame it on me! Blame it on the euro!” will be Rajoy’s slogan—and his people will believe him. In fact they will get fully behind him, regardless of the short-term (12-18 month) pain.

Why will Spain exit the eurozone? Because you can’t squeeze blood from a stone. With a 24% unemployment rate that is rising, and over half of the young people unemployed, no politician in his right mind—especially a nationalist—will decide that even more austerity is the cure for the disease. One thing is cutting off the fat—it’s quite another to be cutting to the bone.

For Rajoy and de Guindos, it will be simpler to exit the eurozone, go back to the peseta, and devalue by 20% to 30% right off.

It is always easier for a politician to cut expenditures via devaluation than via nominal spending cuts. Since the Eurocrats won’t allow a 20-30% devaluation of the euro, and since Spain cannot really cut any more or find any more money in the bond markets, then the only thing left for it to do is devalue a currency that it controls:

The New Peseta: Coming to Spain before the end of the year.

And The Effect On The Eurozone Will Be . . .

The effect on the eurozone will be quite something. In next week’s SPG Supplement, I will outline what will be the immediate effects of Spain exiting the European monetary union—and what would be some smart bets and ideas to keep in mind, in anticipation of that event.

From WWW.JSMINESET.COM

Hey Guys,
I went shopping today and bought a 5lb bag of sugar. The bag looked different. Upon closer inspection it’s now a 4lb bag.

Some back of the napkin math – if the price remained the same then that’s a 20% increase in food inflation. This is in addition to the 25% decrease in size (increase in price) for Egg Beaters I mentioned in my February email.

Are these price increases due to an increase in economic prosperity (demand-pull inflation)? I believe the chart below should answer that.
Possibly the cost-push inflation.
CIGA Rich
http://www.jsmineset.com/wp-content/...001_thumb5.jpg



Jim Sinclair’s Commentary
This is real.
http://www.jsmineset.com/wp-content/...002_thumb3.jpg

May help someone

And the 4 hour

So who's the next Reserve Currency? The €€€ is kind of unlikely at the moment

At the moment yes, but once Europe is federalized (sometime is 2050), then it will be the reserve currency

http://zapatopi.net/blog/united_futu...rency_coin.png

http://theeconomiccollapseblog.com/w...ll-440x459.jpg

http://static.ddmcdn.com/gif/pet-microchip-3.jpg

Goldman Happy Dancing
http://26.media.tumblr.com/tumblr_lz...cueho1_400.gif
Come onnn Guysss...hup haaa 1 2 3...yap yap yooo

http://theeconomiccollapseblog.com/a...come-to-an-end


#8 The United Nations Has Been Pushing For A New World Reserve Currency
The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world.
In particular, one UN report envisions "a new global reserve system" in which the U.S. no longer has dominance....

"A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency."

#9 The IMF Has Been Pushing For A New World Reserve Currency
The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world.
In particular, one IMF paper entitled "Reserve Accumulation and International Monetary Stability" that was published a while back actually proposed that a future global currency be named the "Bancor" and that a future global central bank could be put in charge of issuing it....

"A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing."

#10 Most Of The Rest Of The World Hates The United States
Global sentiment toward the United States has dramatically shifted, and this should not be underestimated.
Decades ago, we were one of the most loved nations on earth.
Now we are one of the most hated.
If you doubt this, just do some international traveling.
Even in Europe (where we are supposed to have friends), Americans are treated like dirt. Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.
If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar. But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.
So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end?
Well, some of the potential effects were described in a recent article by Michael Payne....

"The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives."

Most Americans don't realize how low the price of gasoline in the United States is compared to much of the rest of the world.
There are areas in Europe where they pay about twice what we do for gasoline. Yes, taxes have a lot to do with that, but the fact that the U.S. dollar is used for almost all oil transactions also plays a significant role.
Today, America consumes nearly a quarter of the world's oil. Our entire economy is based upon our ability to cheaply transport goods and services over vast distances.
So what happens if the price of gasoline doubles or triples from where it is at now?
In addition, if the reign of the U.S. dollar as global reserve currency ends, the U.S. government is going to have a much harder time financing its debt.
Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade.
But what if that all changed?
What if the appetite for U.S. dollars and U.S. debt dried up dramatically?
That is something to think about.
At the moment, the global financial system is centered on the United States.
But that will not always be the case.
The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam.
Under the right conditions, a shift in momentum can become a landslide or an avalanche.
Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade.
So when will this major shift occur?
Only time will tell.
http://theeconomiccollapseblog.com/w...ll-440x459.jpg

Good Morning Goldman

I saw your Gold Piece and I had read the article on the link. I just wanted to post the image and I did. I did not understand the latin and I posted Seclorum as Seclobum.

I had a problem opening the link so I closed down my computer to boot it up again. That problem was solved. I posted the link now and discovered my spelling mistake and found out the meaning of NOVUS ORDO SECLORUM

http://en.wikipedia.org/wiki/Talk:No...nd_Freemansory

I find this FREE WILL experience to be fascinating because of how it happened.

The Moral Of The Event Is Do Not Post Something You Do Not Understand. On the other hand it might have been meant to happen so that I could review the topic on the link during the Passover Period.

I LOVE FREE WILL

Take Care And Be Well and notice also I used a Small m in GoldMan the first time. My last name starts with "M"

P.S. Upon further research I wanted to see if I could determine the purpose of the author posting the image I found this in the link that I have attached.

And Now Back To Forex...

"Seclorum" as the Founders Understood It
This obsession with Virgil's Latin is a red-herring. Seclorum meant "of the ages" in Roman times, but the real question is what did it mean in the eighteenth century.
The Founding Fathers were very conscious of themselves as establishing a new political order, as opposed to the old political order of monarchy. They were also very conscious of establishing a secular political order, as opposed to the Old World pattern of church-state entanglement. Also, they knew well that "of the ages" (i.e., "within time" or "temporal") had come to mean secular.
They used the old form because quoting Virgil appealed to them, but it is silly to expect that they slavishly followed Virgil's meaning. Why imagine that they were making obscure references to "ages" when a "New Secular Order" was in fact what they were consciously creating?
70.187.212.62 (talk) 14:22, 27 January 2008 (UTC)Dan Holdgreiwe
Your comments might be worth concidering, were it not for several facts. First, in the 18th century education was heavily focused on studying the classics. Men of that era focussed on exact classical translations, not "modern" meanings. Second, and more to the point, we have the words of the man who added that motto to the seal, telling us what they mean... On June 13, 1782, Congress looked at all the designs the various committees had come up with, and asked Charles Thomson, the Secretary of the Congress to come up with a suitable design for America's Great Seal. Thompson was well-versed in the classics, he was once a Latin master at an academy in Philadelphia. (ie he knew his classics intimately and would have insisted on an accurate classical translation)... He explains the symbolism of the reverse as such:

1. The pyramid signifies Strength and Duration: The Eye over it & the Motto allude to the many signal interpositions of providence in favour of the American cause. The date underneath is that of the Declaration of Independence and the words under it signify the beginning of the new American Æra, which commences from that date. (see this web page for sourcing).

In other words... he was trying to say that America would last through the ages, not that it was trying to set up a secular state. If he had wanted to say "secular" he would have used a different word. Blueboar (talk) 14:56, 27 January 2008 (UTC)The idea of "separation of church and state" wasn't published until a few years after the Constitution was ratified. There is no mention of the idea during the arguments leading up to the Constititution, and the Establishment Clause of the First Amendment was added so the states would be free to establish their own separate state religions without Federal interference. Therefore, because secularism wasn't actually part of the founding documents (in fact, God takes a prominent role in the Declaration of Independence), I seriously doubt that they would promote it on a symbol of the nation. -- I. Pankonin (t·c) 00:01, 28 January 2008 (UTC)New Order republics have been secular, if not the gov't the people within the republic are not force to be Catholic as it was under the old order-holy roman empire. We even see knights of various backgrounds all serving the same empire, not forced to be Catholic.99.195.110.205 (talk) 07:48, 27 March 2012 (UTC)Bill Gates was knighted, Alan Greenspan knighted, CIA director Petreuas knighted, and several generals; also rock stars for their ecumenical service are knighted. George Bush was knighted at the college frat. Many different backgrounds, not Catholic, yet all knighted serving the empire. That is what's NEW about this New Order. Still ran by Rome. Forcing everyone to be Catholic FAILED in 1773 when the Jesuits and the whole shebang were banned.99.195.110.205 (talk) 07:57, 27 March 2012 (UTC)