Winning The Cartel's Musical Chairs Game
by DeepCaster LLC, deepcaster.com | April 1, 2010Print
“A major crisis is building in the derivatives market yet a cabal on Wall Street is blocking the formation of a clearing house that could stop the next financial meltdown, a senior official with the Kauffman Foundation said on Tuesday…
The need for disclosure in the swap markets is enormous, yet the will to act is missing because of a small cadre of special interests, said Harold Bradley, who oversees almost $2 billion in assets as chief investment officer at Kauffman…
"I believe we are in a cabal. There are five or six players only who are engaged and dominant in this marketplace and apparently they own the regulatory apparatus," he said. "Everybody is afraid to regulate them."…
U.S. and European officials are trying to craft new rules to regulate the $450 trillion private derivatives market in broad efforts to avoid another financial crisis…
Bradley said those efforts fall short…
Instead, he said regulators have found a boogeyman in high-frequency trading, which has taken the focus off the highly levered derivatives market...” (Emphasis added.)
“Wall Street cabal seen derailing serious swap reform”
Herbert Lash, 3/30/10
“The dollar-based monetary system is no longer adequate for a larger and more integrated world economy…
Prominent developing economies are increasingly demanding to be included in any multilateral dialogue that aims to shape the new economic order…”
“Beyond the Dollar: Rethinking the International Monetary System”
The Chatham House Report, March 2010
“The Federal Deposit Insurance Corp. is trying to encourage public retirement funds that control more than $2 trillion to buy all or part of failed lenders, taking a more direct role in propping up the banking system…
Direct investments may allow funds such as those in Oregon, New Jersey and California to cut fees for private-equity managers, and the agency to get better prices for distressed assets, the people said. They declined to be identified because talks with regulators are confidential…
Oregon’s retirement fund may contribute $100 million as regulators seek “the support of state pension funds to solve the crisis surrounding ongoing bank failures”… New Jersey’s fund may also participate…
The FDIC shuttered 140 lenders last year and expects the tally may be higher in 2010… Pension funds, whose 100 largest members manage $2.4 trillion, could provide capital to acquire deposits and outstanding loans from collapsed banks…
Investing in distressed banks doesn’t always pay off, as the U.S. Treasury Department learned with the Troubled Asset Relief Program. At least 60 lenders skipped some of their promised dividends to the TARP fund…
…The California Public Employees’ Retirement System, the largest U.S. public pension fund, said in a Feb. 16 presentation that one of its goals is to increase its “co-investments” in transactions alongside money managers…
Known as Calpers, the pension fund plans to “explore unique structures with select general partners”…" (Emphasis added.)
“Failed Banks May Get Pension-Fund Backing as FDIC Seeks Cash”
Dakin Campbell, Bloomberg BusinessWeek, 3/8/10
“Alfredo Ley, founder of Ley Investor B.V., an investment management and research firm in the Netherlands, yesterday published a fascinating review of a 1989 academic paper written by the great rationalizer of surreptitious government intervention in the gold market, former Harvard professor and former U.S. Treasury Secretary Lawrence H. Summers, now director of President Obama's National Economic Council…
Ley's review of that paper, headlined "From the Horse's Mouth: Lawrence Summers on Market Manipulation in Times of Crisis," construes the paper as an argument for government to respond to financial crises by propping up asset prices and rigging currency exchange rates, presumably also largely surreptitiously…”
“More advocacy by Obama's top economist for sneaky market rigging”
The GATA Dispatch, 3/27/10
The Threat to Wealth, including a Threat to that (formerly most sacrosanct) category, Pensions, is just beginning, though the Markets now appear to have calmed. But that calm is The Eye of a Market Hurricane which began in 2008, and The Eye is slowly but inexorably moving.
The Megabankers have apparently encouraged FDIC’s push to use Pension Fund Assets to buy often-still-Toxic “Assets” of Failed or Failing Banks. If that Push is successful, it would result in yet another massive benefit to Megabankers.
It would remove failed or failing Assets from the banking system (to the detriment of Pensions) and leave the mega-Bankers in a position to acquire the still-performing Assets in that System “on the cheap”.
It would not be the first such acquisition nor would it likely be the last.
Deepcaster and others reported recently on a similar Mega-Bank-generated Plan to force Pension Funds to Buy U.S. Treasuries – not such a good idea in light of the U.S.A.’s prospective (by 2028) $20 Trillion plus National Debt and $100 Trillion plus downstream unfunded liabilities, for Social Security, Medicare, etc. Given this Reality it is highly likely long-term U.S. Treasuries will decline in value over the next few years.
And Deepcaster’s Long-standing claim that one goal of the Mega-Bank led Cartel’s* ‘End Game’ is the Destruction of the U.S. Dollar, is supported by the Chatham House Report referred to above which serves as a Trial Balloon. And as the degradation of the purchasing Power of the U.S. Dollar proceeds, what happens to the value of the Dollar-denominated Assets. The Answer is unfortunately clear.
The foregoing are just three more examples of the potential appropriation of Citizen Investor Assets, just as the 2008-2009 Market Crash resulted in a massive Wealth Transfer (of some $11.9 Trillion in gain(!) in the six months of July through December, 2008 – the six months encompassing the Market Crash when Investors world-wide were losing Trillions). Verify this Gain for yourself at the Central Banker’s Bank’s own website - www.bis.org, Path: statistics>derivatives>Table 19.
If the Investor/citizens of the U.S.A. (and nations around the world) do not stop the Musical Chairs-like “Game” of Bailouts of and Asset Grabs by the Mega-Banks in which Investor/Citizen/Retiree/Taxpayer Assets are appropriated one by one, then all will ultimately share impoverishment.
One step to stop the grab is to Audit and then Abolish the private for-profit Fed, leader of the Cartel.*
Despite the Hot Air from Washington, DC, it looks as if the chances for passage of Real Financial Reform Bills – including Rep. Ron Paul’s Audit and Abolish The Fed bills – are slim to none in this session.
Indeed, the simple solution to the “Too Big to Fail” problem is not receiving serious consideration in Washington, DC – yet. That would be, of course, to break up the Mega-Institutions and parcel out their Assets and functions to regional and state Banks.
Certain of these Megabanks are now more leveraged than they were before the 2008 Crash, so when the next crises hit, they should be allowed to collapse and be dismantled via a Resolution Trust-type vehicle which could thus parcel out their performing Assets.
Yet to date, Actual and Potential, Asset Appropriation (per the above) and Market Rigging have been allowed to continue thus enabling The Cartel* to acquire ever more wealth and power.
Market Rigging as articulated by Larry Summers in his 1989 Paper (see above) has now clearly won the day. [Reportedly his and Robert Rubin’s concepts were the basis for winning the day too for Russian oligarchs, to whom much of Russian Wealth was transferred in the Perestroika of the late 1980’s and early 1990’s.]
For non-regular readers benefit, it is important to note here the clear and convincing evidence that a Fed-led Cartel* of Central Bankers Financial Institutions and Agents regularly engage in overt and Covert Manipulation of Major Markets.
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2009 Letter entitled "A Strategy For Profiting From The Cartel’s Dark Interventions & Evolving Techniques - II" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
Regular Readers know as well that the Consequences of Bailout, Asset Appropriation, and Market Rigging Outrages is Hidden from the Public by Bogus Official Statistics as demonstrated by Shadowstats.com. Consider recent Official versus Real Numbers courtesy of Shadowstats.
Official Numbers vs. Real Numbers
Annual Consumer Price Inflation reported March 18, 2010
2.14% 9.39% (annualized March 2010 Rate)
U.S. Unemployment reported March 5, 2010
U.S. GDP Annual Growth/Decline reported March 26, 2010
But it is becoming increasingly difficult for The Cartel to maintain control of their Market Rigging and Public “Communications” (read Spin and Conditioning) Policy Operation.
Significantly, last week’s weak Bond Auction (resulting in a spike in rates) and the release of figures showing February was the worst month for new House sales ever, show that Main Stream financial Media Happy Talk about the Bullish Equities Markets and “Recovering Economy” is just so much hot air.
Sooner rather than later, these Realities are going to rear their ugly heads in an Equities Market Takedown. Facilitating that Market Takedown is the fact that Equities Markets are generally considerably overvalued, with the S&P P/E Ratio at about 23 to one.
Some of you will remember the period leading up to the Market Crash of 1987. For months, the Fundamentals and Technicals deteriorated while the Equities Markets continue to rise.
The same was true of the period leading up to the Internet Bubble Burst of 2000. The bubble “should” have burst earlier than it did. But the shorts had to wait for months before profiting.
In our view, a similar situation exists today. The Stimulus Bills plus positive Main Stream Media “spin” plus Cartel Intervention have created a “Sugar High” in the Markets. But it is highly unlikely it will last.
And it is important to note that: Market Crashes and Takedowns typically strike suddenly, before one has time to “get short, or exit longs”.
Thus, in our view we are in the Calm Eye of the Markets’ Hurricane, but that Eye is slowly, but inexorably moving. We shall soon be in the Hurricane again.
For a discussion of how soon “soon” is, read Deepcaster’s April Letter in the ‘Latest Letter’ Cache at www.deepcaster.com.
Thus Investors have an Opportunity on the Short Side of many Equities Sectors if we are willing to have the wisdom to prepare for the revival of the Hurricane (Deepcaster has several Recommendations designed to profit from this scenario, which can be found in the ‘Latest Letter’ and ‘Alerts Cache’ at www.deepcaster.com) and the Stamina to Wait for it.
Given the Cartel’s Musical Chairs Game resulting in the Appropriation of the People’s Assets one by one, we shall not have to wait forever. We believe those Investors who are aware of the apparent Goals of the Cartel’s ‘End Game’ will have a better chance of not being “left without a chair”. (For an explanation of The Cartel “End Game”, see “Surmounting The Armageddon Scenario & Cartel ‘End Game’” (02/26/2010) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)
The Eye of the Hurricane is also reflected in the Precious Metals Markets.
There is a Test abrewing, a Major Test of Cartel Strength in the Gold and Silver Markets. Let us explain.
Five weeks ago, Deepcaster forecast that Gold would be moving back up into the $1100s. And so it has, closing at or above $1100/oz for those five weeks.
We also spoke of the possibility of a “Teaser Spike” up to $1200/oz basis Gold. We shall see.
But, ominous Reverse Head and Shoulders (Bearish) are forming both for Bullion and the Shares, for example. Yet both their Upward Trend Channels are still intact.
But, of course, the fact is the Fundamentals for Gold and Silver remain extremely Bullish. If it were not for Cartel* Intervention, Gold would today be over $3000/oz and Silver over $75/oz in our view.
But we also repeat that The Cartel* is still Potent, delivering $50 down days in Gold in early December, 2009, and early February, 2010.
It IS becoming harder and harder for The Cartel to implement successful Takedown attempts, because more and more Investors are becoming convinced, rightly, that they should buy physical Gold and Silver on the dips, and hold it personally.
But The Cartel’s “bottom line” is that it cannot afford for Gold and Silver to be seen as 'go to' assets in the face of a Cartel Takedown of the Equities (or commodities, for that matter) Markets. The Cartel’s entire Game Plan depends on the ability to continue to successfully suppress Gold and Silver prices.
Thus the Cartel attacks on Gold and Silver will likely continue.
But will they succeed? To see Deepcaster’s Forecast go to www.deepcaster.com and click on ‘Latest Letter’ Cache for the April 2010 Letter.
Silver, too, should share the same fate as Gold since it shares similar Technicals, Fundamentals, and Interventionals.
Finally, we are also in The Eye of the Hurricane in The Bond Market. Notwithstanding the very recent Bounce, that market has been quiescent for months.
Yet, in the last week, U.S. T-Notes and T-Bonds have taken a hit (thus yields have spiked up), not surprisingly, since Equities have been strong and the “The Economy is Recovering” Spin fills Main Stream Media “News” Broadcasts.
But, we reiterate that if an Equities plunge occurs, we can expect the U.S. T-Notes and Bonds to rally.
Though The private for-profit Fed has indicated they will stop purchasing U.S. paper in the open market, they will almost surely continue to do so covertly as they have for years through intermediaries, thus propping up bond prices.
Longer term, these U.S. Securities will almost surely fall, as interest rates rise.
Indeed, a hugh Bearish Head and Shoulders Top has been forming via the Bonds price action in the last two years.
But short-term, it is not in the Cartel’s interest to allow long-term Rates to significantly rise any month soon.
Will The Cartel employ a chunk of the $437 Trillion in dark OTC Interest Rate Contract Derivatives they have available for Market Control to fuel another Bond Rally soon? (bis.org, Path: statistics>derivatives>Table 19) Our view on these issues is available in Deepcaster’s April 2010 Letter, go to www.deepcaster.com and click on the ‘Latest Letter’ Cache.
In conclusion, it should be clear that Investors who want to win and not want to be caught “without a chair” in the Cartel controlled game of Musical Chairs, should not only take account of Fundamentals and Technicals but also “Interventionals” and “Politicals”.
And regarding The “Politicals” MIT Professor Simon Johnson adds his voice to ours in advocating “We Must Break Up Big Banks and End Too-Big-to-Fail”.
“…financial reform…the bill currently under consideration won't really fix anything, says Simon Johnson…
Johnson is a former chief economist of the International Monetary Fund, a professor at the MIT Sloan School of Management, a fellow at the Peterson Institute for International Economics, and a member of the CBO’s Panel of Economic Advisers…
To truly reform Wall Street and make the financial system safer and more stable, Johnson says, we need to eliminate the "Too Big To Fail" policy by breaking up the big banks…
Until you eliminate the "moral hazard" of Too Big To Fail, Johnson says, we'll just move from one crisis to the next. Risk-taking has returned with a vengeance to Wall Street…As a result, in many ways, we're worse off than we were before the crisis.”
“We Must Break Up Big Banks and End Too-Big-to-Fail, Says Simon Johnson”
Tech Ticker – Yahoo, 4/1/10
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