Deutsche Bank: The Bubble Must Go On To Sustain The “Current Global Financial System”

When all is said and done, it all basically boils down to this: from Deutsche Bank’s Jim Reid.
The bubble probably needs to continue in order to sustain the current global financial system and the necessary future deleveraging. However with yields moving ever lower in many parts of the world in recent times, partly due to weak growth, and with debt levels still moving higher, the chances are that most government bondholders are unlikely to achieve a positive real return over the medium to long-term from this starting point. Inflation or even the risk of sovereign restructuring will likely prevent this.

This post was published at Zero Hedge on 09/10/2014.

Big Banks Manipulated $21 Trillion Dollar Market for Credit Default Swaps (and Every Other Market)

Derivatives Are Manipulated Runaway derivatives – especially credit default swaps (CDS) – were one of the main causes of the 2008 financial crisis. Congress never fixed the problem, and actually made it worse.
The big banks have long manipulated derivatives … a $1,200 Trillion Dollar market.
Indeed, many trillions of dollars of derivatives are being manipulated in the exact same same way that interest rates are fixed (see below) … through gamed self-reporting.
Reuters noted last week:
A Manhattan federal judge said on Thursday that investors may pursue a lawsuit accusing 12 major banks of violating antitrust law by fixing prices and restraining competition in the roughly $21 trillion market for credit default swaps.
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‘The complaint provides a chronology of behavior that would probably not result from chance, coincidence, independent responses to common stimuli, or mere interdependence,’ [Judge] Cote said.
The defendants include Bank of America Corp, Barclays Plc, BNP Paribas SA, Citigroup Inc , Credit Suisse Group AG, Deutsche Bank AG , Goldman Sachs Group Inc, HSBC Holdings Plc , JPMorgan Chase & Co, Morgan Stanley, Royal Bank of Scotland Group Plc and UBS AG.
Other defendants are the International Swaps and Derivatives Association and Markit Ltd, which provides credit derivative pricing services.
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U. S. and European regulators have probed potential anticompetitive activity in CDS. In July 2013, the European Commission accused many of the defendants of colluding to block new CDS exchanges from entering the market.
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‘The financial crisis hardly explains the alleged secret meetings and coordinated actions,’ the judge wrote. ‘Nor does it explain why ISDA and Markit simultaneously reversed course.’

This post was published at Washingtons Blog on September 9, 2014.

Deutsche’s David Bianco “Forecasts” The S&P (In One Simple Chart)

While not exactly a “bear”, Deutsche Bank’s David Bianco – until this weekend – had the lowest S&P 500 target for 2014 year-end at 1,850. That’s all changed now…
Laszlo Birinyi would be proud…

Via Deutsche Bank,
We raise 2015 yearend S&P 500 fair value target 7.5% to 2150 from 2000
We still expect a long lasting economic expansion of moderate growth, which should rival the US record of 10 years with S&P EPS growth averaging 6% until the next recession, on 5% sales growth, flat margins, 1% share shrink. Despite entering the latter years of a typical expansion and high margins vs. history, we now think the trailing S&P PE should average 17 vs. 16 until elevated recession risk returns. This is because we now expect long-term real interest rates to stay below normal through 2016 and thus lower our S&P 500 real cost of equity estimate from 6.0% to 5.5%. We raise 2014 and 2015 yearend S&P targets to 2050 and 2150 from 1850 and 2000 and introduce 2300 for 2016 yearend.

This post was published at Zero Hedge on 09/08/2014.

As ISDAFIX Becomes Next LIBOR, Can GOFO Manage To Avoid The Spotlight?

As ISDAFIX Becomes Next LIBOR, Can GOFO Manage To Avoid The Spotlight? In the wake of the recent LIBOR benchmark interest rate rigging scandal and successful prosecution of a number of global investment banks for participating in LIBOR manipulation, a new interest rate rigging scandal is gathering steam.
Allegations surfaced last year that ISDAFIX, a similar global interest rate benchmark, had been rigged by a group of global banks, and these allegations are under investigation by a number of regulators including the US CFTC and the UK FCA. While the regulators have not provided any feedback as of yet, the class action suits by impacted investors are now beginning.
ISDAFIX is a set of global benchmarks for interest rate swaps that are used by the worldwide financial community to price and settle contracts based on these interest rate derivative swap contracts. The interest rate swap market is worth over $450 trillion, and these products and contracts are used by a wide spectrum of participants from large corporates to national pension funds and investment houses. The International Swaps and Derivatives Association (ISDA) owns the ISDAFIX benchmark.
The first class action suit in the US has just been filed by the Alaska Electrical Pension Fund, and is seeking compensation for alleged manipulation of the ISDAFIX benchmark rates. The class action suit accuses 13 investment banks and one brokerage of manipulating the benchmark rates to artificial levels over a multi-year period so as to avoid paying out to clients on the interest rate contracts.
The defendants comprise the largest investment banks in the world including Barclays, JP Morgan, Deutsche Bank, Goldman Sachs, HSBC, UBS, and Credit Suisse, (which are all market making members of the London Bullion Market Association) and also Citigroup, and Bank of America. Brokerage house ICAP is also named in the class action suit. ICAP was in charge of calculating the US dollar version of ISDAFIX by averaging rates which were submitted by the contributing banks.
The Alaskan pension fund suit contains analysis by legal and investment consultancy Fideres. Fideres was also the consultancy that provided analytical evidence of price manipulation for a number of recent class action suits that allege price manipulation of the London Gold Fixing benchmark.
According to the suit, analysis over 2009-2012 by Fideres finds that on nearly every day the banks in question were all submitting virtually identical rates to each other, and that when it became known in December 2012 that UBS had begun cooperating with regulators over the LIBOR investigations, only then did the submitted rates start to diverge.
Following the manipulation allegations, the owner of the benchmark, ISDA, took the administration of the benchmark away from ICAP, and more recently, a new administrator ICE Benchmark Administration has been appointed by ISDA. ICE is the owner of numerous financial exchanges and clearing houses, such as the NYSE Euronext exchange.
After the LIBOR scandal, the LIBOR benchmark became the world’s first regulated benchmark. LIBOR is now regulated by the UK FCA, and coincidentally, LIBOR it is also administered by ICE Benchmark Administration. There is an expectation in the market that the ISDAFIX benchmark will probably also become a regulated benchmark.

This post was published at Gold Core on 8 September 2014.

Equity/Bond Markets At Overnight Highs On Hopes Of More ECB Stimulus; Geopolitics On Back Burner

Even as the NATO summit began hours ago in Wales, conveniently enough (for Obama) at the venue of the 2010 Ryder Cup, so far today geopolitics has taken a backseat to the biggest event of the day – the ECB’s much hyped and anticipated announcement. So anticipated in fact that even as it has been priced in for the past month, especially by BlackRock which is already calculating the Christmas bonus on its “consultancy” in implementing the ECB’s ABS purchasing program and manifesting itself in record low yields across Europe’s bond market, Reuters decided to milk it some more moments ago with the following blast:
Plans to launch an asset-backed securities (ABS) and covered bond purchase programme worth up to 500 billion euros are on the table at Thursday’s European Central Bank policy meeting, people familiar with the discussions say. ECB President Mario Draghi will likely announce such a programme at his news conference unless it comes up against strong opposition at the Governing Council’s policy meeting. The programme would have a duration of three years and comprise both ABS and covered bond purchases. The ECB could begin buying the assets this year, the people familiar with the discussions told Reuters.
The ECB declined to comment.
The notable being the size of the program, which at 500 billion, is precisely what Deutsche Bank said a week ago the size of the ABS program would be. Almost as if the bank with the world’s biggest derivative exposure is helping coordinate the “Private QE”…

This post was published at Zero Hedge on 09/04/2014.

“One Of The Defining Investment Moments Of The Next Few Years”

Some very spot on observations (which contain the amusing line: “inflation has been a modern day (last 100 years) phenomenon tied to the evolution of central banks (the Fed started in 1913) and the gradual demise of precious metal currency systems“) of what will be the biggest trouble with the credit bubble, from Deutsche Bank’s Jim Reid:
One of the more interesting stories of yesterday was a 1bn 50 year private placement bond issued by the Spanish Government with a 4% coupon. It’s a measure of how far things have come in a couple of years that such a deal could be launched. It was also a day when 2 year French yields traded below zero for the first time ever. We still live in remarkable financial times. Back to the Spanish deal, although current low levels of inflation make this deal look optically attractive on a real yield basis we thought we’d look at the rolling average 50 year level of inflation in Spain to highlight what real returns might potentially be over the lifetime of the bond. I hope I survive to see it mature but I hope I won’t be writing about it then. Anyway the average annual inflation over the last 50 years in Spain is 7.0% and as the graph in today’s pdf shows the last time the 50-year rolling average was below 4% was in 1956. Clearly prior to this the average rate of inflation was constantly below this level as inflation has been a modern day (last 100 years) phenomenon tied to the evolution of central banks (the Fed started in 1913) and the gradual demise of precious metal currency systems. So it’s a measure of how buoyant fixed income markets are that investors are prepared to ignore that last half century’s inflation record and the current fiat currency world when pricing long-term bonds. This is not a Spain-specific issue but on a slow news day the story stood out. The same would be true for most countries issuing similar long-dated debt today. Indeed yields elsewhere would likely be even lower.

This post was published at Zero Hedge on 09/02/2014.

And The Best Performing Asset In August Was…

August is the month in which the third try for a global economic recovery officially snapped, with first China, then Europe and finally Latin America succumbing to pre-recession forces and/or outright contraction. Which, in the New Normal, is great news as it means more hopes for even greater imminent central bank easing and “stimulus” if only for the wealthiest (and also please ignore the fact that 6 years of more of the same has not worked, this time will be different). Which explains why August, otherwise the sleepiest month of the year, proved to be fairly strong with both equities and bonds moving higher in tandem.
In fact, the situation in Europe is so dire, that European government bonds yields reached/retested their record multi-century all time lows. As Deutsche Bank summarizes, the 10yr government bond yields for Germany, France, Italy, Spain, and Switzerland declined by 27bp, 28bp, 26bp, 28bp and 11bp in August to 0.89%, 1.25%, 2.44%, 2.23% and 0.44% respectively. From a total returns perspective, a 2% gain in August was the best monthly performance for Bunds and OATs since January which brings their YTD gains to around 8-9%. Not bad in the context of a 7% and 4% YTD gains in Stoxx 600 and the FTSE 100. Italian and Spanish government bonds are still ahead though on a YTD basis with total returns to date at around 12-13%. Staying in rates, US Treasuries were somewhat of a laggard relative to its European peers in August with a monthly return of around 1.2%. Nonetheless, it was still the biggest gain for Treasuries since January and the outperformance in long bonds has also driven the 10s/30s curve to its flattest since June 2009. The search for yield has also benefited Credit on both sides of the Atlantic. Total returns were positive across the main European, US and Sterling credit benchmarks although the highlight was a rebound in US HY. The asset class gained 1.8% in August after having lost 1.7% in July as outflows steadied and reversed as the month progressed.

This post was published at Zero Hedge on 09/01/2014.

The ‘New’ Silver Fix and the Powers That Be!

The ‘New’ Silver Fix and the Powers That Be! With Remarks On Texas Governor Rick Perry & Texas Gold! Accompanied by a Warning to Jewelers!
Presented August 2014 by Charles Savoie
Effective mid-month August 2014, the old silver ‘fix’ has been replaced by a new silver ‘fix,’ run jointly by the CME Group, owner of the COMEX, and Thomson Reuters. But has anything of real substance changed? It certainly has not. The new ‘fix’ was awarded by the LBMA, London Bullion Market Association, composed of neer-do-well entities including Barclays Bank, HSBC Bank, Goldman Sachs, JP Morgan Chase Bank, and additionally Bank of Nova Scotia, Credit Suisse, Deutsche Bank, Mitsui & Company, and Paris based Societe Generale. For 116 months I’ve routinely made details available about a unique organization known to few as ‘The Pilgrims Society.’ Persons who haven’t become aware of this group can find details on Google search. If you especially want the monetary details relating to this group and precious metals, add my name to theirs in the search box or read ‘The Silver Stealers’ documentary. Therefore, I won’t go into another basic explanation of The Pilgrims Society here. The ringleaders of the megabanks above have all had heavy representation in The Pilgrims Society. The rest have been and remain represented in interlocking groups such as the Trilateral Commission and the Bilderberg conferences – groups founded by Pilgrims Society members. I am not among the commentators you can read the fastest, because of the nature of these presentations, in depth examinations must be made to substantiate my claims. However, just to make reference to this alleged ‘new’ silver fix, and how bogus it is, I offer this brief report. An oft repeated phrase most have heard, and which drives home how dismal this old world often is, has it that ‘the more things change, the more they remain the same.’ We will not get into a long documentary such as ‘Who Controls The Gold Stealing New York Fed Bank,’ released last February, but will let a few points suffice. This is a mere matter of a group of gangsters who tossed the ball to others in their racketeering organization. Mitsui Global Precious Metals, a Silver Users Association member, is a subsidiary of Mitsui & Company – a Trilateral Commission interest. The Mitsuis and the Rockefellers have been associates since before 1907 when the Japan Society was founded by Rockefeller-Vanderbilt liaison Lindsay Russell as another offshoot of The Pilgrims Society. The Japan Society in fact was forerunner to the Trilaterals, founded 66 years later, but represented an expansion into Britain and Europe, in response to Bilderberg not including Japanese industrialists and bankers. Meaning that Bilderberg is over-rated compared to the Trilaterals! However, they both sprang from this older organization which remains in the shadows.

This post was published at Silver-Investor on August 29, 2014.

Silver Pricing Change Takes Effect, Other metals to follow

With the launch in mid-August of a new system to arrive at the price for silver, precious metals investors are dealing with the first in a series of changes in how the market prices of silver, gold, platinum and palladium are reached.
More change is coming, since the other three metals have yet to go through the process, but what’s happened so far is this: Concerns about price fixing after everything from LIBOR to currency were found to have been manipulated led to accusations about the gold and silver markets, and in January of this year Germany’s financial regulator Bafin said that the manipulation of precious metals prices was worse than that occurring with LIBOR.
Deutsche Bank was interviewed by Bafin on the matter before the end of 2013, and in January the bank announced that it would exit the commodities business and abandon its positions in the processes of fixing gold and silver prices. Since Deutsche Bank was one of only three involved in the 117-year-old process of setting the price of silver – the other two were HSBC and Bank of Nova Scotia – that meant a new method had to be found before Deutsche Bank departed the scene.
In August, that new method launched. An electronic, auction-based mechanism has taken the place of the traditional conference call among the three banks that had determined how silver would be priced since the time of Queen Victoria. Run by CME Group Inc. and Thomson Reuters Corp., the new system uses electronically entered orders proposing a starting price; if buy and sell orders don’t match up, an algorithm will determine the price to be used for the next bidding round. CME had said in a report when the system went live that each round should take 30 seconds or less, and that participants will be able to view bid and offer volumes, as well as total volumes traded once the price is set.

This post was published at TruthinGold on August 28, 2014.

Can The New Silver Fix End The Ongoing Silver Price Manipulation?

The new silver fix is a fact since 17th August 2014. The silver fix has been a driver in setting the silver price in the last 117 years, but now a revised ‘fixing mechanism’ with other ‘fixing members’ is in place. Up until August 14th2014, three institutions have been participating to the daily silver fix, i.e. Deutsche Bank AG, HSBC Bank USA N. A. and The Bank of Nova Scotia. In the new silver fix, the participating members are HSBC, ScotiaMocatta and Mitsui.
Before looking into the question what to expect from the ‘new’ silver fix, it is important to understand what the ‘old’ silver fix has done to the price of silver. Commodity analyst Dimitri Speck has focused his research on discovering silver price manipulation related to the silver fix, more so than the Gold Fix. Based on his extended statistical analysis around intraday average price patterns, he was able to pinpoint when exactly the manipulation (or, intervention) took place, and he provided the world unbiased charts. The next paragraphs focus on his findings; they are based on Dimitri Speck his book ‘The Gold Cartel.’
The book ‘The Gold Cartel; Government Intervention in Gold, the Mega-Bubble in Paper and What this Means for your Future’ is written by commodity analyst and precious metals expert Dimitri Speck. The book is available at Amazon. It is one of the few ‘must read’ books on precious metals with important investment insights for serious investors.
The key in uncovering the silver price manipulation is to analyze price patterns in three distinct time frames:
Before 2010 Between 2010 and April 2011 After May 2011 In the period before 2010, the intraday average silver price chart clearly shows statistically significant anomalies. The first chart shows the intraday average price between August 1998 and 2011. The obvious observation is that a significant price break down has been appearing right at the silver fix, which is at 7AM EST (New York time). A second sharp decline is visible at 10AM EST, which is probably linked to the gold fixing, see below. The chart takes into account almost 13 years of data, it excludes every form of coincidence or randomness.

This post was published at GoldSilverWorlds on August 28, 2014.

Yet More Financial Fraud

The latest example of financial fraud comes from Barclays recent admission that they manipulated the Libor & Euribor benchmark interest rates. To avoid further legal action and bad publicity, the firm will pay $200 million dollars to the CFTC, $160 million to the US Department of Justice, and another $93 million to Britain’s Financial Services Authority.  But these fines are insignificant sums when compared to the array of financial instruments derived from just the Libor rate – an estimated $800 trillion of securities, loans and derivatives. The average “Joe” has been unknowingly affected through vehicles like adjustable rate mortgages, stocks and pension funds. Financial firms such as Barclays and others suspected to be involved in this latest scandal – Citigroup, HSBC, Royal Bank of Scotland, UBS, Deutsche Bank, JP Morgan Chase, Lloyds, and Bank of Tokyo Mitsubishi – have a tremendous motive to keep these benchmarks aligned favorably with their more profitable, proprietary derivatives trades.

Just how much more evidence is necessary to convince the public that the bankers of the world are  quickly losing control of the financial system?  Their legal box of tools are failing them and they must now resort to illegal means like the mobsters we read about in Dick Tracy strips.  It’s worse now, though, because the too-big-to-fail Wall Street banks have most of our politicians in their back pocket, which means their criminal activities won’t be considered criminal, but rather normal operating procedures.  Hence the minor slap on the wrist for public appeasement. Investors need to be aware of what’s happening and take actions to protect their wealth from being taken over by the mob.

Here’s Max Keiser and Michael Krieger discussing this latest scandal on RT.