Bill Murphy the Founder of GATA (Gold Anti Trust Action Committee) and who has a Gold subscription Newsletter at www.LeMetropoleCafe.com , wrote a special Sunday Report. Bill has been kind enough to give me permission to reproduce it here in full.
(Update 5/22/12 at bottom)
Some of it is about JP Morgan and the information regarding their 2 Billion (ever increasing day by day - now 5 billion) losses through their "hedging" trade desk.
It is extremely interesting information especially the part about the CFTC and their being at the edge of having to take some action, regarding JPM's metal shorts.
Since the newsletter is being reproduced in full, you will see Bill's other comments/information on various other financial events, like the FB (Facepalm) IPO.
Thank you Bill for allowing me to reproduce the information you sent out to your subscribers!
Here is Bill Murphy's extra newsletter information sent out on May 20th 2012:
May 20 - Gold $1591.60 - Silver -
$28.70
JPM, Facebook, Gold …
And The Potential of A Titanic Financial Market Event
"The way I see it, if you want the
rainbow, you gotta put up with the rain." … Dolly Parton
GO GATA!!!
The reason for this rare, extra commentary over a weekend is
to focus on a couple of points which really stand out in their particular significance and are worth
pondering in terms of what is coming down the road for financial markets.
The first is what we jumped all over on PLANET GATA from the
get-go about the JP Morgan hedge trade flap gone wrong. It made NO sense from
the very beginning to any of us that such a commotion was made over a $2
billion loss on a trade, for whatever reason, when they had just reported
yearly gains of $18 billion. Clearly, Mr. Dimon’s public pronouncement, that
caught the attention of the entire investment world, was only paving the way
for future announcements that will be much more dramatic. All he was doing when
he inferred the losses MIGHT get worse was protecting himself, as best he
could, by going on the record.
The latest news on JPM…
14:31 JPM JP Morgan
Chase struggling to unwind ill-placed bets - WSJ
While breaking no real news, this story notes that the
bank's losses could eventually prove to be even bigger than the $5B some people
familiar with the matter have been predicting (see linked comment). The losses
could potentially deepen if the company sells its positions into a market that
has turned against said positions.
The article notes that while the bank has said that it will take its time
unwinding the positions, this does not necessarily guarantee smaller final
losses than trying to close out the trades sooner, as the market could turn
sharply against the bank in the near term.
Reference Link: Wall Street Journal
http://online.wsj.com/article/SB100014240527023038796045774126
13778263918.html
* * * *
14:50 JPM CFTC latest
federal agency to begin investigating JPMorgan Chase - NYT DealBook
NYT Dealbook reports, citing people briefed on the matter,
that the
Commodity Futures Trading Commission opened an enforcement case on
Friday examining the bank's trading loss. The CFTC joins the SEC and FBI in
investigating possible wrongdoing at the bank. Gary Gensler, the agency's
chairman, is expected to disclose the investigation when he testifies on
Tuesday before the Senate Banking Committee.
Dealbook says that the CFTC will potentially examine whether the bank’s trading
affected the market for credit derivatives, for which it has jurisdiction.
Reference Link: NY Times -
http://dealbook.nytimes.com/2012/05/18/c-f-t-c-said-to-open-inquiry-into-jpmorgan-loss/
* * * * *
This latest investigation into JP
Morgan might be a big deal for the GATA camp. This is actually quite
complicated, but very intriguing. The CFTC has been investigating JPM’s role in
the silver market manipulation scheme for what will be four years soon. FOUR
YEARS! Good friends, like Dave from Denver, have nothing but loathsome talk
about the CFTC, for good reason. GATA’s rationale (speaking for myself) about
this ridiculous investigation is that the CFTC really has uncovered the scam,
but because it is backed by the US Government, they are flabbergasted about
what to do, so they do nothing.
The reason they have not closed the case is because they are
petrified the silver market might blow up down the road. Think about if you
were them. They want this to go away, but if the silver market does blow up,
and there is some kind of "Force Majeure" declared in silver by JPM,
the CFTC would not only look like fools, but, perhaps it might be said they
were more than negligent. Thus, they
have done nothing.
Well, all of a sudden, Lo
and Behold a new factor enters the silver scam investigation, which
directly affects Morgan’s constant claims to the CFTC that their huge silver
short position is hedged. Ya mean like hedged in an economic sense as per their
claims re the latest credit derivatives market trade was a hedge? This just
might force the CFTC to demand JP Morgan prove their claims their silver short
position is really a hedged one. This is what I suspect might occur due to the
growing scrutiny over Morgan’s trading activities. The CFTC people, except for
Bart "Elliot Ness" Chilton, are sycophants and have toed the company
line … but there is a point when FEAR makes that no longer viable. They are not
going to go to jail for taking one for the team. My guess is we are getting
close to that Tipping Point.
As the JP Morgan hedged losses mount and become
"official," the heat on them is going to mount. They will be
scrutinized every way imaginable. How can all the class action lawsuits against
them, and blatant evidence against them via just what Andrew Maquire has sent
to the CFTC via their role in the silver scam, be ignored?
We have already been informed, as of a week ago, that the
Morgan losses on their "hedge trade" fiasco could be as high as $15
billion, or more. Already, even the WSJ is alluding that their losses are
higher than $5 billion. This is MEGA! As we have discussed on PLANET GATA, this
is not just about Morgan, but confidence in the entire financial system. If the
$70 trillion derivatives book at Morgan goes NUCLEAR, we could have a financial
market TITANIC event which might be right around the corner.
GOOD GRIEF!
Now, for the weekend edition, number two re the
understandable, but nauseating, commotion over the Facebook IPO on Friday,
which was heralded by CNBC all week.
First, the background…
*The Dow is going down day after day, not with any fanfare,
but all rallies are sold. In very quiet and subdued selling, general investors
inherently know something is wrong and are acting upon that instinct.
*Europe is falling apart we know, but little is being said
about how the US financial system is in parallel with Europe. How bad is this?
Just the state of California budget deficit goes from something like $8 billion
to a staggering $16 billion and it creates almost no commotion. Huh?
Getting back into the GATA aspect of this is that the US
financial markets are all about market manipulation. You need to go nowhere
further on what the real deal about US financial markets than this headline…
Banks
spend big to prop up Facebook shares on first day of trading
By GARETT SLOANE and MARK DECAMBRE
Last Updated: 8:15 AM, May 19, 2012
Posted: 11:34 PM, May 18, 2012
It was another Wall Street bailout — but this time the banks
had to cough up the cash. Facebook’s underwriters propped up the
social-network’s trading debut yesterday, as the shares threatened to crash
through the initial public offering price of $38. The banks working on the massive
$16 billion IPO, including Morgan Stanley, JPMorgan Chase and Goldman Sachs,
did their duty by buying up large blocks of Facebook stock toward the end of
the day to support the price.
Facebook shares opened up 11 percent at $42.05, and traded
as high as $45, before running out of steam, disappointing investors hoping for
a big first-day pop. The shares closed up just 0.6 percent at $38.23.
Without the bank bailout, Facebook’s IPO would have been a
loser on the day, Wall Street insiders said.
The heavy buying, however, cut into the banks’ already
meager fees on the deal. The underwriters agreed to accept a smaller cut — just
1.1 percent of the $16 billion Facebook raised in the IPO — in order to land
the high-profile assignment.
After splitting $176 million in fees, the firms likely spent
more than they made in fees by buying the swooning stock. Sam Hamadeh, CEO of
research firm Privco, believes the banks spent around $380 million on Facebook
stock.
"On the heels of JPMorgan’s $2 billion ‘hedging’ trading
loss, tThe underwriters have used up all the fees they made on the Facebook
deal just to buy and prop up the stock to prevent a busted IPO," said
Hamadeh.
Another source said that the banks took a substantial hit
yesterday, which started strong despite glitches that delayed Nasdaq trading in
Facebook shares by 30 minutes past their 11 a.m. scheduled debut.
While there was plenty of finger-pointing yesterday, many
blamed the bankers for setting the price too high to allow for upside. The IPO
share priced at the high end of the $34 to $38 range, which had been raised
from an initial range of $28 to $35.
The bankers were wary of pricing the shares too low, leaving
money on the table and leading to an outrageous first-day pop. They were
shooting for a modest first-day gain in the range of 5 percent to 10 percent.
Still, some observers heaped scorn on Facebook insiders who
dumped their shares, saying it was a red flag that weighed on the stock.
Facebook had increased the number of shares being sold in
the IPO by 25 percent, to 425 million, with most of the additional float coming
from early investors looking to cash out.
The company’s sky-high valuation also made some investors
queasy. At $38 a share, Facebook is valued at $104 billion — even though it only
made $3.7 billion last year.
Facebook’s big day was a drag on other tech stocks. Trading
in shares of Zynga was halted yesterday after a sharp drop, and the stock
closed down 13.4 percent at $7.16. China’s social network RenRen was also down
more than 20 percent, to $4.93.
-END-
My take on this, from my Behavioral Finance background on
how our financial system really operates, is the effort to hold up the Facebook
IPO was an effort to hold up the stock market as a whole. For the BF folks,
perception is everything. That is why they do what they do. The Counterparty
Risk Management Policy Group (do a Google if new to you), led by the same firms
that held up the Facebook share price, does not exist for no reason. One of
their mandates is to promote market stability and that is what they just did.
That Group works closed with the Plunge Protection Team (Working Group on
Capital Markets) to support the US stock market at various times.
What we saw in the price rises of gold and silver at the end
of the week was stunning and totally out of the natural order of the
gold/silver price manipulation scheme. It was a wowser! My smeller tells me,
because the dramatic rally was so pronounced, that we are headed for some
serious fireworks in the financial arena.
The Gold Cartel could be in deep trouble now because their
honcho, JP Morgan, is in deepening trouble. This is no minor event in terms of
the gold/silver market manipulation scandal.
All hands on deck to prepare for the financial market
commotion that seems to be right around the corner!
Bill Murphy
