Last week we wrote that we were not surprised to learn that the first party of interest in the PFG bankruptcy was “none other than JPMorgan, which together with various other banks, will be the target of a subpoena by the PFG trustee.” We added “How shocking will it be to find that Dimon’s company is once again implicated in this particular episode of monetary vaporization.” It appears that we were not the only ones shocked to learn that Jamie Dimon’s firm could make a repeat appearance again when it comes to missing client money: JPM itself seems to not have expected this development. The result, as just reported by Reuters: “JPMorgan Chase & Co on Monday sought to limit the power the bankruptcy trustee for Peregrine Financial Group has to subpoena information from financial institutions that did business with the failed brokerage.” Why, whatever may JPMorgan be hiding, and whyever is it taking preemptive steps from preventing such information from leaking into the public domain: because it is too “burdensome” – it is only logical that Jamie can not dedicate one person of his 261,453 employees to this modest matter. No fear though: even if it is found that just like in the MF Global bankruptcy JPM may have overreached just a tad when it comes to money that doesn’t belong to it, the CFTC can just say that as a result of an extensive 4 year investigation, JPM was found to have done nothing wrong, and if the public can please already disperse.
Welcome to Capital Account. Knight Capital, the market maker that lost a reported 440 million dollars off a “technical glitch,” will get a $400 million lifeline from investors to stay afloat. Today’s version of ‘Gone in 60 Seconds’ is more like ‘Gone in 60 Nanoseconds’ with the use of high frequency trading. So what purpose does this speed serve? Is there anything keeping a Knight Capital disaster from happening again, and what are the implications for the broader economy and the financial markets? Likewise, is there any benefit that high-frequency trading brings to the market as a whole, or is it just a race to the bottom for the retail investor? We ask commodities trading veteran and former NYMEX board member David Greenberg.
Also, we look at where regulators stand on high frequency trading as a new study questions the true risk of the SEC revolving door. Is the financial incentive simply not there for regulators, since anyone who actually understands the industry would rather work there for more money than go to a government agency? We ask David Greenberg, President of Greenberg Capital, if regulators are prepared to deal with high frequency trading.
On the day Knight blew up, and its stock tumbled initially to the $7 range, when the market speculated the loss may be “only” as large as $150-$250MM, we calculated courtesy of a Nanex analysis which suggested the modus operandi of the “berserk” algo, that the finaly loss would befar greater. This was confirmed a day later when it was made public that the final loss KCG experienced in just 45 minutes of trading was at least $440 million, and will be far greater when the losses associated with all the external trading reroutes are calculated. Nonetheless, with the SEC still completely mum on the whole issue (for one simple reason: it has no idea what happened, and is quiet not out of malice, but sheer incompetence), there is still an open question of just what happened. Here, once again from Nanex, is the complete post-mortem of a firm that was almost fully mortem, explaining everything that happened.
Today John Embry told King World News, “I have been a long time proponent of the idea that we may very well be at peak gold production in the world.” He warned, “We may have seen the peak.” Embry also stated that he believes we are headed towards a, “… classic supply/demand squeeze.” This will send gold, “… to multiples of the current price.”
Embry, who is Chief Investment Strategist of the $10 billion strong Sprott Asset Management, discussed both gold and silver, but first, here is what Embry had to say about the ongoing crisis in Europe: “Over the weekend they accepted more collateral at the Greek Central Bank so they could make their payment to the ECB. So I think they will do what they have to, to keep this thing moving forward.”
John Embry continues:
“But the thing that’s the big problem, and question is, are the funders, Germany, Finland, the Netherlands, etc., do they have the balance sheets and the economic strength to bailout these peripherals in the South that are in horrific condition?
And even if they do, do they have the appetite to do it? All I can tell you is that it’s an enormously serious problem….
The very vocal head of the world’s largest bond fund has long been critical of the global ponzi system better known as the “capital markets.” Now, finally, he shifts his attention to Europe, where the interests of his parent – Europe’s largest insurance company Allianz are near and dear to the heart, and deconstructs not only the biggest challenge facing Europe: getting access to your money, but also the fatal flaws that will make achieving this now impossible. To wit: “Psst! Investors – do you wanna know a secret? Do you wanna know what Angela Merkel, François Hollande, Christine Lagarde and Mario Draghi all share in common? They want your money!” …. but… “private investors are balking – and for what it seems are good reasons – because policy makers’ efforts have been, until now, a day late and a euro short, or more accurately, years late and a trillion euros short.” And so they will continue failing ever upward, as permissive monetary policy which allows failed fiscal policy to be perpetuated, will do nothing about fixing the underlying problems facing the insolvent continent. Then one day, the ECB, whose credibility was already massively shaken last week, will be exposed for the naked emperor it is. Only then will Europe’s politicians finally sit down and begin doing the right thing. It will be too late.
Update: IBEX resumes for trade with a nearly 5 hour delay, last seen higher at 1.68%. We can only hope the Knight algo is not to blame for yet another round of headless chicken buying. Last week it was Knight, today it is the Spanish stock market. Following a halt for a “technical glitch” just after 4 am Eastern time, Spain’s stock exchange, the IBEX, is still not trading as of this posting. So how will Spain and the ECB declare victory if they are unable to demonstrate the daily ramp in Spanish stocks (where shorting financials is once again forbidden…. because Europe continues to be “fixed”). Continue Reading At: ZeroHedge.com
Continue Reading At: ZeroHedge.com
