Re: Mark Jones on JP Morgan
Back from holiday in sunny Zimbabwe and saw this. While I was away, the South African currency was beat up massively, falling from around 6 Rand to the US$ in January 2000 to R13.85/US$ at the low point in late December 2001 (now back to a bit less than R11/US$). The main villains behind the crash (far worse than Argentina's) are the local rich white bastards - mainly Anglo American Corp and DeBeers - taking their apartheid-era money out, but the spectacular falls (9% on December 9 2001) are apparently due to currency shorting teams from JP Morgan and Deutsche Bank, according to our stunned Reserve Bank governor. I'm no gold bug. But is there anything to the raid on South Africa, from the standpoint that our production costs for what remains the world's largest gold stock, have now effectively been cut in half, with the worst damage coming in the weeks immediately after Enron's downfall? Gold won't rise under those supply-inducing circumstances. Anglo American gold is even trying to take over Newmont in Australia with its new-found cash hoard. - Original Message - From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Saturday, December 22, 2001 1:27 AM Subject: [PEN-L:20858] Mark Jones on JP Morgan With a rigged gold market and a constantly strong dollar, J.P. Morgan Chase built up a 23 trillion dollar derivative rate position that is ON THEIR BOOKS RIGHT NOW! That unfathomable mega-position is one that cannot tolerate interest rate and general market VOLATILITY as they are SHORT volatility. That is why the dollar stays around 116.22 and gold is not allowed to rise no matter what happens in the world. Morgan and fellow bullion bankers that are short thousands of tonnes of gold have serious problems at the moment, which no one in Wall Street is talking about. If the dollar gets hit and gold rockets, some of these institutions will be tapicoa. Sound Taps! The short gold positions could do some in, but it is increased gold/dollar and interest rate volatility that could spell doom for J.P. Morgan Chase. As is, the interest rate volatility in the long bond is higher now than it was during the LTCM crisis. The highly regarded Jim Bianco of Bianco Research in Barrington, Illinois points out the volatility on 30 day Treasury options is higher than during the UAL failed buyout in 1989, the Gulf War in 1991 and during the Orange County risis in 1994. In his December report, Bianco also rolls out a chart comparing Primary Treasury Dealer Net Borrowings to Equity Margin Debt (he phrases it Net Borrowing over Net Lending). In 1990, they were both 20 billion. Around midyear 1999, they were both around 275 billion. Today, the Net Borrowing number has risen to 550 billion, while the Net Lending number has dropped to 150 billion. Quite a contrast. Bianco titled the chart: Speculators: Bonds Vs Stocks with the following commentary: This means that the Treasury market is a lot more leveraged than it was just 10 years earlier. How did this happen? A significant part of this leveraging has occurred in the last two years. This coincides with the Treasury's buyback operations, which we believe to be no coincidence. The buy back operations contributed to this leveraging. As the deficit started turning into surpluses in the late 1990's, the Treasury issued new securities and used this money to back higher-yielding Treasury securities issued in the late 1970's/early 1980's. This operation makes economic sense. However, it also has the effect of subsidizing the bond dealing community (welfare for bond dealers). The buyback operations meant issuance was higher than it would be without it. Furthermore, investors began to allocate more money to the equity and credit markets throughout the bull market of the 1990s. In an attempt to make up for these lost investors, the U.S. Treasury further increased their buyback operations. In effect, this increase in buybacks kept the number of dealers higher than it would have been had the Treasury cut back even further on their auction schedule. Nonetheless, the number of primary dealers is currently at an 18 year low. Dealer operations are similar to leveraged hedge funds. This means they have a great need to borrow securities. Since the Treasury was subsidizing the dealer community, the number of dealers grew in relation to the amount of Treasury securities outstanding. The leverage associated with these dealer operations also increased. Th effect of this leveraging means that the Federal Reserve are now hypersensitive to anything that effects the leverage community, including the dealer community. -END- www.lemetropolecafe.com -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Mark Jones on JP Morgan
Mark sent this to his list. I thought that someone here might want to comment on it. J.P. Morgan's Enron Exposure May Exceed $2.6 Bln, Investors Say By Michael Nol and Mark Lake New York, Dec. 20 (Bloomberg) -- J.P. Morgan Chase Co. shares fell amid concern the second-largest U.S. bank's exposure to bankrupt energy trader Enron Corp. is more than the $2.6 billion it has disclosed. The stock fell $1.25, or 3.3 percent, to $36.75 in afternoon trading after the company yesterday said potential losses tied to Enron's collapse are more than twice the amount it announced in November. The new details added to speculation that J.P. Morgan hasn't identified all the risks linked to its relationship with what was once the biggest energy trader. The bank made loans, provided letters of credit and guaranteed bonds for the Houston company. ``It remains to be seen whether this is the full disclosure or not,'' said Robert Morris, chief investment officer at Lord Abbett Co., which owns more than 5 million J.P. Morgan Chase shares and has been buying more in recent weeks. ``I hope it is.'' . ``The difficult thing to figure out is the ripple effect,'' said Jay Willadsen, a financial services analyst at Independence Investment Associates Inc., which holds J.P. Morgan shares. ``You think your exposure is x, but it's really x plus y plus z.'' -END- What will Morgan's exposure be next week, $5 billion? As presented in Midas commentary, one has to wonder what kind of counterparty and derivative problems are flying all over Wall Street and the banking/power sectors? What we do know is that the big players surrounding Enron continue to disclose MUCH bigger problems than they first let on. The really important question is whether these huge debacles can be contained? It also brings us back full circle to understanding the significance of the Gold Cartel's rigging of the gold market. One of the reasons the gold price was rigged was to keep interest rate volatility down (Gibson's Paradox) and to give impetus to Robert Rubin's strong dollar policy. With a rigged gold market and a constantly strong dollar, J.P. Morgan Chase built up a 23 trillion dollar derivative rate position that is ON THEIR BOOKS RIGHT NOW! That unfathomable mega-position is one that cannot tolerate interest rate and general market VOLATILITY as they are SHORT volatility. That is why the dollar stays around 116.22 and gold is not allowed to rise no matter what happens in the world. Morgan and fellow bullion bankers that are short thousands of tonnes of gold have serious problems at the moment, which no one in Wall Street is talking about. If the dollar gets hit and gold rockets, some of these institutions will be tapicoa. Sound Taps! The short gold positions could do some in, but it is increased gold/dollar and interest rate volatility that could spell doom for J.P. Morgan Chase. As is, the interest rate volatility in the long bond is higher now than it was during the LTCM crisis. The highly regarded Jim Bianco of Bianco Research in Barrington, Illinois points out the volatility on 30 day Treasury options is higher than during the UAL failed buyout in 1989, the Gulf War in 1991 and during the Orange County risis in 1994. In his December report, Bianco also rolls out a chart comparing Primary Treasury Dealer Net Borrowings to Equity Margin Debt (he phrases it Net Borrowing over Net Lending). In 1990, they were both 20 billion. Around midyear 1999, they were both around 275 billion. Today, the Net Borrowing number has risen to 550 billion, while the Net Lending number has dropped to 150 billion. Quite a contrast. Bianco titled the chart: Speculators: Bonds Vs Stocks with the following commentary: This means that the Treasury market is a lot more leveraged than it was just 10 years earlier. How did this happen? A significant part of this leveraging has occurred in the last two years. This coincides with the Treasury's buyback operations, which we believe to be no coincidence. The buy back operations contributed to this leveraging. As the deficit started turning into surpluses in the late 1990's, the Treasury issued new securities and used this money to back higher-yielding Treasury securities issued in the late 1970's/early 1980's. This operation makes economic sense. However, it also has the effect of subsidizing the bond dealing community (welfare for bond dealers). The buyback operations meant issuance was higher than it would be without it. Furthermore, investors began to allocate more money to the equity and credit markets throughout the bull market of the 1990s. In an attempt to make up for these lost investors, the U.S. Treasury further increased their buyback operations. In effect, this increase in buybacks kept the number of dealers higher than it would have been had the Treasury cut back even further on their auction schedule. Nonetheless, the number of primary dealers is currently at an 18 year low. Dealer operations are similar to leveraged
Re: Mark Jones on JP Morgan
Michael Perelman quoted M*** J: The highly regarded Jim Bianco of Bianco Research in Barrington, Illinois Highly regarded by bears of generally right-wing persuasion. I once got a spreadsheet from him in which he did a correlation on two time series - their levels, not their rates of change. He got a correlation coefficient over .9, which isn't surprising. Even I, whose econometric knowledge consists mainly of having read Peter Kennedy's book, know that's not kosher. Doug
RE: Re: Mark Jones on JP Morgan
Michael Perelman quoted M*** J: The highly regarded Jim Bianco of Bianco Research in Barrington, Illinois saith D*** H**: Highly regarded by bears of generally right-wing persuasion. I once got a spreadsheet from him in which he did a correlation on two time series - their levels, not their rates of change. He got a correlation coefficient over .9, which isn't surprising. Even I, whose econometric knowledge consists mainly of having read Peter Kennedy's book, know that's not kosher. hey, I once got an R-squared of 1 and an F-stat of infinity! it was econometric nirvana. J** D*
Re: RE: Re: Mark Jones on JP Morgan
I believe that some of the sources here are part of the group that says that the gold market is rigged. Doug has interviewed some of those people, but I never heard the interview. Still, I confess, that the though to a crippled J.P. Morgan does give me some shadenfreude or maybe even freude. On Fri, Dec 21, 2001 at 04:32:49PM -0800, Devine, James wrote: Michael Perelman quoted M*** J: The highly regarded Jim Bianco of Bianco Research in Barrington, Illinois saith D*** H**: Highly regarded by bears of generally right-wing persuasion. I once got a spreadsheet from him in which he did a correlation on two time series - their levels, not their rates of change. He got a correlation coefficient over .9, which isn't surprising. Even I, whose econometric knowledge consists mainly of having read Peter Kennedy's book, know that's not kosher. hey, I once got an R-squared of 1 and an F-stat of infinity! it was econometric nirvana. J** D* -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
