Thanks. Nice to be recognized and compelled to forward to others. Someone just sent me a copy of the GATA post. I hope more become informed. I see that someone also posted a quote there from something I wrote last month. Here is that post in case you missed it. This essay gives more background and some back-up links.
Message 22669800
>>Manipulation and collusion amongst the mega-large NYSE member banks, orchestrated by the Federal Reserve - or at least with their blessing - is the way of the market now. Program Trading is now responsible for 55-70% of all shares traded on the NYSE. Back in 1987 program trading only ran about 13%. During the crash of 1987 it got as high as 16%. As late as 1999 it was only running at about 20%. In early 2002 the 52 week average was running at 26%. NYSE program trading info can be found here; nyse.com
Back in May of 2002 the SEC issued a white paper titled 'Interagency White Paper on Structural Change in the Settlement of Government Securities: Issues and Options'. There are only two major banks that provide settlement services for government securities - JPM and Bank of NY. sec.gov
The SEC issued the paper to address a concern as to what would happen, and what would the remedy be if one of these banks became insolvent. Of course the bank everyone was looking at was JPM and the extremely high level of derivatives they carried on their books. In May of 2002 JPM saw its share price start to fall. The market started to show concerns about JPM and its derivatives exposure. We also had the Co-head of JPM's investment bank to leave the firm on May 23, 2002.
The feedback SEC received back was that there should be an emergency bank set up just in case – a ‘new back’. Well that’s what they did and that is what they named it – ‘NewBank’. Here is the link to the Federal Reserve press release. federalreserve.gov This link shows who runs this bank – the PPT and the boyz.
As I mentioned above, program trading in early 2002 averaged about 26%. Program trading reports show that program trading started to accelerate rapidly in about May of 2002 – the same time they were contemplating a major bank failure. By May of 2003 program trading accounted for 37% of all shares traded on the NYSE – a 42% increase. May of 2004 program trading averaged 53%, or a bit more than double the 2002 level. May of 2005 averaged 56.5%. Program Trading has ramped up the last several weeks and the new 52 week average is 66.9%. Remember, that number is the percentage of ALL shares traded in the NYSE. The stocks in the S&P 500 are what are mostly in these program trades. Up to 85% of all S&P500 stocks traded could now be in program trades. As program trading picked up, other retail trading has slowed.
In September of 2002 Greenspan gave a very telling speech that very well indeed may have gave us a clue to the PPT mindset. In the speech he said; “In today's markets, for example, there is an increased reliance on private counterparty surveillance as the primary means of financial control. Governments supplement private surveillance when they judge that market imperfections could lead to sub-optimal economic performance.” Link to speech; federalreserve.gov
“Private counterparty surveillance”? A new name for the PPT – the PCS Team? Greenspan is referring here to the major NYSE member banks.
Then Greenspan argues against ‘transparency’ in the markets. “There should not be much dispute that markets function best when the participants are fully informed. Yet, paradoxically, the full disclosure of what some participants know can undermine incentives to take risk, a precondition to economic growth. No one can deny that fully informed market participants will generate the most efficient pricing of resources and the most efficient allocation of capital. Moreover, it could be argued that, if all information held by individual buyers or sellers became available to all participants, the pricing structure would more closely reflect the underlying balance of supply and demand. Thus full information would appear to be the unambiguous objective. But should it be?”
Hmmm…he argues against a “fully informed market participants will generate the most efficient pricing of resources and the most efficient allocation of capital.” Amazing.
Then his speech then goes on to argue against regulations that may regulate “new innovations” that would allow the ‘PCS’ folks to make “quasi-monopoly return(s).”
In summary of the speech, Greenspan embraces the idea that mega-banks should be able to collude in developing trading strategies that undermine the smaller investor with out fear regulation, in that these “innovations” are good for the growth of the economy by making the PCS banks stronger. Anyway, that the way I see it. Read the speech yourself. I think anyone would have a hard time coming away with a different conclusion.
So, where are we today? Program Trading reported last week for the previous week was 69.7% of ALL shares traded on the NYSE. Just six mega-banks accounted for 64.2% of ALL the program trading. Their program trades accounted for 44.7% of ALL shares traded on the NYSE.
Are their “innovations’ working?
Just a year later in June of 2003 we started seeing news like this; June 16 (Bloomberg) -- Goldman Sachs Group Inc. and MORGAN STANLEY, the top merger advisers and equity underwriters in the past decade, are making twice as much money this year from trading than from investment banking. The emergence of trading as Wall Street's biggest profit center will be confirmed when Goldman Sachs, MORGAN STANLEY, Lehman Brothers Holdings Inc. and Bear Stearns Cos. release earnings for the quarter ended May 31 during the next two weeks.
And just in the last few months…
Bear Stearns recent earnings report was interesting. Their principle transactions trading unit showed a 52.2% increase in revenues year over year, 29.7% increase over last quarter. On the other hand, commission revenues were down 2.7% year over year. Guess they were making so much money for themselves that they did not let their clients in on their success. Then there is this from their report;
>>Asset Management net revenues were $22 million for the second quarter of 2006 a decrease of 56% from $50 million in the prior year's quarter mainly due to a decline in performance fees on proprietary hedge funds. Assets under management increased 20% to $48 billion on May 31, 2006, from $40 billion on May 31, 2005.<<
If I am reading this right, assets under management for the hedge funds that they manage for other people's money were up 20%. But, because the hedge funds they manage did not perform well, their management fees were down 56%. You don't think that their managed hedged funds (other people's money) was on the losing side of a trade with their own principle trading unit that is trading THEIR money, would you?
Goldman Sachs recently reported. Principle trading and investments were up 147% year over year. biz.yahoo.com Goldman's trading and principle investment unit accounted for 69% of overall revenue in the second quarter.
UBS reported net trading income up 93% for their first quarter. They had this to say about the money they manage for others; “Global equity markets rose by more than 5% in first quarter. The actively managed global equity composite underperformed its benchmark for the quarter, despite positive contributions across some sectors, such as software. The underperformance was largely a result of stock selection in diversified financials and the underweight position in the strongly performing materials sector.” Another one that was on the right side of every trade with their money, but something quite different when they manage other people’s money.
Another. Credit-Suisse, a Swiss mega-bank, recently reported a 95% increase in trading revenues y-o-y. “These significant increases reflected higher revenues across all major business areas amid strong markets.” Later in the report when they are talking about the accounts they manage…” Asset management revenues decreased slightly versus the fourth quarter of 2005 also due primarily to lower trading revenues.” credit-suisse.com
All the above banks are also top program traders as reported by the NYSE. All implied in recent reports that their energy trading units were very profitable. In my opinion, these energy traders were able to keep energy futures high in face of building inventories to squeeze the shorts. ‘Trader Monthly’, an industry magazine, reported in April that top traders are earning $15 to $50 million a year.
I think one must ask themselves how, across the board, the top mega banks can show such substantial growth trading their own funds while the funds they manage for others show less stellar returns. The only way it can be done is through an orchestrated effort involving the Federal Reserve and the ‘PCS’ team. Remember, these are the same banks that the Federal Reserve uses to put more money into the system. Through collusion these member banks can gain substantial profits for their proprietary accounts at the expense of not only the small investor, but anyone that is not a member of this group.
The public needs to know about these shenanigans. Greenspan’s speech pretty much says that it is best that the mega-banks profit from the little guy to have a robust economy. In his example he felt it best that the individual land owner remained unaware of the highest and best use of his property and the values that it may represent. He fairly much endorses ‘irrational exuberance’ as long as the mega banks benefit.
In closing, As I noted above, something really changed in 2002. Remember Greenspan's speech promoting new innovations by the "private counter party surveillance"[team]. I think you will find this interesting…
Every year the SEC comes out with an annual report and includes their mission statement. In Nov 2002 this was their mission statement.
"Since its creation in 1934, the SEC's mission has been to administer and enforce the federal securities laws in order to protect investors, and to maintain fair, honest, and efficient markets." sec.gov/pdf/annrep02/ar02fm.pdf
This is their mission statement for the end 2003
"The mission of the Securities and Exchange Commission is to protect investors, maintain fair, orderly, and efficient markets, and facilitate capital formation." sec.gov/pdf/annrep03/ar03about.pdf
Notice that "Since its creation in 1934" is missing. Obviously implies that their mission may have changed. "Administer and enforce the federal securities laws" appears to no longer be part of their mission.
Then we see that "honest" markets was replaced by "orderly". Orderly manipulated markets are better than "honest" markets, I guess…
And of course their new mission is to "facilitate capital formation." Since when did the SEC begin facilitating capital formation as part of their enforcement duties? Would that not be more of the job of the Federal Reserve?
The small investor is screwed unless something is done to stop these bastards! If you find this post of interest - please forward it others. We need to get the word out.<< |
