LBMA Part VI
THE GRAND LBMA EXPOS: A Collective-Mind Analysis
Part - 6
This writer will present the entire situation via a
chronicle of all the news publications about the subject,
providing dates sources and authors - where possible. Nearly
all available information was researched from Internet
sources. Most comments are verbatim from respective authors.
Occasionally, this writer added comments of clarification
and/or conclusions where the research leaves off.
Internet Commentary #31 -
Posted on the Internet October 7, 1997 by JTF
@the_turning_point
Vronsky -- I really enjoyed your most recent LBMA expose #5. My
name in lights! I am especially intrigued by the posts from
ANOTHER -- just as captivating as the posts by BIG TRADER. ORACLE
OF ALBERTA's comments are interesting as they allude to a
"powerplay by London to replace New York and Tokyo". The
Rothschilds would have alot to lose if the launching of the ECU
is a disaster -- I like the idead of an e-gold "backup" currency.
Who would know better the true value of gold than a Rothschild?
The terms offered to Britain to join the ECU will give us a clue
to the reality of the situation. One wonders - what is so special
about Britain - perhaps it is because of the location of the
LBMA, and the fact that Britain has not yet agreed to commit to
the ECU. As the Oracle of Alberta says -- the Rothschilds may be
standing behind the Brits to step in if the ECU ( supported by
the regular banking establishment of Europe and America )
falters. As I recall a common European currency was attempted
approximately 500 years ago, and failed. Perhaps this time there
will be a backup.
Internet Commentary #32 -
Posted on the Internet October 8, 1997 by JTF
@LBMA - Sherlock Holmes, where are you?
My brainstorming last night was an attempt to analyze logically
ANOTHER's statements on the assumption they are true.
Inconsistencies come out of such an analysis, so that one can
discern truth from falsehood. I have no inside information of my
own, and my interest is to stimulate discussion on a mystery
which seems to be controlling much of our futures. I doubt that
we will ever know fully what is going on with the LBMA, and why
for the last year or so the dollar and gold are inversly
coorelated, but that gold in non-US$ linked prices has not
dropped anywhere near as much!
kuston: If gold is only insurance during oil transactions, then
it should only play a passive role, and gold price should not be
affected. Are you saying that the gold is to be used only as
collateral, until the deal is closed? Couldn't some of the
oil-producing coutries demand gold and get it? Heaven forbid!
Gold as money -- heresy. Please let us all know what you know. If
we all do this, we might be able to unwrap the enigma.
Organ: I printed your post that you say contradicts Oracle of
Alberta. I also have read somewhere that a number of banks that
represent "old money" in europe have considerable influence over
our Fed Reserve. I don't know details, but something like this is
highly likely. It may not be a conspiracy in the true sense, and
there may be several conflicting agendas. Our A. Greenspan is
undoubtedly aware of most of whats going on behind the scenes. I
don't know what his real priorities are. I think it's worthwhile
to gather as much information as possible and analytically
decipher this, to separate the truth from the falsehood. One
thing I've learned over the years is that the opposite of
imperfect is not perfect -- we will never know exactly what is
going on -- but we should keep at it, and work continuously on
our model -- much the same as coming up with a new physical model
of the universe!
Sherlock Holmes, where are you?
Internet Commentary #33 -
Posted on the Internet October 9, 1997 by JTF
@LBMA
What would you do if you were A Greenspan, and you had a currency
collapse that involved 1/3 of the world, and the world currency
is still dollars? Ans: Print dollars like crazy! How would you
prevent the inflationary consequences at home ( and elsewhere? )
. Ans: Sell gold. I don't know how one does this without buying
something else, but perhaps some clever economic gurus have
figured out how to do this with some kind of derivative gold
trading at the LBMA. E-gold to the rescue again? I think what has
happened is the the Central Banks (and LBMA) are using
derivatives to amplify the effect of their gold to achieve the
activity that we now see. However, my intuitive feeling is that
no matter how cleaver they are, the game is still up when they
run out of gold, or they come to their senses. Derivative gold
trading just delays the inevitable.
Is ANOTHER right? Is part of the problem that oil prices are
about to go up more, and the LBMA has to sell gold to boost the
dollar? The alternative is that this is all speculative trading.
This seems unlikely due to the magnitude of the trend for the
last 1 1/2 years, but I bow to the gold gurus on this.
Internet Commentary #34 -
Posted on the Internet October 10, 1997 by Aurator
Anyone looking for clues on LBMA, perhaps the answer lies in the
other London Metals Exchange. Why not? Surely the good folk
(grinnie) behind the LME, may, well just perhaps *may*, be behind
the LBMA.
I know, if i was a aurochild von Morgan, why, I'd make darnt sure
that my grandchildren wouldn't be suprised by any Johnny Come
Lately, especially after that Rhodes fella tried to take it all,
no, I'd plan in advance, remember, Kondratieff and the only
practical use is for inter-generational planning.. but i digress,
I peregrinate, why is ALL NOT WELL with this institution that is
older than, why even the good ol U.S. of A.... ( I1m just warming
up...)
LME: Not such a shining example
MONDAY OCTOBER 6 1997 (London Financial Times)
By Stefan Wagstyl and Kenneth Gooding
"Thousands of metals traders and their clients this week gather
to mark another record year for the London Metal Exchange, one of
the world's most important commodity markets.
The exchange has recovered with remarkable speed from the shock
of last year's crisis when Sumitomo Corporation of Japan, the
LME's biggest client, disclosed copper trading losses of $2.6bn
(œ1.6bn). A survey of exchange users last year made by the
Securities and Investments Board, the regulator, revealed some
shortcomings in LME procedures, but no fundamental weaknesses.
Turnover is at record levels, running at 20 per cent above last
year. There are profits aplenty to finance this week's champagne.
But celebrations will be tempered by fears that all is not well
with the 121-year-old institution. The exchange is investigating
suspicions that several big trading companies are exerting
excessive influence on metals prices.
In recent months, the authorities have intervened to limit
trading in aluminium and zinc to stop excessive price swings.
With limits already in place in copper and lead, four of the
LME's seven metals are subject to controls.
The LME contributes to the confusion. Its rules do
not require the exchange to explain its actions.
Even the membership of the committees that decide
on intervention is secret.
Following closely after the Sumitomo affair - where the company's
head trader admitted buying huge amounts of metal through
fraudulent transactions - such turmoil raises doubts about
whether LME prices truly reflect international supply and demand.
This is of serious economic concern because almost every
non-ferrous metals contract in the world is drawn up with
reference to LME prices.
The LME draws vociferous criticism from Nymex, its New York
rival. Nymex conforms to tough US laws and claims the LME needs
fundamental reforms to make it more transparent. Some
London-based analysts agree, including Wiktor Bielski, head of
commodities research at Deutsche Morgan Grenfell, a Deutsche Bank
subsidiary, who says: "The LME works like a club. The only way to
change it is to bring in American-style external regulation."
Mr Bielski is in a minority. SIB's review found most LME users
"were broadly content with the service provided". This view is
echoed by Robert Wilson, chairman of Rio Tinto, the world's
biggest mining company. "There is nothing that the LME is doing
that we think it should not be doing," he says. "It is taking
steps to improve. This is not to say that the LME is the ideal
pricing mechanism, but I'm not sure we could think of anything
better."
The LME has grown rapidly in the past decade with turnover
increasing tenfold to more than 50m lots, worth $2,000bn, last
year. The traditional privately owned London companies, which
once dominated LME membership, have been replaced by subsidiaries
of international metals and financial companies.
But the exchange still suffers from the same fundamental
challenge as 10 years ago: it does not control the markets it
sets prices for. Most metals trading takes place outside the LME
and outside the UK, far from the reach of the LME authorities.
This became painfully clear in the Sumitomo affair, when LME
trading revealed no sign of Osaka-based Sumitomo's huge
purchases.
However, the modest part of the world's metal that does go
through the LME's warehouses plays a disproportionately important
role in influencing prices. The LME stocks, for which figures are
published each working day, are the most visible part of the
global supply chain. The stock levels often change rapidly,
generating abrupt price movements. In the long run, the
fundamentals of global supply and demand assert themselves. But
in the short term, the LME tail frequently wags the dog of the
world metals trade.
Such a market can be prone to manipulation. A
trader who grabs control of a chunk of LME stocks
can wreak havoc among those who happen to be short
of metal at a given time. Because LME contracts
are traded on margin (where clients put up just 5
per cent of the contract value), determined
operators do not need huge financial resources. As
little as $20m could be enough to manipulate LME
copper stocks.
With considerably more money at his disposal, Yasuo Hamanaka,
Sumitomo's trader, controlled up to 1m tonnes of copper, or about
10 per cent of world annual consumption. However, since he
concealed his trades through non-LME member intermediaries, the
exchange had little evidence that anything was amiss.
Now the LME authorities are keeping a close eye on zinc and
aluminium. In zinc, prices started rising after reports surfaced
earlier this year that Chinese smelters had gone short (selling
metal they did not have, hoping to buy it later at cheaper
prices). But prices soared instead of falling. When traders heard
Chinese companies were short of metal, they snapped up supplies,
exacerbating the shortage, or "squeeze".
Glencore, the Swiss trading group, was reported to have bought
control of substantial stocks. Willy Strothotte, the chairman,
denied he was profiting unfairly: "We don't believe in cartels
and squeezes. But if we are sometimes cautious [buying metal] so
that we can cover our needs, that has to be accepted." The
shortage of metal for immediate delivery was so acute that the
LME authorities set limits on price movements, which are still in
force.
In aluminium, shortages developed after Glencore bought metal on
the LME at a time when Barclays Metals, a subsidiary of the UK
bank, was holding aluminium stocks off the exchange, from which
it was supplying customers. Unfortunately for Glencore, it sought
particular grades that were in short supply. The price of metal
for immediate delivery soared above the price for metal for
delivery in three months, an abnormal switch that upset the
market. The LME intervened in August and controls remain in
place.
How much these squeezes matter is a moot point. The LME says
long-term studies show prices move broadly in line with long-term
supply and demand and that price volatility has not increased
since the 1970s.
Critics counter that, even if periods of volatility are short,
they still greatly inconvenience users. As BICC, the British
cable maker and a big copper user, says: "We don't think the LME
needs fundamental changes. But this year has seen some strange
behaviour, which leaves users worried about prices."
Given that the LME executive operates in a difficult market,
could it do its job any better? The answer is a qualified yes.
In its review, SIB made 38 recommendations for reform, covering
transparency of prices, warehouse stock control and governance.
SIB says the LME's supervisory structures, including personnel
and computers, have not kept pace with its growth. As Jane Lowe,
SIB's head of derivatives markets supervision, will say in a
speech today: "I personally see the review as a catalyst for
change at the LME, so that its regulatory role keeps pace with
its commercial evolution."
In response, the LME is increasing its staff from 40 to 50 and is
considering buying new computers. It will publish more trading
data, including - for the first time - information about large
positions held by LME clients, which could yield signs of
possible squeezes.
To counter complaints that it is too protective of its members,
the exchange has increased the number of board members from
outside the metals trade from two to four, including Kit Farrow,
a former senior Bank of England official. However, they are still
a small minority of the 18-member board.
Metals companies mostly welcome the changes, though they want
them implemented more urgently. "They're moving in the right
direction," says Jean-Pierre Rodier, chairman of Pechiney, the
French aluminium producer. "But, as we all know, change is a slow
process."
Concern remains about how vigorously the exchange will police its
markets. The board already has powers to punish members breaking
rules with fines, suspensions and even expulsions. After the
Sumitomo affair, Lord Bagri, the chairman, promised abusers he
would hang them high. But no offenders have been publicly
identified, let alone brought to book. David King, chairman of
the LME, says inquiries take time.
The LME is also vulnerable to charges that it suffers from a
fundamental conflict of interest. In the long run, its members
benefit from the exchange authorities' efforts to stamp out
manipulation. But in the short term, brokers who are fast enough
to take advantage of a squeeze can profit handsomely. The
exchange says it avoids conflicts of interest by delegating
market investigations from the member-dominated board to
committees made up of people with no interest in the metal under
investigation - including respected outsiders, among them a High
Court judge.
Mr King insists that the safeguards are effective. He says the
LME is a "professionals' market" where clients understand the
risks. There are no retail investors to protect. So the exchange
has not spent too much time in the past promoting its image in
the wider financial world. "Our primary audience is our
membership, the trade and industry," says Mr King.
But satisfying the interests of those most closely involved with
the LME is not be enough. If the exchange is to rid itself of
doubts about its practices, those practices must not only be
fair. They must be seen to be fair."
Vronsky note: Does the strange shroud of secrecy enveloping the
LME and LBMA someway link them... ?
Internet Commentary #35 -
Posted on the Internet October 10, 1997 by JTF
@LBME
Re- Aurator's comments 10/10/87 2:29 about the real LBME secret
lying inside the LME, which apparently works like a private,
unregulated club. Perhaps the distinction between CB activity and
private speculative activity is blurred -- if there are few rules
-- the activity of the central banks and private
investors/speculators may be indistinguishable. The only way one
can separate actions of one party or another would then only be
by what happens to the market.
I am in favor of having free markets, but I think there should be
some rules to prevent massive manipulation -- which in my opinion
is not conducive to a free market. Remember the Hunts and Silver
in 1980?
THE RED BARON
(October 13, 1997)
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(Part - 7 coming in a few days)
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THE GRAND LBMA EXPOS: A Collective-Mind Analysis - Part 1
THE GRAND LBMA EXPOS: A Collective-Mind Analysis - Part 2
THE GRAND LBMA EXPOS: A Collective-Mind Analysis - Part 3
THE GRAND LBMA EXPOS: A Collective-Mind Analysis - Part 4
THE GRAND LBMA EXPOS: A Collective-Mind Analysis - Part 5
CENTRAL BANK GOLD OPERATIONS & ITS RAMIFICATIONS - Part I
CENTRAL BANK GOLD OPERATIONS & ITS RAMIFICATIONS - Part II
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