So what's the o/u on date that taper paused/reversed? Yet Another academic like Ben with the most powerful position in the world that knows absolutely nothing about the real world only academic inbred economic theory
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Yellen’s plan for boosting the weak jobs market
U.S. jobless claims rose 8,000 to 339,000 last week. The Bureau of Labor Statistics reported last Friday that the economy added a lackluster 113,000 jobs in January but the unemployment rate dropped to 6.6%.
This week when Janet Yellen testified before House lawmakers we learned more about how she's thinking about the labor market. In her prepared remarks she pointed to concerns including the long-term jobless as well as part-time workers who would like more work. (Yellen's Senate testimony was scheduled for today but was postponed due to the weather).
And during her testimony, she indicated she believes the increase in unemployment since the financial crisis is cyclical -- meaning due to the business cycle and related to demand.
Related: Yellen pledges continuity; Rickards says prepare for a 'taper pause' in June
"The reason that's important is if you think it's cyclical, then you think monetary policy can help," says Jim Rickards, author of bestseller Currency Wars and the forthcoming Death of Money. That's opposed to structural unemployment which is longer-term and due to fundamental shifts in an economy.
"If you think it's all structural than monetary policy cannot help," and you would have to employ fiscal and regulatory policies, for example, that are mostly in the hands of Congress.
Rickards view is that trouble in the labor market is almost 100% structural: "The Fed has been using monetary easing for five years and it hasn't really worked." He concedes that unemployment has fallen substantially but that many of the jobs created are low-wage part-time jobs.
Related: Jim Cramer: It's hard to be bullish after the jobs numbers
Another key aspect of the labor market story is the decline in the labor force participation to a 35-year low. Yellen told lawmakers while a significant part of this decline is structural due to demographics, she said some of it may be cyclical and she pointed to prime working-age men falling out of the workforce.
Rickards says his central banking sources believe Yellen is very focused on the labor market with real wages as her metric (as a proxy for slack in the labor market).
He also points to a paper co-authored by Andrew T. Levin, who Rickards says he's told is Yellen's "go to" economist on labor issues. The paper makes the point that the difference between unemployment and being out of the labor force is not just statistical: if you are unemployed you are job ready, if you're out of the labor force it takes greater inertia and a lot more monetary policy to get people off the couch and back in the labor force.
"The conclusion is, you need a lot more monetary easing to move the needle and that's what [Yellen's] thinking and focused on," Rickards asserts.
-------------
Yellen’s plan for boosting the weak jobs market
U.S. jobless claims rose 8,000 to 339,000 last week. The Bureau of Labor Statistics reported last Friday that the economy added a lackluster 113,000 jobs in January but the unemployment rate dropped to 6.6%.
This week when Janet Yellen testified before House lawmakers we learned more about how she's thinking about the labor market. In her prepared remarks she pointed to concerns including the long-term jobless as well as part-time workers who would like more work. (Yellen's Senate testimony was scheduled for today but was postponed due to the weather).
And during her testimony, she indicated she believes the increase in unemployment since the financial crisis is cyclical -- meaning due to the business cycle and related to demand.
Related: Yellen pledges continuity; Rickards says prepare for a 'taper pause' in June
"The reason that's important is if you think it's cyclical, then you think monetary policy can help," says Jim Rickards, author of bestseller Currency Wars and the forthcoming Death of Money. That's opposed to structural unemployment which is longer-term and due to fundamental shifts in an economy.
"If you think it's all structural than monetary policy cannot help," and you would have to employ fiscal and regulatory policies, for example, that are mostly in the hands of Congress.
Rickards view is that trouble in the labor market is almost 100% structural: "The Fed has been using monetary easing for five years and it hasn't really worked." He concedes that unemployment has fallen substantially but that many of the jobs created are low-wage part-time jobs.
Related: Jim Cramer: It's hard to be bullish after the jobs numbers
Another key aspect of the labor market story is the decline in the labor force participation to a 35-year low. Yellen told lawmakers while a significant part of this decline is structural due to demographics, she said some of it may be cyclical and she pointed to prime working-age men falling out of the workforce.
Rickards says his central banking sources believe Yellen is very focused on the labor market with real wages as her metric (as a proxy for slack in the labor market).
He also points to a paper co-authored by Andrew T. Levin, who Rickards says he's told is Yellen's "go to" economist on labor issues. The paper makes the point that the difference between unemployment and being out of the labor force is not just statistical: if you are unemployed you are job ready, if you're out of the labor force it takes greater inertia and a lot more monetary policy to get people off the couch and back in the labor force.
"The conclusion is, you need a lot more monetary easing to move the needle and that's what [Yellen's] thinking and focused on," Rickards asserts.
Inflation no concern to the rich ... but inflation in the necessities through the roof since tech bubble burst... Inflation figs a sham they will just keep coming up with new reasons to print more... Like I said before the equity market is their last defense till things get really nasty... And swoon from here and all hell breaks loose...
never owned not heard of jaguar before u posted mickj
2002-2012
gas 158%
beer 25%
eggs 73%
coffee 90%
penur butter 40%
milk 26%
bread 39%
spagetti 44%
OJ 46%
apples 43%
wine 60%
electricity 42%
steak 41%
margerine 143%
tomatoes 22%
turkey 56%
bacon 39%
ground beef 61%
never owned not heard of jaguar before u posted mickj
2002-2012
gas 158%
beer 25%
eggs 73%
coffee 90%
penur butter 40%
milk 26%
bread 39%
spagetti 44%
OJ 46%
apples 43%
wine 60%
electricity 42%
steak 41%
margerine 143%
tomatoes 22%
turkey 56%
bacon 39%
ground beef 61%
At some point they lose control and it all blows up in their face the 95% of the world with no savings are just going to continue to spend more on the things they need to keep their situation "normal" while their income flat to slight up at best ...Only thing they got left now is the wealthy spending more as equity markets bubble (valuations/sharebuy backs/cost cutting/lack of true growth revenue ...stretching thinner everyday) ... Once that gig is up game over...
Dream of U.S. Oil Independence Slams Against Shale Costs
The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder than it seems.
Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency. Iraq could do the same with 60.
Consider Sanchez Energy Corp. The Houston-based company plans to spend as much as $600 million this year, almost double its estimated 2013 revenue, on the Eagle Ford shale formation in south Texas, which along with North Dakota is one of the hotbeds of a drilling frenzy that’s pushed U.S. crude output to the highest in almost 26 years. Its Sante North 1H oil well pumped five times more water than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shares sank 7 percent.
Rethinking the Ban on Exporting U.S. Oil
“We are beginning to live in a different world where getting more oil takes more energy, more effort and will be more expensive,” said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin.
Drillers are pushing to maintain the pace of the unprecedented 39 percent gain in U.S. oil production since the end of 2011. Yet achieving U.S. energy self-sufficiency depends on easy credit and oil prices high enough to cover well costs. Even with crude above $100 a barrel, shale producers are spending money faster than they make it.
Missed Forecasts
Companies are showing the strain. Chesapeake Energy Corp., the Oklahoma City-based company founded by Aubrey McClendon, reported profit yesterday that missed analysts’ forecasts by the widest margin in almost two years. Shares declined 4.9 percent. Fort Worth, Texas-based Range Resources Corp. fell 2.3 percent after announcing Feb. 25 that fourth-quarter profit dropped 47 percent. QEP Resources Inc., a Denver-based driller, slid 10 percent after fourth-quarter earnings reported Feb. 25 fell short of analysts’ predictions.
The U.S. oil industry must sprint simply to stay in place. U.S. drillers are expected to spend more than $2.8 trillion by 2035 even though production will peak a decade earlier, the IEA said. The Middle East will spend less than a third of that for three times more crude.
Bulls Crow
Shale wells can vary in price. Chesapeake will spend an average of $6.4 million each this year, according an investor presentation last updated yesterday. Houston-based Goodrich Petroleum Corp. will spend up to $13 million on some of its wells, Robert Turnham, president and chief operating officer, said in a Feb. 20 earnings call.
Bullish analysts and oil executives have reason to crow. While drilling in Iraq could break even at about $20 a barrel, output will be limited by political risks, Ed Morse, global head of commodities research at Citigroup Inc. in New York, said in a January report. By contrast, the break-even price in U.S. shale is estimated at $60 to $80 a barrel, according to the IEA. The price of a barrel hasn’t dipped below $80 since 2012 and has stayed above $90 since May. Costs in the U.S. will continue to fall as drillers get faster and improve results, Morse said.
Crude Exports
“The U.S. oil and natural gas renaissance is receiving significant investment because return on investment is good and competitive with other opportunities,” Rick Bott, president and chief operating officer of Oklahoma City-based Continental Resources Inc., a pioneer of shale drilling, said in an e-mail. “We’re confident that continued technological advancements will keep the Bakken and other plays at the forefront of investment for the foreseeable future.”
Harold Hamm, the chairman and chief executive officer of Continental Resources who became a billionaire drilling in North Dakota, told U.S. lawmakers Jan. 30 that the country, which U.S. Energy Information Administration data show supplied 86 percent of its own energy last year, can drill its way to energy independence by 2020. Hamm is leading an effort to get Congress to allow crude exports for the first time since the 1970s.
U.S. oil production will average 9.2 million barrels a day in 2015, up from 7.4 million last year, according to the EIA, the statistical arm of the U.S. Energy Department. Colorado boosted output by 11 percent in the first 11 months of last year, Wyoming was up 12 percent and Oklahoma added 24 percent.
“I don’t see the shale boom coming to an end,” said Andy Lipow, president of Lipow Oil Associates, an energy consulting firm in Houston. “We’re just getting started in places like Colorado, Wyoming and Oklahoma.”
Horizontal Wells
Sanchez Energy said in a Feb. 19 statement that Sante North 1H isn’t yet finished and the well will produce more oil than the early report suggested. The company said it has 120,000 acres in the Eagle Ford and plans to spend 90 percent of its exploration budget there this year. The company’s shares have risen 63 percent in the past year.
Traditional wells are bored straight down, like straws stuck into large deposits of crude. Shale is tapped by steering the drill horizontally through layers of oil-rich rock, sometimes for a mile or more. The formation is blasted apart with a high-pressure jet of water, sand and chemicals, a practice called hydraulic fracturing or fracking, to open up cracks that free pockets of trapped fuel. The complexity and materials needed to drill horizontally and blast the rock add to the cost.
Yield Little
The boom’s boosters have given rise to the misconception that wringing oil and gas from shale can be easily replicated throughout the country, Patzek said. That isn’t the case, he said. Every rock is different. The Bakken shale, along with the neighboring Three Forks formation, covers an area larger than France, according to the IEA. An oil-bearing formation that’s 400 feet (122 meters) thick in one spot may taper off to nothing just a mile away, Patzek said. What works for one well may yield little in a neighboring county.
The output of shale wells drops faster, too, falling by 60 to 70 percent in the first year alone, according to Austin, Texas-based Drillinginfo Inc. Traditional wells take two years to fall by about 55 percent before flattening out. That forces companies to keep drilling new wells to make up for lost productivity.
“You keep having to drill more and you keep having to spend more,” said Mark Young, an analyst with London-based Evaluate Energy, which tracks production and its costs.
Sweet Spots
A prolonged slide in prices below $85 a barrel may put pressure on operators that have struggled to contain costs or that don’t own acreage in the prolific “sweet spots” of the oil fields, said Leonardo Maugeri, a former manager at Rome-based energy company Eni SpA who’s researching the geopolitics of energy at Harvard University’s Belfer Center for Science and International Affairs.
Companies have boosted well productivity and will continue to whittle down the break-even price, he said. While the boom could survive a brief dip in oil prices, a long slump could slow drilling and cause production to fall swiftly, Maugeri said.
“To sustain in the short term, the U.S. needs prices at $65 a barrel,” Maugeri said. “That’s a critical level. Below that level, many opportunities will vanish.”
The U.S. benchmark oil contract for West Texas Intermediate crude for delivery in April 2016 is trading at about $85 a barrel, almost $18 a barrel less than today and still $20 above Maugeri’s threshold.
Net Debt
Even with crude prices above $100 a barrel, U.S. independent producers will spend $1.50 drilling this year for every dollar they get back from selling oil and gas and will carry debt that is twice as much as annual earnings, said Ryan Oatman, an energy analyst with SunTrust Robinson Humphrey Inc., an investment bank in Houston.
By contrast, the net debt of Exxon Mobil Corp., the world’s largest energy explorer by market value, is less than half of the cash earned from operations last year. The company will spend 68 cents for every dollar it gets back this year, according to company records and analyst forecasts compiled by Bloomberg.
So far, oil prices have been high enough to keep investors interested in the potential profits to be made in shale, Oatman said.
“There is a point at which investors become worried about debt levels and how that spending is going to be financed,” Oatman said. “How do you accelerate and drill without making investors worried about the balance sheet? That’s the key tension in this industry.”
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net
The path toward U.S. energy independence, made possible by a boom in shale oil, will be much harder than it seems.
Just a few of the roadblocks: Independent producers will spend $1.50 drilling this year for every dollar they get back. Shale output drops faster than production from conventional methods. It will take 2,500 new wells a year just to sustain output of 1 million barrels a day in North Dakota’s Bakken shale, according to the Paris-based International Energy Agency. Iraq could do the same with 60.
Consider Sanchez Energy Corp. The Houston-based company plans to spend as much as $600 million this year, almost double its estimated 2013 revenue, on the Eagle Ford shale formation in south Texas, which along with North Dakota is one of the hotbeds of a drilling frenzy that’s pushed U.S. crude output to the highest in almost 26 years. Its Sante North 1H oil well pumped five times more water than crude, Sanchez Energy said in a Feb. 17 regulatory filing. Shares sank 7 percent.
Rethinking the Ban on Exporting U.S. Oil
“We are beginning to live in a different world where getting more oil takes more energy, more effort and will be more expensive,” said Tad Patzek, chairman of the Department of Petroleum and Geosystems Engineering at the University of Texas at Austin.
Drillers are pushing to maintain the pace of the unprecedented 39 percent gain in U.S. oil production since the end of 2011. Yet achieving U.S. energy self-sufficiency depends on easy credit and oil prices high enough to cover well costs. Even with crude above $100 a barrel, shale producers are spending money faster than they make it.
Missed Forecasts
Companies are showing the strain. Chesapeake Energy Corp., the Oklahoma City-based company founded by Aubrey McClendon, reported profit yesterday that missed analysts’ forecasts by the widest margin in almost two years. Shares declined 4.9 percent. Fort Worth, Texas-based Range Resources Corp. fell 2.3 percent after announcing Feb. 25 that fourth-quarter profit dropped 47 percent. QEP Resources Inc., a Denver-based driller, slid 10 percent after fourth-quarter earnings reported Feb. 25 fell short of analysts’ predictions.
The U.S. oil industry must sprint simply to stay in place. U.S. drillers are expected to spend more than $2.8 trillion by 2035 even though production will peak a decade earlier, the IEA said. The Middle East will spend less than a third of that for three times more crude.
Bulls Crow
Shale wells can vary in price. Chesapeake will spend an average of $6.4 million each this year, according an investor presentation last updated yesterday. Houston-based Goodrich Petroleum Corp. will spend up to $13 million on some of its wells, Robert Turnham, president and chief operating officer, said in a Feb. 20 earnings call.
Bullish analysts and oil executives have reason to crow. While drilling in Iraq could break even at about $20 a barrel, output will be limited by political risks, Ed Morse, global head of commodities research at Citigroup Inc. in New York, said in a January report. By contrast, the break-even price in U.S. shale is estimated at $60 to $80 a barrel, according to the IEA. The price of a barrel hasn’t dipped below $80 since 2012 and has stayed above $90 since May. Costs in the U.S. will continue to fall as drillers get faster and improve results, Morse said.
Crude Exports
“The U.S. oil and natural gas renaissance is receiving significant investment because return on investment is good and competitive with other opportunities,” Rick Bott, president and chief operating officer of Oklahoma City-based Continental Resources Inc., a pioneer of shale drilling, said in an e-mail. “We’re confident that continued technological advancements will keep the Bakken and other plays at the forefront of investment for the foreseeable future.”
Harold Hamm, the chairman and chief executive officer of Continental Resources who became a billionaire drilling in North Dakota, told U.S. lawmakers Jan. 30 that the country, which U.S. Energy Information Administration data show supplied 86 percent of its own energy last year, can drill its way to energy independence by 2020. Hamm is leading an effort to get Congress to allow crude exports for the first time since the 1970s.
U.S. oil production will average 9.2 million barrels a day in 2015, up from 7.4 million last year, according to the EIA, the statistical arm of the U.S. Energy Department. Colorado boosted output by 11 percent in the first 11 months of last year, Wyoming was up 12 percent and Oklahoma added 24 percent.
“I don’t see the shale boom coming to an end,” said Andy Lipow, president of Lipow Oil Associates, an energy consulting firm in Houston. “We’re just getting started in places like Colorado, Wyoming and Oklahoma.”
Horizontal Wells
Sanchez Energy said in a Feb. 19 statement that Sante North 1H isn’t yet finished and the well will produce more oil than the early report suggested. The company said it has 120,000 acres in the Eagle Ford and plans to spend 90 percent of its exploration budget there this year. The company’s shares have risen 63 percent in the past year.
Traditional wells are bored straight down, like straws stuck into large deposits of crude. Shale is tapped by steering the drill horizontally through layers of oil-rich rock, sometimes for a mile or more. The formation is blasted apart with a high-pressure jet of water, sand and chemicals, a practice called hydraulic fracturing or fracking, to open up cracks that free pockets of trapped fuel. The complexity and materials needed to drill horizontally and blast the rock add to the cost.
Yield Little
The boom’s boosters have given rise to the misconception that wringing oil and gas from shale can be easily replicated throughout the country, Patzek said. That isn’t the case, he said. Every rock is different. The Bakken shale, along with the neighboring Three Forks formation, covers an area larger than France, according to the IEA. An oil-bearing formation that’s 400 feet (122 meters) thick in one spot may taper off to nothing just a mile away, Patzek said. What works for one well may yield little in a neighboring county.
The output of shale wells drops faster, too, falling by 60 to 70 percent in the first year alone, according to Austin, Texas-based Drillinginfo Inc. Traditional wells take two years to fall by about 55 percent before flattening out. That forces companies to keep drilling new wells to make up for lost productivity.
“You keep having to drill more and you keep having to spend more,” said Mark Young, an analyst with London-based Evaluate Energy, which tracks production and its costs.
Sweet Spots
A prolonged slide in prices below $85 a barrel may put pressure on operators that have struggled to contain costs or that don’t own acreage in the prolific “sweet spots” of the oil fields, said Leonardo Maugeri, a former manager at Rome-based energy company Eni SpA who’s researching the geopolitics of energy at Harvard University’s Belfer Center for Science and International Affairs.
Companies have boosted well productivity and will continue to whittle down the break-even price, he said. While the boom could survive a brief dip in oil prices, a long slump could slow drilling and cause production to fall swiftly, Maugeri said.
“To sustain in the short term, the U.S. needs prices at $65 a barrel,” Maugeri said. “That’s a critical level. Below that level, many opportunities will vanish.”
The U.S. benchmark oil contract for West Texas Intermediate crude for delivery in April 2016 is trading at about $85 a barrel, almost $18 a barrel less than today and still $20 above Maugeri’s threshold.
Net Debt
Even with crude prices above $100 a barrel, U.S. independent producers will spend $1.50 drilling this year for every dollar they get back from selling oil and gas and will carry debt that is twice as much as annual earnings, said Ryan Oatman, an energy analyst with SunTrust Robinson Humphrey Inc., an investment bank in Houston.
By contrast, the net debt of Exxon Mobil Corp., the world’s largest energy explorer by market value, is less than half of the cash earned from operations last year. The company will spend 68 cents for every dollar it gets back this year, according to company records and analyst forecasts compiled by Bloomberg.
So far, oil prices have been high enough to keep investors interested in the potential profits to be made in shale, Oatman said.
“There is a point at which investors become worried about debt levels and how that spending is going to be financed,” Oatman said. “How do you accelerate and drill without making investors worried about the balance sheet? That’s the key tension in this industry.”
To contact the reporter on this story: Asjylyn Loder in New York at aloder@bloomberg.net
Gold Fix Study Shows Signs of Decade of Bank Manipulation
The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.
Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.
“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”
The Libor Scandal Sets Off a Wave of Probes
The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.
Union Jacks
Officials at London Gold Market Fixing Ltd., the company owned by the banks that administer the rate, referred requests for comment to Societe Generale, which holds the rotating chairmanship of the group. Officials at Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment on the report and the future of the benchmark. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t respond to requests for comment.
Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks. Her 2008 paper “Libor Manipulation?” helped uncover the rigging of the London interbank offered rate, which has led financial firms including Barclays Plc and UBS AG to be fined about $6 billion in total. She is a paid expert witness to lawyers, providing economic analysis for litigation. Metz heads credit policy research at ratings company Moody’s.
The rate-setting ritual dates back to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.
Unregulated Process
Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.
Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. At 3 p.m. yesterday, the price was $1,332.25 an ounce. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.
Bloomberg News reported in November concerns among traders and economists that the fixing banks and their clients had an unfair advantage because information gleaned from the calls provided an insight into the future direction of prices and banks can bet on spot and derivatives markets during the call.
All Down
Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behavior. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. The moves weren’t replicated during the morning call and hadn’t happened before 2004, they found.
Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.
There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards, Abrantes-Metz said in a telephone interview this week.
“This is a first attempt to uncover potentially manipulative behavior and the results are concerning,” she said. “It’s down to regulators to establish why there are such striking patterns but banks have the means, motive and opportunity to manipulate the fixing. The results are consistent with the possibility of collusion.”
Bafin, FCA
Deutsche Bank, Germany’s largest lender, said in January that it will withdraw from the panels setting the gold and silver fixings. German financial markets regulator Bafin interviewed the Frankfurt-based bank’s employees as part of a probe into the potential manipulation of gold and silver prices.
“In general, research that finds certain price patterns does not as such constitute evidence of manipulation,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former Barclays economist. “However, it might encourage interest in finding out more about the sources of these price patterns.”
‘Appropriate Oversight’
The five banks that oversee the fixing set up a steering committee and will appoint external advisers to consider reforms before EU legislation on financial benchmarks’ regulation and oversight comes into force, Bloomberg reported last month.
Britain’s Financial Conduct Authority is also scrutinizing how prices are calculated. The regulator published a report this week outlining its remit for regulating commodities including gold, saying that while it’s responsible for commodities derivatives, it doesn’t regulate physical commodities.
“Abusive behavior can occur in the physical commodity markets which in turn can have an impact on, or be directly linked with, financial market activity and prices,” the FCA said in the report. “The regulatory regime -- both in the U.K. and internationally -- needs to be adapted to ensure robust and appropriate oversight.”
To contact the reporter on this story: Liam Vaughan in London at lvaughan6@bloomberg.net
The London gold fix, the benchmark used by miners, jewelers and central banks to value the metal, may have been manipulated for a decade by the banks setting it, researchers say.
Unusual trading patterns around 3 p.m. in London, when the so-called afternoon fix is set on a private conference call between five of the biggest gold dealers, are a sign of collusive behavior and should be investigated, New York University’s Stern School of Business Professor Rosa Abrantes-Metz and Albert Metz, a managing director at Moody’s Investors Service, wrote in a draft research paper.
“The structure of the benchmark is certainly conducive to collusion and manipulation, and the empirical data are consistent with price artificiality,” they say in the report, which hasn’t yet been submitted for publication. “It is likely that co-operation between participants may be occurring.”
The Libor Scandal Sets Off a Wave of Probes
The paper is the first to raise the possibility that the five banks overseeing the century-old rate -- Barclays Plc (BARC), Deutsche Bank AG (DBK), Bank of Nova Scotia, HSBC Holdings Plc (HSBA) and Societe Generale SA (GLE) -- may have been actively working together to manipulate the benchmark. It also adds to pressure on the firms to overhaul the way the rate is calculated. Authorities around the world, already investigating the manipulation of benchmarks from interest rates to foreign exchange, are examining the $20 trillion gold market for signs of wrongdoing.
Union Jacks
Officials at London Gold Market Fixing Ltd., the company owned by the banks that administer the rate, referred requests for comment to Societe Generale, which holds the rotating chairmanship of the group. Officials at Barclays, Deutsche Bank, HSBC and Societe Generale declined to comment on the report and the future of the benchmark. Joe Konecny, a spokesman for Bank of Nova Scotia, didn’t respond to requests for comment.
Abrantes-Metz advises the European Union and the International Organization of Securities Commissions on financial benchmarks. Her 2008 paper “Libor Manipulation?” helped uncover the rigging of the London interbank offered rate, which has led financial firms including Barclays Plc and UBS AG to be fined about $6 billion in total. She is a paid expert witness to lawyers, providing economic analysis for litigation. Metz heads credit policy research at ratings company Moody’s.
The rate-setting ritual dates back to 1919. Dealers in the early years met in a wood-paneled room in Rothschild’s office in the City of London and raised little Union Jacks to indicate interest. Now the fix is calculated twice a day on telephone conferences at 10:30 a.m. and 3 p.m. London time. The calls usually last 10 minutes, though they can run more than an hour.
Unregulated Process
Firms declare how many bars of gold they want to buy or sell at the current spot price, based on orders from clients and themselves. The price is increased or reduced until the buy and sell amounts are within 50 bars, or about 620 kilograms, of each other, at which point the fix is set.
Traders relay shifts in supply and demand to clients during the call and take fresh orders to buy or sell as the price changes, according to the website of London Gold Market Fixing, where the results are published. At 3 p.m. yesterday, the price was $1,332.25 an ounce. The process is unregulated and the five banks can trade gold and its derivatives throughout the call.
Bloomberg News reported in November concerns among traders and economists that the fixing banks and their clients had an unfair advantage because information gleaned from the calls provided an insight into the future direction of prices and banks can bet on spot and derivatives markets during the call.
All Down
Abrantes-Metz and Metz screened intraday trading in the spot gold market from 2001 to 2013 for sudden, unexplained moves that may indicate illegal behavior. From 2004, they observed frequent spikes in spot gold prices during the afternoon call. The moves weren’t replicated during the morning call and hadn’t happened before 2004, they found.
Large price moves during the afternoon call were also overwhelmingly in the same direction: down. On days when the authors identified large price moves during the fix, they were downwards at least two-thirds of the time in six different years between 2004 and 2013. In 2010, large moves during the fix were negative 92 percent of the time, the authors found.
There’s no obvious explanation as to why the patterns began in 2004, why they were more prevalent in the afternoon fixing, and why price moves tended to be downwards, Abrantes-Metz said in a telephone interview this week.
“This is a first attempt to uncover potentially manipulative behavior and the results are concerning,” she said. “It’s down to regulators to establish why there are such striking patterns but banks have the means, motive and opportunity to manipulate the fixing. The results are consistent with the possibility of collusion.”
Bafin, FCA
Deutsche Bank, Germany’s largest lender, said in January that it will withdraw from the panels setting the gold and silver fixings. German financial markets regulator Bafin interviewed the Frankfurt-based bank’s employees as part of a probe into the potential manipulation of gold and silver prices.
“In general, research that finds certain price patterns does not as such constitute evidence of manipulation,” said Thorsten Polleit, chief economist at Frankfurt-based precious-metals broker Degussa Goldhandel GmbH and a former Barclays economist. “However, it might encourage interest in finding out more about the sources of these price patterns.”
‘Appropriate Oversight’
The five banks that oversee the fixing set up a steering committee and will appoint external advisers to consider reforms before EU legislation on financial benchmarks’ regulation and oversight comes into force, Bloomberg reported last month.
Britain’s Financial Conduct Authority is also scrutinizing how prices are calculated. The regulator published a report this week outlining its remit for regulating commodities including gold, saying that while it’s responsible for commodities derivatives, it doesn’t regulate physical commodities.
“Abusive behavior can occur in the physical commodity markets which in turn can have an impact on, or be directly linked with, financial market activity and prices,” the FCA said in the report. “The regulatory regime -- both in the U.K. and internationally -- needs to be adapted to ensure robust and appropriate oversight.”
To contact the reporter on this story: Liam Vaughan in London at lvaughan6@bloomberg.net
Study: US is an oligarchy, not a democracy
Today's must-read
The US is dominated by a rich and powerful elite.
So concludes a recent study by Princeton University Prof Martin Gilens and Northwestern University Prof Benjamin I Page.
This is not news, you say.
Perhaps, but the two professors have conducted exhaustive research to try to present data-driven support for this conclusion.
http://www.bbc.co.uk/news/blogs-echochambers-27074746
Today's must-read
The US is dominated by a rich and powerful elite.
So concludes a recent study by Princeton University Prof Martin Gilens and Northwestern University Prof Benjamin I Page.
This is not news, you say.
Perhaps, but the two professors have conducted exhaustive research to try to present data-driven support for this conclusion.
http://www.bbc.co.uk/news/blogs-echochambers-27074746
Most renewables are garbage cause the energy balance and economics don't make any sense ... and government isn't going to drive these changes correctly either... Take government susidized ethanol farse for example ... Take oil to plant .. Fertilizers and the things that spread fertilizer consume oil.. Takes oil to harvest.. Takes oil to process.. Takes oil to transport.. And then on top of that you are putting upward pressure on the price of not just corn but other things like meat (eat corn) .. Cause u burning it in your car...
nukes the way to go by far but Japan incident screwed that up bad .. How many people die due to oil related accidents? Or coal mining? Shit happens .. World just run by a bunch of sociopathic globalists that only care about staking their fiat higher .. Until there is some sort of global revolution to change that .. Plight of average joe worldwide gonna get rougher as global policy is pushed for the elites gain at the expense of everybody else... too few resources too many people the number one issue facing mankind looking forward... Clean potable water will become a huge global issue going forward. ..
nukes the way to go by far but Japan incident screwed that up bad .. How many people die due to oil related accidents? Or coal mining? Shit happens .. World just run by a bunch of sociopathic globalists that only care about staking their fiat higher .. Until there is some sort of global revolution to change that .. Plight of average joe worldwide gonna get rougher as global policy is pushed for the elites gain at the expense of everybody else... too few resources too many people the number one issue facing mankind looking forward... Clean potable water will become a huge global issue going forward. ..
At least the fascists take good care of those they send off to bullshit wars to stack their fiat higher
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http://www.cnn.com/2014/04/23/health/veterans-dying-health-care-delays/index.html?c=homepage-t&page=1
Veterens languish, die on a VA's secret list
By Scott Bronstein and Drew Griffin, CNN Investigations
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Deaths tied to VA hospital's secret list
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(CNN) - At least 40 U.S. veterans died waiting for appointments at the Phoenix Veterans Affairs Health Care system, many of whom were placed on a secret waiting list.
The secret list was part of an elaborate scheme designed by Veterans Affairs managers in Phoenix who were trying to hide that 1,400 to 1,600 sick veterans were forced to wait months to see a doctor, according to a recently retired top VA doctor and several high-level sources.
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http://www.cnn.com/2014/04/23/health/veterans-dying-health-care-delays/index.html?c=homepage-t&page=1
Veterens languish, die on a VA's secret list
By Scott Bronstein and Drew Griffin, CNN Investigations
SHARE THIS
Deaths tied to VA hospital's secret list
A A A (resize font)
(CNN) - At least 40 U.S. veterans died waiting for appointments at the Phoenix Veterans Affairs Health Care system, many of whom were placed on a secret waiting list.
The secret list was part of an elaborate scheme designed by Veterans Affairs managers in Phoenix who were trying to hide that 1,400 to 1,600 sick veterans were forced to wait months to see a doctor, according to a recently retired top VA doctor and several high-level sources.
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