An Ignoble Experiment: Rigged

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Rigged

Another great article about the cesspool of Wall Street has been penned by Matt Taibbi of Rolling Stone. Portions of it follow, while the full article can be read here:

Click here to read

The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There's no price the big banks can't fix.

Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything.

You may have heard of the Libor scandal, in which at least three – and perhaps as many as 16 – of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion (that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history – MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets."

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget.

It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks – including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland – that serve on the Libor panel that sets global interest rates. In fact, in recent years many of these banks have already paid multimillion-dollar settlements for anti-competitive manipulation of one form or another (in addition to Libor, some were caught up in an anti-competitive scheme, detailed in Rolling Stone last year, to rig municipal-debt service auctions). Though the jumble of financial acronyms sounds like gibberish to the layperson, the fact that there may now be price-fixing scandals involving both Libor and ISDAfix suggests a single, giant mushrooming conspiracy of collusion and price-fixing hovering under the ostensibly competitive veneer of Wall Street culture.

But the biggest shock came out of a federal courtroom at the end of March – though if you follow these matters closely, it may not have been so shocking at all – when a landmark class-action civil lawsuit against the banks for Libor-related offenses was dismissed. In that case, a federal judge accepted the banker-defendants' incredible argument: If cities and towns and other investors lost money because of Libor manipulation, that was their own fault for ever thinking the banks were competing in the first place.

"A farce," was one antitrust lawyer's response to the eyebrow-raising dismissal.

"Incredible," says Sylvia Sokol, an attorney for Constantine Cannon, a firm that specializes in antitrust cases.

All of these stories collectively pointed to the same thing: These banks, which already possess enormous power just by virtue of their financial holdings – in the United States, the top six banks, many of them the same names you see on the Libor and ISDAfix panels, own assets equivalent to 60 percent of the nation's GDP – are beginning to realize the awesome possibilities for increased profit and political might that would come with colluding instead of competing. Moreover, it's increasingly clear that both the criminal justice system and the civil courts may be impotent to stop them, even when they do get caught working together to game the system.

If true, that would leave us living in an era of undisguised, real-world conspiracy, in which the prices of currencies, commodities like gold and silver, even interest rates and the value of money itself, can be and may already have been dictated from above. And those who are doing it can get away with it. Forget the Illuminati – this is the real thing, and it's no secret. You can stare right at it, anytime you want.

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

---Larry Levin

Congratulations to Rebecca Webb!

The Student of The Day today is Rebecca Webb hailing from the Larry Levin's High Volume Area Room! Rebecca is a model student with great focus on Market Profile and the value of this methodology! Volume is the only true way to gauge support and resistance in the Market and it can be a powerful tool! Even though it was sim today, Great Job Rebecca!!!

Quote:
10:43 am Rebecca Webb: set up for second chance in crude
10:53 am Rebecca Webb: $1280 in gold

NOTICE: Testimonials are believed to be true based on the representations of the persons providing the testimonials, but facts stated in testimonials have not been independently audited or verified. Nor has there been any attempt to determine whether any testimonials are representative of the experiences of all persons using the methods described herein or to compare the experiences of the persons giving the testimonials after the testimonials were given. The average reader should not necessarily expect the same or similar results. Past performance is not necessarily indicative of future results. No person was compensated for providing a testimonial.

Congratulations to Ed Moya

The Educator of The Day today is Ed Moya in Larry Levin's London Calling FX Signal Room!!! Ed is does a really good job with his fundamental approach and technical confirmation! So far today, based on signals generated from his methodology, he is up +34 pips or $340.00! Let's hear it from him:

10:13 am Ed Moya: So far today we are up +34 pips, with an open trade that is winning 20 pips right now but still need another 50 pips to reach my target.

OPTIONS: Volatility Commentary	---Steven Lee / Michael Shorr

US Q1 GDP expanded at 2.5%, the Department of Commerce said on Friday. This was better than 2012 Q4's rate of just 0.4%, but well under the consensus expectation of 3.0%. The University of Michigan Consumer Confidence report was released today. The current and outlook economic indices both dropped for the first time this year and it has now been four months of no change year-over-year.

Today's lesson is about the power and leverage of more complex option strategies. We are taking about Herbalife (HLF) in this example. The instructors were just talking about our general thoughts about the company. Everybody knows about the on-going fight between Bill Ackman and Carl Ichan over the long-term prospects of the company. Is it a pyramid scheme? Is the US Government going to step in, blah, blah, blah. We really didn't know which way it would fall but all-in-all, we had a small bullish bias. So, if one were bullish, what are our options to take action? We could simply buy the stock. That way, for each $0.01 the stock went up, we would make $0.01. That is costly because you have to purchase the shares in full or borrow the funds on margin. Plus, if the stock goes to zero, you lose your entire investment. How about buying a call option? That works too. If the stock goes up in price, you start making money once the stock goes above your strike price plus any premium you paid for the call option. You have limited risk to the downside. You can only lose your initial investment in the premium you paid for the calls. But, you have a finite time for your investment to work in your favor. Once the option expires worthless, you lose your entire premium. What if we could come up with something a bit more complex, but with better risk parameters? We constructed the HLF May 41/45/46 broken wing call butterfly. We would be able to buy this for $0.60. This spread becomes profitable at $41.60 and can profit a maximum $3.40. If we were use the same amount of premium to buy a call option, we would have to buy the HLF 44 Call. So, this would become profitable at $44.60 and would theoretically have unlimited upside potential. So, our broken wing call butterfly brought us to a profitable position a full $3.00 sooner than using the same capital to buy the call option with the same potential downsides and giving up the potential for unlimited returns.

FOREX: Currency Spotlight	---Ed Moya

Even the French are jumping off the austerity bandwagon. The unity between northern countries in euro zone may slowly break this summer. One of the key catalysts for keeping the contagion fear under control is that the 3. larger economies (excluding Spain and Italy) were not experiencing as much contraction as the indebted south. Benoit Hamon, a French socialist minister called out Germany and Angela Merkel over the weekend. With France appearing very weak as unemployment surges again, Hamon explained the deficit cutting plan is not working. Time will tell when then we finally a see a leg lower euro.

STOCKS: Watch List	---Charles Moon

Last week's rally from the 1530.00-low in the S&P 500 did not end with a Friday spike, but it didn't sell-off either. The rally in this stock index brings up some interesting facts that could shed light to the near term future. First, the market rallied despite more bearish news. It also went up on terrible volume, with Friday's volume being the lowest of the week and 3rd or 4th lowest of the year! But Friday's close was fairly weak. If volume increases with a drop below 1570.00, I would be leery of new long stock signals unless they are deep entries. A daily close below 1570.00 could lead to a further drop back to 1530.00. On the flip side, the market held 1570.00 last week and clearly doesn't need bullish news to get the market higher. If the next move is indeed up, the Stalingrad & Poor 500 will be on auto-pilot to 1600.00. Because of the nature of the market at this level, we will focus on swing signals early this coming week. Stocks to Watch: INTC AAPL GOOG IBM AMZN PCLN BBRY FB CTXS BAC C GS JPM CMI CAT NFLX WDC GE LULU LNKD DIS KORS COH FOSL X QCOM STZ NKE UA CHKP JNPR POT GMCR HLF HOG LOW HD LEN TOL V MA AXP DFS LVS MGM

FUTURES: Technical Data

ES 1579.50 / 1574.50 POC… 1577.00 YM 14667 / 14637 NQ 2838.25 / 2826.75	NOTES FROM THE PIT Click Here To Read

COMMODITIES: Play of the Day	---Patrick Assalone

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