Thursday 31 January 2013

When Money Dies.

Baltic Dry Index. 767  -12

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

“The problem with fiat money is that it rewards the minority that can handle money, but fools the generation that has worked and saved money.”

“Adam Smith” aka George Goodman.

For more on “When Money Dies,” scroll down to “Elliott's Paul Singer On How Money Is Created... And How It Dies.”

We open today with the USA’s downward surprise in Q4 GDP. “The steepest drop in defence spending since the early 1970s, uncertainty over the fiscal cliff and the hurricane that swept up the east coast in November combined to hit growth,” writes the UK’s Telegraph. Well yes, but that merely covers up the fun and games in US accounts during an election year. Q3 GDP had come in at a surprising to say the least, 3.1 percent. Ahead of the election too, a happy coincidence? Well not really, it turns out defence spending and federal government spending was deliberately pulled forward into Q3 from Q4, neatly dressing up Q3 for the voters, and their feel good factor too. Q3s upside was overstated, Q4s after the election downside is equally overstated. Averaging the two quarters, as a rough guide, gets GDP turning over at 1.5 percent. Not good, but better than a negative 0.1 percent.

US GDP contracts for first time since end of recession

The US economy unexpectedly shrank in the final quarter of last year for the first time since the end of the recession in 2009, as government spending fell and businesses scaled back investment.

The world's largest economy contracted at 0.1pc annual pace in the final three months of the year, sharply reversing the 3.1pc growth recorded in the third quarter.

The steepest drop in defence spending since the early 1970s, uncertainty over the fiscal cliff and the hurricane that swept up the east coast in November combined to hit growth.

----Although economists were shocked by the contraction, there was encouragement taken from the resilience of US consumer spending.

Household consumption grew at a 2.2pc rate in the fourth quarter, up from 1.6pc in the third. Investors' attention will now turn to the latest monthly jobs report which is due on Friday.

----A drop in government spending inflicted the most damage, led by a 22.2pc fall in defence spending. Exports also declined, falling at an almost 6pc annual rate.

"The economy ended 2012 on a very sluggish pace, even though one-time factors put the number below the trend," said Kathy Bostjancic, an economist at the Conference Board.

In European news, the rising stink of scandal in Siena, just gets worse. Does Italy have an honest banker or regulator anywhere in the nation? As Monte dei Paschi was trading itself into the sewer, the management didn’t seem to know or care what the traders were up to. The traders are accused of taking bribes to take on dodgy derivatives bets, the supervising Bank of Italy took a Costa Concordia approach to banking supervision. Knowing of deeply risky problems for several years, and doing what Italy does best, nothing. With an election coming up later next month, this scandal has nowhere to go but up. The Davos Spring barely lasted a week. Europe now has both France and Italy on suicide watch.

Insight: Monte dei Paschi harbored bank within a bank

SIENA, Italy | Wed Jan 30, 2013 3:27pm EST
(Reuters) - The secret document at the heart of the Monte dei Paschi banking scandal lay for months in a concealed safe in a 14th century Tuscan palace.

Chief Executive Fabrizio Viola said he learnt about the safe's contents only last October, a full 10 months after he had been called in to sort out Italy's third biggest bank .

The 2009 document revealing derivatives deals that have run up huge losses for Banca Monte dei Paschi (BMPS.MI) came to light in the office of Viola's predecessor at the bank's headquarters in Siena.
"The document was in a safe, moreover in an office that was no longer mine," said Viola. "I don't think that the person who put it there had been trying to hide it. But there is no doubt that the document had not been used in the bank's accounting."

The document found at the 540-year-old bank's head offices - which are appropriately in a restored ancient fortress - was a contract mandating Japanese bank Nomura (8604.T) to carry out deals on behalf of Monte dei Paschi.

It revealed that, unbeknown to the new management under Viola, two derivatives transactions known as "Alexandria" which had looked separate were in fact linked. This meant they should have received different accounting treatment, leading to heavy losses.

This discovery prompted an internal inquiry that has, so far, revealed losses of up to 720 million euros ($977 million).

----The safe appeared to have been well hidden as there is no evidence that tax police found it when they combed the Siena offices in May, as part of an inquiry into Monte dei Paschi's 2007 acquisition of smaller lender Antonveneta.

----Whether the contract was deliberately hidden or simply forgotten, Monte dei Paschi's former top management seems to have had little idea of what traders in the finance department that negotiated such risky deals were doing - despite repeated complaints from internal auditors, according to senior sources with knowledge of the situation and documents seen by Reuters.

Three years before the document was uncovered, Monte dei Paschi's own risk control unit and its audit committee had already expressed serious concerns to Vigni about the way the bank's finance department handled risky trades.

Monte Paschi ex-managers probed over bribery, fraud

SIENA, Italy | Wed Jan 30, 2013 5:23pm EST
(Reuters) - Prosecutors are investigating the former management of Italy's troubled Monte dei Paschi (BMPS.MI) bank for bribery and fraud, judicial sources said on Wednesday, as pressure grew on the Bank of Italy and bourse watchdog Consob.

With parliamentary elections less than a month away, the scandal at Italy's third-largest bank has deepened with questions about the role of banking supervisors and the influence of local politicians.
Milan prosecutors said they had transferred an investigation into allegations that Monte dei Paschi executives took bribes to buy toxic derivatives from Dresdner Bank to Siena magistrates investigating the main corruption case.

At the same time, prosecutors in the southern town of Trani, who have previously taken on ratings agency Standard and Poor's, said they had opened an investigation against the Bank of Italy and Consob over accusations they failed in their regulatory duties.

We end for the day back on the dangerous subject of money. Our current crop of fiat currency central bankster have got a clue how deep they are in, playing with fire.’s whole article is well worth the read. Stay long physical precious metals against the day our present round of fiats dies. Though I can’t predict the future any more than the next man, my guess is that this will be the most important article I link to in 2013.

Elliott's Paul Singer On How Money Is Created... And How It Dies

The concept of “money” used to be simple: items of recognized value, initially in the form of shells, livestock, and then precious metals. At some point, someone decided to print currency on paper, but it was widely understood that it had to be backed by something real, like gold or silver. That history is oversimplified, but it illustrates this central truth: Money that is created at will, rather than grown in the field, mined from the earth, or otherwise subject to supply limitations, can be easily degraded. Nobody would want to own something that may or may not have value and purchasing power in the future. What, then, determines the value of money? The worldview and ethics of those in charge of the printing presses are obvious answers that are often overlooked. Another is the confidence (or inertia!) of the people who hold and trade the money, or claims denominated in money.

Fast forward to the modern era, which features central banks, so-called “fractional reserve banking,” leverage, and derivatives. Central banks allowed commercial banks to create money by making loans while keeping small amounts of reserves on hand or at the central banks. As money market funds, bank CDs, and other like instruments were created and then became a sizeable portion of the global financial system, things got even more complicated. An obvious clue that the very definition of money, to say nothing of the appropriate ways to analyze and adjust monetary policy, have departed from the understanding and control of monetary authorities can be found in the proliferation over time of acronyms to describe what used to be called simply “the money supply”: M1, M2, M2A, M3, MZM, and several others.

Add modern derivatives, which entered the scene in a significant way only some 30 years ago, and the picture becomes even murkier. To demonstrate this, in slow motion, consider the creation of a credit default swap (CDS), and then a mortgage collateralized debt obligation (CDO)

---- The purpose of this part of the discussion about money is to show that things have gotten really complex and subtle in the modern banking and derivatives era, and that the old model of money as being solely or mainly the product of bank reserves and bank loans is woefully inadequate.

Now one more element should be added to this mix: quantitative easing, or QE. The government spends money on roads, bureaucrats’ salaries, entitlements, etc. To pay for such spending, Treasury sells a security to the public, and it has an obligation to repay the purchaser when the security matures. The security might be a Treasury Bill, a 30-year bond, or anything in between. The Federal Reserve (or the Fed, as it is commonly known) has the ability to set short-term interest rates, which has incentive/disincentive effects on bank lending and consumer spending. In a nutshell, that model has prevailed as the status quo since the Fed was created in 1913, up until 2008.

Since the crash of 2008, there has been an additional dynamic at work. Namely, the Fed is purchasing massive amounts of Treasury securities, either directly or on the open market. To be clear, the cash outlays by Treasury for government spending are the same as in the preceding paragraph. The difference is that post-crash, there are far fewer securities outstanding that the Treasury must pay off at maturity, because trillions of dollars of such securities are owned by another department of the federal government. We think this process is the effective equivalent of money-printing.

For those who think otherwise, we pose the following question: If QE did not have the effect of printing money, why would the Fed do it? We do not think that QE is merely a duration swap.

---- It is critically important for investors to try to understand what global QE is actually doing, where it may lead, and what will happen when it slows, stops or shifts into reverse. What we urge most strongly is that the current atmosphere of calm and stability, and the lack of virulent inflation, must not be relied upon to continue forever. There are certain words and phrases in official communications that give some hint of the uncertainty that exists about key elements of central-bank policies: confidence, anchored inflationary expectations, and velocity are prime examples. Our takeaway is that when investors lose confidence in ZIRP-soaked, QE-ridden, faith-based paper money, the consequences could be abrupt and catastrophic to societal stability. We do not know exactly what to do about it, except to urge policymakers to STOP substituting QE for sound tax, regulatory, labor, environmental, and fiscal policies.

"Those entrapped by the herd instinct are drowned in the deluges of history. But there are always the few who observe, reason, and take precautions, and thus escape the flood. For these few gold has been the asset of last resort."

Antony C. Sutton

At the Comex silver depositories Wednesday final figures were: Registered 38.06 Moz, Eligible 116.23 Moz, Total 154.29 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today it’s the Eurozone again. Who is going to pay for all the banks “legacy Assets,” using the term “asset” loosely.  Finland, Germany and Holland seem to want to renege on one of last year’s  many fixes. As usual, there’s little hope of making the shareholders and bondholders pay. Not when there’s a bottomless pit called the taxpayers.

"Gold would have value if for no other reason than that it enables a citizen to fashion his financial escape from the state."

William F. Rickenbacker

Analysis: Pall of bank "legacy assets" hangs over euro zone

BRUSSELS | Wed Jan 30, 2013 7:08am EST
(Reuters) - In September last year, at a below-the-radar meeting in Helsinki, three euro zone finance ministers came up with a two-word phrase that sounded harmless at the time but has since troubled European leaders a great deal.

Banks' "legacy assets" sound innocent enough but in the context of Europe's debt crisis, and particularly for Ireland and Spain, the question of how to deal with existing bad debts is a time bomb that has not been defused.

In the months since the term entered the EU's lexicon, efforts have been made to parse it or play it down.
But those that came up with it -- the finance ministers of Finland, Germany and the Netherlands -- appear determined to keep it alive, and until June 2013, the deadline leaders have set themselves to resolve it, the issue will fuel uncertainty.

At its heart, it comes down to the difference between a euro zone country getting direct banking assistance from the region's 500 billion euro rescue fund, known as the ESM, or a country largely being left to fend for itself, with the market volatility and high borrowing costs that go with it.

In that respect, "legacy assets" are a critical link in the chain that binds governments to their banks -- the "vicious circle" that has dragged several states down with their lenders which policymakers are desperate to break.

From the Finnish, Dutch and German point of view, any banking problems that have already come to light, or emerge before the European Central Bank takes over as the euro zone's single banking supervisor in mid-2014, are "legacy".

As Finnish Prime Minister Jyrki Katainen said earlier this month, "a line has to be drawn somewhere" so that European taxpayers aren't left footing the bill for badly run banks.

Katainen says existing banking problems in Ireland, Spain or elsewhere should remain chiefly the responsibility of their governments, and only in the future, after mid-2014, would the ESM, and ultimately European taxpayers, provide any backstop.

----The problem is that is not the way Italy, Spain, Ireland and others have interpreted the rule since it was drawn up at a summit of euro zone leaders in Brussels last June.

At that time, Italian Prime Minister Mario Monti praised the deal, which said the ESM could "have the possibility to recapitalize banks directly", as a breakthrough that would change the debate after nearly three years of debt turmoil.

----In meetings of euro zone finance ministers since then, discussions have taken place about precisely what steps would need to be taken before a country can receive funds from the ESM and how to resolve the "legacy assets" issue.

While the process will only be finalized in the months ahead, it is expected there will be specific rules stating that banks have an obligation to raise their own capital first. If that is insufficient, then the national government would step in, and as a very last resort, the ESM could, under strict conditions, provide capital directly, euro zone officials say.

That is a far more convoluted process than first envisaged, but one that even Ireland's finance minister, one of the strongest advocates for direct recapitalization, including for "legacy assets", has acknowledged is likely.

----Part of the aim of Finland, Germany and the Netherlands is to make accessing the ESM so onerous that few countries will do it. If it is too straightforward, a string of states will apply and the scarce resources of the fund will be used up.

The ESM is based on paid-in capital, which will eventually total 80 billion euros. To bail out a bank, the fund would either have to dip into that, which would get depleted quickly, or borrow on the market to buy bank shares, which is inherently more risky than lending to a government.

"Until government administrators can so identify the interests of government with those of the people and refrain from defrauding the masses through the device of currency depreciation for the sake of remaining in office, the wiser ones will prefer to keep as much of their wealth in the most stable and marketable forms possible - forms which only the precious metals provide."

Elgin Groseclose

The monthly Coppock Indicators finished December:
DJIA: +100 Down. NASDAQ: +123 Unch. SP500: +129 Up.  All three indexes are giving different signals. A time for caution.

Wednesday 30 January 2013

The Race Out Of Eurobonds.

Baltic Dry Index. 779  -13

LIR Gold Target by 2019: $30,000.  Revised due to QE programs.

“We’re living a better life now at the expense of future generations.”

Axel Weber, chairman of UBS and the former president of the Bundesbank.  Davos.

We open today’s chapter in The Decline and Fall of Euroland with some refreshingly honest commentary from Davos by Russia’s Prime Minister. With roughly 200 billion of US  dollars invested in Eurobonds, “we already have enough euro risk,” says Dmitry Medvedev. Worse Russia is thinking of selling out! The logic is that they want to get out before interest rates start to rise, and there’s a mass rush for the exit as bond prices fall. Getting out first and early looks an attractive thing to do.

Of course it all adds to the problems of the ECB, where the Italian running the shop, once dubbed “super-Mario,” has now been dragged into the growing Monte dei Paschi di Siena bank scandal, losing the “super” along the way. Mr Draghi now appears to just be a very ordinary, regular dodgy Italian bankster.

“The problem with Europe is, they’ve got a German in the Vatican and an Italian in the ECB.”


Russia shuns euro bonds on North-South rift, rotates into stocks

Russia has no intention of buying any more eurozone bonds and may start to run down its holdings, warning that it is far from clear whether monetary union can hold together.

“We already have enough euro risk,” said premier Dmitry Medvedev. “Right now we don’t have any plans to buy these bonds.”

Russia has the world’s third biggest foreign reserves, worth an estimated $500bn, with a growing share in eurozone bonds to diversify away from the US dollar.

“We now have a different mission: 42pc of our reserves are euros, so we could get rid of them by investing in equities,” Mr Medvedev told the German daily Handelsblatt.

It was left vague whether he intends to switch the proceeds into EMU stock markets or leave the eurozone altogether. He said efforts to stabilize the euro structure had dragged on too long, leaving the currency bloc in a “miserable condition”.

The Russian leader said Europe had launched a risky experiment – “never seen before in the world history” – by lashing weak and powerful economies together under a strong currency, warning that the Club Med bloc may not survive the ordeal.

“They will either have to get stronger or leave the euro,” he said.

The warning came as fresh money supply and credit data for the eurozone pointed to a weak recovery at best, with a risk growing that the region could remain mired in slump. Loans to companies and households both fell in December, with mortgage lending in Spain down 31pc and no end in sight yet for the housing crash.

“The economic situation remains very fragile,” said Martin van Vliet from ING.

Eurozone “broad” M3 money shrank in December for the second month, dropping €42bn to €9.74 trillion. “Narrow” M1 money stalled again after brisk growth over the autumn.

Monetarists watch M3 for clues on economic growth a year or so ahead, and watch M1 for a short-term signal of future spending.

----Mr Medvedev said the world needs a multi-legged currency system with China’s yuan playing a role. Russia has been buying gold, aiming to push bullion to 10pc of its total holdings.

Elsewhere in the Decline and Fall, capital to turn austerity into growth is still drying up. Stay long physical precious metals. If this isn’t reversed soon, the Davos Spring will turn into the shortest spring on record.

Eurozone lending contracts for eighth month as cheap borrowing fail to revive spending

Loans to companies and households in the eurozone contracted for the eighth month running in December, showing low official borrowing costs are having little success in reviving investment and spending.

11:26AM GMT 28 Jan 2013
Loans to the private sector fell 0.7pc from the same month a year ago, European Central Bank data showed.
The monthly flow of loans to non-financial firms fell €22bn in December after falling by €7bn in November. 
The monthly flow of loans to households showed a drop of €3bn after a rise of €6bn in the previous month.

The cheap funds the ECB is pumping through the monetary system are still not reaching households and businesses evenly across the euro zone as some countries struggle to get their stricken economies back on track, though progress has been made.

On a country-by-country basis, the data showed a €22bn drop in private-sector lending in Spain, the largest monthly fall since July. In Portugal, private-sector lending fell by €2.6bn, the biggest drop in a year.

Spain's crisis strategy under fire as economy buckles again

Spain’s economy has tipped into an accelerating downturn as sales data and the money supply flash serious warnings, calling into question Madrid’s high-risk strategy of refusing an EU-IMF rescue.

The country’s retail sales plunged 10.7pc in December from a year earlier as austerity bites deeper, one of the worst months since the crisis began.

The Spanish car lobby (Anfac) said the country’s output of vehicles has fallen below 2m for the first time since 1993, crashing 17pc last year. The industry has shrunk by a third since the boom.

Ominously, car exports plunged even faster at 18pc, dimming hopes that foreign trade can lift the economy out of slump as internal demand shrinks. While Spanish exports have been a bright spot over the past three years - keeping pace with German exports - the momentum has faltered due to lack of investment.

Citigroup said it now expects Spain's economy to contract by 2.2pc this year and another 2pc in 2014, pushing unemployment to 28pc.

The effects of the slump will overpower any gains from fiscal austerity. The bank said public debt will surge from 88pc to 110pc of GDP in just two years.

Professor Luis Garicano from the London School of Economics said the recovery of EMU sovereign debt markets has not fed through to the real economy, leaving Spanish firms starved of credit and investment. “Credit constraints are forcing Spanish companies to eat up their future,” he said.

The loan crunch has put Spanish firms at a “severe competitive disadvantage” with rivals in the EMU-core, further widening the North-South gap. German firms such as Volkswagen are conquering market share across southern Europe by offering cheap credit for sales.

There has been little relief for Spanish firms since the European Central Bank agreed to back-stop Spanish debt in the summer. Private loans contracted by a further €30bn in December alone, even after stripping out distortions.

We end today’s chapter of The Decline and Fall of Euroland, with more of the ever growing scandal in Italy, that’s now dragged in both of Italy’s Super-Mario’s, Monti and Draghi. Super Mario’s no more, both are looking more like super-incompetents, or worse stereo typical, regular dodgy Italian banksters. You have to ask yourself, would you really want to stay in a club that includes Italy? Thankfully, when the time comes as it will, bailing out Italy is Germany’s problem.

The whole history of civilization is strewn with creeds and institutions which were invaluable at first, and deadly afterwards.

Walter Bagehot.

MPS saga not just a local affair

By Hugo Dixon January 28, 2013
The Monte dei Paschi di Siena saga is not just an Italian affair. Revelations that complex financial transactions used by the country’s third largest bank had the effect of hiding losses are causing a political storm in Italy.

With a general election only weeks away, Silvio Berlusconi looks like being the main winner from the political spat. The former prime minister’s camp has attacked Pierluigi Bersani’s Democratic Party, which is leading in the opinion polls, for being close to Monte dei Paschi (MPS). It has also criticised Mario Monti, the current prime minister, who agreed to increase MPS’s bailout to 3.9 billion euros.

The scandal won’t be enough to get Berlusconi back as prime minister. But it could prevent a Bersani-Monti coalition from running the country with a solid majority in both houses of parliament. If so, fears about Italian political risk could return to haunt the markets.

The still-murky saga has also put Mario Draghi under the spotlight because the ECB president ran the Bank of Italy when MPS was getting into such a mess. Giulio Tremonti, who was finance minister in Berlusconi’s last government, tweeted that it was “stupefying” that Draghi had failed to discover or prevent the complex transactions.

We end for the day with China. How do you compete with a crooked nation like China, where the state, i.e. the Communist Party, get to play fast and loose with the “rules.” Sadly, just like the Fed, the ECB and the BOE.

China averts local government defaults

By Simon Rabinovitch in Beijing January 29, 2013 1:55 pm
Chinese banks have rolled over at least three-quarters of all loans to local governments that were due to mature by the end of 2012, an indication of the immense challenge facing China in working down its debt load.

Local governments borrowed heavily from banks to fuel China’s stimulus programme during the global financial crisis and are now struggling to generate the revenue to pay them back, a shortfall that could cast a shadow over Chinese economic growth.

Banks extended at least Rmb3tn ($482bn) – and perhaps more – of the roughly Rmb4tn in loans plus interest that local governments were to have paid them by the end of last year, according to Financial Times calculations based on official data.

The calculations are imprecise because the Chinese bank regulator only announces figures for total outstanding loans to local governments, and does not publish details about interest payments or refinancing arrangements.

Nevertheless, three separate economists said the numbers confirmed that Chinese banks had implemented rollovers on a massive scale to stave off defaults.

---- Shang Fulin, China’s top bank regulator, said total outstanding loans to local governments were Rmb9.2tn at the end of 2012, according to reports in local media on Tuesday. At the end of 2010 such loans had reached Rmb9.1tn.
In the intervening two years, 41 per cent of all local government debts had been scheduled to mature, according to the national audit office. Moreover, Beijing had effectively blocked all new lending to local governments.

The implication of a stable outstanding loan volume is that the vast majority of local government loans that were to come due over the past two years have simply been extended. Accounting for interest payments of 6 per cent a year, local governments have paid back a maximum of about Rmb1tn.

A permanent Governor of the European Central Bank would be one of the greatest men in Euroland. He would be a little `monarch` in every City; he would be far greater than the Elected Leaders. He would be the personal embodiment of the ECB; he would be constantly clothed with an almost indefinite prestige. Every nation in business would bow down before him and try to stand well with him, for he might in a panic be able to save almost anyone he liked, and to ruin almost anyone he liked. A day might come when his favour might mean prosperity, and his distrust might mean ruin. A position with so much real power and so much apparent dignity would be intensely coveted.

With Apologies to Walter Bagehot. Lombard Street. 1873.

At the Comex silver depositories Tuesday final figures were: Registered 38.06 Moz, Eligible 115.31 Moz, Total 153.37 Moz.  

Crooks and Scoundrels Corner
The bent, the seriously bent, and the totally doubled over. 

Today, meet the banksters again. How the bankster traders at JP Morgan turned cannibal. JP Morgan shareholders might want to consider taking action against what is clearly an out of control, too big to fail, mega “bank.”

"If the financial system goes down, our business is going down and, trust me, yours and everyone else's is going down, too."

Lloyd Blankfein. CEO Goldman Sachs. November 8, 2009

Exclusive: JPMorgan bet against itself in "Whale" trade

NEW YORK | Tue Jan 29, 2013 5:07pm EST
(Reuters) - There is a new twist in the London Whale trading scandal that cost JPMorgan Chase $6.2 billion in trading losses last year. Some of the firm's own traders bet against the very derivatives positions placed by its chief investment office, said three people familiar with the matter.

The U.S. Senate Permanent Committee on Investigations, which launched an inquiry into the trading loss last fall, is looking into the how different divisions of the bank wound up on opposite sides of the same trade, said one of the people familiar with the matter.

The committee is expected to release a report on its investigation in the next few weeks.

The people familiar with the situation did not comment on the dollar value of the opposing trades placed by JPMorgan Chase & Co's (JPM.N) investment bank traders, which was much smaller than the total positions put on by the CIO.

The intra-bank trading was not mentioned in a 129-page report JPMorgan released on January 16, which chronicled some of the bank's risk management failures. The scandal has led to a number of management changes at JPMorgan and has sullied CEO Jamie Dimon's image as a hands-on risk manager.

Kristin Lemkau, a spokeswoman for JPMorgan, declined to comment on the investment bank's trading positions.

A spokeswoman for the Senate committee, led by Michigan Sen. Carl Levin, a Democrat, declined to comment on its investigation.

It was widely known that a group of about eight credit-focused hedge funds, such as BlueMountain Capital Management and Saba Capital Management, were on the other side of the trades that JPMorgan's London-based Whale team made on an index tied to corporate default rates. But the role JPMorgan's own investment bank may have played in the messy unwinding of the derivatives trade has not come out until now.

One of the three people familiar with the matter claimed that JPMorgan managers discussed merging the two sets of trades in an attempt to offset some of the CIO's losses. Those talks ended about a month before Bloomberg News first reported the CIO trades on April 5 last year, the source said.

JPMorgan's Lemkau said that this "never came up in our exhaustive internal investigation."
Last July, the bank fired the three London-based traders in the CIO most closely tied to the trading, including Bruno Iksil, dubbed the London Whale by hedge fund traders because of the size of the trades he placed for the CIO.

Two people familiar with Iksil and his boss, Javier Martin-Artajo, said the two CIO employees complained about the investment bank's actions in the spring of 2012, accusing its traders of deliberately trying to move the market against the CIO by leaking information on its position to hedge funds. Iksil made his complaint to a member of JPMorgan's compliance department, one of the people said.

"We shouldn't pour cold water on everything. We, the eight or nine players in global investment banking, have a very good future."

Deutsche Bank, CEO Josef Ackermann. Davos, January 2007.

The monthly Coppock Indicators finished December:
DJIA: +100 Down. NASDAQ: +123 Unch. SP500: +129 Up.  All three indexes are giving different signals. A time for caution.