Wednesday, December 22, 2010

Trader Holds $3 Billion of Copper in London


Bloomberg News

Copper soared to a new record of $4.2705 per pound on Tuesday in New York, and is up 28.3% this year. Here, the Cerro Verde copper mine in the Atacama desert near Arequipa, Peru.

As commodity prices soar to new records, the ability of a few traders to hold huge swaths of the world's stockpiles is coming under scrutiny.

The latest example is in the copper market, where a single trader has reported it owns 80% to 90% of the copper sitting in London Metal Exchange warehouses, equal to about half of the world's exchange-registered copper stockpile and worth about $3 billion.

The report coincided with copper prices soaring to new records on Tuesday. Commodities prices rallied along with stocks. The Dow Jones Industrial Average gained 55.03 points, or 0.48%, to 11533.16, its highest level since August 2008. Crude oil jumped to its highest level in more than two years and topped $90 a barrel in late electronic trading in New York. Corn and soybeans rose amid worries about hot weather in Argentina.

Copper soared to a new record of $4.2705 per pound on Tuesday in New York, and is up 28.3% this year. The LME's three-month copper contract closed at $9,353.50 a metric ton, up 1.6% on the day, a new record.

J.P. Morgan Chase & Co. recently had a large position in copper, though it is unclear whether the U.S. bank increased its holdings, or whether a new player has taken dominant position.

"Regardless of who owns it, the only thing of note here is that we are being told that one person has a substantial position," said David Threlkeld, president of Resolved Inc., a metals consultancy.

Single traders also own large holdings of other metals. One trader holds as much as 90% of the exchange's aluminum stocks. In the nickel, zinc and aluminum alloy markets, single traders own between 50% to 80% of those metals and one firm has 40% to 50% of the LME's tin stockpiles.

While commodities exchanges scrutinize all holdings to ensure a single player isn't trying to corner the market, and many of the positions are owned by big firms on behalf of clients, the large holdings do result in a concentration of ownership that could skew prices.

At the same time, thousands of new investors are flooding into the commodities markets, either directly or through exchange-traded funds, seeking to take advantage of an expected rise in prices of raw materials as the global economy continues to recover.

While commodities regulators in the U.S. are considering restricting the amount of futures contracts any one trader can hold, they have no jurisdiction over physical holdings.

The LME has strict rules to prevent market squeezes but does not limit how much metal a single trader may hold. Instead, the exchange demands the dominant holder make metal available for short-term periods at very limited profit margins. The LME says it closely watches individual holdings.

Copper demand is likely to outstrip supply this year by an estimated 455,000 metric tons, says Barclays Capital. Copper inventories at the LME have been declining since February.

Consumption is growing rapidly in China, Brazil and the U.S. And the creation of ETFs to hold physical metal is helping drive demand. On Tuesday, ETF Securities, a London-based provider, said that its newly-announced copper-backed ETF has added about 850.5 tons of copper, up 43%, to reach 1,445.5 tons.

Last month, the LME reported that a single holder owned more than 50% of the exchange's copper. People familiar with the matter at the time said J.P. Morgan was the holder. On Tuesday, the LME reported that a single holder now has as much as 90% of the stockpiles, without naming the firm. The LME reports data two days in arrears, so the position increased on Friday.

In the aluminum market, about 70% of the LME metal is locked up, MF Global base metals analyst Edward Meir said during LME Week in London in October.

LME aluminum stocks currently total around 4.3 million metric tons.

As one example, Swiss commodity trading firm Glencore International AG bought about 1.6 million tons of the metal from United Co. Rusal Ltd. earlier this year, market participants said at the time. Glencore then turned around and presold the metal. So even though the aluminum is sitting in LME warehouses, visible to all traders, it is effectively locked up.

These sorts of deals have skewed physical trading in these metals, as other consumers have paid increasing premiums to get hold of stocks, even though the metal looked like it was available in warehouses.

Holding ready-for-delivery metals on an exchange isn't a cheap undertaking for traders, who are responsible for paying insurance, storage and financing costs. And "the end game is to find somebody to buy something you have already bought for a higher price," Mr. Threkeld said.

The recent boom in metal prices has enabled traders to purchase the physical metal, sell a futures contract at a much higher price and still make a profit after paying for storage and insurance.

—Andrea Hotter contributed to this article.

Taking Internet Silver Conspiracies with a Grain of Salt

COMMENTARY - – December 16, 2010 – Earlier this month a video titled JP Morgan Silver Manipulation Explained hit the internet, and was an instant sensation among silver buffs and conspiracy theorists alike. Within a few days, the talking cartoon animals set us ablaze with misguided hope and anger. With large claims including how we the people could crash JP Morgan on account of a huge gaffe caused by a naked short order that they couldn't cope with, many went charging into battle.

Now, don't get me wrong. I'm a hobby conspiracy theorist myself, and am always open to debate over a drink with any of my friends on topics from everything including the Fed, to fractional reserve banking to the entire Bre-X debacle that all started from an office in my hometown of Calgary. But, this one was a head scratcher. How could a cheaply animated video complete with corny insults and funny noises and poop jokes capture so much attention? Why did this need to be debunked? Well, first off, the claims are self-serving and preposterous at best. Why would buying silver coins from a website sink the giant ship that is JP Morgan? Why would JP Morgan leave a ventilation shaft opening the size of a womprat for Luke Skywalker to fire his laser torpedoes at? It didn't add up.

So a little more attention to the matter, and the story quickly evaporates. Using basic supply and demand theories, we can see that this isn't such a simple task that we can all take part in just because we're buying silver. I've been doing that for years, and I don't see how just buying more will topple the giant. Even if it could, there would be plenty of time for JPM to stabilize itself and hedge buy taking the ETF route.

Look, there's a REAL lawsuit pending against JP MorganChase and HSBC for silver manipulation. This isn't even mentioned by the talking dog in the video. Why not? Probably because it needed to get to the main point in the first place, which was a plug for the website it was promoting.

Next is the $500 per ounce claim, which has been perpetuated by Max Keiser of RT fame. Likeable as he may be, this talk is ludicrous. Even at a gold to silver ratio of 1 to 17, which was seen after the Hunt brothers took a stab at manipulating the silver supply, and we're still only at a silver price in the range of $82. Where do we have to go as an entire economy to a $500 range? We're talking a shift of more than just a decimal place in the price they're wanting us to believe. Couple that message with the riled up feelings that a good old fashioned conspiracy starring the bad guys at JP Morgan, and our suspension of disbelief is in the hands of the video makers. We are better than that.

I like silver. I like conspiracy theories. But this kind of misdirection can be dangerous if taken too seriously. As always, take the free advice anyone gives with a grain of salt. Including my own.

G. Joel Chury

Editor in Chief

DISCLOSURE: No fee has been paid for the production and distribution of this article and as such should be viewed in the context of a commentary.

Monday, December 20, 2010

Alex Jones interview

The Big Wall Street Banks Have Found a New Way To Strangle the American People: Predatory Property Tax Collection

It turns out that the big Wall Street banks have found a dirty new way to make loads of cash from U.S. homeowners, and they really, really don't want to talk about it. So what is this dirty new business? America's biggest financial institutions have become property tax collectors, and it is extremely lucrative. From coast to coast, the big Wall Street banks are buying up thousands upon thousands of tax liens and are making a killing by socking distressed homeowners with predatory interest, outrageous penalties and almost unbelievable legal fees. In some areas, the big banks are able to foreclose on these homes in as little as six months. The elderly and the poor are the most common targets of these practices. An absolutely brilliant exposé in the Huffington Post has brought these issues to light, and it is creating quite a controversy in the financial world. The big banks are doing nothing illegal here. Local governments are offering to sell thousands of tax liens and somebody is going to end up buying them. But something seems extremely unsavory about the big Wall Street banks capitalizing on the economic downturn that they were so instrumental in causing in such a predatory manner.

Today, millions of American families are barely hanging on to their homes by their fingernails. Millions are out of work and millions of others are barely making enough to put food on the table. Meanwhile, property taxes have absolutely soared in most areas of the nation over the past decade. Many Americans are finding that when that time rolls around they simply do not have a big chunk of extra money to pay a property tax bill.

So millions of American families, including many that have completely paid off their homes, now find themselves in danger of being thrown out on to the street over an unpaid property tax bill.

For many local governments, the headache of trying to collect on thousands of property tax liens is just too much, so they are glad to "outsource" the work of collection.

So how do the big Wall Street banks get involved? Well, it goes something like this....

1) The big Wall Street banks set up or invest in shell companies that will disguise who they really are.

2) These shell companies run around and buy up all of the tax liens that they can get their hands on.

3) Predatory levels of interest (in some states as high as 18 percent), fees and penalties rapidly pile up on these unpaid tax liens. The affected homeowners quickly end up owing much, much more than what the original tax bills were for.

4) If the collecting firm has to hire a lawyer, then that gets charged to the homeowner as well. The bloated legal fees for some of these lawyers can end up being the biggest expense of all.

5) If the tax liens do not get paid, the collecting firms move in to foreclose as quickly as legally possible.

According to the Huffington Post, Wall Street banks such as Bank of America and JPMorgan Chase have been gobbling up several hundred thousand tax liens from local governments. It appears that "distressed housing markets" are being particularly targeted.

Many of these tax liens are sold in online auctions, so it is unclear if many local government officials even realize who the big money behind many of these shell companies is.

Once again, this is all perfectly legal, but it is more than a little distasteful.

The following video by the Huffington Post does a good job of summarizing what they found....

The truth is that there is a huge difference between the letter of the law and true justice.

Just consider the following tragic story from the Huffington Post article....

Barbara Carpenter, a 58-year-old disabled Ohio retiree, found herself in such a situation. The former worker for the American Red Cross struggled to save her Toledo home from a JPMorgan entity called Plymouth Park Tax Services, which in recent years has been among the nation's top buyers of tax liens.

"It's a great neighborhood and the house is in good condition," said Carpenter, who paid $67,000 for the one-story home in 2004. But she fell behind in paying her taxes and a certificate for $1,500 in unpaid taxes was sold off to Plymouth Park, which is based in New Jersey.

Carpenter's lawyer, Joseph Westmeyer, said Plymouth Park routinely charges an upfront fee of around $1,500 as soon as it buys the lien and 18 percent interest on the debt. If they don't get paid, they foreclose.

"It's not a good deal for poor customers," said Westmeyer. Carpenter wound up selling the house in August for less than half what she had paid. Plymouth Park received about $12,000 in legal fees and other charges, including some additional taxes, Westmeyer said, quoting from court records.

Does that sound like an honorable way of making money to you?

Would you like to make your living by throwing elderly women out of their homes and into the street over unpaid tax bills?

Unfortunately, this problem is not going to go away any time soon. One out of every six Americans is enrolled in a government anti-poverty program. Tens of millions of Americans are barely hanging in there. In addition, tens of millions of elderly Americans live on fixed incomes. Meanwhile, property taxes just continue to go up in many areas of the United States.

Unless the U.S. economy experiences a dramatic turnaround, we are going to continue to see large numbers of Americans get behind on their property taxes, and the big banks will continue to be there to scoop up the tax liens.

Large numbers of poor and elderly Americans that don't even have a mortgage will lose their homes and it will all be perfectly legal. Executives at the big banks will be having a good laugh about their huge bonus checks as thousands upon thousands of our most vulnerable citizens are dumped out into the street.

But weren't the big banks largely responsible for causing the housing crash and the economic meltdown that followed?


But so far none of them is really paying any kind of a price. The big banks got bailed out by the U.S. government, and now it looks like the Federal Reserve is preparing another round of "backdoor bailouts" to help them out again.

But do the big banks show any mercy on the poor and the elderly who have gotten behind on their property taxes?

Not at all.

This is 2010 – a time when greed dominates the financial world and when most banks don't seem to know a thing about kindness or mercy.

Reprinted with permission from the Economic Collapse Blog.


Buy Gold

Buy Silver



Tax Lien

Bank of America

JP Morgan

Real Estate