Author: Elite E Services

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2nd Circuit in Libor case v. banks: Rigging rates is price-fixing collusion

Elite E Services
Common sense has prevailed at the 2nd U.S. Circuit Court of Appeals in litigation over an alleged conspiracy among 16 global banks to manipulate the London Interbank Offered Rate (Libor), a key interest rate benchmark. The appeals court held Monday that price-fixing collusion among competitors is a violation of antitrust law, even if it takes place in the context of an ostensibly cooperative rate-setting process.
The 2nd Circuit’s 61-page opinion, written by Judge Dennis Jacobs for a panel that also included Judges Reena Raggi and Gerard Lynch, vacated a controversial 2013 decision in which U.S. District Judge Naomi Reice Buchwald of Manhattan tossed classwide antitrust claims because the Libor rate-setting process is collaborative, not competitive. The ruling revives the banks’ exposure to potentially billions of dollars in damages from investors who say they were victimized by artificial Libor rates.
Rate and market-rigging class actions against banks have become all the rage among antitrust plaintiffs’ lawyers, who’ve won nearly $2 billion in settlements in consolidated litigation over alleged tampering with the market for credit default swaps and hundreds of millions of dollars in settlements tied to manipulation of foreign exchange benchmarks. The 2nd Circuit’s Libor decision will only make the class action bar more excited about claiming collusion in the rate-setting process.
International regulatory and criminal investigators have levied about $9 billion in fines and penalties against some of the banks involved in the Libor rate-setting process, including Barclays, Deutsche Bank and UBS. Internal documents released in government probes have shown some defendants manipulated the rate-setting process to make themselves appear more stable in the financial crisis and to give particular traders an advantage over counterparties. To derive the Libor rate, banks would submit reports of the rate at which other banks were willing to lend them money; those rates were winnowed and averaged to come up with a daily Libor figure.
Judge Buchwald had said plaintiffs could not show their injury was tied to antitrust violations because banks did not compete with one another in the rate-setting process. The 2nd Circuit, however, said her reasoning was flawed. As sellers of securities that incorporated the Libor rate, the banks are competitors. Investors in Libor-pegged instruments, according to the appeals court, are buyers affected by the conspiracy. Plain and simple.
“Schematically, appellants’ claims are uncomplicated,” the appellate opinion explained. “They allege that the banks, as sellers, colluded to depress LIBOR, and thereby increased the cost to appellants, as buyers, of various LIBORbased financial instruments, a cost increase reflected in reduced rates of return. In short, appellants allege a horizontal pricefixing conspiracy, ‘perhaps the paradigm of an unreasonable restraint of trade.’”
The panel rejected as “immaterial” the banks’ arguments that Libor itself is not a product or a price and that the rules for setting the rate were implemented by the British Bankers’ Association, not by the banks. “The crucial allegation is that the banks circumvented the LIBOR-setting rules, and that joint process thus turned into collusion,” the 2nd Circuit said. Investors “have alleged an anticompetitive tendency: the warping of market factors affecting the prices for LIBORbased financial instruments. No further showing of actual adverse effect in the marketplace is necessary.”
The 2nd Circuit also held there’s no question that investors have raised plausible claims of a conspiracy so their case can’t be dismissed as inadequately pleaded. “Close cases abound on this issue, but this is not one of them,” the opinion said. “These allegations evince a common motive to conspire – increased profits and the projection of financial soundness – as well as a high number of inter-firm communications, including Barclays’ knowledge of other banks’ confidential individual submissions in advance.”
The one sliver of hope for the banks in the appellate opinion is a remand to Judge Buchwald to determine whether investors in Libor-pegged financial instruments are the right plaintiffs to enforce antitrust law. As the panel pointed out, plaintiffs have to meet two requirements to establish antitrust standing: They have to show an antitrust injury and they have to show that they are “efficient enforcers.” Judge Buchwald never reached the second issue in her 2013 decision. Now she will have to decide what the 2nd Circuit called “a closer call” than the question of whether investors properly claimed an antitrust injury.
The banks, taking a cue from the appeals court, will doubtless argue on remand that governments around the world are already punishing them for Libor transgressions. “There are many other enforcement mechanisms at work here,” the appellate opinions said. “This background context bears upon the need for appellants as instruments for vindicating the Sherman Act.”
And even the 2nd Circuit agreed that private litigation may turn out to be a bust if, for instance, “the corrupted LIBOR figure on competition was weak and potentially insignificant, given that the financial transactions at issue are complex, LIBOR was not binding, and the worldwide market for financial instruments – nothing less than the market for money – is vast, and influenced by multiple benchmarks.”
Nevertheless, the 2nd Circuit opinion answers a question about benchmark rates and antitrust claims that has divided trial judges in federal court in Manhattan. At least one of Judge Buchwald’s colleagues followed her reasoning, in a 2014 opinion dismissing a case alleging manipulation of Japanese yen Libor. But, as I’ve written, Judges Lorna Schofield and Jesse Furman squarely rejected Judge Buchwald’s interpretation of antitrust injury in more recent decisions. Schofield and Furman, in cases involving supposed tampering with the foreign exchange and ISDAfix benchmark rates, took care to distinguish the facts the in class actions before them from the Libor allegations. In particular, they emphasized that the forex and ISDAfix rates were determined through actual trades, not just by banks’ voluntary submissions.
They also, however, said Judge Buchwald had misread U.S. Supreme Court precedent to reach her conclusion. In Monday’s opinion, the 2nd Circuit agreed. The important cases to consider, the 2nd Circuit said, are 1940’s U.S. v. Socony Vacuum Oil, the seminal ruling on the per se illegality of horizontal price-fixing schemes; and 1982’s Blue Shield of Virginia v. McCready, which said consumers can sue over supposedly collusive schemes that ended up costing them money.
Investors in the various Libor classes had to go to the U.S. Supreme Court to win the right to bring an interlocutory appeal of Judge Buchwald’s antitrust decision to the 2nd Circuit. Thomas Goldstein of Goldstein & Russell, who won the Supreme Court case, argued for plaintiffs at the appeals court as well. (It took an additional nine pages to list all of the plaintiffs’ firms and amici involved in the 2nd Circuit appeal.) Robert Wise of Davis Polk & Wardwell, who argued at the 2nd Circuit for all of the banks, declined to comment.
For more of my posts, please go to WestlawNext Practitioner Insights
http://blogs.reuters.com/alison-frankel/2016/05/23/2nd-circuit-in-libor-case-v-banks-rigging-rates-is-price-fixing-collusion/
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The CME Admits Futures Trading Was Rigged Under Old System

Elite E Services
Ask any trader what they believe to be the hallmark feature of any “rigged market” and the most frequent response(in addition to flagrant crime of the type supposedly demonstrated every day by Deutsche Bank and which should not exist in a regulated market) will be an institutionally bifurcated and legitimized playing field, one in which those who can afford faster, bigger, more effective data pipes, collocated servers and response times – and thus riskless trades – outperform everyone else who may or may not know that the market is legallyrigged against them.
Think of it as baseball game for those who take steroids vs a ‘roid free game, only here the steroids are perfectly legal for those who can afford them. Or like a casino where the house, or in this case the HFTs, always win.
However, as it turned out, the vast majority of the public had no idea that a small subset of the market was juicing, despite our constant reports on the topic since 2009, until the arrival of Michael Lewis’ book Flash Boys, which explained the secret sauce that made all those HFT prop shops into unbeatable “trading titans“: frontrunning.
That’s really all one had to know about the mystical inner working of the modern market. All Reg NMS did was legitimize and legalize frontrunning at a massive scale for those who could afford (and hide) it, all the while the technology race ran in the background making it increasingly more expensive to stay at the top: fiber optics, microwaves, lasers, FPGAs, PCI-Express and so on.
And, as we have also discovered in recent years especially since the advent of IEX, for many exchanges providing a two-tiered marketplace was the lifeblood of the business model: the bulk of the revenues for “exchanges” such as BATS and Nasdaq would come from selling non-HFT retail and institutional orderflow to HFT clients. Since the HFTs made far more than the invested cost in permitting such perfectly legal frontrunning, they were happy, the exchanges were happy too as they betrayed only those clients who didn’t pay up the “extra fee”, and only the true outsiders lost. And any time they complained how rigged the system was against them, the HFTs would scream that “they provide liquidity” as they are the real modern-day market makers.
Except that’s not true: the only time HFTs provide liquidity it when it is not needed. When liquidity is truly scarce and required in the market, such as on days like the May 2010 flash crash, or August 2015…  they disappear.
Meanwhile, nothing changes, because the regulators are just as corrupt as the exchanges and the HFTs, and their role is not to bring transparency to a broken, manipulated market, but to keep retail investors in the dark about just how rigged everything is.
It appears that the CME was doing just that as well.
According to Bloomberg, the CME Group – the world’s largest exchange operator – just completed an “upgrade” traders said would eliminate a shortcoming that gave some participants an advantage.
Under the old system, data connections that linked customers to CME – where key products like Treasury futures and contracts tied to the Standard & Poor’s 500 Index trade – had noticeably different speeds, opening up the potential for gaming, according to traders and other experts. Those who knew how to gain faster access could increase their odds of being first in line to trade.
The new design supposedly stamps that out.
Oh, so it was a design glitch that allowed those who “knew” how to frontrun everyone else to do so. That’s the first time we have heard of the particular excuse. Usually the scapegoat is a “glitch”, only in this case the CME didn’t even bother.
“It’s an excellent step forward,” said Matthew Andresen, co-owner of Headlands Technologies LLC, a quantitative trading firm. “The new architecture is flat and fair, a great improvement,” said Andresen, whose knowledge of market infrastructure goes back to the 1990s, when he worked for electronic trading pioneer Island ECN.
But, wait… if it is an “excellent step” that some traders can no longer frontrun other traders on the CME, why is it not a “poor step” that virtually every other exchange still enables precisely this kind of tiered marketplace, which is neither flat nor fair?
Actually, scratch that: that’s precisely what IEX is trying to resolve. The reaction? An exchange which explicitly profits from providing a two-tiered market and charging an arm and a leg for those who can afford it (and thus frontrun everyone else) namely the Nasdaq, has threatened to sue the SEC if it permits IEX to become a full-fledged stock exchange.
As Bloomberg adds, the situation involving CME’s data connections highlights a fresh set of difficulties ensuring a level playing field in the era of light-speed markets, in which even the smallest bits of a second matter. The race to shave off milliseconds has spurred efforts to carve through mountains, span continents with microwave networks and prompted a backlash championed by the likes of IEX Group Inc., the upstart stock market that delays trading to impose fairness.
Unlike some of today’s state of the art means of being faster than everyone else, frontrunning orderflow on the CME was more of a “brute force” mechanism: CME customers are allotted data connections to the exchange. Some have more, some have less. Given that their speeds varied noticeably under the old architecture, the more lines a trading firm had, the better odds it could find a faster one. Trading firms with a lot of links had the chance to fish around for the fastest way to get trades done. Other firms that didn’t have as many connections or the computer programming resources to test around and find the quickest, most efficient way in were at the mercy of the connections they had.
“The performance could vary widely” with data connections under the former CME architecture, Andresen said. By which he meant that those who could afford to pay much more than everyone else, would also be able to frontrun almost everyone else.
But no more. The new system “is an important innovation that will set a new standard for fair and efficient access to the futures markets,” said Benjamin Blander, managing member of Radix Trading, a Chicago-based trading firm.
CME declined to comment on claims the old system was unfair, Bloomberg adds. “We are continuously enhancing our infrastructure in order to provide the latest and best technology architecture for our clients,” said Michael Shore, a spokesman for CME.
CME has been installing the new architecture since February. The last group of futures and options became available on the new system last week, according to CME. Traders aren’t required to switch over to the new system and can keep trading the old way if they want.
This isn’t the first time CME revamped its systems to stamp out an imperfection. Before an upgrade more than two years ago, traders were notified that their own orders were completed before everyone else found out, potentially giving initiators of transactions time to buy or sell on other exchanges with knowledge of their executions.
We expect more violations of “accidentally” rigged markets to be uncovered in time, both on the CME and elsewhere, although we wonder at this time does it even matter: besides central banks trading with other central banks (especially courtesy of the CME’s own Central Bank Incentive Program), does anyone else even bother? If judging by the total collapse in trading volumes over the past decade in virtually every product class, the answer is clear.
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The Biggest Bitcoin Arbitrage Ever?

Elite E Services
Do you remember when you were growing up and all your friends were allowed Atari game consoles but you weren’t?
Well, I do and the things seemed as foreign to me as Venus. Mostly because the little time I managed to spend on the gaming consoles when my friends weren’t hogging them I found it all a bit silly. I never “got” computer games, and to this day still have poor comprehension of things like Angry Birds.
I suspect that many people around the world view Bitcoin in the same way as I view Angry Birds: with mild amusement and a general lack of understanding as to what the hell all the fuss is about.
I was thinking of this since a buddy of mine recently started taking notice of Bitcoin. Here’s a hedge fund manager who has been known to investigate some of the more out of the box investment opportunities around and Bitcoin is on his radar.
He figured out pretty quickly how to buy, store, and trade the currency. It’s extremely simple and certainly much easier than opening a typical brokerage account. But I wondered if the broader market saw it the same way?
What about Joe Sixpack who’s seen the Bitcoin checkout option on Amazon and thinks it’s another version of PayPal? Or the desk jockey who’s heard about it from his wayward teenage son and thinks it’s the domain of terrorists and crack dealers? What would it take to provide legitimacy to Bitcoin or any cryptocurrency in the eyes of the masses?
To answer my curiosity I googled it and found an article where some know-all was saying that Bitcoin isn’t a “real” currency because it’s not issued by an authority. This may strike a chord but I think the last time someone was so wrong he was standing in front of a tank in Tiananmen Square.
What gives Bitcoin value is largely the very fact that its NOT issued by any such “authority”.
But being an ardent student of history and lover of psychology I understand that there’s a fair few (the majority actually) among us who find comfort in a man in a uniform with a fluttering flag behind him. If it can’t be ISSUED by an authority, then would some such authority ostensibly legitimising it perhaps do the trick? The local government of a Swiss canton perhaps?
Zug Bitcoin
Or what about a listed investment vehicle that you can buy through your Roth?
Surely the folks at the SEC who are in charge of what gets to be listed and accessible to mainstream investors wouldn’t allow crack peddling currencies onto their exchange. So if the SEC OKs it then that is authority we can trust, right?
And this is where the intersection between what is available on an authorised exchange and what can be freely bought in the open market collides. And in this collision space lies a simply huge arbitrage opportunity.
A quick search on the Internet reveals an interesting animal: the Bitcoin Investment Trust (BIT). Only qualified accredited investors can buy BIT but everyday Joe can buy it as GBTC on the OTC market without restrictions.
Presumably, since it trades on a regulated and known platform, investors sense it is somehow more stable, more authorised, and more safe. It allows institutions and retail investors to have a proxy ownership in Bitcoin. I see nothing wrong with any of these things.
Some people like buying gold ETFs as a proxy for gold, others like the shiny metal in their grubby hands, and yet others prefer futures contracts. It all depends on what you’re looking to achieve so why not Bitcoin?
When I first looked at Bitcoin Investment Trust I had to do a double take. The price didn’t reflect the price of Bitcoin so I double checked the mandate. But no, they simply invest in Bitcoin. It’s specifically meant to track the price of Bitcoin. The thing is, it trades at over a 60% premium!
Bitcoin and Bitcoin Investment Trust
In any other market on this planet, were we to have an asset priced at one level in one place and an entirely different price some other place, the price discrepancy wouldn’t last very long. Traders would buy the asset where it is cheaper while simultaneously selling the asset where it is more expensive and pocketing the difference. Something also known as an arbitrage.
Arbitrage opportunities exist in public markets all the time but the discrepancies are typically extremely small and even more so with higher liquidity. It’s also pretty rare for them to last for any real length of time. Years ago I worked with traders whose sole focus was on arbitrage trading but today algorithmic trading trading has almost eliminated these opportunities and jobs.
Bitcoin’s market cap is now over $7 billion so it can no longer be considered “illiquid”. To have such a huge margin of price difference would be like having Icahn Enterprises (IEP) trading at 54 bucks on the NASDAQ while simultaneously trading for 86 bucks on another exchange, say the LSE. We’d all make a fortune with such an opportunity.
I therefore humbly ask any of the Joe Sixpacks out there who’ve invested in this Bitcoin ETF to provide me a borrow as shorting it is not currently available.
Take another look at the above chart and tell me you, too, wouldn’t want to arbitrage this anomaly?
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USAs BIG RED FOREX NUCLEAR OPTION

Elite E Services
As we explain in our book Splitting Pennies – the world is not as we think!  Every day, our money is worth less and less, and markets become more cumbersome, regulated, and overall disfunctional (except for an elite group of billionaires that can front run orders due to advanced computer-aided execution because of ‘order types’).  We explained in an article about America’s Big Red Forex Button, now we need to elaborate on the ‘nuclear option’ – considering that leading generals are saying more and more that war with Russia is ‘plausible’if not ‘likely’.  Military politics in today’s world is a complicated mix of government politics, geopoliti#mce_temp_url#cs, and traditional statecraft.  It’s based on REAL geopolitics, meaning – not what you see on TV, but what goes in to build an energy pipeline, such as has been launched in Southern Europe.  This same politics is what goes into Forex.  Forex is a private market, the participants are 90% private banks, and it’s not regulated.  There’s no exchange.  It’s literally – a globalist capitialist free for all.  The rules are determined by the participants.  It’s all privatized – no government intervention.  HOWEVER.  The big linchpin is that FOREX markets operate at the licensure of the US Government.  The Fed, is a private bank.  But – the Federal Reserve Act was enacted by Congress, creating the Fed.  All these conspiracy nuts talking about the Fed is private blah blah blah 13 families, they missed the boat.  These people cherry pick facts that suit their pre determined beliefs, whatever they may be (The planet is run by Lizards – my personal favorite).  The point here, the Fed is the most powerful institution in the world, arguably.  Because of their powers, not their connections, not their clients, not their skills.  The Fed can tommorrow, set the benchmark rate to 10%, the world would explode – contracts would default, loans called in, companies bankrupt, the US Dollar would rise by huge a amount – it would be an 8.0 earthquake on the economic Richter scale.  And it’s not so far fetched, after all, Paul Volcker did it.  They can do it – and they can do even more.  The Fed can do things, that could literally put an end to the economic system on the planet.  They have all these powers, both legally and physically (meaning that, if the Fed acts electronically – it has the systems to do it, regardless of the legality).
But – the Fed derives its powers from the US Government.
The Fed isn’t a GSE, it’s in a unique situation.  To use the Military analogy, the CIA outsources an untold number of it’s functions, sometimes reported as high as 70% – 80%:
Among the many revelations in the Senate Intelligence Committee’s investigation into the use of torture by the CIA is this crucial detail: The CIA delegated much of its “enhanced interrogation” to others.The report discloses that in 2008, 85 percent of the workforce in the CIA’s Rendition, Detention and Interrogation Group was made up of contractors. Former FBI special agent Ali Soufan, who was at the center of the Sept. 11 investigations, told FRONTLINE that he believes that the CIA’s most troubling interrogation practices can be traced to the agency’s decision to hand over key responsibilities to these outsiders.“They hired people from outside,” said Soufan, who testified to Congress in 2009 about what he saw as the many flaws in the CIA’s procedures. “We hire the best and the brightest to work for the government, and then we outsourced to people who we have no clue who they are.”
This is, in fact, how government works.  The US Government has become the world’s largest business enterprise.  Defense was once a need – now it’s a business.  Every aspect of life from healthcare to managing your retirement has been commoditized and securitized for your consuming pleasure.
The ones who hold the big stick, it’s really the US Government, not the Fed, not the banks.  Because they have the ultimate power – the power to bomb.  Don’t take it lightly, and don’t misunderstand.  The fact that DC enjoys this power is not a critique or some kind of implication that “America is Evil” or some such nonsense.  Simply that, in REAL geopolitical terms, this is the reality of the world’s economy since World War 2.  All other explanations, like “Gunboat Diplomacy” are good metaphors, but the real power is derived from a small suitcase that POTUS carries that can eliminate a continent or the entire planet Earth.  
Is the Petro Dollar system coming to an end?  Yes, but it will be replaced by a new system – the NUCLEAR DOLLAR.  This is why one reason that the only real threat to the USD as a global reserve currency is Russia – not the EU, Africa, or Asia.  But as George Friedman explains in his latest book, the power which controls the trade routes in the Atlantic and Pacific, controls the world.  The United States is uniquely positioned on both coasts, with natural geologic advantages.  This, combined with the largest economy in the world, and Nukes, means that for the forseeable future, the United States will remain the world’s superpower.  This article is a must read for any Forex trader, would-be analyst, or conspiracy nut: 
The other part of the world that could produce a rival to the United States is Eurasia. Eurasia is a region of extremely varied geography, and it is the most likely birthplace of an American competitor that would be continental in scope. Geography, however, makes it extremely difficult for such a power (or a coalition of such powers) to arise. In fact, the southern sub-regions of Eurasia cannot contribute to such formation. The Ganges River Basin is the most agriculturally productive in the world, but the Ganges is not navigable. The combination of fertile lands and non-navigable waterways makes the region crushingly overpopulated and poor.
Things like Oil pipelines, can change this.  It’s why the politics is so complicated, and why the US has such an aggressive foreign policy promoting the use of US-involved contractors, or US-ally client states.
So while the Fed is a private institution, and Forex is run by private banks (for profit corporations) – it does so because governments authorize them to do so.  States provide banking charters.  States can take away banking charters.  If the US Government wanted to, it could mint its own money, create its own currency, and be its own banker.  Many economists and leading analysts have suggested this as sound monetary policy.  But to understand the FOREX system we have today, and how the Fed operates, one must understand government thinking, as explained in our previous article:
The government approaches work in an entirely different way than in private enterprise.  Healthcare.gov – the world’s first billion dollar website, is another great example.  Now imagine the task the Department of Defense is given; protect America from external threats.  Their first step, to identify threats.  In the military, this is done by agencies such as the CIA and the NRO.  Actually if the CIA operated according to its public mission, it would be an analyst agency not much different than those seen on Wall St. – providing information to their DOD bosses who act on it.  Since 911, the potential for financial terrorism has been considered a national security issue.  It’s in the laws, it’s in the regulations, it’s serious.  What if the Saudis flood the market with US Dollars?  What if the Chinese dump treasuries crashing the US Dollar?  What if hackers take control of the NYSE and flood the market with sell orders, causing a crash?  These are all extremely improbably events, so rare there is a higher chance of a giant meteor striking Manhatten this year.  The probability is so low it’s difficult to calculate.  But just like the false threat of Russian’s launching nukes, billions of dollars have been spent building a Big Red Button to press in case it happens.  It’s because government workers have one thing in mind; protect themselves.  Avoid a potential disaster.  The last thing any government worker wants is to be in charge of security on a day like 911, even if the threat is financial.  Although the debate rages about TARP and government actions during the weekend of the Bear Stearns collapse – the financial system was saved.  They pressed the button.  But this wasn’t the Forex button.
The Fed is a method of outsourcing.  Government doesn’t really DO anything, except collect taxes, make laws, and delegate powers.  Things like USPS and Healthcare.gov are anomalies.  
The US Government maintains the ultimate currency Nuclear option:  Destroy the US Dollar.  The power to destroy, is real power.  They can do it – just like they can create a new currency.  If you think this is irrational or impractical, see hundreds of references where they’ve done this in the past 100 years, including but not limited to issuing Military Payment Certificates (MPCs) during times of war, and has been often accused of counterfeiting US Dollars.  There’s no better ‘slush fund’ to finance a ‘black budget’ than REAL currency printed off the books, that no one knows exists.  And why not, it doesn’t cost much to print, and as an ‘anonymous’ Congressman admits in a recent release, they’re just a sinkhole of leeches:
More details are being released about the anonymous expose of Washington D.C. corruption and largesse that confirms why Americans hate their national government and have rallied to anti-establishment presidential candidates like Donald Trump. As NYPost reports, the 65-page manifesto called ‘The Confessions of Congressman X’ is based on years of transcribed private discussions, which the congressman last November gave editor Robert Atkinson, says more time is spent fundraising than reading bills and calls Washington a “sinkhole of leeches,” where money ‘corrupts’ and House members are “puppets” to lobbyists who bankroll their campaigns.
Recapping the FOREX NUCLEAR OPTIONS that USA has:
  • USA can revoke the powers of the Fed, and create their own government run central bank
  • USA can make null and void, use of the US Dollar as “Legal Tender” – to be replaced by a new currency, something electronically, centrally controlled
  • USA can freeze all incoming and outgoing Foreign Currency transactions (which are processed by the Fed)
This is all possible, and much more.  These are operating powers.  Does it imply that anything like this will ever happen?  Probably not.  But investors should understand the reason WHY NOT.  Because if someone is holding a gun to your head while you work, it’s not likely that you’re going to throw stones at him.  The French tried that, and Nixon pressed the button.  And finally, they didn’t get their Gold that they wanted.  They just got more worthless US Dollars.  

http://www.zerohedge.com/news/2016-05-19/usas-big-red-forex-nuclear-option

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Greek Pipeline Breakthrough To Challenge Russian Gas Dominance In Europe

Elite E Services
Submitted by Nick Cunningham of Oilprice.com
Greek Pipeline Breakthrough To Challenge Russian Gas Dominance
After years of debate, political jockeying and acrimony, a major pipeline project to bring natural gas to Southern Europe has broken ground.
The Trans-Adriatic Pipeline (TAP) will connect the Caspian Sea to European markets, providing Europe with another large source of natural gas that will help the continent diversify away from Russia. The route begins at the Caspian Sea in Azerbaijan, where the South Caucuses Pipeline will carry Caspian gas from the large Shah Deniz-2 gas field, delivering it to the border with Turkey. From Turkey the gas will tie into the Trans Anatolian Pipeline (TANAP), which will take the gas across Turkey to the border with Greece where it will meet up with the aforementioned Trans-Adriatic Pipeline. The Caspian gas will then travel through TAP across Greece, beneath the Adriatic Sea and onto Italy.
South Caucuses Pipeline to TANAP to TAP
The TAP route
The pipeline projects are part of what is often referred to as the “Southern Corridor” for European gas. For years Europe has pressed for a gas pipeline through the southern corridor that would offer it an alternative to Russian gas. But TAP was not always an inevitability – before the consortium of companies took up the project, the European Union favored the Nabucco Pipeline, which instead of sending Caspian gas to Italy, would have resulted in a pipeline snaking its way through the Balkans to Central Europe
And back when Nabucco was in vogue, Russia pushed hard for its own route through Southern Europe. The so-called South Stream Pipeline would have sent Russian gas beneath the Black Sea to Bulgaria. European regulators worked hard to derail that pipeline on anti-competition grounds. Shortly after the death of South Stream, and following in the wake of Russia’s standoff with Europe over its incursion into Ukraine, Russia pushed the “Turkish Stream” project, which would have sent Russian gas to Turkey and then onto Southern Europe. But the project was more of an idea than a reality, and due to a set of differences between Russia and Turkey, not the least of which was the cost of the pipeline and how it would be paid for, the project never really went anywhere.
The complexity of pipeline politics and the web of pipeline routes can be confusing, but suffice it to say the Turkish-Greece-Italy route has won out, through the TANAP and TAP pipelines. On May 17, TAP broke ground in Thessaloniki, Greece. Construction will take several years, but when the $45 billion project is completed in 2020, it will deliver 10 billion cubic meters per year of natural gas from the Caspian Sea to Europe.
Greek Prime Minister Alexis Tsipras was in attendance for the groundbreaking event, as were top officials from Georgia, Azerbaijan, Albania, the EU and even the U.S. State Department. Each have their own reasons for supporting the project. The project developers – BP, the Azerbaijan state-owned oil company SOCAR, and others – obviously have direct profit motives in mind. The national governments see economic opportunities through construction and transit fees. For Greece, in particular, the EU sees TAP as providing an economic stimulus to the indebted nation at a time when debt negotiations continue to torment both sides.
From the perspective of the U.S. government, TAP will reduce Europe’s dependence on and vulnerability to Russia; in essence, it is a major geopolitical victory. U.S. Secretary of State John Kerry, in a congratulatory letter to Greece’s Prime Minister, said that TAP is a “prime example of infrastructure that enhances European energy security.”
Diversity of supply has become one of Europe’s key energy security objectives, along with building an “energy union” between EU member states.
“A single European energy market will allow us to increase our security of supply by allowing energy to flow freely across our borders,” European Commission Vice President for Energy Union Maros Sefovi said at the ceremony. “It will allow us to better negotiate with our external partners, given that the EU is the largest energy importer in the world.”
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Analyst Warns Deutsche Bank’s Problems May Now Be “Insurmountable”

Elite E Services
Call it some no holds barred German bank on German bank action.
After a tumultous start to a year that Germany’s largest, and judging by the tens of billions in legal settlements and charges also its most criminal bank, Deutsche Bank, would love to forget, things got worse over the weekend when a note issued by another German bank said that either Deutsche will have to massively dilute its shareholders as a result of “insurmountable” debt, or a fate far worse could await the Frankfurt-based lender.
Berenberg analyst James Chappell pulled no punches and spoke in uncharacteristically frank terms, traditionally reserves for the fringe media, when he said that “facing an illiquid credit market limiting Deutsche Bank’s (DBK) ability to delever and with core profitability impaired, it is hard to see how DBK can escape this vicious circle without raising more capital. The CEO has eschewed this route for now, in the hope that self-help can break this loop, but with risk being re-priced again it is hard to see DBK succeeding.” Chappell then broke the cardinal rule of sellside analysts: never issue a Sell rating on a fellow bank. “We downgrade to Sell and cut our price target to EUR9.00.“
According to Chappell, the biggest problem, of which DB has many, is that it simply has too much leverage, some 40x to be precise, something we have warned about since 2013.To wit:
Too many problems still: The biggest problem is that DBK has too much leverage. On our measures, we believe DBK is still over 40x levered. DBK can either reduce assets or increase capital to rectify this. On the first path, the markets do not exist in the size nor pricing to enable it to follow this route. Going down the second path also seems impossible at the moment, as the profitability of the core business is under pressure. Seeking outside capital is also likely to be difficult as management would likely find it hard to offer any type of return on new capital invested.
In other words, DB may be frash out of options. But wait, there’s more bad news because as Berenberg adds, the entire “industry is in structural decline“
The difficulty in analysing investment banks from the outside is that it is hard to establish core profitability. In an industry in structural decline, investment bank management teams are also likely to face similar challenges. Each weak quarter is seemingly greeted with an excuse that it could have been better if not for the wrong type of volatility, client uncertainty or central bank intervention. Q1  2016 saw the absence of one-off profitable events that have protected revenues in the past. We have perhaps had the first glimpse of what core profitability in the investment banking industry really is (ROEs in the midsingle digits at best) and it could be even worse if the traditional seasonality occurs.
Which brings us to his price target and Sell rating:
Price target cut to EUR9.00: We look at DBK’s valuation in two ways. One is a sum-of-the-parts analysis on the basis of normal conditions returning. This would imply a price target of EUR15.00. The second is a leverage adjusted P/E using the sector average multiple of 10x. This implies a price target of EUR9.00, using tangible book value. Considering “normal” conditions are unlikely to return and risk is re-pricing, we use the latter.
We applaud Chappell and only wish more of his peers had the guts to tell the truth and call it like it is.
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China Sends Hawkish Fed A Message – Devalues Yuan Near 2016 Lows

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Just as we warned was probable, The PBOC sent a message loud and clear to the newly hawkish Fed following today’s surge in the dollar after the minutes were released. With the 2nd biggest daily devaluation since the August collapse, China pushed the Yuan fix against the USD down to its lowest since early February – barely above the January lows. As we warned earlier, the China-Panic trade looms loud now as turmoil appears all that is left to stop The Fed unleashing another round of liquidity-suckiong rate hikes sooner than the market wants.
All eyes have been firmly focus on the Yuan’s move against the USD but in fact the Yuan has been falling non-stop against the world’s major currencies…
The critical issue now is that the U.S. dollar is appreciating again. The
Bloomberg Dollar index is up 2.8% in the last two weeks and another 2%
wouldn’t be an unreasonable consolidation in the context of it dropping
more than 7% in the previous three months.
That previous dollar slide distracted from the fact that yuan depreciation never abated. Against the basket, it’s been weakening at an average rate of almost 1.2% per month for the last five months.

The market’s single-minded focus on USD/CNY is crucial and it’s also why disaster can still be averted. It will require the PBOC to temporarily suspend their yuan-weakening policy for as long as the dollar is climbing.
Otherwise, prepare to batten down the hatches for the coming storm.
It appears that it is the USD’s turn to face The PBOC once again… The 2nd biggest daily devaluation of the Yuan fix against the USD since August’s collapse.
Simply put, China does not want The Fed sucking the liquidity lifeline out of world markets right as it embarks on another round of desperate credit reflation.
Given The Fed’s comments today, the only excuse left for Yellen and her friends (unless they are willing to lose all credibility due to short-term fluctuations in macro-economic data from now to June meeting – as opposed to their mandated long-term view) is if markets turmoil enough to warrant some level of conservatism. As we have warned before – bullish stock market investors should be careful what they wish for – the higher stocks go, the higher the chances of rate hike, and the more likely China pre-taliates with some turmoil-inducing events to stall the unwind… the last time traders panicced about China, bad things happened to stocks…
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“We’re Running A F**king Casino” Congressman Admits DC Is A “Sinkhole Of Leeches”

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More details are being released about the anonymous expose of Washington D.C. corruption and largesse that confirms why Americans hate their national government and have rallied to anti-establishment presidential candidates like Donald Trump. As NYPost reports, the 65-page manifesto called ‘The Confessions of Congressman X’ is based on years of transcribed private discussions, which the congressman last November gave editor Robert Atkinson, says more time is spent fundraising than reading bills and calls Washington a “sinkhole of leeches,” where money ‘corrupts’ and House members are “puppets” to lobbyists who bankroll their campaigns.
“Like most of my colleagues, I promise my constituents a lot of stuff I can never deliver,” he admits.
“But what the hell? It makes them happy hearing it . . . My main job is to keep my job.”
As NYPost.com reports, the book, published by the small Mill City Press, is based on years of transcribed private discussions, which the congressman last November gave editor Robert Atkinson. Atkinson declined to say whether Congressman X – a Democrat – is a current or former House member.
The title of one chapter sums up his view of congressional leaders: “Harry Reid’s a Pompous Ass,” he says of the Senate Democratic leader.
“We spend money we don’t have and blithely mortgage the future with a wink and a nod. Screw the next generation. It’s about getting credit now, lookin’ good for the upcoming election,” he says.
He said he and his colleagues often lie to try to be all things to all people instead of tackling the nation’s problems.
“I contradict myself all the time, but few people notice,” X says. “One minute I rail against excessive spending and ballooning debt. The next minute I’m demanding more spending on education, health care, unemployment benefits, conservation projects, yadda, yadda, yadda.”
Voters are described as gullible, know-nothing jerks, while the only people who count are the big donors who pour billions of dollars into lobbying.
“Voters are incredibly ignorant. It’s far easier than you think to manipulate a nation of naive, self-absorbed sheep who crave instant gratification . . .,” vents Congressman X.
He says money “corrupts” and House members are “puppets” to lobbyists who bankroll their campaigns.
“Business organizations and unions fork over more than $3 billion a year to those who lobby the federal government. Does that tell you something? We’re operating a f–king casino,” he says.
He describes himself as a “closet moderate” who supports charter schools and tax vouchers to allow poor kids to go to private schools.
But students take a back seat to partisan politics…
“Our education’s in the toilet, and all we do is snipe at each other,” he says.
Congress is too polarized and partisan to get anything done, by the congressman’s account.
“There seems to be a complete disintegration of confidence in government. A fear that government is its own special interest,” he says.

“America’s on an irreversible decline and no one in Washington seems to care . . . God help us.”

X says the cloak of anonymity gave him the freedom to expose ­secrets, including how the public’s money is wasted. New York sources speculated it’s Rep. Steve Israel (D-LI), a moderate who announced he’s retiring and who has complained about the constant need to fundraise to finance re-election campaigns.
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