SEC Imposes Redemption “Gates” On Money Market Funds

Peter’s Commentary

There are $2.6 trillion invested in money market funds.  The SEC has just voted to impose “Gates” to restrict redemptions of money market funds during periods of market turmoil. This is highly likely to cause money market investors to transfer funds to other investments, such as equities. This could help propel equities to unexpectedly high bubble figures.

ZeroHedge reports:

Moments ago the gates arrived, when following a close 3-2 vote (with republican commissioner Piwowar and democrat Stein dissenting), the SEC adopted new rules designed to curb the risk of investor runs on money market funds, capping the end of a years-long heated debate between regulators and the industry dating to the financial crisis according to Reuters.

Among the changes, funds will have to switch to a floating share price instead of the current $1/share (hence the term breaking the buck). But the key part: “The SEC’s rule will require prime money market funds to move from a stable $1 per share net asset value, to a floating NAV. It also will let fund boards lower redemption “gates” and fees in times of market stress.”

The Fed itself, has warned in April 2014 that the possibility of suspending convertibility, including the imposition of gates or fees for redemptions, can create runs that would not otherwise occur… Rules that provide intermediaries, such as MMFs, the ability to restrict redemptions when liquidity falls short may threaten financial stability by setting up the possibility of preemptive runs.

So why impose the “Gates”?

Clearly, everyone understands that the only purpose behind implementing “gates” is to redirect the herd. And with some $2.6 trillion in assets, money markets can serve as a convenient source of “forced buying” now that QE is tapering, if only for the time being. The only question is whether the herd will agree to this latest massive behavioral experiment by the Fed, and allocate their funds to a stock market which is now trading at a higher P/E multiple than during the last market peak.

And should this particular exercise in inflating stock bubbles fail, then gating bond funds, another “reform” which as we reported last month is in the works, should certainly force equities to unseen bubble proportions.

On the other hand, a blow off top in which the S&P rises by a few hundred points in weeks if not days may be just what this market needs for its final catharsis before everyone realizes just how insane centrally-planned things have gotten, and the long-delayed reset can finally take place. Source

US Intelligence: No Evidence of Russian Involvement

Peter’s Commentary

Paul Craig Roberts reports that US Intelligence Officials have at last been given permission to confirm there is no evidence of Russian involvement in the downing of Fight MH17.

US Intelligence: Russia Didn’t Do It, July 23, 2014

After days of placing hostile blame for the downing of the Malaysian airliner on Russia, the White House permitted US intelligence officials to tell reporters that there is no evidence of the Russian government’s involvement.

Obviously, the US satellite photos do not support the Obama regime’s lies. If the White House had any evidence of Russian complicity, it would have released it to great fanfare days ago.

We are fortunate that the analytical side of the CIA, in contrast with the black ops side, retains analysts with integrity even after the purge of the agency ordered by Dick Cheney. Incensed that the CIA did not immediately fall in line with all of the Bush regime’s war lies, Cheney had the agency purged. The black ops side of the agency is a different story. Many believe that it should be defunded and abolished as this part of the CIA operates in violation of statutory US law.

Don’t hold your breath until Washington abolishes black-ops operations or the Obama regime apologizes to the Russian government for the unfounded accusations and insinuations leveled by the White House at Russia.


Putin Calls Unscheduled Duma Meeting On East Ukraine

Peter’s Commentary:

Putin has called the State Duma back from a planned vacation due to the situation in East Ukraine. It appears he is pushing for a cease fire and for Ukraine to negotiate. reports:

State Duma deputies, who are currently on a planned vacation, urgently come to Moscow to participate in an unscheduled meeting because of the situation in eastern Ukraine, a source in the State Duma told Ukrinform on Wednesday.

“Maybe something will happen tomorrow. Now this issue is being solved. Something is being planned, because many deputies come, probably for a quorum. Many deputies arrive… and today they already have to be in Moscow,” he said. report that:

“Tonight Ukrainian leadership will probably be (issued) an ultimatum, demanding a ceasefire and start negotiations in the Ukraine-Russia-”DNR” / “LC”.

Thus, Russia will try to legitimize the terrorists as a political entity.

If Ukraine does not agree, Putin, according to the interlocutor, may decide on entering the Russian troops in Ukraine under the guise of “peacekeepers.”

As reported, after the meeting of the EU Council has learned that the European Union could recognize so-called “DNR” and “LC” terrorist organizations.”


It seems that Putin does not want to keep the situation in Ukraine dragging on, and is likely pushing to negotiate.

New Orleans Firefighters’ Pension Fund Loses Almost Half Its Value Since 2011

Peter’s Commentary

The New Orleans pension fund has fallen from $158.5 million in net assets at the end of 2011 to a low of $84.8 million.

From the World Socialist Web Site:

Like all funded pension schemes, the New Orleans firefighters’ pension plan is prey to the swindling and double-dealing of the financial industry. The list of bad and often downright shady investments made by the fund could fill several volumes. For example, in 2008 it and two other Louisiana public employee pension funds invested $100 million in a scheme by Fletcher Asset Management, supposedly involving an anonymous financial backer, which guaranteed a 12 percent return on investment. Fletcher Asset Management is now embroiled in several lawsuits filed by pensions and hedge funds throughout the country, including the three pension funds in Louisiana, alleging tens of millions of dollars worth of corruption and fraud.

The firefighters’ fund is particularly vulnerable, however, because it relies heavily on high-risk real estate investments, which cannot be easily liquidated in the event of a budget shortfall. Fully 45 percent of its investment portfolio is tied up in real estate, ranging from a $2.3 million loan to a now-closed Days Inn in the New Orleans suburb of Metarie to a 99 percent stake in the Lakewood Golf Club, a few blocks away from the fund’s offices, which accounts for $17.5 million of last year’s net asset loss. Source


The New Orleans firefighters’ have a bitter pill to swallow due to the losses in their pension funds.

Warning: Bank Bail-Ins Coming Fast

Peter’s Commentary

Bail-ins are coming. If you are going to protect yourselves, you need to do it now.

From the Financial Times:

Mark Carney, the Bank of England governor is pushing officials for an agreement on bailing in creditors of globally important, cross-border banks that get into difficulty.

Officials are planning to bring up a proposal at the G20 leaders meeting in Brisbane this November.  Due to the differences between countries’ legal regimes and corporate policies, it is unsure at this stage just how detailed the proposals will be.

The Japanese have problems with these bail-in plans as its banks are heavily deposit funded and Japanese officials are not sure about the idea of banks issuing bonds that can be restructured in a financial crisis.

Mark Carney wants to get to the bottom of the too-big-too-fail-issue this year. He expects regulators to have solved two issues by the time of the November Brisbane summit: – the loss absorbing capacity that the large banks have to hold and the contractual provisions in derivative contracts. Source.


Bail-ins in the western world are a financial certainty. There is major pressure to come up with an agreement by November. Knowing this, why would you not take action to protect yourself financially?

What the Media Isn’t Reporting About Malaysian Airlines Flight MH17

Peter’s Commentary

Ron Paul demands a real investigation and throws some light on both sides of the conflict.

Written by Ron Paul for the Ron Paul Institute, July 20, 2014

Just days after the tragic crash of a Malaysian Airlines flight over eastern Ukraine, Western politicians and media joined together to gain the maximum propaganda value from the disaster. It had to be Russia; it had to be Putin, they said. President Obama held a press conference to claim – even before an investigation – that it was pro-Russian rebels in the region who were responsible. His ambassador to the UN, Samantha Power, did the same at the UN Security Council – just one day after the crash!
While western media outlets rush to repeat government propaganda on the event, there are a few things they will not report.
They will not report that the crisis in Ukraine started late last year, when EU and US-supported protesters plotted the overthrow of the elected Ukrainian president, Viktor Yanukovych. Without US-sponsored “regime change,” it is unlikely that hundreds would have been killed in the unrest that followed. Nor would the Malaysian Airlines crash have happened. 
The media has reported that the plane must have been shot down by Russian forces or Russian-backed separatists, because the missile that reportedly brought down the plane was Russian made. But they will not report that the Ukrainian government also uses the exact same Russian-made weapons.
They will not report that the post-coup government in Kiev has, according to OSCE monitors, killed 250 people in the breakaway Lugansk region since June, including 20 killed as government forces bombed the city center the day after the plane crash! Most of these are civilians and together they roughly equal the number killed in the plane crash. By contrast, Russia has killed no one in Ukraine, and the separatists have struck largely military, not civilian, targets.
They will not report that the US has strongly backed the Ukrainian government in these attacks on civilians, which a State Department spokeswoman called “measured and moderate.”
They will not report that neither Russia nor the separatists in eastern Ukraine have anything to gain but everything to lose by shooting down a passenger liner full of civilians.
They will not report that the Ukrainian government has much to gain by pinning the attack on Russia, and that the Ukrainian prime minister has already expressed his pleasure that Russia is being blamed for the attack.
They will not report that the missile that apparently shot down the plane was from a sophisticated surface-to-air missile system that requires a good deal of training that the separatists do not have.
They will not report that the separatists in eastern Ukraine have inflicted considerable losses on the Ukrainian government in the week before the plane was downed.
They will not report how similar this is to last summer’s US claim that the Assad government in Syria had used poison gas against civilians in Ghouta. Assad was also gaining the upper hand in his struggle with US-backed rebels and the US claimed that the attack came from Syrian government positions. Then, US claims led us to the brink of another war in the Middle East. At the last minute public opposition forced Obama to back down – and we have learned since then that US claims about the gas attack were false.
Of course it is entirely possible that the Obama administration and the US media has it right this time, and Russia or the separatists in eastern Ukraine either purposely or inadvertently shot down this aircraft. The real point is, it’s very difficult to get accurate information so everybody engages in propaganda. At this point it would be unwise to say the Russians did it, the Ukrainian government did it, or the rebels did it. Is it so hard to simply demand a real investigation?


It’s refreshing to hear another point of view about this terrible incident. Neither you or I should be lumping blame until the facts are, hopefully, made clear to us through a proper investigation.

Goldman Sachs MD Found Dead After Kiteboarding

Peter’s Commentary

Another sad banking death.

Bloomberg, July 21, 2014

Nicholas Valtz was found dead by family members on Sunday. They went searching for him after he didn’t come back from a kiteboarding outing. He was a Managing Director in cross-asset sales at Goldman Sachs.

According to police, he was a novice kiteboarder and was found floating in Napeague Harbor secured to his kite.

“We’re deeply saddened by this tragedy and our thoughts are with Nick’s family,” Michael DuVally, a spokesman for Manhattan-based Goldman Sachs, said in an e-mailed statement.

According to ZeroHedge, this tragic death, brings the number of financial services executives deaths to 16 this year.

1 – William Broeksmit, 58-year-old former senior executive at Deutsche Bank AG, was found dead in his home after an apparent suicide in South Kensington in central London, on January 26th.

2 – Karl Slym, 51 year old Tata Motors managing director Karl Slym, was found dead on the fourth floor of the Shangri-La hotel in Bangkok on January 27th.

3 – Gabriel Magee, a 39-year-old JP Morgan employee, died after falling from the roof of the JP Morgan European headquarters in London on January 27th.

4 – Mike Dueker, 50-year-old chief economist of a US investment bank was found dead close to the Tacoma Narrows Bridge in Washington State.

5 – Richard Talley, the 57 year old founder of American Title Services in Centennial, Colorado, was found dead earlier this month after apparently shooting himself with a nail gun.

6 – Tim Dickenson, a U.K.-based communications director at Swiss Re AG, also died last month, however the circumstances surrounding his death are still unknown.

7 – Ryan Henry Crane, a 37 year old executive at JP Morgan died in an alleged suicide just a few weeks ago.  No details have been released about his death aside from this small obituary announcement at the Stamford Daily Voice.

8 – Li Junjie, 33-year-old banker in Hong Kong jumped from the JP Morgan HQ in Hong Kong this week.

9 – James Stuart Jr, Former National Bank of Commerce CEO, found dead in Scottsdale, Ariz., the morning of Feb. 19. A family spokesman did not say whatcaused the death

10 – Edmund (Eddie) Reilly, 47, a trader at Midtown’s Vertical Group, commited suicide by jumping in front of LIRR train

11 – Kenneth Bellando, 28, a trader at Levy Capital, formerly investment banking analyst at JPMorgan, jumped to his death from his 6th floor East Side apartment.

12 – Jan Peter Schmittmann, 57, the former CEO of Dutch bank ABN Amro found dead at home near Amsterdam with wife and daughter.

13 – Li Jianhua, 49, the director of China’s Banking Regulatory Commission died of a sudden heart attack

14 – Lydia _____, 52 - jumped to her suicide from the 14th floor of Bred-Banque Populaire in Paris

15 – Julian Knott, 45 - killed wife and self with a shotgun in Jefferson Township, New Jersey

16 – Nicholas Valtz, 39 - killed in apparent kiteboarding accident in Nepaugue Harbor, Long Island.

What’s Copper’s Story?

Trader Dan Norcini monitors Copper and Crude Oil to determine the strength of the world economy. Currently Crude Oil is being affected short term by the geopolitical events in Ukraine and the Gaza strip so it’s short term strength maybe misleading.

So let’s look at copper instead, to see whether the global economy is getting stronger.

Copper - Weekly Chart July 21 2014

Copper – Weekly Chart

The lower part of the chart shows the positioning of the Commercials versus the large traders (hedge funds). As you can see, in the last couple of weeks, the hedge funds have built up a long position, whereas the Commercials are now short the market.

As Dan says:

The hedge funds seem to favor improving growth, which is in line with the seemingly non-stop upward progress of the equity markets while the other large reportables [Commercials] favor a slowing of growth and a more deflationary looking environment as time moves forward.

The view of the latter is aided by the overall fall in the various commodity indices such as the Goldman Sachs Commodity Index for example and the recently declining TIPS spread.

With regard to the actual Copper Chart:

The initial view of the chart suggests that prices are in a gradual decline lower which began three years ago. Within that time span, there have been rallies upward in price but those have failed to hold and the market then resumed its DOWNWARD GRIND.

Over the last year, Copper prices have not been able to penetrate the resistance zone noted on the chart. That is near the $3.40 level. Three weeks ago, a sharp rally erupted which looked as if the big bet by the hedge funds was going to finally pay off, but there was no follow through the next week. This past week saw the market retreat lower once again.

Without a convincing change for the better in the chart pattern of this key industrial metal, it is doubtful that we will see economic growth overall exceeding current expectations. While there is no doubt that the easy money policies of the Western Central Banks have succeeded in preventing things from worsening and have allowed more borrowing ( and thus more growth) to occur, traders are unclear what is going to happen if interest rates rise in the near future. This uncertainty is what is contributing to the relatively stagnant trading pattern in copper.

For me to come around to the view that the global economy is actually picking up speed, I would want to see a confirmation in this chart pattern by seeing that resistance zone which is overhead give way. For now the bull forces and bear forces are stalemated (remember – I am speaking of intermediate time periods, not daily movements) with neither side being able to get a clear cut advantage. Source


The copper chart is providing no clear indicator of an improving global economy. We will only start to see an indication of this when the overheard resistance zone gives way.

What do you think the copper chart is telling us?


Traveling today and tomorrow

Traveling today to Memphis and will be in meetings today and tomorrow. Will keep in touch with the markets and will try to post any significant items.  Peter.

Gold and the mining shares go nowhere today

Peter’s commentary:

Both gold and the mining shares remain range bound today. Perhaps gold is receiving some support from the ECB’s action to introduce negative interest rates last week.

There is now a good counter argument for the common statement that you shouldn’t invest in gold because it doesn’t pay interest. At least  you don’t have to pay negative interest. That should make the buying of gold look more advantageous in future, especially in the ECB countries.