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Monday, May 10, 2010

Look what I found on a "Yahoo Finance" board. I had suspected that much: had a feeling the whole thing was a manipulation - what isn't, these days??? It ended up benefiting the big boys, while, again, scores of people got destroyed. Same stuff in the silver market; below.

1.The market crash of May 6 was not an accident.
On Feb 24 the new uptick rule was "news released" and it was indicated that the rule would go into effect 60 days after it was published in the Federal Register.
On March 9 it was published, saying it was to go into effect in 60 days (May 9).
Thus on May 6, the last great legal naked short plunge was conspired.
Market Makers and Insiders were able to cover their shorts at a deep discount.

When fully implemented the uptick rule will be applied on a stock after a 10% drop from it's prior days close.
No more 40 points drops on a 41 dollar stock. Even with the 60% special rule for last Thursday many investors got ripped off on there GTC stop loss orders
    **************************************************************************                            See also this article:  

2.A New Enron in the Stock Market

By Jeff Clark
May 11, 2010

Imagine winning the lottery twice in the same week.

Imagine picking the exact finishing order of all the horses in the Kentucky Derby... five years in a row.

Now, imagine you're Goldman Sachs.

The illustrious Wall Street firm that seems to beat all the odds did it again last quarter. Goldman traders were profitable in 63 out of 63 trading days. Not one losing day in the bunch. This amazing feat follows on the heels of the 61-out-of-63 record for the quarter ended December 31, 2009.

Daily profits for the firm ranged anywhere from $25 million to well over $100 million. Indeed, Goldman traders rang up over $100 million in profits for 35 of the 63 trading days.

Now, it is entirely possible Goldman traders are THAT good. Maybe they can have a perfect batting average and they can hit homeruns more than 50% of the time. It's also possible I could be struck by lightning while being attacked by both a great white shark and a lion at the same time.

Possible, but not likely.

What's really going on here? Allow me to speculate...

Like Michael Milken's old firm, Drexel Burnham, ruled the junk- bond market in the 1980s, and like Enron controlled the electricity market in 2000, Goldman has cornered the stock market today.

Everyone follows what Goldman is doing. If Goldman's computers are buying, you better be buying. If they're selling, you sell, too. It's like a playground game of follow-the-leader. Everything goes along fine as long as the kid in the front of the line doesn't do anything that could hurt the little guy at the back.

Like your mom used to say, "It's all fun and games until somebody loses an eye."

Eyes were popping out everywhere last week.

The computer algorithm trading programs, which are largely responsible for Goldman's odds-defying profit streak, went nuts. They kicked off sell programs that wiped out nearly 10% of the stock market's value in 10 minutes. Then they executed buy programs that pumped prices back up to more reasonable levels.

"No harm done," the Wall Street big wigs will likely argue. After all, as of this morning, stocks are right back where they were before last Thursday's shenanigans.

The problem, though, is the little guy got hurt.

There was nothing wrong with junk bonds in the 1980s. The market gave low-quality firms access to capital, and investors received a reasonable return for the risk. But the leader went too far and the little guy got hurt. Drexel Burnham went bankrupt, and Michael Milken went to prison.

There was nothing wrong with trading energy contracts in 2000. It allowed states with excess electricity to sell to other states that were energy deficient. But the leader went too far and nearly bankrupted several states. Enron went under and CEO Ken Lay was surely headed to prison (he passed away before his trial).

There's nothing inherently wrong with algorithmic computer trading programs. They provide liquidity and increased volume on the exchanges. But last week, the leader went too far.

There's no doubt Goldman, and many other big Wall Street firms, made gobs of money during last week's volatile sessions. Normally, there's nothing wrong with that.

This time, though, Goldman profited at the expense of the little guy.

Goldman CEO Lloyd Blankfein should be a little nervous today.

Best regards and good trading,

Jeff Clark 


See also this:

3.Feds probing JPMorgan trades in silver pit

  12:30 AM, May 9, 2010

Federal agents have launched parallel criminal and civil probes of JPMorgan Chase and its trading activity in the precious metals market, The Post has learned.
The probes are centering on whether or not JPMorgan, a top derivatives holder in precious metals, acted improperly to depress the price of silver, sources said.
The Commodities Futures Trade Commission is looking into civil charges, and the Department of Justice's Antitrust Division is handling the criminal probe, according to sources, who did not wish to be identified due to the sensitive nature of the information.
The probes are far-ranging, with federal officials looking into JPMorgan's precious metals trades on the London Bullion Market Association's (LBMA) exchange, which is a physical delivery market, and the New York Mercantile Exchange (Nymex) for future paper derivative trades.
JPMorgan increased its silver derivative holdings by $6.76 billion, or about 220 million ounces, during the last three months of 2009, according to the Office of Comptroller of the Currency.
Regulators are pulling trading tickets on JPMorgan's precious metals moves on all the exchanges as part of the probe, sources tell The Post.
JPMorgan has not been charged with any wrongdoing.
The DOJ and CFTC each declined to comment, as did JPMorgan.
The investigations stem from a story in The Post, which reported on a whistleblower questioning JPMorgan's involvement in suppressing the price of silver by "shorting" the precious metal around the release of news announcements that should have sent the price upwards.
It is alleged that in shorting silver, JPMorgan sells large blocks of silver option contracts or physical metal -- actions that would bring down the price of the metal -- closely following news that would otherwise move the metals higher.
Last week, The Post got a telling e-mail the Justice Dept. sent to a concerned investor. "Thank you for your e-mail regarding allegations that JPMorgan Chase, and perhaps other traders, are manipulating the silver futures market," the e-mail read.
Telling, indeed, as the concerned investor, in an e-mail to Justice's Anti-trust division, never mentioned any companies or traders.

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