Who Makes Goldman Sachs Look Like the Boy Scouts?

The company is Glencore. It is a commodity trading firm in Zug, Switzerland.

Originally, Glencore went under  the name of  Marc Rich & Co.. For those who don't remember Rich, he was a commodities trader in the US in the 1970s, who  made a few billion dollars by committing fraud. Essentially back then, President Jimmy Carter had some stupid law that legally separated old oil and new oil. It was a complete legal fiction, with the only difference being in the price. As I recall, I think old oil had a lower price than new oil. 

The purpose was to smooth out the rampant petroleum  price increases that were occurring  at the time, after the Ayatollahs took over Iran and kicked out America's stooge, his highness the Shah. 

Basically all Rich did was swap the paper work for old oil and new oil. In other words, he bought old oil, then claimed it was new oil, and hence was assured a substantial profit for every physical trade he made in the commodity. 

Well eventually, with this being so obvious, and a few billion dollars later in Marc's bank account, even the stupid US  Attorney General's office became aware of what happened.  Rich then promptly fled the country, and eventually he and his money wound up in Switzerland. For reasons not explained, the US authorities never bothered pursuing him. But of course the reason is obvious. Rich, most likely, simply made well paid "contributions" both in Switzerland and America. 

Then about twenty years later,  after Rich had been indicted, Billy Clinton decided, during his last days as president, to make a generous gesture to the persecuted of the world. For an undisclosed sum, he pardoned several infamous criminals of all charges against them. Marc Rich was one of the criminals that received Billy's  blessing. 

Of course, being a businessman, Marc liked to keep active. So what better idea than to found a commodity trading firm in Switzerland, of which Glencore is now the descendant. 

But Glencore is no ordinary commodity trading firm. Though most of their dealings are clandestine, and they have a policy of omartra that would make the Mafia look like blabber mouths, people in the commodity business claim Glencore actually controls,  or manipulates, many of the world's essential commodities. 

Supposedly this is not done through paper transactions such as derivatives or forward contracts.  But by actually buying up and taking possession of  the entire physical supply of a certain commodity, in certain critical areas of the world. One suspected example of this occurred a few years ago in Southeastern Europe, when manufacturers there discovered that their Russian suppliers of aluminum didn't have any metal to sell. This seemed strange when the area was suffering its' own mini economic crisis. UC Rusal, the world's largest aluminum producer, claimed its' entire inventory had been sold. Upon inquiry, it was supposedly discovered to be on a train somewhere in Switzerland. 

And supposedly Glencore made at least a 20% profit on that deal. Who lost? The factory workers in Southeastern Europe. 

Apparently this is only one of many instances, others being - American steel workers, Bolivian minors, and food distribution in Africa. Guido suspects the large oil "contego" in the United States also involves Glencore. Basically, this is the withholding of oil, already delivered to  the US, from being distributed to the American economy, by keeping it in storage facilities  and ship tankers off the gulf coast. A simple analogy would be having so many tons of water  delivered to a desert town, with someone buying up all this water before it was sold to the general public. Obviously thirsty people would pay more for the water. And just as obviously, if  physical oil is withheld from the American market,  it's price will go up, no matter how depressed the economic situation. 

So, you American workers having to commute to work, just remember - you can thank Glencore for making you poorer. 

It is remarkable that the United States Federal government hasn't done anything about this. Even in  ancient Babylonian times, the authorities were aware of this type of rigged price fixing, and prevented it by executing criminal speculators and their entire family. That was one, among several reasons, why the practice suddenly stopped. 

I guess the Obama administration and Congress  must be appreciating  the bribes, aka campaign contributions, that are probably being made by Glencore.

"Behind all great fortunes lies a crime." - Balzac

Adventures in Paradise - The Appeal of Foreign Markets

The way things are today, everyone likes to believe that it must be better somewhere else. It can't be, they say, that everywhere else is as bad as it is here. 

This seems to be especially the case with the American investment community. Every day there seems to be stories about how economic growth has returned to Europe, especially Germany. In Asia, it is China and India. In Latin America, since they were chosen to host the 2016 Olympics, it is Brazil. 

Well all you people looking for adventure in foreign lands, Guido has a big surprise for you. At  best, the economic / financial situation in foreign countries is no better than America. Usually it's a lot worse. 

Once US citizens realize this, and once they take a realistic look at just how bad everything is in their own country, maybe they will finally grasp at just what a momentous mess Bernanke and his banker pals have created in the world. 

For Brazil, just look at the October 5 article on this website entitled "Still the Country of the Future".

As for Europe, just look at Germany, its' largest economy. On this website, articles such as "German Car Industry Kaput"  for Sept 2, "Who Killed the Oktoberfest?"  on Sept 9, and "Hyped Real Estate  - Or is that Hypo?" on Sept 12, will give plenty of elaboration at just how dire things are in that country.

But Germany is not alone. Though they have more fiscal latitude, the French are running record deficits. Unenemployment in France is increasing every month. In fact throghout Europe, the number of unemployed is especially terrible among the young people. Most countries have double digit jobless figures for those 25 or younger. In Spain it is estimated that at least 35% of the eligable young are without jobs. 

But this is not just ordinary people. According to an Oct 6 story at DW-World.de Deutsche Welle, the number of German billionaires has shrunk rapidly. The record holder for this wealth loss seems to be Maria Schaeffler, who appears  to have had her net worth shrink 90%. And this was even without any help from that crook Bernard Madaff. But evidently, according to DW, she's not alone. 

Now you know when people like this are hurting, and they can't make this year's  holiday to Monte Carlo, that things must be  dire. . Here is a link to the DW story -

http://www.dw-world.de/dw/article/0,,4767051,00.html

And as for China, here is a link below on the IMFs assessment -

http://translate.googleusercontent.com/translate_c?hl=en&ie=UTF-8&sl=de&tl=en&u=http://www.spiegel.de/wirtschaft/soziales/0,1518,652625,00.html&rurl=translate.google.com&usg=ALkJrhgEOnTBi81ITVQ_OnBun_Gc2VJ0cA

It is not optimistic. On this website for further details, you might wish to read the story "China Plays Monopoly" dated Sept 1.

We are all one world. There is no place to hide.

"If the grass is greener on the other side, use fertilizer." - A small town radio announcer who got fired. < With jokes like this, is that any surprise? >

Deflation Dollar Panic - No, Chicken Little, the Sky is Not Falling

Some, who are passionate about a deflation in dollar prices, are in a panic today.

Seems there have been rumors about the petro countries getting out of dollars. Supposedly secret meetings are occurring. In short, everyone is fed up with Bonzai Ben Bernanke and wants to unload their dollars for "real" money. Or so goes the rumor.

What is not rumor is that the dollar is going down at this moment. If the dollar depreciates relative to other currencies,  usually this means prices in dollars will go up. In other words inflation. Hence, the fear of deflation advocates. If you have inflation, obviously you're not having deflation.

One deflation newsletter today, to Guido's knowledge, has posted two articles denying this will happen, almost boarding on hysteria.

Well relax, you weak sisters, the dollar won't collapse today. Because it's already been collapsing over the last hundred years.

Since 1910, the dollar has lost over 98% of its' intrinsic value relative to goods and services. This has enriched the wealthy and demolished the middle class / income segment of the population. With the demolition of the middle class, democracy and basic freedoms are disappearing.

Coincidentally or otherwise, this all seemed to occur around the same time the Federal Reserve was created in 1913 to be America's "currency guardians". Now whether this is cause and effect, may be open to debate. But if anyone thinks the Fed or other Central Banks will be abolished, they are living in a myth. Like the Mafia, flu, and child birth. Like death and taxes, Central Bankers will always be with us, for better or worse.

The focus of people should not be on getting rid of Central Banks, but on getting better Central Bankers.

As for inflation / deflation this century, just look at the price of gold. It is up over four times in price from what it was at the turn of the century.

Various reasons have been given for this. But the simple explanation is that gold has become a substitute for currencies as a store of value. It's illogical and doesn't make any sense. But then it even makes less sense to  have any confidence in Bonzai Ben and his ilk.

Is this the time to buy gold? Right now, Guido wish he knew that for himself . I do own gold, and have been in and out of gold this whole century, trading with that 400% move up, and sometimes getting out when the price contracted. But never selling short and always getting back into this investment.  Right now I am not buying gold, because I already own it and am enjoying the paper profits.

To make money in a speculation / investment, one should be putting their bets down before the investment starts moving up, and especially before everybody starts getting excited about it. That's when the easy money can be made. And that's why gold was such a sure thing at the beginning of this century.

Right now, Guido is having trouble finding any more easy money. Perhaps, as some assert, this is because the Central Bankers have so messed up the markets. If so, it will pass.

As soon as that opportunity comes and Guido has put his money where his mouth is, I'll let you know dear friends.

"I got across Europe and came to America because I had a pocketful of gold coins." - A farmer in Wisconsin who immigrated after World War II.

< As always, this article is for information purposes only. It is not investment advice or in any other way a recommendation. Please read the disclosure at the bottom of this web page. >

Three Semi Wise Men -Prechter, Soros, and Roubini

Bloomberg.com has an updated article a few hours ago. Basically it gives the opinions of Robert Prechter, George Soros and Nouriel Roubini, on where they think US stock markets will be going. Specifically the S&P 500. Here is the link to the entire article -

http://www.bloomberg.com/apps/news?pid=20602004&sid=aBSFMAyyENko

Robert Prechter writes an investment newsletter called the Elliot Wave Theory, or some such title. His detractors never tire  deriding him for belonging to a musical rock band in his youth. However, what they fail to mention is his score of successful predictions for this century. They have almost been 100% correct.

What Mr. Prechter told Bloomberg, was that he thought the S&P 500 had reached its' peak in September, and would be below the  676 low it reached in March of this year. How soon this will happen, Mr. Prechter did not seem to predict for Bloomberg.

Greorge Soros , as many may know, is a self-made billionaire who made his billions speculating in financial markets. The French have never forgiven him for speculating against their national currency the Franc, before it was transformed into the Euro. Even today, they still wish he would drop dead.

Essentially, Mr. Soros told Bloomberg that the US banking system is bankrupt, and will hinder world economic recovery. In Guido's view, this sounds just a little bit optimistic. Without a solvent financial system and with a fantastic amount of debt, it is inevitable America will be going one way. Into the depths of economic hell. The only question is when.

But Mr. Soros has always been an optimist. Back in August or September 2008, he bet on Lehman Brothers not going bankrupt and bought into the company. Supposedly he lost some money ; how much nobody really knows . However, it is certain some of the French enjoyed this, and had their own schadenfreude to console them in their stock market losses during October.

As for Noriel Roubini, as Guido had said months before - he talks, and talks, and talks. As one self-made financial billionaire told Guido privately < no it's not Mr. Soros > - " I didn't know anybody listened to him. He's been in the S&P 500 for three years." . This time Mr. R's latest prediction is that he thought the US stock markets had gone "too high" and may go down < I like the way he equivocates his statements. > . Last month Noriel thought the US economy was recovering. Then that same day, he seemed to deny he said any such thing and still thought the economy had problems.

Your guess is as good as mine what he will say tomorrow.

For where Guido thinks stockmarkets  are going, you can read  on this website the Sept 3 article "Tale of the Bull - aka, Bovine Scatology", the Sept 13 article "When will the Opera Lady Sing", and the Sept 15 article "What Price Glory - or, Buy While It Lasts" .

"Well if you talk and talk enough, sooner or later you're going to be right 50% of the time." - Marc Fabor laughing about himself in a Bloomberg interview.

< This article is for information purposes only. It is not a recommendation or otherwise investment advice.  Please read the disclosure at the bottom of the page. >

Still not the Country of the Future - A Short Comment

In our Sept 17 article entitled  Emerging Market Folly we had this quote-

"Brazil is the country of the future. And it will always be the country of the future."

Over the past few weeks there have been several stories about Brazil's current economic growth. Even Lulu, its president, was saying "There's no recession here". Perhaps this was merely a lot of hype to have the 2016 Olympics staged in that country.But whether hope or hype, it looks like everyone is starting to believe this fairy tale.

The latest eulogy  appears to be a story on Bloomberg.com, about 4 hours ago. Basically, it seems certain multinational banks are starting to get excited about Brazil as an investment. Partly this may be based on a "central bank" survey of one hundred economists, who think Brazil will grow 4.5% next year. Below is the link to the full article -

http://www.bloomberg.com/apps/news?pid=20601082&sid=aZ.B.s2j5oFE

Now Guido finds all this enthusiasm very interesting. Considering that the actual people living in Brazil have a different opinion. Of course, we know Brazil always had problems, such as drugs, slums, and organized gangs that would make even Los Angeles look like The Golden City. But apparently, according to residents in Rio de Janeiro < where the 2016 Olympics will be staged >, things have gotten much worse than they were compared to even a year ago.

Briefly stated, these actual residents of Brazil, mostly business people, say the economy and society is falling apart. Corruption is worse than it has ever been. To have anything done, anything at all, a person better be ready to pay bribes, kickbacks, etc. Citizens of Japanese descent < going back several generations > are advising their acquaintances in Japan not to visit the country ; the reason being literally that they'd probably get half their money taken away in scams by government officials and tourist employees at the airport. One popular shake down evidently goes something like this -

 "Ah you're Japanese and you look like a foreigner < good guess considering they just arrived from Japan >. You look like a suspicious terrorist. Maybe we'll have to detain you in one of our jails that are rated the worst in the world. How much money have you got, terrorist? Ah that much huh. Tell you what, we'll make it a fine . A little secret between us two. Just pay us this much and go enjoy  Copacabana, provided some street gang doesn't shoot you on your way over there. Ciao."

Guido tried to get other specifics and details about how and why the economy and society were now disintegrating. But all he kept being told was "everything". "The whole society and economy is completely collapsing. Everything is collapsing." Maybe I should have just asked them if there was any good news. It might have been easier.

Brazil has fantastic natural resources, not the least of which is it's population. Too bad it can't be used to everyone's advantage.

"Every blessing ignored becomes a curse." - Pualo Coelho

The New Italian Investment Bankers - Who Needs Lawyers

Most people know the Mafia lends money to those who can't borrow anywhere else. I mean  anywhere else, even  their own mother-in-law who is still waiting for that two year loan to be paid back. < This is  the original sub prime lending. >

It's called loan sharking in America. The interest rate charged on these loans is called the "vig", and can range anywhere from 100-200% per annum compounded. No one that borrows at these rates will ever be able to pay back the loan, and of course the mobs know this.

Basically, they completely bankrupt the debtor, if they haven't already killed or crippled  him for default. Then after they completely strip this lucky person of any money he has or can get, the mafia takes a look at what his earning potential may be. Like a wife who can be "persuaded" into prostitution. Or if he's a businessman, how they can use his operation for fraud or as a front to launder money.

Hey, it's only business paisan.

Well, of course, you can imagine that with all these scandals of the ridiculous sums investment bankers make, that some mafia clan would be interested in getting into this business. The business of investment banking.

And according to Italian authorities, one has

It is the Ndrangheta of Calabria. In Italian the word Ndrangheta stands for heroism and virtue. And you can be sure these boys have made a virtue out of making money.

Their latest venture is to become investment bankers. But not to any ordinary businesses. Their clientele for the moment is other organized crime groups. Supposedly they have been helping the Colombian drug cartels make "investments" overseas. But for a fee, of course.

It's done on a handshake and nod of the head. No lawyers are needed to draw up any legal documents. After all, when the security is someone else's body, who needs their signature.

So far no disputes or disagreements have occurred over these "financing" and "investment" activities. But you can be sure if one does, it's going to be more exciting than any court room drama.

Guido partly learned this from reading an article in The Guardian recently, a newspaper in Britain. Besides the Ndrangheta, it also discusses other organized crime activities occurring in Italy based on a recent Italian government report. The link is below -

http://www.guardian.co.uk/world/2009/oct/01/mafia-influence-hovers-over-italians

For more information on the systema  < what the Cammera mob families are called in Naples >, we would suggest you read Gomorrah by Roberto Saviano. It  gives a first person analysis of the criminal clans in Naples. The Cammora, as they are commonly called on the Italian peninsula, are actually way more powerful and ominous then the Sicilian mafia. And also much more influential world wide. Guido has heard that Ndrangheta, in particular, has no compunction in doing anything that can turn a lira. Even dealing in Nuclear waste, or so it has been rumored.

For his efforts in writing Gammorah, Signor  Savaino has lived in hiding, moving every day to a new and different place to sleep. The Italian authorities have provided him with at least ten Carabinieri body guards, fully armed with submachine guns and shotguns. Even so, Signor Savaino has decided to leave Italy for a more tranquil residence.

Good luck on that ever happening amica.

Now you know why Guido prefers to remain anonymous. < But hey it's only business And besides you systema people, none of these stories originated with me. Blame it on The Guardian >

"Discretion is the better part of valor." - Shakespeare.

"Money is welcome even if it comes in a dirty sack." - An old South Italian proverb

The Seven Snow White Dwarfs of G7 - All Named Dopey

The G-7 ended their usual stupid meeting in Istanbul. And to some people's surprise they actually issued  a communique.

However, the communique basically said nothing, except this time it said more nothing than it usually says. If that sounds confusing, please understand, so do the G-7 communiques.

Basically it was the same platitudes like "there must not be these currency fluctuations", which is doublespeak for everyone, but Bernanke,  saying they've had enough  of the dollar falling. Other "reassurances" were that the same stimulus of fiscal and central bank policies would be continued. Which is another way of saying - hey everyone, we're still in deep scat. Some economists would say this is an indication that we have a price deflation. Of course, they've been saying this for the past year and prices are still going up. < See the Oct 2 article at this website "On the Light Side - Guido Saw It, Guido Kicked It". >

Trichet, the European Central Bank president, said he thought the G-7 closing statement sent a "strong message" Strong message to who, Jean-Claude? To currency speculators?

Because essentially, this "strong message" is nothing more than an indication that these guys have agreed on nothing. Disunity among central banks usually brings strain to the currency markets.

By a "remarkable coincidence", there also seemed to be a bankers' "conference" at the same time in Istanbul. It wouldn't surprise me at all, if it was across the street from the G-7 conclave.  From what little information is available, the purpose of this supposed "bankers conference",  was to make sure the G-7 didn't come up with any ideas of increasing capital controls for these banks. Which is another way of saying, the banks don't want to be forced to be more responsible.  < Gee, I wonder if it was indirectly taxpayer money that paid the travelling expenses of these bankers? >

The economic / financial crisis still exists. If anything, it has gotten worse. Public officials seem unable to solve the problem, because they're using the same policies that got us into this mess in the first place.

Expect it to get worse. Let's see what happens Monday - with currencies, gold, commodities, and financial markets in general.

No Guido guesses on this. Seriously, folks, like everyone else out there, I have no idea what might happen or what crazy thing Bernanke may do. Anyone who tells you differently, is either existing in an illusion, or should be making their living singing ballads.

Good luck next week.

"Buy when there's blood in the street." - Baron Rothschild < The Baron literally did mean buy when there's blood in the street. And I guess the more blood, the more opportunity. >

< As always, this article is for information purposes only. It is not a recommendation or otherwise investment advice. Please see the disclosure at the bottom of the web page. >