Tonight on The Independents: The Gun Show, Starring Cody Wilson, Geraldo Rivera, David Keene, Judge Napolitano, Damon Root, Emily Miller, and Virginia Tech Shooting Survivor-Turned Background-Check Advocate Colin Goddard

Tonight on Fox Business Network at 9 pm ET, 6 pm PT (with
repeats three hours later), The
will produce a special show on the topic of
guns. Leading off will be a discussion of mass-shooting events and
background checks, featuring Colin Goddard, who
describes the awful events at Virginia Tech in 2007, and Reason
Senior Editor Damon Root. Next,
Washington Times columnist Emily Miller, author of
Gets Her Gun: …But Obama Wants to Take Yours
, details the
arduous process she went through to obtain a handgun in the
District of Columbia after suffering a home invasion.

Former National Rifle Association president David Keene talks
about the NRA’s penchant for
blaming shooting events on culture
, and deals with a question
about marijuana legalization; Kennedy goes shooting
3-D gun visionary Cody Wilson
; NRA member and Fox News
personality Geraldo
effing Rivera
talks about why he’s fallen out of love with the
gun-rights group, and Fox News
Senior Judicial Analyst
Andrew Napolitano will advocate—wait for
it!!—legalizing the individual ownership of nuclear weapons.

It’s a great episode and you should watch it. Follow the
on Twitter, use the hashtag #indFBN, and go to the
for previous-episode video and more.

from Hit & Run

Russia Today Responds To Wahl Public Departure: Just A “Self-Promotional Stunt”

Having expressed her perspective of Russia Today’s “whitewashed” coverage of Putin’s invasion of Russia, Liz Wahl resigned live on air yesterday. This came on the heels of her colleague Abby Martin’s recent comments voicing here disagreements with Russian policies on the same state-funded network. Russia Today has responded… When a journalist disagrees with the editorial position of his or her organization, the usual course of action is to address those grievances with the editor…But when someone makes a big public show of a personal decision, it is nothing more than a self-promotional stunt.”


Russia Today full statement:

Ms. Wahl’s resignation comes on the heels of her colleague Abby Martin’s recent comments in which she voiced her disagreement with certain policies of the Russian government and asserted her editorial independence.

Abby Martin’s comments…

The difference is, Ms. Martin spoke in the context of her own talk show, to the viewers who have been tuning in for years to hear her opinions on current events – the opinions that most media did not care about until two days ago. For years, Ms. Martin has been speaking out against US military intervention, only to be ignored by the mainstream news outlets – but with that one comment, branded as an act of defiance, she became an overnight sensation. It is a tempting example to follow.

When a journalist disagrees with the editorial position of his or her organization, the usual course of action is to address those grievances with the editor, and, if they cannot be resolved, to quit like a professional. But when someone makes a big public show of a personal decision, it is nothing more than a self-promotional stunt.

We wish Liz the best of luck on her chosen path.


via Zero Hedge Tyler Durden

No, Deflation Is Not A “Danger”

Submitted by Pater Tenebrarum of Acting-Man blog,

The 'Deflation Danger' Should Abate …

What is it with this perennial fear the chief money printers have of falling prices? Not that we are likely to see it happen, but if it does, what of it? Bloomberg reports on the recent ECB decision with the following headline: Draghi Says Deflation Danger Should Abate as Economy Revives

The headline alone is a hodge-podge of arrant nonsense. First of all, 'deflation' (this is to say, falling prices), is not a 'danger'. Speaking for ourselves and billions of earth's consumers: we love it when prices fall! It means our incomes go further and our savings will buy more as well. What's not to love?

The problem is of course that when prices decline, the 'wrong' sectors of society actually benefit, while those whose bread is buttered by the inflation tax would no longer benefit at the expense of everybody else. But they never say that, do they? Has Draghi ever explained why he believes deflation to be a danger? No, we are just supposed to know/accept that it is.

Secondly, the 'as economy revives' part makes no sense whatsoever. Why and how should a genuinely reviving economy produce inflation? Economic growth occurs when more goods and services are produced. Their prices should, ceteris paribus, fall (of course, we are not supposed to inquire too deeply into which ceteris likely won't remain paribus if Draghi gets his wish).


From Bloomberg:


“ European Central Bank President Mario Draghi signaled that deflation risks in the euro region are easing for now after new forecasts showed that inflation will approach their target by the end of 2016.


The news that has come out since the last monetary policy meeting are by and large on the positive side,” he told reporters in Frankfurt today after the central bank kept itsmain interest rate at 0.25 percent. He also indicated that money markets are under control at the moment, lessening the need for emergency liquidity measures.


Draghi is facing down the threat of deflation in an economy still recovering from a debt crisis that threatened to rip it apart less than two years ago. New ECB forecasts today underscore his view that the 18-nation bloc will escape a Japan-style period of falling prices as momentum in the economy improves.”


(emphasis added)

We have highlighted the sentence above because we keep reading about the 'Japan-style deflation trap' for many, many years now. You would think that Japan was a third world country by now the way this keeps being portrayed as a kind of monetary evil incarnate that destroys the economy. Of course, nothing could be further from the truth.


Inflation is Not Equivalent to Economic Growth

'Inflation' is not the same as 'economic growth' – on the contrary, it both causes and frequently masks economic retrogression. How much inflation has there been in the euro area over time? Let's have a look.



Euro Area TMS-a

The euro area's true money supply since 1980. One can only shudder at this depiction of 'deflation danger' in action – click to enlarge.



What about prices though? Let's have a look-see:



HCPI-LT-wow chart

Since 1960, there was exactly one year during which prices according to the 'CPI' measure actually fell, namely in 2009, by a grand total of 0.5% – click to enlarge.



As Austrian economists have long explained, it is simply untrue that prices must rise for the economy to grow. Consumers obviously benefit from falling prices (only Keynesian like Paul Krugman don't realize that, as their thought processes are evidently unsullied by logic and/or common sense). All of us can easily ascertain how beneficial the decline in computer prices, cell- and smart phone prices, prices for TV screens, etc. is. Naturally, it would be even better if all prices fell, not only those on a select group of consumer goods.

What about producers? Won't they suffer? By simply looking at the share prices and earnings of the companies that make all the technological gadgets the prices of which have been continually declining for decades, everybody should realize immediately that the answer must be a resounding NO. This is by the way not only true of the firms that are in the final stages of the production process, i.e. the stages closest to the consumer. It is obviously also true for the firms in the higher stages of the capital structure. But why? It is quite simple actually: prices are imputed all along the chain of production. What is important for these companies to thrive are not the nominal prices of the products they sell, but the price spreads between their input and output.

In fact, the computer/electronics sector is the one that comes closest to showing us how things would likely look in a free, unhampered market economy.

Of course, in said free, unhampered market economy, Mr. Draghi and a host of other central planners would have to look for a new job.


via Zero Hedge Tyler Durden

CPAC’s Libertarian Infiltration

Um. ||| Chris Moody/Yahoo! NewsAdam “vs.
The Man
” Kokesh leaned in, conspiratorially. “I think
there’s about 2-3 percent hardcore An-Caps here,” he said,
approximately (I wasn’t recording our conversation). “And 20
percent libertarians!” The notion filled us both with some wonder,
and not a little bit of pre-emptive dread.

We were at the Conservative Political Action Conference (CPAC),
the annual inside-the-Beltway convention of grassroots political
activists from the hinterlands, national conservative celebrities,
and D.C.-based advocacy groups. CPAC has long been the lowest
hanging fruit for political journalists looking to write
conservative-freakshow articles
(or post some fine photo
thereof), but over the past few years two overlapping
stories have competed for shelf space: The organizers’ ongoing
tussles over all things
, and the rising tide
of libertarianism
within the grassroots faithful. (In a tidy
conflation of the two strands, the panel discussion I participated
in, “Can
Libertarians and Social Conservatives Ever Get Along?
“, was
organized primarily around the potentially civilization-destroying
question of having government recognize same-sex marriages.)

The libertarian momentum was on jarring display
last year
, as an army of “Stand With Rand” kids, with
OMFG-I-can’t-believe-I’m-here looks on their faces helped propel
the Kentucky senator to the top of the conference’s
straw poll
, just days after his epic
anti-drone filibuster
scrambled political ideologies from coast
to coast. But this year those same activists looked…a year older,
with considerably less shock value. Assimilated. “That
feeling you have,” Kokesh told me (again, approximately), when I
admitted to—horrors—actually liking one or two elected
politicians nowadays, “is what it feels like when you’ve become
part of the Borg.”

“Imagine a time when our great country is governed by the
Constitution, imagine a time when the White House is once
again occupied by a friend of liberty,” Paul said during his
well-received speech today. “You may think I’m talking about
electing Republicans—I’m not, I’m talking about electing lovers of

As the Washington Examiner’s Charlie Spiering pointed
out, “That line would have been a slam-dunk for a conference of
libertarians, but it drew a loud cheer from the standing-room-only
crowd in the room.” The National Journal put it this way:
Paul Is the King of CPAC

Libertarian-leaners inside CPAC haven’t quite adjusted to the
new reality. “Hey man, can’t believe they let people like
us in here!” I heard a half-dozen variations of from young
libertarians on Thursday and Friday (Kokesh, too, reported having
similar conversations).  

Or maybe the kids are just savvy enough not to trust the Borg.
After all, it was only 18 months ago that the establishment GOP
kicked Tea Party activists and Ron Paul supporters (as well as Rick
Santorum’s grassroots army of social cons) to the curb at the
Republican National Convention, in a display of raw (if
) power that no participant
will ever soon forget
. Sure, Rand Paul and the various campus
4-liberty groups can pack a popularity contest decided by powerless
activists, but if you think CPAC supremacy is determinative, then
I’ve got some spare tickets to the inauguration ceremony for

President Ron Paul

Of potentially more import than personality-based politics is
the way that the booth action and policy discussion at CPAC have
changed. Today on the main stage in front of a packed audience of
several hundred I watched a Republican governor from Texas
brag about closing prisons
while mocking California’s woefully
over-stuffed corrections facilities. Rick Perry’s criminal justice
record is
by no means angelic
, but he is at or near the head of the
gubernatorial class when it comes to meaningful reform.)

Groups like Right on
now compete for booth space with Families Against Mandatory Minimums,
, and—shockingly to those of us of a certain
Concerned About the Death Penalty
. The libertarian project of
criminal justice reform is coming to this country in 2014, and
though some important impetus has come from
self-identified libertarian Republicans
(as a CPAC
video on this subject will show later), much of it has also come
from social conservatives with hearts open to redemption, and
fiscal conservatives shocked at the bottom line. Libertarian
projects become viable when non-libertarians (and even
anti-libertarians) embrace them.

Demographics, as Students for Liberty President Alexander
McCobin pointed out during our panel today, are pushing
conservatives in at least a more federalist, if not explicitly
libertarian, direction. (For an example of how Republicans are
changing their tune on pot and gay marriage, see this video from CPAC
.) Younger conservatives do not share
my co-panelists’ view of heterosexual marriage-sanctity as holding
western civilization together by a thread, and as Senior Editor
Jacob Sullum has

, the generation gap between younger and older
Americans on these issues is
. (Consider for a moment
that half or more of Republican-leaners under age 45
support legalizing weed and same-sex marriage.)

Throw in the fact that Millennials are potentially
the most politically unaffiliated generation in history
, and
that Republicans have steadfastly
failed to stop bleeding support
even under the lousy record of
Barack Obama, and you have the pre-conditions for a more
libertarian GOP.

Would I bet on that? Not even for a second. But I see no reason
not to cheer on the symbolic and occasionally even substantive
libertarian tack by Republicans. Now if only we could get more

 to play along….

from Hit & Run

China Is Crashing … As Predicted

The head of China’s sovereign wealth fund noted in 2009: “both China and America are addressing bubbles by creating more bubbles”.

He’s right …

Global credit excess is worse than before the 2008 crash.

The U.S. and Japan have been easing like crazy, but – as Zero Hedge notes  [if you missed it when Tyler Durden first posted this] – China has been much worse:

 Here is just the change in the past five years:

You read that right: in the past five years the total assets on US bank books have risen by a paltry $2.1 trillion while over the same period, Chinese bank assets have exploded by an unprecedented $15.4 trillion hitting a gargantuan CNY147 trillion or an epic $24 trillion – some two and a half times the GDP of China!


Putting the rate of change in perspective, while the Fed was actively pumping $85 billion per month into US banks for a total of $1 trillion each year, in just the trailing 12 months ended September 30, Chinese bank assets grew by a mind-blowing $3.6 trillion!


Here is how Diapason’s Sean Corrigan observed this epic imbalance in liquidity creation:

Total Chinese banking assets currently stand at some CNY147 trillion, around 2 ½ times GDP. As such, they have doubled in the past four years of increasingly misplaced investment and frantic real estate speculation, adding the equivalent of 140% of average GDP – or, in dollars, $12.5 trillion – to the books. For comparison, over the same period, US banks have added just less than $700 billion, 4.4% of average GDP, 18 times less than their Chinese counterparts – and this in a period when the predominant trend has been for the latter to do whatever it takes to keep commitments off their balance sheets and lurking in the ‘shadows’!

Indeed, the increase in Chinese bank assets during that breakneck quadrennium is equal to no less than seven-eighths of the total outstanding assets of all FDIC-insured institutions! It also compares to 30% of Eurozone bank assets.

Truly epic flow numbers, and just as unsustainable in the longer-run.

And here:

So what’s the problem?

Well, the world’s most prestigious financial agency – the central banks’ central bank, called the Bank of International Settlements or “BIS”  –  has long criticized the Fed and other central banks for blowing bubbles.  The World Bank and top economists agree.  So do many others.

As such, it was easy for us to predict a crash in China when the bubble collapses.

We argued in 2009 that China’s period of easy credit was analogous to America’s monetary easing starting in 2001 … and Rome’s in 11 B.C.

We noted in 2009 and against in 2011 that China is suffering from a lot of the same malaises as the American economy, including corruption, crony capitalism, and failure to disclose bad debt.

In 2010, we asked “When Will China’s Bubble Burst?

China’s $23 Trillion Dollar Credit Bubble Is Bursting

International Business Times noted last year that China’s debt-laden steel industry was on the verge of bankruptcy.

Quartz reported in December that a huge coal company called Liansheng Resources Group declared bankruptcy with 30 billion yuan ($5 billion) in debt.

Chinese Business Wisdom argues (via China Gaze) that waves of bankruptcies are striking in 10 Chinese industries: (1) shipbuilding; (2) iron and steel: (3) LED lighting; (4) furniture; (5) real estate development; (6) cargo shipping; (7) trust and financial institutions; (8) financial management; (9) private equity; and (10) group buying.

AP notes today:

Chinese authorities have allowed the country’s first corporate bond default, inflicting losses on small investors in a painful step toward making its financial system more market-oriented.


A Shanghai manufacturer of solar panels paid only part of 90 million yuan ($15 million) in interest [it owed] …


Until now, Beijing has bailed out troubled companies to preserve confidence in its credit markets. But the ruling Communist Party has pledged to make the economy more productive by allowing market forces a bigger role.

Time asks whether China has reached its “Bear Stearns moment”:

A dangerous build-up of debt and an explosion of risky and poorly regulated shadow banking have raised serious concerns about the health of China’s economy. That’s why the Chaori default — the first ever in China’s domestic corporate bond market — has sparked fears that the country could be headed for a full-blown economic crisis like the one that slammed Wall Street in 2008. “We believe that the market will have reached the Bear Stearns stage,” warned strategist David Cui and his team at Bank of America-Merrill Lynch in a report to investors.


The concern of Cui and others is that the Chaori default will be the tip-off point for an unravelling of China’s financial system. The default could wake investors and bankers to the realization that companies they thought were safe bets are potentially not, and they could begin to reassess other loans and investments to other corporations. In other words, they might start redefining what is and is not risky. That could then lead to a credit crunch, when nervous bankers become wary of lending money, or lending at affordable interest rates. More bankruptcies could result. That eventually causes the financial markets to lock up — and we end up transitioning from a Bear Stearns moment to a Lehman Brothers moment, when the financial sector melts down. “We think the chain reaction will probably start,” Cui wrote. “In the U.S., it took about a year to reach the Lehman stage when the market panicked … We assess that it may take less time in China.”

The Financial Post reported in January:

The U.S. and Europe learned the hard way about the dangers of shadow banks in the financial crisis but, five years later, China appears set to get its own painful lesson about what can happen when large capital flows get diverted to unregulated corners of the financial system.




“We estimate that 88% of the revenues of Chinese trust companies is at risk in the long term,” said McKinsey and Ping An.



Billionaire investor George Soros recently wrote on a popular news website that the impending default and the growing fear reflected in Chinese markets has “eerie resemblances” to the global crisis of 2008.

The big picture:  the $23 trillion dollar Chinese credit bubble is starting to collapse.

As Michael Snyder wrote in January:

It could be a “Lehman Brothers moment” for Asia.  And since the global financial system is more interconnected today than ever before, that would be very bad news for the United States as well.  Since Lehman Brothers collapsed in 2008, the level of private domestic credit in China has risen from $9 trillion to an astounding $23 trillion.  That is an increase of $14 trillion in just a little bit more than 5 years.  Much of that “hot money” has flowed into stocks, bonds and real estate in the United States.  So what do you think is going to happen when that bubble collapses?


The bubble of private debt that we have seen inflate in China since the Lehman crisis is unlike anything that the world has ever seen.  Never before has so much private debt been accumulated in such a short period of time.  [Note: Private debt is much more dangerous than public debt.] All of this debt has helped fuel tremendous economic growth in China, but now a whole bunch of Chinese companies are realizing that they have gotten in way, way over their heads.  In fact, it is being projected that Chinese companies will pay out the equivalent of approximately a trillion dollars in interest payments this year alone.  That is more than twice the amount that the U.S. government will pay in interest in 2014.




As the Telegraph pointed out a while back, the Chinese have essentially “replicated the entire U.S. commercial banking system” in just five years…

Overall credit has jumped from $9 trillion to $23 trillion since the Lehman crisis. “They have replicated the entire U.S. commercial banking system in five years,” she said.


The ratio of credit to GDP has jumped by 75 percentage points to 200pc of GDP, compared to roughly 40 points in the US over five years leading up to the subprime bubble, or in Japan before the Nikkei bubble burst in 1990. “This is beyond anything we have ever seen before in a large economy. We don’t know how this will play out. The next six months will be crucial,” she said.

As with all other things in the financial world, what goes up must eventually come down.




The big underlying problem is the fact that private debt and the money supply have both been growing far too rapidly in China. 


According to Forbes, M2 in China increased by 13.6 percent last year…

And at the same time China’s money supply and credit are still expanding.  Last year, the closely watched M2 increased by only 13.6%, down from 2012’s 13.8% growth.  Optimists say China is getting its credit addiction under control, but that’s not correct.  In fact, credit expanded by at least 20% last year as money poured into new channels not measured by traditional statistics.

Overall, M2 in China is up by about 1000 percent since 1999.  That is absolutely insane.




But I am not the only one talking about it.


In fact, the World Economic Forum is warning about the exact same thing…

Fiscal crises triggered by ballooning debt levels in advanced economies pose the biggest threat to the global economy in 2014, a report by the World Economic Forum has warned.



What has been going on in the global financial system is completely and totally unsustainable, and it is inevitable that it is all going to come horribly crashing down at some point during the next few years.


It is just a matter of time.


via Zero Hedge George Washington

Not Fitting in Elite Notions of Success Does Not Make Latinos Losers

Every time comprehensive immigration reform gathers steam, some
new restrictionist trope emerges to show that Latinos are
ambitionless losers who can’t be assimilated in the American
mainstream. The latest one is that by the third — not first,
not second, but third — generation Latinos stop advancing. They
drop out of college, shun professional fields and become part of
the great American underclass.

But such fears are overblown. For starters, they are based on
systematically skewed data. Many Latinos stop
as Latinos by the third generation given the
high rate of intermarriage. However, the Census Bureau relies on
respondents’ own identification when it classifies them. This means
that the many educationally, professionally, linguistically and
ethnically integrated Hispanics don’t even get counted as Hispanics
in various studies relying on Census data. 

In addition, I note in a column in the Washington
this morning:

A new
by Jennifer Lee and others at the University of
California, Irvine, examining the intergenerational mobility of
various immigrant groups in Los Angeles, found that the educational
attainment of Mexicans does stall after the third generation,
compared to Asian immigrants. “However,” they note, “it is far from
clear that this cross-sectional finding represents any kind of
downward mobility or stagnation.”

Mexican median household income rises from $27,748 in the first
generation to $53,719 in the second and $62,930 in the third.
Likewise, the rate of homeownership rises from 35.2 percent in the
1.5 generation to 62.3 percent in the second and nearly 72 percent
in the third-plus.

for the whole thing.

from Hit & Run

Gunmaker Stocks Outperform Post-Sandy Hook

Smith & Wesson’s earnings report gave renewed momentum to a rally in gun-making stocks, which began amid a debate about firearms that followed the Sandy Hook Elementary School shooting 15 months ago. As Bloomberg notes, many gun enthusiasts have stocked up on weapons to avoid potential restrictions in response to the Sandy Hook incident, the second-deadliest mass killing at a school in U.S. history, and that has driven stocks like Sturm Ruger to handily outperform even the highest of high-beta momo indices like the Russell 2000. SWHC was up 16% after earnings – its biggest gain since the shooting – as it beat expectations once again.



“The market should continue to be supported” as new gun owners purchase additional firearms, Ronald Bookbinder, a New Orleans-based analyst at Benchmark Co., wrote yesterday.


Chart: Bloomberg


via Zero Hedge Tyler Durden

“No Inflation” Friday: The Dollar Has Lost 83.3% Against…

Submitted by Simon Black of Sovereign Man blog,

I needed a caffeine jolt late this morning after the long journey up from South America.

And while I’m generally averse to aspartame, high fructose corn syrup, and other government-sanctioned poisons, I did briefly consider a hit of Coca Cola as I walked past a vending machine on my way out of a grocery store.

Then I saw the price.

To give you some quick background, this was the same grocery store my mother used to shop at when I was a kid. And if I was really lucky, we’d stop for a can of coke on the way out– 25 cents back then.

Fast forward to today–. I’m a grown man of 35 now instead of a 9-year old kid. And while the store has changed hands a few times, there’s still vending machine near the entrance.

Same coke, same 12 ounces (though now in a plastic bottle instead of an aluminium can).

Price today? $1.50. [note, this is the vending machine price, not grocery store price.]

Put another way, $1 would have bought me 48 ounces of Coca Cola 26 years ago. Today that same dollar buys me just 8 ounces.

This means that the dollar has lost 83.3% of its value against Coca Cola over the past three decades, averaging roughly 6.6% inflation per year.

Some readers may remember the price of Coca Cola being just 5c back in the early 1950s (for a 6.5oz glass)… meaning the US dollar has lost 93.8% against Coca Cola over the past six decades.

Now, we are taught from the time we are children that ‘a little inflation is good…’

And when central bankers tell us they’re targeting an inflation rate of 2% to 3%, that certainly doesn’t seem so bad. 2% is practically just a rounding error. But bear in mind a few things–

1) An inflation rate of 2% is not price stability.

As Jim Rickards frequently points out, even with just 2% inflation, a currency loses over 75% of its value during an average lifespan. This can hardly be considered monetary stablilty.

And this practice of gradually plundering people’s purchasing power over time is incredibly deceitful.

2) Even if, they rarely meet their target.

As this case shows, 6.6% certainly ain’t 2%. The official statistics and research papers may say 2%. Reality is much different.

3) Wages often don’t keep up.

According to the US Labor Department, the median weekly wage back in 1988 was $382… or roughly 18,336 ounces of Coca Cola.

Today the median weekly wage is $831.40… or just 6,651.20 ounces.

So as measured in Coca Cola, the average wage in the Land of the Free has declined by 11,684 ounces per week– a 63.7% decline over the last three decades.

You can make a similar calculation denominated in Snickers bars, gallons of gas, etc.

If you have a big picture, long-term view, it’s clear that standard of living is falling.

Some readers may remember decades ago– a single parent could go out and, even with a blue collar job, comfortably support a growing family.

Today, dual income households struggle to keep their heads above water. This is the long-term plunder of inflation.

And just to give you a reminder of what things used to cost, I’ve pulled a page from the March 7, 1988 edition of the Bryan Times of Bryan, OH: 26-years ago today.

inflation federal reserve No inflation Friday: the dollar has lost 83.3% against...

You can scroll through the paper and note the prices:

25c for a dozen eggs. 69c for a loaf of bread. 49c for a pound of Chicken. A brand new Mustang LX for just $9203.

That’s the Federal Reserve for you. 100 years of monetary destruction and counting.


via Zero Hedge Tyler Durden

Meet The Mysterious Firm That Is About To Leave Blythe Masters Without A Job

It was about a month ago when it was revealed that the infamous JPMorgan physical commodities group, plagued by both perpetual accusations of precious metal manipulation and legal charges most recently with FERC for $410 million that it had manipulated electricity markets, was in exclusive talks to be sold to Geneva-based Marcuria Group. It was also revealed that Blythe Masters, JPMorgan’s commodities chief, “probably won’t join Mercuria as part of the deal.” Of course, we all learned the very next day that Ms. Masters – an affirmed commodities market manipulator – and soon to be out of a job, had shockingly intended to join the CFTC trading commission as an advisor, a decisions which was promptly reversed following an epic outcry on the internet. This is all great news, but one thing remained unclear: just who is this mysterious Swiss-based company that is about to leave Blythe without a job?

Today, courtesy of Bloomberg we have the answer: Mercuria is a massive independent trading behemoth, with revenue surpassing a stunning $100 billion last year, which was started less than ten years ago by Marco Dunand and Daniel Jaeggi, who each own 15% of the firm’s equity. And it probably should come as no surprise that the company where the two traders honed their trading skill is, drumroll, Goldman Sachs.

Dunand and Jaeggi first met studying economics at the University of Geneva in the late 1970s. Their friendship was galvanized a few years later working for grain trader Cargill Inc. and sharing an apartment while on a training course in Minneapolis. Mercuria’s corporate strategy and culture have reflected the professional paths of its founders, who spent the bulk of their early careers at investment banks.



They left Cargill in 1987 for Goldman Sachs’s J. Aron unit in London. They stayed until 1994, then joined Phibro for a five-year stint when it was controlled by Salomon Brothers.


That experience defined the trading strategies of Dunand and Jaeggi who moved from Phibro to start Sempra’s European and Asian trading business in 1999 before founding Mercuria in 2004.


Without a commanding position in any region or commodity, the firm has sought out bottlenecks and imbalances in niche markets and positioned itself to make money trading derivatives using insights gained from its physical trading. In its early days it profited by opening a trade route shipping Russian crude to China from Gdansk, Poland.


Mercuria also differs in tone. At its headquarters on Geneva’s poshest shopping street, traders and executives wear open-collared shirts, sweaters and jeans, a sharp contrast to the shirt-and-tie policies at more established firms.

Not surprisingly, some of the key hires in the past couple of years as the firm expanded at a breakneck pace and added some 570 people, bringing its total headcount to 1,200, were from Goldman: “The hires include Houston-based Shameek Konar, a former managing director with Goldman Sachs Group Inc. who is chief investment officer overseeing Mercuria’s corporate development, including the JPMorgan negotiations. Victoria Attwood Scott, Mercuria’s head of compliance, also joined from Goldman Sachs.” We find it not at all surprising that the Goldman diaspora is once again showing JPMorgan just how it’s done.

So just how big is Mercuria now? Well, it is almost one of the biggest independent commodities traders in the world:

Mercuria traded 182 million metric tons of oil or oil equivalent in 2012, according to its website. Vitol, the largest independent oil trader, handled 261 million and Trafigura traded 102.8 million tons of oil and petroleum products. Brent crude rose 3.5 percent that year in a fourth annual advance. It slipped 0.3 percent in 2013 and is down 2.6 percent this year at about $108 a barrel.


With more trading companies trying to gain an edge by owning businesses that produce, store or process commodities, Mercuria followed suit. It now has stakes in a coal mine in Indonesia, oil and gas fields in Argentina, oil storage in China and a biodiesel plant in Germany. In June, it invested $50 million in a Romanian gas producer.


The JPMorgan unit employs about 600 and represents a range of assets assembled over decades by firms including Bear Stearns Cos. and RBS Sempra, which the bank bought during an acquisition binge beginning in 2008.


They include gas and power trading on both sides of the Atlantic, physical assets spanning 40 locations in North America, an oil-trading book with a supply and offtake contract with the largest refinery on the U.S. East Coast, 6 million barrels of storage leases in the Canadian oil sands, and Henry Bath & Sons Ltd., a 220-year-old metal-warehouse operator based in Liverpool, England.

In other words, the old boys’ club is about to get reassembled, only this time even further away from the supervision of the clueless, corrupt and incompetent US regulators. And with the physical commodity monopoly of the big banks finally being unwound, long overdue following its exposure here and elsewhere over two years ago, it only makes sense that former traders from JPM and Goldman reincarnate just the same monopoly in a jurisdiction as far away from the US and Fed “supervision” as possible. Which also means that anyone hoping that the great physical commodity warehousing scam is about to end, should not hold their breath.

As for the main question of what happens to everyone’s favorite commodity manipulator, “It hasn’t been determined whether Blythe Masters, who has led the JPMorgan unit since 2006 and orchestrated the buying spree, would join Mercuria, a senior executive at Mercuria said.” Which means the answer is a resounding no: after all who needs the excess baggage of having a manipulator on board who got caught (because in the commodity space everyone manipulates, the trick, however, is not to get caught).

Finally, with “trading” of physical commodities, which of course include gold and silver, set to be handed over from midtown Manhattan to sleep Geneva, what, if any, is the endgame?

The talks with JPMorgan forced Mercuria to put another deal on hold. Mercuria was nearing the sale of an equity stake of 10 percent to 20 percent to Chinese sovereign wealth fund State Development & Investment Co., according to two people familiar with the matter. The discussions with SDIC were halted once Mercuria neared the JPMorgan business, one of the people said.

But they will be promptly resumed once JPM’s physical commodities unit has been sold, giving China a foothold into this most important of spaces. Because recall what other link there is between China and JPM?

One may almost see the connection here.


via Zero Hedge Tyler Durden