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 http://ift.tt/1chQuS4 Tyler Durden

5 Things To Ponder: Serious Stuff

Submitted by Lance Roberts of STA Wealth Management,

There was so many good things to read this past week that it was hard to narrow it down to a topic group.  After a brief respite early this year, the markets are hitting new highs confirming the current bullish trend.  As a money manager, this requires me to increase equity exposure back to full target weightings.  After such an extended run in the markets, this seems somewhat counter-intuitive.  It is, but as Bill Clinton once famously stated; "What is….is." 

However, while the current market "IS" within a bullish trend currently, it doesn't mean that this will always be the case.  This is why, as investors, we must modify Clinton's line to: "What is…is…until it isn't."  That thought is the foundation of this weekend's "Things To Ponder."  In order to recognize when market dynamics have changed for the worse, we must be aware of the risks that are currently mounting.

1) Fisher Warns Fed's Bond Buying Could Be Distorting Markets via Reuters

While this article falls in the "no s***" category, Dallas Fed President Richard Fisher points out areas that we should be paying closer attention to for signs of change.

"There are increasing signs quantitative easing has overstayed its welcome: Market distortions and acting on bad incentives are becoming more pervasive," he said of the asset purchases, which are sometimes called QE.

 

"I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis."

Here are his main points:

1) QE was wasted over the last 5 years with the Government failing to use "easy money" to restructure debt, reform entitlements and regulations.

2) QE has driven investors to take risks that could destabilize financial markets.

3) Soaring margin debt is a problem.

4) Narrow spreads between corporate and Treasury debt are a concern.

5) Price-To-Projected Earnings, Price-To-Sales and Market Cap-To-GDP are all at "eye popping levels not seen since the dot-com boom."

"We must monitor these indicators very carefully so as to ensure that the ghost of 'irrational exuberance' does not haunt us again,"


In order to make it in professional sports, you have to be an elite athlete.  What is amazing, is that among all of the elite athletes, there are always one or two that rise above all others.  Players like Michael Jordon, Tiger Woods, Nolan Ryan and many others have elevated their game to inexplicable levels.  In the investment game, there are a few individuals that have done the same.  The follow three pieces are views from some of these men Howard Marks, Jeff Gundlach and Seth Klarman.

2) Howard Marks: In The End The Devil Usually Wins via Finanz Und Wirtschaft

"Our mantra at Oaktree Capital for the last few years has been: «move forward, but with caution». Although a lot has changed since then I think it’s still appropriate to keep the same mantra. Today, things are not cheap anymore.  Rather I would describe the price of most assets as being on the high side of fair. We’re not in the low of the crisis like five years ago."

 

"Let’s think about a pendulum: It swings from too rich to too cheap, but it never swings halfway and stops. And it never swings halfway and goes back to where it came from. As stocks do better, more people jump on board.  And every year that stocks do well wins a few more converts until eventually the last person jumps on board. And that’s the top of the upswing."

 

"But there actually are two risks in investing: One is to lose money and the other is to miss opportunity. You can eliminate either one, but you can’t eliminate both at the same time."

 

"There are two main things to watch: valuation and behavior."

3) Seth Klarman: Downplaying Risk Never Turns Out Well via Value Walk

"“In the face of mixed economic data and at a critical inflection point in Federal Reserve policy, the stock market, heading into 2014, resembles a Rorschach test,” he wrote. “What investors see in the inkblots says considerably more about them than it does about the market.”

 

"If you’re more focused on downside than upside, if you’re more interested in return of capital than return on capital, if you have any sense of market history, then there’s more than enough to be concerned about.”

 

“We can draw no legitimate conclusions about the Fed’s ability to end QE without severe consequences.”

 

“Fiscal stimulus, in the form of sizable deficits, has propped up the consumer, thereby inflating corporate revenues and earnings. But what is the right multiple to pay on juiced corporate earnings?”

 

“There is a growing gap between the financial markets and the real economy,”

 

“Our assessment is that the Fed’s continuing stimulus and suppression of volatility has triggered a resurgence of speculative froth.”

 

“In an ominous sign, a recent survey of U.S. investment newsletters by Investors Intelligence found the lowest proportion of bears since the ill-fated year of 1987,” he wrote. “A paucity of bears is one of the most reliable reverse indicators of market psychology. In the financial world, things are hunky dory; in the real world, not so much. Is the feel-good upward march of people’s 401(k)s, mutual fund balances, CNBC hype, and hedge fund bonuses eroding the objectivity of their assessments of the real world? We can say with some conviction that it almost always does. Frankly, wouldn’t it be easier if the Fed would just announce the proper level for the S&P, and spare us all the policy announcements and market gyrations?”

4) Jeff Gundlach & Howard Marks: Beware Of Junk Bonds via Pragmatic Capitalist

 "There’s been some cautionary commentary in recent months from some bond market heavyweights.  Most notably, Howards Marks and Jeff Gundlach. In a Bloomberg interview today, Marks said you need to be cautious about low quality issuers:

 

'When things are rollicking and the market is permitting low-quality issuers to issue debt, that’s when you need a lot of caution,'

 

And just a few weeks before that Jeff Gundlach referred to junk bonds as the most overvalued they’ve ever been relative to Treasury Bonds."

5) Bernanke Unleashed: What He Can Say Now That He Couldn't Say Before via Zero Hedge

Now that Ben Bernanke is no longer the head of the Fed, he can finally tell the truth about what caused the financial crash. At least that's what a packed auditorium of over 1000 people as part of the financial conference staged by National Bank of Abu Dhabi, the UAE's largest bank, was hoping for earlier today when they paid an exorbitant amount of money to hear the former chairman talk.

"The United States became 'overconfident', he said of the period before the September 2008 collapse of U.S. investment bank Lehman Brothers. That triggered a crash from which parts of the world, including the U.S. economy, have not fully recovered.

 

'This is going to sound very obvious but the first thing we learned is that the U.S. is not invulnerable to financial crises,' Bernanke said.

 

"He also said he found it hard to find the right way to communicate with investors when every word was closely scrutinised. 'That was actually very hard for me to get adjusted to that situation where your words have such effect. I came from the academic background and I was used to making hypothetical examples and … I learned I can't do that because the markets do not understand hypotheticals.'

 

The complexity though arises because in order to help the average person, you have to do things — very distasteful things — like try to prevent some large financial companies from collapsing.  The result was there are still many people after the crisis who still feel that it was unfair that some companies got helped and small banks and small business and average families didn’t get direct help.  It’s a hard perception to break.”

I guess the real question is now that the markets are once again over confident, over extended and excessively bullish – have we actually learned anything?

Have a great weekend.


    



via Zero Hedge http://ift.tt/O3g2XW Tyler Durden

Treasuries Tumble Most In 6 Months As Trannies Soar To New Highs

The world and their pet rabbit was convinced yesterday that today's jobs number was both the most-important-number-in-the-world and didn't matter (because whether it beat or missed it was bullish for stocks). Seconds after the release that appeared to be true as JPY instantly dragged stocks to record highs (and the USD up and bonds and gold down). However, trumped by confirmation that the taper is continuing, Gazprom warnings, Lavrov threats, and finally reports of a Russian invasion, stocks leaked lower to Tuesday's ramp-day closing levels. Thanks to some last-minute JPY and VIX banging, S&P closed green for the 15th of last 16 NFPs. Despite intraday volatility, the USD ended the week unchanged, gold +1%, silver -1.5% and Treasuries +14bps or so (its worst week in 6 months!). Credit markets continue to be non-believers (with the high-yield bond ETF plunging this week). Critically, after last night's default in China, Iron Ore and Copper futures were crushed and we suspect Sunday night's Asia open could see more fireworks.

So some see today's jobs data as good news (NFP beat) which is bad news as it encourages moar taper… sell bonds, sell gold, buy USD and it took a little for stocks to catch up that in fact this is dismal job growth and hoping that we have reached escape velocity is a dream… and this print won't allow the Fed to save the day if we tumble on the back of some exogenous event…

 

Only one thing mattered today to keep the "common knowledge" meme alive – a green close on a payrolls Friday no matter waht was critical… JPY was tired having been abused all week… so VIX, the old-whipping-boy of market-manipulating muppets, was smashed lower into the close just perfectly to get the S&P 500 cash index to close green by the smallest margin…

 

Now tell us this – some talking head claimed that everyone is hedged? and that's the ammo for a rmap higher… if everyone is hedged then who the fuck was selling the crap out of vol into the close today?

 

For 2014, Gold and Silver remain the winners, The USD and HY Credit the losers…

 

High-beta has had a tough couple of days…the S&P has closed higher on a jobs Friday 15 of the last 16 times… as we were saved in th elast few minutes…

 

And the MoMo names suffered the last 2 days…

 

But Trannies just were on fire on the week…

 

Healthcare (well Biotechs) continues to lead the year but Financials were th ebig winners this week (up over 3%)…

 

Treasuries were banged higher in yield all week…

 

and even as stocks fell on Friday to end the worst week in 6 months…

 

Credit markets are not as exuberant as stocks…

 

While the USDollar ended the week unchanged (ramping back on the NFP print) – it is clear from the chart below what currenies were in charge this week (AUD up, JPY down)…

 

And so AUDJPY ran the show in stocks…

 

Commodities were a mixed bag despite the UNCH of the dollar… copper crushed on China and gold bid as fear remains about Ukraine…

 

Interestingly, "Most shorted" stocks ended the week -0.6% as the massive squeze at the start of the week gave way as "most shorted" stocks sold off dramatically more than the broad market…

 

Charts: Bloomberg

Bonus Chart: Iron Ore and Copper collapsing as credit fears unwind in China…

 

Bonus Bonus Chart: Seems like the NFIB "promises" to raise compensation were worthless…


    



via Zero Hedge http://ift.tt/O3fhhz Tyler Durden

Has This Chart “Reached A Permanently High Plateau”?

Despite stocks being at record highs, sell-side strategists proclaiming today’s jobs report as great, and the Fed comfortable tapering in the face of transitory weather-related macro weakness, the following chart suggests all is not well… Echoing Irving Fisher, it appears we have reached a permanently high plateau in the duration of unemployment in America…

 

 

h/t @Not_Jim_Cramer


    



via Zero Hedge http://ift.tt/1k0X0g2 Tyler Durden

Fed’s Dudley “US Dollar Wins”; Bitcoin “Not a Good Store Of Value”

While the volatility of Bitcoin has been considerable, perhaps merely reflective of the early days of a revolution, the fact that the “value experts” at the Fed have pronounced:

  • *DUDLEY SAYS BITCOIN ‘IS NOT VERY GOOD STORE OF VALUE’
  • *DUDLEY SAYS ‘U.S. DOLLAR WINS’ OVER BITCOIN ACROSS MANY METRICS

..raised an eyebrow or two on our furrowed brows. We thought a look at the following two charts since the inception of Bitcoin and the inception of the Fed would help clarify “value” stability…

 

Bitcoin since inception…

 

And the USDollar since the Fed’s inception…

 

You decide?


    



via Zero Hedge http://ift.tt/O37vUP Tyler Durden

Student And Car Loans Account For 102% Of All New February Consumer Credit

Another month down, another month in which US consumers deleveraged by paying down their credit cards. Although that is not exactly correct: as we showed recently, the New Normal source of credit has nothing to do with revolving debt, or credit cards, or any other old normal notions, and everything to do with student debt, which is used for everything except paying for tuition. That, and car loans of course. Sure enough, in February, of the $13.7 billion in new loans created, $13.9 billion, or 102% of all, was there to fund student and car loans.

 

And looking further back at the data over the past year, of the $172 billion in new consumer debt, a stunning 96% has gone to new student and car loans.

 

So there it is in a nutshell: the deleveraging consumer continues to delever, except when it comes to purchasing Government Motors cars courtesy of government subprime NINJA loans, and of course, student loans, which as we profiled recently, are never getting repaid, and will be yet another taxpayer-funded bail out in a few short years.


    



via Zero Hedge http://ift.tt/1dA184Y Tyler Durden

Can The United States Rule The (Energy) World?

Submitted by Daniel J. Graeber of OilPrice.com,

Geopolitical crises in Eastern Europe have been met with calls in the United States to use energy as a foreign policy tool. With U.S. Energy Secretary Ernest Moniz asking the industry to make a stronger case, however, it's domestic policies that may inhibit energy hegemony.

"The industry could do a lot better job talking about the drivers for, and what the implications would be, of exports," Moniz told an audience at the IHS CERAWeek energy conference in Houston.

The Energy Information Administration said in its weekly report that gross exports of petroleum products from the Unites States reached 4.3 million barrels per day in December, the first time such exports topped the 4 million bpd mark in a single month.

EIA said the United States is a net exporter of most petroleum products, but crude oil exports are restricted by legislation enacted in response to the Arab oil embargo in the 1970s.

In January, Kyle Isakower, vice president of economic policy at the American Petroleum Institute, said reversing the ban would help stimulate the U.S. economy and lead to an increase in domestic oil production by as much as 500,000 bpd. Current export polices, he said, are "obsolete."

This week in Houston, Sen. Lisa Murkowski, R-Alaska, ranking member of the Senate Energy Committee, said oil could help reposition the United States as the premier superpower.

"Lifting the oil export ban will send a powerful message that America has the resources and the resolve to be the preeminent power in the world," she said.

President Obama can show "true American grit" if he acts quickly and according to precedent. If the ban is reversed, it will be for the benefit of the international community, she said.

Moniz, who said in December the export ban deserves some "examination," said he wasn't yet convinced the case had been made to open the U.S. spigot, however.

For natural gas, House Energy and Commerce Committee Fred Upton, R-Mich., said expanding U.S. liquefied natural gas exports could be used to contain Russia, which dominates much of the Eastern European gas market.

Russia caused a stir with its military response to the Ukrainian situation and Upton said Monday foot-dragging at the Energy Department on LNG exports was putting U.S. allies in Eastern Europe "at the mercy of Vladimir Putin."

The U.S. federal government needs to determine that LNG exports to countries without a free-trade agreement are in the public's interest. The United States doesn't have a free trade agreement with any European country and the current transatlantic agreement up for debate has been stymied by EU concerns over the National Security Administration's cyberespionage campaign.

A January report from the Center for a New American Security said the economic connection that would come from oil exports could manifest itself as "coercive political influence" in foreign affairs. Domestic policy, however, needs to be honed first before the U.S. tries once again to tip the balance of power overseas.


    



via Zero Hedge http://ift.tt/NGOgR3 Tyler Durden

Pesident Obama Explains How He Will Blow The Student Loan Bubble Even Bigger – Live Feed

Despite warnings from various members of the Fed that Student Loans are becoming troublesome, we suspect President Obama’s address this afternoon on expanding opportunities to go to college will be nothing but more pumping free money into a hyper-inflating (and increasingly worthless) higher education system…

 

 

As we previously noted,

What’s worse, while the 90+ day student debt delinquency rate did
post a tiny decline from 11.8% to 11.5% in Q4, on a total notional basis
due to the increase in outstanding balances, as of this moment
the amount of heavily delinquent student loans has just hit a fresh
record high of $124.3 billion, up from $121.5 billion in the prior
quarter.

So: when does the Fed finally admit i) there is a student loan
problem and ii) the only way to solve said problem is to promptly
monetize it?

Finally, putting new “debt” creation in perspective, in 2013 just student and car loans alone represented 108% (that’s right, more than all) of total household debt created.

 

That won’t end well..


    



via Zero Hedge http://ift.tt/1g6vVaE Tyler Durden

Russian Troops Storming Ukraine Air Force Base In Crimea, Time Reports Citing Crimea TV

More lies, propaganda, or for once, the truth? Just out from Time’s Simon Shuster:

Then again, considering the source is disinformation central Ukraine Pravda, take it with a huge grain of salt. More as we see it.


    



via Zero Hedge http://ift.tt/1k0BjwN Tyler Durden

Caption Contest: Napoleon Complex Edition

Hiding behind the big boys (literally) appears to be the m.o. of France’s President Hollande who declared today that “there will be no referendum in Crimea without Ukraine’s agreement,” and added that it is a necessity for Russia to “accept the solution.” We suspect Vladimir Putin will have something to say about that but who is going to argue with Hollande given the following image…

 


    



via Zero Hedge http://ift.tt/1hTzZLe Tyler Durden