STOCK MARKET WATCH -- Monday, 19 August 2013

[Demeter]

2. JPMorgan & GS Are Playing Whack-A-Mole With Everyone Suing Over Metal Warehousing Businesses

http://www.businessinsider.com/jpm-goldman-face-suits-over-warehouses-2013-8#ixzz2cMkYCHRy

As if on cue, around the country individuals and companies have started filing lawsuits against JP Morgan and Goldman Sachs for allegedly delaying deliveries of aluminum stored in their metals warehouses, thus manipulating the price of the commodity. Lawsuits have been filed in Michigan, Florida and Louisiana. On top of that, The Commodities Futures Trading Commission has subpoenaed JPM, Goldman, and commodities trading firm Glencore for documents related to their warehouse businesses, Bloomberg reports.

...a story that appeared in the New York Times last month, accusing Goldman Sachs of using its Detroit metals warehouses to hoard aluminum, driving up the price of the commodity for customers and consumers alike. To understand why you have to understand supply, demand, yield curves and a weird trading term — "contago."

But there are powerful people unwilling to let this issue go, including Ohio Democratic Senator Sherrod Brown, and beer maker MillerCoors. The company's global risk manager Tim Weiner, says that these activities have inflated aluminum costs by $3 billion over the last year... In an attempt to preserve this lucrative business from further criticism, Goldman countered the New York Times with its own defense last month, saying that aluminum demand is weak, and that its Detroit-based warehouses control such a small portion of the market that it couldn't possibly be impacting price. The bank later promised to speed up deliveries of aluminum to customers. But that didn't stop the onslaught. It wasn't long after Goldman's defense that JP Morgan's Henry Bath warehousing businesses (picked up from RBS during the financial crisis fire sale) was under scrutiny as well... a complaint filed against Goldman and its warehouses, Metro International Trade Services, in Michigan. It's a class action suit filed by aluminum product manufacturer Superior Extrusion. The defendants also include the London Metals Exchange and "John Does 1-10".

...According to the complaint, From 2010 to now Goldman has had a monopoly over London Metals Exchange warehouses in the Detroit area, controlling over 80% of the storage space. That constitutes "75% of the LME aluminum in storage in the United States. It is estimated to constitute more than 50% of the total aluminum in warehouse storage in the United States," the complaint continues. Superior Extrusion accuses Goldman of "extreme monopoly pricing power and abusive agreements in very unreasonable restraint of trade." Those agreements are described as “get paid more to do less” inefficiency agreements. The LME, say the plaintiffs, have been more than complicit in this. Superior Extrusion alleges that the LME and Goldman have secondary agreements in which Goldman overbids other market participants to get aluminum to its warehouses.

...In short: The whole thing is a massive anti-trust conspiracy....


BUT WE DON'T PROSECUTE ANTI-TRUST CASES ANY MORE....