DARK POOLS: The Next Unregulated Bubble

The Day The Music Died…

In 1979, then Democrat President Jimmy Carter, flanked by a Democrat Congress chaired by Walter Mondale and Tip O’Neil, passed an SEC Regulation allowing what are known in Wall Street as Dark Pools.   Tip O’Neil was a major advocate of Universal Healthcare and Roosevelt’s New Deal. Mondale is still working for Dorsey and Whitney, a law firm in Minneapolis where Democrat Presidential candidate, Amy Klobuchar, is also employed.

This SEC pronouncement allows investors to anonymously purchase large blocks of securities actively traded on any exchange without the trade being listed. As such, the real price of any given stock is inaccurate and might not reflect the pooled purchase or sale for several days or more.   These ‘after hours’ trades are not public, are typically only available to select high wealth investors including banks and hedge funds, and are considered a stealth parallel to public exchanges while having far fewer regulatory and disclosure requirements.

Initially, they represented a minor force in the markets – roughly 2-3% of trades.  But the passage of the regulation has been the mainstay for banks and Wall Street to run amok.

Dark Pools are likely to be the next Financial Crisis.   Banks have already been cited and fined for fraudulent trading and misinforming clients, but they don’t care, the fines are a fraction of the revenues.

In 2007 as SIV’s (Structured Investment Vehicles) began to stumble invoking the Financial Crisis, Dark Pools began to grow substantially and are now thought to represent perhaps as much as 50% of market trading. Today most pools are owned by mega banks including; Deutsche Bank, JP Morgan Chase, Citigroup, Goldman Sachs, Credit Suisse, Bank of America, etc…

Having negotiated their way out of the price fixing Libor scandal of the 1990’s during the Clinton regime, banks then created the next buble, SIV’s, and when the banking crisis revealed the schematic fraud of SIV’s banks demanded bailouts, and Dark Pools became the nouveau riche fashion statement.

Today, banks actively trade their own and each others shares in massive Dark Pool bundles manipulating prices and using the shares as collateral for loans.   In essence an elaborate Ponzi scheme, but more importantly a vast money laundering platform as well.

Banks argue that Dark Pools are actually beneficial because fees are lower and all investors win… Except those who don’t have the billions it takes to become an investor.

By the end of 2008 when the bank collapse was at its height and the last SIV’s had shuttered, Dark Pools began to rise. With Bush’s Federal Reserve bailout funds of $700 billion authorized to get these poor banks back on track, they simply redirected the funds into a new Ponzi bubble paid for by US taxpayers.

Follow The Money.

IN 2000, Jeffrey Epstein became Director and Chairman of Liquid Funding Ltd, in partnership with Bear Stearns.   According to Paradise Papers, the partnership was registered in Bermuda and went out of business in 2010.  Liquid Funding was a SIV.

Bear Stearns was worth $20 billion before the Financial Crisis, within a few months that capitalization had tanked to $235 million when Chase Bank bought them March 2008.

It is likely Epstein’s wealth was dramatically affected during this time frame as well – of course at the heels of his initial indictment in 2006.

Of course, if banks are manipulating their own prices with Dark Pools, it goes without saying that equities are also onboard capitalizing on manufactured profits.

But all of this manipulation ultimately finds at its core The Federal Reserve.

In 2007, the assets of the Federal Reserve were valued at $869 billion – by 2017, those assets had risen to $4.5 trillion with the help of Ben Bernanke and Janet Yellen.   A rather remarkable feat created under the monetary policy of ‘quantitative easing’.  But it was the “Gramm-Leach-Bliley Act of 1999” that gave the Federal Reserve the authority to determine ‘appropriate’ financial activities for bank holding companies and member banks.   It was signed into law by Bill Clinton.

Gramm was a senior advisor to John McCain during his presidential run. Breaking ranks, Leach endorsed Obama with Madeleine Albright and was subsequently appointed to Obama’s 9th Chair for the National Endowment for the Humanities. Both Gramm and Bliley were initially Democrats.

It would appear that the Corporate world at large much approved of the deregulation imposed by the Chair of the SEC in 1979 – Harold M. Williams.   It is worth noting that the SEC is an independent agency within the federal government and as such operates outside the executive office of the President.   It was created as a part of Roosevelt’s New Deal.

The SEC and the Federal Reserve will often work jointly.

Market Meltdown Mania

MARKET MELTDOWN?

DOW, Nasdaq, S&P, plunged to negative territory sending everyone into panic mode! France’s market, Germany’s market, Canada’s market all followed or led – doesn’t really matter because the selloff was global.

Saudi Arabia’s credit was lowered to negative in response to oil tanking to near $40 a barrel. Silver slipped, copper slipped and gold hedged upward a bit.

More migrants losing patience and turning violent.

North Korea threatens South Korea.

A former UBS and Citibank trader was jailed for libor manipulation.

BP manipulated the natural gas market.

The silver inventory market for taking delivery – is being manipulated.

Currency manipulation, market manipulation, insider trading, we read the headlines and don’t process the words.

The boy’s games are imploding.

The Big Boys have been accumulating their stashes, waiting for the inevitable, taking advantage of a public that wears blinders and pretends everything is just fine. Blame it on China…the pundits decry – But, in fact the oil market was a hefty driver of the global economy and when we started messing with it in order to tank Russia’s economy we risked exactly what we reap today. An uncontrolled spiral.

MarginsMix – A Nix: The US is well aware of the margin call phenomena – pushing algorithms to their limits, computer trading has the effect of heightening losses as the computer generates automatic sells and calls based on math rather than emotion. With the Chinese market soaring to unlimited heights, 150% upticks and flyers, they thought joining the margin world was a good investment option. Add to the fly that every Yu, Hu and Hong joined in the frenzy with little knowledge and less logic, the China market began to waver. And as the waver turned into a tsunami, little earthquake tremors began to surface around the world.

Ethics no longer play in the big game. Greed rules. And when the manipulation travels without a passport, ultimately it leaves a trail of death and destruction along its path before the earth swallows the mud and spits back fire. Each time, a new greed is manufactured; libors, derivatives, micro-lending, anything to hijack a new manipulation, the old is left to die and the new becomes the game. A game of thievery – Pacman – and whoring.

Who is to blame? We all are for allowing it, for jumping on the bandwagon, for voting for government officials who we know are corrupt, dishonest, fake, fraudulent. When we think that lying and cheating aren’t wrong because everyone does it, we are to blame. When we think that casualties of war and strife are worth nothing more than a noncommittal shrug, we are to blame.

So the market is tanking… don’t see a lot of job growth coming out of that Mr. President. Oil tanking, a lot of layoffs Mr. President. We wanted to cripple Russia and ended up crippling the global economy. Not the brightest move Mr. President.

When we lose our ethics, just as when we lose our morality, we lose ourselves. So if you really want to point a finger, point it back at ourselves, not at China or Russia or Venezuela or Brazil or Yemen or Syria or Sudan or Egypt or Turkey or Qatar, or anywhere else. Because our priorities have turned topsy-turvy and left us with empty hearts, empty bank accounts, and empty lives.

When something goes up disproportionately, you can bet it will come down disproportionately.

Margins are debt. Debt kills. So be careful what you ask for – you just might get it…going – going – gone.

Like a Bridge Over Troubled Water…