These 25 Banks Harbor Nuclear Secrets that Could Vaporize Your Future.
- From: bromselick@xxxxxxx
- Date: 14 Oct 2005 21:38:52 -0700
By John Pugsley, Chairman, The Sovereign Society --
There's a Fuse Box Buried Deep Within the U.S. Economy...and it's About
to Blow...
When it does, the lights on the dimming U.S. economy will go black...
Major banks (once thought "too big too fail") will be shaken to the
ground. Corporate bankruptcies will soar. Bonds will crash. The Dow
will dive towards 4000. And the dollar will continue its slide into the
dustbin of monetary history...
Deep in the shadows of the real economy...lies an underground
economy...where the world's largest financial players conduct secret
transactions worth trillions of dollars...
These transactions are made far away from the headlines of the evening
news. You'll seldom read about them in the Wall Street Journal ...and
you'll rarely hear about them on CNN - yet they affect every investment
you make: Your stocks, your bonds, your mutual funds - even your real
estate.
Financially they act like a giant underground fuse box...whose
financial currents (though invisible) are channelled through to the
real world of day-to-day investments. In the same way unseen electrical
currents power our physical world - so too do these unseen financial
currents secretly power our economy.
Occasionally though, something happens. A country blows up...or a
bank...or an investment fund...which reveals the catastrophic power
these financial currents carry. We witnessed their affects when world
stock markets collapsed in 1987...when Asian markets plummeted in
1997...and when the LTCM hedge fund collapsed in 1998. But even these
devastating events will pale in comparison to what lies ahead.
A series of events are about to unfold that will short-circuit the
system and cause this giant underground fuse box to blow. When it does,
we may bear witness to the largest financial upheaval since 1929...and
the lights on our dimming economy will indeed go black.
Get ready, for the final unravelling of the American economy...
My name is John Pugsley. I am Chairman of an elite group of
international investors called the Sovereign Society. We are one of the
world's most private - yet powerful - financial alliances. We operate
far away from the corruption, greed and conflict of interest that is
epidemic on Wall Street.
For decades our experts have accurately predicted major economic trends
and disasters. In the early seventies I wrote a book called Common
Sense Economics, which accurately predicted the inflationary explosion
in America...and helped investors get rich off gold. In the
mid-eighties, another of our experts James Dale Davidson warned of the
coming collapse of global stock markets. Investors who adhered to
James's advice saved their assets from the devastating losses that
ensued after Black Monday. In the nineties James also forecasted the
world's transformation from an industrial economy to an information
economy...and was dubbed "one of the greatest geopolitical forecasters
of all time".
The Phantom Economy - 27 times the size of the U.S. economy
- that's about to blow...
In the past decade a giant and potentially lethal economic bubble has
been quietly forming in the Over-The-Counter Derivatives market. If you
don't know what that is, you're not alone. Most investors are
completely unaware of what goes on behind closed doors at banks, major
brokerage houses and leading corporations.
But know this: Derivatives have been at the core of almost every major
economic disaster since 1987. They were responsible for Black Monday.
They were behind the Asian crisis, the "...poorly structured
derivatives of all kinds that redistribute risk, but don't eliminate
it, portend the likelihood of another LTCM debacle...Greenspan is
clearly off base in his support of derivatives and their medicinal
'hedging' qualities." Says
Bill Gross, the legendary bond fund manager.
LTCM hedge fund disaster, the fall of Barings Bank, the bankruptcy of
Orange County, and the collapse of Enron and Argentina.
And they'll soon be responsible for what could turn out to be the
greatest economic disaster yet. For the popularity of these notorious
financial instruments has erupted at an alarming rate. Their explosive
growth has given birth to an underground economy - so powerful and so
complex - that no one really understands it. Not Buffet - not even
Greenspan. Yet one thing is clear to all: This "Phantom Economy"
carries threats that have the power to blow up the U.S. financial
system.
At their very simplest - a derivative is merely a bet. And it can be a
bet on absolutely anything: interest rates, exchange rates, stocks,
commodities - even the weather. For instance, you could bet on the
number of tornadoes that will hit Kansas in 2007. Find a counter-party
who's willing to wager against you - and you'll have created a
derivative. And to make the bet you often only have to put down a
fraction of the amount. For example, if you wanted to bet a million
dollars on tornadoes in Kansas you may only need to put down $10,000 -
just one one-hundredth of the value.
This is where derivatives can become very dangerous. Derivatives are
mostly used to hedge against risk. But they are also used to make
highly leveraged and highly dangerous bets.
For instance, a single bet made by one rogue trader in 1995 brought
down the proud 223-year old Barings Investment Bank. This age-old
institution helped finance the rise of the Great British Empire in the
19th Century. And an unmonitored 27-year old hotshot derivatives trader
brought it down with one wild bet.
Even worse - the derivatives trading of a single hedge fund in 1998
almost caused the collapse of the entire global financial system. This
hedge fund - Long-Term Capital Management - was not even known by the
mainstream investor public at the time, yet its private derivatives
bets would've collapsed world markets if the Fed had not organized an
emergency bailout.
"The Next Four Rogue Traders"
And how they could devastate your financial future...
Despite repeated efforts by concerned parties to tame the rank bubble
growing in the derivatives market, Greenspan refuses to let them be
regulated. He claims that they are good for the economy...that they
provide for an efficient, flexible and safer financial system...
But is he telling you the truth?
In an address to the Council of Foreign Relations on November 19, 2002
about derivatives he admitted that there was a "remote possibility"
that they could cause a chain reaction that would culminate in a
financial implosion.
Even more worrisome in a speech he gave to bankers in May 2000 he
admitted that: "The rapid growth and increasing importance of
derivative instruments...has been a particular concern."
Yet even still he has allowed the bubble to grow unchecked.
In 1986 the global derivatives market was just over $1 trillion. Today
that figure has reached a staggering $248 trillion according to the
latest figures from the Bank of International Settlements. What's more
disturbing, is that nearly one third of these "So dominant is Morgan
Chase in the derivatives market that its exposure looks like
typographical errors" Says,
Jim Grant of Jim Grant's Interest Rate Observer
derivatives are concentrated in the hands of just 3 American banks: JP
Morgan Chase, Bank of America and Citigroup. These banks account for a
mind-bending $77.6 trillion of the global derivatives market.
What's more, all these derivatives deals are done behind closed doors
by a few powerful men...men who are dangerously balancing your future
on a complicated portfolio of derivatives bets, the form of which,
nobody knows about. These men have been allowed to freely create
monumental derivatives portfolios without investors and bank depositors
even remotely aware of the mounting tidal wave of risk. Their moves
have gone completely unchecked - and they have no responsibility
whatsoever to report or describe any of their moves to their
shareholders.
One bad move...one unexpected crisis...could blow these banks'
delicately balanced derivatives portfolios off their axis and spin
world markets into an unprecedented collapse.
And because the numbers have gotten so big...and the risks so
high...banks recoil whenever the topic of derivatives is raised...
But soon they may have to talk...
The #1 System-Wide Financial
Risk No One Wants to Talk About
How much of your financial future are you willing to leave in the hands
of these few all-powerful derivatives players? If their past
performances are anything to go by - you can be assured that your best
interests will not be a priority. They've already duped you with
derivatives - by using them to help Enron and other energy and
telecommunication pirates cook their books. What next do they have in
store for you?
The Coming Implosion of the
Largest Casino Economy Ever Created
A chain of events are about to unfold that could set off these
financial time bombs one by one. If you don't act now your retirement
may go up in smoke...
America's big banks are carrying hidden risks that no one has warned
you about. And they're all tied up in these banks' derivatives
portfolios...
The Biggest and Most Dangerous Myth About Derivatives
Like most professional betting games - derivatives have a zero-sum
outcome. There will always be a winner and a loser. The betters put up
their money. And the people who run the casino, bank or brokerage
house, figure out ways to pass on the risk. One of the biggest myths
bout derivatives is that they reduce risk. They do not. They simply
transfer risk to someone else who is willing to bear it. The risks
being taken in the derivatives market are growing greater and greater
each day.
The alchemy of derivatives rests on complicated mathematical models
that predict how markets and derivatives will behave under certain
conditions. The models use past market performance to predict the
future. But they can't account for the unaccountable. Every once in a
while an asteroid strikes or a country blows up...which throws these
delicately-balanced derivatives portfolios off their axis. Trades take
place in electronic neverland and can be entered from anywhere in the
world. And computers are enabling the creation of purer and purer
financial plutonium. And as with nuclear mishaps, there are no small
accidents. Get ready for "The Chernobyl of the Financial World"... an
amount of cash collateral to the counter-party to cover your bet. This
amount depends on the institution's credit rating. If the institution
starts to get into financial difficulties its credit rating will drop,
which means it'll have to supply yet more cash collateral to its
counter-party. This could cause a liquidity crisis, which may lead to a
further downgrade - which could set off a downward spiral. And if one
major bank falls they'll all start to topple like dominoes.
The frightening thing is: this nightmare scenario has already begun.
And in a moment, I'll show you what the world's wealthiest investors
are doing right now toshelter themselves from this coming crash...and
how they're already using this technique to access "forbidden"
investments and opportunities that are already up 209% ...32% ...50%
....55% ...And which promise to soar much higher when the economic house
of cards starts to fall.
The Fall of the House of Morgan
America's banks right now are like a bunch of climbers on a mountain
all tied by a rope. J.P. Morgan Chase is at the top of the rope. If it
falls, the others will start to topple down the mountain with it -
along with the American economy. The end result could be
unprecedented...
Since Chase Manhattan bid $33 billion for JP Morgan in September 2000
the bank has been on a downward spiral. Its basic premise has not
worked. The bank claimed it would provide huge new growth. Thousand's
of Chase's corporate customers were to be pushed into Morgan's arms and
pay big fees for takeover deals and securities issues. But instead of
striking new profits the bank has tapped into a seemingly endless well
of red ink. It's private equity portfolio has shrunk...it's lost
billions of dollars in high profile bad loans to Enron, K-Mart, Global
Crossing, Tyco, Argentina...it's laid off over 10,000 workers...and
closed hundreds of branches...
What's more, Morgan Chase has now become the largest gambler in
economic history. It's derivatives portfolio now sits at a staggering
$43 trillion - that's an amount greater than one and a half times the
size of the entire global economy . And according to the Comptroller of
the Currency the bank has more dollars at risk in derivatives than it
has in capital. It carries a shocking $8 in risk per dollar of capital.
That's more, by orders of magnitude, than any other major bank in the
world. And it's enough to completely wipe out the bank's risk-based
capital. Just a 12.5% loss on its derivative books would be enough to
wipe it out. What's more, that risk keeps rising.
A Brief History of Derivatives
(The Most Dangerous and Controversial Financial Instruments Ever
Created)
The giant bubble forming in the global derivatives market (led by
America's big banks) bears frightening resemblance to the S&L crisis.
In the 1980's a lack of regulation and oversight, allowed America's
banks to trade dishonestly, hide losses and embezzle client and
government funds. The same scenario is unfolding right now amongst the
world's global derivatives traders. America's big banks, big
corporations and mutual funds have turned into giant casinos...using
unregulated over-the-counter and massively leveraged derivative bets as
a new source of income...and as a way to disguise losses and dupe
investors. The difference though to the S&L crisis, is that when the
derivatives bubble finally blows, the fall-out will be 100 times worse.
The S&L crisis cost American taxpayers hundreds of billions of dollars
and depressed the real estate market for years. But no pot will be big
enough to bail out America this time.
1973 The Chicago Board Options Exchange opens...and trading in
large-scale derivatives begins.
1983 President Reagan signed the 1982 Futures Trading Act for
derivatives. This was a major feature in the disastrous Reagan-era
deregulation of the U.S. economy.
1986 The notational value of derivatives balloons to $618 billion...
1987 The failure of the stock markets and the derivatives markets to
operate in sync, causes the collapse of global stock markets (according
to the Presidential Task Force on Market Mechanisms)...and the terrific
force of derivatives is felt for the first time.
1988 The notational value of derivatives hits the $1 trillion mark.
1994 Global derivatives market exceeds $10 trillion mark...and the
first series of major derivatives failures begins. (Metallgesellshaft
loses $1.5 billion on oil futures, Procter & Gamble loses $157 million
by trading derivatives, Orange County, California, publicly
acknowledges a $1.5 billion loss due to its derivatives plays,
bankrupting the county).
1995 Barings Bank goes bust because one rogue trader, Nick Leeson,
loses $1.4 billion with derivatives bets on the Nikki index that were
shattered by the Kobe earthquake.
1995 Wisconsin's $6.7 billion State Investment Board Posts $95 Million
Loss From Unauthorized Use of Derivatives.
1996 Global derivatives market exceeds $10 trillion mark
1997 Under-regulated, derivative-based credit swap contracts causes the
collapse of the Asian markets.
1998 The derivatives trading of a single hedge fund, Long Term Capital
Management, almost causes the collapse of global stock markets. Fed
organizes a $3.5 billion bailout.
2000 Global derivatives positions leaps to over $95 trillion - even as
the stock market crashes and the global economy goes into recession.
2001 Enron (without the public knowing it) had secretly transformed
itself from an energy trader into an unregulated derivatives player,
causing its eventual collapse.
2003 Fannie Mae lost $1.9 billion on its derivatives portfolio causing
its stock to plummet.
2003 Buffet warns investors that the bubble in the derivatives market
is a "mega-catastrophe waiting to happen." His comments send ripples
through global markets.
2005 Global derivatives market exceeds $272 trillion (more than 7 times
the size of the entire global economy).
And now the thing Wall Street most fears has begun.
When the fuse box blows, the lights on the "blazing" U.S. economy will
go black
Standard & Poor has started to lower the giant behemoth's credit
rating. It's long-term rating was downgraded from a Double A Minus to a
Single A Plus. If the bank receives further downgrades it will not only
hurt its ability to compete in all its businesses...but it could set in
motion the very death spiral that so many on Wall
Enron was once thought to be one of America's greatest corporate
stories,yet it duped millions of investors by secretly transforming
itself into a high-flying derivatives trader - a move that eventually
led to its collapse.
Street fear. (In a moment, I'll give you private introductions to 3
global banks who boast triple A credit ratings, and where your money
will be much safer!)
Wall Street's Greatest Fear Unfolds!
Morgan Chase's position has become highly precarious. Its stock price
has been on a steady slide for over a year. Its earnings continue to be
under enormous pressure, and considering the current state of the
American economy, its future does not look bright. America is drowning
under a sea of un-payable debt loads... bankruptcies are
soaring...mortgage repayment delinquencies are reaching all-time
highs...and the national debt continues to soar. It all spells bad news
for J.P. Morgan Chase and America's big banks.
We believe J.P. Morgan's risk profile is greatly understated. And its
consistent refusal to talk to anyone but its large investors about
their derivatives portfolio is disturbing to say the least.
If this giant behemoth comes crashing down, it will bring the entire
economy with it. When LTCM failed, the government had to organize an
emergency bailout - forcing the hands of a consortium of big banks and
investment houses to fork over $3.5 billion dollars to save the
economy. That was just one hedge fund with only a trillion dollars of
derivatives on its books. Morgan Chase is a powerful multinational
institution with $43 trillion on its books. If it were to fall, a chain
of interlocking commitments would break down and major institutions
would start to topple. Widespread panic selling would ensue. And there
would be a run on the banks...and a run on stocks. But most will find
their money trapped in a crashing market and a financial system
splitting at the seams.
Few know it, but if the DOW drops 10% in any one trading day, circuit
breakers will kick in...and markets will close down...just as they did
after September 11. But the problem with circuit breakers is: They may
halt the panic selling but they don't come with an "on" switch to bring
the buyers back. The system will overload and the fuse box will blow.
And no amount of Fed fiddling will bring it back. No pot will be big
enough this time.
Are You Banking at One of These Casinos?
Derivatives were designed to help banks, corporations and countries
hedge against risk. But banks found they could make a killing by
concocting more exotic derivatives that effectively bet on the future
direction of interest rates, foreign exchange, commodities and stock
indexes. And since banks aren't making money from traditional lending
any more, derivatives are a fantastic new way to net huge gains. And
why not take some big risks when the Fed will "supposedly" back you -
and the transactions can stay off the books - far away from the prying
eyes of investors and analysts. As we see it, America's banks have
turned into giant casinos. And now this Giant Casino Economy has begun
to splinter. Are you banking with one of them? RANK
BANK NAME
JPMorgan Chase Bank
Bank Of America
CitiBank
Wachovia Bank
HSBC
Wells Fargo Bank
Bank One
Bank Of New York
State Street Bank & Trust
Fleet National Bank
National City Bank
National City Bank of Indiana
Mellon Bank
Keybank
PNC Bank
Suntrust Bank
LaSalle Bank
Standard Federal Bank
U S Bank
Merrill Lynch Bank
Deutsche Bank Trust Company
Northern Trust Company
First Tennessee Bank
Capital One Bank
Union bank of California
Bank failures occur every year in America. There were over 1,000 bank
failures between the years 1986-1990 during the S&L debacle, which cost
American taxpayers hundreds of billions of dollars and depressed the
real estate market for years. And now considering the self-serving and
dangerous practices Wall Street's banks have begun to engage in - where
would you prefer to bank? In America or in age-old financial havens
who've shown little systemic risk and who haven't experienced a bank
failure in their 200-year old financial history?
And it won't be just your stocks and your bank that will crash. The
whole economy will "The Risk That Won't Go Away"
Cover story on the dangers of derivatives from Fortune Magazine
tumble with it. Everything you own will be at risk. Your house. Your
bonds. Your retirement. Maybe even your job.
The day of reckoning will have finally arrived. America's party will be
over. And the hangover from the unprecedented binge will be long. Very
long.
.
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