By: banshee on Venerdì 20 Dicembre 2002 11:33
Un approfondimento della questione Blanchard vs JPM e Barrick.......
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BLANCHARD SUIT-The whole issue of a conspiracy to either drive gold down in recent years or to keep it from rebounding as quickly as it otherwise might just took on an entirely new complexion. Yesterday, the big New Orleans-based precious metals dealer Blanchard and Company filed a $2 billion antitrust-based suit against J.P. Morgan Chase and Barrick Gold (NYSE-ABX) accusing them, among other things, of "unlawfully combining to actively manipulate the price of gold" and making $2 billion in short-selling profits by suppressing the price of gold at the expense of individual investors.
Some of you remember that the Gold Anti-Trust Action Group (G.A.T.A.) had a somewhat similar suit dismissed earlier this year in U.S. District Court in Boston. However, when the judge dismissed G.A.T.A.'s action, it was chiefly, he wrote at the time, on the grounds that G.A.T.A. did not have standing to sue. Since the organization itself could not prove that it had been damaged by the antics of the "gold conspiracy," it had no claim that could be acted on. The judge said, though, that he might be more amenable to considering a claim if it were brought by one or more parties who could prove that they were indeed damaged.
Who better than Blanchard? This company has thousands upon thousands of customers who have bought gold in recent years. There could very well be a veritable parade of people brought into court who can claim they lost money by buying gold through Blanchard (or anyone else, for that matter.)
While it was important for someone to pick up G.A.T.A.'s torch who could demonstrate they have standing, there is another big difference in the Blanchard suit. When G.A.T.A. filed its action, it named everyone and his brother as defendants; the U.S. Treasury, the Fed, the International Monetary Fund, the Bank of International Settlements and many more. Blanchard's suit, by contrast, does not seek to so flamboyantly go after every single party allegedly involved in various aspects of the now-defunct gold carry trade game. Instead, it has narrowed its targets to the two players who, arguably, are going to be most easily proven guilty.
Barrick, as most of you already know, was the king of the hedgers among major gold producers. And it has primarily been J.P. Morgan Chase which has served as Barrick's enabler, allowing the mining giant to construct elaborate hedges that-until recently-benefited Barrick greatly. The trouble is that, at the same time, these hedging practices have endangered the very health of the venerable House of Morgan, who, according to most observers, will be left holding the bag if and when Barrick (which has conspicuously warned of late of production and earnings troubles) defaults on its obligations. And, these practices have served as one of the chief means of artificially driving down gold's price.
"Since the end of 1987," according to Blanchard C.E.O. Donald Doyle, Jr., "when the collaboration between Barrick and J.P. Morgan began, the growth of global income and wealth would have lifted the gold price to approximately $740 if the price had been able to respond to the normal laws of supply and demand. If gold had kept pace with inflation, the price today would be approximately $760."
The lawsuit, according to a Reuters release, claims that in the past five years Barrick and J.P. Morgan Chase injected millions of additional ounces of gold into the market - additions that were several times as great as the annual production of every gold mine in South Africa, the largest gold producing nation in the world. By using privately negotiated derivative contracts and concealing the addition of billions of dollars worth of (physical) gold with off-balance sheet accounting, Barrick was able to make it virtually impossible for gold analysts and investors to determine the size and the market impact of its trading positions.
"The same type of accounting maze that hid Enron's debts made it possible for Barrick to manipulate the price of gold without the checks and balances that come from public scrutiny. As a percentage of Barrick's total assets, its off-balance sheet assets make Enron look like a champion of full disclosure," quipped Doyle. "Is Barrick a gold mining company, or is it a hedge fund with a mine out back?"
The suit (continuing with Reuters' characterization) alleges that J.P. Morgan Chase financed Barrick's repeated short selling with remarkably advantageous terms not available to others, including deferred repayments and no margin calls. Doyle said the short-sales scheme between the bank and Barrick appears to be the proverbial "money for nothing."
While the G.A.T.A. suit never had much of a chance, this one should prove different; and the progress of it will be most interesting to watch. Blanchard reports that it is in the process of setting up a web site that will allow those interested to follow the suit's progress: the site is www.savegold.com.