Glencore, Metal Derivatives, Conspiracies & The End Game

Those looking for the signs of the End Game in metal manipulation need to look no further than the headlines of the past few weeks: Glencore and Trafigura are at the HEART of the commodity manipulation for over 40 years and they are now on their knees just waiting for the Kill Shot.
This is the End of an Era…but you need to know why these companies are so important so here’s the full story…
It’s all in their history!!

By Bix Weir, Road to Roota

Remember Marc Rich? Many know him as the rich donor that Bill Clinton pardoned in his final act as President on January 20, 1999. That’s pretty much all your “Average Joe” knows. If you want to know the real Marc Rich read the book “Metal Men” by A. Craig Copetas and you will get a better understanding of this unique individual.

Marc Rich was born Marcell David Reich but changed his name to present himself as more Anglo-American and less of the poor Jewish immigrant that fled from Germany…he claimed it would be better for business. This name change wasn’t the only facade he would portray over the years.

Marc Rich was by far the most successful physical commodity trader in the world from the early 1970’s until the day he died in Switzerland in June 2013. There is no disputing that fact. But during that time he and the small group of traders that he trained racked up a laundry list of crimes around the world that would make Al Capone blush. In 1983 he was indicted on 65 criminal counts including racketeering, money laundering, tax evasion and trading with Iran during the US hostage crisis. Facing charges that would have amounted to over 300 years in prison he fled to Switzerland where he ran his global operations for another 18 years until Bill Clinton mysteriously pardoned him and his colleagues in 2001 for reasons unknown to the public.

The true story – the conspiracy story – is that Marc Rich controlled the backbone of the commodity rigging operations run by a group I have come to call the “Bad Guys.” As large financial institutions and central banks ran the computer controlled price rigging operations, Rich and his traders were hired, as needed, to control the physical side of these covert operations.

Here’s a short list of the Crimes and Conspiracies he played a key part of: hired by Henry Kissinger and the Israeli Mossad in the 1970’s to help rig the oil markets in order to set up Petro-Dollar; hired by George Bush Sr. as part of “Project Hammer” to economically destroy the Soviet Union; hired by Bill Clinton in the 1990’s to rig the gold and silver markets for the “Strong Dollar Policy” in exchange for the pardons of himself and Pincus Green(Rich’s right hand man) also exonerating his accomplices Ivan Glasenberg (now CEO of Glencore) and Claude Dauphin (Majority owner and Chairman of Trafigura who just suspiciously DIED on September 30, 2015).

Although it is still unknown to the public to what extent he played, Marc Rich was knee deep in the Bernie Madoff scandal which was much, much more extensive than the mainstream media portrayal of it as a $65B Ponzi Scheme run by a single person. The Madoff con was how the “Bad Guys” got paid via market rigging programs run out of the secretive 17th floor below the Madoff Investment Securities offices located on floors 18 & 19 of the “Lipstick Building” on 3rd Avenue, NYC. Marc Rich and friends controlled the commodity side of that operation.

If above information isn’t enough to make you feel ill, in the 1990’s then-Rep. Bob Wise, D-W.Va, unearthed evidence in hearings from the early 1990s which showed that while Rich was still a fugitive the U.S. Mint was a large customer buying metal from one of his companies. The US Mint issued at least 21 separate contracts for various types of metal to the company. Also, in 1988, the US Defense Logistics Agency lifted its bar on contracting with Rich’s company while he was still under indictment…so much for being on “America’s 10 Most Wanted” list! There were/are people in the US Treasury and at the US Mint that were kneed deep in this global con game.

So what does all these past misdeeds of Marc Rich have to do with the current situation for commodity investors?

That’s easy…Glencore PLC is headline news these days and is sitting on suspected derivative losses in the billions. The global financial system is on a “Death Watch” and many are likening the ramifications of Glencore imploding as the next “Lehman Moment”.

Let’s put the conspiracy pieces together – Glencore at one time was called Marc Rich & Co and owned and operated by the very same Clinton Pardon recipient, Marc Rich. According to court documents around from the world, Rich hired and trained the most unscrupulous, oops, I mean successful commodity traders alive today. Many in the commodity industry call them “The Rich Boys”. These are NOT business men but covert commodity trading racketeers who have no county, follow no laws and have no allegiance to anyone. These people can be bought by the highest bidder to do the more unsavory deeds in the underbelly of the already shady physical commodity world. Oil out of Iran, Toxic chemical “disposal” off the Ivory Coast, commodity market price rigging for profit and/or “on consignment” – you name it. Glencore is still headed by one of the co-conspirators in the US indictments against Rich’s company, their CEO Ivan Glasenberg.

In the 1990’s Glencore was privately owned by Marc Rich but was split into two companies with the exodus of a few of “The Rich Boys” who start an identical operation called Trafigura. Having the two companies kept the spotlight off the Marc Rich entity but it is not hard to imagine these two management teams worked together to foment their market manipulations and operations. In 2011 Glencore went public and Trafigura was kept private to avoid the scrutiny of the regulators and law enforcement. They not only liked the privacy – they needed it.

For over 40 years Marc Rich’s companies traded, conspired and rigged commodity markets with practical immunity. Setting up each market rigging operation by either holding back physical inventories or flooding the physical markets with product depending where there was money to be made. Although physical commodity trading can be a great way to make money if you control the majority of the inventory, the real money was to be made in leveraged futures and options contracts…especially when you can significantly influence the supply of physical inventories. Knowing the future outcome of every futures or options bet on commodities can be very lucrative.

Fast-forward to today and it is clear that something has gone wrong at Glencore and Trafigura. Their game is no longer working and being massively leveraged commodity derivative players is not a good thing for “The Rich Boys.” Glencore has lost 65% of it’s market cap in less than 3 months with a sudden 29% drop on Monday (9/28/15). Their “reported bank debt” is ballooning at over $30B but when you add in operating lines of credit and letters of credit it is closer to $100B…and revenues are falling off a cliff!

The rating agencies are threatening a downgrade from their investment grade rating unless they sell off assets to reduce their debt load and there are rumors that this downgrade would trigger significant metal collateral calls. The problem is that this forced liquidation goes against any good trader’s Modus Operandi – NEVER SELL AT THE BOTTOM OF A MARKET!…especially if it would blow up your derivative book.

Trafigura is no better off but they are private and less is known about their problems. In January they were estimated to have $20B in debt but with a much weaker cash flow than Glencore. Again, rumors of collateral calls are spreading. But there is something else happening at Trafigura, the founder and largest shareholder(and one of the original Rich Boys), Claude Dauphin, turned up dead on September 30th (the last day of the 3rd Quarter) in Bogota, Columbia. The company said he died after a battle with cancer but he lived in Switzerland and France – not Columbia. Hmmm. I wonder if he really died or just disappeared to the same tropical island that many rich criminals go for their “afterlife”!

Given the wild stock price fluctuation with Glencore and the rampant speculation about the demise of Trafigura I would venture to say that the commodity rigging game that has been so successful for these people for so many years is now coming to a ugly end. Both companies are well versed in the use of leverage to make enormous amounts of money in any rigged market. Since they had never lost at this game in the past, they most likely were leveraged to the hilt when their trusty operations failed them.

So let the collateral calls begin. Make “The Rich Boys” deliver the physical metal they used as collateral to leverage their nefarious deeds as this was always the End Game for those calling for the end of metal price manipulation – Metal Delivery.

Like all financial conspiracies, the ramifications won’t hit the mainstream media until weeks or even months after the damage is done. It was true for Lehman Brothers, Enron, AIG and Madoff Investments…but in the end we will find out the truth and then all my friends at GATA and those traveling with me on “Road to Roota” can finally say…


May the Road you choose be the Right Road.

Bix Weir