Glencore Mirrors The Entire Global Financial And Economic System

  • Collapsing fundamental economics
  • Plunging end-user demand for its products
  • Overloaded with debt
  • Hidden land-mines in the form of OTC derivatives

Who said “black swans” have to be hidden?   Glencore is in full view.  After a dead-cat bounce from a quick descent that took Glencore stock from 310 (pounds) to 68 in 5 1/2 months, the stock is rolling over again and headed lower:


This isn’t just about the plunging price of copper, which is now back to its pre-financial system collapse price in 2008 and headed lower. Copper is responsible for generating only 36% of Glencore’s operating income.  This is about the plunging prices and demand for oil and all base metals.

It’s about a company (global financial system) that hides a lot of risk, debt, derivatives, corruption and fraud.  Point of example:  Glencore’s funded debt level is $50 billion and it has the capability to draw on credit lines that would take it up to $100 billion.  But the sleazebag snakeoil promoters cite Glencore as having $19 billion in “liquid” inventories so the debt number that gets quoted and widely accepted is $31 billion.   But it’s not.  It’s $50 billion.  And Glencore’s “liquid” inventory is the same base metals that are plunging in price from oversupply and lack of demand.

Furthermore, over 30% of Glencore’s EBIT is derived from what the Company lables as its “marketing” business.  But this is the legacy business that was originally Marc Rich’s commodities trading company.   It’s a corrupted commodities trading and brokerage business. That means it’s riddled with hidden counter-party risks and derivatives.  We don’t know the full extent of Glencore’s risk-exposure in this area because this an area that global financial regulators give financial firms a lot of breathing room with which to cover up the truth using insidious accounting schemes.  But what I do know for sure is that you can rip and toss out any of the research reports indicating the Glencore’s derivatives exposure is limited to $5.2 billion.   The real number is multiples of that.

With 50 billion (pounds) in funded debt and not including hidden off-balance sheet skeletons – Glencore’s debt to market capitalization (13 billion pounds) is nearly 4:1.  That is an extreme degree of leverage for a volatile, commodities-based business which is headed into an economic depression.

Glencore is a microcosm for the entire global economic and financial system.  Including and especially the United States.  And here’s the kicker.  Deutsche Bank is Glencore’s largest creditor.  We can also very safely assume that Deutsche and Glencore are counterparties to a vast web of derivatives contracts.   I’m sure Deutsche has also tried to off-load credit exposure thru the use of credit default swaps with hedge funds and other shadow banking participants.  But who are those counterparties and how is the risk of default on this “insurance” Deutsche has likely “purchased.?”  Glencore has the possibility of taking down Deutsche Bank, which in turn would take down the entire German system.

The rest will flow from there and there will be a lot of blood, including and especially in the United States.

Just like with Glencore, the true degree of ongoing economic collapse and financial risk exposure has been papered over with both QE and more debt issuance.  It won’t take much trigger a financial nuclear explosion.

I would suggest that this is why the Central Banks and the relateve propaganda machine have shifted into full-gear in their effort to prevent the price of gold from engaging in unfettered price discovery.  I would also suggest that this is why the U.S. conducted a highly visible Trident nuclear missile test along the west coast, in full view of Russia and China.

15 thoughts on “Glencore Mirrors The Entire Global Financial And Economic System

  1. I was in Houston last week and made a trip to Galveston
    with a buddy of mine. His condo faces into the Gulf of
    Mexico. I noticed at night there were lights connecting
    like an expansion bridge out into the Gulf. When I asked
    if there was a new bridge recently built other people in
    the room (locals) laughed. That’s not a bridge you see
    out there, those are oil tankers and it’s been like that for
    the last three months.

  2. Another outstanding article Dave my compliments!
    You really expose the idiots in plain english.
    Maybee they will have their hands full of problems with propping up Glencore and Deutsche Namk so there will be no resources left to prop up the rest of the bankrupt companies so all will crash.
    After this happens I hope there will be an individual like the main charachter in the movie “Assault on Wall Street” that knows how to deal with bankster scum.

  3. this is such a gargantuan beast that even repeated head shots won’t
    kill it. Global manipulation gives the perps a lot of lives. I keep hoping
    that someone will come along with a silver bullet to the heart and
    finally put an end to this madness.

  4. I hope this time they won’t be able to paper over that Glencore crap. If you look at the price action today in gold you can smell the reek of desperation on WallSt. Can’t wait for the next chapter in this charade.

  5. Seems obvious something big is happening now behind the scenes that
    will shock and rock the global house of cards to it’s core. The unrelenting
    day after day pressure on the price of gold is a sure indicator of that. It may
    be we don’t even get to the new year before the scum behind the corruption
    lose control and then all hell breaks loose and the greatest depression ever
    follows. Scary times indeed and the sheeple haven’t a clue.

  6. Deutsche Bank is also a big creditor to Volkwagen.

    I also think Glencore/DB was papered over by the central banks i mid-September.

  7. Bin der dun dat!

    The dress rehearsal for what is about to occur, happened 17 years ago September 1998.
    With the failure of (LTCM) Long-Term Capital Management, kicking off the (TBTF) too-big-to-fail mime. They were heavy into a little known thing of off-balance sheet agreements, whose value “derives” from that of the underlying assets – derivatives.

    Then a monkey wrench was thrown into the works – Russia defaulted on it’s debt.
    All of LTCM’s bets went sour and they had to be rescued. Lesson learned? No way!

    And the band plays on. The amount of derivatives that LTCM had on it’s off-balance sheet, was ‘piddling’ compared to what is now floating around. Back then it was Russia. Could one of the western countries or regions (EU) be next? Or how about the US having a deja vu moment?

    The really funny thing? Most everyone will be very surprised by the event saying; “Wow! Who could have seen that coming?”

  8. Trusting Banks’ Own Capital Models Can Be Dangerous

    I am very pleased that Basel Committee Chairman Stevan Ingves announced recently the committee will propose new limits on banks’ discretion to use internal models to assess capital strength.

    As I have written extensively, large banks — typically with more than $250 billion in assets — are allowed by national regulators to create opaque credit, market and operational risk models that hide assumptions and inputs from most people at the bank, not to mention market participants. The success of these models is critical in determining the right amount of regulatory capital to sustain losses.

    Risk modeling as a concept for measuring banking capital has serious problems at its core.

    In an excellent paper, “Math Gone Mad,” Durham University professor Kevin Dowd criticized the Federal Reserve’s use of modeling in stress tests. He argues that models developed from within a group become irrational. “Most risk models, regulatory risk models, in particular, are textbook examples of the ritualistic fetishes associated with primitive tribes,” he wrote. “A fetish can be described as irrational attachment to an object — in this case, a risk model — regardless of its true usefulness. This is to treat the models as if they were ritual implements with magical properties and is the very essence of superstition.”

    The quality of big bank systems continues to be a significant problem. This tends to happen after multiple mergers and acquisitions, which brings together people from different corporate cultures, who exhibit playground behavior of hoarding information and not sharing it with other relevant groups inside the bank. This silo mentality is detrimental to creating a good and relevant model. Sometimes the problem with weak systems actually comes from management, such as in Deutsche Bank, which had a strategy of pitting people against each other and created an information system infrastructure that would make Kafka proud.

    In recent Basel Committee and private sector surveys, 50% of globally systemically important banks say that they cannot rely on their systems to give them a relevant view of their total risks, particularly in a period of stress. The other 50% need another two to three years to comply with the Basel Committee’s risk data aggregation principles, which become effective in January. If internal auditors and bank examiners cannot trust banks’ data, it is not possible for anyone to trust banks’ risk models to tell the market and regulators whether a bank is well-capitalized.

  9. Dave,
    I am impressed with your sophisticated and in-depth research, and grateful that you share it. I also enjoy your street wise, wise crackin’ commentary. Thanks for keeping us informed of what the “sleaze bag snake oil promoters” are frackin’ us with.

  10. Xi on BRICS: “Pure gold fears no fire” November 16, 2015

    Chinese President X Jinping in a meeting with his BRICS counterparts said the five countries need to upgrade their economic structures for long-term development.

    “China stands ready to share development opportunities with other BRICS countries and lift our economic cooperation,” he said at a BRICS leaders’ meeting held in the Turkish resort city of Antalya on the sidelines of a Group of 20 (G20) summit.

    “Pure gold fears no fire,” Xi stressed. “As long as we hold firm confidence and strengthen coordination, the BRICS countries will surely sail through winds and waves.”

    The leader of the world’s second largest economy met Presidents of Brazil, Russia, South Africa, Dilma Rousseff, Vladimir Putin, Jacob Zuma and the Indian Prime Minister Narendra Modi ahead of the G20 Summit.

    Xi also warned that the BRICS are facing increasing complexities and difficulties and experiencing slower growth.

    symbolism? is that fire as in finance, insurance, real estate economy?

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