Why the LIBOR-rigging scandal is so important

I’ve got a trade I’m going to put into the portfolio this week based in part on the idea that the banksters are finally about to get some justice.

You’ve no doubt read about the LIBOR rigging scandal. You’ve probably seen a lot of pundits and commentators try to brush it all aside like just another in a long litany of “well, the banks are screwing us all, but we can’t risk the system” offenses. But, I’m thinking this deal is already hitting the banks in ways that nobody is realizing yet. And it’s likely to become even more of a catalyst for more loss recognition at every bank that’s playing in derivatives.

So let’s connect some dots here. There’s $800 trillion in derivative bets out there based on LIBOR. JPM bet hundreds of billions of the bank’s “excess funds” on corporate debt trends, which are based on LIBOR, using derivatives. Just as the LIBOR scandal comes to light, JPM suddenly has to take $2 billion, $4.4 billion, then $5.8 billion in total “recognized” losses on those bets.

Do you think that’s all a coincidence in timing? Or are these banks truly ticking time bombs of endless fraud, stamped by regulators but still clearly criminal whenever it’s brought to light?

And even the mainstream media are starting to explain how everything that JP Morgan and every other major bank is reporting are creative at best and more likely totally fictional.

And now there’s even mainstream media talk that the crimes committed in this LIBOR rigging scandal are so varied and vulgar and excessive that some executives might finally get charged with crimes.

A couple years ago before I quit TV, I got into a debate with my old pal, Neil Cavuto, because I wouldn’t let him get away with calling Jamie Dimon a capitalist. I explained that Jamie Dimon’s bank was insolvent and living on taxpayer largesse with trillions in hidden life support from the government and how it was all a lie that JP Morgan “was forced to take the TARP bailout money”. He truly couldn’t believe what I was saying. I bet he’s starting to now.

Long-time readers know I’ve been waiting patiently for the right timing to start betting big against the banks. I think shorting the financials right here right now is probably a terrific bet and at worse an excellent hedge to whenever the endless financial crises that these banks created finally comes home to roost.