The House Edge: A Shuffle of Aluminum, but to Banks, Pure Gold

The story of how this works begins in 27 industrial warehouses in the Detroit area where a Goldman subsidiary stores customers’ aluminum. Each day, a fleet of trucks shuffles 1,500-pound bars of the metal among the warehouses. Two or three times a day, sometimes more, the drivers make the same circuits. They load in one warehouse. They unload in another. And then they do it again.

This industrial dance has been choreographed by Goldman to exploit pricing regulations set up by an overseas commodities exchange, an investigation by The New York Times has found. The back–and-forth lengthens the storage time. And that adds many millions a year to the coffers of Goldman, which owns the warehouses and charges rent to store the metal. It also increases prices paid by manufacturers and consumers across the country.

Tyler Clay, a forklift driver who worked at the Goldman warehouses until early this year, called the process “a merry-go-round of metal.”

Only a tenth of a cent or so of an aluminum can’s purchase price can be traced back to the strategy. But multiply that amount by the 90 billion aluminum cans consumed in the United States each year — and add the tons of aluminum used in things like cars, electronics and house siding — and the efforts by Goldman and other financial players has cost American consumers more than $5 billion over the last three years, say former industry executives, analysts and consultants.

The inflated aluminum pricing is just one way that Wall Street is flexing its financial muscle and capitalizing on loosened federal regulations to sway a variety of commodities markets, according to financial records, regulatory documents and interviews with people involved in the activities.

The maneuvering in markets for oil, wheat, cotton, coffee and more have brought billions in profits to investment banks like Goldman, JPMorgan Chase and Morgan Stanley, while forcing consumers to pay more every time they fill up a gas tank, flick on a light switch, open a beer or buy a cellphone. In the last year, federal authorities have accused three banks, including JPMorgan, of rigging electricity prices, and last week JPMorgan was trying to reach a settlement that could cost it $500 million.

Using special exemptions granted by the Federal Reserve Bank and relaxed regulations approved by Congress, the banks have bought huge swaths of infrastructure used to store commodities and deliver them to consumers — from pipelines and refineries in Oklahoma, Louisiana and Texas; to fleets of more than 100 double-hulled oil tankers at sea around the globe; to compa-nies that control operations at major ports like Oakland, Calif., and Seattle.

In the case of aluminum, Goldman bought Metro International Trade Services, one of the country’s biggest storers of the metal. More than a quarter of the supply of aluminum available on the market is kept in the company’s Detroit-area warehouses.

Before Goldman bought Metro International three years ago, warehouse customers used to wait an average of six weeks for their purchases to be located, retrieved by forklift and delivered to factories. But now that Goldman owns the company, the wait has grown more than 20-fold — to more than 16 months, according to industry records.

Longer waits might be written off as an aggravation, but they also make aluminum more expensive nearly everywhere in the country because of the arcane formula used to determine the cost of the metal on the spot market. The delays are so acute that Coca-Cola and many other manufacturers avoid buying aluminum stored here. Nonetheless, they still pay the higher price.

Goldman Sachs says it complies with all industry standards, which are set by the London Metal Exchange, and there is no suggestion that these activities violate any laws or regulations. Metro International, which declined to comment for this article, in the past has attributed the delays to logistical problems, including a shortage of trucks and forklift drivers, and the administrative complications of tracking so much metal. But interviews with several current and former Metro employees, as well as someone with direct knowledge of the company’s business plan, suggest the longer waiting times are part of the company’s strategy and help Goldman increase its profits from the warehouses.

Gretchen Morgenson contributed reporting from New York. Alain Delaquérière contributed research from New York.

This article has been revised to reflect the following correction:

Correction: July 20, 2013

A previous version of this article misstated one of the financial institutions that received approval to buy up to 80 percent of the copper available on the market. It is BlackRock, not the Blackstone Group.

'Amityville' house back on market, blood not included

Just in time for Halloween, the owners of the home made famous in the spooky 1970s film "The Amityville Horror" are dramatically slashing the asking price on their Toms River, New Jersey, colonial, which was used for exteriors in the film. The decision wasn't triggered by demonic activity, however. Apparently, another frightening "D" word was to blame.

"My husband and I are getting a divorce," said Odalys Fragoso, who bought the house with her husband Jose Fragoso in 2001. "It's not that the house is haunted or anything. We had wonderful times in that house."...

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Summer Solstice Ghost Hunt at Guys Cliffe House

Come and join us at the Summer Solstice ghost hunt at one of the UK’s most active locations.

In a hidden part of Warwickshire atop a natural sandstone ridge sits this forgotten property. Linked to the legend of Guy of Warwick this long hallowed site has offered occupancy firstly within caves, then in the shelter of the chapel and finally within the great homes that arose to overshadow the surrounding landscape.  This is a many layered place that encapsulates a heady mix of pagan beginnings amid the oratory and hermitage, it has connections to the slave trade and also served as an hospital in the Great War and boys home during World War Two. Here too the stone walls have absorbed the high dramas of life upstairs and downstairs. Is it any wonder that the serenity found here is just an illusion? Abandonment, auctionary vandalism and fire finally took the grandeur away, leaving us this vacant and part-ruined house and its long companionship with the old chapel. Quiet now, but perhaps only a reality away from those that still walk here? Those that walk alone..

NEW pay 50% deposit by cheque and pay the balance four weeks prior to the event.

LOCATION SHOTS

The Amityville Horror Haunted House For Sale

Those who were fans of 1979 shocker, “The Amityville Horror” can now get pretty close to the cultural phenomena: by owning the New Jersey house where the movie was filmed. That is, if they have a couple million lying around.

The NBC “Today” show recently interviewed the owners of the home, who are putting it up for sale. No, spooks haven’t chased them out. In fact, they describe it as a nice center-Colonial with a waterfront view, rather than an otherworldly portal with a gateway to hell in the basement. The home was the filming location for “The Amityville Horror,” and the owners describe it as a nice four-bedroom, with a pool. Asking price: just more than $1.3 million.

“It is not haunted,” said owner Odalys Fragoso, who also said she regularly has been asked about seeing flies or hearing voices imploring her to “Get out!” She also showed the “Today” crew how she has a home-theater in the basement, where the host was treated to a showing of the 1979 original.

It’s important to consider that the home in New Jersey is merely the Hollywood set for the 1979 film. The actual home exists, in – yes – Amityville, N.Y. If the past few owners of that home have been any indication, the only thing haunting the Amityville house has been curiosity-seekers, be it ones who merely drive by to those who go so far as to ring the doorbell.

The saga of the Amityville Horror is long and storied. In 1975 George and Kathleen Lutz moved into the Long-Island home with their children. Within a month they fled, claiming the home was haunted and that evil forces pushed them out. Their story became the basis of the 1977 Jay Anson book, “The Amityville Horror,” published with the declaration, “A True Story” in the title. Based on the book’s striking success, it was made into the 1979 film, starring James Brolin and Margot Kidder. The Lutzes’ claims immediately inspired controversy, with many researchers pointing out inconsistencies in their account of their time in the house. Perhaps the biggest blow came when attorney William Weber went on record – giving subsequent interviews – that he and the Lutzes’ concocted the haunting story one evening over many bottles of wine. The Lutzes strenuously objected, going so far as to sue Weber. But, the silver-tongued lawyer stood by his account of events.

Weber’s involvement with the Lutzes stemmed from his job as the attorney for Ronald DeFeo, Jr., who lived in the house with his parents and siblings in 1974. DeFeo, Jr., was convicted of shooting to death his mother, father, two brothers and two sisters. Currently serving a life sentence, DeFeo, Jr., was described by associates as a deeply troubled young man, so much so that news of his heinous crime did not shock them or even seem out of character. Weber went for an insanity defense, and reportedly collaborated with the Lutzes because their claims would call the murders further into doubt. Weber and the Lutzes supposedly were inspired to their wild tale be the recent success of the 1973 film “The Exorcist,” which is among the most successful movies ever made.

Enthusiasts of the Amityville Horror story (which has spawned several books and movies, including a poorly received 2005 remake), have often pointed to the most bizarre aspect of the DeFeo, Jr., case: That all the victims of the murder were shot lying face-down in their beds, with no signs of sedatives in their systems. Investigators find that bit of evidence incongruous, given how strikingly loud the shotgun report would have echoed throughout the house.