Saturday, November 5, 2011

G-Pap spreads diarrhea all of the modern world...

Now G-Pap is dressed in a nice suit and walking through the beautiful sunset for his action shots…he wants us to believe that he will form a consortium - by Monday!...yet his work is more grotesque than that of the lowliest sewage worker. The thing is that I actually respect a sewage worker…he does not pretend to be something he is not…he is really working in the sewer. However, our politician friends work several levels beneath the sewer and pretend that they are sailing on pristine fresh water lakes in 20 knots of wind - at their backs no less. 

G-Pap has spread his venom to Europe and to the US via the incompetent regulators and officials that are supposed to keep us and the fincancial system safe and in order. Even more disturbing is that G-Pap has been afforded this opportunity by even higher level leeches like Ben Bernanke, Alan Greenspan, Robert Rubin and Larry Summers and their assorted cronyists who thought that Trichet and the ECB were actually a good idea and who believe that the only way to fix the problem of spending too much, is by borrowing more and the only way to fix the problem of borrowing too much is to borrow more and spend more. These are not really very complex problems but they have gained their circular logic due to the nature of politics and the surreptitious nature of compensation of officials and cronyists. 

G-Pap has now exported to the US, via the MF Global disaster, the concept that the way to fix too much risk is by granting even more risk and then closing the eyes. All of the big futures exchanges have granted risk waivers of sorts by reducing margin rates to maintenance margin on all futures products supposedly to handle the smooth transition of accounts from MF Global to their new FCM's. Anyone who believes that a harebrained plan like that coming from a regulating body will work as planned is smoking something pretty potent. These same regulators watched as MF Global (and who knows how many others) used their client money to trade…and did nothing for years…but NOW they have an interesting plan and idea and its REALLY going to work. NOT! 

The reality is that when there is blood in the water the sharks will be circling…especially when the prey is wounded and weak. The regulators are weak, MF Global investors are tired and weak and the market and the system as a whole is weak…I think the answer as to who is the hunter and the hunted is easily answered. The regulators have now succeeded in taking one disaster and magnifying it into the beginning of the biggest capitulating global liquidity crisis in history. 

If regulators wanted to deal with this issue, they could have granted specific credits or options on futures/buying power to MF Global customers not all of wall street. Publishing that the MF Global situation was such a debacle that they are willing to change policy and risk protocol dramatically is rife with its own unforeseen risks. Those risks are going to be watched VERY closely by the sharks quietly circling the pending disasters. What’s more is that anyone trapped does is only getting what they deserve, there have been plenty of warnings. Capitulation of the prey and of the regulators by the great white market sharks should not be far off.

The reality is that the government has now once again demonstrated that its answers to problems of over leverage and risk taking are more risk and more leverage. As we know the problem of being pregnant can not be solved by being more pregnant - so the problems of MF Global and the European system can not be solved with such a circular and catatonic approach any better.

Regulators and investors subscribing to this perspective are committing suicide and their demise will be brutal and swift.

Liquidity crunch is on - deception continues everywhere but in the charts...

G-Papsmear is lying his butt off…chaning his story and his government and some magically he is going to have a consortium by Monday AM…I think not. Additionally, the liquidity crisis continues to accelerate and the shortage of dollars is more and more evident in the charts as of friday…I will post more details later today.

Friday, November 4, 2011

Some charts to consider...

Bearish candlesticks closed the day and we have these charts…

MF Global…Goldman Tax and JPM...

There is no practical way that the regulators could NOT have known about the endemic fraud at MF Global…what were the regulators doing sleeping with the enemy? The next question is what’s going on with JPM and Goldman Tax, BAC and Wells etc…all of whom own sovereign derived positions at much higher leverage than MF but do not mark the positions accurately because its part of being a bank to supposedly hold to maturity and commit accounting fraud! I guess this is why the banks on this list are able to fake their earnings with loan loss reserve write ups…

Are the regulators going to wake up and be similarly surprised when these institutions implode? JPM is a disaster and Goldman is worse which is hard to believe…BAC is simply a criminal enterprise and Wells bought Wacovia…how they could be faring much better than BAC would be remarkable.

MF Global was a shot accross the bow…the banking system as well as many more investment firms will be next on the block…

Meanwhile, Bill Black does have quite a few reasonable things to say…I do not agree that government is the solution but I definately think that people should NEVER be paid to do nothing…its bad for their skill sets and its bad for morale and moreover its bad for the country. As for the CEO’s of all the above firms and quite a few more who believe they can pretend to be great financiers and market participants…they should likely all be in JAIL.

Wednesday, November 2, 2011

Paul Krugman = 0 versus Niall Ferguson = 10

Krugman is not worth the pixels used to render his blog on the

How MF Global kicked off a Global Bank/Financial System Run...

Apparently everyone is sleeping…and the MF Global event is not a big deal…right? The reality is that though Charlie Gasparino seems to HATE John Corizine…he seems to think that the MF blow up was not a systemic event. Charlie Gasparino, I have found, is not nearly as insightful or smart as I one thought he was…He however, is much more arrogant and misguided than I thought he was capable of being…I guess that happens when you sign up at Fox.

In any case, the theory goes that MF and its challenges are not a problem for the system…I believe that the MF and Bear Stearns parallels are too close for comfort. The cases are essentially identical. Both events occured for very similar reasons and both are trigger events for crisis intensification - and this while Ben Bernanke talks calmly about all the things the Fed has done right and with distinction…So, this is the subject of this post. MF, like Bear over leveraged its book and used desperate measures to try to prop the whole game up. MF assumed it could use credit and other people's assets to hold up their dealings…with at least 700 million (probably more…the numbers will likely keep getting bigger) that was not theirs.

However, there is one thing that is absolutely endemic on Wall Street…people at both firms could get paid a lot of money to taking outsized risks with money that was not their own - and those people did just that. The whole problem with the accounting control fraud on wall street and the financial systems stems from people feeling like they have a right to money and purchasing power that is not really theirs and that its their right to use it to drive their compensation schemes. This is why I do not believe that money managers should be paid for anything but making you money…why pay a management fee? Pay only performance…that approach is much more constructive and does not reward mediocrity…which clearly John Corizine and his kind are striving and succeeding to be.

However, people WANT to believe that things are ok…but they secretly know its not. When you tell people who have been trying to put their head in th sand that they can not have access to their money and at the same time asset prices are collapsing around them…they get very very anxious. The people putting their heads in the sand tend to be people who want the system to keep working the way that it has in the past. They want to make money believing in dollars weaken, credit is cheap, leverage is good and assets increase in value. They usually also get paid handsomely for their pursuits of making money in such a scheme and pass the risks to other participants. This generally follows the axiom of privatizing profits and socializing losses.

So, lets look at MF Global. The main issue here is that improper incentives and complicit plans created an issue where people can now be sure that for certain almost all financial firms are committing accounting fraud and their assets are not truly where people think they are. The reality is that if John Corizine wanted to get his big bonus…the whole deal was not his ambition alone - it was probably engineered by his private share holders cronies and board members incentivising for their own gain to generate new profits to move share prices up. I am quite sure their suggestion was that it would be easier accomplish this objective with prop trades than actually building their business. Why else would anyone risk a perfectly good business in exchange for a far less certain and manageable outcome. Clearly, the board and key shareholders had to create the proper incentive for such an agenda. The interesting thing here is that all of these key people are looking at attempting to benefit from access to the assets of others - a classic credit money technique.

The result at this point of all this compensation incentivized risk taking, however, is that the largest liquidity squeeze and bank run in history has likely begun. BAC clearly does not have your money safe, neither does JPM or Goldman Sachs or now many non-bank financial entities like MF Global are proven to be highly duplicitous and untrustworthy. As I said before there are a lot of roaches…and we will need the cans of DDT.

The NFA sent out the following email, requesting disclosures to be made to pool participants that clearly indicate they many not be receiving their anticipated capital in amount or time from MF Global…clearly there are no guarantees…and the key is to get safe.

If you are a Member operating a pool that has pool funds held at MF Global, you must make the following disclosures:
  • On October 31, 2011, MF Global reported to the SEC and CFTC possible deficiencies in customer segregated accounts held at the firm. As a result, the SEC and CFTC determined that a SIPC-led bankruptcy proceeding would be the safest and most prudent course of action to protect customer accounts and assets, and SIPC initiated the liquidation of MF Global under the Securities Investor Protection Act.
  • As of (insert date) approximately $XXX of (Name of Pool)'s assets were on deposit in an account(s) at MF Global. These assets represent XX% of the (Name of Pool)'s net asset value of $XXX.
  • The General Partner does/does not believe that these actions will have a material impact upon the operations of (Name of Pool) and its ability to:
  • Satisfy redemptions requests;
  • Adequately value redemption requests and the manner in which they will be handled;
  • Accept new subscriptions in (Name of Pool) and properly value the net asset value for new subscribers; and
  • Provide for accurate valuation in the (Name of Pool)'s account statements provided to participants.
  • Participants are cautioned that there can be no assurances:
  • That (Name of Pool) will have immediate access to any or all of its assets in accounts held at MF Global; and
  • As to the amount or value of those assets in the context of the bankruptcy.
  • Participants should also be aware that future actions involving MF Global may impact (Name of Pool)'s ability to value the portion of its assets held at MF Global and/or delay the payment of a participant's pro-rata share of such assets upon redemption.
Read it as one may…this is not good and we must keep in mind that we may soon be getting these types of disclosures from the FDIC and other supposed government insurance schemes that encourage complacency that are endemic to a vast credit money ponzi scheme.

What we need to be prepared for is this HUGE margin call starting to playout emminently…and that means now, as in the next few weeks. This will mean, banks and financial institutions that even have a whiff of accounting fraud and undercapitlization are going down. Gettting money out of one of these firms is going to be a very frustrating process as it currently is for MF Global customers. As the run continues people will be forced to sell everything not glued down to get their cash needs met. And that my friends means GOLD and SILVER too.

The irony is that the source of the MF Global is the same source as our 2008 debacle and the various scams that have been perpetrated by politicians, wall street and regulators for the last years. Its a disease, a sickness that no one believes they have - especially Paul Krugman. Its a fraudulent currency that is source. Its the reason that there is no other process in our system other than involuntary wealth transfer…when people participate in the leeching behavior what we get are the symptoms of the disease. MF Global is just a symptom and not a cause. When you put raw meat in front of a wild animal expecting it not to eat is quite ridiculous. Our illustrious leaders have put the essence of valueless money creation and money amplification in front of wild financial provocateurs - we should expect them to eat at the trough we created. If we want to get rid of the symptoms we need to get rid of the disease. Often the end of a disease occurs with the capitulation of its host. That appears to be the path of this disease. We need to teach our children and culture what money is and how to respect it - until we do that we will continue down the same path and these disastrous symptoms will be all too prevalent.

On another note, becuase I view the MF Global breach as the trigger of the unwinding of a systemic liquidity problem in the financial system, I took quite a large withdrawal from my bank accounts today so I can be holding cash that I know I can get when I need it…it may seem extreme…but since when is being safe extreme. Currently, I look at having my money in a bank with less than 1% reserves and covered by FDIC insurance that can  pay me back anytime up to 99 years from now as much more extreme.

S&P500 Analysis...

Monday, October 31, 2011

Bob Januah Says it like it is...

This latest bailout relies on the market not calling what I see is a huge „bluff‟, because if the market does call it, the bailout simply won‟t be credible or even deliverable. It is instead akin to a self-referencing ponzi scheme, and I can‟t believe eurozone policymakers have even considered going down this route. After all, we all have recent experience of how such ponzi schemes end, and we all remember how eurozone officials often belittled and berated US policymakers for their role in the US housing/CDO/SIV financial bubble. - Bob Januah
He thinks the S&P could go as low as 700…That is to be seen…though I see no reasonable possibility that is could not do so in short order. Additionally, I expect that the S&P could go well south of that if the liquidity crisis expands as it seems likely.

MF Global…not so MF but quite global...

I did not really comment on this last week. However the amount of BS being propagated on the media and street about them is just ridiculous. The reality is that Bear Stearns also blew up because of what is really  proprietary trade gone wrong…all the big firms have essentially a ponzi financed prop trade that is short the dollar and attempting to capitalize on asset price inflation. MF was no exception and the reality is that you can see how the leveraged positions short dollars and long assets will end up turning out for the banks and large firms in general. Now, if MF were the only story we might skip it…but when Bear blew up its book…there were quite a few others on the verge of doing so at the same time…how the saying goes is that where there is one roach there are probably a lot more…well get your roach repellent out TODAY…we are going to need it…the contagion is spreading from Europe to everywhere.

ANYONE who has their trades cleared through MF Global either directly or indirectly has been unable to trade today. So, any trader who only trades there is just sitting there watching the market move…what a disaster. My best wishes go out to everyone who trades through them…maybe now people will better understand why I will NOT trade via Goldman and did not choose MF Global either but rather Interactive Brokers. I have to say for the record that I feel like IB is the best shop on the street and one of the most conservatively managed too.
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