Last Thursday, three former Credit Suisse bankers were arrested in London in connection with a fishing fraud aided and abetted by Mozambique government officials and other characters.
Indictments handed down by the United States District Court for the Eastern District of New York charged the bankers and their accomplices with bribery, money laundering, and securities fraud in connection with raising more than $2 billion for three suspect companies, including a tuna fishing business marketed as guaranteed by the government of Mozambique.
The companies, with proceeds from bond sales, allegedly generated cash to pay bribes and kickbacks by overpaying $713 million for equipment they bought from an accomplice.
Corporate investigations and risk consulting firm Kroll says $500 million of the money raised is missing.
More than $50 million was paid to the bankers and their cohorts in the form of kickbacks.
That doesn’t include $200 million in bank fees the conspiring borrowers paid their bank cronies.
It’s another story of greedy, loan-pushing bankers, paying bribes, getting kickbacks, canoodling with corrupt foreign heads of state and government officials, and bank compliance departments being circumvented like subway thugs jumping over turnstiles.
Back in October, JPMorgan Chase & Co. (NYSE:JPM) analysts Eduardo Lecubarri and Nishchay Dayal warned that $7.4 trillion of global assets managed in passive funds could exacerbate a rout the next recession.
They were wrong, but at the same time, they were right.
We’re not in a recession.
But, the escalating selloff is weighing heavily on passive investors, especially in the highflying big-cap stocks that led indexes and index funds higher for ten years.
That means passive investors are losing money and could turn seriously active any day now.
If that happens, a crash may not be far behind – and we’re getting close to market levels that could trigger active selling by passive investors.
For most of last year, tech stocks were the momentum drivers; but now, after a tumultuous final quarter of 2018, momentum has reversed. There are no true leaders to look to, and an aura of negativity seems to permeate the market.
On the first episode of Varney & Co. in 2019, worries are still rampant when it comes to the government shutdown. But, as guest host Charles Payne points out, investors may be surprised (and relieved!) to know that the last time a shutdown coincided with the market falling was in 1990. Rather than focusing on that, Shah Gilani later reveals what investors should be focusing on as we enter the New Year – and a new, bearish-leaning market. Click here to watch.
The feds might be coming after the robots – finally.
Even here, as we start the New Year, I don’t have my hopes up. But I’ll take this good news.
On December 21, the SEC charged the country’s second-biggest robo-advisor, Wealthfront Advisers LLC, and a small defunct robo-adviser, Hedgable Inc., with misleading clients.
According to The Wall Street Journal, the two robo-advisors used “automated tools to create portfolios for clients, rather than relying on people to pick investments and councel customers through decisions,” misled clients by not monitoring accounts to prevent trades that created adverse tax consequences, illegally paid bloggers whose endorsements resulted in account openings, and, in the case of Hedgeable, used only 4% of client accounts to calculate company returns.
Here’s the $200 billion question (researchers at Backend Benchmarking say robo-advising makes up $200 billion of the investment and trading universe): Are do-it-yourself investors who rely on robo-advisors being shortchanged?
I have a question for you, it’s about the all-time biggest Dow Jones Industrial Average up-day in history.
You know, that 1086.25-point, 5% rocket ride up we all witnessed on Wednesday.
The question is: Do you think on December 26 that traders and investors woke up, got on their computers, called their brokers, and started buying stocks like it was a day-after-Christmas sale at the mall?
Before you answer that question, let me remind you. On the day before Christmas, the Dow Jones fell 653.17 points, hammering the average down to a new 52-week low.
So, I ask you again – this time your answer counts – were investors and traders and retail customers and retirees buying up beaten-down stocks on Wednesday, levitating all the major averages?
The question then should be: Who the heck was buying on Wednesday like there was no tomorrow?
Treasury Secretary Steven Mnuchin just shined a very bright light on a very dark corner of Wall Street.
Last week in a Bloomberg interview, Mnuchin said, “In my opinion, market structure has led to a lot more volatility. Part of this is a combination of the market presence of high-frequency traders combined with the Volcker rule.”
While the Treasury Secretary got a lot of flack for not pinning the stock market’s recent woes on President Trump’s trade war with China, the President’s threat to shut down the government, the President’s tweets about the Federal Reserve raising rates, he at least got the real narrative right.
Of course, rising rates are weighing on the stock market. Fears that a trade tiff with China will turn into a full-blown war is definitely weighing on the stock market. So were fears that there might be a partial government shutdown. And, that global growth is slowing is a heavy weight on stocks.
But those weights have nothing to do with the market moving 500 points one way or another in a day.
Here’s what we know about The Goldman Sachs Group Inc. (NYSE:GS) and their involvement in the outrageous 1MDB fraud scheme:
On the heels of Goldman Sachs’s horrific 2008, the then-investment bank was forced, on a Sunday night in September, to become a bank holding company to get saved by the Federal Reserve on Monday, staving off insolvency and its likely bankruptcy. It gathered itself and set its sights on greener pastures.
Recognizing that Asian institutions held more than $12 trillion in assets and Goldman had relationships with only about 15% of managers controlling those assets, CEO Lloyd Blankfein pointed his finger towards Southeast Asia.
In 2010, Blankfein’s rallying cry was “we need to ‘be Goldman Sachs in more places.'”
The bank proceeded to double its staff in the targeted area. That included Andrea Vella, the former aeronautical engineer and JPMorgan Chase & Co. (NYSE:JPM) derivatives designer, and Tim Leissner, subsequently a 10-year partner at Goldman, as rainmakers.
And make it rain, they did.
In 2012, Vella, Leissner, and Leissner’s deputy, Roger Ng, brought a debt deal to the Goldman bond deal committee in Hong Kong for consideration and due diligence.
The charge was to raise $1.75 billion for the newly formed Malaysian government investment company, 1Malaysia Investment Bhd., for the fund to purchase energy assets from Tanjong Energy Holdings, owned by Malaysian billionaire Tatparanandam Ananda Krishnan.
It didn’t go so well. The committee cited “potential media and political scrutiny” and noted the fund’s “scant record.” But, Vella, Leissner, Ng, and the credit traders they enlisted to help them prevailed.
The Goldman Sachs Group Inc. (NYSE:GS), the most prolific moneymaking machine in the history of Wall Street, was charged Monday by Malaysia’s Attorney General with criminal wrongdoing in the massive 1MDB scam.
While it’s not the first time Goldman’s boiling greed has got it in hot water, the size and scope of the bribery, fraud, theft, and money laundering in the criminal affair known as 1Malaysia Development Bhd. could permanently scald Goldman’s reputation and cause it to lose banking licenses worldwide.
This is a rather long-winded story, so I’m going to split it into two parts. You’ll get the first half today, and I’ll conclude the story on Friday.
I’ll be honest, I am not comfortable with this market. Monday, the Dow swung more than 1,500 points in one day.
From the month of October, the Dow has swung more than 11,000 points, that’s a 41% swing in terms from the top to the bottom. That is a staggering amount of volatility, and I don’t think the market is done yet.
That being said, I’ve received tons of questions from my readers about everything from the role of high-frequency trading (HFT) to what I think about Warren Buffett’s bullish stance on the banking sector.
I’m always interested in hearing your feedback, and if you didn’t get a chance to ask me something before this issue, you can send me an email here.