Posts Tagged “Goldman Sachs”
Out of far left field, I see something coming that I never expected.
It’s more like the coming together of pieces of a puzzle that have eluded us for too long.
By the way, Occupy Wall Street, if you’re listening, and I hope you are, and you’re still floundering (which I know you are) without a cause that anybody can really wrap their heads around, drop your drums, chants, and wanderings, and make the coming together of this puzzle what you’re protesting.
And make what could result what you are demanding.
Because, really, this could be the mother lode…
Very soon we will see if the old market adage “Buy the rumor, sell the news” is true.
While rumors of Europe’s impending demise were momentarily shot down by an array of silver bullets, the actual news out of Brussels of a grand bargain wasn’t… exactly… honest.
Let’s call the half-measures agreed to by European leaders “Brussels sprouts,” because they’re more like “green shoots” than a cabbage patch panacea.
The leaders agreed to agree that they needed an agreement on how to more closely integrate their fiscal and monetary interests.
Yeah, that’s what they said. I say good luck with that.
Actually, they made some other moves, too.
Find out what else these European “leaders” did…
In yet another sign that markets are broken, yesterday’s huge market advance came on the heels of two presumably separate (yeah, right) central bank moves.
Both were designed to add liquidity and support to shaky and dangerously deteriorating markets.
(That was good news?)
First, China lowered the reserve ratio its banks have to hold against loans they make. They didn’t do that because things over there are rosy. They did it because the property market is teetering and financing has been drying up.
Full story here…
What a fun day that was yesterday.
No, I’m not talking about Jefferson County, Alabama, filing for bankruptcy… that’s not fun or funny, as you’ll come to learn shortly.
I’m talking about global stock markets and bond markets.
Wow, what fun! Can you imagine being short stocks and having one heck of a day yesterday? I can.
Can you have imagined that Italy’s interest rates would have soared the way they did? I can. And you could too, if you read what I wrote on Monday about how the CDS market was broken and what that would do to Italian bond rates.
Look, I’m not the kind of guy to say I told you so, but if I was, I’d sure be saying it now.
Italy is the canary in the coalmine – not Greece. (FYI, they used to keep a canary in every coalmine, because if it died, that meant poisonous gases that humans couldn’t smell were present.)
If Italy implodes, either by its bond yields exploding, its economy sinking, or its fiscal house burning, all of Europe is going down. And America will surely follow.
While you were sleeping this morning, Italy had to offer 6.087% interest on the one-year bills it floated. That compares to the 3.57% it paid just last October 11. What smells is that Greece just floated some bills at 4.90%.
In other words, the canary (Italy, in case I lost you) is starting to teeter on its perch.
It has another €28 billion to roll over by the end of 2011, and how much it will have to offer investors to buy its paper is anybody’s guess.
There’s only one guessing game that matters in Europe right now. That is whether or not the ECB will step up and promise – à la the U.S. Federal Reserve Bank – to be lender of first and last (and in-between) resort.
The ECB has to do something bold. And it probably will.
If it does, the next guess will be, where will its backing and credibility to backstop all of Europe come from?
Will it come from the same teetering nations that’s its going to have to support? Good luck with that. Or will it come from the backing of the IMF, with a ton more commitments from the U.S. and other G20 countries? Good luck with that.
We’re going to get a relief pop this morning in the stock market. Good luck with that, too.
Until Europe is figured out – and it won’t be any time soon – stay short with tight stops, just in case there is a Santa Claus coming to a chimney near you.
Oh, and by the way, if Italy starts singing again, watch Spain, then France, they are the next canaries we’ll have to watch in the coal pit we call the European Union.
Full story here…
Did you hear the story about MF Global?
No, not the headlines about its bankruptcy – the real story.
If you haven’t heard it yet, it goes something like this.
MF Global became a primary dealer only eight months ago.
“Primary dealer” is an elite status. It means the firm is one of only 22 government bond dealers that trades directly with the Federal Reserve’s New York trading desk.
Only, the Federal Reserve doesn’t regulate or oversee MF Global, the Commodities Futures Trading Commission (CFTC) does – or rather is supposed to.
But, even more incongruously, the CFTC isn’t the first overseer of MF Global . It ceded that responsibility to the CME Group Inc. (Nasdaq: CME), which owns and operates the largest futures exchanges in the United States. The designated self-regulatory organization for more than 50 futures brokers, CME was supposed to be the cop on the beat.
However, the not-so-funny thing about the relationship between MF Global and the CME Group is that MF Global recently boasted on its Website that it “was the top broker by volume at CME’s metals and energy exchanges in New York and in the top three at its Chicago exchanges.”
So, is it any wonder that the CME just last week audited MF Global’s segregated customer funds and found them to be in compliance?
These are the same supposedly segregated funds which the CME is now saying may have been tampered with. According to the CME:
“It now appears that [MF Global] made subsequent transfers of customer segregated funds in a manner that may have been designed to avoid detection insofar as MF Global did not disclose or report such transfers to the CFTC or CME until early morning on Monday October 31, 2011.”
How much money are we talking about? About $633 million – or 11.6% out of a segregated fund requirement of about $5.4 billion.
Do you see what I’m driving at?
So the real story is, t he Federal Reserve, which doesn’t regulate MF Global but regulates all banks in the United States, lets a futures commission merchant with investment bank wannabe desires become an insider in its dealings. Meanwhile, a private for-profit enterprise that runs the self-regulatory apparatus that oversees its own customers steps in for a federal agency that’s supposed to be in charge of commodities, futures and derivatives markets.
And that’s only the tip of the iceberg….
A referendum? In Greece? Are you kidding me?
As my 16-year-old nephew Nathaniel says, “What the…?“
Apparently, that’s a popular statement of surprise in his southern California surf town. The first time he said it, I was flabbergasted, thinking he was going to finish that well-worn exclamation with a bad word. But it works better his way…
What isn’t going to work is George Papandreou’s call for a referendum.
He wants the Greek people to decide if they want to tighten their belts so much that they’re willing to starve themselves to death for the sake of paying back the IMF and their European neighbors.
Why his move hurts everyone…
I’ve already expressed my desire to embrace the Occupy Wall Street movement.
I said last week that I would join in whole-heartedly if I knew exactly what the protesters were trying to achieve.
But I don’t know – and I’m not convinced they do, either.
Still, that doesn’t mean we should dismiss them entirely. After all, there are millions of Americans who sense there’s something terribly wrong with our capitalist system, but they can’t pinpoint exactly what it is either.
But I can…