February 22 2012
International Forecaster Weekly |
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Self regulation does not work, policy in the hands of a few, the cost of Congress, the deliberate downfall of Greece, tarriffs had benefits, Greece to be a suburb of Germany, Dell stock insider trading arrests, a step away from bankruptcy.
One of the things we learned in almost 30 years in the brokerage business is that self-regulation does not work. The players are simply too abusive, greedy and prove to take the regulations to the very edge. We saw that at MF global. All markets are rigged today. Twenty-five years ago perhaps 80% were rigged. The SEC and CFTC are well aware of this and in many cases aid and abet in the crimes. The crimes are too many to mention, but among the leading problems are complicity in front running and naked shorting. There is no such thing as an efficient market hypothesis. Just another phase to led you off into the forest.
A small group of big hitters control Wall Street, the Federal Reserve, our government and our economy. Just ask members of the Council on Foreign Relations, the Trilateral Commission or the Bilderberg Group. They know what is going on because they help make policy, and arrange to get it executed. Wall Street is one long litany of fraud, where the guilty seldom go to jail and the tables are squared via fines, usually paid by the firms and not the individuals. While the SEC and CFTC investigations go nowhere, or don’t happen at all, they relish charging small and medium sized brokerage houses to justify their existence. That is when they are not pursuing some newsletter writer, all of whom cannot afford top legal help, or any legal help at all. The whole game is crooked and has been for many years. It is government and its agencies and Wall Street and baking that controls your entire lives. Their power is immense and that is how they get away with what they get away with.
The same is true with Congress 90% of which are bought and paid for via campaign contributions and other artifices such as insider trading. That is why we have free trade and globalization, offshoring and outsourcing. Congress and those running for the office and president don’t even talk about it, yet, in 12 years it has cost 12 million jobs and 450,000 businesses. Obviously that is not a serious matter for Congress. Or should we say those who pay Congress, transnational conglomerates, want free trade just as it is. Our nation could not compete with slave labor countries in 1795 and they cannot compete now. There has to be a leveling force, a balance that stops the pillaging of America, which destroys economic independence and eventually sovereignty. We are a step away from post industrial dependency and bankrupt as well. Congressional complicity stands out like a beacon, when these asset strippers do not have to pay taxes on foreign earnings. Who has ever heard of something so unreasonable? Instead of lowering corporate taxes as other nations had done we eliminated taxation, so transnational corporations could compete. This is what we call modern colonialism.
After the debacles of the 1790s and British colonialism, the US switched to a tariff system, which worked quite well until about 25 years ago. Then came WTO, NAFTA and CAFTA, the result of which you are witnessing today. The system of tariffs allowed government to fund itself via exercise taxes funded by foreign corporations, which kept Americans from having to pay income taxes for about 100 years. Tariffs are part of what made America great and we cannot be great again without tariffs, it is as simple as that. You cannot have prosperity giving away 12 million jobs in 12 years. As we have seen you cannot have persistent and growing trade deficits year after year and not go broke. Here we are 217 years later doing the same stupid thing over again. The main reason for this is that the public is not paying attention and Congress does whatever their paymasters tell them to do.
The debt position of the US deteriorates each day and with it not only the dollar, the world’s reserve currency, deteriorates versus other currencies and gold and silver. Having the dollar as the world’s reserve currency gives many benefits to Americans and if that advantage is lost so is what is left of American prosperity. Are we to follow in the footsteps of Greece? It is wrong to say that tariffs cause depressions. They were increased six times over the past 200 years and no depression followed. If we do not get tariffs America cannot survive as a world leader.
If a written document exists outlining the deliberate default of Greece and has been in the possession of two Wall Street banks for a month then the fall of Greece has been in the works for some time. The date of March 23rd was supposedly the date for default. The rating agencies are supposed to be the trigger for the default. The 23rd is a Friday and on Saturday Greek bank accounts are to be frozen. If that is true all Greeks should have their euros and any other currencies and valuables out of all Greek banks.
Several months ago we stated that we did not know what was really going on behind the scenes in Germany. Our question was did they really want to save Greece and perhaps the euro, or were they interested as the majority of Germans are, in dumping the euro and the EU? Over the past week commentaries were all over the place, many of them off the wall. We have seen delays for 2-1/2 years, but nothing like we have seen over the past month. It is like most non-Greeks had monkey wrenches to throw into the gears of progress. The US says they do not want to get any deeper into Europe’s problems, as the IMF offers a pittance. The Germans and Schäuble these past 2 weeks had nothing but negative comments and commands trying to keep moving the goal posts, so to cast confusion among Greek negotiators. We are told on Saturday that on Thursday a deal was cut. Mrs. Merkel wants to replace the Greek government with a EU commissioner. In German it is called Gauleiter. We guess they want to have Greece as a subsidiary of Germany.
#7 ISSUE NWO Puppet Masters VS. Military PATRIOTS = Revolution: Part 1 of 2
NWO Puppet Masters VS. Military PATRIOTS = Revolution: Part 2
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Last week the Dow rose 1.2%, S&P rose 1.4%, the Russell 2000 gained 1.9% and the Nasdaq 100 rose 1.4%. Cyclicals rose 1.2%; transports fell 0.3%; consumers rose 1.6%; banks 2.4%; broker/dealers 2.6%; high tech 1.9%; semis 2.8%; Internets 1.0% and biotechs were unchanged. Gold bullion was unchanged, as the HUI fell 0.6% and the USDX gained 0.3%.
We have not seen a conclusion to the Greek debt crisis and it and Europe are an unmitigated disaster. Europe is on the tail end of a post credit boom. The LTRO-ECB-FED new bailout could buy 1 to 2 years. Then they will need another $1.6 trillion.
Two-year T-bills rose 2 bps to 0.29%, the 10-year T-note rose 1 bps to 2.00% and the 10-year German bund rose 2 bps to 1.92%.
Fed credit expanded $4.6 billion to $2.918 trillion – year-on-year that is up 17.1%. Fed foreign holdings of Treasury, Agency debt surged $26.2 billion to $3.447 trillion. Custody holdings were up $63.5 billion, yoy, or 1.9%.
Global central bank international reserve assets rose $958 billion yoy, or 10.3% to $10.250 trillion. Growth over two years has been 31%.
M2, narrow, money supply fell $7.4 billion to $9.772 trillion. That is up 10% yoy.
Total money fund assets rose $3 billion to $2.659 trillion.
Total commercial paper out declined $10.8 billion to $962 billion. That is down $79 billion yoy, or 7.6%.
Four men arrested last month for allegedly participating in a “criminal club” that made almost $62 million using illegal tips to trade in Dell Inc. stock pleaded not guilty.
Level Global Investors LP co-founder Anthony Chiasson; Todd Newman, a portfolio manager formerly at Diamondback Capital Management LLC; Jon Horvath, an analyst at hedge fund Sigma Capital Management LLC; and Danny Kuo, a fund manager for Whittier Trust Co., entered not guilty pleas to conspiracy and securities fraud charges yesterday in Manhattan federal court.
Prosecutors from the office of Manhattan U.S. Attorney Preet Bharara said the ring, which allegedly involved five hedge funds and investment firms, is the largest identified by the U.S. to date tied to a single stock. One trade earned a $53 million illegal windfall for Chiasson and Level Global, prosecutors allege.
All four men are charged with one count of conspiracy to commit securities fraud. Newman is charged with three counts of securities fraud and Chiasson with four counts of securities fraud. Horvath and Kuo are additionally charged with one count of securities fraud. All four were arrested Jan. 18. They entered their pleas in a hearing before U.S. District Judge Richard Sullivan.
Prosecutors have recordings of conversations between Chiasson and John Kinnucan, founder of an expert networking firm whose mobile phone was wiretapped by federal investigators, Assistant U.S. Attorney Antonia Apps told the judge.
“Mr. Chiasson fired me after only three months, much to my surprise at the time, but after seeing the kind of information he was evidently getting elsewhere, now I understand why he didn’t have any need for the types of channel checks I could provide,” Kinnucan said in an e-mail yesterday.
Kinnucan said he’s “highly confident Mr. Chiasson will not be convicted of any insider trading charges based on any of our conversations, since everything we talked about was industry- standard research, as practiced by all the investment banks, large and small, and which practices have been blessed by the SEC for many years now,” a reference to the U.S. Securities and Exchange Commission.
Prosecutors also have recordings of Newman, Horvath and Kuo speaking with cooperating witnesses, Apps said. She didn’t name the witnesses.
Three other men charged in the scheme pleaded guilty and are cooperating with the U.S. -- Jesse Tortora, formerly of Diamondback; Spyridon “Sam” Adondakis, a Level Global analyst; and Sandeep Goyal, a former employee at Round Rock, Texas-based Dell, the third-largest maker of personal computers.
Sullivan scheduled a hearing in the case for April 13. He didn’t set a trial date.
The case is U.S. v. Newman, 12-cr-121, U.S. District Court, Southern District of New York (Manhattan).
Ex-Citigroup Executive Denies Wrongdoing in Tibor-Fixing Case
A former Citigroup Inc. executive accused by Japanese regulators in a probe of suspected interest-rate manipulation denied wrongdoing and said authorities never questioned him before they issued findings.
Christopher Cecere, who worked for Citigroup in Tokyo as head of G10 trading and sales for Asia until 2010, was identified as “Director A” in a Dec. 16 administrative case by Japan’s Financial Services Agency, according to two people with knowledge of the inquiry. The agency said Director A and another Citigroup trader engaged in “seriously unjust and malicious” conduct by asking bankers to alter data they submitted in the process of setting a benchmark Japanese lending rate. Japan’s FSA penalized the firm and took no action against the employees.
During Citigroup’s internal investigation, the New York- based bank didn’t question Cecere about his conduct or indicate to him that it suspected he had acted improperly, he said in a Feb. 10 phone interview. Regulators also didn’t seek his version of events, he said. He left the firm in good standing, he said. He later joined Brevan Howard Asset Management LLP, a London- based hedge fund that manages about $33 billion.
Japan’s regulators were the first to announce findings as authorities in Asia, Europe and the U.S. conduct widening inquiries into whether employees at some of the world’s biggest banks sought to manipulate the London, Tokyo and euro interbank offered rates, known as Libor, Tibor and Euribor, respectively. The rates were used by investors to gauge the ability of firms to borrow money at the height of the 2008 credit crisis and can play a key role in derivatives trades.
While Cecere asserted his innocence, he declined to comment on the FSA’s description of events, including whether he pressed someone to change rates for Tibor, saying he has no insight into the watchdog’s investigation or findings.
Citigroup was forced to write off $50 million as it exited trades made by Tokyo-based employees, a person familiar with the matter said last week. Thomas Hayes, a Tokyo-based trader for Citigroup, was dismissed last year for suspected involvement in the rate manipulation, according to two people familiar with the case. Contact information for Hayes couldn’t be found.
Cecere said the holdings that Citigroup recorded losses on were one of many businesses that reported to him in his role overseeing sales and trading units in Asia.
Mika Nemoto, a Tokyo-based spokeswoman for Citigroup, declined to comment on Cecere’s remarks.
Once again, the Securities and Exchange Commission has embarrassed itself. Last week it let off the hook two hotshot former Wall Street hedge-fund managers who lost a bundle for the investors trusting them to manage their money responsibly.
Instead of going to court on Feb. 13 and laying bare the sordid facts for a jury, at the last minute the SEC settled a civil suit against Ralph Cioffi and Matthew Tannin of the now defunct Bear Stearns Cos. These were the hedge-fund managers who five years ago loaded up their two funds with billions of dollars of lousy mortgage-backed securities and collateralized- debt obligations, leveraged them to the hilt and, when the market for the securities soured in July 2007, liquidated the funds.
According to the SEC’s 2008 civil complaint against the men, the collapse of the funds cost investors at least $1.6 billion. These problems were among the very first indications that serious trouble was looming in the housing market and securities tied to it. The liquidation of the two funds led to the effective bankruptcy of Bear Stearns itself in March 2008 and the subsequent financial crisis that nearly wiped Wall Street off the face of the earth.
But the price the SEC extracted from Cioffi and Tannin as part of a settlement -- after previously telling the court it intended to go to trial -- was a mere pittance, “chump change,” according to the federal judge in Brooklyn overseeing the case. Cioffi, who made $22 million in 2005 and 2006 at Bear Stearns, will pay just $800,000 and agree to a three-year ban from the securities industry. Tannin, who was paid $4.4 million in his last two years at Bear, will pay $250,000 and agree to a two-year ban. Neither has to admit to wrongdoing. The agreement will deter absolutely no one from trying to pull off a similar stunt.
In combination with their November 2009 jury acquittal on criminal charges in federal court, the SEC civil settlement provides a major victory for the defendants’ attorneys, Hughes Hubbard & Reed LLP (for Cioffi) and Brune & Richard LLP (for Tannin). The American public, on the other hand, is left with the trillion-dollar bill for Wall Street’s financial crisis caused by the Wall Street bankers and traders who walked off with billions in bonuses.
This outcome is beyond outrageous. In its complaint, the SEC flat-out stated that Cioffi and Tannin mislead their investors: “Particularly during the first five months of 2007, as the funds suffered increasing losses to the value of their portfolios and faced growing margin calls and redemptions… senior portfolio manager Cioffi and portfolio manager Tannin deceived their own investors, as well as the funds’ institutional counterparties, by fraudulently concealing from them the full extent of the funds’ deepening troubles.”
One of the ways Cioffi and Tannin did this was by displaying, graphically, on the monthly account statements the percentage of the funds invested in subprime mortgages. For instance, according to an investor’s statement from March 2007, the amount of the funds invested in subprime mortgages was stated clearly as 6 percent. But when the funds blew up, Bear Stearns created internal “talking points” memos for how to deal with investor complaints. A memo from June 2007 pointed out that one of the questions deemed likely to be asked was: “I thought the fund was diversified, and now it turns out it seems to have had a fair amount of exposure to the subprime mortgage market. What exactly was the exposure?” The answer: “60 percent.”
In other words, Cioffi and Tannin told their investors the funds were diversified -- and raised billions of dollars based on that representation -- but in reality they were highly concentrated in subprime mortgages. And now, thanks to the SEC’s settlement, the two men may never even be held remotely accountable.
Even Frederick Block, the judge who was to preside at the trial but instead has been asked to bless the settlement, openly questioned whether the terms fit the crime. He not only called the monetary settlement “chump change,” but also said the SEC’s injunctive provision was “silly” and asked, “Am I just a rubber stamp here or is there some inquiry I ought to be making about these provisions?”
In this, he was echoing the well-known views of the outspoken federal Judge Jed Rakoff, who last year rejected an agreement between the SEC and Citigroup Inc. (C) where the give-up by the bank was relatively small -- $285 million -- and the firm was allowed to settle without denying or admitting guilt. In the Cioffi-Tannin case, the penalty is even smaller and the investors’ loss greater. Go figure.
John Worland, the SEC’s attorney, defended the agency by saying that it has no ability to sue for damages, only for the disgorgement of ill-gotten gains. While technically correct, it’s not the whole story: The SEC certainly figured out a way to penalize Goldman Sachs Group Inc. (GS) to the tune of $550 million in the so-called Abacus case in 2010, when the firm actually lost some $90 million on the deal.
Then Worland delivered this stunner: “Neither Mr. Cioffi or Mr. Tannin got rich.” You know how far things have gone downhill when a lawyer for the SEC, making a bureaucrat’s salary -- God bless him -- can’t seem to see that two hedge fund managers are in fact quite rich and got that way in the course of losing their investors a fortune.
We are all worse off for the SEC’s continued lax enforcement of wrongdoing on Wall Street. If it won’t protect us from charlatans, who will? Judge Block, please deny the proposed pathetic settlement and send the parties back to the negotiating table or, even better, your courtroom.
(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist. Read his previous column on Wall Street arbitration online. The opinions expressed are his own.)
Prompted by a delay in a big trade at a popular ETF, the U.S. Securities and Exchange Commission is taking a closer look at a possible connection between high-frequency traders and hedge funds jumping in and out of ETFs, and instances where ETF trades fail to settle on time, this person said.
The SEC's inquiry is part of a wider probe that began last year and focused on complex ETFs that allow investors to magnify returns or bet against stock indexes.
U.S. and UK regulators are concerned that so-called settlement fails - when trades are not completed on time - could contribute to volatility and systemic risk in financial markets. The probe's main focus is on illiquid ETFs, but regulators are now also examining popular ETFs and failed trades, according to the person.
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