Panic Behind The MF Scenes As Company Refuses To Disclose Information To Regulators Even In Death
As in life, so in death. Reuters reports that "U.S. regulators are unhappy with the failure of MF Global Holdings Ltd to provide them with the required data and records, a source close to one regulator told Reuters on Monday. "So far they've been very disappointed with the cooperation in the fulsomeness of records and data from MF," the source said, noting regulators have been working with the firm since late last week. "They were supposed to be able to show us their books and they're supposed to be able to tell us what's what and where their customer funds are and how they've been segregated and protected and to date we don't have the information that we should have," the individual told Reuters." Seriously, as Erin Burnett would say, you are already bankrupt. Just how much worse is it if you even in death you still are hiding secrets? And at this point it should be obvious to everyone: whatever MF is hiding is not something that will hurt it or much less its stakeholders for which the management team obviously never cared one iota. After all the company is already dead. Whatever is on its books has huge impacts to those either behind the corporate veil, read Mr. Corzine, who may or may not have regulatory issues arising from 10(b)-5 "concerns", or more probably, to other banks and Primary Dealers. And with even one simple affidavit still to be filed in Bankruptcy Court, the panic behind the scene is palpable.Someone Is Going To Jail For This: MF Global Caught Stealing Hundreds Of Millions From Customers?
Say you are the head back office guy at MF Global, it is the close of trading on Thursday, the firm has already completely drawn down on its revolver, and all the resulting cash in addition to all the firm's cash at your disposal in affiliated bank accounts, up to and including petty cash, has been used to satisfy margin demands due to declining collateral value, yet the collateral calls just won't stop, and impatient voices on the other side of the phone line demand you transfer even more cash over immediately or else risk default proceedings commenced against you within minutes. What do you do? Do you go ahead and tell your superior that the firm is broke even though the co-opted media is trumpeting every 5 minutes that "MF Global is fine", knowing full well you will be immediately fired for being the bearer of bad news, or do you assume that courtesy of your uber-boss being the former head of the Vampire Squid, and thanks to infinite moral hazard which after Lehman made sure nobody would ever fail ever again, that there is simply no way that you will be left without some miraculous rescue, if only you can last one more day, and as a result proceed to "commingle" some client funds with the firm's cash. It turns out that at MF Global you do the latter... over and over... until you have literally stolen hundreds of millions from the firm's client accounts in hopes that the miracle rescue will come on Friday... then over the weekend... and then you realize no miracle is coming, partly because your actions have been exposed, partly because miracles only exist in fairy tales. The next thing you know, your firm is bankrupt and hundreds of clients are about to learn that all their money is gone. Poof. This is not a fictional tale. This is precisely what very likely happened at MF Global in the past 72 hours. And someone has to go to jail. That someone, if indeed this criminal act is proven to have taken place, should be none other than Jon Corzine himself.MF Global files for bankruptcy/Questions on Obama Legitimacy/silver and gold raid
Good
evening Ladies and Gentlemen:
Today the price of gold fell by $22.00 to $1724.20 as the bankers
decided to raid in concert with an intervention by the Japanese to lower
their Yen. The price of silver followed suit down by 93 cents to
$34.34. The big news of the day is the bankruptcy filing by MFGlobal a
huge trading firm under the direction of former Goldman Sachs CEO and
also the former
Monthly Gold Charts - October 2011
I have to keep my comments brief today as it is time for Halloween!
Looks like precious metals owners got a back of tricks today instead of
treats. The culprit was the intervention by the Japanese monetary
authorities who hit the Yen with a barrage of selling and sent the markets
into a tizzy. The subsequent rally in the US Dollar then had the mindless
hedgies dumping everything they bought late last week as equities were
trashed along with the commodity sector in general.
Copper and silver were both sold off and gold went along for the ride to the
downside.
If some of you might ha... more »
Today Was Ugly
The S&P 500 index futures started selling off around midnight (Denver time)
and steadily went lower from then until the 2 p.m (Denver) close of the
NYSE. Both the SPX and the Dow closed on their lows of the day and the
selling in the final 5 minutes of trading accelerated.
On the surface the analysts and media will blame the action on deteriorating
situation with regard to the "bailout" agreement rolled out on Friday. I
lifted my leg all over it on Friday and several high profile analysts
released similar analysis over the weekend and this morning. While there is
no doubt reali... more »
China wants Europe to solve its own problems
Oops. How quickly the confidence of change fades when reality remains unaltered. China smart enough to distance itself from a savior role that must come from within. A savior must demand one currency, one debt, and plenty of devaluation. Headline: China wants Europe to solve its own problems LONDON: China has stressed it will not be a ''saviour'' to Europe as the Chinese President, Hu Jintao,... [[ This is a content summary only. Visit my website for full links, other content, and more! ]]
China Manufacturing PMI Drops To 32 Month Low
China Manufacturing PMI prints at 50.4, down from 51.2, when consensus was expecting an increase to 51.8. This is the lowest print in 32 months, and the lowest since February 2009. But wait, before concludng that this is very bad news, uh, ahem... well, sorry, we haven't taken the CNBC spin school yet. It's bad news and the hard landing is coming. We leave the spin to the professionals. Oh wait, yes, China will go ahead and ease immediately if not sooner. Because the PBoC has surely completely forgotten how much fun it was to see pork prices rise by triple digits year over year, and because it knows all too well that no matter what it does the Fed will never, ever print, and thus export metric tons of inflation straight across the Pacific. How's that for spin?
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I'm PayPal VerifiedOpen Europe On The Greek Referendum: Is Democracy Finally Coming Home?
Euroskeptic think thank Open Europe once again appears on the scene with one of the first more extended reactions to what the possibility of a Greek referendum, which according to the Guardian will take place in January, means for Greece, the Eurozone, and the latest bailout (which according to Williem Buiter, who reiterates to the FT something we said 2 months ago, needs to be €3 trillion). One thing we would like to point out is that if indeed the popular vote on the future of Europe will take place in January, then kiss the year end rally goodbye as the uncertainty around the market will be insurmountable by anything the bureaucrats can throw at the concern that Europe is on fast-track to political suicide. From the source: "This could be big turning point in this crisis. The EU should move quickly to come up with plans to mitigate the fallout of a no vote, specifically how to handle a rudderless and broke Greece, which would probably include plans for allowing it to exit the euro. A yes vote would be far from a solution, at best it would buy some time for the Greek government and the EU to enforce some necessary reforms thanks to a fresh mandate. As with any referendum it may come down to the phrasing of the question. Let’s hope the Greek government and the EU do a better job of communicating the issues at hand than they have done so far in this crisis."Ugly Close As 30Y TSY Yield Drops Most Since March 2009
While
much was made of the MF Global news today, we suspect that the tipping
point for risk assets was more likely driven by the plethora of
reality-based analysis of the situation in Europe combined with the
afternoon news that Greece is facing a referendum and a lack of demand
for the EFSF issue today. Heavy volume arrived into the close to the
downside, suggesting asset allocation rotation from equities to bonds,
which helped propel TSYs even further down in yield. The entire complex
flattened notably with 30Y outperforming -24.5bps, the largest single-day yield move since March 2009,
as the much-watched 2s10s30s butterfly has retraced all of last week's
increase. ES closed at its lows (down over 2.5%) only to extend those
losses in the evening session as we post as IG and HY credit tracked
notably wider once again.Europe According To...
While we have shown this series of images by Bulgarian modern artist Yanko Tsvetkov previously, now that the question of European "unity" is more debatable than ever, and with a Greek referendum in effect guaranteeing the collapse of the Eurozone at least in its current framework, it makes sense to refresh on these pictures which straddle the thin line between reality and satire, which these days is one and the same. But no matter what, the important part is that everyone is hedged. Just ask MF Global... and MS.
Guest Post: MF Global: Comments From A Bank Executive
More from our Bank Exec friend, this time on MF Global after we tried to lay blame on Rubin, Thain and Corzine for blowing up their firms: "MF Global. They named that company right. You probably didn't see it first hand but Lehman, Bear and Merrill were doing the dumbest real estate deals "ever" in the run up to the implosion. Every real estate veteran saw it, and while AIG's CDS exposure gets airplay, bad real estate lending is at the center of the disaster. So, Merrill was toast before Thain showed up. He was just the funeral director. Citi (with its 14 off balance sheet SIV's @ $1 trillion) was an abomination in progress before Rubin arrived, the Enron of banking and each and every officer and board member should go to jail. But they won't because they are all too powerful and very politically connected."EURUSD Retraces Entire 'Bailout' In 3 Days
Joining US TSYs, BTPs, and SPGs, the EUR has now retraced the entire post-summit rally in a mere 3 days, and is down 300 pips today alone.
It also seems the actions in Greece are starting to get reactions in US
financials and broad risk assets. We also note that EURJPY has retraced
over 75% of the intervention in 18 hours...perhaps Azumi will let the
market be now?
10Y
US Treasuries have now successfully eradicated all the post-summit
losses and are well on their way to last week's low yields as the
reality (that we unendingly slammed into people's heads) appears to be
hitting managers minds. 2s10s30s has also retraced the entire
post-summit shift and the EUR is also getting very close to unch (from
pre-summit). This leaves only ES (and credit to a lesser degree) as the
odd man out having retraced only 50% of the post-summit euphoria.
Reaching
for yield (and prospectively capital appreciation) while shortening
duration had become the new 'smart money' trade as we saw HY credit
curves steepen earlier in the year (only to become the pain trade very
quickly). The attraction of those incredible yields on short-dated
sovereigns was an obvious place for momentum monkeys to chase and it
seems that was the undoing of MF Global. The Dec 2012 Italian bonds (in
which MF held 91% of its ITA exposure), as highlighted in today's
Bloomberg Chart-of-the-day, appears to be the capital-sucking
instrument of doom for the now-stricken MF. As if we need to remind
readers, there is a reason why yields are high - there is no free lunch
- and while some have already leaped to the defense of the
bet-on-black Corzine risk management process with comments such as 'He
was simply early and will be proved correct' should remember that only
the central banks have bottomless non-mark-to-market pockets to
withstand the vol. It also sets up a rather useful lesson for those pushing for EFSF leverage to buy risky sovereign debt - but given today's issue demand, perhaps that is moot.
Three
years after upgrading Lehman days ahead of its bankruptcy, here is
Dick Bove on CNBC last week assuring anyone idiotic enough to listen to
him that, you guessed is, MF Gloal is fine and a buyer will promptly
materialize. How much longer will the Comcast financial comedy channel
tolerate this individual?
Hidden
among the detritus of last night's MF headlines and JPY Azumification,
Moody's released their Weekly Credit Outlook. The report was rather
unsurprisingly (given our perspective on the lack of real news last
week) negative on the Euro Summit implications noting that while some
positives remain, the negatives at a grossed-up level seem to outweigh
the market's exuberance. In most scenarios they see the impact as
neutral (for Ireland and Portugal, European banks and Insurers, and the
EFSF itself) but they are most concerned at the impact the 'plan' will
have on AAA-rated euro are countries and the considerably higher bank
recap needs. We can only leave it to the market to decide how
self-referencing CDS should be priced.
As
the EUR trades at its lows of the day (having retraced over 60% of the
Euro-Summit rally, we wonder how long before the broad European equity
markets will take to fill the gap from that wondrous liquidating day.
Equities are underperforming credit so far this morning but it is very
clear that hedgers/shorts are back in lower cost credit positions as
European sovereigns leak wider in yield (cash and CDS). We also note
that EFSF is underperforming Bunds (by around 7bps so far this morning)
making us wait for the Barroso-Van-Rompuy 'We're gonna need a bigger
boat' speech.
With
tonight's multi-year record CNY fixing and trillions being flushed at
maintaining an arbitrary line in the sand, it seems appropriate to
re-consider how to hedge a China hard landing and what probabilities
various asset classes are assigning to it occurring. While many are
pointing to what seems an entirely capricious level of 79.20 JPY to the
USD as the 'new normal' being defended, we were curious at the strange
coincidence that the CNYJPY cross implied by tonight's CNY fixing and
the 79.2 JPY was exactly the average CNYJPY level during the QE2 period.
It seems the Japanese are hedging their tail-risk against the Chinese
and a recent note by Morgan Stanley points to how various asset class
traders might consider hedging their own version of a hard-landing
scenario and notably they 
For
the last 45 minutes, USDJPY has been unable to shake loose of 79.2 by
more than a pip or two. Following the SNB and their efforts with EURCHF
and USDCHF, is Azumi now pushing another of our freely floating
foreign exchange currencies to a peg? Gold is down a little (in its
knee-jerk response to USD strength reflecting off the JPY intervention)
but one has to wonder if slowly but surely we are being reverted to the
'fixedness' of a gold standard?
Thanks
to Mr. Azumi's clearly unique (and Halloween-centric) perspective on
Japanese currency fundamentals, USDJPY managed to peak with a six
standard deviation move, bested only by 10/28/08 (what a weekend for a 3
year anniversary!!) before all the way back to 1995. However, as
always with his unilateral decisions, the market seems to know best and
we have already given back over 38% of the drop. Interestingly, broad
risk markets have not enjoyed this move at all as correlations are not
helping the Japanese cause and ES continues to leak lower.
When
it comes to discussing monetary history, and specifically what happens
when it all goes wrong, there are two must read tomes: one is "The
Dying of Money" by Jens Parsson (
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This 5-part web series pits the fantasy of unlimited growth against the
wheeling-and-dealing of Wall Street's glitzy surface. We urge any ![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
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