To quote John Mauldin

Submitted by Roanman on Fri, 11/18/2011 - 06:06

 

John Mauldin's Frontline Thoughts claims a readership of one million.

We believe 'em, as nearly everybody around here reads it most every week.

You have to sign up to access the letter on the "EU Debt Crisis" from which this quote was taken.

The good new here is that it's free and highly recommended.

Click anywhere below to acces this fine site.

 

 

The single clearest metaphor we've seen yet on this mortgage thing.

Submitted by Roanman on Thu, 11/17/2011 - 06:49

 

Helga is the proprietor of a bar. She realizes that virtually all of her customers are unemployed alcoholics and, as such, can no longer afford to patronize her bar. To solve this problem, she comes up with a new marketing plan that allows her customers to drink now, but pay later. Helga keeps track of the drinks consumed on a ledger (thereby granting the customers’ loans).

Word gets around about Helga’s “drink now, pay later” marketing strategy and, as a result, increasing numbers of customers flood into Helga’s bar. Soon she has the largest sales volume for any bar in town.

By providing her customers freedom from immediate payment demands, Helga gets no resistance when, at regular intervals, she substantially increases her prices for wine and beer, the most consumed beverages.

Consequently, Helga’s gross sales volume increases massively.

A young and dynamic vice-president at the local bank recognizes that these customer debts constitute valuable future assets and increases Helga’s borrowing limit.

He sees no reason for any undue concern, since he has the debts of the unemployed alcoholics as collateral!!!

At the bank’s corporate headquarters, expert traders figure a way to make huge commissions, and transform these customer loans into DRINKBONDS.

These “securities” then are bundled and traded on international securities markets.

Naive investors don’t really understand that the securities being sold to them as “AA” “Secured Bonds” really are debts of unemployed alcoholics. Nevertheless, the bond prices continuously climb!!!, and the securities soon become the hottest-selling items for some of the nation’s leading brokerage houses.

One day, even though the bond prices still are climbing, a risk manager at the original local bank decides that the time has come to demand payment on the debts incurred by the drinkers at Helga’s bar. He so informs Helga. Helga then demands payment from her alcoholic patrons, but being unemployed alcoholics they cannot pay back their drinking debts.

Since Helga cannot fulfil her loan obligations she is forced into bankruptcy. The bar closes and Helga’s 11 employees lose their jobs.

Overnight, DRINKBOND prices drop by 90%. The collapsed bond asset value destroys the bank’s liquidity and prevents it from issuing new loans, thus freezing credit and economic activity in the community.

The suppliers of Helga’s bar had granted her generous payment extensions and had invested their firms’ pension funds in the BOND securities. They find they are now faced with having to write off her bad debt and with losing over 90% of the presumed value of the bonds.

Her wine supplier also claims bankruptcy, closing the doors on a family business that had endured for three generations, her beer supplier is taken over by a competitor, who immediately closes the local plant and lays off 150 workers. Fortunately though, the bank, the brokerage houses and their respective executives are saved and bailed out by a multibillion dollar no-strings attached cash infusion from the government.

The funds required for this bailout are obtained by new taxes levied on employed, middle-class, non-drinkers who have never been in Helga’s bar.

Now do we understand?

 

Since we're on the subject of slime, it's back to JP Morgan and MF Global.

Submitted by Roanman on Mon, 11/14/2011 - 11:39

 

The following is the punch line to a white paper by John Roe, and James L. Koutoulas, Esq. concerning the disposition of stolen assets trapped in the MF Global fiasco.

Click anywhere on the excerpt below for a very short and well written paper which also serves as a primer on the how, the what, the who and the why of commodities trading.

Way super double highly recommended. 

 

By subordinating customers with collateral in segregated funds to creditors of MF Global's estate, the Trustee is essentially making the creditors the beneficiary of a criminal act.  If MF Global comingled segregated funds with corporate assets, it was a criminal act.  Paying such a creditor's claim with a portion of those comingled funds would make them a beneficiary of that crime.  Paying JP Morgan with an Iowa farmer's money is not only morally and legally wrong, it risks the future of the American economic model.

 

Commodities accounts were reputed to be regulated by an entity of the federal government known as the Commodity Futures Trading Commission.

It's true mission however is to assist large Wall Street Banks in their theft of middle class America's wealth.

Click this little gear here for our recent piece concerning former Goldman Sachs great, Democratic Senator from New Jersey (is that better Robert?), Democratic Governor of New Jersey, well known Democratic and Obama fundraiser, and MF Global CEO John Corzine who famously lobbied the CFTC in order to prevent the instituition of rules associated with the Dodd-Frank legislation that would have prevented MF Global from commingling client's money with it's own and thus would have prevented this 630 million dollar theft.

 

Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives

Submitted by Roanman on Mon, 11/14/2011 - 05:41

 

In 2004 Alan J. Ziobrowski et al published a study titled “Abnormal Returns from the Common Stock Investments of the United States Senate which confirmed substantial market outperformance of investments made by members of United States Senate." Last week, Ziobrowski et al published a subsequent study titled Abnormal Returns From the Common Stock Investments of Members of the U.S. House of Representatives which finds as follows:

 

We find that stocks purchased by Members of the U.S. House of Representatives earn statistically significant positive abnormal returns. The returns outperform the market by 55 basis points per month (over 6% annually). As additional evidence of information advantage, the trade-weighted portfolio of purchased stocks significantly outperforms the equal-weighted portfolio indicating that Representatives invested much larger amounts in those stocks that performed best. The regression coefficients also suggest that House Members favor the common stocks of smaller growth companies with slightly above-average risk.

 

In sum, the findings from this study of the U.S. House of Representatives’ common stock transactions are generally supportive of the previous study of the U.S. Senate. We find strong evidence that Members of the House have some type of nonpublic information which they use for personal gain. That having been said, abnormal returns earned by Members of the House are substantially smaller than those earned by Senators during approximately the same time period. These smaller returns are due presumably to less influence and power held by the individual Members. The nature and source or sources of information is unknown, but clearly further research is warranted. We recommend that congressional committees should be studied for abnormal returns and indications that members of those committees may favor stocks in industries their committees oversee. Abnormal returns associated with the common stocks of specific industries or companies should be investigated for patterns of potential misconduct. We suggest the examination of the relationships between campaign contributions, common stock acquisitions, and abnormal returns.

 

Click anywhere above to link up to the paper.

 

Bob Seger and the Last Heard

Submitted by Roanman on Sat, 11/12/2011 - 16:33

 

If you are a Detroiter of a certain age, you have very distinct memories of hustling home after school to catch your favorite musical group lip sync their newest hit on Detroit's version of American Bandstand, Swingin' Time hosted by WKNR then CKLW disk jockey Robin Seymour.

They were all there as all of Motowns greats appeared, Mitch Ryder and the Detroit Wheels, The Amboy Dukes, Question Mark and the Mysterians, Parliment, The Stooges and I'm pretty sure the MC5 along with most of the national acts that came through town.

Dick Clark was wishing his show was so cool.

Long before the Silver Bullet Band was even a glimmer in Bob Seger's eye there was Bob Seger and the Last Heard and then the Bob Seger System.

This is a very young Bob Seger on vocals and cheesy organ, Pep Perrine on drums, Dan Honaker on bass and I'm pretty sure that's Carl Lagassa on guitar, performing what is in my opinion one of the greatest stories in the history of Rock and Roll and Bob Seeger's first local hit record.

Bob Seger and the Last Heard.

East Side Story.

 

 

Rule (1.29)

Submitted by Roanman on Thu, 11/10/2011 - 15:57

 

When somebody starts telling you the game is rigged in favor of the "Big Banks", this is exactly what they're talking about.

Click anywhere below for the entire Robert Lezner, Forbes article where you will learn that Former Goldman Sachs star trader, United States Senator, Governor of New Jersey, well know Obama bundler and MF Global CEO John Corzine met no fewer that 10 times with the Commodity Futures Trading Commission in order to see to it that this vile rule of the supposed government regulator, did not change as a result of Dodd-Frank.

 

MF Global May Have Used Customer Funds In The Losing $6.3 Billion Trade Without Informing Clients

 

After an intense day of investigation, I have just discovered  that a CFTC (Commodity Futures Trading Commission) rule(1.29) allowed  Jon Corzine’s MF Global to use the margin and cash in customers heretofore segregated accounts to amass a risky $6.3 billion investment in European sovereign debt that backfired. Nor did Corzine have the obligation to  inform any of these customers he was  gambling with their money. Or that he was intending to keep all the profits for himself and  his troubled firm. Nothing for the customers.

The language of Rule1.29 allows  “The investment of customer funds in instruments described in 1.29 shall not prevent the futures commission merchant (MF Global) or clearing organization so investing such funds and retaining as its own any increment or interest resulting therefrom.” Increment refers to any trading profits or gains.

The criminal division of the Justice Department in New York — as well as the SEC and the CFTC and members of Congress– are  investigating whether any laws were violated and if so, whether any criminal charges can be brought. As of 3pm today, there has been no sign of the missing $633 million. My sources believe it was probably grabbed by the institutions that made the margin calls on MF Global as the European bonds sank in value.

This shocking loophole, which is available to all  commodity traders, whether giant ones like Goldman Sachs or members of commodity exchanges,  means that huge risks are being taken with money that does not belong to the trading firms– without the customers having any idea of the danger they are in.  As Andy Abraham, a futures trader in Israel put it to me today;  “this means they can take segregated funds and leverage them to kingdom come. It means nothing is safe.”

This rule, which has been in effect since 1974, is shocking and highly irregular since it allows any futures dealer to use customers money for its own selfish purposes– and never inform its customers it is doing so. What’s even more unfair is that the dealer(MF Global) gets to keep all  the income and the trading profits, if any from a transaction that uses other people’s money– not its own house capital.  That is unless some prior arrangement about sharing profits was made privately beforehand with the client. None of the MF Global clients I’ve spoken to today had the foggiest notion about this arrangement– which at minimum is   outrageously unfair to the rule that the customer  comes first. All losses must be made  up by the dealer, which in this case may be totally impossible.

 

Just a small example of the rot that is our government.

 

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