Archive for 2010

John Paulson Needs A Good Lawyer

Simon Johnson’s view of the charges against GS for fraud is more optimistic than those of several other commentators – he sees this development as a first step towards examining the fraud at the heart of Wall Street. – Ilene 

John Paulson Needs A Good Lawyer

Courtesy of Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown, at Baseline Scenario 

Of all the reactions so far to various dimensions of Goldman fraudulent securities “Fab” scandal, one stands out.  On Bill Maher’s show, Friday night, I argued that John Paulson – the investor who helped design the CDO at the heart of the affair – should face serious legal consequences. 

On the show, David Remnick of the New Yorker pointed out that Paulson has not been indicted.  And since then numerous people have argued that Paulson did nothing wrong – rather that the fault purely lies with Goldman for not disclosing fully to investors who had designed the CDO.

But this is to mistake the nature of the crime here – and also to misread the legal strategy of the SEC.

The obvious targets are Goldman’s top executives, whom we know were deeply engaged with the housing side of their business in early 2007 – because it was an important part of their book and they were well aware that the market was in general going bad.

Either Goldman’s executives were well aware of the “Fab” and its implications – in which case they face serious potential criminal and civil…
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Simon Johnson: “If John Paulson Avoids Charges, It Shows How Broken Our System Is”

Courtesy of Tyler Durden

“[Goldman] designed something intentionally complex that’s basically a mechanism of transferring money from you to John Paulson. John Paulson, it is true, has not been charged with anything. But he was involved in designing the security. For all we know right now it was probably his idea and if he walks away without being charged, it shows how broken our system is.” This is Simon Johnson discussing the Goldman fraud charges on Friday night with Bill Maher. Could the public’s attention now be shifting ever more toward those top performing hedge fund managers who year after year made billions, and instead of praising them for their acumen, are now seeing a sentiment shift toward one of wealth merely as a result of massive criminal collusion between the hedge funds and the big banks… well big bank, cause Goldman is really all that’s left of the traditional broker/dealer complex. Which once again invokes our long-standing point: the DOJ should immediately break up Goldman Sachs into many smaller entities, due to the firm’s unquestionable (allegedly) criminal monopolistic impact on the marketplace. Christine Varney – wake the #&$* up! And whatever happened to that FBI investigation into SAC? Will Stevie Cohen be next as the mid-term elections approach and the public demands blood from someone?

Watch the Simon Johnson interview on Bill Maher 7 minutes into the clip below. The entire 10 minute clip is worthy of your attention.

Below is the full Q&A following the show, in which the case for accelerated action against Goldman by the administration is made.





Merrill Lynch Accused of Same Fraud as Goldman Sachs; Tip of the Iceberg of Fraud Charges

Merrill Lynch Accused of Same Fraud as Goldman Sachs; Tip of the Iceberg of Fraud Charges

Courtesy of Mish 

Merrill Lynch now stands accused of the same fraudulent actions as Goldman Sachs. Please consider Merrill Used Same Alleged Fraud as Goldman, Bank Says

Merrill Lynch & Co. engaged in the same investor fraud that the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of committing, according to a bank that sued the firm in New York last year.

Cooperatieve Centrale Raiffeisen-Boerenleenbank BA, known as Rabobank, claims Merrill, now a unit of Bank of America Corp., failed to tell it a key fact in advising on a synthetic collateralized debt obligation. Omitted was Merrill’s relationship with another client betting against the investment, which resulted in a loss of $45 million, Rabobank claims.

“This is the tip of the iceberg in regard to Goldman Sachs and certain other banks who were stacking the deck against CDO investors,” said Jon Pickhardt, an attorney with Quinn Emanuel Urquhart Oliver & Hedges, who is representing Netherlands-based Rabobank.

Goldman Sachs, the most profitable securities firm in Wall Street history, created and sold CDOs tied to subprime mortgages in early 2007, as the U.S. housing market faltered, without disclosing that Paulson helped pick the underlying securities and bet against them, the SEC said in a statement yesterday.

The SEC allegations are “unfounded in law and fact, and we will vigorously contest them,” Goldman said in a statement.

“When one major firm becomes aware of the creative instrument of others, there is historically an effort to replicate them,” said Jacob Frenkel, a former SEC lawyer now in private practice in Potomac, Maryland.

SEC spokesman John Heine declined to comment on whether it is investigating Merrill’s actions.

Merrill loaded the Norma CDO with bad assets, Rabobank claims. Rabobank seeks $45 million in damages, according to a complaint filed in state court in June 2009. Rabobank initially provided a secured loan of almost $60 million to Merrill, according to its complaint.

No Surprise

That Merrill Lynch now stands accused should not surprise anyone. Nor will it be any surprise if Morgan Stanley and Citigroup are accused of similar dealings. Indeed, it may be interesting to see who is not accused.

Goldman’s statement The SEC allegations are “unfounded in law and fact, and we will vigorously contest them” is an interesting theoretical debate.

Accusations that Goldman…
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Yesterday Germany, Today UK, Tomorrow The World: Goldman’s Response To Lawsuits By Everyone – Q1 Stub Bonuses!

Courtesy of Tyler Durden

As expected, the line of people preparing to sue Goldman is now longer than the posers who bought the iPad on launch day. Reuters reports that British Prime Minister Gordon Brown, who himself has been in hot water over his much lamented decision to sell UK’s gold despite protests from the BOE and likely under the guidance of Goldman and JPM, wants an investigation into the Goldman affair by the FSA, and is saying that impacted UK banks will be considering legal action. Furthermore, GB slammed Goldman after the TimesOnline reported that Goldman will pay $5.6 billion in bonuses for just three months work, including 600 million pounds for London-based staff. Among other things, the ratings-strapped politician, who as recently as ten years ago was doing the bidding precisely of Goldman and its cronies when dumping the gold stash, accused the bank of “moral bankruptcy.” We assume is referring to Chapter 11. Of course, that would imply that Brown’s hypocrisy should be sufficient for immediate Chapter 7 liquidation proceedings.

From Reuters:

Brown, who is fighting an election campaign, piled pressure on Wall Street’s most powerful bank, accusing it of “moral bankruptcy” over reported plans to pay big bonuses.

“I want a special investigation done into the entanglement of Goldman Sachs and the companies there with other banks and what happened,” Brown told BBC television.

“There are hundreds of millions of pounds have been traded here and it looks as if people were misled about what happened. I want the Financial Services Authority (FSA) to investigate it immediately,” he said.

“I know that the banks themselves will be considering legal action,” Brown said, apparently referring to European banks that lost money on the product marketed by Goldman Sachs.

“We will work with the Securities and Exchange Commission in the United States,” he said.

A spokeswoman for the FSA declined comment. “We would never confirm or deny we are investigating anybody,” she said.

And here is the latest confirmation that Goldman is pursuing nothing less than a first derivative of accelerated wealth transfer before the world ends: the Times of London has discovered that the firm is paying an unprecedented stub bonus of $5.6 billion for the first quarter. Goldman knows its days are numbered so it will pay off as much as it…
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A Goldman Opportunity for Reform?

Courtesy of Leo Kolivakis

Please read my latest entry and post your comments here:

http://pensionpulse.blogspot.com/2010/04/goldman-opportunity-for-reform.html

Thank you,

Leo Kolivakis





GS, the SEC and Timing

Courtesy of Bruce Krasting

It is possible that the SEC investigation into the bad acts of Goldman Sachs evolved over a period of time and the decision to announces formal charges just happened to take place on Friday. I doubt that very much.

A few thoughts:

-This investigation has been ongoing for a long time. At some point we will know when it was initiated and when Goldie became aware of it. Reuters has a report quoting an unnamed source that the Wells Notice relating to the SEC inquiry was delivered six months ago. My own instincts on this are that is was even longer than that. This could easily have been going on for a year.

-Mary Schapiro (head of SEC) does not go to the bathroom without first checking with Rahm Emanuel. To say that this is a high profile case is a silly understatement. This is THE case of the century. The decision to go forward with a public complaint last Friday was done with the President’s knowledge and approval.

-Everyone in D.C. has been pointing to the financial markets as a measure of the “success” of their policies. They point to DOW 11,000, they point to narrowing credit spreads, and they look at wealth creation as the “report card” which validates their actions. I don’t believe these folks are stupid at all. They knew full well that the initial reaction of the markets would be very broadly negative. They must have considered that the SEC action could have lasting consequences to the capital markets. They knew that they had spent a kings ransom to bring the banks back to life, they must also know that this step could have the effect of undermining all of that.

Given the foregoing I have to assume that at some point the SEC sat down with Blankfein and said, “Do you want to pay a big fine, not admit any guilt and agree to be good boys in the future?” Again a guess: If on Friday the announcement had been that GS had agreed to a $3b fine and the case was closed GS’s stock would have risen and the broad market would not be worrying about how sloppy things are going to be in the next few weeks. I think Blankfein would have written a very big check to avoid the…
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High-Frequency Trading as High-Tech Robbery

High-Frequency Trading as High-Tech Robbery

By MIKE WHITNEY writing at CounterPunch 

train robbery, picture from wikimediaThe Securities and Exchange Commission (SEC) knows that High-Frequency Trading (HFT) manipulates the market and bilks investors out of tens of billions of dollars every year. But SEC chairman Mary Schapiro refuses to step in and take action. Instead, she’s concocted an elaborate "information gathering" scheme, that does nothing to address the main problem. Schapiro’s plan--to track large blocks of trades by large institutional investors-- is an attempt to placate congress while the big Wall Street HFT traders to continue to rake in obscene profits. It achieves nothing, except provide the cover Schapiro needs to avoid doing her job.

High-frequency trading (HFT) is algorithmic-computer trading that finds "statistical patterns and pricing anomalies" by scanning the various stock exchanges. It’s high-speed robo-trading that oftentimes executes orders without human intervention. But don’t be confused by all the glitzy "state-of-the-art" technology. HFT is not a way of "allocating capital more efficiently", but of ripping people off in broad daylight.

It all boils down to this: HFT allows one group of investors to see the data on other people’s orders ahead of time and use their supercomputers to buy in front of them. It’s called frontloading, and it goes on every day right under Schapiros nose.

In an interview on CNBC, HFT-expert Joe Saluzzi was asked if the big HFT players were able to see other investors orders (and execute trades) before them. Saluzzi said, "Yes. The answer is absolutely yes. The exchanges supply you with the data, giving you the flash order, and if your fixed connection goes into their lines first, you are disadvantaging the retail and institutional investor."

The brash way that this scam is carried off is nearly beyond belief. The deep-pocket bank/brokerages actually pay the NYSE and the NASDAQ to "colocate" their behemoth computers ON THE FLOOR OF THE EXCHANGES so they can shave off critical milliseconds after they’ve gotten a first-peak at incoming trades. It’s like parking the company forklift in front of the local bank vault to ease the transfer of purloined cash. Due to the impressive research of bloggers like Zero Hedge’s, Tyler Durden and Market Ticker’s, Karl Denniger, many people have a fairly good grasp of HFT and understand that the SEC needs to act. But Schapiro has continued to drag her feet while issuing endless proclamations about pursuing the wrongdoers. She needs to…
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Wealth Dispersion and General Thoughts on the Future of Economics on a Saturday Afternoon

Wealth Dispersion and General Thoughts on the Future of Economics on a Saturday Afternoon

Courtesy of Jesse’s Americain Cafe

Image Of Thinking Man's Brain Through Bowler Hat

Here is an interesting graph of wealth distribution, or dispersion, as I call it from Cherchez La Verite.

I am not sure I agree with his conclusions or even his premise, not because I disagree but because it requires some thinking and leisure to digest it. But the data is most interesting.

I wonder if any of the quant economists have performed simulations on virtual populations, and then examined the results of varying different tax rates, and concentrations of wealth because of fiscal policy and regulatory structure, among other things.

I have an hypothesis that great concentrations of wealth lead to economic stagnation, but I am afraid that I have not the means or the talent anymore to conduct that type of research.

The difficulty in a study like this is that the assumptions are greatly magnified into the results. If you assume certain buying, spending, and savings behaviours, the downstream impact can greatly alter, and even distort, the outcomes.

And when people reason through this verbally, rather than perform a structured simulation based on transactions, the distortions increase by an order of magnitude or more based on their own biases.

I used to create simulations like this all the time, for industrial and commercial purposes, and also did a decent amount of econometric modeling. So I am sure someone is doing it somewhere. But I suspect they are doing it in think tanks and places where the outcome is predetermined by the basis of their grant.

Concentrated wealth magnifies the needs and predispositions of the holder. Since the amount they require for basic necessities can only consume so much, one would think that the amount spent on the aggregate of necessities will eventually be reduced. And what they do with their excess of necessity wealth is going to be greatly influenced by their character. Are they a gambler, who inherited the wealth? Are they productive and beneficent? Are they dissolute and venal?

And what about government? Taxation can concentrate enormous wealth in the government. What sort of government does one have, or does one assume? Are they warlike, productive, redistributive, and how corrupt? What about corporations? They can be like small governments, and levy taxes through monopoly…
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Janet Tavakoli: Did Goldman Sachs Commit Fraud?

Janet Tavakoli: Did Goldman Sachs Commit Fraud?

Courtesy of JESSE’S CAFÉ AMÉRICAIN

Highlights:

Yes. The only thing that was surprising how long the SEC took to do it.

The complaint does not go quite far enough. It was a blatant fraud, more than just a failure to disclose information.

And this may be the beginning of a lot of questions about a lot of investment banks. It has massive implications IF the SEC does its job right, which they have not done in the past. 

  Tavakoli Structured Finance 


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Guest Post: Floating Alternative To Nabucco Pipeline Moving Toward Implementation

Courtesy of Tyler Durden

Submitted by Yossef Bodansky of OilPrice.com

Floating Alternative to Nabucco Pipeline Moving Toward Implementation

Romania, Azerbaijan, and Georgia on April 13, 2010, took a major step toward the implementation of a substitute energy distribution network to substitute for the US-backed Nabucco strategic gas pipeline complex.

Azerbaijan Minister of Industry and Energy Natik Aliyev, Romanian Minister of Economy, Commerce and Business Environment Adriean Videanu, and Georgian Energy Minister Alexander Khetaguri met in Bucharest to sign a new agreement in the gas sector. The new agreement constitutes an expansion of the late February agreement that was limited to LNG exports to Romania. The new agreement set forth modalities for exporting LNG to the rest of the European Union (EU) via Romania. The new project will now be known as the Azerbaijan-Georgia-Romania-Interconnection project (AGRI).

The April 13, 2010, agreement also included specific modalities for the joint construction of two terminals to transport natural gas from the Caspian Sea to Europe across the Black Sea, as well as the setting up of an AGRI headquarters in Bucharest in the next few months.

Bucharest considers the new agreement to be a milestone in the development of natural gas exports to the EU. “Romania will insist this one becomes one of the priority projects at the European level,” Videanu said at the signing ceremony. “The project brings energy resources from the Caspian zone to the EU.” With the AGRI online, he stressed, Romania would play “a very important rôle” in gas supplies to Europe. The AGRI agreement aimed to provide for “possible avenues for gas transit diversification to Europe from Azerbaijan”, explained another senior Romanian official.

For political reasons, all senior officials were quick to state that the new AGRI was not competition to Nabucco, let alone a substitute, despite the reality that this was, in fact, an almost inevitable outcome of AGRI. For example, the Romanian Ambassador to Azerbaijan Nikolae Ureke noted that AGRI was intended to fill in the gaps created by continued delays in the Nabucco project. “The reason of nonrealizability of this project is the shortcoming of finance. We hope that Nabucco project will be realized next year as planned. AGRI project isn’t a competitor for Nabucco, it is a complementary project. Europe needs alternative projects for guarantee of energy sources. It would cause the falling of a high gas price.” SOCAR…
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Phil's Favorites

US House condemns Donald Trump's racist tweets - why his language is so dangerous

 

US House condemns Donald Trump's racist tweets – why his language is so dangerous

Courtesy of Natasha Lindstaedt, University of Essex

President Donald Trump has been denounced by the US House of Representatives for tweets attacking four Democratic Congresswomen of colour calling on them to “go back and help fix the totally broken and crime infested places from which they came”. The resolution, which passed by 240 to 187 votes on July 16, condemned the “racist comments that have legitimised fear and hatred of New Americans and people of colour”.

In response to Trump’s threat, the four...



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Kimble Charting Solutions

Aussie Dollar About To Send Bullish Message To Precious Metals?

Courtesy of Chris Kimble.

The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).

And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.

But this setup may be changing soon as a big test comes into play for the AU$.

It is currently testing falling resistance on a bullish falling wedge pattern.

If it succeeds in breaking out at (1), it will send metals and commodities a short-term bullish message. Stay tuned!

This article was first writ...



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Zero Hedge

Three Iranians Caught Smuggling "Many Tons" Of Nuke-Related Material Out Of US

Courtesy of ZeroHedge. View original post here.

A major case involving three Iranian citizens who for years allegedly smuggled nuclear related materials into Iran from a US broker has been revealed this week in a New York federal court. 

The scheme involved illegally exporting "many tons" of carbon fiber out of the United States between 2008 and 2013, which federal prosecutors say violated existing US sanctions and a UN em...



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Insider Scoop

Cannabis Stocks Gainers And Losers From July 17, 2019

Courtesy of Benzinga.

Read more about our latest Cannabis News! CANNABIS HOME Gainers
  • Aurora Cannabis (NYSE: ACB) shares rose 3.49%, to close at $7.41.
  • Aphria (NYSE: APHA) shares increased by 3.97% to close at $6.55.
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Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

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Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

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Some other great content in this free eBook includes:

 

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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