Posts Tagged ‘Louise Story’

NYT Muffs Merrill/Magnetar Piece (And Why is No One Investigating the Related Bonus Fraud?)

NYT Muffs Merrill/Magnetar Piece (And Why is No One Investigating the Related Bonus Fraud?)

By Yves Smith and Tom Adams, an attorney and former monoline executive, at Naked Capitalism 

Radar Marking an Earthquake's Epicenter

Louise Story has penned what presents itself as an important story at the New York Times, one that charges Merrill Lynch with misrepresenting the size of its subprime, specifically, collateralized debt obligation exposures, in the runup to the global financial crisis. The ruse the article depicts is a CDO called Pyxis., which purportedly served as a dumping ground for exposures Merrill could not unload. Initially, Merrill was able to escape reporting these positions because it claimed to have hedged the risk. In fact, the hedges failed, the bank was ultimately on the hook and was later forced to ‘fess up to the magnitude of its holdings. This revelation sounds juicy in that Citigroup and some of its recent senior executives paid fines to the SEC for similar, albeit less convoluted-sounding, misconduct.

But in fact, the story is astonishingly incomplete, to the point of being misleading. While Merrill’s probable accounting improprieties are noteworthy and merit investigation by the authorities, they are not the most important element of this episode. CDO abuses amounted to accounting fraud to enable employees and executives to loot their companies. Moreover, they were not perpetrated by isolated actors, but were part of what Bill Black calls a criminogenic environment.

To put it more simply, if you think Merrill’s misrepresentations to investors are a big deal, they are only a small aspect of the bigger, and frustratingly largely untold, tale of the role of CDOs in the crisis. CDOs were the epicenter of the upheaval, the device that magnified a what otherwise would have been contained subprime bubble into an economy-wrecking meltdown. When the music stopped, it was the dealers themselves that wound up holding much of the toxic paper they’d created. AAA rated CDOs went from haircuts of 2-4% in early 2006 to 95% in later 2007. The collapse in CDO valuations and the resulting inability to use CDOs as collateral for repo was a major, if not the major, cause of dealer illiquidity and insolvency which resulted in massive bailouts and backdoor subsidies.

Accounts like Ms. Story’s are blind man and the elephant affairs: at best, they do a good enough job of depicting, say, the trunk, but leave the beast…
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Ratigan Deconstructs Goldman, Connecticut AG Blumental Wants Criminal Charges Filed

Ratigan Deconstructs Goldman, Connecticut AG Blumental Wants Criminal Charges Filed

Courtesy of Tyler Durden

We expected Dylan to explode during today’s show. We were disappointed as he somehow managed to contain it, and did a pretty good recap of the Goldman affair (if a little too many matchbox cars on the show for our taste). The notable take home for us was that CT AG Blumenthal said that "criminal charges have to be pursued against Goldman." We are sure Cuomo is not too far from this line of thinking. And we would be remiss if we did not point out that credit has to be given where it is due: Gretchen Morgenson (whom half the blogosphere was bashing a month ago over semantics) and Louise Story broke the entire story 4 months ago, and the SEC complaint reads verbatim from the authors’ December 24 article.

Visit msnbc.com for breaking news, world news, and news about the economy


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Investigation Begins Into E&Y's Role In Connection With Lehman's Repo 105 Scam

Investigation Begins Into E&Y’s Role In Connection With Lehman’s Repo 105 Scam

Courtesy of Tyler Durden

Fox Business reports that the investigation around Lehman is intensifying. Surely the SEC, now generically equated with objects that float around in sewers in formal conversation, has realized it has to do something, anything, to find at least one scapegoat for the financial collapse. Which is why we read with little surprise Gasparino’s report that "thee SEC has ramped up its inquiry into Lehman’s fall, particularly after court-appointed bankruptcy examiner Anton Valukas issued a lengthy report stating that Lehman’s top executives were “grossly negligent” in possibly hiding the risky nature of the firm’s finances during its final day." What we find much more interesting is that "yet another investigative agency, the Public Accounting Oversight Board — created under the 1992 Sarbanes-Oxley law to investigate and discipline public accounting firms — has launched an inquiry into the role of Lehman’s auditor, Ernst & Young, following the examiner’s report, which accused the big accounting firm of “professional malpractice,” for its work in approving accounting techniques Lehman used during its dying days in the summer of 2008." In the absence of any Wall Street villains, which it is now all too clear have endless diplomatic immunity from prosecution by the corrupt regulators, will the auditor, together with Dick Fuld, be made into the sacrificial lambs? Or will we continue the farce that anything even remotely related to capital markets integrity and reporting is real and valid? Judging by the nearly 60 days of no S&P downticks, the market has answered that question for us.

More from Gasparino:

It was the use of one of those accounting techniques, known as Repo 105, which appears to be at the top of the list of investigators, people with knowledge of the inquiry say. The use of the accounting technique, which is designed to temporarily lower the amount of “leverage,” or borrowing a firm uses to stay afloat thus lowering its risk levels, isn’t necessarily illegal. In fact, Lehman sought and received a favorable opinion from Ernst & Young to use the technique in 2008.

But what might fall afoul of the securities laws, according to people close to the inquiry, is if Lehman turned to the gimmick in a concerted effort to hide its risk level. One person with knowledge of the inquiry say investigators


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Phil's Favorites

Why Facebook created its own 'supreme court' for judging content - 6 questions answered

 

Why Facebook created its own ‘supreme court’ for judging content – 6 questions answered

Facebook’s new Oversight Board affirmed the social media network’s ban on Donald Trump. AP Photo/Jeff Chiu

Courtesy of Siri Terjesen, Florida Atlantic University

Facebook’s quasi-independent Oversight Board on May 5, 2021, ...



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Zero Hedge

Kolanovic: Most Are Unprepared For The Coming Persistent Inflation Shock

Courtesy of ZeroHedge View original post here.

For the past two years, JPMorgan's head quant and resident permabull, Marko Kolanovic, has been periodically predicting an imminent rotation out of growth and into value stocks (a rotation which had failed to take hold until earlier this year when we finally saw some glimmers of value outperformance). Most recently, Kolanovic predicted in February that March would see a major move higher in commodity names as vol-control funds and CTAs started buying up commodity and reflation-linked stocks on the 1 year anniversary of the covid crash only to see the energy sector slump in the next two mont...



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Biotech/COVID-19

India COVID crisis: four reasons it will derail the world economy

 

India COVID crisis: four reasons it will derail the world economy

India is the fifth largest economy in the world. Deepak Choudhary/Unsplash

Courtesy of Uma S Kambhampati, University of Reading

The second wave of the pandemic has struck India with a devastating impact. With over 300,000 new cases and 3,000 deaths across the country each day at present, the total number of deaths has just passed the 200,000 mark – that’s about one in 16 of all COVID deaths across the world....



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Digital Currencies

Historic Reversal: For The First Time Ever Ether Options Trading Volume Surpasses Bitcoin's

Courtesy of ZeroHedge View original post here.

The world is gradually realizing that whereas bitcoin is a one-trick pony (one which may or may not be replaced by central bank digital currencies), it is ethereum that is the truly revolutionary architecture powering the new digital realm. We saw this on Monday when not only did ethereum soar as bitcoin prices stagnated, but that's also when Crypto derivatives exchange Deribit experienced an unusual trend for the first time ever: its ether (ETH) options trading volume (...



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Chart School

Yellen can not stop the dollar decline

Courtesy of Read the Ticker

Printing money results in a lower currency, so long as the currency does not fall too fast.

Previous Post: US Dollar Forecast - Weakness

Here are the very strong fundamentals for a lower US dollar: 

(a) US inflation exploding.
(b) Massive US twin deficits.
(c) Better conditions in Europe.

However French election worries in 2022 Q1 and Q2 may provide US dollar strength (via European weakness) after Christmas, but this strength may come after a low in the DXY near $84.  

It looks like Yellen knows a down swing in the US dollar is near because ...

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Politics

If China's middle class continues to thrive and grow, what will it mean for the rest of the world?

 

If China's middle class continues to thrive and grow, what will it mean for the rest of the world?

Over the past few decades, hundreds of millions of Chinese citizens have become part of the middle class. AP Photo/Ng Han Guan

Courtesy of Amitrajeet A. Batabyal, Rochester Institute of Technology

China’s large and impressive accomplishments over the past four decades have spurred scholars and politicians to debate whether the decline of the West – including the ...



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ValueWalk

Managing Investments As A Charity Or Nonprofit

By Anna Peel. Originally published at ValueWalk.

Maintaining financial viability is a constant challenge for charities and nonprofit organizations.

Q4 2020 hedge fund letters, conferences and more

The past year has underscored that challenge. The pandemic has not just affected investment returns – it’s also had serious implications for charitable activities and the ability to fundraise. For some organizations, it’s even raised doubts about whether they can continue to operate.

Finding ways to generate long-term, sustainable returns for ...



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Kimble Charting Solutions

Will Historic Selloff In Treasury Bonds Turn Into Opportunity?

Courtesy of Chris Kimble

Long-dated treasury bonds have been crushed over the past year, sending ETFs like TLT (20+ Year US Treasury Bond ETF) spiraling over 20%.

Improving economy? Inflation concerns? Perhaps a combination of both… interest rates have risen sharply and thus bond prices have fallen in historic fashion.

Today’s chart looks at $TLT over the past 20 years. As you can see, the recent decline has truly been historic. $TLT’s price has swung from historically overbought highs to oversold lows.

At present, the long-dated bond ETF ($TLT) is trading 7.8% below its 200-...



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Mapping The Market

Suez Canal: Critical Waterway Comes to a Halt

 

Suez Canal: Critical Waterway Comes to a Halt

Courtesy of Marcus Lu, Visual Capitalist

The Suez Canal: A Critical Waterway Comes to a Halt

On March 23, 2021, a massive ship named Ever Given became lodged in the Suez Canal, completely blocking traffic in both directions. According to the Suez Canal Authority, the 1,312 foot long (400 m) container ship ran aground during a sandstorm that caused low visibility, impacting the ship’s navigation. The vessel is owned by Taiwanese shipping firm, Evergreen Marine.

With over 2...



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Promotions

Phil's Stock World's Weekly Webinar - March 10, 2021

Don't miss our latest weekly webinar! 

Join us at PSW for LIVE Webinars every Wednesday afternoon at 1:00 PM EST.

Phil's Stock World's Weekly Webinar – March 10, 2021

 

Major Topics:

00:00:01 - EIA Petroleum Status Report
00:04:42 - Crude Oil WTI
00:12:52 - COVID-19 Update
00:22:08 - Bonds and Borrowed Funds | S&P 500
00:45:28 - COVID-19 Vaccination
00:48:32 - Trading Techniques
00:50:34 - PBR
00:50:43 - LYG
00:50:48 - More Trading Techniques
00:52:59 - Chinese Hacks Microsoft's E...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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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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