MIKE

Posts Tagged ‘MFGlobal’

by Tyler Durden
12/23/2011
ZeroHedge

Yesterday, we breached the topic of the real decoupling that is going on: that between the macro and the micro (not some ridiculous geographic distribution of the US versus the world), by presenting David Rosenberg‘s thoughts on why Q4 GDP has peaked and why going forward it is energy prices that are likely to be a far greater drag on incremental growth than the preservation (not the addition as it is not incremental) of $10 per week in payroll taxes (which only affects those who are already employed), even as company earnings and profit margins have likely peaked. Today, following up on why the micro is about to return with a bang, and why fundamentals are about to become front and center all over again, albeit not in a good way, is, surprisingly, Morgan Stanley’s Mike Wilson, who has issued his loudest warning again bleary eyed optimism for the next year: “Think of 2012 as the “payback” year….when many of the extraordinary things that happened over the past 3 years go in reverse. I am talking about incremental fiscal stimulus, a weaker US dollar, positive labor productivity, and accelerated capital spending.” Said otherwise, 2012 is the year when everything that can go wrong in the micro arena, will go wrong. And this is why Morgan Stanley being bullish on the macro picture! As Wilson says, his pessimistic musing “tells the story for what to expect in 2012 assuming the situation in Europe doesn’t implode. In other words, this is not the macro bear case.” If one adds a full blown European collapse to the mix, then the perfect storm of a macro and micro recoupling in a deleveraging vortex will prove everyone who believes that 2012 will be merely a groundhog year (in same including us) fatally wrong.

Lastly, when it comes to predictions Morgan Stanley (which called the EURUSD short the hour Goldman put it on as a long) should be taken far more seriously than Goldman, which merely wants to be on the other side of its clients.

The complete very troubling forecast from Morgan Stanley:

by Mark H. Melin
December 21, 2011
ZeroHedge

Commodity Customer Coalition founder James Koutoulas is requesting that MF Global bankruptcy Judge Martin Glenn investigate three potential legal issues that are said to have occurred in transferring of MF Global assets.  The key issues include the fact that JP Morgan was able to purchase MF Global bonds at a discount without any open bidding process and the assets were apparently sold without disclosure to or approval from the U.S. bankruptcy court or trustees.  The third issue centers on JP Morgan seeking special favors from the Federal Reserve to receive priority treatment over investor segregated fund accounts.

The first such non-transparent movement of assets occurred when JP Morgan is said to have purchased MF Global’s Sovereign Debt at a significant discount without an open bidding process, paying $0.89 and later selling that debt to investor George Soros for $0.95.  No one is going to complain about JP Morgan generating profit.  However, purchasing assets of a bankrupt firm without an open bidding process or disclosure to the bankruptcy court and trustees is where JP Morgan may be in trouble, according to Mr. Koutoulas.  This sale could be subject to clawback provisions, legal experts speculate.  (On December 9, 2011 The Wall Street Journal reported the fact that bonds were moved to KPMG London office, which was the bankruptcy administrator, but at the time the article did not discuss sale details or approval through the bankruptcy process.  See “Corzine’s Loss May Be Soros’s Gain” by Gregory Zuckerman and Dana Cimilluca.)

The key issue is that such transfers is the bonds were purchased at a discount without open bidding and the process was not disclosed to or authorized by the U.S. Bankruptcy Court, according to Mr. Koutoulas.  “Who gave JP Morgan permission to purchase those bonds at a discount without open bidding?”

The second questionable movement of assets is said to have occurred when JP Morgan purchased MF Global’s stake in the London Metals Exchange (LME) without proper disclosure.  The event was widely reported at a basic level on November 28, 2011.  The larger issue, however, appears to center on the fact that such a transaction was not approved by the U.S. bankruptcy court and trustee.

“Was this disclosed in court?” Mr. Koutoulas rhetorically asked.  “No.  Was their trustee approval?  No.”

The third issue occurred in congressional testimony Thursday, December 15, 2011 where it was discovered JP Morgan asked the Federal Reserve to write a letter claiming that the segregated funds should not be categorized as client money.

“How many letters like this have they asked for in the past?  I want all the statistics regarding the number and content of letters,” Koutoulas questioned.  “JP Morgan wanted a ‘get out of jail free card’ from the Fed.  Guess what?  That doesn’t fly with me.”

“Their hubris is so severe.  They think we don’t know the industry, like we are Occupy Wall Street radicals or something and don’t have a clue or message,” Mr. Koutoulas said, noting that the CCC is comprised of experienced industry participants who understand the financial services industry from the inside.

Mr. Koutoulas seeks to solve the problem with JP Morgan without dragging the issue through court.  In speaking to JP Morgan, Mr. Koutoulas said “Listen, you are buying vulture MF Global claims at $0.86 ½ on the dollar.   Why don’t you pay a fair price of $0.97 ½ take the customers out of the bankruptcy and we will indemnify you from any class actions resulting from this.”  A vulture claim occurs when an MF Global claimant such as a farmer or small business person is in desperate need of cash and sells their claim to someone such as JP Morgan, who purchases the claim at a lower rate than the value at maturity.  In this example if JP Morgan purchased the claim at $0.87 and all clients were eventually “made good” JP Morgan would receive the par value of $1.00.  With the MF Global bankruptcy proceedings apparently moving along much quicker than expected, JP Morgan stands to potentially make a quick 13% return on such vulture claims.

Mr. Koutoulas reports that JP Morgan would not even discuss the issues.  “I can see that you disagree with me,” said Mr. Koutoulas, whose organization represents over 7,000 MF Global clients, mostly professional investors.  “They won’t even meet with me and talk with me.”

Mr. Koutoulas is currently working Pro Bono and many of the lawyers are working at a highly discounted rates and requested that industry participants donate to help .  “I need professional litigators and bankruptcy attorneys backing me up,” said Northwestern Law School grad Koutoulas who also operates Typhon Capital Management, which is an NFA-registered Commodity Trading Advisor and Commodity Pool Operator.  “We’ve had an outpouring of lawyers who want to help,” Mr. Koutoulas said, sitting with a young Yale Law School grad as we spoke.

In calling on MF Global presiding bankruptcy Judge Glenn to investigate these issues, Mr. Koutoulas is rallying the futures industry to boycott use of JP Morgan.  “Call your FCM and if they are using JP Morgan say ‘We won’t do business with you if you work with JP Morgan,’” he said, requesting that industry participants get on Twitter and follow the #BoycottJPM hash tag.

Another example of why you should choose physical gold and silver rather than the paper counterpart. These derivatives are simply way too over leveraged and when the music stops someone is going to be left without a chair and the one sitting will most likely be JPMorgan or Goldman Sachs. And don’t expect the government to do anything about it. Lawrence Lepard describes the heist below:

By Lawrence Lepard
November 18, 2011
ZeroHedge

Imagine you are Ben Bernanke, or on the Board of Governors of the Federal Reserve. The time frame is July and August of 2011 and the price of gold is on a tear. Commodities inflation has been persistent and is breaking out everywhere. Your prediction that inflation “is contained” and is a “temporary phenomena” are beginning to look absurd. What do you do?

Simple. Hint that QE3, the primary drive of inflation, is coming and then fail to deliver at the September FOMC meeting. That takes care of the price of gold and the gold stocks. Ah, but those pesky commodities speculators keep making money and trading against what you want the markets to do. So what is to be done there? Hey Jon Corzine, how about you tank the largest broker for the small commodities punters in the world, and we let them twist in the wind? That will serve them right. Teach them to bet against the government approved scenario.

Think it did not happen? Well think again. All of the pieces fit. It sure is convenient that all those commodities speculators are now out of the box. Also, who will want to speculate on commodities in the future given customer funds are no longer protected. Furthermore, commodities speculators are not a very “All American” group. From the authorities point of view they can say: screw them, who will feel sympathy? Hell, James Bullard, Fed Governor, in an interview on CNBC yesterday said the MF Global collapse proves that the system works. Yes it does Jim, for you. Personally, I have $90,000 at MF Global and I would like to have my honestly earned money returned. Unfortunately, the odds of that happening any time soon seem slim. In part because when MF Global entered bankruptcy the judge appointed a Trustee whose law firm has done substantial work for JP Morgan, a deeply interested party. We will probably never find out what happened here. But for those of us whose eyes are open the results speak for themselves.

This whole mess stinks to high heaven. I am with Gerald Celente, if the largest commodity broker in America can go bankrupt and nothing is done, then where can you put your money and expect it to be safe? I, for one, do not accept that Jon Corzine is stupid enough to lever up MF Global 40:1 and use the proceeds and customer money to bet on European sovereign debt. This was a hit, pure and simple. That is why there is no resolution to the problem, and it is just another example of the deeply corrupt US political/financial axis. It may take money away from a bunch of commodities speculators, and it may cool down the perceived inflation, but it is just another hole in the dike which is The US Financial System. A dike whose life can probably now be measured in months, not years.

Read the entire article HERE.