LTCM General Counsel: "The U.S. Stared Near-Catastrophe In The Eye, With LTCM, And Decided To Double Down."

Must read interview by Kathryn Welling with James Rickards, former General Counsel of Long-Term Capital Management. His observation that the financial system is now as risky as it was back then is something that modern bankers will hear and thoroughly forget immediately, only to be reminded once everything collapses once again: "What strikes me now, looking back, is how nothing was changed: no lessons were applied. Even though the lessons were obvious, in 1998. LTCM used fatally flawed VaR risk models. LTCM used too much leverage. LTCM transacted in unregulated over-the-counter derivatives instead of exchange traded derivatives. So risk models needed to be changed, or abandoned. Leverage had to be slashed. Derivatives had to be traded on exchanges or cleared through clearinghouses. Regulatory oversight needed to be ramped up... The government did just the opposite. Glass-Steagall was repealed in 1999, so that banks could become hedge funds. The U.S., in effect stared near-catastrophe in the eye, with LTCM, and decided to double down."

Goodbye David Paterson? Governor's Top Aide Holds Emergency Meeting With Entire Staff, Topic Unknown (But Likely Guessed)

Update: Nope. It's not what everyone expected. MSNBC reports this is the resignation of the director of communications. It appears Patterson is sticking until the bitter end.

Is this the end for troubled New York Governor David Paterson? The Wall Street Journal has just reported that "his top aide is convening an emergency meeting of the administration's entire staff Thursday afternoon. Larry Schwartz, the governor's chief of staff, alerted the staff about the 2:30 p.m. EST meeting by email on Thursday, but didn't specify what would be discussed." One thing is certain: the New York governor, presiding over a state which recently was declared to be out of cash as early as March (so, well, now), will likely be all to happy to hand over the baton to his replacement, most likely current AG Cuomo.

Fannie Follow Up: Change In Lending Rules To Non-US Financials Leaves Ten Banks In The Cold

Traders said that amidst all the rumors, market sources have cited a Fannie Mae business change that was said by sources to involve Fannie Mae restricting its non-US-bank lending in the fed funds rate market to the following list of 10 banks (US banks not
changed): Deutsche Bank, ING, BNP, Barclays, Lloyds, RBS, Scotia, Ntl Bank of Canada, RBC and Toronto Dominion. Thus it would be "substantially reducing" its list of banks by "what was thought to be dozens" of banks, said a trader; it appeared there was no reason given.

Marc Faber: "I Would Recommend People Buy Every Month Some Gold For Ever"

Marc Faber's latest thoughts on the euro (not good), on Greece (also not too good), and gold (good to quite good). "I don't think it will work out, and I think other countries like Spain and probably Portugal (and Italy) will then also have to be bailed out eventually, and it will lead to more monetization in Europe, one of the reason the euro has been so week... The pain of the austerity will be very, very burdensome on Greece, and eventually the economy can not grow with the kind of budget they will have to enact, and under these conditions their currency is way overvalued (they are in the euro). And so without the ability to grow, their ability to pay the interest and repay the debt will actually diminish.... I think everybody should accumulate some gold over time. I would recommend people to buy every month some gold for ever."

Short Sale Ban V2 Coming? Germany's Regulator To Require Short Financial Position Disclosure

Yesterday CDS speculators, today financial shorts, tomorrow the world. German regulator BaFin has learned absolutely nothing from America's 2008 brush with the short sale ban, and has announced that it is tightening disclosure rules on short-selling as related to ten financial company shares, saying it "wanted to ensure the stability of the financial system" is preserved. Ah, the old "if-the-world-is-threatened-by-vicious-speculators-you-must-acquit-of-irresponsible-fiscal-policies-and-mismanagement" defense. Additionally, BaFin, which is still trying to figure out just who it was that got cremated on the most ridiculous short squeeze ever (i.e., Volkswagen) said that the move was made necessary "by the need for the regulator to be informed quickly to take "targeted action" should such activity pose risks."

Is BlackRock The "Mysterious" Direct Bidder?

Rumors swirling earlier this morning that the identity of the heretofore unknown direct bidder may be none other PIMCO competitor BlackRock. In part these rumors have been fuelled by an earlier WSJ article "BlackRock plays it safe - Treasuries" in which author Min Zeng notes that "the world's largest money-management firm by assets, has increased its holdings of Treasury securities in recent weeks in response to the unsteady outlook for growth, ongoing sovereign-debt woes and contained inflation risks." If so, it will be interesting to watch the divergence in sovereign bond holdings between PIMCO, which has made it clear it finds the best opportunities in foreign holdings, namely Brazil, Russia, and Poland, and BlackRock, which prefers to play it safe by going domestic. Yet, is BlackRock merely being handed PIMCO's sloppy seconds? Bill Gross' fund has lately been marginally "constructive" at best on US Treasuries. To be sure, a deep pocketed buyer will be needed to absorb the trillions in upcoming UST supply, and with PIMCO allegedly out of the picture, the US Treasury will gladly take anyone's money at this point.

Making Sense Of A Market Which Is Now Completely Uncorrelated To The Strength Of The Dollar

Over the past three months it has become clear that one of the traditional staples of the second part of the bear market rally (the one beginning in July of 2009), the near 1.00 correlation between a weak dollar and a strong market, has broken terminally. And even with the dollar surging as problems in Europe come to the fore, the market, after dipping temporarily in early February, has staged an almost complete comeback, which has left many scratching their heads as to what the cause for this uncorrelated market move may have been. An interesting summation from one of the more prominent economic skeptics, David Rosenberg, provides some answers not only to this question, but why an economy which refuses to improve, can lead to continuous stock gains.