Archive - Mar 29, 2013

Meet The Last Schtuppers...

Gold rose 1.1% in March, its first monthly rise in six. 

For the quarter, gold was 4.5% lower in dollar terms and 1.4% lower in euros. However, signalling that the demise of gold is greatly exaggerated, gold is 3.7% higher in Japanese yen and 2.6% higher in sterling.

As one astute financial journalist said to me “ ‘cash in the bank’ doesn’t have quite the same ring to it anymore.”

Far from being a unique situation, the fragile exposure of unsecured depositors across the Euro zone is the norm; and their fragility was further increased in the last twelve months thanks to policies created by the same authorities who now refuse to honor their promise of a banking union, and instead impose capital controls, which have effectively destroyed any credibility on the safety of capital in the Euro zone. However, even if one accepts my view, the unintended outcome begs the following question: Why was there cheap money available for subordinated debt holders to cash out, but there is none now to protect the savings of depositors?

For those claiming there is something called a "recovery" underway, perhaps they can point out just where on this chart of Real Disposable Income per capita one can find said recovery. Because we are confused: with the average Real Disposable Income of $32,663 per person, or lower than where it was in December 2006 ($32,729), one may be excused for scratching their head.

One of the prevailing false conventional wisdoms about the Cypriot cash confiscation is that it primarily affected rich, tax-evading individuals of Russian origin. Alas, those same individuals are likely to have been least affected, as subsequent discoveries of capital control breaches by the "richest and best connected" reveal, while increasingly it appears that the uninsured depositors on whose back the nation of Cyprus was bailed out are small and medium corporations, who had been parking cash for net working capital purposes with Cyprus' banks, cash which is now gone forever to feed the creeping insolvent Euro-monster, and which can't be used to fund such day to day business activities as payroll, purchases, and business operations. Such as this one.

Hopefully the $155 million purchase of Picasso's "Le Reve" by Steve Cohen coupled with his splurge on a $60 million East Hamptons pad comes with a 30 full day money back guarantee, because very soon he may have more practical and immediate uses for the money. If the SAC head was hoping that the recent $602 million settlement his firm had reached with the SEC was enough to put all his troubles behind him, he may want to think twice. First, yesterday, New York District Judge Victor Marrero pulled a "Judge Rakoff", when he balked at the SEC’s use of the “neither admit nor deny” provision (the same argument used by Rakoff when he rejected an SEC settlement with Citigroup in 2011). Marrero also asked what would happen if Martoma, who has pleaded not guilty to related criminal charges, is convicted. “How would it look if in the settlement before it, the parties were allowed to say ‘We did nothing wrong?’” Marrero asked. “The ground is shaking, let’s admit that,” said Marrero. “This court is in the same position that Judge Rakoff was some months ago." But in the end we are sure that Marrero, just like Rakoff, will fold to pressure, and money. However, where things got interesting is that moments ago the Feds arrested long-time SAC suspect and PM Michael Steinberg, giving him a perp walk out of his Park Avenue apartment. This was the highest profile arrest so of any SAC employee and means that while the SEC may be trying to close the book on Cohen, the Feds are only now getting started.