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This Year’s ‘Lehman Moment’ Might Occur Soon

Econophile's picture





 

This originally appeared in the Daily Capitalist and was written by DoctoRx who writes our market commentary. He has 30 years of investment experience.

 

The strangely-named MF Global is now the subject of the lead article of the online NYT, with the title Regulators Investigating MF Global for Missing Money.  Here’s the lede:

Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday.

 

The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday.

One of the reasons for the stock market crash after Lehman is discussed in the article.  Innocent hedge fund money (if there is such a thing!) was lost to the rightful owners in the collapse.  If indeed there has been misappropriation of customer funds at MF, how many customers are going to withdraw their funds from other commodities accounts as well as from standard stock/bond brokers, after selling their holdings first?  Especially after the frustrating decade-plus we have experienced in the financial markets, why shouldn’t people just move to direct ownership of Treasurys and into FDIC-insured bank deposits?

The story could hardly be worse.  MF Global was not just any old futures firm.  It was run by a stalwart of the Democratic establishment and the former leader of Goldman Sachs.  If his firm was guilty of what would basically be akin to embezzlement of funds owned by the firms clients, whether or not Mr. Corzine was blameless, how could one trust a securities firm run by someone who had not been a high-ranking government official?

A major “risk-off” move could be in the making.

 


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Tue, 11/01/2011 - 15:13 | Link to Comment MFL8240
MFL8240's picture

"........why shouldn’t people just move to direct ownership of Treasurys and into FDIC-insured bank deposits?"

 

Awh, because the US is bankrupt! Is that a good enough reason?

Tue, 11/01/2011 - 14:48 | Link to Comment walküre
walküre's picture

Is the FED preparing for a QE announcement tomorrow?

Tue, 11/01/2011 - 14:17 | Link to Comment PulauHantu29
PulauHantu29's picture

"Why put off until tomorrow what you can do today?"

I'm not sure this applies to meltdowns.....

Tue, 11/01/2011 - 13:36 | Link to Comment CustomersMan
CustomersMan's picture

 

 

     A very short time ago, a few weeks, we saw the news that State Street Bank and Bank of NY - Mellon were stealing $ Billions $ from the accounts of Pension and other accounts, by altering trade executions on foreign currency transactions.

 

  These are 2 of the "most trustworthy" (if you can call them or any that) in the world.

 

  It just goes to show you there is no moral compass left. Anything goes, no laws, no institutions to protect and serve, so why should we abide by any. Ad to this the total deparvity of B of A (Band of Assholes) and now MF Cornwhole.

 

  And they want the protesters to assure them, we will be peacefull and obey the law, non-violence is the watchword. Why, when they don't abide by any, anytime,anywhere?

  Because they are Gutless, and fear just retribution, for only a tiny modicum of what we've learned of their operations so far. Much more is coming.

Tue, 11/01/2011 - 13:06 | Link to Comment ricocyb13
ricocyb13's picture

MF wanted to become a Mini Goldman Sachs, and being managed the same way as GS.

So when is Goldman Sachs going bancrupt? And what happens when it does?

Tue, 11/01/2011 - 13:01 | Link to Comment zebrasquid
zebrasquid's picture

PHYS is going more into mining shares, so be careful, there's stock market risk there...not simply a buillion proxy.

Tue, 11/01/2011 - 13:00 | Link to Comment zebrasquid
zebrasquid's picture

PHYS is going more into mining shares, so be careful, there's stock market risk there...not simply a buillion proxy.

Tue, 11/01/2011 - 12:28 | Link to Comment SamAdams1234
SamAdams1234's picture

Madoff anyone?

Tue, 11/01/2011 - 12:47 | Link to Comment vast-dom
vast-dom's picture

"If his firm was guilty of what would basically be akin to embezzlement of funds owned by the firms clients, whether or not Mr. Corzine was blameless, how could one trust a securities firm run by someone who had not been a high-ranking government official?"

 

As in any Ponzi scheme, time is of essence. With advent of derivatives and other shadow accounting products, most banks are essentially embezzling on the fly as part of their day-to-day operations. Nothing surprising here save for the fact that someone finally got busted and only bacause of insolvency. Mark these my words: EVERY SINGLE FINANCIAL INSTITUTION and FUND WILL HAVE SIMILAR DISCOVERY IF AND WHEN THEY START TO LEHMAN OUT AS FUNCTION OF UNWIND DUE DILIGENCE.

Tue, 11/01/2011 - 16:23 | Link to Comment Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

I found this the most interesting:

"The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday"

So they got found out because they were trying to sell a pig in a poke. 

Tue, 11/01/2011 - 11:42 | Link to Comment earleflorida
earleflorida's picture

"The Known Unknowns coming to a park near you?" 

ref: "Shock Report: troops may be Needed" by steve watson & paul watson [12/16/08 - prisonplanet] -

http://www.prisonplanet.com/army-strategic-shock-report-says-troops-may-...

Marshall Law = Bush #41/ Clinton #42 / Bush #43 & Obama #44 = NWO

Tue, 11/01/2011 - 13:09 | Link to Comment jomama
jomama's picture

that story is from 2008.

Tue, 11/01/2011 - 14:47 | Link to Comment earleflorida
earleflorida's picture

would it be better if it were from Sept.10, 2001?

Tue, 11/01/2011 - 11:47 | Link to Comment the grateful un...
the grateful unemployed's picture

marshall law, like Marshall Dillon, is what we need, if we had some lawmen and regulators we could frogmarch half of Capital Hill into a jail cell, where they belong

Martial Law is what they plan to give us, for demanding the first kind, (OWS) we are given the second.

Tue, 11/01/2011 - 11:34 | Link to Comment the grateful un...
the grateful unemployed's picture

maybe they think FDIC will backstop their depositors retroactively, (just as they did the MM NAV). we all know how pooled asset rules work, when they're allowed to work. (we all know how mortgage transfers are supposed to work, when they're allowed to work - banks who buy the paper can call or renegotiate the paper) to make the point BEFORE the 2008 crash CITI set up firewalled bank accounts to protect depositors. not to say the MF consciously said, screw em, if we sweep passive accounts maybe we can make the margin call, and if we fail, what's one more bailout to THEM. Corzine being closer to the Executive office than say, someone like Steve Forbes.

its also possible they were into EURODEBT as a surrogate for someone (now who would that be?) the whole thing smells, but worse than what? banking on the TBTBN (to be noticed) after all there's a hurricane in Peru, and goat with two heads in Argentina

what we'd like to know, what we need to know, and what we are told, are three different things.

 

Tue, 11/01/2011 - 10:34 | Link to Comment cognus
cognus's picture

If everyone had read "Game As Old As Empire" all this would seem to perfectly fit the pattern.  Its the game they play the best - MF just worked out a little more quickly than others.

That missing cash?  I'll wager they will find an "accounting error" ....

Tue, 11/01/2011 - 10:29 | Link to Comment El Gordo
El Gordo's picture

And some people thought Bernie Madoff was a big time crook, but this puts him in the minor leagues.  Of course, the biggest crook(s) of all, the ones determined to spend out great grandkids money next year, all work in DC, and nobody says Bo Peep about how much they cost us.

Tue, 11/01/2011 - 11:25 | Link to Comment IAmNotMark
IAmNotMark's picture

Ron Paul does.  He has been for years. Of course, that's why people think he's a crazy old man.

Tue, 11/01/2011 - 13:13 | Link to Comment jomama
jomama's picture

that's probably what makes him 'un-electable'.

Tue, 11/01/2011 - 18:04 | Link to Comment buyingsterling
buyingsterling's picture

Translation: Abandon all hope.

Tue, 11/01/2011 - 10:21 | Link to Comment tempo
tempo's picture

How could someone SO rich and SO powerful and SO smart become involved in Highly speculative/risky/leveraged investments in Italian Bonds where as the losses mounted his company started using custome funds to cover his losses? I thought we passes laws after Lehman that ensured this type of leveraged speculation with others people money could not happen again?

Tue, 11/01/2011 - 11:02 | Link to Comment Zero Govt
Zero Govt's picture

Corzine was driving MF from a brokerage firm across into finance so there is not a shadow of a doubt he is behind the strategic direction of placing big Bond bets or them going stupendously bad

What is of particular concern is an ex-politician and ex-Goldman Sucks executive emptying client accounts to bailout his shit bets... although obviously that process of social theft has been going on since 2008 with full US Govt approval... indeed far longer if you count the establishment of monopoly money with The Fed

Tue, 11/01/2011 - 11:09 | Link to Comment Nothing To See Here
Nothing To See Here's picture

This process of social theft has been going on for decades now, through fractional-reserve banking.

You deposit, they gamble.

Tue, 11/01/2011 - 09:58 | Link to Comment Grand Supercycle
Grand Supercycle's picture

DOW chart showing bearish megaphone pattern warned of downtrend resumption:

http://stockmarket618.files.wordpress.com/2011/10/2011-10-31_dow_dy_x.png

As mentioned for some time, bullish USD weekly chart continues to exert it’s influence and according to my analysis this will continue.

Tue, 11/01/2011 - 13:35 | Link to Comment jomama
jomama's picture

thanks for the laugh!  i really needed that.

Tue, 11/01/2011 - 09:43 | Link to Comment El Yunque
El Yunque's picture

I wonder aloud how deep the bloodletting in swaps will be, if anyone was insane enough (enough? just insane) to "insure" and I use the term loosely, that shit to the planet.

When an MF falls, is it a "credit event?" It sure as hell makes a sound.

It's too bad that most of my democratic friends, myself included, know exactly shit about high finance and should be relegated to politics, and left the fuck out of the buisness of business, if for nothing more than to watch it, and occasionaly pass a law or two to keep our conservative friends from driving a fucking titatium stake through the heart of capitalism forever.

Karl Marx has to be laughing his ass off in hell right about now.

It seems like every time we find a way to stabilize something, a hundred more find a way around the goddamn barrier.

When we fuck something up, we really fuck it up.

Holy shith, (eyes roll, face palm, hands through hair, deep breath...) holy shith.

I'm thinking maybe a bikini and jet ski rental hut on a beach in Costa Rica right about now, if I can find enough change in the cushions to get the fuck out of here before the world puts up their own fences to keep us Yankees the fuck out.

HOLY SHITH.

Tue, 11/01/2011 - 12:36 | Link to Comment Fred Hayek
Fred Hayek's picture

Uh, according to a story in New York magazine that talked about relations between Blankfein, Dimon, Mack et al and our empty suit of a President, Blankfein and Dimon and most all of their ilk are actually democrats.

It makes perfect sense, actually.  Why should they make any pretense of being for a free market and wanting to bear responsibility for their own actions?

I sure hope Lloyd and Jamie aren't among your democratic friends.

 

Tue, 11/01/2011 - 15:36 | Link to Comment El Yunque
El Yunque's picture

You left out Hank "The Crank" Paulson.

As I said before, Democrats, for the most part, shouldn't be involved with anything that actually involves touching money, while Republicans should not be involved with anything that involves manipulating law. Autocrats and democracy = bad juju. Multicrats and finance = handing out money. One not very profitable, the other not very governable. Welcome to Demcracy 2.0 and Capitalism, version 7.8761a-666

Democacy and capitalism are more or less pooch-screwed until we re-arrange the deck chairs here.

And to the other comment down the chain, Marx may not have know shit about capitalism in his critique of it, but he sure as hell made some accurate predictions about it.

Personally, I'm hoping to turn off my moral compass and play the game, if the system doesn't digest me first.

Tue, 11/01/2011 - 10:10 | Link to Comment LFMayor
LFMayor's picture

were you just trying to be polite or are you swearing in the Castillian dialect, you know, lisps and such?

Tue, 11/01/2011 - 13:39 | Link to Comment my puppy for prez
my puppy for prez's picture

LMAO!!!!

I took upper level espanol under a Castillian professor, and the "lithp" was simply embarrassing to use.  

Tue, 11/01/2011 - 10:29 | Link to Comment El Yunque
El Yunque's picture

I'm channeling Brother Bluto, from Animal House; that's the look on my face right now, as I ponder what to do next, after Germany gets through bombing Pearl Harbor, er, Greece. };>

Tue, 11/01/2011 - 11:15 | Link to Comment Zero Govt
Zero Govt's picture

Marx cannot laugh at capitalism because the tosspot never understood capitalism

if you want to see how to deal with this situation check-out Iceland. When they let their bankers and banks go bankrupt they solved the problem of bad banks and bad bankers. They were flushed down the toilet of failure. End of banker problems.

We instead propped up both bankrupt banks and shite banksters (like Blankfein and Dimon) and therefore we still have all the banking problems still with us carried like a sack of crap around with us since 2008

Iceland 1 - Western World $13 Trillion down and counting....

 

Tue, 11/01/2011 - 15:45 | Link to Comment El Yunque
El Yunque's picture

I believe that the best route to fixing the shite bankster problem is getting banks the hell out of the wealth generation business.

Rebuild the firewall and give them their own set of dominos to play with. Goes in a limited way for insurance as well. Then have everybody on the planet watch every time they take a piss until the rest of you guys get a handle of this epic clusterfuck.

Tue, 11/01/2011 - 13:43 | Link to Comment Pike Bishop
Pike Bishop's picture

The best thing about the smart Icelanders was the carry-trade they went to with their own currency.

Knowing that their currency would go to further shit, even after they voted/told their gov't and banks to stick it.... they borrowed kroner, then bought baskets of foreign currencies.

Then they bought things you can touch, at home and for import.

Now they are paying back in shitkroner.

And their past with Brussels and GB is being decided by a few elite in a foreign land.

Then they will be paying back with shittierkroner.

Tue, 11/01/2011 - 12:35 | Link to Comment Piranhanoia
Piranhanoia's picture

Have you read Marx?   To say he didn't understand capitalism is humorous.

Tue, 11/01/2011 - 18:01 | Link to Comment buyingsterling
buyingsterling's picture

Marx is only proved right because of the actions of Marxists and fellow travelers. In Marx's day, there was a gold standard in much of the world, and no derivatives. Capital was actually used for productive purposes. Had those traditions continued, we'd be fine now. Capitalism doesn't break down until _someone wants something for nothing_ from the system and games it to get it. That's the philosophical essence of Marxism - giving or taking for some, at the expense of others.

Tue, 11/01/2011 - 12:39 | Link to Comment Fred Hayek
Fred Hayek's picture

Marx didn't understand that there are elements of both upper and lower classes allied to notions of both hard and soft money. 

Tue, 11/01/2011 - 09:41 | Link to Comment airedalesrule
airedalesrule's picture

oh yeah, got to mention that MF was recently added as a primary dealer of Treasuries.

Tue, 11/01/2011 - 11:24 | Link to Comment Zero Govt
Zero Govt's picture

Great news. Tiny Tim sure knows how to pick 'Winners' doesn't he?

Anyone from the Govt-Goldman Club gets auto-clearance, a circle of insolvency that's getting ever more iliquid as the morons bleed every form of finance to keep themselves propped up

Did MF have a Credit Rating the past couple of months??

Tue, 11/01/2011 - 09:33 | Link to Comment BadKiTTy
BadKiTTy's picture

Mutha Fooka Global bitchez!

And 100 large for the CEO for his troubles!

You couldnt make this up even if you made things up!!

K@

Tue, 11/01/2011 - 09:22 | Link to Comment xcehn
xcehn's picture

Nothing less than a MIRACLE can prevent it.

Tue, 11/01/2011 - 09:28 | Link to Comment SGS
SGS's picture

Such as right now as the 10 yr bund is getting decimated? lol

Tue, 11/01/2011 - 09:20 | Link to Comment Clowns on Acid
Clowns on Acid's picture

Gupta, Corzine, Paulson, Blanfein....all recent GSers. Lets have the Feds look at GS books immediately! Why wait...be proactive !

Tue, 11/01/2011 - 13:34 | Link to Comment my puppy for prez
my puppy for prez's picture

Cuz the feds are IN BED with GS!!!  GS is their "sugar daddy"!

Tue, 11/01/2011 - 13:38 | Link to Comment CustomersMan
CustomersMan's picture

 

  The FED is Goldman, one in the same.

Tue, 11/01/2011 - 10:24 | Link to Comment Melin
Melin's picture

Tongue-in-cheek? Kinda like having the SEC look at Madoff's books?

Tue, 11/01/2011 - 10:12 | Link to Comment Savyindallas
Savyindallas's picture

The feds work for Blankfein -maybe we should invite the Russians in to look at the books. I seem to get better news from RT(Russia Today) than I can get from our propagandists on CNBC Foxnews, etc.   - Putin seems like a nice honest fellow. He's done a reasonably good job with his crooked oligarch problem. We can't seem to get rid of ours  -they have their minions on Wall Street and Washington all over the place -they're like fleas. At first they are a nuisance, then they really get out of control and nasty  -you can't kill the little demons  - then when they really get out of control, the sickness sets in and before you know it -you've got bubonic plague.  

Tue, 11/01/2011 - 15:02 | Link to Comment CompassionateFascist
CompassionateFascist's picture

"boobonic plague"...@http://seductivejewess.com. Same ethnic as "Russian" oligarchs, tho.

Tue, 11/01/2011 - 09:03 | Link to Comment Uchtdorf
Uchtdorf's picture

I think Corzine is now wishing he had died in that car crash a few years ago.

Tue, 11/01/2011 - 08:38 | Link to Comment CPL
CPL's picture

You are just figuring that out now?

 

Fucks sakes.

 

Wait for the next ridiculiously large implosion coming up in the bond market.  Who the fuck wants to buy bad debt in an inflation based universe.

 

At least one HFT shop is grounded permanently.  20 more to go.

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