JALLEN wrote:VMI77 wrote:JALLEN wrote:VMI77 wrote:
The stock market isn't the issue, the issue is debt. Nothing is being done to address the issue, nor will anything be done. A collapse is mathematically inevitable --the only question is whether it will be a year from now or ten years from now. There is no political will to address the problem and that isn't going to change. We've got 20 years left at the outside --though personally I think it will come sooner rather than later. Europe is in the same situation and may collapse first. The ruling class is just kicking the can down the road while it extracts every last possible dollar of wealth from the system.
And btw, the "experts" don't make money in the stock market by predicting ups and downs --that's gambling and experts don't gamble. The "experts" make their money because the system is rigged in their favor --and right now it's kinda hard for the big boys to lose money even on a gamble, since the money they're using to place their bets is provided to them for free.
You mean experts like John Corzine, former Chairman of Goldman-Sachs? Or the experts at the company formerly known as Lehman Brothers, or perhaps Bear Stearns? Maybe the experts at the old Merrill Lynch that lost untold billions in the "system... rigged in their favor?" Possibly the London Whale formerly at J.P. Morgan-Chase?
What good will wealth be if the mathematically inevitable economic collapse occurs? Will it still be wealth? Much of what counts as assets on balance sheets now won't be wealth if and when that happens.
The markets now are affected by the deleveraging that has progressed for some years, and by the central banker's efforts to soften the blow of deleveraging. In a way, you can't blame them for trying, since letting nature take its course is politically unpalatable. The ruling class here, politicians, get re-elected by bringing home the bacon, the more the better and more now than before or we find somebody else who can.
Anyway my point was that Limbaugh isn't a particularly impressive predictor. That my quote was this Professor spouting off about the stock market emphasizes the perils of forecasting, not the stock market.
Yes, some like John Corzine who stole about $1.6 billion from customers and walked away rich, powerful, and uncharged with a crime even though he openly committed a felony...but that's not really what I was talking about. The system is rigged in many other ways that are not "illegal," --though they should be....."dark pools," for instance, and free money from the Fed. There are things that are now legal in the world of finance that were illegal, and some of which were felonies when I was young --such as the financial legerdemain that made Enron possible, and the tricks banks are currently playing with debt securitization. In the 50's and 60's this was still largely a capitalist country, but the last two decades have radically transformed the system into Crony Capitalism.
Corzine did not "steal" the money as that term is commonly used and understood. There were tremendous losses that eroded the firm's capital and more besides. What appears to have happened is that firm took positions which moved against them, more collateral was required, more was posted, and the further deterioration of those positions eventually led to assets less than liabilities and bankruptcy. The "experts" guessed wrong. I am given to understand that the customer agreements in common use in that industry permitted the firm to use customer funds in that manner, or so it can be cogently argued, meaning prosecution was either dubious or unavailing. Prosecutors do not like to bring and try cases they appear likely to lose, and a case like this which would involve untold documents, witnesses, no telling how long to try, against the formidable resources, financial and legal, of the defendants, is daunting at best. I've not studied that matter in detail so am going by experience and what has appeared in the financial press that I have seen.
The system is set up in certain ways, "rigged" in your parlance, I suppose. Many of the things that used to be legal when I was a young stockbroker are thoroughly illegal now. I can't think of anything off hand that was illegal then but legal now. These firms have elaborate and expensive inside counsel officers and high priced outside law firms to keep them on the right side of things, but that doesn't keep them from losing when their investments turn out badly, and sometimes doesn't work at all, like the fiasco at Salomon Bros. decades ago.
What is a "dark pool?"
MF Global, with the knowledge of Corzine, used money that doesn't belong to it to settle debts it incurred in speculation.To me this is stealing. Segregation of customer funds used to be sacrosanct; that it is no longer, and seems to be just fine with people like you who work in the industry is one of the changes I'm talking about. You're no doubt an honest broker and assume the best of others, but I find your description of what happened at MF Global to be rather troubling. Still, from the information I've seen, there are a host of prosecutable charges, and there is at least one that is obvious:
http://market-ticker.org/akcs-www?singlepost=2808792
Corzine testified to this:
"I simply do not know where the money is, or why the accounts have not been reconciled to date," Corzine's prepared testimony read. "I do not know which accounts are unreconciled or whether the unreconciled accounts were or were not subject to the segregation rules."
Sarbanes-Oxley requires him as the CEO of a company to (1) guarantee that effective risk controls and rules are in place and (2) monitor their compliance. It renders failure to do so -- that is, the old-fashioned "I didn't know" defense that was routinely used after 2000-era failures in the Internet space -- a felony.
Now of course Mr. Corzine is entitled to the presumption of innocence and he is entitled to a trial before being pronounced guilty, but the law on this point is clear: Executives, the CEO and CFO in particular, are required under Sarbanes-Oxley to factually know about matters such as this and they are required to attest to that knowledge -- and the presence of appropriate and sufficient risk controls under penalty of felony indictment.
It appears that Mr. Corzine has admitted in front of a Congressional Committee that he does not know, and therefore this appears to be a prima-facie admission that he is in direct violation of this law.
And that's without even getting into stuff like this:
http://market-ticker.org/akcs-www?singlepost=2792257
MF Global’s problematic trades were different from AIG’s, but they were also derivatives, in fact, they were a form of credit derivative. The "repo-to-maturity" transaction was just a form over substance gimmick to disguise this fact. Specifically the transactions are total return swaps, a type of credit derivative, and the chief purpose of these transactions is leverage.
A total return swap-to-maturity includes a type of credit derivative. It allows you to sell a bond you own and get off-balance sheet financing in the form of a total return swap. Alternatively, you can get off-balance sheet financing on a bond with risk you want (but do not currently own so there is no need to sell anything) and take the risk of the default and price risk. (Price risk can be due both to credit risk and/or interest rate risk.) This is an off-balance sheet transaction in which the total return receiver (MF Global) has both the price risk and the default risk of the reference bonds. In this case, MF Global had the price risk and the default risk of $6.3 billion of the sovereign debt of Belgium, Italy, Spain, Portugal, and Ireland. As it happened, the price fluctuations of this debt in 2011 weren’t due to a general rise in interest rates, they were due to a general increase in the perceived credit risk of this debt.
Dark Pool:
In finance, dark pools of liquidity (also referred to as dark liquidity or simply dark pools) is trading volume or liquidity that is not openly available to the public.[1] The bulk of these represent large trades by financial institutions that are offered away from public exchanges so that trades are anonymous. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly between market participants.
https://en.wikipedia.org/wiki/Dark_liquidity
And as far as the experts "losing" money --as with Corzine, it's not their money they're losing. All these guys, even the Ken Lays, walk away with millions.
