muses of the moment

June 6, 2012

MF Global-The Truth is finally leaking out

It’s the cover-up, not the original crime, that is the downfall of giants.

Here are some links regarding new and confirmed information about the MF Global Crime of the Decade and it implications.

Click here. Accounting fraud is alive and well in US financial markets and regulators are not doing anything about it. (One reason is if the regulators enforced accounting rules, no US bank/brokerage/investment/insurance/company would be solvent.

Click here. Repo market is still at risk. (Yes, that could mean your brokerage house, 401k, pension or hedge fund.)

MF Global CAN HAPPEN AGAIN. In fact, it did, a few months ago at JPM. The only difference is, JPM has access to unlimited Fed funds. For them, it is a trading loss, not a bankruptcy issue that affects customer funds. They also claim it was their own loss (not customer) in a general hedge. That is still to be determined in gg’s mind. Groovygirl doesn’t believe that for a second; they just modified the financial reports. Because if they admitted that they pulled an MF Global (losing customer funds on derivative bets) every customer would pull their money out of the bank. JPM’s loss was either a direct result of the MFG bankruptcy or a similar loss on derivative bets (bets related to the European crisis).

Click here. “Surprise”. Yes, the MF Global executives knew they were taking/risking customer money.

Click here for Fortune’s Last days of MF Global.

Click here Warren Pollock’s video on the latest report from the MFG Bankruptcy Trustee.

groovygirl’s still confused why no one is in jail….

Nothing is fixed. The banking system is failing and it is taking the entire financial/investment industry with it, along with liquidity and capital. Make sure you are protecting your finances as much as possible.

Some ideas to explore:

  • Have your brokerage accounts with 2-3 brokers, not just one. So, if one account closes, you are not up the creek. (You should do this with banking accounts too.) Read the brokerage contract. Understand what repo means. (It means the money in your name is not really yours at every moment of the day.)
  • Keep only the amount of money you need to day-trade in your brokerage accounts. Sweep the rest into a regular FDIC-insuranced banking accounts AT OTHER BANKS. Do not use your brokerage account as a catch-all bank account.If you want T-bills, put the money with the government directly through treasurydirect.gov. Same with bank CDs, put it directly with a bank, don’t go through your brokerage account.
  • If you holding stocks longer than 60-90-days, get the paper certificates. GG knows this is a pain, do it anyway.
  • Read the fine print. Where is your investment in your 401k, hedge or pension fund clearing their trades?
  • What are your legal rights if your investment (whatever and wherever that investment is) should be wiped out due to a repo loss?
  • Limit your trading until you find all this stuff out.
  • What connections does your broker have with London? (That is where all these shenanigans are happening.)
  • If your account should close, be sure your trades close as well. (This was a major issue in MF Global.)
  • Research, research, research.

Your profit and capital does you no good if it is “missing” or delayed in getting back to you or gone completely.

Venus Transit

Filed under: Odds 'n ends — totallygroovygirlfriday @ 10:22 am

groovygirl watched the Venus Transit yesterday. If you missed it, here is a link to photos. (Different colors are from infrared telescopes and different filters used to observe the event.) On the first photo, look at the bottom of the sun at around 6:00, there is a little bump, that is a solar storm/flare.

More images here. Very cool montage of video/photos from NASA here.

It happens about every 100 years or so. Just another example of a cycle ­čÖé

Commerical Real Estate

Filed under: European Debt Implosion, Fiat Currency, Housing Market, Tangible Assets, The Banking Crisis — totallygroovygirlfriday @ 1:20 am

groovygirl wanted to bring up a point for a while now. Reggie’s recent blog post on the implosion in European CRE (commercial real estate) brings the perfect opportunity. Click here. You will immediately notice the similarities between US Real estate crash and the coming European Real Estate crash (caused by a European banking crisis). Deja vu!

Long term view:

The creditor nations (like China) are using their excess dollars to buy things. Pre- 2007, they were buying up commodities and mining industries in Africa. Recently they have been using their excess dollars to buy bankrupt US commercial real estate and invest in commodity-related companies. They are also sitting on a lot of euros from trying the help out Europe/Greece situation the last few years. As soon as the European CRE market┬á hits bottom, they will play the same hand. Buy real estate cheap with excess fiat currencies they don’t want long-term. They are trading fiat currency for tangible assets.

The Western nations, or debtor nations, are creating more fiat currencies and national debt to try and plug the their debt/banking implosion and keep their populations from rioting in the streets.

Now, I understand that China’s economy is deflating and their own banking/housing market is in jeopardy, but just as the US came out of the Great Depression owning the world, so to will China.

Between moving away from the dollar/euro for trading (setting up their own trading, reserve, and SWIFT systems) and using excess dollars/euros to buy the globe’s tangible assets, they will be the next world economic power.

Having said all this, gg is not advocating investing in China right now. This is a macro-world empire change, not necessarily investment advice.

Side musing: it is this macro-economic lesson that suggests becoming a creditor and not a debtor, and holding onto the purchasing power of your money. This will allow you, too, to buy tangible assets (and income-producing assets) at fire-sale prices.

Right now there are a lot of income-producing assets that are eating investors alive because of the debt to income ratio. Income decreased from the economic depression, and they can not service the debt. The only thing making that income-producing asset a loss is the debt. If another investor came in with straight cash, bought it at a discount, the asset would all of sudden be solvent again. As the economy continues to drag, more investors/businesses will be in this situation.

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