Bill Black: On the Incidence of Fraud Leading to the Crisis, the Absence of Prosecutions, Dodd Frank, and What Must Happen Now. Full must listen to interview here while Santa is about to log out.
William Black: Well, I say the both of them were driven by fraud. The Savings & Loan crisis was a tragedy in two parts. First part was not fraud, it was interest rate risk. But the second phase, which was vastly more expensive, was to defraud and the National Commission that looked into the causes of the crisis said that the typical large failure fraud was invariably present. And there were real regulators then. Our agency filed well over 10,000 criminal referrals that resulted in over 1,000 felony convictions and cases designated as nature. And even that understates the grade in which we went after the elite. Because we worked very closely with the FBI and the Justice Department, to prioritize cases—creating the top 100 list of the 100 worst institutions which translated into about 600 or 700 executives—and so the bulk of those thousand felony convictions were the worst fraud, the most elite frauds.
If you didn’t know, Catalonia, is the biggest province in Spain in terms of Economy. Barcelona is the capital, and the Catalonian economy is the same size as Portugal’s. So far so good, but Catalonia is locked out from the ordinary financial markets, and is struggling to finance it’s debt. Of course, they have some great tactics in how to fix the problem. They will ask for help from the government, and from the local “citizens”. That sounds all great, they will impose more austerity in a country where unemployment is running at 22.5%, and counting. Meanwhile, the properties are valued at “fantasy” levels, and would create black holes in the balance sheets of banks, if values somewhat realistic. Spain is up for more pain. Video with the president of Catalonia below.
Guest post by BB Finance.
The stock markets are on auto pilot. They are grinding higher despite all the doubts and walls of worry. But that is the plan for the next nine days. There may be a small correction in between just to shake out the weak hands and correct the overbought conditions but the ship is on course. So lets talk today about something else. ”Gold”.
There was a time when we could say for sure that USD is on one side and everything else on the other. That means when USD would be up, all commodities, which includes oil, precious metal and equities, would go down and vice versa. Which also mean that if Equities would go up, it would be somewhat reasonable to expect that gold would also go up. Of course the degree of up or down would vary. But of late that correlation is breaking down.
Spot gold prices had a freefall on December 12. But it is still within the long term rising trend line as you can see from the GLD chart.
Some short term chart levels below. As we suggested a week ago “markets will consolidate going into the last days of trading”. Not really unexpected, but could offer some good vol plays, as people soon will start puking vol, as juniors on the desks now all chant ”dude, the market is not moving”.
PIMCO’s not so rosy outlook of what to expect in 2012.
- As things stand today, it is more likely that the ECB will leap to a rescue only when it is too late. Absent any increase in private or external sources of aggregate demand, the eurozone economy will likely experience a recession in 2012.
- Chinese deleveraging and rebalancing could mean much slower Chinese growth and a smaller impact of Chinese aggregate demand on the global economy.
- We expect the global economy to grow by 1% to 1.5% in 2012. This is significantly slower than the 2.5% growth rate achieved in 2011 and the 4.1% rate achieved in 2010.
Probably the most important chart for anybody trading he markets actively. As we pointed out yesterday, NYSE and NYSE Arca have put forward rule changes when it comes to quote stuffing. This is probably the first step towards regulating the HFT space. We are pro technical evolution and computers aiding the Trading space, but we are not pro predatory strategies where the majority of quotes add no value, except for “stuffing” the market. Hopefully, the broken market will become less boken, and we regain real liquidity.
Chart below, courtesy of Nanex;
Despite the fact we had the Fannie Mae and Freddie Mac, Lehman and AIG, the “system” has not changed. It is still possible to not know where the money of MF Global clients is. Regulators are chasing, but are not catching anything. It is still astonishing, the MF Global “event” could happen. Regulators obviously do not talk to each other, and therefore there is nobody responsible. With regulators not able to keep track of where the money is, we can’t but ask ourselves how the regulation of the HFT will proceed? Video with Nomi Prins on the MF Global below;
The divergence between the Vix and Implied Volatility Skew continues to grow to levels greater than what preceded the July selloff in equities. That does not mean a similar selloff is a guarantee but it does mean the market is extremely complacent right now.
Both at the money (vix) and out of the money (skew) options are simply not being bought. In other words positions are not protected from downside risk which can lead to a massive spike in volatility and increased selling.