THE FBI AND OTHER RAYS OF HOPE

    By Oxy Mora on Mon, 11/22/2010 - 11:02pm |

    Today was a significant day in the fight against the financial oligarchy. I'll summarize it the best I can, not being a lawyer or an insider. I have a keen interest in today's events not only as an Obama supporter but in terms of my own investment objectives and strategy.

    The FBI and SEC have joined in criminal probes of major players in our financial oligarchy. Their focus is on "insider trading". According to Chris Whalen of Risk Analytics, an instituional research firm, hedge funds and other players on Wall St. have long considered it their privilege to get information before anyone else and have gone to extreme lengths to get that information. That sense of privilege, and the source of "expert advice"  is about to change and that makes me happy.

    A niche industry called "Expert Advice Networks" has sprung up in the last decade to provide information to traders and investors. The key player is a firm in Silicon Valley called Primary Global Research, but other similar firms have sprouted. It has been estimated that most of the 20 largest banks, 9 our of 10 of the largest hedge funds and many law firms subscribe to Expert Advice feeds. Originally formed to provide advice on high tech companies' products and research, etc. , it is believed that the advice firms pushed the envelope and employed sources within companies to provide advance information, and worse.

    Today the FBI raided the offices of three hedge funds who are suspected of insider trading, presumably on the type of information supplied by firms like Primary Global Research. 

    Suddenly we have some gravitas on our side. Insider Trading charges are apparently hard to prove but presumably there will be indictments and if there is anything that will sober up the oligarchy it is the prospect of jail time. IMO the timing couldn't be better for Obama with respect to upcoming hearings on the CFPB, on Summers replacement if it ever happens, and no doubt a myriad of other hearings on financial regulation. Finally Obama has some "objective" ammunition to use against the regulatory nay-sayers--give me the name of one Republican who will publicly demagogue the FBI.  I think the Republicans will run a huge risk attempting to block regulations in a climate of criminal investigations and trials in the financial industry.

    From a personal standpoint I decided to sell some money market funds and add to my equities in my modest self directed IRA. Time will tell, but I became very optimistic today. The raids in the U.S., the problems with Ireland, all of the negativity of Republicans--but still the major indices today were off just a little and the Nasdaq was up--this latter interesting since Silicon Valley might be the center of the Expert Advice probe. There will be some rough days ahead but the economy is actually growing, the midwest states are increasing agricultural exports, Microsoft is selling bonds with a 1% coupon and buying their own stock back--signalling a shift toward equity values and possibly a bottom in corporate bond rates. Do you suppose we could get a good tech rally going next year? If we could, Obama's chances would materially improve and I might make a few bucks in my IRA.

    The situation in Europe could get much worse, the crisis in Ireland, Greece and perhaps Portugal could spread. However I think there is a ray of hope here also. I feel sorry for Europeans, of course. But frankly, when we compare ourselves to Europe, suddenly we don't look so bad and it's a lot harder for Republicans to demagogue Obama and the Fed.  Obama was dealt some good cards today, let's hope he plays them well. 

     

     

    Comments

    Personally, when we had the economic/mortgage/stock market crash, I thought that applying the ancient Roman policy of decimation to bankers would have been the simplest and most effective measure for reducing future fraud on The Street. The punishment could have been best supervised by Hank Paulsen, a kind of Consul of Wall Street, who also has a faint resemblance to Russell Crowe.


    by NCD on Tue, 11/23/2010 - 12:01am

    One side of me would have liked to see the whole thing come crashing down--especially if i could have protected my own assets in the process. I really don't like bankers but they say revenge is best when eaten cold--maybe we'll finally see some of the perp walks we had hoped to see after the Lehman Brothers crash.

    I just hope Obama will finally get some tough spokespeople to go up to the Hill to fight the Republicans who are going to try to weaken and defund financial reform.  Russell Crowe is exactly the type I have in mind--did he take any economics courses?


    by Oxy Mora on Tue, 11/23/2010 - 12:14am

    I'm glad that you see the FBI raids as a ray of hope, especially as they may pertain to your own potfolio.  But I would warn you that this is not a significant shot against the oligarchy.  It may be a distraction, as the public loves bad-guy targets, but it is pretty much Small Bore in the overall picture.

    One man who blogs and comments here in the field of economics has said that all hedge-fund tradin is based on insider trading; it may be just the degree and nature of the information and how it's collected.

    It's easy to watch the teevee and shriek at the 'millions of profits from insider trading', but forget that there have been few investigations into the system criminal fraud in the housing and banking sector involving many, many trillions of dollars.  The partnership between the financial sector and government is assuring that the zombie banks' balance sheets will be addressed in legislative and Central Bank creative book-keeping fixes, and assure that there will be another meltdown for which taxpayers will foot the bill.

    Right now the entire basis for capitalism is under assault: property ownership, and the degree to which that has been compromised is huge, and possibly astronomical.  Watch for bills that will attempt to paper over the problems within the banks, especially the mortgage servicers and MERS faux-mortgages and deeds.  Watch for the administration's assurances that most of the banks have passed the new stress tests Chris Dodd recommended.  Those who know seem to believe that there will likely be a few sacrificail lambs who get taken down as a sop to the public rage, but there won't be moves to put big banks into receivership, clean them up, break them up, while the commercial divisions function daily (which happened in the S&L crisis).

    Some say Americans love bipartisanship.  Well, this criminal effort has been pretty bipartisan, so that's a good thing, yes?  But if you believe that most of this nastiness is essentially authored by those who are addicted to continually ratcheting the wealth of the country up into the one- or two-percenters, and don't want any of this exposed, the FBI raids won't make a blip on your radar.

    The new business editor, Peter Goodman, at Huff-po has a piece up about it that may interest you, and more folks will be weighing in soon, I'm sure, like Yves Smith and others at naked capitalism (on the dagblog webroll on the right side) and Hudson and others at Credit writedowns, etc.

    http://www.huffingtonpost.com/2010/11/22/insider-trading_n_786969.html

    http://www.creditwritedowns.com/category/political-economy

    Er...should have said: not to harsh yer mellow er nuthin'...  ;o)


    by we are stardust on Tue, 11/23/2010 - 11:40am

    You speak truth and you always do a lot more research than I do.  Much of "reform" has been and will be watered down, I know that. But I am beginning to take a longer term perspective about change, which puts me in a minority of one here. We live under an umbrella of corporate power which not only distorts the real world for consumption by the populace but has corrupted both political parties. We are the exception in terms of trying to get at the truth, but we are a fraction of a populace. The job of education of the populace as well as deconstruction of the corporatocracy is huge and we have to take it one election at a time.


    by Oxy Mora on Tue, 11/23/2010 - 2:15pm

    I'm just not sure what to say to such a passive response.  It's hard for me to realize that you and others don't realize what an emergency level we exist in right now.  You mentioned above that you aee the economy improving a bit over the next two years.  For whom, I'd have to ask.  Bank profits, oil profits, and corporate profits are all up.  So yes; I guess you could say that the economy is fine for them.

    Even freaking Ben Bernanke is saying that there needs to be a stimulus, and that he can't do anything more with Fed actions, no matter what opinion one holds on the advisability of the recent QE2.  Alan Greenspan admitted they got it all wrong, and missed the housing bubble that caused the meltdown, with the aid of corrupt and dangerous selling of securitized mortgages. 

    It's way past reform time, Oxy.  Done deal.  But there are at least some measures regulators could take NOW that would help over the long term re: too big to fail banks.  But those in power don't want the public to know how dangerous the financial house of cards is, so they sit on their hands.   And the Powers will be all surprised at the next crash, too, and we'll hear some talk about more financial reform, but unless we demand it somehow, it likely won't happen either.

    Change: one President at a time.  I want this one to help us out.  What, we're supposed to yawn at the idea that 20+% real unemployment will be considered structual from here out?  That now is the time to cut the saftey net for actual people in the middle of a recession/depression?  And that our President may actually bargain on an extension of the Bush tax cuts for the rich???

    I'd think that you aren't in a minority here, many here seem passive.  but even if you are more concerned about Dems retaining the Presidency, or gettting back seats in Congress, the last thing you should do is accept what's going on now.

    If the systemic rot in the housing market were just confined to Countrywide and BoA, it would be hell, not only for banks, but for homeowners all over the country, unable to sell or buy houses for fear of cloded mortgages.  Housing was our nest-egg, remember; our wealth, as per Scarlett O'hara?

    Some of us who blog or comment here have ZERO cushion financially, our kids the same.  So maybe we are feeling more desperate for fixes we know our possible.  This system that's now working for THEM but not for US, the system we've underwritten with our tax dollars, our disappered pensions, our job security SUCKS.

    Economists who say we are becoming a banana republic aren't joking: they see what the government is willing to go into debt for in terms of the trillions for wars, ag subsidies, oil subsidies, etc., and know that if the middle class disappears entirely, the wealthy and the uber-wealthy will still be fine.  We just can't let it happen.

    Think who might get elected to the Presidency and Congress in 2012 if we go further underwater. 

    I'm not trying to take my frustration out on you; it's just that your passivity got my goat. 

     


    by we are stardust on Tue, 11/23/2010 - 6:03pm

    I'm with you in spirit, my friend. George Bush took a rotten system and used it to supercharge the wealthy. That was his heritage--investment banking. He went to the Harvard Business School. It's all about free market forces. He and his ilk see no problem with greater distribution to the top. I hate the way this turned out. I'm disappointed that Obama hasn't done more. It's just that for my mental health I've got to lengthen the time horizon for turning this around.  


    by Oxy Mora on Tue, 11/23/2010 - 6:46pm

    By the way I read the Blodgett article. Thanks.


    by Oxy Mora on Tue, 11/23/2010 - 6:48pm

    Speaking from personal experience, mental health is highly over-rated. 

    Wonder whjich school Geithner, Summers, Rubin, et.al. attended (or were presidents of...)?  (Stardust whistles...) 

    I'm glad you liked the Blodgett piece; I'd meant to link a P. Goodman piece.  See what I mean about mental health?


    by we are stardust on Tue, 11/23/2010 - 7:11pm

    Being the consumate researcher, what do you think of Roger Altman as a replacement for Summers?


    by Oxy Mora on Tue, 11/23/2010 - 10:41pm

    Whaaat?  Loyd Blankfein and Ken Lewis turned him down?  Seriously, he'll fit in just fine.  Anti-regulatory during Clinton days, former Lehman Bros. dude.  The word is that Obama wants to be seen as repairing his relationship to 'business' (WTH??).

    On the other hand, his appt. would signal that he is cementing his ties to Wall Street even further.  It's not even a Senate-confirmable position, so he could choose anyone he likes.  Oh...they'll love, love, love him on the trading floor.

    He makes some noises about corporate taxes being to high (forgets to mention that most of the largest ones pay zero taxes...)

    Here's a Bloomberg video.  The dude is gaga for altman... Some are soo happy that Altman has said he thinks that the financial sector should be grateful for the trillions given them by the feseral government, and dammit!  They should show it!   ;o)

    http://www.bloomberg.com/video/64581110/

     


    by we are stardust on Wed, 11/24/2010 - 8:41am

    Thanks, Star. Good cop. But we still need Russell Crowe.


    by Oxy Mora on Wed, 11/24/2010 - 9:34am

    Er...no cop at all, or maybe faux-cop.  Friend of Wall Street, but a bit of a change we can believe in: he went to Georgetown and Yale!


    by we are stardust on Wed, 11/24/2010 - 11:05am

    What we need in government is one more effing Yalie. But I like Chris Coons--now there is a blue blood surname.


    by Oxy Mora on Wed, 11/24/2010 - 11:08am

    Star, you'll be happy to hear that Tiffany stock hit an all time high today. Must be those wealthy bankers buying diamonds for trophy wives and mistresses. Seriously, what does that tell you about wealth distribution?

    But the insider probe is widening, they arrested Mr. Chu of Primary Global Research.


    by Oxy Mora on Wed, 11/24/2010 - 2:15pm

    It tells me that 'trickle up' works; i.e.: Fuck the taxpayer to reward the banks and corporations so they can buy more jewels.  Gotta love it.

    If I had any discretionary money at all, I would bet you that few, if any at all, will be jailed; there will be some fines like with Goldman Sucks, but that's about it.  Hope I'm wrong.  But how many of the Big Perpetrators of the meltdown will be touched?  Zero!  And Roger Altman will likely repace Summers.  Call me a cynic.  I am.  With about 43 trillion reasons to be so.

     


    by we are stardust on Wed, 11/24/2010 - 2:28pm

    Diamonds are forever and so are your truths.


    by Oxy Mora on Wed, 11/24/2010 - 2:36pm

    Well, at least my opinons are.  Innocent  LOL!

    http://www.youtube.com/watch?v=Jo_dV7E4aIQ    Happy Thanksgiving to you.


    by we are stardust on Wed, 11/24/2010 - 3:02pm

    One last thought, Oxy Mora.  Corporate profits and bonuses have gone up, diamonds are up, the Dow Jones is waaaay up, la la la, but here's what pisses me off today: I HAD TO EAT FREE PARSNIPS FOR LUNCH.  Parsnips!  Do you know how awful parsnips taste?

    I want my money back, Mr. President.

     


    by we are stardust on Wed, 11/24/2010 - 5:05pm

    I envy you the parsnips. Might have to go buy some and throw a roasting chicken in the oven. Yum.


    by Oxy Mora on Wed, 11/24/2010 - 5:40pm

    This was an interesting development.  I don't think it much levels the playing field for the small investor and, to paraphrase Henry Blodget it wouldn't matter much if it did because the Jets will always beat the high school football team on any playing field, level or not.  So don't try to out trade Wall Street.  Even they can't do it.

    As for these networks, I think it's interesting that they are high priced but largely not shadowy.  S&P even has one!


    by Michael Maiello on Tue, 11/23/2010 - 12:17pm

    Right, Destor, a small investor should not trade--period. And the playing field is not level. But long term investing is still an option, especially spreading out purchases with the "dollar averaging" method, and having a balanced portfolio. I do think the FBI raids are significant, that they will assist regulatory reform and will partially lift a weight off consumers and small investors. Of course my views and actions could just as well be a sell signal. But I have confidence that the economy will continue to improve over the next couple of years.  


    by Oxy Mora on Tue, 11/23/2010 - 2:30pm

    I am shocked to see Janus and Wellington involved.  Janus is a company that I thought learned its lesson after the mutual fund timing scandals earlier in the decade.  Wellington, at its size, shouldn't need such an edge.  It basically is the market.


    by Michael Maiello on Tue, 11/23/2010 - 2:42pm

    That is shocking. I'm very fortunate to be part of USAA, the financial services company for ex-military officers, etc. They are pretty conservative and somewhat insulated from the kind of intrigue involved here--maybe that's why their returns aren't as good.


    by Oxy Mora on Tue, 11/23/2010 - 2:59pm

    I know it adds up but I'm always surprised to see how comparatively low supposed insider trading profits are compared to the amount of assets involved.  One of the transactions under investigation supposedly made $90,000 for a $6 billion hedge fund.  Make no mistake, a $90,000 gain for me is huge.  But for a $6 billion investment company?  You mean to tell me you can't generate trading profits of such a small relative size with public information?


    by Michael Maiello on Tue, 11/23/2010 - 4:30pm

    Maybe they're talking a day or so. Sounds like chump change for these guys. It turns out that it's hard to beat an S&P index fund. But one trade a day or so X 300 days gets you to around 5% returns for the year. And my impression is that the trades are short term and frequent. See the HP article Star referenced. It's actually very competitive, which is why they look for an edge.  


    by Oxy Mora on Tue, 11/23/2010 - 6:21pm

    I'm of two minds about this. That they're going after Wall Street insiders is surprising, and encouraging. But keep in mind that they are under incredible pressure to bring retail investors back into the market. There is something like 10 trillion dollars sitting on the sidelines, because people have realized the game is utterly rigged. So, before moving money back into the market, you have to be pretty confident that this is a sign of real reform in regulatory practices in the works, and not just another show put on for the general public to lure money back into market. The insiders are short of outsiders to fleece these days.

    For me it seems like the personally prudent and socially responsible thing to do is still to have your savings in a community bank (or, over here in Switzerland, at the post office). Beyond the stock market shenanigans, there is something distasteful about providing capital to the big corporations these days.


    by Obey on Tue, 11/23/2010 - 6:11pm

    Thanks, Obey. I could be wrong but I think rounding up the financial perps may bring people into the market.--maybe for another fleecing and perhaps I'm gullible--time will tell. There are a lot of legitimate investment funds out there.  As far as being responsible, it is a matter of conscience, that's for sure. I think prosecutions help Obama if he uses the bully pulpit properly.


    by Oxy Mora on Tue, 11/23/2010 - 6:40pm

    The preceding bill sponsered by Rep. Marcy Kaptur, may have failed today, in the House.

    H.R. 3995, the Financial Crisis of 2008 Criminal Investigation and Prosecution Act of 2009

    This bill authorizes: the Director of the FBI to hire 1,000 additional agents and additional forensic accounting experts; the Attorney General to hire more Federal prosecutors; and the Chair of the Securities and Exchange Commission to hire more investigators, to catch and prosecute these white collar criminals and prevent their continued criminal activities.  



    by chucktrotter on Tue, 11/23/2010 - 7:11pm

    Chuck, maybe we can do volunteer work as investigators. But I'm afraid Obama isn't getting any more resources out of Congress. In my opinion what Obama needs is some damned good communicators who are all singing from the same page. Get a message. Drive it home every day.


    by Oxy Mora on Tue, 11/23/2010 - 10:48pm

    Oxy...

    Back in my working days, I read several books regarding the manipulation of our markets.  I knew several co-workers who "played" the markets.  When i voiced my concern that Wall Street was just a fancy form of the Mafia, they would tolerantly smile at me.  Either Obama is deaf or has too many dogs in the fight to break up the Wall Street Ponzi scheme. If he allows this bank scam to continue, he's a one-termer.  I think "big money" has him by the gonads!  Or, perhaps, the truth would cause a depression. 


    by chucktrotter on Tue, 11/23/2010 - 11:44pm

    A lot of the people who were "playing" the market got their heads handed to them. If Obama doesn't take a tough stand on the financial regulations I will really wonder about him.

    On the subject of financial regulations, a commentator tonight said, "well the Republicans are going to make Obama's appointees miserable, they'll just have to make the best of it". That really made me angry. What we need are some of our own mafia types to go up on the Hill and take their baseball bats into the hearings--metaphorically speaking, of course.

    In otherwords, welcome the hearings as a stage to call out the Republicans.  


    by Oxy Mora on Wed, 11/24/2010 - 12:41am

    I try not to be a violent individual.  In this situation, I would hunt-down every SOB related to this scam, herd them into football stadiums and give them one of two choices:  Head first or feet first.  These rich kids have placed me, my family and nation at risk.  That's called treason and should be dealt with accordingly.  I would, also, audit each and every government employee back thirty years.  How do used car salesmen with IQ's two points below plant life become millionaires in a few years?  Same choice as I gave our politicians!  Are we all this stupid? 


    by chucktrotter on Wed, 11/24/2010 - 1:21am

    Right or wrong, this is my reaction; exactly.

    Oh, and I am sure that it is all in the software!!


    by Richard Day on Wed, 11/24/2010 - 6:56pm

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