Posts Tagged ‘MF Global’

Notes From Underground: European Leaders Head to Washington for Meetings When Everyone Knows There Is No Sanity Clause

November 27, 2011

In one of the best Marx Brothers scenes is from A Night at the Opera, where Groucho and Chico are ripping up a contract and they finally come to the SANITY CLAUSE, in which Chico proclaims there is no SANITY CLAUSE. In tomorrow’s Financial Times, there is a story about France pushing for a Christmas gift from the ECB. The gift that the French are hoping for is a backstop for the European banks that are under severe stress because of the huge amount of EURO sovereign bonds on the banks’ balance sheets. In order for the ECB to act, there would have to be a SANITY CLAUSE invoked and the EUROCRATS would have to attain a measure of sanity. The day-to-day machinations of EUROPEAN politics has left the markets FATIGUED and in a very defensive mindset.

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Notes From Underground: Sarkozy Has Overplayed a Bad Hand and It Has Cost Europe

November 16, 2011

It has been the best of times. It has been the worst of times. President Sarkozy began the year with such high hopes and aspirations as he desired to raise his stature on the world stage. He won his early skirmishes against Chancellor Angela Merkel by first defeating Germany’s desire for Axel Weber to attain the ECB Presidency and then forcing the German Chancellor’s hand for a larger pool of capital for the European Financial Stability Facility. But the taste of victory has now faded as the FRENCH BOND MARKET is suffering under the weight of its deeply troubled banks and the GERMAN/FRENCH  10-YEAR BOND SPREAD CONTINUES TO WIDEN. France is deemed to be very vulnerable for its banks own so much EURO SOVEREIGN DEBT that of course is deemed to be riskless and require no haircut or capital to support it.

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Notes From Underground: And The Winner of This Year’s GREENSPAN MORAL HAZARD Award Is … JON CORZINE

November 1, 2011

Another day another crisis in EUROLAND, or the LA LA LAND of Wall Street, which we will know refer to as THE LAND OF MORAL HAZARD. The leaders of the Wall Street establishment have proven again that no risky investment is too big as long it is with OPM (other people’s money). Jon Corzine went all in on a bet on PIIG DEBT in an effort to increase the annual returns at MF GLOBAL. In a ZIRP environment, a clearing house has a difficult time making money because the earnings, which are the overnight float, are so extremely low. In order to generate greater earnings on the FLOAT, greater risks need to be taken so the need to purchase riskier sovereign debt becomes the outlet.

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Notes From Underground: OPEN LETTER TO FINANCE MINISTER AZUMI–IT IS THE EURO/YEN AZUMI-SAN

October 31, 2011

Last Monday in NOTES, the possibility of YEN intervention was discussed following the news of VW overtaking Toyota in the race for gaining market share. It was not GM, Chrysler or Ford that overtook Toyota but VW, a EURO based auto producer. Sunday evening, the BOJ, under the direction of Finance Minister Jun Azumi, moved to intervene in the FX to attempt to stem the continued strength of the YEN. The initial round of intervention has worked as the YEN futures on the IMM dropped 300 points on a one minute bar and never recovered. In its most recent interventions, the effort by the Ministry of Finance failed as Japanese investors continued to repatriate money as the global financial situation remained so uncertain.

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