Tuesday, November 1, 2011


...and mine stinks.  With what is shaping up to be a monumental week, we are off today on a 12 day holiday/grandchild sitting duties journey back east.  Just to show you what I mean, take a look at was as occured over the weekend.

MF Global went toes up.  Now for certain Jon Corzine is having such a bad run that I wouldn't stand within ten feet of the guy for fear that I catch what he has, but I find it interesting why the public thinks the firm failed.  It appears back at the start of the year, ol' Jon, in an attempt to make a sleepy littly clearer look more like Goldie (who fired him, remember?) loaded up on Euro fixed income securities from the PIGS.  Well, we all know what has transpired in Euroland and suddenly everybody got the idea all at the same time that fixed income wasn't the place to be and...well, you see the result.  BUT, the funny thing is it wasn't a bad trade.  MF bought the stuff at a deep discount and there it sits, a couple of points below where it was purchased to be sure but earning a nice tidy yield which was the point of the exercise.  So why this reaction?  You might remember what Charlie has told you:  banks get sick on the asset side by die on the liability side.  Confidence was lost in MF, funding disappeared overnight and bankruptcy was the result.  It is always as such.  Now it appears that there my be a question of misplacement (to be kind) of client funds but this was unknown and played no part in the collapse.  What I would like to know is why the NY Fed pulled their Primary Dealership last week?  Maybe someone will tell me.

Just to enforce the fact that it aint over til it's over in Europe, the Greek Prime Minister announced last night that he was putting the austerity plan which of course is the basis of the bail out package from the Euros to a referendum.  Given that the polls show a 60%+ dissatisfaction with his governance, who knows what the result of this will be.  Just goes to show that survival is the first instinct of any politician.

The G-20 is this week and the agenda used to be how much was Japan and China going to kick into the bail-out.  Now it may well be is there going to be a Euroland because if the referendum goes the way I expect it to go that will become the question of the day.  Of course The Leader will be present and perhaps he can give some advice on how you win a tough  a tough vote in a place like Chicago--like adding Ghadafi and Bin Laden to the voter roles perhaps?  To make matters worse, somebody came up with the bright idea today to overrule the Basel II rules on soverign debt in regard to capital requirements related to the percentage of asset represented by a single exposure to a sovereign which will certainly impact French banks in re Italy, leaving aside for a moment the Italians who are already hurting.  Soc Gen crashed 15%  as I started to write and was headed south.  Italian fixed rate futures got murdered and like the great football coach everyone is screaming, "What the hell is going on out there?"

Anyway, that's what we are facing.  I'm going to break a life-long rule and continue to comment through this period, perhaps not every day, but as much as I can.  This is really too goodto let pass.  I would hate myself if I did...then again, Trouble and Strife is going to hate me when I do.

Happy Landings

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