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Cohan: Others Pay Price for Corzine's Revenge - Fullermoney
November 03 2011, 8:09am
This is a tough, if deservedly so, detailed summary by Bloomberg columnist William Cohan. Here is the opening:
In the end, Jon Corzine was little more than an unsupervised rogue trader.
His disproportionately reckless $6.3 billion bet on the credit quality of a few European nations bankrupted MF Global Holdings Ltd. (MF) over the course of three dramatic days after the short-term credit markets quickly lost confidence in him and his firm. His gamble will cost MF's shareholders and creditors billions of dollars and, virtually overnight, put the careers of MF's almost 3,000 employees in jeopardy.
MF Global now has the distinction of being one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. There is also the matter of the hundreds of millions of dollars of customers' money that regulators have reported to be missing from the firm's coffers.
In any case, it's incredible how little Corzine and his associates learned from the collapses of Bear Stearns Cos., Merrill Lynch, Lehman Brothers Holdings Inc. and American International Group Inc. three years ago. And it now seems very hard to believe that just a few months ago Corzine was considered the front-runner to be the next U.S. Treasury secretary.
It didn't have to be this way. The tragic element of Corzine's MF Global is that Monday's bankruptcy filing could have easily been avoided if Corzine's ego and ambition had been held in check by someone -- anyone -- willing to stand up to the former New Jersey governor, senator and senior partner at Goldman Sachs Group Inc. (GS)
My view - Corzine appears to have shown a total disregard for the employees and clients of MF Global, especially as he could have placed similar if smaller bets privately with his own capital, if it was just about money rather than ego.
A second, different but equally good column on Corzine's background is posted in the Subscriber's Area.
Email of the day (1) - More on Dodd-Frank:
"Re Dodd Franks. Might reports be a lot shorter if they were written not with the help of computers but in longhand."
My comment - Nice one!
A good article on gold - This item, posted in the Subscriber's Area, contains the views of highly regarded gold analysts.
Email of the day (2) - On this week's market action:
"The uptrends from the lows of 4th Oct have been broken in most markets. Does this cast doubt on the rally continuing into the year-end? I felt the markets were overbought at the end of last week, but the correction over the past couple of days has done a lot of damage.
"I'm keen to hear what you think."
This item continues in the Subscriber's Area.
Deepak Lalwani's India Report - My thanks to the author for the latest copy of his informative letter. It is posted in the Subscriber's Area but here is a brief sample showing information based on India's latest census:
There are 28 states and 7 Union territories in India
• 2011 census for India shows a total population of 1.21 bn or about one in six of people in the world are Indian
• Many Indian states have a population equivalent to European countries
• The combined population of India's two most populous states (U.P. and Maharashtra) with a combined population of 312m is greater than the population of USA
• Likewise, the combined population of India's five most populous states (UP, Maharashtra, Bihar, West Bengal, Andhra Pradesh) at 592 m is more than the population of the European Union's 28 member states of about 550 m
• A little more than 60% of Indians live in one of seven states: UP, Maharashtra, Bihar, West Bengal, Andhra Pradesh and Tamil Nadu
• The rising middle class will drive India's economy for the next 3 decades at least. The sheer numbers will help now
• However, India's huge population will keep it only as a middle income country on per capita GDP basis even in 30 years, despite it becoming the 3rd largest economy in the world
• %age decadal growth of population in India : 1951-61 to 2001-2011:
1951-61 : 21.64%
1961-71 : 24.85%
1971-81 : 24.66%
1981-91 : 23.87%
1991-2001 : 21.54%
2001-2011 : 17.64%
The latest census shows the lowest decadal growth since after Independence in 1947
My view - India has favourable demographics and enviable intellectual talent. Unfortunately, it is even better known for its lack of infrastructure and corruption.
At Fullermoney, we often say that governance is everything. This is certainly true for India and it may be viewed as a mixed blessing that corporate leaders are openly talking about the "absence of decision-making", as you can see from this short article kindly forwarded by a reader.
This item continues in the Subscriber's Area.
My personal portfolio: A trading position increased - Details and charts are in the Subscriber's Area.
Robert Harris's Rogue Algorithm Trades on Fear, Makes Millions: Interview - If you are feeling a bit blasé about these calm, orderly markets, perhaps this book will get the adrenalin flowing:
Imagine the killing to be made right now if you could find a way to capitalize on fear. That's precisely what Dr. Alexander Hoffman does in Robert Harris's gothic new thriller, "The Fear Index."
The physicist-turned-hedge-fund-manager unleashes a trading algorithm that feeds on human emotions to predict market fluctuations. In just a week, VIXAL-4 makes a profit of $79.7 million. Then, on May 6, 2010 -- the day of the so-called flash crash, when the Dow briefly dropped 9.2 percent -- it goes rogue, catapulting its creator into a paranoid universe of murder and market mayhem.
"The fund is like a malevolent creature," says Harris, 54, the author of bestselling novels including "Pompeii," "Fatherland" and "The Ghost," the basis for Roman Polanski's movie about a thinly veiled Tony Blair. Speaking from the depths of a leather chair in a London hotel, he shares some of his own anxieties over club sandwiches and lounge music.
Anderson: What inspired the switch from historical and political thrillers?
Harris: I see myself as writing books about power and this is the same -- it's all about control.
A dozen years ago I wanted to write a version of George Orwell's "1984" in which the threat to the individual wasn't the state, but rather corporations and computers. I got very interested in artificial intelligence. It wasn't until the financial crisis that I realized I could marry finance and computers.
Additional commentary by Eoin Treacy
Email of the day - on the impact of China's lower Purchasing Manager's Index number:
"Would you expect any appreciable fallout from the lower Chinese PMI number on the Chinese markets and does this number influence your near/medium term outlook for that economy?"
My comment - Thank you for this question which others may also have an interest in. China's economy is supported by a high degree of capital investment and the size of its export sector. Consumer spending is growing quickly but still has a long way to go before it reaches a position comparable to that of Hong Kong or Taiwan. The government has been tightening policy for more than two years in an effort to unwind the 2009 stimulus, which relative to the size of the economy was the biggest in the world. Banks have taken the brunt of monetary tightening with reserve requirements at 21.5%. As I reported on my return from China last week, the export sector is feeling pressured because higher wages, lower demand, higher commodity prices and the strong Yuan all conspire to compress margins. The property market is finally beginning to show signs of slowing which was one of the central aims of the government's tightening.
This section continues in the Subscriber's Area.
China to impose rare earths invoice system to curb illegal sales and regulate prices - This article by Shivom Seth for Mineweb may be of interest to subscribers. Here is a section:
In a bid to further curb the rampant illegal production of rare earths, China is all set to introduce specialised invoices for designated rare earths producers this month. Though rumours to that effect have been surfacing all through last month, traders say a decision in this regard has been taken to cushion the fall in rare earth prices and to curb over production.
Traders in China have been caught off guard by a sudden dip in rare earth prices, with the prices of certain minerals plunging over 30% as compared to last month. This has led to many dealers who had accumulated inventories at high prices being thrown off balance. Moreover, prices of rare earths sold without invoices have fallen even further,'' said an analyst tracking the sector.
My view - Rare earth metal prices have fallen sharply over the last few months as supply overtook demand primarily due to overproduction in China. It remains to be seen to what extent a quota system can be enforced but since the sector is of strategic interest to China, we can probably give the authorities the benefit of the doubt.
This section continues in the Subscriber's Area.
Speaking engagements - I have agreed to participate in a few events at this year's World Money Show in London. The times and dates for these are.
Panel discussion "Global investing: Where in the world are the next breakout winners?" 4.30 pm - 5.30pm on Friday November 11th.
I will host The World Money Show's inaugural Alumni Coffee/Tea Meet & Greet between 8.15 am - 9.15am on Saturday November 12th.
Panel discussion "Breakout trends: Finding the luminaries on the horizon" 9:30 - 10:30 am on Saturday November 12th.
The Chart Seminar November 3rd and 4th - The next TCS will be in London, on the fast approaching dates above and held at the Radisson Edwardian Hampshire Hotel. This is in the heart of London's West End, with the main entrance on the lower side of Leicester Square and views overlooking Nelson's Column in Trafalgar Square.
Bearing in mind the adage: Wealth is accumulated in down markets and realised in up markets, this is a good time to develop and hone one's behavioural, technical skills.
Come along to learn, contribute, profit and enjoy.
Please note - I will am travelling to London today for The Chart Seminar and will return to the office on Monday November 7th.
