Its Raining Small Fry and Patsies on Wall Street

Not to excuse anything these two fellows did. Its clear that they broke the law.

But isn't this what most of Wall Street and Washington DID the earlier part of this year? Did they hold a lottery or something and these two lost?

Has anyone checked Ben Bernanke's and Hank Paulson's emails? Is it all right to lie through your teeth as long as you can make a plausible case that you are a clueless idiot devoid all common sense, with an optimistic certainty and belief that would shame a saint?

Are you going to feel better when you find out you are doomed because you have been living in a web of lies, but that the guy telling them is blameless because he was an incompetent moron?

Bear Stearns Fund Prosecutors Reveal `Lot of Evidence' of Fraud
By David Voreacos

Jan. 20 (Bloomberg) -- E-mails, witness statements and a money trail may help convict two former Bear Stearns Cos. managers accused of misleading investors and lenders about two hedge funds that imploded, legal analysts said. (on Wall Street!?? That's part of the job description isn't it? - Jesse)

Ralph Cioffi, 52, and Matthew Tannin, 46, were charged yesterday with falsely saying the funds were thriving while knowing investments in subprime mortgages could cause their collapse. U.S. prosecutors claimed the men lied about liquidity, redemption requests, and their own investments before the funds shut down last June, costing investors $1 billion. (Uh, didn't the CEO of Bear Stearns do exactly the same thing the week before it collapsed? Maybe their real crime is that Bernanke didn't bail them out and make their claims good. Insufficiently connected and protected? - Jesse)

``This one is a shotgun of all sorts of facts,'' said former federal prosecutor William Mateja. ``They've got a lot of evidence to establish a securities fraud against hedge fund managers. Not having heard the other side of the story, it appears that they have a strong case.'' (On Wall Street the sounds of deleting emails and shredding memos today - Jesse)

The indictment and arrests of Cioffi and Tannin are the first charges relating to last year's mortgage-market breakdown. The government is probing banks and mortgage firms whose losses in subprime loans and related securities total $397 billion. (We guess these guys aren't 'Friends of Frank' or anyone else. Were they boinking some big guy's trophy wife on the Hamptons or something? - Jesse)

Cioffi and Tannin were each charged in federal court in Brooklyn, New York, with conspiracy, securities fraud and wire fraud. Cioffi also was charged with insider trading for his $2 million redemption from one fund. They face as long as 20 years in prison on the fraud counts. They also were sued by the U.S. Securities and Exchange Commission.

`Scapegoat'

Cioffi's lawyer criticized Brooklyn U.S. Attorney Benton Campbell for ordering the arrests, saying it was an effort by the government to make an example of innocent men. (There are no 'innocent men' on the Street. Their crime is to be 'insufficiently connected' and 'not knowing where enough bodies are buried to nail some higher-ups - Jesse)

``Because his funds were the first to lose might make him an easy target but doesn't mean he did anything wrong,'' defense lawyer Edward Little said.

Tannin's lawyer, Susan Brune, said her client is innocent and prosecutors have made him a ``scapegoat.'' (Does 'scapegoat' really capture this? What do you call it when wolves are chasing your sleigh, and you toss someone over the back to slow them up? Do we betray our central European roots? Great success! - Jesse)

The 27-page indictment details how Cioffi and Tannin began the Bear Stearns High Grade Structured Credit Strategies fund in October 2003. They said it was a low-risk investor in high-grade securities including collateralized-debt obligations, or CDOs, that offered returns of 10 percent to 12 percent, according to the indictment.

By 2006, returns fell, and the men started a second, more leveraged fund into which most clients transferred their money, prosecutors said. By March 2007, Cioffi and Tannin believed the funds ``were in grave condition and at risk of collapse,'' prompting fraudulent statements and actions to stave off a run by investors, according to the indictment.

The men fretted in April after a report showed the CDOs were worth far less than they hoped, according to the indictment. (For our non-US readers "fretted" is an idiom for "shit their pants in epic proportion - Jesse)

`Damn Ugly'

``The subprime market is pretty damn ugly,'' Tannin wrote in one e-mail to Cioffi. ``If we believe the [CDO report is] ANYWHERE CLOSE to accurate I think we should close the funds now. The reason for this is that if [the CDO report] is correct then the entire subprime market is toast.'' (Sounds like the lead paragraph in almost any financial story in the UK Telegraph - Jesse)

Tannin sent the e-mail from a personal account, not the Bear Stearns system, to the personal e-mail account of Cioffi's wife, according to the indictment. (Oh, THAT's how it avoided being deleted by 'the big magnet' - Jesse)

That e-mail and others cited in the indictment ``are really absolutely the key,'' said Villanova University Law School Dean Mark Sargent, who read the indictment. (Time to free up disk space. Look for plummeting sales at Western Digital and Maxtor - Jesse)

``They show that they knew the funds were cratering, that the bottom had dropped out of the subprime market, and their leverage was putting enormous pressure on the fund,'' Sargent said. (Is there ANYONE on Wall Street who didn't know? This is all about the Enron CEO defense and 'plausible deniability' You can't convict me, I'm a clueless idiot. ((Note to W, it might work at that war crimes trial buddy.)) - Jesse)

The e-mails ``support the government's theory that the defendants are thinking one thing and saying another to investors or lenders or internal brokers,'' said Paul Radvany, a Fordham University law professor and former federal prosecutor.

E-Mails

``It's hard to imagine a compelling reason not to use Bear Stearns's internal e-mail to talk about Bear Stearns hedge funds,'' said Christopher Clark, a former federal prosecutor in New York.

Prosecutors also cited a series of statements that Cioffi and Tannin made to investors in conference calls and privately to lenders and subordinates. Cioffi failed to tell investors that he redeemed $2 million of his $6 million investment, moving it to another Bear Stearns hedge fund, prosecutors said.

In a conference call on April 25, 2007, Cioffi discussed investor withdrawals, saying there would be ``a couple of million of redemptions'' by June 30, according to the indictment. He knew there had been $47 million in redemptions, prosecutors said. Cioffi didn't mention his own $2 million withdrawal, according to the indictment.

Tannin's Money

Tannin repeatedly told investors that he would add his own money to the funds, and didn't, prosecutors said.

``It's very hard to say you weren't shading the truth in an important way when you say you had a couple of million dollars of redemptions when in fact you had $47 million,'' Clark said.

``The movement of money is key,'' said Andrew Hruska, a former federal prosecutor in Washington and Brooklyn. ``That's a matter of not just saying but doing. When you say `I'm putting in money' when in fact you're taking it out, there's no argument.''

The case is U.S. v. Cioffi, 08-00415, U.S. District Court, Eastern District of New York (Brooklyn).

To contact the reporters on this story: David Voreacos in Newark, New Jersey at dvoreacos@bloomberg.net.
Last Updated: June 20, 2008 00:01 EDT

Schroder Investment Management Says Gold to $5000 per Ounce. Is it Probable?

Another surprising announcement from a 'name' financial management firm that ought to be in a position to have an informed opinion arrived on the news. Yesterday both Morgan Stanley and the Royal Bank of Scotland forecast a meltdown in financial assets, and today Schroder Investment Management posits the shocking target of $5000 per ounce for gold.

Obviously we cannot address this type of a forecast, or even intelligently surmise if Schroder is basing this on a realistic extrapolation from the course of the financial crisis, or is just talking their book, in the same way some were forecasting Dow 36,000.

We do believe strongly that at some point the ratio between the Dow Jones Industrial Average and the price of gold in dollars/ounce will be "2" and perhaps closer to "1" but cannot say if this will occur at 2,000, 4,000 or 5,000.

What we are also convinced of is that at some point the train will leave the station, the boat will leave the dock, and if you are not on it before it leaves finding a place of any substance will not be easy, and may not even be possible for some time.

Consider the question, how many fiat currencies have lasted for more than 100 years before being replaced and devalued because of the ravages of inflation?

Let's hope we do not see this, as it will represent a significant deterioration in the purchasing power of the dollar and the pound and probably a few other currencies. But given the other forecasts of the past few days, and the outrageous actions of the Federal Reserve in corrupting their base assets, we are not as surprised or skeptical of this forecast as we might have been only a month or so ago.


Gold May Rise to $5,000 on Inflation, Schroder Says
By Bei Hu

June 19 (Bloomberg) -- Gold prices may rise to $5,000 an ounce as investors seek to protect themselves against accelerating inflation, said Schroder Investment Management Ltd., which oversees $277 billion of assets globally.

''You could easily see for the next several years that prices rise not to $1,000 an ounce, but prices rise to $5,000 an ounce or beyond as inflation psychology becomes more and more embedded and people become desperate to have a source of value,'' said Christopher Wyke, London-based emerging market debt and commodities product manager at Schroder, which oversees about $10 billion of commodity assets.

Investors are turning to gold for protection as two-thirds of the world's population cope with inflation rates that are climbing to more than 10 percent, Wyke said. Cash and inflation-linked bonds are poor substitutes as low interest rates, coupled with surging inflation, erode the real value of assets, he said.

Bullion for immediate delivery was down 0.2 percent at $892.48 an ounce at 9:57 a.m. in Singapore, after gaining 3 percent in the past four days. Wyke didn't give a time frame for his gold prediction.

Demand for gold will also rise as central banks become net buyers for the first time in 20 years, driven by developing countries, he added. Last year, world production of gold sank to the lowest since 1937 as reserves are depleted and few new sources of gold have been found.

New Fund

Wyke was speaking at a press conference in Hong Kong today to market the Schroder Alternative Solutions Gold and Metals Fund, the first commodity fund authorized for sale to individuals in the city that invests primarily in derivatives, including futures, warrants, swaps and options. Robert Howell and Paula Bujia will manage the fund.

Gold may account for about 40 percent of the fund's assets, based on a ''model'' fund used to simulate returns, said Wyke. The fund would also buy securities linked to metals including aluminum, copper, iron ore, zinc and uranium.

The limited amount of gold available, relative to the size of the global capital markets, means a small shift in investments may lead to significant price changes for the metal, Wyke said. Total gold above ground is worth about $4.8 trillion, compared with global stock and bond markets worth $135.2 trillion.

UBS AG, Hang Seng Bank Ltd., KBC Groep NV and Lehman Brothers Holdings Inc. are among firms that manage commodity funds in the city, according to the Hong Kong Securities and Futures Commission. Bank of East Asia Ltd. in February started a fund that buys shares of companies that produce materials and energy.

Evergreen Investment to Liquidate Ultra Short Term Opportunities Fund

Interesting, but it will be more significant when Lehman, Citigroup, or Wachovia itself go on the block. What do you think the NAV of their shares are? (Hint: refresh your knowledge of imaginary numbers.)

Evergreen Investments Announces Liquidation of Ultra Short Opportunities Fund
Ticker Symbol: U:WB

BOSTON, June 19 /PRNewswire/ -- Evergreen Investments today announced that the Board of Trustees of the Evergreen Funds approved a plan to liquidate Evergreen Ultra Short Opportunities Fund (EUBAX).

Shareholders of record as of June 18, 2008 will receive a cash distribution based on a $7.48 per share net asset value (NAV) calculated after the close of business on June 18. As of such date, the Fund had total net assets of $403 million.

Evergreen's parent company, Wachovia Corp. , will provide financing for the liquidation which will occur on or about Thursday, June 26, 2008. Effective immediately, shares of the Fund will no longer be available for purchase by new shareholders.

Web site: http://www.evergreeninvestments.com/

Ultrashort Opportunities Fund

The investment seeks current income consistent with preservation of capital and low principal fluctuation. The fund invests primarily in commercial and residential fixed and variable rate mortgage-backed securities, including CMOs and other mortgage-related investments. It may invest up to 25% of assets in debt securities of issuers located in developed foreign countries and up to 10% in bonds denominated in foreign currencies, with no more than 3.33% in debt securities denominated in any single foreign currency. It normally maintains an average portfolio duration of approximately one year or less.

Citigroup Spoils Option Expiry Antics with a Simple Statement of the Obvious

The usual suspects were walking up the XLF to squeeze the short interest in financials when this little truth-bomb from Citigroup hit the wire, spoiling their traditional quad witching option expiry market manipulation.

It is not over yet. The worst is yet to come. They have taken the easiest writedowns first.

You don't like to hear this do you? Well, how many times does someone have to lie to you about something important before you realize they are a liar? That they view the truth as something to convenient bend to their will to get their way, to skin you from your money? To take away your family's wellbeing?

We are in for some hard times. Don't believe much of what you hear because the lies and scams and propaganda are coming hot and heavy, and it is not designed to help you. Try to use your critical judgement, or at least your common sense. A useful step is to get your information from sources beside CNBC and Fox. Reading is a useful habit to acquire.

There is a list of interesting internet sites over on the left under the title Divertissement Éducatif. Read some. Get some other viewpoints, some other sets of facts, some other interpretations. If you are not doing so well, maybe, just maybe, you are being used badly, and you are allowing it to happen.

Gold and silver are not contingent on anyone else's word, but can be slammed by the same short term forces that make stocks go up against all reason. Now might be a good time to have some at hand.


Citigroup CFO Crittenden Expects More Writedowns on Bank's CDOs
By Josh Fineman

June 19 (Bloomberg) -- Citigroup Inc., the biggest U.S. bank, will have substantial writedowns on its holdings of collateralized debt obligations, Chief Financial Officer Gary Crittenden said.

The second-quarter markdowns won't be as large as last quarter, Crittenden said today on a conference call with investors hosted by Deutsche Bank AG.

Citigroup fell as much as 4.4 percent on the New York Stock Exchange after the comments. The shares dropped 81 cents to $19.59 at 11:42 a.m., after reaching $19.51.

To contact the reporter on this story: Josh Fineman in New York at jfineman@bloomberg.net.
Last Updated: June 19, 2008 11:43 EDT


Citi's CFO: More 'substantial' write-downs in 2Q
Thursday June 19, 1:16 pm ET
Citigroup CFO predicts 'substantial' write-downs on debt instruments in 2nd quarter

NEW YORK (AP) -- Citigroup Inc.'s chief financial officer on Thursday warned that the nation's largest bank by assets would suffer more "substantial" write-downs on debt investments in the second quarter.

CFO Gary Crittenden also said that there will likely be more write-downs related to leveraged loans and bond insurers.

Citigroup shares fell 77 cents, or 3.8 percent, to $19.64 by early afternoon trading.

Crittenden did say that Citi's second-quarter write-downs on structured debt products known as collateralized debt obligations, or CDOs, would be lower than they were in the first quarter. In the first quarter, Citigroup marked down the value of its CDOs by about $3 billion. All told, the bank in the first quarter wrote down more than $14 billion.

The executive spoke at a conference hosted by Deutsche Bank. His comments come on the heels of profit declines at three major Wall Street investment houses, and Fifth Third Bancorp's decision to raise $2 billion in capital. Futures and options broker MF Global Ltd. has also warned that tight credit spreads will weigh on its fiscal first-quarter earnings.