MF Global Sold Assets to Goldman While It Was Looting Their Customer Accounts

It turns out that MF Global sold hundred of millions in assets to Goldman in the last two business days before its bankruptcy. It is not clear that MF Global actually received the payment for the sale, or if the funds were held by their clearing agent and banker, JP Morgan, who knew that they were going to be bankrupt.

That revolving line of credit at JPM of $1.2 Billion is about the size of the missing customer funds.

I wonder if JPM withheld payment on the sale of Goldman assets, and took customer assets as collateral for the credit line. As MF Global's banker they were at the center of most if not all of these transactions.

The idea that the customer money was 'missing' is ludicrous. It would be more correct to say that the ownership of the money was disputed, and was in the hands of JP Morgan and perhaps Goldman.

These are serious offenses. But it becomes even worse if JPM afterwards sought to withhold the stolen funds and cover up the transactions, impeding an official investigation. And then their legal maneuvering afterwards to cut the customer interests in the courts is of course beneath contempt.

Nasty business indeed. I wonder how long the Obama Administration and the Congress are going to cover this up. I am sure the details are known to the regulators already.

I still remain hopeful that the customers will receive their funds. I am not so confident at all that justice will be done. At least the UK has placed the last minute London traders bonuses at the end of the queue.

As far as the restoration of sound markets and money, the looting is only just begun.

Reuters
MF Global sold assets to Goldman before collapse: sources
By Lauren Tara LaCapra and Matthew Goldstein
January 3, 2012

(Reuters) - MF Global unloaded hundreds of millions of dollars' worth of securities to Goldman Sachs in the days leading up to its collapse, according to two former MF Global employees with direct knowledge of the transactions. But it did not immediately receive payment from its clearing firm and lender, JPMorgan Chase & Co , one of the sources said.

The sale of securities to Goldman occurred on October 27, just days before MF Global Holdings Ltd filed for bankruptcy on October 31, the ex-employees said. One of the employees said the transaction was cleared with JPMorgan Chase.

At the same time MF Global, which was run by former Goldman Sachs head Jon Corzine, was selling securities to Goldman to raise badly needed cash, the futures firm was also drawing down a $1.2 billion revolving line of credit it had with JPMorgan, according to one of the former MF Global employees.

JPMorgan spokeswoman Mary Sedarat said the bank did not withold money because of the line of credit. She declined further comment on details of the transactions.

JPMorgan has fought aggressively in bankruptcy court to protect its interests, and received a lien on some of MF Global's assets in exchange for granting the firm $8 million to fund its bankruptcy costs. The lien puts JPMorgan's interests ahead of MF Global customers who have not yet received an estimated $900 million worth of money from their accounts, which remain frozen as regulators search for missing funds.

The hastily crafted transactions and the seeming inability of MF Global to recoup some of the money in the sale to Goldman may start to explain why so much money remains unaccounted for at the futures firm.

It is unclear what type of assets Goldman bought from MF Global, but the securities were worth hundreds of millions of dollars, the former employees said. The sources spoke on the condition of anonymity...

Read the rest here.

Gold Daily and Silver Weekly Charts - Big Rally From Year End Mark-To-Market Boogie Woogie

It appears that the theory that the big shorts were slamming down gold and silver into the year end *might* be valid, given the huge rally today.

But it is too soon to say for sure. I have drawn a short term downtrend line on the gold chart that is a 'must take' for the bulls.

If they can take it out, that's a nice bull flag there on the chart that gets activated.

Non-Farm Payrolls report on Friday and the Euro-whiz kids meet again on the 9th to puzzle through their Gordian knot of a currency and political system.

I read the book Currency Wars by Rickards over the holiday. It was interesting, and is worthwhile for those not familiar with the money and metals markets. His history of the currency wars and old is enlightening. There is not as much 'meat on the bone' in this book as there was in Econned for example, and it is an easier read, but Rickards knows what he is talking about and says his piece well.

I took a 'test' that estimates one's political orientation last week, and it confirmed that I am still almost dead center, just a little to the liberal side but not much. I thought that this was the case and was glad to see the confirmation. 2012 is not going to be a good year for moderates.

I read somewhere today that sociopaths and psychopaths in business are not a problem because people just shun them eventually so the market is naturally self-policing and self-correcting. Ah, if only this pretty piece of idealism was the case. Of course it is just another variation of the efficient markets hypothesis .

This used to be a favorite argument of Bill Buckley and William Rickenbacker when they used to discuss the issue of market regulation.  Anyone who has been in security or fraud investigation knows it is utter nonsense.

Conmen are like cockroaches.  And the better class of white collar crooks are exceptionally devious and manipulative, and often set up sinecures and monopolies that are rather long-lived in addition to their various frauds which are easily replicated and recycled from place to place.

But people keep drifting back to the assumption that information is symmetric and transparent, markets inherently fair, and most people are good. Like a dog returns to its vomit, so idealists and the deluded return to the natural goodness of business and markets to justify some of the most outrageous howlers of arguments over and over again.

The number one son and his friends are home from University so this dad is deep into computer repairs and cooking favorite meals. It does not get much better than this.

SP 500 and NDX Futures Daily Charts - Pop Go the Weasels

Market popped with a big gap open and then chopped around finishing slightly lower than the open on the day, but still significantly higher on light volume. If you were long coming in to today you could make money.

The Non-Farm Payrolls for December is on Friday and there is another Europe meeting on the 9th so these events may cap a new rally until they unfold.

The Fed announced a new 'communications campaign' wherein they will release their economic outlooks. Consider how bad their forecasts have been in the past this looks like just a broadening of their jawboning reach for the management of market perceptions.

The big gap open set up the potential for an 'island top' if we get a gap down on the open tomorrow. So the ball is definitely in the bulls court. Since the volume is so low they can easily take the ball and run if there is no overnight news of the disturbing kind.

Net Asset Value Premiums of Certain Precious Metal Trusts and Funds