MF Global: Trail Growing Cold - 'No One to Blame"'

I did predict something like this would happen in about the second week of the scandal, didn't I?

Did you ever imagine that in America a major brokerage firm would brazenly steal over a billion dollars in customer funds and assets, and that no one would even be prosecuted?

And that the financiers would use the courts to just keep the money, and basically tell the broker's customers to eat shit? 

The money?  Oh no, that's just vaporized.  Just a freak accident, practically  an act of God.   Very mysterious, but could not happen again.  Protection?  Sorry don't know anything about that.

No one knows anything.  Except that the financial system can't be trusted, and that nothing in it is safe.  But they are afraid to admit it.

Reuters Africa
ANALYSIS-Criminal probe trail going cold at MF Global
Thu Feb 9, 2012 10:54pm GMT

Feb 9 (Reuters) - When commodities brokerage MF Global imploded, the FBI and federal prosecutors were quick to launch an investigation to pursue what seemed obvious to outspoken regulators and lawmakers: laws were broken and crimes were committed.

More than three months later, it is far from clear that anyone will face criminal charges over the disappearance of more than $600 million in customer money as MF Global spiraled towards bankruptcy in the brokerage's final, frantic days in the last week of October.

So far, the MF Global investigation is not tracking the early progress of other high-profile financial scandals such as RefCo, where former Chairman Phil Bennett was arrested within days of the disclosure that the futures firm had been hiding losses for years.

Lawyers and people familiar with the MF Global investigation of the firm that was run by former Goldman Sachs head Jon Corzine say that even though the hunt is still on to find out whether or not officials at MF Global intended to pilfer customer money in a desperate bid to keep the brokerage from failing, the trail at this point is growing cold.

To date, scant evidence of criminal intent has emerged in company emails, no former or current employees have sought to cut a deal to provide testimony about potential wrongdoing and seasoned defense lawyers say they are not seeing the tell-tale signs of a hot criminal investigation.

A source familiar with the work of Louis Freeh, trustee for the MF Global holding company that filed for Chapter 11 bankruptcy protection, says investigators have yet to find evidence of fraud in the multi-faceted and complex investigation.  (Perhaps stealing and then passing on stolen goods as your own does not qualify as fraud? And what is the MF Global trustee, Lous Freeh, who invokes attorney client privilege with MFG, doing running the investigation? - Jesse)

The source, who declined to be identified because Freeh's office is still conducting its inquiry, says there was plenty of "chaos" at MF Global in its waning days, but "no evidence of fraud." Freeh is a former Director of the Federal Bureau of Investigation...

Read the rest here.

Drei Groschen Oper - Die Moritat von Mackie Messer  English translation.

Yes We Can!

Gold Daily and Silver Weekly Charts - More of the Same - Monetary Trends

Some economists were saying patently silly things about gold today.

It might be useful to review why gold proves such an irritant to financial engineers and modern monetary theorists.

Typically when this happens we are a few weeks away from a major money episode of some sort, most generally of the printing kind. 

The Fed has a penchant for allowing asset bubbles to form, although that typically ends rather badly.  The mispricing of risk is the antithesis of fostering a healthy market economy. It is ironic that it is so often done in the name of restoring 'confidence' which afterwards appears to be little more than cleverness and hubris, if not downright folly. Confidence obtained by deception or false premises never lasts, and is always corrosive. But it can appear to be expedient.

"I don't know where the stock market is going, but I will say this, that if it continues higher, this will do more to stimulate the economy than anything we've been talking about today or anything anybody else was talking about."

Alan Greenspan

A stock bubble does not stimulate real economic growth, even though it may temporarily confer the appearance of vitality. Rather it encourages malinvestment and the dissipation of resources. In the end it affects the transfer of wealth from savers and labor to speculators and financial insiders. And the corruption drives out productive investment.

"Whoever commits a fraud is guilty not only of the particular injury to him who he deceives, but of the diminution of that confidence which constitutes not only the ease but the existence of society."

Samuel Johnson

The volatility on the stock indices is very subdued, if not complacent. Be careful.

SP 500 and NDX Futures Daily Charts - Winding Up for a Move - VIX

"Once stock prices reach the point at which it is hard to value them by logical methodology, stocks will be bought as they were in the late 1920s not for investment but to be unloaded at a still higher price. The ensuing break could be disastrous because panic psychology cannot be summarily altered or reversed by easing money policies."

Alan Greenspan, 1959

The Fed and its acolytes in the banking system sometimes foster an environment where equity prices rise in a steady manner, with little solid underpinning. The higher they go, the further they slide away from rational valuations, the less is required for them to take a tumble.

At the extreme, it can be a bit of a mystery and rather difficult to determine what exactly caused the market collapse. This is how it was with the Great Crash of 1929. Most often it can be something mundane and seen before, but at that stage of the bubble's ascent can cause a fatal break in confidence. And then comes the deluge. And confidence is not so easily restored.

Gold Daily and Silver Weekly Charts

Bear raid. Boring really.