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The silver shorts have their backs up against the wall. And that makes them dangerous.
Intraday commentary here.
It looks like there will not be a criminal case in the MF Global theft of customer funds, but they could face a fine of up to $140,000.
The viral moral hazard unleashed by TARP continues to multiply and reverberate through US financial markets to their detriment. It has a marked dampening effect on market participants, and encourages unethical behaviour and a spirit of lawlessness. In that sense MF Global is just one symptom among many of a major set of policy errors committed by the Fed, the Congress, and the last two administrations at least.
"In economic theory, moral hazard is a tendency to take undue risks because the costs are not borne by the party taking the risk. The term defines a situation where the behavior of one party may change to the detriment of another after a transaction has taken place...Economists explain moral hazard as a special case of information asymmetry, a situation in which one party in a transaction has more information than another. In particular, moral hazard may occur if a party that is insulated from risk has more information about its actions and intentions than the party paying for the negative consequences of the risk. More broadly, moral hazard occurs when the party with more information about its actions or intentions has a tendency or incentive to behave inappropriately from the perspective of the party with less information."
From a practical standpoint, I guess this clears the way for Corzine to be the next Treasury Secretary, a fitting replacement for Geithner the amoral technocrat.
Hide your women, children, IRA's and 401k's. The economic hitmen are coming to town.
As Janet Tavakoli said the other day, the media coverage of this scandal has been a comedic lightweight fly by that no one in the know could possibly take seriously.
And as Chris Whalen said, we always have known where the money ended up. And that is a big part of the problem. Corzine is Too Big to Jail and the Banks are Too Big To Fail.
Perfect illustration of the credibility trap that is destroying the economy.
Now the elite New York Times chimes in with its own version of the mysteriously vaporizing, blameless money meme. Maybe someone should look in Judge Crater's pockets, or Jimmy Hoffa's wallet.
Et tu, Gray Lady?
As I said, I have now given up all hope of justice being done in this case. But I think obtaining some of the stolen customer money back from the banks and MF Global Holdings is still possible.
We're not in Kansas anymore, Toto. Smells more like 1920's Chicago.
What we need are The Untouchables, honest public servants not compromised in the web of a credibility trap.
NYT
Doubtful Signs of a Criminal Case Against MF Global
By AZAM AHMED and BEN PROTESS
February 28, 2012, 8:45 pm
Federal authorities are struggling to find evidence to support a criminal case stemming from the collapse of MF Global, even after a federal grand jury in Chicago has issued subpoenas.
Investigators, unable to find a smoking gun amid thousands of e-mails and documents, increasingly suspect that chaos and poor risk control systems prompted the disappearance of more than $1 billion in customer money, according to several people involved in the case. (Are these the emails that the lawyer for the Creditors in the bankrputcy case had sole possession of for months? Vaporization by honest sloppiness - Jesse)
When the money first went missing, prosecutors in New York and Chicago scrambled to stake a claim. Now, four months later, both Preet S. Bharara, the United States attorney in Manhattan, and Patrick J. Fitzgerald, his counterpart in Chicago, are shying away from leading the case, one of those people involved in the case said.
Indeed, a number of federal prosecutors have expressed doubts to others involved in the case that anyone at MF Global — including the firm’s chief executive, Jon S. Corzine, and back-office employees in Chicago — intentionally misused customer money, said people involved in the case who were not authorized to speak publicly about the investigation.
The subpoenas by the grand jury in Chicago were disclosed by the CME Group, MF Global’s chief regulator, in a securities filing on Tuesday. But the grand jury, according to the person involved in the case, has yet to hear any evidence on the case — a sign that the investigation has yet to bear fruit.
Still, it is early in the investigation, and regulators and others have yet to finish plowing through the mountain of documentation they recently received from the company. (And what investigative principle suggests the wisdom of allowing the company to go over the evidence first before handing it over to the investigators? - Jesse) In addition, authorities have yet to interview key witnesses — including a person who is believed to have transferred client funds in the firm’s final days.
The inability to bring a criminal case would certainly disappoint thousands of clients, including farmers, traders and hedge fund managers, who are still without access to at least a third of their money.
The government is still hopeful it can file a civil suit against the company, people close to the case said, though doing so against a bankrupt firm with a long line of creditors could be seen as more symbolic than substantive.
Such a case would most likely center on the firm’s failure to safeguard client money, a cardinal sin in the world of futures firms. The penalty for improperly dipping into customer money is a roughly $140,000 fine, equal to about a thousandth of the overall shortfall that clients are enduring....
Read the rest here.
Anyone who thought Bernanke was going to announce QE3 today is delusional.
Feb. 29 Comex March silver futures first notice day
Feb. 29 Comex March copper futures first notice day
Feb. 29 Nymex March palladium futures first notice day
Last night Harvey Organ said:
"This is the first time in quite a while that gold and silver rose big time a day before first day notice. The bankers try and influence our longs not to take delivery so they generally raid. Today was different."
Well, Harvey spoke too soon; it really wasn't different. The metals rallied higher yesterday, and then were smacked down in a very calculated and violent bear raid today.
I was expecting something like this, and here it is. These fellows have their backs to the wall in silver.
I have seen reports that 225 million ounces of paper silver were dumped on the Comex in less than thirty minutes.
The last time I checked there were less than 35 million ounces of silver registered with the dealers for delivery in at the Comex.
First day notice is when holders of paper futures give notice to the exchange that they intend to take delivery the silver claims they hold from the Comex warehouse. The amount of paper held is multiples of the bullion that can be delivered at current prices.
The 'tell' is the lack of a serious sell off in equities. The yawning divergence in the risk trade is hard to miss.
This notion that gold and silver are selling off because Bernanke is not going to do QE3 is ludicrous. He does not need to do QE3. The Fed is all over these markets in Operation Twist. Jim Rickards has explained this scenario many times that I have linked here.
What is the answer? Unless you are a full time experienced trader playing with 'cool money,' stop trading. This market is far too thin and given over to gimmicks for the average person to participate. It really is.
Take long term positions that suit your investment situation, and then ignore the noise that the trading desks throw out to shake people from their positions, painting pictures on the charts to shape perception.
Bernanke is still powerful, but the trends in the longer term are even more powerful.
The volatility and gaming in the markets will only get worse, as they are thinly traded and dominated by a few big trading houses that act as they choose, almost with impunity. And if a major default is coming, the volatily will go through the roof.
You have three choices. Buy, sell, or stay out of the daily trade.
And for the vast majority, the last choice is the best, especially while the markets are given over to such inefficiency and corruption. I'm sorry, but that is the way it is. And its a shame on the government, but unfortunately these days the powerful and the elite have none.
If you have the overwhelming urge to gamble with your money, take a trip to Las Vegas or Atlantic City. The food is better, the drinks are cheaper, and the games, although still stacked against you, are at least relatively honest.
And you don't have to worry about the Casino looting your accounts and safe deposit boxes to cover their own personal gambling losses.
