MF Global: $658 Million in Missing Customer Funds Found in Account at JP Morgan - Maybe

Government Of the People, By the People, and For the People

According to Bloomberg, $658.8 Million in what could be the 'missing customer funds' were 'found' today in an account at JP Morgan.

I know how it is.  Sometimes you forget to check your coat pockets and miscellaneous bank statements too. Sloppy bookkeeping. Tsk tsk. Oh well, just an honest mistake, right?

JP Morgan is one of the largest holders and agents of MF Global debt.

Jefferies Group underwrote MF's bond offering late this year.

MF Global’s commodity customer funds are reported to have a shortfall of $633 million, or about 11.6 percent, out of a segregated fund requirement of about $5.4 billion, according to the CFTC.

The CME is forcing the transfer of customer accounts to other brokers who are demanding double margin and issuing margin calls and forcing liquidation of positions, sometimes at widely fluctuating prices, according to some reports.

And in related news: SEC Investigates Insider Trading of MF Bonds

Hey, now that he has resigned from MF Global, perhaps Jon Corzine will consider taking Tired Timmy's place as Treasury Secretary. He is ex-Goldman you know.

Once you pass through the glass ceiling it becomes a glass floor.

Update:   JPM is now said by some news outlets to be denying that it is holding any MF Global customer money.  "It's MY milkshake. And I'm going to drink it all up!"  slurp slurp grnnfef.

When the going get tough, the weird turn pro.
  

The Disappointing Non Farm Payrolls Number: An Early Christmas 'Goose' Stuffed with Baloney

The Birth-Death Model was out of normal to the high side enough to raise a comment. This is shown in the first slide. Lately the BLS statisticians had not resorted to this and had actually been running at estimates a little more to what one might expect in a business slump.

The headline number without the Birth Death model, deseasonalized, showed negative growth.

So the truth is probably that jobs growth was flat to negative. But even that nugget of truth is liable to be lost in future revisions. I wonder if the desire to show growth will skew the statistics even further as we go forward.

Typical games are to play with the chain deflator in GDP to make it look better, and to play with seasonality, birth-death model, and rolling revisions in the payrolls numbers. And of course the tinkering with CPI is apparent to anyone not carrying an agenda who has looked into the mechanics of the changes in the past ten years.

But I suppose since Obama is speaking this morning at the G20, and telling Europe how to solve its banking and debt problems as the US has done, a passable grade on jobs growth was de rigueur pour le charlatan.

Next up, blame the slump on Europe after allowing your hedge funds, banks, and talking heads of the financial demimonde to drag them down, and then implement QE3 as a rescue plan.  Anything, rather than admit to the corruption in the system and then have to engage in meaningful reform. 

This is the nature of a credibility trap in the aftermath of the deep capture of politicians and their apparatus by the monied interests in a crony kleptocracy, teetering on the edge of general discovery.

If Obama is Hoover, which may be a somewhat flattering comparison to both,  then where on the political horizon is Roosevelt?  So far all that is offered to the voters is a choice amongst a freak show of corporate goons, imperious ideologues, and mini-Mussoliniani.

MF Global: The Mother of All Margin Calls

No, not the credit default implosion of the company itself. This is about the customers whose money was misappropriated.

The treatment of the non-insider investors and speculators by Wall Street is often shameful. This may be one of those times.

I think this has driven some of the recent trading, as the wise guys take advantage of the specs.

Brace for more odd swings in the markets.

Reuters
MF Global clients face day of reckoning as margins call
By Jeanine Prezioso and Karl Plume
NEW YORK/CHICAGO | Thu Nov 3, 2011 6:12pm EDT

(Reuters) - Call it the mother of all margin calls: Up to 50,000 former customers of bankrupt broker MF Global must find some $1 billion in additional collateral almost overnight, or be forced out of their trades.

Come Friday, with the mass transfer of commodity trading accounts from Jon Corzine's fallen firm to six of its erstwhile rivals, margin clerks will be wrapping up a reckoning of how much additional money is needed to cover millions of positions. Clients who can't quickly meet their margin will have to liquidate, making for a tumultuous day's trade.

A court order to move the trades late on Wednesday brought only marginal relief to clients who have been essentially frozen out of their funds and positions since Friday. While accounts will now be transferred more quickly, only 60 percent of the collateral will be moved to the new brokers.

That figure may yet fluctuate as brokers scramble on Thursday to work out the details, but the net result is still likely to mean that customers will be forced to post a hefty sum within a day or two. Many of MF Global's mainly small-scale clients may fail, triggering a mass liquidation of both short and long positions that may roil markets.

"I've got somewhere in the region of 8,000 positions. We can't afford to double margin those sorts of positions," said Tom Wacker, a proprietary gold futures trader in New York. "If we can't get our positions transferred they're going to be liquidated and we're going to lose a lot of money."

Eventually, in days or weeks, the remainder of the money should be returned. The $600 million that regulators say MF Global may have misappropriated from customers could remain outstanding, but that is less than a tenth of its funds.

In the meantime, however, brokers are unlikely to extend loans to new, unfamiliar customers to make up the margin gap -- and in some cases may simply refuse to take them at all.

"We are going to require full margin on our accounts," says Sean O'Connor, chief executive of INTL FCStone, the second-smallest of the six futures commission merchants (FCMs)selected to take the accounts....

Gold Daily and Silver Weekly Charts - A Pervasive Sense of Disestablishment

"Terror... often arises from a pervasive sense of disestablishment: that things are in the unmaking."

Stephen King

Big up day for the metals.

I do not care for their synchronicity with stocks. So many assets are now correlated to a global reflationary event, and the markets are overly sensitive to headlines. That makes these markets highly dangerous.

What is happening with MF Global and the US futures markets is a disgrace. But hypocrisy and betrayal are the temper of the times.

"By the pricking of my thumbs,
Something wicked this way comes."

William Shakespeare, Macbeth

SP 500 and NDX Futures Daily Charts - Here Comes Groupon

"The wolf thought to himself: 'What a tender young creature! what a nice plump mouthful.-- she will be better to eat than the old woman. I must act craftily, so as to catch both."

The Brothers Grimm, Little Red Cap

The Wall Street wiseguys are shoving the Groupon IPO out the door tonight I hear.

It *could* do well, but it strikes a kind of a chord for a high water mark in the post 2008 equity echo bubble. But I have found it useful not to underestimate the reckless disregard of the US financial system and the Fed for the overall economy. So we may see this bubble higher to a crescendo.  The real prize is Facebook.

I consider this a dangerous market, highly event driven and thin of substance. Kind of like Obama and the rest of the Republican hopefuls.

I have heard from a number of people, including some fund operators, of the heartache this MF Global situation is giving to them in the form of bounced checks and busted positions. It is disgraceful.  But that is getting to be a tired, overused word in these times of general breakdown of equal protection under the law and regulations.

Gold Daily and Silver Weekly Charts - La Douleur du Monde

The metals had a nice rally today after the post-option expiration gut check.

Benny cooed some reassuring words but did nothing.  The equity markets rose for lack of anything better to do.

Gold and silver have not yet broken out and set the 'W Pattern' with a strong close above resistance around 1780.

If they can stick a strong close the year end target of 1950 is activated.  Right now I cannot judge the probability, so I am running a more balanced hedge.  Europe weighs heavily on most markets.

SP 500 and NDX Futures Daily Charts - Much Ado About Very Little

Benny reassured the markets without really saying anything.

FOMC November Statement - G20 and Greek Debt - Bernanke at 2:15 - NFP Friday

"Everybody was expecting Tim Geithner and Bob Rubin, who's pulling the strings behind the scenes in the Obama Administration, to roll out some kind of IMF funded bailout for Greece in a global reflation. Your audience would love that.

It hasn't manifested itself yet. Supposedly at the G20 meeting next month, Obama was going to declare the jubilee and have the IMF just print money to bail out Greece, because they do not want to see restructuring here in the US, especially the top four banks.

Isn't it amazing that we have this supposed liberal Democrat as President, and he has never gone after the Big Banks? That's because they own him."

Chris Whalen, in an interview with King World News

The G20 meeting that Chris Whalen mentions begins on Thursday. There is little doubt in my mind that Mr. Papandreou announced his referendum to place the problem of Greek debt high on the G20 agenda.

Bernanke has a press conference at 2:15 EDT which may be interesting.

Non-Farm Payrolls for October will be reported on Friday morning. Expectations are in the 85,000 - 100,000 range.

The Fed is clearly laying the groundwork for some variation of QE3, but perhaps not just yet.  They seem to be playing the game of looking for a rationale for a decision that may be controversial.

But the Fed is facing some time constraints for QE3 with the Presidential elections next year.  The Fed is normally loathe to engage in unusual stimulus in conjunction with important elections for fear of being perceived as 'politically motivated.'   Which it is of course.  It just depends on what politics you care to use as a ruler. The Fed's preoccupation is the banking system first and foremost-- and size matters.

As for the greater public, let them eat food stamps, and whatever else may trickle down from the top 1%.

I suspect that the great exogenous variable remains European financial stability and its possible impacts on the upper crust of the US banking system. 

Federal Reserve Board
Press Release
November 2, 2011

Information received since the Federal Open Market Committee met in September indicates that economic growth strengthened somewhat in the third quarter, reflecting in part a reversal of the temporary factors that had weighed on growth earlier in the year. Nonetheless, recent indicators point to continuing weakness in overall labor market conditions, and the unemployment rate remains elevated. Household spending has increased at a somewhat faster pace in recent months. Business investment in equipment and software has continued to expand, but investment in nonresidential structures is still weak, and the housing sector remains depressed. Inflation appears to have moderated since earlier in the year as prices of energy and some commodities have declined from their peaks. Longer-term inflation expectations have remained stable.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect a moderate pace of economic growth over coming quarters and consequently anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets. The Committee also anticipates that inflation will settle, over coming quarters, at levels at or below those consistent with the Committee's dual mandate as the effects of past energy and other commodity price increases dissipate further. However, the Committee will continue to pay close attention to the evolution of inflation and inflation expectations.

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee decided today to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee will regularly review the size and composition of its securities holdings and is prepared to adjust those holdings as appropriate.

The Committee also decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions--including low rates of resource utilization and a subdued outlook for inflation over the medium run--are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013.

The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools to promote a stronger economic recovery in a context of price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; Elizabeth A. Duke; Richard W. Fisher; Narayana Kocherlakota; Charles I. Plosser; Sarah Bloom Raskin; Daniel K. Tarullo; and Janet L. Yellen. Voting against the action was Charles L. Evans, who supported additional policy accommodation at this time.