EES: The frightening truth about PFG

Forex brokers have been going under nearly on a monthly basis, as any forex trader or client can attest for the last few years. The most recent, PFGBest, was also a futures commissions merchant with over 70,000 clients and a reported $500 million in customer funds.

http://seekingalpha.com/article/717721-the-frightening-truth-about-pfgbest

Russell Wasendorf Sr. on NFA advisory committee, NFA removes from site

Above snapshot google cache:

http://webcache.googleusercontent.com/search?q=cache:_9gmnxqiRn0J:www.nfa.futures.org/nfa-about-nfa/committees/advisory-committee.HTML+&cd=3&hl=en&ct=clnk&gl=us

Current site:

http://www.nfa.futures.org/nfa-about-nfa/committees/advisory-committee.HTML

Citigroup Lets Clients See Fund Data After Peregrine

Citigroup Inc. (C), the third-biggest U.S. bank, said it will show trading clients how the lender is managing their funds as regulators probe missing customer cash at MF Global Holdings Ltd. (MFGLQ) and Peregrine Financial Group Inc.

Customers using New York-based Citigroup to buy and sell futures and over-the-counter derivative products can now see how much client funds the bank holds, Christopher Perkins, global head of OTC clearing, said today in a phone interview. Clients can use a Citigroup website to monitor the composition of the funds and where they’re being held, he said.

Citigroup is responding to allegations surrounding MF Global and Peregrine, which filed for bankruptcy after shortfalls in client accounts. This has raised scrutiny of how regulators ensure that banks and brokerages separate and protect customer cash when trading in futures.

“It’s almost impossible for regulators to come up with rules that prevent malfeasance and fraud,” Perkins said. “You can come up with the best rules in the world but if people violate them, you’ve still got a problem. The best way to mitigate these kinds of threats to client money would be through enhanced transparency.”

http://www.bloomberg.com/news/2012-07-11/citigroup-lets-clients-see-fund-data-after-peregrine.html 

EES Articles now available on Seeking Alpha

Elite E Services, Inc. (EES) announces a publishing agreement with Seeking Alpha.  EES has published articles on the topics of finance and technology in publications such as Futures Magazine, Stocks & Commodities Magazine, FX Trader Magazine, and on websites such as barchart.com. 

About Seeking Alpha

Seeking Alpha is the premier website for actionable stock market opinion and analysis, and vibrant, intelligent finance discussion. We handpick articles from the world's top market blogs, money managers, financial experts and investment newsletters - publishing approximately 250 articles daily. Seeking Alpha gives a voice to over 5,000 contributors, providing access to the nation's most savvy and inquisitive investors.  Our site is the only free, online source for over 1,500 public companies' quarterly earnings call transcripts, including the S&P 500.  Seeking Alpha was named the Most Informative Website by Kiplinger's Magazine and has received Forbes' 'Best of the Web' Award.

EES Profile URL: http://seekingalpha.com/author/elite-e-services

EES analysis advises international clients on Forex markets.  For customized Forex research, hedging solutions, and Currency Overlay, contact Elite E Services at http://contact.startelite.com

PFG shut down by NFA

NFA takes emergency enforcement action against Chicago futures firms Peregrine Financial Group, Inc. and Peregrine Asset Management, Inc.

July 9, Chicago - National Futures Association (NFA) announced today that it has taken an emergency enforcement action againstPeregrine Financial Group, Inc. (PFG), an NFA Member futures commission merchant (FCM) and Peregrine Asset Management, Inc. (PAM), an NFA Member commodity trading advisor (CTA) and commodity pool operator (CPO) located in Chicago, Illinois.

NFA has taken the Member Responsibility Action (MRA) to protect customers because PFG has failed to demonstrate that it meets capital requirements and segregated funds requirements. NFA also has reason to believe that PFG does not have sufficient assets to meet its obligations to its customers.

Effective immediately, PFG and PAM are prohibited from soliciting or accepting any additional customer accounts or customer funds, except as margin for existing positions. Additionally, PFG and PAM are prohibited from accepting or placing trades for any customer accounts except for the liquidation of existing customer positions and are prohibited from distributing, disbursing or transferring any funds, including to existing customers, without the prior approval of NFA.

PFG and PAM may request a hearing on this matter before NFA's Hearing Committee.

The complete text of the MRA is available on NFA's website (www.nfa.futures.org).

NFA is the premier independent provider of innovative and efficient regulatory programs that safeguard the integrity of the futures markets.

Topic Research:

http://www.businessinsider.com/the-pfg-cash-shortfall-crisis-heres-what-we-know-so-far-2012-7

http://www.cbsnews.com/8301-500395_162-57469161/peregrine-financial-group-brokerage-said-to-be-$220-million-short-in-customer-funds/

Roubini Says 2013 `Storm' May Surpass 2008 Crisis

JPMorgan, Goldman Shut Europe Money Funds After ECB Cut

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. and BlackRock Inc. (BLK) closed European money market fundsto new investments after the European Central Bank lowered deposit rates to zero.
JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money-market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.

“The European market environment is in unchartered territory with such historically low -- or even negative --yields for high-quality issuance,” Goldman Sachs (GS) said in a memo to fund shareholders, citing the ECB’s rate cut. “It is not currently feasible for our portfolio managers to deploy capital without substantially diluting the yield for the existing base of shareholders.”

The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero. Money funds have been struggling to invest client assets at a profit as interest rates globally are near record lows and Europe’s sovereign debt crisis has reduced the supply of available debt. Managers have been forced to cut fees to keep customer returns above zero, and some have abandoned the business.
All three firms said the restrictions are temporary and they will monitor market conditions. Investor redemptions from the funds are not being limited.

http://www.bloomberg.com/news/print/2012-07-06/jpmorgan-shuts-europe-money-market-funds-on-ecb-rate-cut.html

ECB cuts rates by quarter point, other central banks join in

The European Central Bank cut rates by a quarter point, as expected, and the Bank of England moved forward with more quantitative easing. In a surprise move, the People's Bank of China joined in Thursday, moving forward with surprise rate cuts at about the same time as the Bank of England news.

http://www.cnbc.com/id/48082851


The euro sank to a one-month low as Spanish and Italian bonds plunged, while stocks retreated, after the European Central Bank disappointed investors anticipating a more aggressive effort to fight the debt crisis.


http://www.bloomberg.com/news/2012-07-05/asian-stocks-oil-copper-drop-as-europe-slump-may-worsen.html

http://www.dailymail.co.uk/money/news/article-2169209/Pound-moves-half-year-highs-euro.html

(Reuters) - Stocks fell on Thursday after the biggest three-day rally of the year and the euro and commodities slid too as investors awaited clues on Federal Reserve stimulus and a jobs report likely to show Europe's crisis weighing on the U.S. economy.

A slowdown in the U.S. service sector to a 2-1/2-year low in June was in line with investor fears the euro zone debt crisis was sapping global growth. The data encouraged traders to take profits from a strong equity market rally that began last Friday and extended into the first two sessions of this week.

http://www.reuters.com/article/2012/07/05/us-markets-global-idUSBRE8520GN20120705

What is Libor and why should we care?

The LIBOR manipulation story has exploded into a major scandal overseas. The CEO of Barclays, Bob Diamond, has resigned in disgrace; his was the first of what will undoubtedly be many major banks to walk the regulatory plank for fixing the interbank exchange rate. The Labor party is demanding a sweeping criminal investigation. Mervyn King, Governor of the Bank of England, responded the way a real public official should (i.e. not like Ben Bernanke), blasting the banks:

It is time to do something about the banking system…Many people in the banking industry are hardworking and feel badly let down by some of their colleagues and leaders. It goes to the culture and the structure of banks: the excessive compensation, the shoddy treatment of customers, the deceitful manipulation of a key interest rate, and today, news of yet another mis-selling scandal.

Read more: http://www.rollingstone.com/politics/blogs/taibblog/why-is-nobody-freaking-out-about-the-libor-banking-scandal-20120703#ixzz1zlE8PbwZ

EES: Put on the Euro

In a recent article on Seeking Alpha, we outlined a strategy to strangle the euro which is a bet on volatility, not direction. However, a growing number of analysts are becoming more bearish on the euro and overall European situation. With any meltdown in the eurozone, the best way to profit from a collapse of the euro is by buying a euro Put option (ideally spot EUR/USD (FXE)).

http://seekingalpha.com/article/702181-a-put-on-the-euro-to-parity

EES: Modern Institutional Decay

What has happened to our institutions?

The trend of the modern institutionalization of our system began in the late 19th century, but didn't gain worldwide support until the early 20th century. It reached its peak after World War 2, when the feeling was that global institutions could stave off further bloody conflicts. Without WW2, establishing institutions such as the United Nations, the International Monetary Fund, and eventually the European Union, would not have been possible.

http://seekingalpha.com/article/695701-modern-institutional-decay

A Manifesto for Economic Sense

A Manifesto for Economic Sense

More than four years after the financial crisis began, the world’s major advanced economies remain deeply depressed, in a scene all too reminiscent of the 1930s. And the reason is simple: we are relying on the same ideas that governed policy in the 1930s. These ideas, long since disproved, involve profound errors both about the causes of the crisis, its nature, and the appropriate response.

These errors have taken deep root in public consciousness and provide the public support for the excessive austerity of current fiscal policies in many countries. So the time is ripe for a Manifesto in which mainstream economists offer the public a more evidence-based analysis of our problems.

• The causes. Many policy makers insist that the crisis was caused by irresponsible public borrowing. With very few exceptions - other than Greece - this is false. Instead, the conditions for crisis were created by excessive private sector borrowing and lending, including by over-leveraged banks. The collapse of this bubble led to massive falls in output and thus in tax revenue. So the large government deficits we see today are a consequence of the crisis, not its cause.
• The nature of the crisis. When real estate bubbles on both sides of the Atlantic burst, many parts of the private sector slashed spending in an attempt to pay down past debts. This was a rational response on the part of individuals, but - just like the similar response of debtors in the 1930s - it has proved collectively self-defeating, because one person’s spending is another person’s income. The result of the spending collapse has been an economic depression that has worsened the public debt.
• The appropriate response. At a time when the private sector is engaged in a collective effort to spend less, public policy should act as a stabilizing force, attempting to sustain spending. At the very least we should not be making things worse by big cuts in government spending or big increases in tax rates on ordinary people. Unfortunately, that’s exactly what many governments are now doing.
• The big mistake. After responding well in the first, acute phase of the economic crisis, conventional policy wisdom took a wrong turn - focusing on government deficits, which are mainly the result of a crisis-induced plunge in revenue, and arguing that the public sector should attempt to reduce its debts in tandem with the private sector. As a result, instead of playing a stabilizing role, fiscal policy has ended up reinforcing the dampening effects of private-sector spending cuts.

In the face of a less severe shock, monetary policy could take up the slack. But with interest rates close to zero, monetary policy - while it should do all it can - cannot do the whole job. There must of course be a medium-term plan for reducing the government deficit. But if this is too front-loaded it can easily be self-defeating by aborting the recovery. A key priority now is to reduce unemployment, before it becomes endemic, making recovery and future deficit reduction even more difficult.

How do those who support present policies answer the argument we have just made? They use two quite different arguments in support of their case.

The confidence argument. Their first argument is that government deficits will raise interest rates and thus prevent recovery. By contrast, they argue, austerity will increase confidence and thus encourage recovery.

But there is no evidence at all in favour of this argument. First, despite exceptionally high deficits, interest rates today are unprecedentedly low in all major countries where there is a normally functioning central bank. This is true even in Japan where the government debt now exceeds 200% of annual GDP; and past downgrades by the rating agencies here have had no effect on Japanese interest rates. Interest rates are only high in some Euro countries, because the ECB is not allowed to act as lender of last resort to the government. Elsewhere the central bank can always, if needed, fund the deficit, leaving the bond market unaffected.

Moreover past experience includes no relevant case where budget cuts have actually generated increased economic activity. The IMF has studied 173 cases of budget cuts in individual countries and found that the consistent result is economic contraction. In the handful of cases in which fiscal consolidation was followed by growth, the main channels were a currency depreciation against a strong world market, not a current possibility. The lesson of the IMF’s study is clear - budget cuts retard recovery. And that is what is happening now - the countries with the biggest budget cuts have experienced the biggest falls in output.

For the truth is, as we can now see, that budget cuts do not inspire business confidence. Companies will only invest when they can foresee enough customers with enough income to spend. Austerity discourages investment.

So there is massive evidence against the confidence argument; all the alleged evidence in favor of the doctrine has evaporated on closer examination.

The structural argument. A second argument against expanding demand is that output is in fact constrained on the supply side - by structural imbalances. If this theory were right, however, at least some parts of our economies ought to be at full stretch, and so should some occupations. But in most countries that is just not the case. Every major sector of our economies is struggling, and every occupation has higher unemployment than usual. So the problem must be a general lack of spending and demand.

In the 1930s the same structural argument was used against proactive spending policies in the U.S. But as spending rose between 1940 and 1942, output rose by 20%. So the problem in the 1930s, as now, was a shortage of demand not of supply.

As a result of their mistaken ideas, many Western policy-makers are inflicting massive suffering on their peoples. But the ideas they espouse about how to handle recessions were rejected by nearly all economists after the disasters of the 1930s, and for the following forty years or so the West enjoyed an unparalleled period of economic stability and low unemployment. It is tragic that in recent years the old ideas have again taken root. But we can no longer accept a situation where mistaken fears of higher interest rates weigh more highly with policy-makers than the horrors of mass unemployment.

Better policies will differ between countries and need detailed debate. But they must be based on a correct analysis of the problem. We therefore urge all economists and others who agree with the broad thrust of this Manifesto to register their agreement at www.manifestoforeconomicsense.org, and to publically argue the case for a sounder approach. The whole world suffers when men and women are silent about what they know is wrong.

http://www.manifestoforeconomicsense.org/A-MANIFESTO-FOR-ECONOMIC-SENSE.pdf In PDF

Sign the Manifesto: http://www.manifestoforeconomicsense.org/

Europe Situation May Turn Disorderly, Roubini Says

Barclays fined for attempts to manipulate Libor rates

Barclays has been fined £290m ($450m) for trying to manipulate a key bank interest rate which influences the cost of loans and mortgages.

Its traders lied to make the bank look more secure during the financial crisis and, sometimes - working with traders at other banks - to make a profit.

http://www.bbc.co.uk/news/business-18612279

http://www.zerohedge.com/news/shocking-details-barclays-epic-lie-bor-fraud-duuuude%E2%80%A6whats-ur-guys-345-3m-fix%E2%80%A6tell-him-get-it

Philip A. Falcone and Harbinger Charged with Securities Fraud

Washington, D.C., June 27, 2012 — The Securities and Exchange Commission today filed fraud charges against New York-based hedge fund adviser Philip A. Falcone and his advisory firm, Harbinger Capital Partners LLC for illicit conduct that included misappropriation of client assets, market manipulation, and betraying clients. The SEC also charged Peter A. Jenson, Harbinger’s former Chief Operating Officer, for aiding and abetting the misappropriation scheme. Additionally, the SEC reached a settlement with Harbinger for unlawful trading.
http://sec.gov/news/press/2012/2012-122.htm

Additional Materials

• SEC Complaint: Harbinger Capital Partners LLC; Philip A. Falcone; and Peter A. Jenson
• SEC Complaint: Philip A. Falcone, Harbinger Capital Partners Offshore Manager, L.L.C., and Harbinger Capital Partners Special Situations GP, L.L.C.
• SEC Complaint: Harbert Management Corporation, HMC-New York, Inc. and HMC Investors, LLC
• SEC Administrative Proceeding