Will Derivatives Wipe Out Some Currencies?

[soonerlew]

Found this interesting........................

Will Derivatives Wipe Out Some Currencies?

www.kitco.com/ind/Laird/sep062007.html


Warren Buffet stated in his Berkshire Hathaway annual report for 2002, "Derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal"

www.fintools.com/docs/Warren%20Buffet%20on%20Derivatives.pdf


Not sure that I understand it all but it is interesting........

[hundredtoone]

Sooner I think this is where the LOSSES in the OTC and Pink sheets are hiding...and the NS losses are a HUGE part of this IMO leveraged 10/1 on companies like CMKX...the losses must be assumed by BANKS IMO because they were responsible for BORROWING and DELIVERING on these NSS...it is HUGE...and the PIPER must be PAID IMO...thanks for the links...some have NO MARKET because the company is HALTED...HA HA...

"The problem is not made any easier by the fact that over 70% of all derivatives are OTC (over the counter - private one on one contracts). This is why the MBS and mortgage derivatives mess collapsed so fast, because there was no market for them."

www.kitco.com/ind/Laird/sep062007.html

...Flying Moose(cmkxunofficial)

[hundredtoone]

Bank of England in dramatic intervention


· Northern Rock forced to seek emergency funding
· Savers are assured that their money is secure

Ashley Seager
Friday September 14, 2007
The Guardian


Northern Rock: Photograph: Owen Humphreys/PA

The Bank of England was last night forced to hand emergency funding to one of Britain's biggest mortgage providers - Northern Rock - as it became the first major financial institution in the UK to run into serious trouble as a result of the credit crisis that has caused turmoil in world financial markets.
The Bank's intervention was agreed with its governor, Mervyn King, the chancellor, Alistair Darling, and the Financial Services Authority sources close to the situation said last night. The news is likely to lead to big sell-offs in banking stocks when the stock market opens today.

money.guardian.co.uk/news_/story/0,,2169161,00.html

...Flying Moose(cmkxunofficial)

[hundredtoone]

Fears grow for British economy as panic over Northern Rock spreads


Experts warn that a decade-long borrowing binge has left Britain dangerously exposed to the fallout from the global liquidity crisis

Heather Stewart and Heather Connon
Sunday September 16, 2007
The Observer


US Treasury Secretary Hank Paulson flies in to London tomorrow to discuss the worsening global credit crisis with Chancellor Alistair Darling, as fears intensify that the lending squeeze could be the last straw for Britain's buy-now-pay-later economy.
Thousands of anxious customers queued outside branches of Northern Rock to withdraw their savings this weekend, ignoring calls for calm from Darling, after he helped broker an unprecedented emergency loan from the Bank of England to rescue the bank.

money.guardian.co.uk/news_/story/0,,2169950,00.html

...Flying Moose(cmkxunofficial)

[hundredtoone]

Fed adds 16.75 BILLION to banking system today...Flying Moose(cmkxunofficial)

[hundredtoone]

By: gusjarvis
16 Aug 2007, 11:53 AM EDT
Msg. 590262 of 603915
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the house of cards is crumbling
SECOND BIG FUND HALTS WITHDRAWALS AS THE ASSET-BACK COMMERCIAL PAPER CRISIS REACHES DEADLINE

Posted By: RayelansMailbag
Date: Wednesday, 15 August 2007, 3:01 p.m. Second Big Fund Halts Withdrawals as the Asset-Backed Commercial Paper Crisis Reaches Deadline

Read Here

August 14, 2007 (LPAC)--Hours after Coventree Capital's announcement this morning, Read Here a second fund--in what will be a worldwide flood of such "runs" against Asset-Backed Commercial Paper (ACBP) Read Here funds by tomorrow's rollover deadline--has halted withdrawals in the midst of an investor run on its assets.

Sentinel Management Group Inc., a 30-year-old, $1.6 billion "high-yield money management fund" based in Northbrook, Illinois, asked the Commodities Futures Trading Commission for permission to halt investor withdrawals, even while claiming that all of its paper was of the highest grade.

Most of Sentinel's investments are in the short-term commercial paper called ACBP, which as LPAC has reported since Aug. 8, is at the heart of a $1 trillion liquidity crisis as the Aug. 15 date for redemption or rollover of large volumes of this paper arrives.

"Investor fear has overtaken reason and has induced a period in which most securities have simply ceased to trade," said Sentinel Management in a letter to its clients--or former clients--which got right to the heart of the problem. ACBP "conduits," often set up by and for banks, invest not in the faith and credit of corporations as with corporate bonds, but in the computer-modeled "value" of various collateral assets, many of them based in the collapsing U.S. mortgage bubble and now plunging toward zero value, as Bear Stearns was the first to announce one month ago. Sentinel's client letter continues, "We are concerned that we cannot meet any significant redemption requests without selling securities at deep discounts to their fair value."

The wave of similar announcements by hedge funds and other in coming days will trigger a second wave of the international bank credit crisis which hit last week.



...Flying Moose(cmkxunofficial)

[hundredtoone]

By: gusjarvis
07 Oct 2007, 11:13 AM EDT
Msg. 610987 of 610991
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everyone must have seen this hey
tramp
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NY Fed has called a special meeting for 14 comp.
« Thread Started on Today at 7:41am »

What is a Wells Notice?


Is All Heck About To Break Loose?

The NY Fed has called a special meeting for 14 companies who dominate the credit-derivatives market. The 14 companies include JPMorgan Chase & Co. (NYSE: JPM), Deutsche Bank AG (NYSE: DB), Goldman Sachs Group Inc., Morgan Stanley (NYSE: WMD) and Merrill Lynch & Co. (NYSE: MER). There have been allegations of illegal naked short selling, and regulators are smarting over allegations that they gave super hedge funds a free pass because regarding "fails to deliver" (FTD). Regulation SHO included a "grandfather clause" to fix the FTD problem, but the FTDs are so massive a problem that even with a six months notice it has not been cleaned up.

I just learned that on May 17th, Refco received a Wells Notice. STOCKGATE TODAY informs us that
A Wells Notice is notification issued by regulators to inform individuals and companies of completed investigations where infractions have been discovered.

In 2001 Sedona Corporation stock was manipulated through an orchestrated scheme of illegal shorting [naked shorting]. In February of 2003 the SEC brought to conclusion an enforcement action against financier Rhino Advisors and Rhino Executive Thomas Badian for their orchestration of the manipulation.

The $1 Million civil fine was only the tip of the proceedings against Rhino as the SEC handed over audiotapes whereby the Rhino Executives were reportedly recorded bribing US Brokers to collapse the stock of Sedona. Excerpts of the audiotapes were later used in December 2003 criminal arrest warrants issued against Thomas and Andreas Badian.

The second firm besides Rhino involved in this "naked shorting was Refco!
Over at The Street.com on Oct. 6th in SEC Looking at Hedge Funds in Stock Placements

The Securities and Exchange Commission is close to bringing enforcement actions against at least two hedge funds that have been active players in the $14 billion-a-year market for PIPEs, or private investments in public equity, people familiar with the inquiry say.

Within the past few months, the SEC formally notified one of the hedge funds that it is facing potential regulatory action by sending it a so-called Wells Notice. The other hedge fund has yet to receive a Wells Notice, but regulators are close to taking that next step, sources say.

[...]

The probe is focusing on allegations of stock manipulation by hedge funds, which tend to be the biggest investors in these shadowy stock sales, and allegations of wrongdoing by the Wall Street firms that round up buyers. PIPEs are popular with hedge funds because the buyers usually get to buy shares at a steep discount to the current market price.

Critics contend the ability of a hedge fund to purchase discounted stock makes the PIPEs market ripe for abuse by disreputable short-sellers, traders who place market bets that a stock will decline in price.

As I understand it, Hedge funds can may bets that a stock will go down by shorting the stock. You and I would have to be able to borrow the stock in order to short it. What the SEC is concerned about is shorting "naked", not borrowing the shares. When delivery is due, the hedgies can't deliver, it is considered a "fail" an FTD, but there is no enforcement of the rules to deliver.

Regulators pursued a potential enforcement action against Friedman Billings Ramsey (FBR), an investment banker that lined up hedge funds to invest in the PIPEs. This summer, Knight Capital (NITE) disclosed that its Deephaven Asset Management Group could face potential regulatory action over its trading in a series of PIPE deals from June 1999 through March 2004. And, Refco, meanwhile, set aside $5 million to cover the cost of settling allegations that some of its brokers acted improperly in arranging trades for an investor in a PIPE transaction.

There are over 8000 hedge funds. I hear there aren't 8000 good portfolio managers. The spreads are so thin that you have to use a lot of leverage to make the spreads work for you. And, the competition is fierce. We had 20 year bull market that has created a lot of exccesses. Those excesses are in the process of being purged from the system. Look for powerful money interests to fight hammer and claw to keep all of this under the rug through deals and manipulation. You can manipulate markets for awhile, but you can not fight the trend.

ragingbull.quote.com/mboard/boards.cgi?board=CMKI&read=610987

...Flying Moose(cmkxunofficial)

[hundredtoone]

By: gusjarvis
07 Oct 2007, 11:16 AM EDT
Msg. 610988 of 611034
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and remember this when you read that
"I can't leave the topic of "fails" without touching on one more highly important issue currently facing the Commission. This goes back to the meaning of "fail" as a noun. The SEC has recently been involved in a very proactive (some might even say prudential) exercise with respect to the issue of fails in the OTC derivatives markets. In response to reports of widespread documentation problems in those markets, the SEC has joined forces with other regulators, most notably the Federal Reserve Board and Britain's FSA, to encourage OTC market participants to clean up years of incomplete and inaccurate trade documentation. The need to act was clear. From all reports, the backlog of unconfirmed trades, which essentially are fails, and the widespread and unchecked use of novations in the credit derivatives markets had crippled risk management efforts and set the stage for a massive meltdown in certain default scenarios. Given the multi-trillion dollar aggregate notional amounts of the contracts involved, it was easy to see that the OTC derivatives dealers and their counterparties had created an operational problem similar in scope to the late 1960's back-office crisis on Wall Street.

In September 2005, the Federal Reserve Board and other regulators including the SEC called together 14 major OTC derivatives dealers to address these operational issues. The focus at that time was on OTC credit derivatives. Of course, the SEC does not necessarily have jurisdiction over OTC credit derivatives, but the firms subject to SEC supervision through our Consolidated Supervised Entity program are dealers in that market, and so it was important for the SEC be involved in overseeing the cleanup process. In addition, the SEC does regulate OTC equity derivatives, which were affected by many of the same operational maladies suffered by credit derivatives.


ragingbull.quote.com/mboard/boards.cgi?board=CMKI&read=610988

By: gusjarvis
07 Oct 2007, 11:23 AM EDT
Msg. 610992 of 611046
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and don't forget they cleared old fails already
despite the way it looks, and that is why there is no lawsuits against the sec and the fact that all the naked shorted companies but a few that will expose this are silent, because it is done:

and don't forget this, the otc market was cleaned up off the market, the big boards we will see, it looks like they are doing it on the open market right now possibly. It looks like almost all old fails were taken care of long ago:


"The dealers agreed after the 2005 meeting to develop processes for reducing the operational risks associated with the documentation backlog, and established a timeline that would allow regulators to track their progress. At a follow-up meeting in early 2006, the dealers reported significant progress in cleaning up aged unconfirmed trades, and committed to future deadlines for further reductions. The dealers also committed to objectives for increasing the electronic settlement of eligible trades, and began to work with DTCC to build upon its Deriv/SERV platform by establishing a "Trade Information Warehouse" to automate and standardize post-trade processes and to store copies of each contract. I understand that new enterprises, such as Swapswire, have entered the market to provide centralized, automated trade processing, and I assume that such competition will encourage and drive innovation in this area.

Today, due in large part to the increased use of electronic settlement systems and standardized contracts, the number of aged unconfirmed OTC credit derivative trades at the CSE firms supervised by the SEC has been reduced by approximately 90% since the September 2005 high. That is truly a success story, and I applaud both the principled regulatory approach and the tremendous efforts of the market participants."

ragingbull.quote.com/mboard/boards.cgi?board=CMKI&read=610992
...Flying Moose(cmkxunofficial)