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« Did FDR End the Great Depression? | Main | Who is Sue Goldman? »

Friday, April 16, 2010

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Martin Armstrong

Carl Futia nailed it AGAIN!!!
:)

marketman

Yelnick,

There's no doubt that the timing of this announcement has a political undercurrent to it. But the Goldman news isn't much of a surprise since it had already been printed in the media given the NY Times article by Gretchen Morgenstern and Louise Story back in late December.

That having been said, you also have to think that Goldman feels that it has a pretty good case given that they chose not to "settle" earlier.

David

looks like we have topped out here with the ending diagonal and we should see lower prices in the weeks to come... a video update posted for those interested...

http://www.tradeyourwayout.com/2010/04/sp-500-elliott-wave-update-3rd-time.html

yelnick

marketman, it may blow over, but other indictments are coming - such as Steve Rattner of Quadrangle, and maybe one of the biggees such as the CEO of BofA. The Demos will now push hard for reform, and stupidly the Repubs backed themselves into the wrong posture of "no", looking like defenders of crooks. They should have been yelping about the year-long delay in financial reform, and making the Demos look like creatures of Wall Street. 


Market implications are interesting. Carl Futia expects a deeper drop now, as of course so does Hochberg. Tony C thinks the market is in a minor 4th wave and will turn north soon.  If you look at the chart, this is the sharpest drop since what most folks count as wave 2 in mid-Feb, so perhaps we just ended wave 3. We will get a good test over the next week of these views. 


Hank Wernicki had a good fractal setup today pre-market (in the ES) right before the GS implosion broke. Handy sometimes, those fractals.


EvilSpeculator was mazed to see the ISEE reading spike to 350, higher than 279 in 2007. (ISEE is put/call ratio). Early today the 10 SMA was at 240, a bit higher than 229 at the top in 2007, and it closed at 250. Worth reading: Tax Day ISEE Earns Astronaut Wings

joe

I think you got it right Yelnik.

And by the way - if Goldman did it, they all did it.

This has legs.

Joe

Ed

I would encourage anyone interested in the GS news to listen to the broadcast, Inside Job.... I think it will become clear that GS is just but a tip if the iceberg. Lots and lots of people need to go to jail over this mess. Its one thing to put on a short trade, its a whole other thing to create products that are, by design, meant to fail and sell them to others using misinformation.

http://www.thisamericanlife.org/

Just hit "stream episode"

Zendo

The aftermath for these ibanks would be massive civil suit by their client who bought the CDOs and other related structure products. Such claim is already happening in Asia, government are investigating these banks and forcing them to settle with their client. This is not just a US effort, indeed it could turn into a worldwide effort to reform and regulate these ibanks which is a good thing.

joe

I think so too Ed and Zendo - and you too Zendo.

Joe

Zendo

Joe, the problem is lots of retail client bought CDO structure product and lost all their saving. The banks selling these product currently are under investigation, authority question their sales tactics, misrepresentation of the credit quality of the product as well as the underlying asset safety. Clients were mislead into buying such complex product because the promotion material is out right fraudulent and skipping the detail and risk disclosure.

Yes they all did it - MS, MER, BSC, LEH, even other major foreign banks as well, the housing market start to come down in late 2006, most ibanks in their structure product finance or derivatives group knew that, but they kept on printing those trade.

I'll be surprised if US government just let this banking industry go unregulated after this. Lets hope they'll do the right thing and put this people away.

Zendo

Further complicate the problem is the way ibanks and the rating agency sleep together. How can a junk become an investment grade paper. The fees collect by these rating agency to put an approval stamp on these CDOs, its criminal and out right conflict of interest. Thats why so many institution bought this ABS, if the credit rating is not as high. So I think investigation should cover the rating agency as well.

joe

Not the retail going to tip this one over. Watch the suits on the managed accounts. I have a fair amount of knowledge of the suits pending against SSB.

Many will end up in arbitration - but some won't.

WHat those little theives did - it will come out.

I am real sure.

Joe

Mike McQuaid

David, a 5th wave failure has a lower high than the 3 wave, not so on your chart and your comment. You also characterized the chart as rallying fast which is impulsive and yet you lable the pattern as corrective. You can't have it both ways, you ought to discount one and support the other. Your 5th wave failure does not match the textbook definition. Sadly these errors make your analysis of dubious value.

Zendo

joe, i thought SSB is under C now or they still operate as separate entity? I agree with your observation in general, retail generates publicity, discretionary accounts as well as institutional account claim will cause the bulk of the damage, now these banks cannot get away with just 10 cents for a dollar settlement, I'd speculate they need to pay their clients close to 90 cents or more as soon as this NY DA start their prosecution. What they have done is robbery, and lots of these bankers should go to jail.

joe

Jp Morgan actualy took them over - apprently. It won't really matter in the end tough. Thimk like musical chairs - mostly matters who ended up sitting

I knoww tht basis in the SSB charges alright - the dead bang winner the get inarbitration - and I conclude it just begins their.

Man, this is just getting started here.

Joe

joe

I would be honored to give you guys the actual blow for blow in such a case shorly- if that is what yu want to hear?

Joe

Zendo

Joe, enlightened us anytime. Will be interesting to see how this unfold. I thought C sold the brokerage business to MS, can't remember SSB bought out by JPM. Anyways, private banking, retail brokerage, institutions... same sh*t hit the fan. The question is when will be the big pension fund and foreign institutions can come in and sue these banks as they hold not only CDOs but also lots of CMBS which are basically worth nothing. Institutions have a hard time to justify their claim as they are professional money managers.

LovelyGuy

Dear Yelnick,

I agree with your comments.

I feel,

1 This will give Obama a strong reason to "Implement" financial reforms. hence it has a political spin, for sure.

2 If that is a case (against a "True and Honest" inquiry" within the entire financial industry), the entire saga will end soon.

3 If not then this is a just beginning of a major problem around Wall Street and financial institutions in US.

4 In case of either 2 or 3, It is clear that US financial institutions are gripped by corruption. Indeed it is deep routed too involving politicians. (Or that was a case anyway but wasn't that apparent to public)

5 Every time market dips, analysts jump on "Yes" this is a start of "That" downfall. Almost all times they proved wrong. This includes Neely and Bob. I love Elliott's but I have to admit, majority of analysts have failed to count waves recently. Summary: Every analyst will go wrong at some stage. (No shame to that admisison although, it is just a complex market that can't be predicted accurately sometimes)

6 However, I personally feel that market is almost fully priced and can't really go up significantly. If it does, as has been) it certainly enters in to a Bubble territory. Bubbles are generally not created every two yearly. I remember 11200 to 11700 was on the screen for quite some time back in 2008 and when we broke that range, we went down significantly. Hence one must consider that zone as a huge resistance technically.

Thanks and Regards

LovelyGuy

Wave Rust

more logical for a minuette flat 4th of minor 3 correction now, and then 5th minuette by end of the week.
Then the minor 5th of intermediate 3 into Memorial Day to set up the intermediate 4th retail skinning down into 4th of July.
Then rally to mid august and sideways to late august for end of Primary 1.

By late august, the bubble should be huge. even perma bears will be bullish with the summer rally.

Kamakaze political phenomena coming in late august. by august 24th, most state primaries will be over. knowing whether you will be elected or re-elected, or not, will give members of Congress the will to commit suicide and vote for the next huge tax before January 2011. Despicable but true.

we will pretty much know the results of the mid-term elections for congress and state governors and legislatures. Knowing Congress makeup makes cap and trade viable or dead. knowing state governors and legislatures means knowing more about how the gerrymandering will go in the big states from the census, hence the 2012 electoral college.

could be a real electoral college shift, if those census workers from acorn find those non-existent zip codes where all those jobs were saved!

wave rust

btw, Yelnick, who is Sue Goldman and what does she have to do with markets?

yelnick

Wave, Sue Goldman is a seductress that always comes along during periods of financial innovation (better known afterwards as flimflam) and with the most meager of bribes can bend Congress to her will she does her tricks on the unsuspecting public.

marketman

Zendo,

I agree with you 100% about the rating agencies, especially given the conflict of interest of who pays them for their "rating" along with the fact that much of the "model" that they use to calculate "ratings" comes from the I-Bankers themselves.

However, I think that many of you are missing one very significant point in regards to the case here with Goldman. They were NOT UNDERWRITERS in these customized and structured CDO's. As a result, they will not be held to a higher legal bar given that fact. There is a distinction to be made here and I think that some of you are comparing "Apples" to "Oranges" when it comes to the responsibility of an UNDERWRITER, and those that are creating a synthetic product for professional institutions.

Michael

Interestingly enough, after all of the investigation by the SEC, all they were able to come up with were charges against a 29 year old VP ( Fabrice Tourre ) and not a single Managing Director. I think that Goldman is actually relieved to see that this is the only thing that the SEC was able to come up with. If the SEC can't prove that there was evidence of systematic intent by Goldman via a Managing Director or two up the food chain in management, this specialized and customized transaction comes down to merely a single element ( an aggressive VP ), and not one representative of the Corporate "culture" at Goldman.

Remember, these are highly leveraged and exotic transactions.
They are not marketed to RETAIL clients. Moreover, Goldman is not obliged to disclose the identities of a buyer to a seller, and vice versa. These were highly sophisticated trades for Big Boys only. And as noted above in the previous post, Goldman was not playing the role of an underwriter in this transaction.

Should be interesting to see what the SEC can do with this.

They certainly are late to the Party ( by nearly 3 years ) and all they have is a young, then 29 year old aspiring VP that they are basing a lot of their case on. Their case could simply come down to a rogue salesman who was principally responsible for structuring the deal, and who made misrepresentations regarding the collateral selection process, and Paulson's investment of $200 million in the equity of ABACUS; which Paulson did not make.

Again, the SEC did not charge or name any Goldman managing director.
This, in my opinion is significant.

Michael

P.S.

http://www.nypost.com/p/news/business/flashy_trader_key_figure_in_case_pEia2BGivHUaAIaWcUyjiP?CMP=OTC-rss&FEEDNAME

Dsquare

"We expected Dylan (Ratigan) to explode during today's show. We were disappointed as he somehow managed to contain it, and did a pretty good recap of the Goldman affair (if a little too many matchbox cars on the show for our taste). The notable take home for us was that CT AG Blumenthal said that "criminal charges have to be pursued against Goldman." We are sure Cuomo is not too far from this line of thinking. And we would be remiss if we did not point out that credit has to be given where it is due: Gretchen Morgenson (whom half the blogosphere was bashing a month ago over semantics) and Louise Story broke the entire story 4 months ago, and the SEC complaint reads verbatim from the authors' December 24 article."

http://www.zerohedge.com/article/ratigan-deconstructs-goldman-connecticut-ag-blumental-wants-criminal-charges-filed

Zendo

marketman, I do agree the product named in this charge by SEC is not being underwritten and sold to everyone, so the chance for those professional institutions who purchased the CDO and make claim against GS is quite difficult given they have signed off all the trade terms and risk documents. Yet if the trade involve was later discovered as fraudulent, the legal recourse by these institution might become substantial.

Yet as Michael mentioned in another post, the evidence so far is not substantially damaging which currently does not indicate the top hierarchy of the firm was involved. Maybe as lots of people's suspicion that the purpose is not to take down GS but to gain political capital for the bank reform?

JT

True, Morgenson and Story deserve a lot of credit.

One can only hope that Blumenthal really goes after the Rating's Agencies like he says he is! Meanwhile the exchange on CNBC on Friday between structured finance specialist Sylvain Raynes and Jim "The Clown" Cramer was priceless, with David Faber and the other Goldman apologist, Erin Burnett in accompaniment.

http://www.zerohedge.com/article/cnbc-guest-tells-truth-calls-cramer-shallow-yanked-air

:)


Zendo

Michael, could SEC (given the current release of information so far) charge GS solely base on misrepresentation and mislead their institutional client for fraud disregard whether they are professional investors or not?

I understand its an OTC trade and its done between sophisticated professional institutions, yet the debate remains does these professionals investors were given adequate information to access the risk and the quality of the underlying as GS (and many other ibanks) deliberately hiding those crucial information given they already talked about the real estate market is crashing down since late 2006. As GS always claim they put their client first, why not market and sell them protection instead?

Imho, GS cannot just act as a agent and neglect their fiduciary duty toward their institutional client, and they can't layoff their liability because these are all professional investors and they should have conduct their due diligence and recognize the risk given GS is advising them as well.


Zendo

Also Michael, this guy is a VP and should be quite junior (considered he only made $2 million bonus for that year :) ), so he needs someone to sign off this trade.

I think the news mentioned this trade was approved by a committee (maybe a risk committee, or compliance) which will definitely involve MDs, legal and department heads (MDs definitely). So it also involve senior management, but I doubt it will go all the way to the top dogs.

Its not as simple as a rouge trader who can move funds and make bets, fake documents and cover everything by himself, (btw he's only a sales trader). What he had done involve lots of people above him. I think as the investigation widen there will be people come forward.

Hockthefarm

JT:

LMAO. Great clip, thanks.

For anyone to even think these people had a moral bone in their bodies is a joke. Sustainable proof in a court of law is probably where Goldman does most of their spending. I think we are finally getting to the point where too big to fail really means too big to exist. If the dems can get there, they are going to remain in power for a long time. Timely perp walks won't hurt either. Republicans are painting themselves out of existence.

Hock

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