What a week 11-20-2011

Many things for the market to devour this coming week.  First, there is news leaking out that the super committee is going to be a failure.  Could have huge ramifications depending on what if anything was accomplished.  Second, Jack Abramoff was on many TV and radio talk shows telling how our government is hopelessly broken.  According to him many of our legislatures are in the lobbyist's pocket.  He gave examples of how our government really works, and most of it is legal due to special laws that apply only to our elected officials.  Third, this one will send shivers down your spine.  Ann Barnhardt who is the manager of Barnhardt Capital Management is closing her business.  Here are excerpts in her own words.
"The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy."
"I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm."
"And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism."


With all of this happening it is our recommendation that we be an all cash position at the moment. We will be closing all positions on Monday.  

Strategist Tim Staermose wrote just last week that cash is a great place to be right now… and we’ve been arguing for months that markets are completely broken. The market’s price discovery mechanism has given way to rumor and political innuendo.

A real economy cannot function under such circumstances. With Europe on the precipice and roughly $600 TRILLION in global derivative notional value lurking in the system, can a real collapse be that far off?

Famed hedge fund manager Mark Mobius recently said, “There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.”

Not only have the major issues not been resolved, but governments continue making things worse. More bailouts, more printing, more deficits take an enormous problem and make it unfathomable.

In addition Robert Wenzel of Economic Policy Journal says of the banking situation:

The Financial Stability Board has released a list of 29 banks that it considers global systemically important financial institutions (G-SIFISs) and thus considered Too Big To Fail.

The initial list of G-SIFIS:

• Belgium: Dexia
• China: Bank of China
• France: Banque Populaire, BNP Paribas, Crédit Agricole, Société Générale
• Germany: Commerzbank, Deutsche Bank
• Italy: Unicredit
• Japan: Mitsubishi, Mizuho, Sumitomo Mitsui
• Netherlands: ING
• Spain: Santander
• Sweden: Nordea
• Switzerland: Credit Suisse, UBS
• UK: Barclays, HSBC, Lloyds, Royal Bank of Scotland
• US: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JP Morgan, Morgan Stanley, State Street, Wells Fargo
• According to the FSB, Systemically Important Financial Institutions are firms whose disorderly failure, because of their size, complexity and systemic interconnectedness, would cause significant disruption to the wider financial system and economic activity.
  Bottom line: These are the banks through which the banksters operate. Of note, apologist for TBTF bailouts, Warren Buffett holds major positions in at least three of these banks, Bank of America, Bank of New York Mellon and Wells Fargo.