My morning reads:

• Too Late for the Euro? (Columbia Mag)
The next crisis?: Derivative CDs Tempt Savers as Banks Reap Fees (Bloomberg)
• How Citibank Dumped Lousy Mortgages on Taxpayers (Pro Publica)
• (Why?) Gross Fund at 66% Premium Shows Pimco Allure in Quest for Yield (Bloomberg)
• Today’s WTF headline: Roubini for World Bank? (Alphaville) see also Lunch with the FT: Kenneth Rogoff (
• Collection and Credit Firms Facing Broad New Oversight (DealBook)
Art Cashin: Here’s The Real Risk If Greece Defaults (WSJ) see also Athens faces tough bail-out terms (
• Student Loans Near $1 Trillion Hurt Young Home Buyers (Bloomberg)
• Facebook’s ‘man in the middle’ attack on our data (IT World)
• Walter Isaacson’s ‘Steve Jobs’ (Daring Fireball) see also Apple’s Stock Is a Bargain (Slate)

What are you reading?


Central Bankers Rub Gold Bugs the Right Way

Source: WSJ

Category: Financial Press

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

12 Responses to “10 Friday AM Reads”

  1. SivBum says:

    About one third down was the article on the S&P 500 volume since 2000:

  2. flocktard says:

    Regarding PIMCO, we see the same thing with their closed end muni bond funds- most sell at a discount to NAV, but PIMCO’s sell at a premium. This is all “brand equity” and it shows the value of Bill and Mo doing their endless roadshow on radio and TV. Not that they’re not brilliant- they are. But this kind of visibility really pumps the paper.

  3. farmera1 says:

    CDs/Derivatives/Weapons of Mass Financial Destruction (all insured by the FDIC)

    So what is an appropriate name for these CDs, how about Counter-fit Derivatives (for old people).

    I have a hard time with the FDIC insuring all of these things. Banks are selling them to completely unknowledgeable, unsophisticated, people. I know this first hand because my local bank tried to sell these things to me and the bnak had an investor education day (free food and drinks) to sell these really nasty things. Lots of grey hair in attendance. There sales pitch reminded me of the free trip to Florida to buy a time share/condo. Ugh. The local bank had no clue what they were selling and couldn’t answer basic questions on how these things worked, but the bank was pumping them to their “customers”.

    I can only conclude a few things:

    -Bankers really are the amoral social paths as they have been portrayed.
    -FDIC is completely nuts, but on the other hand this is what the FED wants people to do, move out the risk scale and take money out of old line CDs and take on more risk.
    - As these things get more common, I’ll predict at some point they will blow, if the market goes down, people can’t get their money out, and they end up paying penalties, this will get really ugly.

    Just as the real estate markets were corrupt from top to bottom, and banks were right in the middle of the mess, the Counterfit Derivatives market will get very ugly and again banks will be there with their hand out for welfare.

    I’m going to go buy some more gold…… this financial mess keeps getting sicker and sicker.

  4. jmacdon says:

    BR – a suggestion for a blog post.

    I keep reading about Greek CDS contracts being ‘triggered’, for instance in the article about Art Cashin.

    On the other hand, I have read more than once that CDS contracts are marked to market daily, so there is no such thing as being triggered (which is why for instance AIG got hammered when Goldman, Sachs kept coming back for margin calls on the CDS they bought from AIG).

    I’m just a dumb retail investor who doesn’t know about these things. Would you elaborate?

  5. VennData says:

    DNA robot could kill cancer cells

    BORING! Eww… these guys are SO uncool. I am, like, totally against these little nano things. Who knows what they might do? They could, like, destroy everything. If only they could destroy these dorky scientists and their disgusting GM Frankenfoods, that might make me happy, for like a nanosecond.

    ‘thumb-up’ LIKE.

  6. machinehead says:

    From the Bloomberg article on structured CDs:

    Four years after subprime mortgages caused the worst financial crisis since the Great Depression, the government-backed insurance pool created in 1933 is guaranteeing investments that marry derivatives with what are supposed to be the safest product offered by a bank other than savings accounts

    The dollar amount of so-called structured CDs sold isn’t known because they aren’t registered with the U.S. Securities and Exchange Commission, and the brokers that sell them aren’t required to be licensed by Finra.

    As long as a CD’s principal is guaranteed at maturity and risks are disclosed to investors, it’s considered a bank deposit, even if tied to a basket of stocks, commodities or other assets, said James Deveney, chief of the FDIC’s deposit insurance division.

    Selling complex derivatives to the public without an SEC-approved registration and prospectus is a CLEAR violation of the intent of the Securities Act of 1933. That the FDIC has provided a safe harbor for this squalid scam in no way excuses the SEC and the Justice Dept. from failing to quash it.

    Remember the subprime CDOs that were peddled to unwitting victims in 2006 with misleading AAA ratings? This time around, instead of a bought-off rating agencies, it’s the freaking FDIC putting a government imprimatur on highly-engineering garbage securities which are designed from the get-go to sucker the innocent, the uninformed and the credulous.

    BR, you’re a lawyer, a finance pro and a prominent commentator. Take this ball and run with it. Call the SEC, get a comment, write a column. Go on record before the next totally-predictable bankster debacle surfaces. Their corrupt end-run around the law, using structured CDs to swindle old ladies, is egregious and scandalous.

    One thing they never taught me in MBA school is how relentless dirty an industry banking is.

  7. darklingthrush says:

    These structured CDs were exactly what was being sold throughout Asia several years ago, with the key difference being the FDIC guarantee on principle. In Hong Kong they were called “mini-bonds” and readers may recall mass protests in HK after Lehmans went down and thousands of older savers realized they weren’t getting their money back. Many, many settlements ended up happening though – it was a big mess, and probably barely mentioned in the non-financial US press .

    These things were for gambling, pure and simple and had risk disclosures out the wazoo but still no one had any idea what kind of risks they were taking. If they are really being marketed to retirees here in the States, well at least they’ll get the principle back (maybe at the expense of the US taxpayer though)…

  8. machinehead says:

    From the Business Week article posted by darklingthrush:

    The inquiry into the sale of minibonds prompted the Hong Kong Monetary Authority, the city’s de facto central bank, to propose that lenders physically separate deposit-taking and investment businesses at their branches and tape all conversations related to sales of investment products.

    This distinction exists in U.S. law, too. Plain-vanilla deposits are insured by the FDIC. Risky securities are registered with the SEC via a prospectus, and sold through Finra-licensed brokers.

    Being a hybrid, the large risk element of structured CDs means they should be SEC registered. That is the spirit and intent of the Securities Act of 1933.

    If Congress wasn’t bought and lobotomized, they would be holding hearings to conk both these dysfunctional agencies over the head. As they used to say in Chicago, structured CDs are ‘honest graft’ in plain sight.