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Questions Left Unanswered

Posted by Larry Doyle on February 7, 2011 7:13 AM |

Some random thoughts and questions in the midst of trying to determine what is really going on in the markets, the economy, and the world:

1. Just how healthy are our major money center banks? How many toxic mortgage related assets remain on their books? Where are those assets marked? With the housing market continuing to erode, and it is, how can those asset valuations not be eroding as well?

2. Will the American public ever truly learn what happened inside Bernard Madoff’s operations?

3. What about Allen Stanford? His trial has been postponed for two years. Do we really think Stanford will ever stand trial? Will we ever learn the nature of this scam? Was Stanford acting on behalf of the Department of Justice in operating his Caribbean based operation? Was the US government, that is the DOJ, effectively complicit in Stanford’s scheme? Will we ever know?

4. Does the official unemployment rate mean anything anymore? The official unemployment rate (U-3) for years would move in increments of .1 to .2 and we witness in the last two months a decline of .8. Is this to be believed? Has the Bureau of Labor Statistics compromised its own integrity in the process?

5. Is our nation any better prepared in terms of financial regulation and oversight? We witness the SEC in disarray in terms of future funding of operations and subsequent allocation of resources. Does this matter as long as the market is headed higher? What about Wall Street’s own self-regulator, FINRA? Will America ever truly learn what happened within FINRA’s internal investment portfolio? Did FINRA front-run the auction-rate securities market in 2007 as I believe they did? Did FINRA have its own funds directly or indirectly invested in Bernie Madoff’s operations? What was the real nature of Mary Schapiro’s relationship with Madoff? Will we ever learn the details on all these fronts?

6. What about Ben Bernanke’s credibility? Is he given a hall pass when stating that inflation in emerging markets is not a function of the quantitative easing programs of the Federal Reserve?

7. Will lawsuits addressing mortgage fraud (if not worse) brought against the large money center banks be properly adjudicated or dismissed as noise in the midst of trying to nurse our economy back to health?

8. So many questions left unanswered. Can America really move forward when questions such as these are not properly addressed? Who in our media will bang the drum on these questions and others? Who in our government will demand answers to these questions? If nobody is willing to ask the questions, can we assume these issues do not really exist?

How does that work?

What questions would you like to see addressed?

Larry Doyle

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I have no affiliation or business interest with any entity referenced in this commentary. The opinions expressed are my own and not those of Greenwich Investment Management. As President of Greenwich Investment Management, an SEC regulated privately held registered investment adviser, I am merely a proponent of real transparency within our markets so that investor confidence and investor protection can be achieved.

  • fred

    There is no doubt, without the short sellers the market would simply move higher making everyone happy, except of course, the short sellers.

    The market must be allowed to go down for no other reason than that it is the only time that the entire truth is being exposed and discounted. In the MBS mess, the shorts did their job, they exposed the truth, now what are we going to do about it? So far, not much!

    Gov’t reports, including employment, inflation and GDP, should be released AS IS with no statistical adjustments, m/m and yr/yr. Let Wall street put the spin on, ie. birth death, seasonality, imputed rent, inventory adjustments, etc.

  • Pete

    Sweep it under the rug and whatever does not fit, just bring the vacuum along and suck it up.

  • BM

    FinReg is a disaster, kudos for what Chairman Bernanke did post meltdown – he needs to go, we are inflating the next bubble as we e-mail. I’m sure you have read M. Lewis’ The Big Short and S. Johnson’s 13 Bankers. We are just a pin prick away!

    Oh, and the media? That’s a joke, right?!?

  • EM

    Questions left unanswered, will unfortunately remain unanswered.

    Yes, Allen Stanford has avoided trial. He “allegedly” stole millions (or is it billions?) of money from everyday citizens. Investment advisors steal millions and billions. Politicians and bankers steal trillions. But the Christmas 2009 terrorist, Umar Farouk Abdulmutallab (otherwise know as the “underpants” bomber) has also avoided trial.

    Mad Mary Schapiro has never answered for her failure to investigate her “friend” Bernie Madoff and confirm or deny that FINRA money was invested through him. We have financial leaders who cannot prepare their tax return, and those regulating the markets who claim not to understand derivatives.

    I only understand derivatives in a simplistic way, but they are a product deserving adoption by the state lotteries and casinos. Here is how it works….

    You bet money that you do not have. Suppose you want to bet $1,000. You place just a quarter on the line, but you are betting based on the $1,000. You win some and lose some. As long as your winnings exceed your losses, you are in good shape. You are served drinks and other hospitalities. You are a financial hero. But eventually your losses will exceed your winnings. The casino boss asks for all the money ($999.75) that you pledged, but never put on the table. You say, “Sorry I don’t have it, and I won’t have it.” So the casino boss nods to a big enforcer who comes up to the table and breaks the legs of the persons standing on your left and right, simple tourists who were wagering real money they had earned. They have to go to the hospital, or the morgue. You join other derivative bettors and move to another casino and repeat the process.

  • shaina

    This is a hard time to try to grasp the real reasons, but in my opinion we should work harder to do what each and every one does best and in time everything will fall into right places.

    • LD

      Shaina,

      Welcome to Sense on Cents!! You certainly grasp that there is no substitute for hard work in our attempt to promote maximum productivity.

  • Huckleberry

    Personally, I think question set #1 and question #7 are key. But there is one other nagging issue that, I think, underpins all the rest:

    Who owns what?

    Given the issues surrounding mortgage note conveyance, robosigning, and the “rocket dockets,” I cannot see how anyone can even attempt to accurately value anything. It seems that a lot of property “ownership” appears, at this point, highly provisional in nature.

    Moreover, given the fact that most of these will have to be sorted by the courts, note by note by note, – these mortgaged-assets (real, imagined or shadow) might be eroding long after Chernobyl has recovered…






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