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HomeMadoff CFO, Frank DiPascali, Singing Like a Canary
Posted by Larry Doyle on August 9th, 2009 11:54 AM |
Frank DiPascali, CFO for Bernie Madoff, is widely expected to plead guilty this Tuesday. DiPascali has waived his right to be indicted by a grand jury in a sign that he is looking to cut the best deal possible.
How high a pitch and how many tunes will investigators receive from the canary known as Frank DiPascali? Do you think there are a whole host of people not sleeping very well lately wondering what notes Mr. DiPascali may reach?
Who might some of these people be?
1. Walter Noel: head of Madoff’s largest feeder fund, Fairfield Greenwich.
2. Sandra Manzke: formerly headed Tremont Advisors, another large feeder fund. Manzke left Tremont in 2006 and launched a money management firm Maxam.
3. Andrew and Mark Madoff: Bernie’s sons ran the Madoff broker-dealer operation.
4. Peter Madoff: Bernie’s brother and general counsel.
5. Shana Madoff and husband Eric Swanson: Shana, Bernie’s niece, married former SEC lawyer Swanson in 2007. Swanson was with the SEC for ten years prior to departing in 2006. Ms. Madoff served on a committee at the Wall Street regulator FINRA.
6. Robert Jaffe: vice-president of Cohmad Securities. Jaffe was instrumental in signing up a multitude of investors with Madoff.
7. Sonny and Marcia Cohn: this father-daughter team owned Cohmad Securities, which was physically located within the same space as Madoff’s operations.
8. Certain large Madoff investors with whom DiPascali had regular contact. How much did they know?
9. Who were the regulators from FINRA and the SEC responsible for monitoring the Madoff operation? Are they nervous as well? Will investigators dare to pursue this angle?
Obviously, if any of these individuals (and any others) are implicated by DiPascali, they are entitled to due process.
I would love to see Mr. Harry Markopolos reintroduced into this equation. Mr. Markopolos clearly knew the inner workings of the Madoff operation. Will investigators have the courage to engage him and expose the shortcomings in our regulatory oversight?
No stone should be left unturned!!
LD
NoQuarter Radio’s Sense on Cents with Larry Doyle
Posted by Larry Doyle on August 8th, 2009 4:33 PM |
UPDATE: The show has concluded, but you can listen to a recording in its entirety by clicking the Play button on the audio player below. Once the playback has started, you can forward or rewind to any portion of the show by clicking at any point along the play bar.
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As the markets rebound and the economy seems to recover, please join me this Sunday evening August 9th on NQR’s Sense on Cents with Larry Doyle as we dig deeper and work harder in navigating the economic landscape. Is the market and economy truly rebounding as quickly as it may appear? Is Wall Street back to ‘business as usual?’ What is the true nature of Goldman Sachs? Is the banking system properly portraying its overall health? What about Freddie and Fannie?
I am thrilled to have a longstanding veteran within the financial markets as my guest on this week’s show. Smriti Popenoe has extensive financial experience and is uniquely qualified to comment on all these topics and more.
Ms. Popenoe held senior positions within the Mortgage Portfolio Management group at Freddie Mac from 1994-2003. She was involved in the successful launch of a mortgage REIT, Sunset Financial (2004-2006). Ms. Popenoe then moved to Wachovia Bank where until this past April, she held a senior position within the Portfolio and Balance Sheet Management group.
Throughout her career, Ms. Popenoe has honed skills and insights which are at the core of our current economic debate. I have no doubt my conversation with her this Sunday evening will be nothing short of riveting. Call the show to share your thoughts or ask questions at (347) 677-0792.
Don’t miss it. Please share with friends and colleagues.
LD
Barack Obama’s Arrogance vs. Honest Debate
Posted by Larry Doyle on August 8th, 2009 11:24 AM |
There is no doubt that of all the items on Barack Obama’s agenda, his desire to revolutionize our system of health care is of highest priority. His problem right now is the fact that he is losing the debate across all public opinion polls. He knows it and his Democratic colleagues know it.
Obama and his Democratic constituents are faced with the political predicament of whether they want to risk their political futures by ramming health care legislation against the will of the American people.
Prior to making that decision, Obama and the Democratic leadership are trying to reframe the debate in an attempt to sway public opinion. They are entitled to elevate the debate in any manner which they choose. Debate is the essence of democracy.
The public is also entitled to their voice. The public is sending strong and vocal messages to Washington on this topic.
Against this backdrop, I was more than a little surprised to view a vdeo clip of President Obama at a recent rally in Mclean, VA.
Not that Barack Obama needs my advice, but his tact in this forum will not resonate with those currently unsupportive of his health care proposition. In short, I know arrogance when I see it. Our President displays tremendous arrogance in his demeanor and delivery at this rally. In fact, he is not very Presidential. Please review President Obama stating, “Don’t Want The Folks Who Created the Mess to Do a Lot of Talking.”
Leaders welcome debate. They don’t shy away from it. In fact, if we were to silence those who created messes in our political and economic system, Washington would be a very quiet town.
Thoughts, comments welcome and appreciated.
LD
Wall Street Wisdom: Andrew Lanyi
Posted by Larry Doyle on August 7th, 2009 4:23 PM |
Wall Street as an industry is very easily vilified. I panned it myself the other day. That said, there are a lot of great people on Wall Street just as there are great people in every industry.
On that note, I was moved by a story in this morning’s Wall Street Journal: A Survivor of Nazi Brutality Who Ascended Wall Street.
The individual profiled, Andrew Lanyi, clearly had a unique outlook on life and Wall Street. I am particularly impressed by his discipline, mentoring, and wisdom.
Do yourself the favor of reading this piece. Savor Mr. Lanyi’s life story like a fine wine. There are rich lessons here for all of us.
LD
Which Way’s the Beach?
Posted by Larry Doyle on August 7th, 2009 2:38 PM |
2:30pm, Friday afternoon August 7th, Midtown Manhattan.
Stocks are up close to 2%. Wall Street is back. Meet me on the bar car. Which way’s the beach?
I can picture those lucky enough to get off the trading desks early, sprinting to the train to head to ‘the shore’ (don’t say ‘the beach’ in Jersey) or ‘the Hamptons.’
Living for the moment when appropriate is not necessarily a bad thing as long as one never loses sight of the scope and length of the overall landscape. In so many words, I guess I am saying enjoy the view when you have it but never forget that life is a journey, not a destination.
Imputing this thought process into an investing style, one needs to be nimble enough to detect short term trends while never losing sight of the long term fundamentals. I understand the long term is nothing but a series of consecutive short terms; however, so much of our country seems to have a tough time looking beyond the very short term. I believe that mentality is the foundation of our economic problems. Where am I going with this?
Enjoy the up market while it lasts, but be mindful that our economy has massive debt burdens and structural issues that will require real attention to truly regain its footing.
These debt burdens and structural issues are embodied in a report put out yesterday by Comstock Partners entitled Deleveraging the U.S. Economy.
I STRONGLY recommend this report to those looking for a macro-perspective on our economic landscape. It encompasses a wide array of economic data and perspectives. Throw it in your ‘Save’ file. Suffice it to say . . . the road is long!!
For now, though, the train is leaving the station. Which way’s the beach?
LD
How Charitable is ‘Cash for Clunkers’?
Posted by Larry Doyle on August 7th, 2009 11:09 AM |
With the Senate’s approval of another $2 billion in funding for the ‘Cash for Clunkers’ program, the automotive industry will breathe a sigh of relief. I have nothing against the automotive industry, but there are aspects of this program that I find disconcerting both in style and substance.
While economists purport that this program will add measurably to next quarter’s GDP report, I would question the true integrity of that assessment. Why? GDP measures:
the monetary value of all the finished goods and services produced within a country’s borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory.
Others have already put forth that the Clunkers program is merely accelerating demand. I concur, but will grant that a spark within the automotive sector may help generate benefits across other parts of our economy.
Are consumers increasing debt and redirecting purchasing power that may have gone elsewhere given the presence of this program? I guess we could make that case with a purchase made on credit at any point in the economic cycle.
My main issues with this program revolve around the requirement that cars being swapped are required to be destroyed. Certainly not all of those cars are worthless. Shouldn’t the implicit value of cars being destroyed be subtracted from GDP if we want to have real integrity in our economic measurements? Why? If goods being produced, in this case autos, are predicated on others being destroyed then it only makes sense to net the values of the autos.
My biggest issue with this program, however, centers on the fact that there is real value being destroyed via this program. Why couldn’t or shouldn’t the cars being swapped be provided to worthy charities? I saw this point raised early this morning and it hit me: how many charities would love to have these vehicles in order to do their work? In fact, how many of these vehicles would have gone to these charities if not for this program?
Not sure if it was divine intervention, but I received an e-mail later this morning from the Charity Assistance team at Donate Car USA addressing this topic.
I would strongly encourage anybody who may be interested in the ‘Cash for Clunkers’ program to review the costs and benefits of donating your vehicle. ‘Cash for Clunkers’ may very well have an immediate negative impact on charities who depend on car donations. Ultimately, I hope this program will actually raise the awareness of donating vehicles versus destroying them.
Let’s not forget those in need.
LD
Unemployment Report: August 7, 2009
Posted by Larry Doyle on August 7th, 2009 9:02 AM |
The widely anticipated August Unemployment Report covering the month of July was just released. Let’s dive right in and take a look at the numbers . . .
Unemployment Rate
May 8.9%
June: 9.4%
July: 9.5%
August: 9.4%
>>LD’s comments: This number is surprising on its face, as expectations were for the rate to move to 9.6% or 9.7%. What happened? Overall, this report does certainly reflect a growing sense of stability in employment BUT this figure also reflects the fact that 422k people have left the labor force, meaning they have given up looking for work. Long term unemployed rose by 584k and now exceeds 5 million people. As time goes by, more and more of these people will stop receiving unemployment benefits.
Non-Farm Payroll (click here for definition of this term)
May: loss of 519k
June: loss of 322k
July: loss of 467k
August: loss of 247k
>>LD’s comments: This number, along with a positive revision of a net 43k jobs to prior months, is another indication of growing stability. Construction lost 76k jobs. Manufacturing lost 52k jobs. Before the economy can do better, it has to stop doing worse. This report plays into that. However, I would ask the question if the economy will merely adapt to overall lessened employment for a protracted period.
Average Hourly Earnings
May : +.1
June: +.1%
July: 0.0%
August: +.2%
>>LD’s comments: Another positive sign, although it is muted by the fact that last month’s hourly earnings was surprisingly weak. Over the two month period, an average of .1% per month is to be expected. Will this support a sudden pickup in consumer demand? I doubt it.
Average Hourly Workweek
May: 33.2 hours
June: 33.1 hours
July: 33.0 hours
August: 33.1 hours
>>LD’s comments: Again, this piece of data is consistent with the other parts of this report. For perspective, though, be mindful that last month’s reading was the lowest figure for this data since 1964.
Further Color: While many economists will spin this report as a clear sign of an improving economy, I maintain it is a sign of an adapting economy. I am surprised and disheartened by the fact that so many people have actually left the labor force. That level of discouraged workers, along with the level of long-term unemployed, plays into a real structural problem and long term drag on our economy.
Market Reaction: Equity futures have spiked by approximately .7%, but the biggest market reaction is in the bond market as interest rates have moved higher by approximately 12 basis points across the curve. What is going on there? The market is going to price in an expected increase in rates by the Federal Reserve sooner than Ben Bernanke would otherwise prefer. Recall how Bernanke at his recent Congressional testimony emphatically stated he would leave rates unchanged for an extended period. The market reaction is stating that he may not have that luxury. Why? Fears of inflation.
Additionally, this report will make the underwriting of the massive Treasury supply (3yr, 10yr, 30yr) next week very challenging.
The greenback also had a nice spike after this report. This move is consistent with a market expectation of an increase in rates by the Federal Reserve.
Can the equity market continue to rally in the face of rising rates? I will monitor closely.
Please track our work here at Sense on Cents via Twitter, Facebook, RSS feeds, or e-mail subscription. Visit and comment often!!
LD
Economic and Market Cross Currents
Posted by Larry Doyle on August 6th, 2009 4:56 PM |
On an otherwise uneventful Summer afternoon in the markets, a few developments today caught my eye:
1. Retail Sales remain decidedly sluggish as same store sales declined in July by the second sharpest amount of the year. Is that any indication of an economy truly turning the corner? As I wrote on July 29th in my post, “Economy and Markets: Improving, Declining, or Adapting?”
While most economists and market analysts are looking at statistics and data to determine whether the economy and consumers are improving or rolling over, my take is different. I view the economy and consumers as adapting to the new dynamic at work in our country.
Economists point to the drawdown in inventories as a reason why future GDP reports will rebound strongly. That rebound will only occur if consumers start spending. I personally do not expect that will happen to a meaningful extent anytime soon.
2. Bloomberg reports Tudor Hedge Fund Says Gain in Stocks is ‘Bear-Market’ Rally:
Tudor Investment Corp., the $10.8 billion hedge fund firm run by Paul Tudor Jones, told clients that the gain in U.S. stocks in the past 100 days is a “bear- market rally.”
“Impressive counter-trend rallies are a feature, not an oddity, of secular bear markets,” the firm said in an Aug. 3 investor letter. “We are not inclined to aggressively chase the market here. Rather, we eye a better opportunity to be long equities into year-end on a potential autumnal pullback.”
The Standard & Poor’s 500 Index of the largest U.S. companies has climbed 47 percent since falling to a 12-year low on March 9. The index broached 1,000 for the first time in nine months this week after companies reported better-than-expected profits.
“Investor psyche is still fragile,” Greenwich, Connecticut-based Tudor said. Slowing growth in China and the return of front-page stories on swine flu are “further catalysts for global equity markets to pause in September,” the letter said.
Tudor is viewed as one of the top money managers in the business. I respect his opinion. (more…)
China Wants Inflation Protection
Posted by Larry Doyle on August 6th, 2009 1:35 PM |
Will China continue to fund the U.S. deficit? What would happen to interest rates if China exited our U.S. Treasury market? Where would the United States attract the necessary funds? This dilemma has been one of the most widely debated topics in financial markets.
On the heels of the U.S.-China economic summit held last week in Washington, a story is now seeping into the market that at the behest of the Chinese, the U.S. Treasury will increase issuance of Treasury Inflation Protected Securities (TIPS). The Wall Street Journal reports, U.S., in Nod to China,to Sell More TIPS. This story gives us a lot of food for thought, including:
1. how quickly do the Chinese think inflation may rear its ugly head?
2. do the Chinese have a lack of confidence in Ben Bernanke specifically or the Federal Reserve in general?
3. how high do the Chinese think inflation may rise?
4. will we continue to witness Chinese officials calling for a move away from the U.S. dollar as the international reserve currency?
5. could we envision the U. S. Treasury executing the sale of TIPS on a private placement basis to the Chinese?
Who knows how this scenario will play out. For our purposes, the fact that our largest creditor is looking for inflation protection speaks volumes.
If the Chinese are concerned about inflation, then I am as well.
LD
Crime Pays
Posted by Larry Doyle on August 6th, 2009 11:44 AM |
The Wall Street Journal reports that former AIG CEO Hank Greenberg has settled accounting charges brought by the SEC for $15 million. Greenberg to Pay $15 Million to Settle SEC Fraud Case. For Greenberg, that $15 million settlement is the equivalent of leaving a nice tip after a good meal.
Recall that Greenberg recently won a case against AIG over claims to $4.3 billion of AIG stock. As Bloomberg reported on July 8th, AIG Looting Case Against Starr Was Weak.
The fact is Hank Greenberg has always been viewed as an arrogant, ruthless individual who ran AIG as his personal fiefdom. As was shared with me and I wrote this past February 24th in a post, “How Does One Lose $125 Billion?”:
It is believed by some AIG veterans that under Hank’s watch the books were cooked via a money laundering scheme centered offshore and executed through an office in New Hampshire.
The accounting malfeasance supposedly went back to the 1970s.
More than a little disconcerting.
$15 million is hardly a rounding error for Mr. Greenberg.
LD
