Dancing with the Devil: A Breach of Trust

Yet again, the Golden Child of Wall St. is revealed as a fox in sheep’s clothing.
I was engaged in a debate about the role Goldman Sachs may have played in the downfall of Greece’s economy with a relative (through marriage) who migrated from Greece to the United States when she was 10. My research on the near collapse of the US financial market clearly points to the gradual deregulation and the unethical banking practices. There are a number of factors that contributed to the fiscal crisis, particularly the securitization of subprime Housing Loans, re-packaged and sold Globally as “A” rated paper. Regardless of the fact that the underlying debt was “C” rated, banks had the audacity to sell the mortgage-backed securities as “A” rated, low risk bonds. Of course, we can’t ignore the rampant Securities and Banking fraud, which generated hundreds of charges and investigations by the SEC against Banks and Hedge Funds.
I’ve written numerous articles about the Euro crisis. Like many economists, I believe the U.S. fiscal crisis precipitated the downward spiral of a number of EU members. This is mainly because of large quantities of foreign investment in U.S. Housing securities, which went sour. Much to my surprise, in the process of gathering data surrounding the global crisis, I learned that EU members; Greece, Italy, Spain and France, carried out non-transparent, accounting practices for over a decade. No doubt the high debt ratios hidden by accounting loop-holes would have eventually brought the weakest EU members to fiscal ruin at some point anyway.Although, our financial calamity accelerated the timeline of the reveal. America's financial troubles was the equivalent of lighter fluid, igniting the masked problems of the EU’s weakest links.

Apparently the Greek-American community seem to have a different slant on how Greece's economy found itself engulfed in a fiscal and political battle for stability. The lack of transparency and debt-to-revenue ratio was certainly taking its toll on the weakest EU members. This was made worse when changing leadership was blind-sighted by the urgency of country’s debt portfolio – particularly the derivative-structured debt owed to Goldman Sachs. When the housing market collapsed, interest rates increased, drastically increasing the debt service on the Goldman/Sardelis deal
My Greek-American in-law (who shall remain nameless), vehemently contends that Goldman Sachs is the monster that brought her beloved country to its knees. This is hardly the case, since Greece's debt was already 127% of its GDP by 2009. Also, by that time, Greece was seeking a bailout for over 300 billion Euros. Nevertheless, She was referring to a secret transaction between Goldman and the Managing Director of Public Debt Management Agency (Christoforos Sardelis), back in 2001, where a masked loan of $2.8 billion Euros was signed, sealed and delivered. Executed completely under the radar. The loan, which was thought to be earmarked for the preparation of hosting the 2004 Olympics, was later revealed not to be the case. Although I admit, the unholy alliance with Goldman was a financial set back, it was not the smoking gun.

The under-the-radar transaction executed by Sardelis and Goldman was a Currency Swap. Given the variable rate structure, there was mounting debt service, as interest rates increased, making it difficult for Greece to contain. I appears that Greece’s Debt Management Agency didn’t thoroughly analyze the deal to determine the long-term impact of this type of debt structure for Greece, given their compromised economy. A simple “what if” analysis would have helped them to analyze the impact of increasing interest rates. The Currency Swap transaction belongs to the derivative family, which are always complicated to quantify or analyze given the fluctuating market, currency and structure. These are highly risky transactions, and certainly not recommended for unstable municipalities suffering from high debt, declining GDP, and 25% unemployment.

The secret deal between Sardelis and Goldman could be classified as irresponsible given the size of the debt, and the fact that it was tied to fluctuating interest rates. The operative word being, “fluctuating”. Regardless of Sardelis’ good intentions, “it takes two to tango”. Therefore, Sardelis is equally at fault. My Greek-American in-law may be reluctant to accept it, but the blame has to be shared.

Since 2010, when I initially started writing about the Euro crisis, I learned that Sardelis was motivated by the Maastricht Treaty, requiring all EU members to show “improvement” in their public finances. This Goldman swap was a "dance with the devil" and simply a desperate attempt to “hide” the debt from the country’s books to comply with the Maastricht Treaty. These swaps were one of several techniques that European governments used to meet the terms of the treaty. There were certainly alternatives techniques available, so why did Goldman push this particular structure? Whatever the case, Sardelis was out of his element, and out smarted by his trusted Bankers. It was reported in the Wall St. journal that Goldman served up fictitious, historical exchange rates for the transaction, which earned them $760 million in U.S. fees.

Attemps to Implement Austerity Measures Lead to Violent Protests.

By the time Spyros Papanicolaou took over the Public Debt Management Agency in 2005, the loan had ballooned to over 5 billion Euros. Given the role that Goldman played in the fiscal unraveling of the housing market, which sent trimmers across the globe, you would think that their CEO, Blankfein, would consider a forgiveness of some portion of the debt. Goldman and Papanicolaou did get around to restructuring the debt, but I’d be willing to bet there was no forgiveness of debt.

Goldman Sachs may soon be faced with a public image dilemma, but until then I supposed they’ll continue to carryout their Mission to squeeze clients for every possible dollar.

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Romney’s Victory Website: And The Ugly Truth About Politics

It appears that Mitt Romney and his GOP “posse” had a Vision that the Election was going to yield a landslide victory! Although they could not have been more wrong, their arrogance was palpable. I am sure by now you’ve heard reports about Mitt Romney admitting that he only wrote a Victory speech. That is more than positive thinking, that is sheer arrogance (and not the most attractive trait in a candidate). Fox news, and other conservative media outlets had pre-election panels, and Election-day panel discussions, that harshly laid out reasons why Democrats, and Obama, will be shown the door. During the early afternoon on November 6th, the conservative news anchors and pundits entertained themselves by predicting what the Romney Cabinet would resemble. Who are the likely candidates for the Romney Administration, and who would be passed over for one reason or another. It was not unlike pre-Super Bowl chatter, only this game will impact the entire country, and the world. As the day progressed, the conservative political analysts were confident and excited.

There seem to be such utter certainty, that I was startled by it. It was like being in an alternate world, chiefly because I couldn't see how one-plus-one could equal four. It appeared that Fox News, and conservative Talk Radio, converted simple math (adding likely Romney votes) into an algebraic equation....and it all made sense to THEM. Looking at the issues influencing voters, which bore out to be true, I took note of the following issues:

 Women in America want the right to choose what goes on with their bodies, and don’t appreciate being referred to as “Binders of women”
 Latinos are concerned about immigration laws that impact their children and families.
 FEMA should be left alone; States and local governments, and citizens need financial help after Natural Disasters .
 A sizable portion of the “47%”, Romney wrote off, were retired, or veterans who have paid a lifetime of taxes, or risks their lives fighting for this Country. They’ve earned the right to Social Security, and other government programs
 Auto Makers, their 181,000 auto workers and their families were happy that Obama didn’t take Romney’s advice to “let them go bankrupt”
 Gays are passionate about having heir marriage legally recognized, giving them the same rights as heterosexual married couples.
 Youth votes are more likely to vote for Democrat, given the “Occupy Wall Street” movement, which blames the wealthiest 1 %, and the Bush Administration for the economic and fiscal crisis

The above political and social issues can be translated to a simple addition problem. Accordingly, the 7 bullet points could be treated as an aggregate of votes away from the republican candidate, Mitt Romney. Although the slow economy and high unemployment were working against Obama, as long as the turnout were as strong, or better than 2008, he had a good chance of winning re-election.

So why then, were the Republicans and Carl Rove so vehemently certain that Romney would be elected the 45th President of the United States? To the extent that he had his Victory Website rolled out early Thursday morning?

Perhaps this tidbit of information will provide a clue: Shortly after Obama’s stunning victory, I read a disturbing article that attempted to explain a complicated web of investment companies and venture capital that involved Mitt Romney’s son, Tagg Romney. In a nutshell, Tagg Romney owns the company that invested in the company that bought a controlling interest in a Voting Machine Vendor. What? I was so shocked, that it took the wind out of me. What this amounts to is so incredibly unethical, I can’t help but to think of Watergate. So, that explains the why the Romney camp felt so sure they would be moving into the White House. This is unfathomable and beyond a mere “conflict of interest” issue. This also explains why several concerned voters released video tapes the rigged voting machines they encountered, and posted it on YouTube. One male Caucasian Voter illustrated that when he chose Obama for President, a check would appear next to Mitt Romney’s name. He tried it multiple times, and eventually left that booth. He did not indicate who he ultimately voted for, but stated that he just wanted to report a “strange” occurrence.

Provided below is just one of the "Rigged Voting Booth" videos.

The combination of the Tagg Romney’s secret ownership of a voting machine company, and the YouTube videos of rigged voting machines is too much of a coincidence. I also believe that if this Article was misstating the facts, there would have been a lot of noise and defamation claims coming from the GOP or the Romney camp. Instead there is silence - as if the planned strategy was not to respond, so that the issue would quickly go away. I am almost certain that the Obama Administration is too busy to pursue the matter, especially since the stolen votes did not help them achieve their goal. The outcome of the this election, begs the questions: If Nixon hadn't won the election, would the Watergate break-in become the scandal that rocked Capital Hill - to destroy Nixon's political career? Given the lack of attention drawn to the Rigged Voting Machines connected to Tagg's Venure Capital Company, I can't help but wonder if Watergate would have become one of the biggest scandals in America's political history, if Nixon did not get Elected? Whatever the case, politics is left with a black eye, as democracy stumles on.

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Industry Outlook: Technology Driven Jobs Growth

The Department of Labor names the Service Sector as one of the top five industries that will drive the economy over the next 6 years, out pacing all other industries According to a recent Bureau of Statistics Report, the service sector employs approximately 112.8 million people. Given the continuous advancements of technology, technology related occupations are expected to grow 25.9%, while the service sector (including project management and consulting) will be the driving force in the economic growth through 2018. It is no surprise that the demand for IT consulting and system upgrades will foster increased business, driven solely by the face-paced changes in technology.

This is really good news for a wide range of career paths particularly; project managers, IT consultants, and risk analysts, network security specialists, developers, corporate trainers and recruiters. The Industry Outlook page indicates the Department of Labor anticipates 18 percent growth in the IT management and consulting services through 2020, out pacing all other occupations by 4 percent.

The Department of Labor Industry Outlook page indicates that the service sector will be accountable for employing as many as 131 million people between now and 2018. In their Industry Outlook Report issued the second quarter of this year, the Department of Labor points out that technological consulting services will be among the fastest growing sectors for professional and technical workers. To further support the positive outlook for IT and related Management and Service sectors, a Plunkett Research Report issued earlier this year, reiterated the projected 18 percent growth for the aforementioned industries. Like a super heroe, Technology will impact the overall business community as it continues to drive change, demand and thus economic recovery.

Small and mid-size organizations struggle to keep up with advancements that influence their ability to remain competitive as the market place transforms. For this reason globalization and express technology advancements foster new opportunities for IT consultant firms (Deloitte, 2012). Industry and Occupational Outlook data can be found at US Department of Labor website

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Silver Lining for Seniors:Outpacing National Unemployment

Great news for seniors comes as the economy crawls to recovery. At the depths of the recession unemployment was as high as 10%. By the 3rd quarter of this 2012, the national unemployment rate dipped below 8%, to settle at 7.9.
Although, this is a welcome turn of events, there are still millions of people unemployed or under employed. Nevertheless, it’s a positive indication that the long awaited recovery process is at work. Fortunately, seniors are the age group benefiting the most from the jobs surge. A Daily News article by Elizabeth Lazarowitz reported that 70% of the jobs filled since 2010, were fill by candidates over 50. In the past two years nearly 3 million jobs were filled by seniors, which has driven the national unemployment rate for down to 6.7% for people over 50.

We’ve always heard that employers have little use for their senior employees, and instead chase them out for younger, “cheaper” talent. Well…finally, the tables have turned. It took a while, but it appears that wisdom, experience and stability has become much more attractive to companies for the obvious reasons. In the aforementioned Daily News article, Kate Wendleton, president of Five O’Clock Club is quoted as saying “When employers have a choice, they say, ‘I need someone who’s seasoned and who will be up and running” What seemed to be common sense, took decades for HR executives to ascertain: Training, learning curves, and mistakes are eminently more expensive than the higher salaries required for, shall we say, "seasoned " professionals. This is exhilarating news for anyone over 50 seeking to find a job, change jobs or careers. My only question is; Why has it taken so long for companies to appreciate the immense value an experienced, older employee brings to the table?

In these difficult times, companies are forced to go into stealth mode to sustain their profit margins and growth objectives. That entails staff trimming, budget cutting, and closely analyzing the performance data for a more vivid perspective on their bottom line. What do you think that ultimately revealed? New recruits - fresh out of college, usurp far more costs and waste than the tried-and-true “senior” employees. That said, those candidates over fifty, or pushing sixty should carry their experience and grey hairs with pride and confidence – as the short-sighted HR executives have finally seen the light.

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Doin' the Twist: The Federal Reserve Steps in to Spur the Economy

In the beginning of the year, the Federal Reserve indicated their plan was to let the economy stand on its own. By the end of last month, however, the Feds broke down and reduced long-term interest rates in a program they refer to as Operation Twist. In this program, the Feds would drive down interest rates to encourage business activities, such as borrowing and hiring. According to a Wall Street Journal article by Peterson and Hilsenrath, the Federal Reserve officials announced that Operation Twist will be extended through the end of the year, but they’re “poised to do more”.

At the end of the 1st Quarter, the Feds indicated that there was no need for their help. The economic picture appeared brighter following a strong 4^th Quarter, and encouraging jobs report.

By the time the we turned the corner into the 2^nd Quarter, the economic storyline began to change amid heightened pressures from overseas. The market, which had anticipated S&P downgrades for Spain and France, could no longer withstand the push-back stemming from the European Union’s fiscal and political upheaval. Globalization has its rewards, but this isn’t one of them. When the EU sneezes, we are going to get the sniffles, as if the distance were non-existent.

As the Euro fiscal storm brewed, the dismal jobs report and Facebook IPO did its part to shrivel up any confidence Investors might have had left. The market uncertainty lingers, regardless of good economic news. This  depicts the profile of weary investors - possibly suffering from Post-Traumatic Stress Disorder.  Being the eternal optimist, I’m hoping Operation Twist will have us all dancing in the isles by the end of the year.

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Financial Fraud Strikes Again

Haven't we had enough of financial scandals? Of course not, here we go again. This time it is with a boutique futures trading broker - Peregrine Financial Group, also known as P.F.G.. On July 9, 2012, the National Futures Association (NFA) - the industry wide, self-regulatory organization for the U.S. futures industry, made an inquiry with U.S. Bank and learned that out of the $225 million in customer segregated funds that P.F.G. had reported to the NFA as being on deposit at the Bank just days earlier, only approximately $5 million was actually on deposit. The NFA also learned that, although P.F.G. submitted confirmations that U.S. Bank account balances as of February 2010 and March 2011, were reported to be approximately $207 million and $218 million, respectively, P.F.G.'s actual balances were less than $10 million for each one of these months.

On top of the reported financial fraud, a day earlier, the chairman and chief executive, Russell Wasendorf Sr., tried to commit suicide outside of the firm’s offices in Cedar Falls, Iowa .The Federal Bureau of Investigation is investigating the matter, according to a spokeswoman for the Omaha office, Sandy Breault. Ms. Breault indicated that the Chicago office of the agency might also get involved.

The Commodity Futures Trading Commission (C.F.T.C.) is seeking a restraining order against P.F.G., to prevent the destruction of any information that may be needed in the course of the investigation. The C.F.T.C. is also asking a federal court to appoint a receiver for the firm and freeze its assets.

This feels a lot like a curtain call for MF Global, where $1.6 Billion is still missing. (refer to a prior article in this blog for more information about MF Global). Similarly in this case, as the complaint states: “P.F.G. and Wasendorf have used customer funds for purposes other than those intended by its customers, and consequently, have misappropriated these funds”. “The whereabouts of the funds is currently unknown".

Needless to say, the operations of the firm have been halted. Unfotunately, I am one the many victims. For two years, I was an active futures trader with the company which offered  proprietary trading platforms to small retail customers like myself with unique and robust features that were not available from other brokerage houses. Although it has been several years since I day traded, due to time constraints, I still kept a funded account with P.F.G.. I contacted the NFA today and registered my name as an account holder. I urge all others affected to do the same. It may not amount to much but at least it is better to take some kind of action and to make your voice heard.

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To Be or Not To Be: EU Shows signs of cracking

Twenty years ago, when the idea was circulating about a unified currency in Europe, it seemed like such a brilliant concept, based upon sound economic and political arguments. Today, it almost seems like an impossible dream. Landon Thomas of the New York Times asks in his article "Can they muster the will and resources to keep the euro zone from breaking apart?

As the world looks on, and markets take defensive positions, the Euro crisis unfolds like the climax of a mystery novel. Greece's dramatic elections - where the people ousted Sarkozy, opting for an unlikely candidate, François Holland. The outcome of the election was a clear sign that the people were not ready for the strict austerity measures needed to turn their economy around. Bailout alone was not going to save Greece, it was only expected to buy them time to pull their policies, and fiscal plan together. The political and civil unrest in Greece, gave little hope for a turnaround. Instead the notion of Greece leaving the European Union resurfaced with somber overtones of reality.

By the end of May, Spain had decided to pump 19 billion Euros into its struggling Lender, Bankia, SA, as a strategy to illustrate stability, and quell any notion that the crisis continues for its financial sector, in light of Greece's downward slide. This is a prop-up strategy that is effective in influencing perception, which is crucial in the realm of investors and financial markets. The US equivalent of $24 billion, was a rich injection that is twice the amount Spain spent in the recent past to straighten out the banking sector during US housing market collapse - causing a global rippling affect. Spain is swiftly reacting to mitigate a repeat of the fiscal mayhem stemming from billions of dollars lost in toxic mortgage-backed securities.

Meanwhile, two weeks ago, S&P downgraded Bankia, and several other Spanish Banks, causing worldwide concern. The rating agency made matters worse by painting a gloomy near-term forecast for the region, citing their belief that Spain is heading toward a double dip recession. S&P also noted that there was a reasonable expectation of an increase in troubled assets. On the heels of Frances downgrade, and Spain’s fiscal concerns, the question becomes, was this unified currency such a sound economic and political move in the first place. Friday, the DOW closed 300 points lower, illustrating investor sensitivity to the Euro Crisis - although, it should be noted that market anxiety was further stimulated by the soft jobs report.

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