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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (7189)	9/15/2005 2:06:40 PM
From: macavity	Read Replies (2) \| Respond to of 33421

Too funny! 18-Feb-2004 The Onion theonion.com 14-Sep-2005 CNN money.cnn.com Life following Irony! -macavity

To: John Pitera who wrote (7189)	9/15/2005 5:30:00 PM
From: All Mtn Ski	Read Replies (2) \| Respond to of 33421

The timing of this will probably coincide with an upcoming quick 275- 300 basis point sprint in the 10 year yield. Wow, what's going to trigger that? The Bond market and the yield curve have been one of the confounding investment themes for me in 2005 and is one of the reasons I've been in cash all year (haven't missed much). If we do get a large uptick in rates, that's going to really kill the folks in ARM and IO mortgages as well. Goes along with my theory that Americans have relinquished too much accountability in our democracy, thus being ruled by a political class and not by leaders. I think it will take a great event, like a severe depression, to get the citizens to demand more accountability and thus regain control of our democracy. The ineptitude of the federal bureaucracy was greatly exposed by Katrina, IMHO, and still the nations sits. But nothing wakes up people like a depression.... A-M-S

To: John Pitera who wrote (7189)	10/14/2005 2:59:34 PM
From: John Pitera	Read Replies (1) \| Respond to of 33421

Refco Unwinds Positions At Core Brokerage Unit A WALL STREET JOURNAL ONLINE NEWS ROUNDUP October 15, 2005 The other shoe dropped at Refco Inc. Friday, when the trading firm announced that it had started unwinding proprietary and client positions at its main business, Refco Securities LLC. On Thursday, Refco put a 15-day halt to all business at another unit, Refco Capital Markets Ltd., citing a lack of cash to keep that business afloat. At the time, it said its ore broker-dealer business remained on solid financial footing. In a brief statement Friday, Refco said the broker-dealer unit will "only be engaging in security transactions to the extent necessary to offset and effectively liquidate outstanding long and short customer and proprietary positions." The crisis at the largest independent futures-brokerage firm in the U.S. began Monday when the company put Chief Executive Phillip R. Bennett on indefinite leave after discovering that a firm he controlled owed Refco $430 million. Federal prosecutors arrested Mr. Bennett Tuesday night, charging him with fraud in connection with the firm's IPO. Confidence in the New York-based company's prospects continued to deteriorate Friday. At midmorning, Refco's 9.0% notes maturing 2012 were down 12 3/8 points at 27.7 cents on the dollar, yielding 41.4%, according to MarketAxess, an electronic trading service for corporate bonds. On Thursday, the notes plunged 36 points. There hasn't been a steep drop in a bond price like this since energy trader Enron Corp. collapsed at the end of 2001, said Martin Fridson, publisher of Leverage World, a research service focusing on the high-yield bond market. Most other meltdowns have also been companies in financial services, he said. Refco shares -- which have shed over 60% of their value since the week began -- remained halted on the New York Stock Exchange at $7.90. The exchange said it is waiting for the company to disclose more financial information before trading resumes. With more than $4 billion in customer accounts, Refco's futures-brokerage business rivals the derivatives desks of some major Wall Street firms and makes the company one of the largest players in a global business that saw nearly nine billion exchange-listed futures contracts trade hands last year. The company is best known for commodities but also active in financial products. It also does much of its business in privately negotiated derivatives transactions. Refco Capital Markets is an unregulated, Bermuda-based business that provides prime brokerage services to hedge funds for trades in the stock, bond and foreign-exchange markets. The broker-dealer unit, Refco's main operation, is regulated. Refco, like other big trading houses, relies heavily on borrowed money to participate in billions of dollars in transactions. With its financial picture uncertain, trading partners have grown anxious. As the skittishness has spread, a company-specific problem about questionable accounting has rapidly evolved into a concern for the broader market. Because of Refco's exposure to a wide array of trades across several markets, including opaque financial-derivatives markets, regulators are scrambling to see if Refco's woes could lead to broader problems. The Federal Reserve has inquired about Refco in the course of its normal daily conversations with Wall Street bond dealers, according to people at those firms. But the Fed isn't raising concerns about so-called systemic risk -- central-bank lingo for the idea that one firm's misfortunes can pose a threat to broad swaths of the financial system or even the global economy. During the year ended Feb. 28, Refco processed 654 million derivatives contracts, making it the largest broker on the Chicago Mercantile Exchange. It cleared $13.7 trillion in Treasury-bond trades and processed more than $1.2 trillion in foreign-currency trades. According to its August prospectus, it has 200,000 customer accounts in 14 countries. Refco also is highly leveraged: Its latest balance sheet, as of May 31, showed $74.3 billion of assets and $74.1 billion of liabilities. Refco's difficulties could also spell problems for its auditor, Chicago-based Grant Thornton LLP. The firm replaced Arthur Andersen LLP as Refco's independent auditor in 2002 and is one of the largest U.S. accounting firms outside the Big Four. But Grant Thornton, according to people familiar with the matter, was unaware until recently that Mr. Bennett periodically had arranged for a Summit, N.J., hedge fund, Liberty Corner Capital Strategy, to take a $430 million debt that he owed to Refco onto its own balance sheet through a series of paper shuffles executed toward the end of several of Refco's quarters. Grant Thornton says it's investigating. Auditors are required to look for fraud but aren't necessarily at fault for missing such fraud. The Public Company Accounting Oversight Board has opened an inquiry into Grant Thornton's audits of Refco, according to a person familiar with the matter. --Peter A. McKay, Aaron Lucchetti, Susanne Craig, Craig Karmin, Jonathan Weil and Mark Whitehouse contributed to this article