Blog Posts by Michael Santoli

  • MF Global’s Collapse: The Fed’s Role

    By Michael Santoli | The Exchange – Tue, Oct 30, 2012 4:57 PM EDT

    The "MF" in MF Global Ltd. may not have really stood for "malfunction," but one year after the  brokerage firm succumbed to trading losses and customer defections by entering bankruptcy protection, it's clear the story of the company's demise was multifaceted.

    Piperlime store opening, New York City

    Most immediately, former MF Global chief executive Jon Corzine's decision to use the firm's own capital to buy the spurned debt of some peripheral European countries generated losses, drew credit-agency downgrades and spooked trading clients, many of whom withdrew their funds before the bankruptcy, which stranded $1.6 billion in customer money within MF.

    Financial controls also appear to have been lacking for years before MF's undoing, according to retrospective accounts, with the broker's accountants unable to get a firm handle on its cash balances in a timely way.

    Civil action against MF Global, charging that the firm mislead investors about the risky bets it was making with European debt, is going forward as of now, despite

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  • Bulls Take a Licking, Keep on Ticking

    By Michael Santoli | The Exchange – Fri, Oct 26, 2012 1:35 PM EDT

    In the blur of a prizefight, it's not always easy to determine whether a boxer who refuses to go down has an iron jaw or is simply punch-drunk.

    The stock market of the past few weeks is a bit like that fighter, absorbing punishing combinations of corporate earnings shortfalls, hit-and-miss economic data and renewed stirrings of worry about the European debt drama.

    Yet with a loss of around 4% from the September high in the Standard & Poor's 500 index Friday morning's level near 1,400, the major indexes have so far declined the urgent invitations of the bears to hit the canvas. (Consistent with the pattern, major averages ended nearly unchanged Friday, despite another round of disappointing earnings.)

    Light Profits

    About a third of the 30 companies in the Dow Jones Industrial Average came in undeniably light on some combination of third-quarter profits, revenues and forward guidance, including International Business Machines (IBM), Caterpillar (CAT) and 3M (MMM).

    Of course, Amazon (AMZN

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  • Labeling China a Currency Manipulator Not Best Strategy for Balanced U.S.-China Trade

    By Michael Santoli | The Exchange – Thu, Oct 25, 2012 1:36 PM EDT

    In Monday's debate, Governor Mitt Romney reiterated his promise to use his first day in office to formally designate China a "currency manipulator," or a trading partner that keeps the value of its currency artificially low so its exports are cheaper for Americans and others to buy. If he ordered his Treasury secretary to issue such a declaration, it would force contentious formal negotiations on China's foreign-exchange policies, which, if unsuccessful, could lead to outright trade sanctions on China imports.

    U.S. politicians have complained for years that China unfairly gives its manufacturers an advantage by preventing its currency, known as the renminbi, from rising in value against the dollar.

    While China does indeed restrict the amount that its currency is allowed to appreciate against the dollar and other currencies, confronting Chinese leaders about their currency management and trade practices would be politically tricky, and wouldn't necessarily be economically effective.

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  • On Wall Street, Selling Fear Is Good Business

    By Michael Santoli | The Exchange – Wed, Oct 24, 2012 10:30 AM EDT

    Years of financial tumult have given brokers a new and resonant sales message: "Be afraid."  Whether it's good investment advice is almost beside the point — the financial-services industry has determined that fear sells:

    -- In the current retirement issue of Money magazine, which lacks even a single article or advertisement that promises glorious investment returns, Prudential Financial bought a full-page ad to offer "A responsible answer to an era full of risk."

    -- Elsewhere in the popular press, leading asset manager BlackRock begins its pitch for its funds by asserting, "Today's markets are as uncertain as ever."

    -- Main Street brokerage house Raymond James, sympatico with the message of most of its peers, asks in a recent marketing brochure: "In these volatile times, is your portfolio structured as it should be?"

    There's nothing mysterious about how things arrived at this point. By their words and actions, individuals have shown an abiding disdain for the stock market.

    Apparently,

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  • ‘Era of Uncertainty’ May Be Drawing to a Close

    By Michael Santoli | The Exchange – Tue, Oct 23, 2012 12:00 PM EDT

    If economists, business executives and investors have been sure of one thing this year, it is that uncertainty — over economic policies, political leadership and central-bank actions — is largely to blame for the shambling global economic pace, spotty job growth and serial bouts of anxiety in financial markets.

    But the bull market in "uncertainty" has likely peaked -- not that many have noticed amid the political noise and unsettled stock market, which is falling sharply Tuesday amid disappointing earnings and worries over Spain.

    Like most overplayed market themes, there's a set of plausible facts and resonant conditions at the core of the uncertainty obsession:

    • A close and contentious presidential race, with economic philosophies at its core, is about to culminate.
    • The "fiscal cliff," in which spending cuts and tax increases of up to $600 billion could be triggered, is just ahead in January.
    • China is undertaking a once-a-decade leadership succession as it strains to re-energize
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Pagination

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