Some breaking news on the WSJ. Federal prosecutors are conducting a criminal investigation into whether GS or employees committed securities fraud. This is more serious than the fairly toothless senate committee.
As Super Bowl fans gather around the TV and the chip bowl, some will probably be guilty of double-dipping those chips. In this latest “Is It True” segment, WSJ’s Christina Tsuei finds out whether double-dipping is really such a health hazard.
John Taylor, chairman and chief executive officer of FX Concepts LLC, the world’s largest currency hedge fund, sees the euro dropping to $1.20 by August, and believes parity is possible. Be very careful, because as of today Goldman is now accumulating euros (as per its just released Sell recommendation). More from Taylor: “It’s going to be quick because things are really falling apart…. Some of these [countries] have to be thrown out [of the EMU]. If you look at a country like Latvia, which has been effectively in the Euro, has been saved by the European Commission and the IMF much like they are suggesting Greece will be, their retail sales were down 30% last year, the GDP was down 18%, it is expected to drop another 8% this year. Latvians are starving, the place is a disaster area: that’s what you have to go through to be a part of the Euro.” On whether his firm has felt any political pressure on putting on bearish euro bets: “None at all. We are SEC regulated and the information is there, but nobody seems to be caring.” Lastly, Taylor ridicules the WSJ story about the restaurant-based collusion: “Yes, they had a meeting and talked about how bad the euro was. But that they in fact had some impact: their assets are 1% of the daily volume. Somebody like us, we have a bigger position against the euro than those people put on.” Taylor says in the next three to six months, the dollar will be strongest against the euro, and Eastern European currencies. In a longer horizon, he says to be long Asia and short the euro. Bottom line: sell Europe, buy everyone else. And join the bandwagon… Just as Bernanke prepares the dollar’s next suicide move with inflation obviously not working.
The focus of the inquiry are mortgage-backed collateralized debt obligations or CDOs and whether banks misled investors about these bets.
So why the focus on these specific derivatives?
“Presumably what’s closest to home, no pun intended, for a lot of people is their mortgages and foreclosures that we’re seeing,” Todd tells Aaron in the accompanying segment. “So those are the instruments that kicked Main Street in the groin pretty much. That’s where the line was drawn for a lot of the populace anger to really start to percolate.”
Harrison, who warns against the unintended consequences of Wall Street reform in an earlier segement, says policymakers risk going down a “slippery slope” by attacking financial instruments they don’t understand in an effort to score political points.