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MONDAY, OCTOBER 31, 2011
- The
discovery of insolvency at MF Global contrasts with recent news that
problems in Euroland had been fixed.
- As it
goes down, MF Global could rank as a rather big default. The attached
WSJ article estimates it could be close to the eighth largest in a
series that started with the post-2000 problems.
- Upon
hearing about MF, the first thought was "another Bear Stearns"
that announced a problem with one of its hedge funds on June 15, 2007.
It turned out to be moderate in comparison to subsequent
disappointments.
- Even
if MF Global was a moderate failure it would be an alert.
- In
early October we had thought that the Dollar Index (DX) would weaken and
this would rally most of the disasters. Although expected to be choppy,
the action could have been favourable into the
new year.
- In
the strongest month in the S&P since 1974 - what might have taken
three months took only three weeks.
- Sunday's
ChartWorks noted that the Dollar Index was
making an important low.
Wrap
Most of the positive action likely to
run into January has been accomplished in a sensational rally. News about the
Euro "fix" was made as pretty as possible - prompting a huge short
squeeze.
More detailed analysis of the
"fix" suggests the book is not as attractive as the cover. There
has been one day of general selling in stocks, commodities and corporate
bonds. The DX closed at 75 on Friday and is now at 76.2. Rising above 76.7
would set a near-term uptrend.
As a monitor of good or bad things,
the gold/silver ratio has turned up a little today. The low was 49.4 on
Thursday and Friday. The advance has been to a little above 50. Not much, but
if it rises through 53 it would signal another phase of the liquidity crisis.
Another item to watch is the attached
chart on ten-year Italian bonds.
October 31, 2011, 10:38 AM ET
MF Global: Likely Among the 10
Biggest Bankruptcies Ever
MF Global, the brokerage run by
former Goldman Sachs chief Jon Corzine, today filed for bankruptcy
protection, becoming one of the highest-profile U.S. victims of bad bets on
European government debt.
With the Chapter 11 filing, MF Global
also is likely to be added to the ignominious list of the 10 largest
bankruptcies in U.S. corporate history. Here is that list, according to
research firm BankruptcyData.com, and based on the value of each company's assets
before its bankruptcy filing.
Based on MF Global's
disclosed assets in its bankruptcy filing, it is likely to slot in just ahead
of Chrysler as the eighth-largest U.S. bankruptcy.
- Lehman
Brothers Holdings, September 2008: $691 billion in assets
- Washington
Mutual, September 2008: $327.9 billion
- WorldCom,
July 2002: $103.9 billion
- General
Motors, June 2009: $91 billion
- CIT
Group, November 2009: $80.4 billion
- Enron,
2001: $65.5 billion
- Conseco,
2002: $61.4 billion
MF Global: $41 billion (as of Sept. 30)
- Chrysler
April, 2009: $39.3 billion
- Thornburg
Mortgage May, 2009: $36.5 billion
- Pacific
Gas & Electric Co., 2001: $36.15 billion
Source: BankruptcyData.com; SEC filings for MF Global
asset size
10-Year Yields:
Italy
 
Bob Hoye
Institutional Advisors
The opinions in this report
are solely those of the author. The information herein was obtained from various
sources; however we do not guarantee its accuracy or completeness. This
research report is prepared for general circulation and is circulated for
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Copyright
© 2003-2008 Bob Hoye
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