Another interesting article about Bear...

Making a market all by yourself...

Now investigators are trying to determine whether Cioffi and his team
crossed legal lines. The Klios provided the Bear hedge funds with a
ready, in-house trading partner. Their financial reports, which were
reviewed by BusinessWeek, show many months in which the Cioffi-managed
Klios traded only with the Cioffi-managed Bear funds. For example, in
April, 2006, one Klio CDO bought $114 million worth of securities from
one of the Bear funds. Such trades, says Steven B. Caruso, an attorney
who represents several Bear hedge fund investors, may be "indicative
of an incestuous, self-serving relationship that appears to have been
designed to establish a false marketplace."

If that's why the trades were made, the maneuvers could have falsely
boosted the hedge funds' returns—and the fees Cioffi and his team
collected. In an e-mail to Cioffi and co-manager Matthew Tannin cited
in a legal filing, Raymond McGarrigal, another executive at the Bear
funds, gushed about the Klio setup, writing that "one of the great
things we've done is allow the Klio to buy assets from the hedge
fund." Lawyers for Tannin and McGarrigal declined to comment.
The End of an Era?

Full article:
http://tinyurl.com/3bno5b

Latest on Bear...

...as stated here previously, lawsuits aplenty from the fallout.

Bear Stearns Sued by Barclays Unit Over Fund Collapse
2007-12-19 17:47 (New York)

By David Glovin and Yalman Onaran
Dec. 19 (Bloomberg) -- Barclays PLC, the U.K.'s third-
biggest bank, sued Bear Stearns Cos. over losses caused by the
implosion earlier this year of a hedge fund that invested in
subprime mortgages.
Barclays Bank PLC, a unit of London-based Barclays, claimed
the New York-based securities firm hid negative financial
information about the collapsed fund, according to a complaint
filed today in Manhattan federal court. Barclays said it was the
``sole participating shareholder.''
The collapse of the Bear Stearns fund was ``one of the most
high-profile and shocking hedge fund failures in the last
decade,'' Barclays said in the complaint, which seeks unspecified
damages.

What precision...

A very precise estimate for the Russian markets next year. One wonders aloud: "Why not 31% or 33%...or any number in between?

Russia's RTS May Surge to 3,000 in 2008, Banks Say (Update2)

By William Mauldin

Dec. 18 (Bloomberg) -- Russia's RTS Index will climb 32 percent to 3,000 by the end of next year as government spending shields the economy from a global slowdown, according to UralSib Financial Corp. and Renaissance Capital.

UralSib's Chris Weafer, the top-ranked Russian equity strategist in Thomson Extel's 2007 survey, and Renaissance's chief strategist Roland Nash recommended buying shares of OAO Gazprom, Russia's biggest natural-gas producer, and companies that will benefit from government investment in refining, smelting, railroads and electricity.

Silly market analogy of the month.

The mechanics of gravity are "slightly" different from market movements...whether plotted on the traditional euclidian X and Y axes, or compiled into different statistical packages. My target for this year was 1320 for the S&P, and I thought this was pessimistic...and the proliferation of "the end is nigh" analogies such as the below makes me think that we may be in for a rally.

SAN FRANCISCO (MarketWatch) -- "Perched on the edge of a cliff."
That's how one economist describes the U.S. economy as the markets get ready for a busy week of data, including numbers about the already damaged U.S. housing market, orders for durable goods and personal income and spending.
"What we're looking for is confirmation that indeed the U.S. economy is slowing sharply in the fourth quarter," says Ellen Zentner, an economist at Bank of Tokyo-Mitsubishi UFJ. Zentner said that within a month, it could be apparent whether the economy is slipping into a recession or not.
"The U.S. economy is really perched on the edge of a cliff right now," says Zentner...

Now the dollar does matter...

One could add a nice politically minded narrative that includes Ron Paul's recent lambasting of Bernanke, but the truth is the dollar matters to the Fed, and it is now disclosing more of its hand. By deeming the rate cut a "close call", it has finally begun to take steps in ameliorating inflation expectations, which has ticked up considerably since its actions starting September 18. It is still in between the Scylla of inflation and Charybdis of housing-led recession...and it knows that the financial economy (an admittedly loosely defined term) has always followed the real economy and the engine of housing.

By Brian Blackstone
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)--Though last month's decision by the U.S. Federal
Reserve to lower official interest rates was a "close call," officials were
worried enough about the chances of a severe housing-induced downturn to act,
according to the minutes of that meeting released Tuesday.
The minutes dwelled extensively on the economy's vulnerabilities, suggesting
that while officials adopted a neutral view of economic and inflation risks
last month, they probably see the potential downside from weak growth as the
bigger worry.
Reflecting the jittery balancing act officials face, they also seemed more
worried about the dollar than in previous meetings, calling its recent
"significant" decline an inflation risk.
"Many members noted that this policy decision was a close call," the Fed said
in the minutes of the Oct. 30-31 Federal Open Market Committee meeting. Minutes
are usually released with a three-week lag, but October's were moved up one day
so as not to conflict with the early market close Wednesday ahead of
Thanksgiving.

A banking problem.

As I have said repeatedly, a financial crisis is immiminent in China. Central planning (unless of the U.S. Fed variety I say with a little sarcasm) cannot work as a doctrine. Investors and institutions with shiny new deposits in Yuan will have to deal with risk a magnitude greater than "sovereign risk".
However, I must admit that this problem is as old as international investment, and with the present era of fiat money and its ability to create and destroy money at an unprecedented rate, I think we will find that global capital flight will be exacerbated. "Its different this time" should read to any investor as "I have 6 months to find buyers of my securities inventory at favorable prices before a crash".

The below illustrates some of what I said above - do you really want deposits with Chinese banks and their centralized monetary system?

China Freezes Lending to Curb Investing Frenzy
By JAMES T. AREDDY
November 19, 2007;PageA1

SHANGHAI -- Chinese authorities are slamming the brakes on bank lending, in
their latest attempt to curb the runaway investment threatening to overheat
what is soon to be the world's third-largest economy.
In recent weeks, regulators have quietly ordered China's commercial banks to
freeze lending through the end of the year, according to bankers in several
cities. The bankers say that to comply, they are canceling loans and credit
lines with businesses and individuals.
A China Banking Regulatory Commission official here confirmed that local and
Chinese subsidiaries of foreign banks have been asked to ensure that loans
at the end of the year don't exceed the total outstanding on Oct. 31.

C to disclose more write-offs...

I don't want this to become a news blog, but the number of write-downs from major houses is something that can't be ignored. I know very few people (myself decidedly NOT included) who know how to "properly" value a security backed by cash waterfalls originating from mortgages. It's interesting to note that the banks taking the largest write offs had these things in their own inventory, and not in the inventory of their in-house hedge funds...

By David Enrich and Robin Sidel
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--Citigroup Inc. (C) is poised to announce billions
of dollars in further writedowns on mortgage-related securities,
according to people familiar with the matter.

The announcement is expected to come as early as Monday morning, in
advance of Citigroup submitting its quarterly report to regulators, the
people said.

The size of the additional writedowns was still under discussion Sunday
by Citigroup directors, but people estimated they could be $7 billion to
$8 billion. That would come on top of about $2.2 billion in
mortgage-related writedowns and trading losses that Citigroup reported
last month as part of its third-quarter earnings.