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On Death and Derivatives – UPDATED

On Sunday a former Senior Deutsche Bank manager, William Broeksmit,  was found hanged at his house. He was the retired Head of Risk Optimization for the bank and a close personal friend of Deutsche’s Co-Chief Executive, Anshu Jain. Mr Broeksmit became head of Risk Optimization in 2008. He retired in February 2013.

Early this morning, Gabriel Magee, a Vice President of CIB (Corporate and Investment Banking) Technology at JP Morgan jumped to his death from the top of the bank’s 33 story European Headquarters in Canary Wharf.  As a VP of CIB Technology Mr Magee’s job would have been to work closely with the Bank’s senior Risk Managers providing the technology which monitored every aspect of the bank’s exposure to financial risk.

These deaths could well be completely unrelated and just terribly sad for their respective families. On the other hand neither of these men had any obvious problems and both were immensely wealthy. So why would two senior bankers commit suicide within a couple of days of each other?

One place to start is to note that JP Morgan Chase had, at the end of 2012,  a mind boggling, but only silver medal, $69.5 Trillion with a ‘T’ gross notional Deriviatives exposure . While the gold medal for exposure to Derivative risk goes to …Deutsche Bank, with $72.8 or €55.6 Trillion Gross Notional Exposure. Gross Notional means this is the face value of all the derivative deals it has signed. Which the bank would be very quick to tell you would Net Out to far, far less. Netting Out, for those of you who do not know just means that a bet/contract in one direction is considered to balance or cancel out a similar sized bet/contract betting the other way. But as I wrote in Propaganda War – Risk Weighted Lies and further in Propaganda Wars – Balance Sheet Instabilities ,

…this sort of cancelling out is fine on paper but in reality is more akin to  people trying to swap sides in a rowing boat.

Both of the men who killed themselves were intimately concerned with judging and safeguarding their bank from risk.

To give you an idea what sort of risk that size of a derivatives book is consider that the entire GDP of Germany is €2.7 Trillion. Remember that Derivatives are what Warren Buffet dubbed “weapons of financial mass destruction.”

Next question might be, when do these weapons become dangerous? The answer obvioulsy varies in accordance with the type of derivative you are considering. One huge group of derivatives that both JP Morgan and Deutsche both deal very heavily in are currency and interest rate swaps. They become dangerous when there are large moves in currency values and interest rates.

At the moment The Tukish Lira has been in free fall for days. The Turkish central bank tried to defend it and could not stem an unstoppable tide. It then stunned everyone by raising its over-night lending rate (the interst rate it charges to lend to banks over-night) from 4.25% to 12 %!

This did not work either and today the Lira continues to be in crisis, as is the whole Turkish stock market.

The Hungarian Forint is also crashing. As is the entire Argentinian economy. The Peso fell 10% in a single day recently. At the same time there is massive uncertainty surrounding Ukraine as there is also surrounding the interest rates and stability of South Africa.

So imagine you are a large bank with huge derivatives business much of which covers bets in your equally large Foreign Exchange business. Essentially that boat in which you are hoping you can ‘net out’ about 70  Trillion dollar’s worth of derivatives positions is now being bounced about by several large storms.

Many of those derivatives contracts would have been entered into during Mr Broeksmit’s tenure at Deutsche, while Mr Magee would have been overseeing and advising on his bank’s risk exposure as it swayed about over at JP Morgan.

All in all I don’t think it is far fetched to think both these men may have been under huge strain and possibly more afraid than the rest of us, because they were in prime position to know much more than the rest of us.

All of which brings to mind yet another banker who recently fell to his death.

Just under a year ago, in March of 2013, David Rossi, head of communications at one of Itay’s largest and most catastrophically insolvent banks, Monte dei Paschi, fell from the balcony of his third story office at the bank’s head-quarters. How a man who isn’t drunk and who, as far as I am aware, left no suicide note just ‘falls’ from a balcony is a mystery. But the Italian authorities, I have no doubt, did a bang up job.

It turns out that,

Monte dei Pasche…had engaged with shady derivatives deals with Deutsche Bank to cover up hundreds of millions of euros in loses, and then employed some creative accounting to hide the trades from share holders and the public.(My emphasis).

Now what I find strange about this man’s death is that as Head of Communications he would not have done any banking himself. Therefore, he would not have been guilty of any wrongdoing. So why would he kill himself? It seems to me the worst that could have happened to him is that he became aware of rather serious wrongdoing that other people and other banks even,  might have not wanted brought to light….

And then I remembered one more death. Pierre Wauthier, the former Chief Financial Officer (CFO) of Zurich Insurance Group hung himself last year, at his home. Now this death you might think has no possible connection with the others. In fact it has two. Both are, as with the rest of what I freely admit is a speculative piece, circumstantial.

The CEO of Zurich Insurance group at the time of Mr Wauthier’s suicide was Josef Ackermann, former CEO of Deutsche Bank. Mr Ackermann resigned shortly after it was revealed that Mr Wautheir, in his suicide note, had named Mr Ackermann. According to Mr Wauthier’s widow it was Ackermann who had placed her husband under intolerable strain. Of course we don’t know what the issue was that caused the ‘intolerable strain’.  But let’s look a little closer at what tied these two men together.

Mr Ackermann stepped down as CEO of Deutsche Bank in 2012 after ten years at the helm. During that time he had transformed Germany’s largest bank from a large but slightly dull national player into one of the very largest and most agressive of the global banks. One of the ways Ackermann had grown Deutsche so spectacularly was to make it the world’s largest player  in the derivatives market. Nearly all of that 72 Trillion dollars’ worth of derivative exposure was accumulated under his leadership.

Mr Ackermann had built a derivatives position 18 times larger than the GDP of Germany itself.

A year and a half after Mr Ackermann took over at Zurich Insurance Group, Zurich announced it was going to start offering banks a way of holding less capital against their risky assets/loans by offering to insure or ‘buy’ the risk from them. This is know as Regulatory Capital Trade. As one of the archtiects of the trade was quoted at the time,

“We are looking at products where banks would buy insurance for their operational risks issues. These are normally risks that are not covered by traditional insurance.”

This new insurance venture was, on the one hand, in response to the European regulators insisting that banks had to hold more capital against their risky assets and on the other, a result of the dire need of Insurers to find products that could yield them a profit. The trade is a classic result of a period of extended low interest rates where traditionally safe investments like Soveriegn bonds and vanilla loans and securities just don’t pay enough to cover insurers’ needs let alone let them make a tidy profit. In other words those insurers who understood what banks were exposed to and were willing to take the risk on themselves – because they thought they were cleverer – could find yield where others feared to tread. And of course one of the largest pots of risky assets on bank books is derivatives. All those lovely foreign exchange bets and interest rate bets, and derivative trades which underpin the rapidly growing European ETF market (in which guess who is a massive palyer?  Yes, that’s right, Deutsche) – they would all have levels of risk the banks would love to off-load.

Holding more capital against risk might be prudent but it is hell on bank growth and bonuses. Regulatory Capital Arbitrage, is how you game (quite legally, of course) that particuar regulation. The bank gets to keep the underlying asset, while the risk is ‘sold’ to or insured by (depends on how you account for it at both ends) someone else. In this case Ackermann’s Zurich Insurance Group.

In some ways it was a creative move – in the way finance is creative , like making a better land mine I suppose – since Zurich already ran the world largest derivative trading exchange, Eurex. With the new trade Zurich would not just be running the exchange but would now become a major player in the risk trade. Of course this is fine so long as the risk never materializes. Which brings us back to the present spreading turbulence in markets from Ukraine, to Argentina and Turkey.  It is also worth noting Zurich also offers insurance against about 50 or so emerging market banks going under.  Might not seem quite so safe a market to be in just at the moment.

As Chief Financial Officer Mr Wauthier would have had to be on side with Mr Ackermann about the wisdom of this bank-risk insurance trade.

Now I realize, as I said above, that this is all circumstantial and speculative. But derivatives are, as Warren Buffett said, very dangerous. Deutsche is sitting on the world’s biggest pile of them and J P Morgan the second biggest pile. And right now global events are making those risks sweat. When HSBC tries to limit cash withdrawals and so does one of Russia’s largest banks then something somewhere is not healthy. We are , I think, circling around another Morgan Stanley moment.


UPDATE   – Today another senior financial executive, Mike Dueker, the Chief Economist at Russell Investments was found dead at the side of the road. Police investigating said his death appeared to be suicide. Russell Investments is one of  the largest Asset Management houses in America. It is owned by Northwestern Mutual one of America’s Insurance giants. Northwestern is one of, if not the, largest seller of  individual private insurance. Like most such companies it also provides all sorts of other financial products.

Just recently Northwestern confirmed it is looking to sell Russell valuing at around $2 billion. Washington has said it thinks Russell is a fantastic Asset Manager which has recently been revolutionized and is poised to do even better. Why it wants to sell it is therefore less than clear.

But I couldn’t help but wonder about another news story from Reuter’s from a couple of days ago. which quoted a fairly stark warning from the Office  of the Comptroller of the Currency (OCC) in the US ,

A U.S. bank regulator is warning about the dangers of banks and alternative asset managers working together to do risky deals and get around rules amid concerns about a possible bubble in junk-rated loans to companies. (my emphasis)

Now I don’t know if Russell would fall into the ‘alternative’ category but any company that was in trouble in the credit crunch, and Russell was, and has now been ‘revolutionalized’ and is poised to do really, really well, – at a time when there have been few good returns on investment other than risky junk bonds and the like – makes me wonder.  The article goes on,

The Office of the Comptroller of the Currency has already told banks to avoid some of the riskiest junk loans to companies, but is alarmed that banks may still do such deals by sharing some of the risk with asset managers.

This is the regulatory capital arbitrage trade I was talking about above in connection with the Deutsche and J P Morgan derivatives.  The OCC’s worry was that,

Among the investors in alternative asset managers are pension funds that have funding issues of their own, he said.

“Transferring future losses from banks to pension funds does not aid long-term financial stability for the U.S. economy,” he added.

Northwestern isn’t a pure pension fund but as a large insurer and one that offers many of the same kinds of long term annuity invesments I would say the OCC’s statement is looking at them as well. And they had their own asset manager to help them.

The way that risk has been being sold out of banks and is ending up in pensions is something I wrote about in some detail back in 2012, in “Where has all the Risk Gone.” So this risk has been growing for some time.

When the next blow out comes I think it is very likely we will find that it is the pension and insurance companies that turn to us and say ‘bail us or watch everything you saved disappear’.

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91 Responses to On Death and Derivatives – UPDATED

  1. Just me January 29, 2014 at 9:45 pm #

    “The news that should have us all worried is: the derivatives market contains $700trn of these debts yet to implode.”


  2. steviefinn January 30, 2014 at 1:05 am #

    Fascinating stuff, – I wonder what Jonathon Sugarman would make of it. Bernanke’s last act in leaving the EM hanging out to dry might not help things.


  3. jill phillips January 30, 2014 at 10:11 am #

    A question that nags at my mind as I read these shocking tales is: Did this situation derive (no pun this) – or would it have arisen so seriously in Germany – had the Big Happy Gamblers at US Fed not stolen its Gold Hoard?

  4. Robin Smith January 30, 2014 at 3:35 pm #

    “Why don’t you come with me. And let the dead, bury their dead”.

    Its pretty shocking for you to use the death of anyone to further your ideas. Daily we hear the doctrine of planet savers praying the economy will collapse as soon as possible, so their dogma can be sanctified, despite the suffering.

    Its almost certain, unless the suicides were murder, these two financiers killed themselves because similar to your post, they were so poor in spirit.

    Despite having enormous wealth in material things, how much spirit did they have in comparison, to balance it all out, into a life worth living?

    We are no saints at MeltFund. We do understand this knowledge fully. We devote a whole morning of our training class to showing our clients, all of whom are very wealthy, how to make this balance. They pay very well indeed because they want to live and then find wealth.

    Read on here: http://www.meltfund.com/2014/01/economics-101-what-is-main-purpose-for.html

    • Golem XIV January 30, 2014 at 4:50 pm #

      Shock on Robin. I think you are being just a little sanctimonious.

      • Mr Shigemitsu February 1, 2014 at 8:17 pm #

        Dear Golem, MeltFund is just a pisstake, “Robin Smith” is having you on!

    • Apneaman January 31, 2014 at 2:35 pm #

      Hey MeltFund whats worse,using the death of anyone to further your ideas or investing in companies that, directly and indirectly, cause the death and suffering of untold amounts of people to further your wealth?
      Mortgage repossessions. Can it get any scummier than that? I love how you people can manufacture a bubble (housing), which caused millions to become jobless and homeless then turn around and buy it all up at discount. Too bad it won’t work. Who you gonna rent it to? The people living in the tent city’s or the ones sleeping in cars or under the overpasses. When this stock market bubble pops soon your fund will pop too. Most everything will pop. The biggest and final pump and dump. But it had nothing to do with the planet savers praying. You all got TOO greedy and wiped out your customer base. There’s only so much money and you guys got most of it.

      Your right about planet savers and their dogma, but that applies to you too. The problem with most of planet savers is their fighting a battle that has been over for a while. The laws of physics do not care about dogma. It’s too late. So you keep investing and believing “The Market” will fix everything and the savers can keep recycling and buy more feel good products and jet off to more useless protests and believe that will save the planet and I’ll keep up the cynicism and the arctic will keep melting. .

    • Babyblue February 23, 2014 at 7:51 pm #

      i think it is pretty obvious these men have been murdered, not suicide. 20 bankers have now died. One apparently shot himself three times in the back of the head but it was suicide. hmmmm. I’m not buying it.

  5. Emma Laming January 30, 2014 at 5:22 pm #

    And it all comes back to … the US. When the US has properly adjusted interest rates (that is to say, free of manipulation) sensible money (and not so sensible money) will pile in for a decent return on their investments.

    In the mean time the not so sensible money is playing fast and loose wherever it can turn a dime. That means Greece/Hungary/TheFallGuy gets a pasting and the US government lives another day.

    And that includes Wall St. where, so I am told, 98% of derivatives are held. And that’s the ones we know about. I mean we are talking some nasty stuff here, Bank of America is now not very famous for tipping a shed-load of cr*p onto a bank backed by the US taxpayer.

    Something like 79 trillion squigglers or something around that sum. And they did this (in October 2011) in broad daylight and in front of the banking watchpuppy. You can read about it here:http://www.bloomberg.com/news/2011-10-18/bofa-said-to-split-regulators-over-moving-merrill-derivatives-to-bank-unit.html

    “But derivatives are, as Warren Buffett said, very dangerous.”

  6. The Dork of Cork January 30, 2014 at 7:12 pm #

    Lets not forget about Industrialists ,perhaps especially those most exposed emerging markets or as I like to call them converging markets.


    The Irish domestic economy (what little remains) continues to decline.
    All so we can afford yet more cars produced in the core and further east…….yet we have 1.8 million of them – how much is enough ?

    There is a strange trade dynamic developing between London (deficit) and German surplus goods production and to make this happen all of Europe must decline.

    We can see this starkly in Irish real economy figures

    Irish Milk sales for human consumption (million litres)
    All Milk
    1992 : 525.2
    1998 : 543.2 (peak)
    2013 : 479.0 (trough)

    Milk sales collapsing in Ireland despite a increase of 1~ million people since the early 1990s and a huge rise in the infant population………..strange don’t you think ?

    Not really – its how the euro system in particular functions.

    This is the overriding feature of the euro system
    Abundant domestic goods become expensive relative to cash flow and external products cheap relative to cash flow which eventually will cause a collapse of the Industrial supply chain as obvious externalties are added to the consumer via tax increases , wage deflation and internal goods inflation.

    Just to add – this is funny

    Guinness sales down 6 % in the last 6 months…….blamed on the hot summer…….but we had a wet winter !!!!!!perfect for the pub.

    Again domestic goods production overpowered by credit fueled (at 0% in many cases) external goods , lets wait to see January car sales in Ireland.

    These strange production distribution consumption loops (i.e the entire Industrial system) proves the Industrial system cannot or will not provide for real fiat demand as the fiat does not exist in quantity.
    This is beyond strange.
    In Europe at least productions goal is not consumption as we cannot consume what we produce.
    This is otherwise Known as Industrial failure and is directly as result of the easy credit / hard money policies of the bankers and the symbiotic Industrialists which produce .extreme credit driven products such as cars and the like.

    Why do we allow them to reclaim payment on a scarce currency that they also control ?

    What is happening is no less then a collapse of European civilization via first the implosion of the village / market town / Provincial city merely to service financial and to a lesser extent state capitals.

  7. The Dork of Cork January 30, 2014 at 7:49 pm #

    Interesting Passenger Car Fleet Per Capita from the ACEA

    It shows that Europe continues to increase its car fleet (in 2011 it was 483 per 1000)
    While the US is showing a major decline over those years(1995 – 2011) at 417 per person.
    1995~ was the beginning of the final phase of Euro integration / disintegration of nation states.
    We in Europe have now more cars per person then the Americans !!!!!
    This is simply incredible since up to the time of lets say the Suez crisis Europeans especially on the periphery were essentially a non car people.

    Irish Industry oil consumption
    Y1960 : 382 Ktoe
    Y1971 :1,780 Ktoe (peak~ just before euro entry)
    Y2008 : 1,295 ktoe
    Y2011 : 840 Ktoe

    Irish transport oil consumption
    Y1960 : 393 KToe (our little Beeching cut period)
    Y2008 : 4,361 Ktoe.
    Y2011 : 3,428 Ktoe

    We can clearly see what is happening since euro entry………the objective since euro entry (1973 or 79) has been to destroy local industry (much of it servicing domestic demand) and use the new energy surplus created by deflation events in the early 80s and today to buy and drive yet more cars.
    People are driving around in circles for no purpose whatsoever…….real end use energy consumption has been in crisis since the early 1970s and the eurosystem is at the very heart of these strange events.

    The jobs created in Europe are clearly utterly pointless(other then to scramble for scarce money tokens)
    If the euro is not a banking / multinational conspiracy I don’t know what is.
    Rockefeller style demand management is screaming from the Data…….destroying real input output signals and thus Industry servicing real domestic demand.

    The euro system has imposed 2 massive wage deflations on Ireland already.

    This increased tax or local goods price inflation is merely the banking system which controls fiat production imposing the costs of its business and trade system on the entire population.
    World trade is now almost entirely based on servicing debt and not real demand.
    The data is clear for all to see………..especially in extreme banking fiefdoms with good data such as Ireland.
    The euro was / is a conspiracy of the elite.
    What else could it be ?

    The derivative game is directly linked to the Euro based trade system of Euro area wage deflation / tax increases / domestic goods inflation (they are really all aspects of the same industrial failure) and the equal and opposite inflation in so called emerging markets…….
    The world trade system is not a rational input output mechanism of comparative advantage – it is simply a product of the banks operations which will result in continued catastrophic dislocation and flux.

    The weird trade system is now even wiping out the local beer industry in Ireland.
    This is simply fantastic (not in a good way) result.

    Beer in quantity never ever traveled over long distances for obvious weight and quality control reasons.
    Yet I must pay 4.50 for a pint of Heineken brewed down the street and 1.25 for a supermarket can of Heineken brewed in Amsterdam !!!!

    This is how I believe Derivatives effect the real world of trade by somehow keeping these circus balls up in the air.
    Current real trade & production relationships are simply the most absurd creatures of monetary experimentation ever created.

    • allcoppedout February 5, 2014 at 6:07 am #

      Well said, more or less as ever Dork. Hardly saw you as desperate enough to drink Heineken though. There is no beer of the magnificent kind arriving in 36 gallon barrels manipulated by dwarf draymen who could snap your spine with their fingers, nurtured to nectar by cynical landlords who let you go on the slate until payday. We might as well meet in bring your own can clubs.

  8. Just me January 30, 2014 at 11:38 pm #

    “Shocking Reality Of What Will Happen As Currencies Collapse”


  9. Dave January 30, 2014 at 11:43 pm #

    Absolute nonsense. A VP in technology is not a senior role. Nor would a VP salary make you ” immensely wealthy”. Who knows why he chose to commit suicide but given he was not a senior employee it’s incredibly unlikely it had anything to do with the bank’s overall performance.

    • Golem XIV January 30, 2014 at 11:55 pm #

      Well I stand corrected if you say a VP is not a senior role. VP certainly doesn’t sound very junior. Or is everyone in banking a VP?

      As for being immensely wealthy perhaps we are just different in what we reagrd as immensely wealthy. I measure it against the average person I walk by in town. By those standards I would regard him as pretty wealthy.

      • Matt February 3, 2014 at 5:39 pm #

        VP tends to be the largest corporate title band at banks along with AssistantVP (if they do that grade at all). You want Directors or Managing Directors to get to the level you are thinking about.

      • allcoppedout February 5, 2014 at 6:18 am #

        In the now ancient ‘Up the Organization’, Townsend recommended making all sales people VPs to gain the customer’s attention. Your speculation still holds for me. Add in a shadowy ‘Murder Inc’ and we have the novel and film – though this wouldn’t make the story untrue. My only contra-argument would question whether bankers are honourable enough for suicide. Even NHS managerialists and care management failures get pay-offs that allow retreat to a warm beach. Have the banks implemented HR and reward policies that prevent this?

    • ConfederateH January 31, 2014 at 8:10 pm #


      Have you been following the case of the Madoff programmers who coded the fake trades to hide Madoff’s ponzi? They tried to claim they didn’t know what the code was for. Just like Obama and Holder and Dimon and all the other Fed and LBMA related banks.


      I think these deaths (plus the more recent one:
      are a small variables of a much bigger equation .

      I also find the indictment of Dinesh D’Souza to be highly suspicious:


      as are the purges at the top of the US military. Throw in the recent hijacking of 3 EMP capable nuclear warheads and there is a major power struggle going on behind the scenes. Time it with a some games in the currency markets and the pins are getting aligned.

      Dead men tell no tales and help encourage the silence of others.

      • Phil (Mcr) January 31, 2014 at 11:12 pm #

        The purges at the top of the US military are very interesting, I agree.

        Correct me if I’m wrong but the US military appears to be shifting to a model heavily slanted towards automation (drones etc.) and special forces. Hundreds of thousands of soldiers are just too expensive.

        I’m guessing those guys at the top just weren’t down with the agenda.

  10. Mike Hall January 31, 2014 at 12:29 am #

    Please consider signing this Avaaz petition – Internet Neutrality is under real threat.

    It should always be run as a Commons for the People, never manipulated by private or corporate interests for private gain.


    • Golem XIV January 31, 2014 at 9:29 am #

      Done. Thanks for posting this Mike.

      • Baffled Popperian December 7, 2014 at 11:43 pm #

        Same here. Hope I am not too late.

  11. Mike Hall January 31, 2014 at 12:42 am #

    This looks good 🙂

    Capital in The Twenty-First Century


    “Few books have been met with as much anticipation at Thomas Picketty’s Capital in the 21st Century. A reviewer in the Journal of Economic Thinking declares it “one of the watershed books in economic thinking.”

    Picketty, an economist at the Paris School of Economics, is well known for his work on inequality — much of what we know about American inequality is based on a database he developed with Emmanuel Saez of UC Berkeley.

    The book has been available in French for several months, and the English translation, by Arthur Goldhammer, is due out in March. Its release is expected to set off a firestorm in our economic discourse.

    Thomas Edsall previewed the book in Tuesday’s New York Times. ”

    Tom Hickey

  12. Just me January 31, 2014 at 1:17 am #

    “Exclusive: Deutsche Bank suspends currency trader”


  13. Just me January 31, 2014 at 2:14 am #

    “We offer two explanations for the tapering. One is technical, and one is strategic.”


  14. Just me January 31, 2014 at 5:42 pm #

    “Third Banker, Former Fed Member, “Found Dead” Inside A Week”


  15. GoinFawr January 31, 2014 at 6:26 pm #

    Magyar “forint”, nem ‘L’
    A beka segge allat.
    Jo napot

  16. Just me January 31, 2014 at 6:40 pm #

    “BBVA Posts $1.15 Billion Loss on China Bank Stake Charge”


    “Abe Doomsday Risk Prompts Moody’s Warning on JGBs: Japan Credit”


    • OpenThePodBayDoorsHAL January 31, 2014 at 7:38 pm #

      LOL, Japanese banks will suffer Doomsday losses if Japanese yields “surge”. You mean if they “surge” from 0.00% all the way up to 1 or 2%?
      This will play out just like 2008. Everybody dancing along, then “Oh sh*t, nobody saw THAT coming!” Except anyone who was paying attention. Only this time rates are already at zero. Time to raid pensions & bank accounts…

  17. Just me January 31, 2014 at 7:19 pm #

    “Rajan: Global Monetary Cooperation Has Broken Down”


    • steviefinn January 31, 2014 at 8:29 pm #

      Just had a little look at Russell Investments report in regard to 2014. All fairly optimistic on the world economy including Japan & Europe. They consider that the Fed’s tapering might cause some volatility but reckon that emerging market equities should be fine & that QE has not caused any distortion in asset prices.


      They offer a Multi Strategy Alternative Fund :

      “The Fund includes managers that use a diverse range of alternative investment strategies and sub-strategies that are expected to have low correlation to each other. The Fund may invest in a broad range of instruments, markets and asset classes economically tied to U.S., foreign and emerging markets. Investments may include equity securities, fixed income securities and derivatives. The Fund may take both long (expectation that the underlying asset will rise in value) and short (expectation that the underlying asset will decline in value) positions in all of its investments. The Fund may also make investments for hedging purposes in order to address perceived misalignment between the Fund’s investment exposures and current or anticipated market conditions”.

      A big fish :

      Russell has more than $237 billion* in assets under management (as of 6/30/2013) and works with over 2,500 institutional clients, independent distribution partners and individual investors globally. As a consultant to some of the largest pools of capital in the world, Russell has $2.6 trillion in assets under advisement (as of 12/31/2012). It has four decades of experience researching and selecting investment managers and meets annually with more than 2,200 managers around the world. Russell traded more than $1.4 trillion in 2012 through its implementation services business. Russell also calculates approximately 700,000 benchmarks daily covering 98% of the investable market globally, which includes more than 80 countries and more than 10,000 securities. Approximately $4.1 trillion in assets are benchmarked to the Russell Indexes.

      I must admit to being somewhat out of depth here, but it doesn’t look good to me in the light of this :


      Strangely enough the last blog entry from Mike Deuker was exactly a year ago today :


      Never figured on getting interested in this stuff.

  18. Just me January 31, 2014 at 7:29 pm #

    “When the next blow out comes I think it is very likely we will find that it is the pension and insurance companies that turn to us and say ‘bail us or watch everything you saved disappear’.”


    • Bix Byderbix February 6, 2014 at 6:33 pm #

      If I was a snivelling s**t, wanting to make unholy sums of money, I am pretty sure I would start an insurance company for the financial markets.
      Just like Hank Greenberg ‘unintentionally’ did at AIG.
      Offer cover to everyone’s daft derivatives, MBSs, CDAs, CDOs, whatever for a tiny premium. Just rake in the money, even take counter-positions from the Squid (but charge them double). Then pull out a massive salary and bonus, and wait for Armageddon.
      When the bubble blows, a sincere apology to all my insured and one collapsed, insolvent company.
      Strangest thing is, no-one will mind or be at all put out. For this is the game nowadays, no-one is working for the good of their company, only for their personal wealth. They will be pulling their own extra-ordinary bonuses for managing to insure their risky positions.

      Do you think Jamie Dimon has the slightest interest in how JPM is performing, as long as he controls the PR? Give that man a bonus, after all he needs to be richer than you.

  19. Just me January 31, 2014 at 10:13 pm #

    “Huibert Boumeester” “David Kellermann”


  20. Just me February 1, 2014 at 12:22 am #

    “Kenneth Lay: Another suspicious death?”


    “The Death of Neil Coulbeck”


  21. Gasket Derringer February 1, 2014 at 9:21 am #

    insurance in case you are broke, broeksmithhh … once again the sound of Truth rings in the name… million little pieces of filthy paper with the little faces of shameplotation, little grredy grins that grind them gears, about to shift down to nothing, if you can’t find it or make it… forget it. Crash Test Dumbasses.

  22. andrew cullen February 1, 2014 at 12:41 pm #

    Golem XIV

    This is an excellently researched and presented article.

    Suicides are on the increase world wide. This is causally linked to people’s increasing stress levels during es exposuresa deepening and prolonged crisis.

    The TBTF banks are sitting on a bonfire of derivatives exposures.

    The 5 years of excessive money printing has not led to hyperinflation (yet). But it is now manifestly impacting EM currencies.

    Which means, as you eloquently show, that the FX & Derivatives trading departments of the big banks are probably in these days learning about, and trying to hide, humungous losses.

    Look forward to more work from you like this.

    PS. No wonder the BIS and IMF are pushing “bail ins” as the new policy for bank rescues.

  23. Just me February 1, 2014 at 2:59 pm #


    “The banker’s death last week is the fourth to have occurred at the top restaurant.”


  24. Just me February 1, 2014 at 3:09 pm #

    “Detroit bankruptcy blueprint would gut pensions”


    “Currency turmoil signals new phase of global economic crisis”


  25. Kathy P February 1, 2014 at 9:14 pm #

    Thank you for this excellent piece and for your capacity for integrative analysis.

    • Golem XIV February 1, 2014 at 9:26 pm #

      Thank you for being part of our community.

  26. Just me February 3, 2014 at 3:56 pm #

    “Deutsche Bank: “We’ve Created A Global Debt Monster”


    Someone has to pay for all this, and that someone is YOU!.

  27. Just me February 3, 2014 at 4:30 pm #

    ““Suicide” By 13 Meter Embankment (40-50 feet)”


    • steviefinn February 4, 2014 at 8:28 pm #

      RBS screaming about the fed’s taper ;

      AmbroseEP A Evans-Pritchard
      It begins. RBS this morning warns of “market bloodbath” unless Fed halts taper. We will hear more of this, but Fed looks pretty determined.

      According to this European banks have lent EM countries about $3 trillion – Might be a bit tough to get the citizens of those countries to bail them out. Bail-ins next ? Maybe one way to shake up those who are complacently above the austerity inflicted on the poor.


      • allcoppedout February 5, 2014 at 8:25 am #

        Deep in the laboratories of ACO Research (Delaware-Cayman Offshore) Inc we have been working on a virus that will cause all banksters to try bungie jumping with stainless steel rope. We got the idea from an early episode of The Avengers. Goldmunk Bluebeard Bank are packaging our IPO in return for first use of the antidote, under development in our ‘Rubberneck’ project. News of new SEC/ECB ‘stretch testing’ for banks will hit the wires soon.

        Derivatives are essentially a form of re-insurance, an old trick in which you discover, when your ship sinks, the address of the man now responsible for the underwriting is in an offshore jurisdiction. Private insurance schemes essentially work only when more fees are collected than claims paid, adjusting for investment profits. There have long been exemptions to insurance such as certificates of deposit and exemptions for government – to avoid the costs.

        Any netting out must rely on a frequency distribution of ups and downs – but before I get technical (as in the wait for the science bit in cosmetic ads) think of backing all the horses in all races, a sure losing strategy of handing admin fees to the bookie. Private debt is nae bother remember, because it nets out to zero in double entry book-keeping (but don’t tell Steve Keen without a beer in your hand and a smile). A tote could be used to net out bets for a small admin cost, but how can you net out a system that has globally fallen 20% or in which no one wants the diseased tulip bulbs any more and those in the know have the system’s money offshore? Punters on slot machines could pool their winnings and losses for a net return which will be 25% less than all money put in. Who in the derivatives’ system is in the position of bookie or casino owner? What is their position in any netting out? Given the aggregate punter is always a loser, how do we net out the loss of spending power in the general economy? The notional $700 trill (once bird seed) is not notional in terms of fees generated. Such fees are real as costs of doing business elsewhere. This is before we consider so much of finance is Ponzi, relying on the next investments paying out the early promises and directed financing into such as property no one lives in or isn’t needed because of the changes in retailing, in a system of wage freeze amongst people who would once have bought the properties or stuff sold from them if their disposable income hadn’t already been netted into the Ponzi and are now too skint to buy or get loans to buy the very assets with prices inflated way beyond what can be afforded, and yet constitute the very value that would be in the netting out …

        Any frequency distribution on which netting out is assumed is a simple model neglecting features we find in real systems like positive feedback, differential growth stages – indeed based on fictional GDP growth involving the Ponzi, where for example, US GDP:

        The economy used to grow by making people wealthier. Now, consumers go further into debt, while their incomes are stagnant or falling. In 1980, a $7 trillion economy included $2 trillion “globally marketable output” (GMO) – real wealth, the kind of stuff you can sell to pay your bills. Today, we have a $16 trillion economy. But how much of that is from GMO? Well, about $13 trillion is consumer spending. And various statistical adjustments. Only $3 trillion is GMO.

        That’s the real growth of the US economy since 1980 – a piddly, pathetic $33 billion a year. Barely enough to keep up with population increases. Dork has been telling us it’s much worse, really, in Europe.

        Growth and inflation are the means we have used to write down debt. Growth has not been real. The banks, when last pushed, couldn’t even net out amongst themselves. I see paper after paper alleging stochastic method, often with the same copied claim to be abstracted from Brownian motion – fine for understanding how bits of stuff that comes out of pollen particles behave in controlled conditions. No explanation of how they know they are looking at something without convection currents or even wind.

        Any real netting out should involve reducing banks and rich wealth as we approach company costs. This should already have involved a sophisticated jubilee on debt, assets given to people against obligation to work and simple guaranteed income for those who can’t. Half-way to robot heaven we are still working like serfs or being ground under like an unsaleable crop. If we leave derivative netting to the banks, they will buy those that pay out much as you might buy insurance on your neighbour’s house and burn it down. This is probably the basis of the emerging markets crisis. One suspects those banks and funds not on the inside will be in looting bankruptcy long before any insurance holder gets paid. Then the house of cards.

        Good plot David – my novel (finished but failed – back to the day job) had the ‘banker slayings’, but also prestigious investor money through a Mayfair hedge fund with ‘real’ killings in the Kivus of DRC, related to drug-running through Equatorial Guinea, CIA mercenaries – with the orchestrating villain an ugly toad trying to become Tory minister for industry. I think I only strayed from the truth in the thwarting of the plot by cops who discovered links between the financiers and a pain sex paedophile racket, and thus being able to blackmail a treasury minister into letting them prosecute the financial crimes.

        • David Sheegog February 6, 2014 at 5:06 pm #

          coppedout, I like your scenario, but I would add that capitalism is entirely a Ponzi. Why else would capitalism require constant growth? And why do govts put “amateur” Ponzi guys in prison? Because govt have a vested interest in keeping the capitalist Ponzi going.

          • allcoppedout February 6, 2014 at 7:42 pm #

            I once delivered a paper on the premise capitalism had never emerged from feudalism other than as a fiction to maintain it. The move was no more real than the one from pyramid to network marketing. I was SIO on a Ponzi case – the guy coughed but claimed he was only do what everyone else in the City did.

            I agree more or less David, but I’m not sure productive investment in Ponzi.

      • Just me February 6, 2014 at 11:32 pm #

        “£1 trillion timebombs RBS must defuse””


  28. ArtSmith February 5, 2014 at 7:31 pm #

    You’re not the only one thinking in this direction, Though he takes it one step further and calls the deaths murder…


  29. Just me February 6, 2014 at 10:31 pm #

    “A Rash of Deaths and a Missing Reporter – With Ties to Wall Street Investigations”


  30. Just me February 6, 2014 at 11:26 pm #

    “£1 trillion timebombs RBS must defuse”


  31. Just me February 7, 2014 at 11:23 am #

    “Here is a preview of tomorrows front page of the Irish Independent”


    “Danske Bank locks 10,000 customers out of their accounts”


  32. Just me February 8, 2014 at 1:02 am #

    “4th Financial Services Executive Found Dead; “From Self-Inflicted Nail-Gun Wounds”


    • allcoppedout February 8, 2014 at 11:27 am #

      Seven self-inflicted wounds. Why are these guys not just having it away on their toes with stashed loot – and for that matter how many more are doing just that?

      • steviefinn February 8, 2014 at 2:07 pm #

        Seems like a needlessly brutal form of suicide to me. Now if bankers were like gangsters……………………….

    • Just me February 8, 2014 at 12:39 pm #

      “The McRae Mystery”


  33. Phil (Mcr) February 9, 2014 at 9:48 pm #

    Well well well

    ”Department for Work and Pensions considers privatisation as part of search for savings as budget shrinks by a third”


  34. Phil (Mcr) February 9, 2014 at 9:48 pm #

    ”MPs try to muzzle media regulator: Fears that ‘sinister’ plans to transfer powers from Ofcom to Government will put diversity and quality in jeopardy”


  35. Just me February 12, 2014 at 9:02 pm #

    Obituaries 02/10/14

    “Ryan Henry Crane, 37, Of Stamford, Worked For J.P. Morgan”


  36. Just me February 21, 2014 at 2:18 pm #

    “UK economy faces Lehman-type crisis, says leading economist”


  37. Just me February 21, 2014 at 11:24 pm #

    “12 Banker Suicides Linked to JP Morgan Investigation for Forex Manipulation”


  38. Just me February 28, 2014 at 10:28 pm #

    “Jim Willie Bombshell: Saudi Royal Gold Ransacked in London to Prevent Default!”


  39. Just me March 8, 2014 at 12:57 pm #

    “Fed’s Plosser ‘very worried’ about QE consequences”


    “The mother of all crises”



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