As a result of the fallout of the Barclay's Libor scandal and resignation of its Chairman and CEO, it was further revealed that the Federal Reserve was aware of this fraud and manipulation for years. What's a trader or investor to do with such information and any other information reported by governments, central banks, and corporations? The message is loud and clear: if we don't think you can handle the truth, we are not giving it to you. The obvious next question is- What other reports might the powers that be, cooking? And this beat goes on, and on, and on...
Here is a multiple choice question:
Which Fraud disturbed you the most?
- The Barclay's Libor Rate Scandal
- The Fed Cover-Up of the Libor Rate Scandal
- The PFG Chapter 7 filing and arrest of its Chairman for embezzling $200 Million
- The MasterCard (MA) and Visa (V) Settlement for price fixing
- JPM's "tempest in a teapot" bad trade ($7.5 billion estimated)
- The Muni bond rip-off/collusion orchestrated by money center banks
- Viacom refusing to allow me to watch the season opener of "Breaking Bad" on my DirecTV?
- All of the Above
Correct Answer: None of the above!
The markets and the world at large seem to have been anesthetized to these daily headlines. Friday, the Dow climbed 200+ points, led by financials after hearing the good news that JPM is still in business. The irony here is that the internal office that oversees JPM's overall risk put on a trade that could have bankrupted the company, ruined millions of depositors, and caused another financial meltdown. All is well however, as JPM fired the entire ministry of silly trades and is back on track to bigger, and better earnings.
Now that we have gotten all that out of the way, the US Equity markets absorbed an abundance of bad news and general malfeasance and ended the week basically unchanged, regaining an unconfirmed bullish market phase. Since markets can be gauged by how they respond to news, one might conclude they have done a fine job. The leaders remain biotech (IBB), transports (IYT), and Real Estate (IYR). Cloud Computing (SKYY), which we highlighted last week as a potential short, underperformed by a wide margin and dropped almost 3%. With this mixed bag let's go to this week's video and check the markets pulse.