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Author: yodaorange Big red star, 1000 posts Feste Award Nominee! Feste Award Winner! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 463505  
Subject: Investor of the year: John Corzine? Date: 10/6/2012 10:36 PM
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Turns out that John Corzine is a pretty savvy investor. His big bet at MF Global was on Italian 2% bonds maturing December 2012. At the time Corzine bought the bonds, the future of Italian sovereign debt was highly questioned. To his credit Corzine was able to accurately forecast that the ECB would unilaterally backstop Italian bonds. Corzine’s only fault was over-leveraging them. If one of us had purchased these bonds in a cash account without leverage, we would have a nice return. MF global was not able to meet the margin calls by Morgan Stanley at the time. Had MF Global been able to meet the calls and/or been given Fed backstopping, we would be hailing Corzine as one of the best performing investors for 2012.

Corzine was way ahead of his time. Bill Gross announced yesterday (10/5/12) that PIMCO has been buying Italian sovereign bonds. [2]


"Spain and Italy are recent adds based on expectation that the ECB will buy them in a few weeks," Mr. Gross told Dow Jones Newswires in emailed comments Friday. He explained his philosophy in such situations as: "Buy what central banks buy before they buy them.


Another instance that the distance between financial genius and financial dunce is sometimes very small. Kind of reminds me of Long Term Capital Management where Nobel Laureate economists almost blew up the financial world and had to be bailed out by the Fed in 1998.

I think buying short term Italian and/or Spanish sovereign bonds is a reasonable strategy for a low percentage of assets. Obviously I would not recommend leveraging them >5X like Corzine did. Leverage up to 2X would be fine if you can borrow at low margin rates. Alternately, you could go along with Bill Gross on this trade by owning a PIMCO fund. The new PIMCO ETF “BOND” has been a huge success. . .

PS: In June I posted that I thought MF Global failed due to managerial incompetence, not criminal intent.[3] Being incompetent is not a criminal offense, hence Corzine and all of the MF Global team are off the hook.

Thanks,

Yodaorange


[1] Trade that killed MF Global
http://peterlbrandt.com/what-really-happened-at-mf-global/

[2] Bill Gross story on buying Spanish and Italian bonds
http://online.wsj.com/article/SB1000087239639044422310457803...

[3] Yodaorange 6/22/12 post on MF Global
http://boards.fool.com/mf-global-the-final-days-30111678.asp...
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Author: WatchingTheHerd Big red star, 1000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 405443 of 463505
Subject: Re: Investor of the year: John Corzine? Date: 10/6/2012 10:55 PM
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PS: In June I posted that I thought MF Global failed due to managerial incompetence, not criminal intent.[3] Being incompetent is not a criminal offense, hence Corzine and all of the MF Global team are off the hook.

=====================

There are still outstanding questions of how Corzine may have personnally directed the transfer of funds from customer accounts to attempt to meet margin calls on MF's own account in the waning days of the firm, are there not? Here's a story as recent as June 4, 2012:

http://www.forbes.com/sites/halahtouryalai/2012/06/04/jpmorg...

It's not that the money is truly missing and unaccounted for, it's just not in the right hands and the wrong hands (JPMorgan acting as MF's clearing bank) refuse to return the money for re-distribution back to the rightful accounts of individual customers.


WTH

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