The “Daisy Chain Effect” on our Financial System

How big Financial Firm’s Bad Performance gets Rewarded

Did you hear the one about an analyst telling the truth about Citibank’s dismal risk exposure and being blamed for a $369 Billion Dollar downturn?

So much for the demise of the equity research analyst’s “Independence.”

On Wall Street you are: Damned if you do; Damned if you don’t.

The $369 Billion Analyst

Meredith Whitney’s downgrade of Citigroup yesterday didn’t just push down shares of the banking giant, it also helped send the whole market into a tailspin. And that market skid of nearly 3% shaved $369 billion from the valuation of U.S. companies.

Whitney of CIBC, who said Citigroup may need to slash its dividend to shore up its finances, indicated to Bloomberg that she was the only analyst who had the guts to say out loud what everyone already knows. “No one had the moxie to put in print what I put in print.”

In fact, not everyone agrees with her. Some analysts and investors say Citi has plenty of cash to ride out the storm and continue paying its 54-cent-per-quarter dividend. But perhaps that kind of language shouldn’t be surprising from someone who is married to a former World Wrestling Entertainment champion, John “Bradshaw” Layfield.

Notice the not so subtle slander?

And Whitney has these fighting words for Chuck Prince, the embattled CEO of Citigroup: “There’s no question he has to leave.”

With Citigroup shares plunging 7% yesterday, to $38.51, their lowest level in four years, Whitney may just have hastened that departure.

On the other hand the Commodity Futures Trading Commission wants the public to be more informed of fraud and fraudulent claims by unscrupulous foreign exchange and other Commodity Firms:

Commodity Futures Trading Commission Forex Fraud

The Commodity Futures Trading Commission (CFTC) has witnessed increasing numbers, and a growing complexity, of financial investment opportunities in recent years, including a sharp rise in foreign currency (forex) trading scams. A federal law enacted in December 2000, called the Commodity Futures Modernization Act of 2000 (CFMA), makes clear that the Commission has the jurisdiction and authority to investigate and take legal action to close down a wide assortment of unregulated firms offering or selling foreign currency futures and options contracts to the general public. In addition, the CFTC has jurisdiction to investigate and prosecute foreign currency fraud occurring in its registered firms and their affiliates.

How about Peregrine Financial Group’s acquisition of American National Trading aka the “ANTC” Group?

A cursory review of American National would reveal that their main principals and firm was alleged to be in violation by the National Futures Association of:

C.R.2-2(a) - CHEAT,FRAUD DECEIVE CUSTOMERS C.R.2-9(a) - SUPERVISION OF EMPLOYEESC.R.2-29(a)(1) - FRAUDULENT COMM. TO PUBLIC PROHIB

Gee, how inspiring.

But, nonetheless, Peregrine Financial Group, announced that: "PFG and ANTC are joining forces to better serve ANTC’s customers," said PFG Chairman and Chief Executive Officer Russell R. Wasendorf, Sr. "There are so many synergies, and we believe there will be significant benefits to ANTC customers.

Synergies? Benefits? So Many?

Really.

From a very cursory public regulatory records search—which doesn’t include any civil or criminal complaints—there appears to be over 40 customer complaints with either the National Futures Association and/or the Commodity Futures Association against Peregrine Financial Group alone.

Not very inspiring of “trust” is it?

The future of our ability to invest with confidence and trust, and to believe what our capital market Financial Firms do, is how they perform, or what they don’t perform.

Based on the recent meltdown in the large New York and Chicago Securities and Financial Firms, that appears to have been replaced with a culture not only of greed, but of our collective ennui.

We have been collectively “dumbed down” to not expect anything truthful.

It’s time that we take back the power from these charlatans? The question, is, of course, rhetorical.