Bernie Madoff "Ponzi" scam revealed

http://clusterstock.alleyinsider.com/2008/12/how-bernie-madoff-could-have-lost-50-billion

It was revealed this week that Madoff has swindled clients up to $50 billion dollars over a few decades through an elaborate "Ponzi" scam cooked up by him. To me, this scandal is the worst that could happen in modern times. Rich folks are enticed by the steady returns they could get from investing with Madoff, but because of greed, now they have to pay the price. To me: the common folks will never entrust their hard earned money to Wall Street ever.....

Once more details are uncovered, it would have ripple effects throughout the hedge fund industry, and threaten to pull down the world markets down with it, as redemptions are going to pile on top of one another. Deleveraging is still alive and healthy, lest people has forgotten.

Again, this has shone a bad light on the ineptitude of the SEC, specifically Chris Cox, who has repeatedly failed to safeguard investors' interests, through the short-selling ban fiasco and now Madoff. He will certainly go down in history as the worst financial regulator "ever". And to think that US taxpayers are footing his salary and bonuses, this is OUTRAGEOUS, bar none.

Russia Devaluation Gathers Pace as Central Bank Loosens Control

http://www.bloomberg.com/apps/news?pid=20601087&sid=aRhI2KitimCs&refer=home

I believe Russia is the next trouble spot that is going to drag the world financial markets down with it. Remember Russia debt default 10 years ago? It is widely rumored that it might happen again...
It it were to happen, some hedge funds might blow up big again.

The Good & Bad of Treasury yield approaching 0%

By Aaron Task,

Dec 10 2008

One of the most shocking developments in a shocking year occurred yesterday when the Treasury auctioned $30 billion of four-week notes with a yield of 0% (yes, ZERO, as in nada).

Incredibly, demand for the zero-yield notes was so strong the government could have sold four times as much, and previously issued four-week notes traded with negative yields Tuesday. In other words, investors were content to suffer a quantifiable loss of 0.1% to 0.2% vs. risk bigger losses in other assets.

This is "good news" because it means the government can finance the massive stimulus package necessary to aid the economy, says James Galbraith, economics professor at the University of Texas at Austin and author of The Predator State: How Conservatives Abandoned the Free Market and Why Liberals Should Too.

But the reality of zero-yield Treasuries is also "very disturbing news [because it] says there's a wholesale flight from the private credit markets into the safety of public bonds," adds Galbraith, the son of famed economist and author John Kenneth Galbraith.

It is because of this "collapse of the [private] credit mechanism" and "violent decline of private sector activity," that Galbraith believes the economy needs as much as $1 trillion of fiscal stimulus, as detailed here.

"Every which way it is up to the capacity of the U.S. government to step up and act," he says. Otherwise, the causes of the mass layoffs announced to date (and the impact of the layoffs themselves) will spill over into other sectors of the economy and cause "much, much more complicated problems in a few months."