“A Dystopian Future”

The World Economic Forum dropped a bombshell in its recent Global Risk 2012 report:

Dystopia, the opposite of a utopia, describes a place where life is full of hardship and devoid of hope. Analysis of linkages across various global risks reveals a constellation of fiscal, demographic and societal risks signalling a dystopian future for much of humanity. The interplay among these risks could result in a world where a large youth population contends with chronic, high levels of unemployment, while concurrently, the largest population of retirees in history becomes dependent upon already heavily indebted governments. Both young and old could face an income gap, as well as a skills gap so wide as to threaten social and political stability.

Read the full report here, and maybe build a bomb shelter, or stash some cash somewhere safe.

MF Global Shakedown

There’s a lot of stuff happening with a company called MF Global Holdings, Ltd. It was run by former Goldman Sachs chief Jon Corzine. I say was because on Monday, MF Global filed for Chapter 11 bankruptcy.

What Chapter 11 does is it allows MF Global to stop paying its creditors while it restructures its business or sells off parts of its company. That means the $1.2 billion MF Global owes JPMorgan and the $1 billion it owes Deutsche Bank is in limbo.

But that’s now where the story ends.

MF Global made some bad bets on European debt. It holds some $6.3 billion in bonds from places like Italy, Spain, Portugal, Ireland and Belgium. The company wanted to be a mini-Goldman, according to some analysts, and move from being a futures broker to a full-fledged investment bank, trading with its own money.

And that’s where things get interesting.

Regulators are investigating MF Global after discovering hundreds of millions of dollars in customer money is missing.

The investigation is trying to determine of the company used some of its customers’ funds to back its own trading. So far, no one has been accused of anything, but if it turns out that MF Global did used customers’ cash to trade with, there’s going to be a huge uproar.

But it wouldn’t be a big surprise to us. When Sandy Franks and I wrote Barbarians of Wealth this kind of behavior was exactly what we expected from big banks and the Wall Street elite.

We’ll stay on top of this here at The Wandering Investor.

50% Writedown for Greece

An agreement has finally been reached on Greece. The debt debacle has tossed markets up and down, like a middle-aged housewife’s emotions following the storyline of a soap opera.

Not to trivialize the crisis… Europe was inching closer and closer to the really tough decisions – to let Greece go belly up (and take Spain, Italy, and Portugal with it), or let the Euro go, and risk huge monetary problems transitioning back to individual currencies.

So what’s the deal? How much debt are insurers going to have to eat?

50%.

From Bloomberg:

European leaders cajoled bondholders into accepting 50 percent writedowns on Greek debt and boosted their rescue fund’s capacity to 1 trillion euros ($1.4 trillion) in a crisis-fighting package intended to shield the euro area.

The markets like this news… even in Europe. France’s CAC 40 index was up 5.23% today, with Germany’s DAX up 4.99%. Great Britain joined the bunch with its FTSE 100 index up 2.78%.

Mongol “Lost Fleet” Found

One of the most interesting histories I researched for Barbarians of Wealth: Protecting Yourself from Today’s Financial Attilas was the Mongol Empire under its ferocious ruler, Genghis Khan.

He was the first Mongol to unite all the tribes, becoming the second largest empire in history. The Mongols ruled over land stretching from the Korean Peninsula, down into northern India, and across to Eastern Europe.

But one area they didn’t conquer was Japan.

Kublai Khan, Genghis’ 13th century descendent, mounted two attacks on Japan. Both were rebuffed – not by a strong Japanese navy, but by the Kamikaze, two typhoons, seven years apart, that destroyed the Mongol fleet.

Archeologists believe they have found one of the ships from Kublai Khan’s “Lost Fleet” – 4,400 vessels that were destroyed in one of the typhoons.