Bank stocks fell today as MF Global files for bankruptcy. Even though the Dow was down big today, it was still up over 10% for the month of October which was the best increase since the month of August 1982.
What a surprise-ex Governor of NJ Corslime fails at yet another thing. The best investment of my time was campaigning against this fraud two years ago at this time of year and helping the great state of NJ elect a person who knows how economics works in Governor Christie. And to think this incompetent failure will walk out with $12.6 million for his troubles.
One benchmark, income of the median household—meaning the one in the very middle of the middle—declined 3.2% to $53,518 during the 2007-2009 recession and fell a further 6.7% to $49,909 between June 2009 and June 2011, according to an analysis of monthly Census Bureau numbers.
Here are the top financial stories of the day:
1) Stocks fall on worries about US broker, Europe-From the AP
Despite being known as the stock market's jinx month, this October is shaping up to be one of the best months on record. The main reason is progress in Europe toward containing that region's debt crisis.
The Standard & Poor's 500 index has gained 12 percent for the month, which puts the broadest stock-market measure on track for its best month since January 1987. Even after a decline Monday, the Dow Jones industrial average is still up 10.6 percent in October, its best month since August 1982.
The big breakthrough in Europe came early Thursday of last week, when European leaders reached a far-ranging agreement aimed at shoring up the region's banks and preventing a debt crunch in Greece from bringing down Europe's financial system.
But a lack of many key details in the plan has made markets jittery again, and on Monday fresh reminders of how the Europe crisis can affect U.S. financial institutions helped bring the market lower.
Bank stocks fell broadly Monday after the securities firm MF Global filed for bankruptcy protection.
Last week the company's debt was downgraded to junk status by ratings agencies concerned about its large holdings of European government debt. The company is headed by former New Jersey Governor and Goldman Sachs chairman Jon Corzine.
MF Global's bankruptcy filing labeled JPMorgan Chase & Co. the brokerage's largest creditor.
JPMorgan, widely considered the strongest of the big banks, dropped 3.4 percent.
Other banks sank. Bank of America lost 4.3 percent. Citigroup dropped 5 percent, and Morgan Stanley 5.8 percent.
The Dow was down 153 points, or 1.3 percent, to 12,076 at 2:24 p.m. ET. The drop comes after the Dow closed out its fifth straight week of gains, its best winning streak since January.
The Standard & Poor's 500 index was down 17, or 1.3 percent, to 1,268. Energy and materials companies led the decline. The Nasdaq composite is down 28, or 1 percent, to 2,709.
The Organization for Economic Cooperation and Development warned Monday that European economies will see a "marked slowdown" next year. The organization called on the European Union to provide more information on how it plans to stem the debt crisis.
Major stock indexes dropped in Europe. Germany's DAX fell 3.2 percent. France's CAC-40 dropped 3.2 percent. Both still closed the month with strong gains. The German index rose 11.6 percent, the French one 8.7 percent.
October has earned a reputation as a famously bad month for stocks. The October 1929 crash divided the roaring 1920s from the Great Depression of the 1930s. It's the month that has given the market two black eyes: Black Tuesday in 1929 and Black Monday in 1987.
This October started off on a sour note when the Dow and S&P 500 hit their lowest point for the year Oct. 3, but the market has soared since then. The Dow is up 13.3 percent since then, the S&P 15.2 percent.
Investors were relieved when European leaders made progress in tackling the region's debt crisis in recent weeks. Worries that the U.S. might slip into a recession have faded, and many big U.S. companies like McDonald's Corp. have reported stronger profits for the third quarter. More than three-quarters of U.S. companies in the S&P 500 that have reported results so far had earnings that beat analysts' expectations, according to the financial data provider FactSet.
"It's a rally off what was a very pessimistic view of the global economy," said Todd Henry, an emerging-market equity specialist at T. Rowe Price. "Does it have legs? I think that's yet to be seen."
The European debt crisis is still far from fixed. One troubling sign is that borrowing costs for Italy and Spain have increased, a signal that traders remain worried about their ability to pay their debts.
2) Corzine's MF Global files for bankruptcy-From Reuters
Jon Corzine's bid to revive his Wall Street career crashed and burned on Monday when his futures brokerage MF Global Holdings Ltd filed for bankruptcy protection following bad bets on euro zone debt.
Corzine, who once ran Goldman Sachs and became governor of New Jersey, had been trying to turn MF into a mini Goldman by taking on more risky trades.
But once regulators forced it to disclose the bets on debt issued by countries including Italy, Portugal and Spain, the firm's fortunes quickly began to unravel.
MF Global's
The Chapter 11 bankruptcy filing came after talks to sell a variety of assets to Interactive Brokers Group Inc broke down earlier on Monday, a person familiar with the matter said. MF Global's shares plunged last week as the company's credit ratings were cut to junk.
Regulators had expressed "grave concerns" about the viability of MF Global, which filed for bankruptcy only after "no viable alternative was available in the limited time leading up to the regulators' deadline," the company's COO, Bradley Abelow, said in a court filing.
The severity with which markets and regulators reacted to MF Global's troubles may have surprised Corzine, whose affinity for risk-taking finally caught up to him after a career that took him to the top echelons of Wall Street and then into politics first as a U.S. senator.
Corzine, 64, was seen leaving the company's midtown Manhattan office and hopping into a black SUV vehicle early Monday afternoon.
"They went for what would be a very profitable trade with European sovereign debt that obviously has blown up in their face and brought the company down," said Dave Westhouse, vice president of Chicago retail broker PTI Securities and Futures.
The bankruptcy is reminiscent of 2008 when Lehman Brothers collapsed at the height of the financial crisis. But market participants said the impact from this collapse, far smaller, would likely be contained.
MF Global's 2,870 employees, as well as counterparties, were left scrambling and confused on Monday, as MF Global halted its shares, but did not file for bankruptcy until well after U.S. markets had opened.
"Ultimately it will have lost all confidence of its investor base," said Michael Epstein, a restructuring adviser with CRG Partners. "I'm not sure what restructuring it actually does. In some respects, it's a baby Lehman, in effect."
Three traders wearing MF Global jackets were seen leaving the Chicago Board of Trade prior to the opening of pit trading and floor sources told Reuters they had been turned away after their security access cards were denied.
The New York Federal Reserve suspended MF Global from conducting new business with the central bank. CME Group Inc, IntercontinentalExchange Inc and Singapore Exchange Ltd and Singapore's central bank all halted the broker's operations in some form except for liquidations.
There was little evidence of any severe ruptures in commodity markets, although volumes were down sharply as investors said they preferred to wait for more clarity before placing new trades.
JPMorgan Chase & Co's exposure for a $1.2 billion syndicated loan to MF Global is less than $100 million, a source at the bank said.
Jeff carter, an independent futures trader in Chicago, said the impact on the markets should be smaller and nothing like when Lehman failed and hedge funds had money locked up with the firm for months.
Corzine's decision to chase yield by going after European sovereign debt was clearly ill-advised and always seemed much too risky, Carter said.
On Monday, MF Global's HR department was busy making calls withdrawing job offers it made over the past few weeks, according to a person familiar with the situation.
BANKRUPTCY FILING
MF Global scrambled through the weekend and into Monday to find buyers for all or parts of the company, while at the same time hiring restructuring and bankruptcy advisers in case nothing could be done.
In the past week, MF Global posted a quarterly loss, its shares fell by two-thirds and its credit ratings were cut to junk.
Corzine was trying to transform MF Global from a brokerage that mainly places customers' trades on exchanges into an investment bank that bets with its own capital.
But the company was also suffering because of low interest rates, which hurt profits from core brokerage operations.
It may be easier for MF Global to work out a sale in bankruptcy than outside of it, said Bill Brandt, chief executive of Chicago-based turnaround firm Development Specialists Inc.
By filing for bankruptcy, MF Global freezes the value of its free-falling notes and gives potential suitors a clearer picture of the losses they would be taking on, Brandt said.
"If I were trying to do a deal fast, rather than sell the company itself, I'd see if I could peg the notes at a discounted price and find someone else to buy the distressed notes," Brandt said.
If a sale is in the offing, the buyer may be a European bank or sovereign government, as such entities would be particularly keen on stopping the slide and maximizing the value of the notes, Brandt said.
MF Global Finance USA Inc also filed for Chapter 11 protection, court records show. Both MF Global entities filed for protection from creditors with the U.S. bankruptcy court in Manhattan.
"The real question is how many assets will be left to transfer," said Niamh Alexander, an analyst at Keefe, Bruyette & Woods.
"Customers might move very quickly and it may be that every hour that passes shrinks the portfolio of assets that could be transferred" to a buyer, KBW's Alexander said.
The bankruptcy, meanwhile, is the latest flop for finance-focused private equity fund J.C. Flowers, whose other recent investments include nationalized German bank Hypo Real Estate.
MF Global's deeply distressed 6.25 percent notes maturing in 2016 fell 4 cents to 46 on the dollar, according to the Trace, which reports bond trades. The price had earlier fallen as low as 15 cents.
Its shares remained halted in New York.
The company hired boutique investment bank Evercore Partners Inc to help find a buyer, separate sources said this past week.
3) Slow Recovery Feels Like Recession-From the Wall Street Journal
Americans are two years into a recovery that doesn't feel much different to many of them from life during the most bruising recession in seven decades.
Scenes of the long haul back from the slump show a nation struggling to rebuild after a battering that crossed ages, regions and occupations.
A sobering set of economic statistics is at the heart of tales of Americans moving in with relatives, switching careers and dialing back on spending to cope with straitened circumstances amid the fitful rebound.
One benchmark, income of the median household—meaning the one in the very middle of the middle—declined 3.2% to $53,518 during the 2007-2009 recession and fell a further 6.7% to $49,909 between June 2009 and June 2011, according to an analysis of monthly Census Bureau numbers.
According to a study done by former Bureau staffer Gordon Green and others at data-crunching firm Sentier Research, the income of the typical American household, adjusted for inflation and in 2011 dollars, has dropped well below the January 2000 level ($55,836).
Other data paint a similarly bleak picture. No recession since the Great Depression was deeper or longer than the most recent. It has taken two years for the nation's total output of goods and services to return to pre-recession levels, longer than after any recession since World War II. And on a per-capita basis, the Commerce Department said Thursday, output remains 3% lower than it was at the end of 2007.
Since the recession's end in mid-2009, the economy has been expanding but it isn't adding jobs at a fast-enough pace—at least 150,000 a month—to absorb the growing population. The unemployment rate stands at 9.1%, and nearly half the unemployed have been out of work for six months or more. Housing, the most fragile sector, has yet to rebound. As of June, home prices were 10.1% below mid-2009 levels. One in five mortgage borrowers has a loan bigger than the value of the underlying home.
Education, once a reliable means to employment and earning power, has been no insurance against declining incomes during the recovery. Between June 2009 and June 2011, the median income of households led by high school graduates fell 8.2%, Sentier estimates. Households led by people with two-year associates degrees saw incomes fall even more: 11.2%. And even those led by individuals with bachelor's degrees were squeezed: down 5.9%.
Recoveries are hard-pressed to take hold when earnings tread water or fall behind. Consumers who have less income and smaller retirement accounts—or who are underwater on their mortgages—are likely to spend less. Worries about finding or losing a job, or paying back debts, translate into cautious spending. Only 21% of Americans responding to the October Wall Street Journal/NBC News poll said they expected the economy to improve in the next 12 months. In the latest Wall Street Journal survey of economists, respondents said it would take more than a decade for median income to return to pre-recession levels.
Amid meager, if any, income growth, U.S. households are gradually whittling down their debt burdens. Americans are roughly halfway through efforts to reduce their debt, according to Jerry Webman, senior investment officer and chief economist at Oppenheimer Funds. Based on data such as consumer-credit levels, "it looks like we're at a bottoming point," he said. Until that process is over, it will constrain the economy, even if the U.S. is spared additional adverse shocks, leaving Americans groping for a way through an uneven recovery.
Quote of the Day from Dave Ramsey.com:
Proverbs 27:19 — As water reflects the face, so one's life reflects the heart.
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