MOAF, the "mother of all frauds" lurks and waits like a leopard by the wayside.  The following articles are designed to alert the investor and the public to avoid becoming another TARP victim, financial fraud victim, or victim deceived by the media and multinational owned Wall Street  politicians.

Multi-Trillion Dollar Fraud Lurks

by LM Lupo, 9.24.2009

The next financial fraud, one of biblical proportions, is forecast to reach the multi-trillion dollar level consuming the entirety of the U.S. GDP.  If the Lehman and Bear Sterns fraud totaling over one trillion was not enough, the Federal Reserve and the U.S. Treasury expanded fraud by several trillion dollars with taxpayers fronting nearly $800 billion in, as grandpa would say, "broad daylight bank robbery." But it is important to note that the U.S. was not alone in this robbery, as every major industrialized nation has doffed their cap to facilitate the next massive, multi-trillion dollar fraud.

Investors must not only beat the market, but also the corrupt politicians, cheaply bought off regulators, bribed judges, and well funded Wall Street lobbyists skilled in perverting justice and looking out after their own criminal interest. That's quite a challenge.  As a professional in due diligence and financial research  (the art of scrutinizing investments for veracity, safety, and legality) this challenge is beyond the scope and means of even the most sophisticated investment houses.  In fact, I have officially shuttered the Financial Trader Research shop, one of the most successful investment research boutiques extant since now even financial reports--the fundamental investor communiqué-- are clearly unreliable, and when fudged there is little to no recourse for the investor or researcher.  

Without trust, the foundation of all business transactions, there is simply no business, and hence all bets are off.  But what about Sarbanes Oxley, FASB, Department of Justice, or the SEC, you say?  These are mostly laws, boards, and tax payer funded agencies that are designed to give the stamp of approval to the prurient fraudsters...for a profit.  Would that this were cynical rather than true.

Taking Action

But on a more proactive and positive note, lets prepare like wise investors and zero in on this pending multi-trillion dollar fraud for it truely offers a once in a lifetime speculative opportunity.

The numbers in the graphic above (horror show if invested therein) represent simple historical facts and numbers dating back to 1991, which supports some dour findings.  Given Wall Street's history, the inexorable path towards the ultimate imploding tower of financial Babel is about to unfold. Where it will begin and what will be the actual catalyst is unknown at this time, yet we know for a certainty that it is working even now.  The forecast for a multi trillion dollar fraud is based on the elegant history captured above (serial fraud) and the ugly axiom that all human nature degrades to the lowest common denominator, which anyone who has ever participated in an unruly crowd can attest.

Multi Trillion Dollar Fraud Candidates

Listed in order of highest probabilities and Monte Carlo outcomes are the likely candidates for the looming multi trillion dollar fraud.

1...U.S. Bond Market

Since the Federal Reserve has monetized and borrowed nearly nine trillion dollars using U.S. Treasuries ($30,000 per U.S. citizen) this market obviously stands front and center with a high probability of the next massive Wall Street Fraud.  The concept of too big to fail, or too big not to fail, comes to mind with the Federal Reserve and the U.S. Treasury.  Its certainly no joy to write about ones own country in such dismal light, but since we have taken our citizens power and handed it over to the multinationals, lobbyists, and criminals its really not so grim, after all.

While the Fed is monetizing irresponsibly by cloaking a titanic off balance sheet portfolio, the TARP banks and other financial institutions are trading Treasuries with enormous leverage, likely higher than 40-1 if precedent and addictive behavior--two very powerful predictors--are factored into the equation.  Imagine the carnage when this saturnalia comes to an end.  A mere 10% adverse move in Treasuries, which is typical in most years, would create an instant $1 trillion dollar loss to the financial institutions trading Treasuries.  No?  Oh, wait, we forgot to add the leverage.  Based on the Wall Street fraud curve above, we'll settle on a $3 trillion to $7 trillion loss.  Sadly, most readers won't even raise an eyebrow: this scenario simply confirms their own corruption thesis.

2...Credit Market Redux

The credit market (corporate and asset backed) has yet to recover and the pricing of assets, residential, commercial, and other paper is still oblique if not orthogonal.  This market certainly qualifies for the next multi trillion dollar fraud since many of the asset backed securities for the credit market were either complete fictions or outright mendacities.  This market might simply be smoldering now while awaiting a fresh breeze for ignition from an agent such as, say, a double dip recession.  Readers that experienced the recent financial meltdown do not require any further details or evidence.

3...Derivative Market

The ultimate Noahic deluge otherwise known as the $60 trillion dollar derivatives market looms as thick, dark, black storms.  China repudiation is already on the books for commodity contracts, and now commoditized financial contracts, CDO's, CMO's, or Treasury based instruments remain vulnerable due to derivative securitization.  This multi trillion dollar fraud is similar to a rotten chicken carcass floating down the Amazon awaiting a school of piranhas.  You know the feathers will fly with this one and few will feel too bad given that this chicken is already done for anyway.

4...Life Settlement Contracts 

Goldman Sachs is creating a trading index on this financial product soon to be securitized just like mortgages, of course, but here one only produces a  a profit when people die--the sellers of the contract.  This is not a gallows joke, read the definition here.  The current Life Settlement Contract market--call them death betters--is roughly $500 billion to one trillion dollars depending on whether or not you account for fraudulent contracts, you know, the policies that don't have real living people attached to them.  I've listed this one last given that the size is not that large (yet) and would require some very creative prowess which is not something that most insurers and Goldman possess. 

5...Chinese Economic Fraud and Warfare

Written by Professor Woodward, University of Mary Hardin-Baylor

China has almost $2 trillion in reserves and about half of that in U.S. Treasuries.   What about the possibility that the strategy of China is to bankrupt all other industrial nations while taking all the real wealth they can. Is it possible that China is in the process of borrowing from international financiers, governments, etc. money by using their U.S. Treasuries as collateral and leveraging their borrowing at 10 times the dollar amount of the value of the Treasuries?  China could then take that monetary wealth and convert it into real wealth by buying up commodities, building their infrastructure, manufacturing plants, etc. Then simply default on the payments later. This would bankrupt the other industrialized nations who lent them the money leaving only China with a sound economy. While they do need the rest of the world for an outlet now for their production, in the future, they may not be as dependent on exports, as domestic demand will be terrific and they have all the resources they need to grow and expand their economy.

Conclusion

I'll leave it to the reader to decide which financial threats above constitute the most likely multi-trillion dollar fraud on Wall Street in the near future.  The items I've captured are from decades of my forensic experience and research house due diligence.  There might be other more creative frauds out there, so keep your eyes open.

If you foresee a potential multi-trillion dollar fraud send me a note with rationale and I'll share with the community and the list above. Perhaps the plunge into economic chaos remains inexorable; however, one can always profit and even provide a service to alert investors and the public, which is what these pages will remain for the digital world. 
 

email: editor at financialtrader.com, subject "fraud article"

Useful research links:

1...Federal T-Bond and Treasury Fraud

Note:  I am not big on videos, but this is congressional testimony from the Federal Reserve chief office of inspector general (OIG).

http://dailybail.com/home/there-are-no-words-to-describe-the-following-part-ii.html

Seven Trillion in New Debt

http://finance.yahoo.com/news/US-issues-7-trillion-debt-rb-118622363.html?x=0&.v=4

2...Derivative Bomb From China

http://uk.biz.yahoo.com/31082009/323/update-1-beijing-s-derivative-default-stance-rattles-banks.html

http://blogs.wsj.com/chinajournal/2009/09/01/beijing-may-need-to-clean-house-on-derivatives-woes/

http://www.forbes.com/feeds/reuters/2009/09/01/2009-09-01T102249Z_01_SP508234_RTRIDST_0_CHINA-DERIVATIVES-ANALYSIS.html 

http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSSP47327420090831?pageNumber=2&virtualBrandChannel=11604

3...Credit Market Redux, Lehman & AIG

Citadel Investment Group LLC filed a claim seeking to recover as much as $470.5 million that the hedge fund believes it is owed from derivatives contracts tied to Lehman Brothers Holdings before its collapse, according to a court filing.  The amount being sought represents the value of the derivatives contracts, and also factors in costs Citadel incurred to replace the trades that were terminated when Lehman Brothers failed.  It wasn't known how much the derivatives alone were worth.

http://online.wsj.com/article/SB125116148170955541.html

Moody's ratings found to be criminal and fraudulent.

http://finance.yahoo.com/tech-ticker/article/342356/Former-Moody%E2%80%99s-Exec-Blows-Whistle-on-Bad-Ratings-Is-It-a-Smoking-Gun;_ylt=AsCciBqHj_XXh0Capc5DeR27YWsA;_ylu=X3oDMTE1OXRjMmx2BHBvcwM4BHNlYwN0b3BTdG9yaWVzBHNsawNmb3JtZXJtb29keXM-?tickers=MCO,MHP,XLF,^dji,^GSPC,BRK-A,SKF&sec=topStories&pos=6&asset=&ccode=

4...Life Settlement Contracts

Nice blog and articles summarizing and commenting on the new market of death betting.

http://cbfe-econ.blogspot.com/2009/09/wall-street-to-securitize-peoples.html

The Vintage Fraud Landscape

Iceland has a "Serious Fraud Office" investigating a potential 70 banking cases (lenders) from the currently active 35. 

http://www.guardian.co.uk/business/2009/sep/11/iceland-banks-fraud-uk

Professional $290 million Obama fraudster and fund raiser that must have angered someone.  The case is: U.S. v. Nemazee, 09-mj-1927 in U.S. District Court for the Southern District of New York (Manhattan)

http://www.reuters.com/article/topNews/idUSTRE58K5A420090921?feedType=RSS&feedName=topNews&rpc=22&sp=true

Voice in the Wilderness, Gregor Forme

August 9th, 2009
4:19 am GMT
[permalink]

I find the numerous comments that choose to whitewash morality quite funny. The notion that by taking advantage of what one has classed a morally suspect option because it is profitable and available one has somehow bypassed the original moral dilemma.  This requires some incredibly flexible morals. To put the absurdity in clearer light, let’s take a profitable enterprise that is generally universally condemned as immoral: slavery. The argument that some here are taking is that if an investment were available in some slave-holding operation in a country that had not made it illegal, it would be immoral as a fund manager to NOT invest in it if it increased your investors net worth.
- Posted by Gregor Forme

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