This very well could be the most important Slabbed post of the year…

And it has nothing to do with Jefferson Parish Political Corruption.

For literally years our good friend Mr CLS has been methodically hammering away at the complexities surrounding insurance securitization and the implications of such for each and every one of us, especially those of us on the coast being price gouged for wind coverage. So suppose you’re a reporter with insurance beat responsibilities like Becky Mowbray, Anita Lee, Jeff Amy, Paige St John, Beatrice Garcia or a national outfit like Bloomberg that has done some quality coverage on insurance issues that is ready to kick it up a notch in terms of understanding.  What is now coming to light with Bank of America’s alleged forced placed insurance fraud is a must read as more turds float to the surface in the global insurance finance cesspool.

Some of the very same problems could very well exist in other facets of the securitized insurance market; problems the folks at U Penn Wharton School no doubt did not conceive of when they were pioneering insurance linked securities such at Catastrophe Bonds not long ago as the reasons for the lack of market transparency in the global insurance markets come into sharper focus.

Don’t look for the political shoe shine boys for big insurance such as the coast’s own Steven Palazzo or Commish Mike Chaney to say much on this.  Both men, despite paying lots of lip service to the topic of insurance, remain firmly, purposely ignorant of the any fraud perpetrated by their big business buddies on Wall Street.

sop

Not long ago on Slabbed, Longshanks said the American people were in reality slaves…

And when you read the Rolling Stones article on Wall Street being completely above the law you’ll understand why you see names like Brooksley Born, Judge Jed Rakoff, AIG and crooked CEO John Mack in our archives. And sadly, I’ve concluded Longshanks is probably right, we are becoming economic slaves to financial interests and that the sheeple are too self-absorbed and ignorant to understand that basic fact. It also explains why I have little respect for sham regulators like Jim Donelon and Mike Chaney or the rest of the corporate do bitches that populate the Republican party. The Democrats aren’t any better though their rhetoric doesn’t come across as quite so clueless.

Perhaps this is why discriminating bloggers call folks like House Speaker John Boehner a dumb fuck for talking about repealing the weak financial re-regulation bill that passed last year. Meantime the Hollow One, $tung by critici$m about being too hard in Wall Street, is now genuflecting before CEOs like John Mack $pit $hining their $kin flute$.  Ain’t 2 party politics swell!

Hat tip to Editilla and Dambala.

sop

The National Association of Insurance Commissioners picks Mississippi Commish Mike Chaney to chair its Property and Casualty Insurance Committee. Now we’re truly f*cked.

Mississippi Insurance Commissioner Mike Chaney

Folks never mind Mississippi has some of the highest homeowners insurance rates in the nation and that Mike Chaney has sat on the wind mitigation program and stonewalled any other solution to giving relief to coastal homeowners who are being price gouged for wind coverage. The NAIC, a stone age relic and barely living testament to the failure of state by state regulation of insurance has named Chaney to chair its P&C committee.

I’m pretty sure this means Mr Chaney gets more free trips to locales like Key Largo.  For everyone else except the insurance companies who whom Mr Chaney works, this means another year of ankle grabbing.

Hat tip: The Sun Herald

sop

Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.

Louisiana Insurance Commissioner Jim Donelon

Folks rarely does a business writer nail and explain a very complex subject in the interplay between our fragmented insurance markets here in the US  and the world of high finance but Paige St John over at the Herald Tribune explains how State Farm really didn’t pull out of Florida’s hurricane insurance market, how they game the anti trust exemption insurers enjoy and how they are able to price gouge as a result.  These same forces are at work in Mississippi, Alabama, Texas and Louisiana.

We last featured Paige’s work last October in our post It’s a ‘Bermudan’ day in the neightborhood…Paige St John at the Herald Tribune exposes why ‘buying Bermuda’ is like being hooked on crack and it is clear Paige is on track for a big time business journalism award for her work in this area.  Finally it was our post on Paige’s reporting on the Allstate McKinsey papers that literally landed us on the national blawg scene as Victoria Pynchon covered our coverage.

Here are a few excerpts:

When State Farm stepped up its march out of Florida, it loudly and publicly claimed hurricanes were pushing it toward financial disaster.

The company argued it had to leave the Florida coast — and drop nearly half a million customers — because it could not profit in a state wracked by so many storms.

But State Farm never really left Florida. Continue reading “Market manipulation and price fixing explained to the point even a clown can understand. Paige St John exposes the State Farm shuffle in Florida for the Herald Tribune.”

So this time I actually put on a tie before the insurance forum…….

Being that I am a hard hat CPA a tie is not required in my line of work but I thought what the heck, I need to look my best for insurance commish Mike Chaney, who will certainly be at the RAND forum. Man o man was I disappointed though because I looked high and low for Mike, who we affectionately know as Mikey the Cook here on Slabbed due to his warm association with fellow Commish Jim “Jimbo the clown” Donelon.

Now there were several theories about Mikey the cook’s whereabouts.  One theory goes that he was in Bloomington giving an interview with the Pantagraph which is State Farm’s hometown newspaper. Such is not a far-fetched theory as Mikey has graced the pages of the Pantagraph before waxing nonsensical. Here is a snippet from their Katrina coverage which featured Mikey the Cook’s remarks:

“It was a win-win for State Farm, the state and the courts,” said Mississippi insurance commissioner Mike Chaney, who monitored the mediation program. A probe of State Farm’s claims handling by his department found questionable decisions and irregularities, but no elaborate scheme or illegal actions, he said.

Now we’ve always said Mike Chaney wouldn’t know insurance fraud if it bit him on the ass, unless that is, Continue reading “So this time I actually put on a tie before the insurance forum…….”

Homie Dave Treutel snags a spot on the NFIP advisory board

I’ve known Dave pretty much all my life. He comes from a fine family and is a fine choice for the insurance industry advisory board to the NFIP.  Being from Bay St Louis he had a ring side seat after Katrina to the myriad of ways insurers defrauded the NFIP for example and witnessed first hand the human toll of the bad faith claims handling procedures employed by certain insurers, so he takes the human equation with him to the quarterly DC meetings as well.  Dave’s business acumen means he also has a good understanding of the internal controls needed at NFIP, most notably a bit of oversight, to insure that major retail insurers never defraud the program again.

Anita Lee has all the details at the Sun Herald and in a great example of a broken clock being right twice a day, she even snagged some quotes from Jimbo the Clown’s sidekick, Mississippi Insurance commissioner Mikey “The Cook” Chaney who shares our sentiments about Dave and what he brings to the table.  Unfortunately for the citizens of Mississippi, Mikey does not recognize fraud even when it bites him on the ass unless it is an individual defrauding a major multinational insurer. Fortunately for us at Slabbed, Mikey doesn’t know when to shut his mouth but such is a common trait with the political class. We’ll be visiting on him again soon.

Again our congratulations to Dave Treutel and we’re delighted to have in him as our voice within the NFIP.  Well done Dave!

sop

A peek inside Slabbed as we set up some important financial concepts and introduce the ol’ Forex Scam. Anyone else remember Russell Erxleben?

These past 2 weeks we’ve periodically gotten a huge number of worldwide referrals from what appears to be a pornographic website, based on the verbage contained the referring URL.  Running the link through a Whois search reveals it is in reality a Forex scam site.  As is my custom I checked the wiki entries to see if the explaining could be made easy for me and sure enough the two wiki entries had a wealth of great information.  (Those wondering about the Forex proper can click here.) For the balance of this post we’re going to concentrate on the scam I linked first and the implications therein so is there we now visit:

A forex (or foreign exchange) scam is any trading scheme used to defraud traders by convincing them that they can expect to gain a high profit by trading in the foreign exchange market. Currency trading “has become the fraud du jour” as of early 2008, according to Michael Dunn of the U.S. Commodity Futures Trading Commission. But “the market has long been plagued by swindlers preying on the gullible,” according to the New York Times. “The average individual foreign-exchange-trading victim loses about $15,000, according to CFTC records” according to The Wall Street Journal. The North American Securities Administrators Association says that “off-exchange forex trading by retail investors is at best extremely risky, and at worst, outright fraud.”

With the scam set let’s visit with the assertion it is possible to beat the Forex. I’ll note these same concepts apply to the stock markets too in varying degrees:

The forex market is a zero-sum game, meaning that whatever one trader gains, another loses, except that brokerage commissions and other transaction costs are subtracted from the results of all traders, technically making forex a “negative-sum” game.

…………..there are many experienced well-capitalized professional traders (e.g. working for banks) who can devote their attention full time to trading. An inexperienced retail trader will have a significant information disadvantage compared to these traders.

Retail traders are – almost by definition – undercapitalized. Thus they are subject to the problem of gambler’s ruin. In a “Fair Game” (one with no information advantages) between two players that continues until one trader goes bankrupt, the player with the lower amount of capital has a higher probability of going bankrupt first. Since the retail speculator is effectively playing against the market as a whole – which has nearly infinite capital – he will almost certainly go bankrupt. The retail trader always pays the bid/ask spread which makes his odds of winning less than those of a fair game. Additional costs may include margin interest, or if a spot position is kept open for more than one day the trade may be “resettled” each day, each time costing the full bid/ask spread.

Although it is possible for a few experts to successfully arbitrage the market for an unusually large return, this does not mean that a larger number could earn the same returns even given the same tools, techniques and data sources. This is because the arbitrages are essentially drawn from a pool of finite size; although information about how to capture arbitrages is a nonrival good, the arbitrages themselves are a rival good. (To draw an analogy, the total amount of buried treasure on an island is the same, regardless of how many treasure hunters have bought copies of the treasure map.)

So it is the middle men who always make the money. Often the middle men also are taking a trade position too so the game truly is rigged.  I mention this because the entry properly mentions information advantages. Indeed in my closest circle of stock trading friends we often discuss price/volume movements in issues we own in terms of buyers/sellers “with superior knowledge” or “access to information” the retail investor simply does not have.  Properly analyzed the data can confirm previous buys or signal that it’s time to sell.  These concepts also underpin the business of insurance where “information advantages” has a more proper name: Information asymmetry. Continue reading “A peek inside Slabbed as we set up some important financial concepts and introduce the ol’ Forex Scam. Anyone else remember Russell Erxleben?”

Good evening world from old town Bay St Louis

I don’t have Mr Chaney’s (aka Mikey the Cook) proverbial million dollar beach view but the land lord assured  me they are being gang raped on the wind insurance nonetheless folks.

I finally have a bit of broadband here on the coast which would also explain my relative absence.

Mr CLS was smoking hot today on Yahoo! ALL plus I heard a very familiar old name today in hedge fund manager Daniel Loeb.  Seems his fund has lost its ass and he can’t bring himself to man up and take the blame for it.  Some of us can make money on EDC Danny Boy.  :mrgreen:

I’m feeling particularly ornery tonight….

sop

Before we covered political corruption in Jefferson Parish we cut our teeth on AIG.

Mississippi Insurance Commissioner Mike Chaney

“There would be nobody there to protect consumers except the lobbyists for the insurance companies,” Louisiana Insurance Commissioner James Donelon said. “That’s how federal regulation works. 

He and others pointed to the financial collapse of AIG Inc. under federal regulation. AIG insurance companies under state regulation remained solvent. 

It was never a question in my mind that AIG, including its state regulated insurance operations, were insolvent. Rather the qustion in my mind was exactly how ignorant the State insurance commissioners that parrotted that III talking point above were and the relative degree of their stupidity. Sadly for our friends in Louisiana I concluded the hands down dumbest insurance commish was Jim Donelon mainly because even Mississippi’s Mike Chaney had enough sense to not parrot Robert Hartwig’s talking points on AIG. 

Today, even our State Insurance commissioners know better than to hold up AIG as a triumph of state regulation, especially after they allowed insurers to cook their books to gain regulatory capital, a topic we well covered back in the day:  Continue reading “Before we covered political corruption in Jefferson Parish we cut our teeth on AIG.”