Wednesday, April 8, 2015

Tuesday, April 7 Financial Regulatory Review: 1 Arrest, 1 Charge, Consumer Credit Up & FOMC Annual Report Out


  • Jeffrey Ray Filla was arrested on April 6 in Fort Bend County, Texas on securities fraud in the sale of investments in Prophecy Fund LP, a commodities trading program in which he primarily found investors from his church. Filla is also accused of trying to hide the state of the fund by concealing losses with false financial statements. According to the filing Filla invested a large amount of the proceeds in Auto Direct LLC, an automobile sales lot; Filla was the sole managing member of Auto Direct. 
  • On April 8 the SEC charged LA based Pacific West Capital Group, Inc. and its owner Andrew B Calhoun IV with fraud in the sale of "life settlement" investments. A life settlement, as odd as it may sound, is when an investor invests in an insurance policy in exchange for a share of the death benefit on the policy holder. Specifically, the SEC alleges that Calhoun IV, a Beverly Hills, California, life insurance agent, raised ~$100 million from life settlement investors and defrauded investors by paying them with the proceeds of new life settlement investors -- classic Ponzi scheme. Also named as defendants are Ohio-based PWCG Trust, and five sales agents of Pacific West, Brenda C. Barry of Issaquah, Washington, and her company BAK West, Inc., Andrew B Calhoun Jr. of Anderson, South Carolina, Eric C. Cannon of Lakewood, California, and his company Century Point, LLC, and Michael W. Dotta and Caleb A. Moody, both of LA.
  • In February, according to the FRB, consumer credit increased at a seasonally adjusted annual rate of 5-1/2 percent. "Revolving credit decreased at an annual rate of 5 percent, while non-revolving credit increased at an annual rate of 9-1/2 percent." In a nutshell, these means consumers are taking on more debt which bodes well for consumer confidence, but not for inflation.
FRB Consumer Credit - G.19

  • The annual report for the Federal Open Market Committee was published yesterday by the Markets Group of the Federal Reserve Bank of New York. The report covers operations during 2014 as well as many of the latest developments around the Fed's operations. It also has some great charts like the one below and is a must read for all those curious about the Fed's role in monetary role and the mechanics of operations vs policy. I'll be publishing my thoughts on the report within the week.  

Update on Economic Indicators

Crude Inventories is coming out in about 15 min. and FOMC Minutes for the day should arrive around 2pm. It's a given the Fed is going to raise rates by the end of the year - I suspect earlier rather than later. What's not clear is what they plan on doing about inflation or if Committee members are uniformly concerned. On deck tomorrow: initial claims, continuing claims, wholesale inventories, and natural gas inventories.