Yesterday, the global financial services firm that provides retail, corporate and investment banking services was fined $451.4 million after disclosing fake LIBOR and Euro interbank rates. It was reported that Barclays provided false rates in order to lessen fears about that bank’s health. As a consequence, Barclays will also cut bonuses of three lieutenants and the CEO.

Barclays is the United Kingdom’s second largest bank by assets had total cash of $1.55 trillion, a book value per share of $28.39, debt to equity ratio of 16.01 and the long term debt to equity ratio of 0.45.

For the options traders out there, BCS has a weekly volatility of 2.98% and a monthly volatility of 3.06%. The 14 day average true range was 0.44 with a beta of 2.65.

David Cornes holds a degree in economics from the University of Montana.

1.Raise payroll taxes
2. Increase the retirement age
3. Cut benefits

The most likely scenario is a combination of all three. Then what? That is what brings me to a fourth option that is very worrisome to me:

Confiscation.

This sounds like a crazy idea which is what I thought when I first heard it talked about but the more I think about it the more I begin to think that it could happen someday.

Just think about what happens to our deficits when interest rates rise to 6% – 8% which is where they were just a few years ago. Remember, the government is funding a majority of our trillions in debt with short term paper. This is highly susceptible to a crisis should interest rates move sharply creating a huge increase in borrowing costs. The massive amounts of debt the government has taken on will only escalate. As the years pass by, the Social Security numbers get grim.

Imagine a scenario 10-15 years down the road where we are in a financial crisis due to a heavy debt load and out of control deficits. People are angry that options 1-3 above have already been taken and there is talk of cutting benefits even further. It’s not hard to imagine a socialistic government in place that feels that it would be best to help its citizens during their retirement years by better managing their IRA’s and 401k’s by seizing those assets to help shore up Social Security for the good of mankind.

While those who have worked and saved so hard for all those years would regard this as theft, a large majority of people who don’t save for retirement, who wouldn’t be losing anything, and would think this is a good idea in order to guarantee their retirement and financial security. I’ve seen statistics that something like 70% of Americans do not even have a $1000 emergency fund. If you have no job, no savings, and little prospects, it would be very easy to vote for a support a system that would confiscate 401k’s for the betterment of society.

There are people in Congress who want to “encourage” plans to convert people’s 401k’s to annuity streams when they retire, it makes me wonder if this is just the first step to get people used to the idea.

While I don’t think there is a high likelihood this will happen anytime soon, it does make you think about what could happen and it doesn’t really seem that far-fetched.

The Hang Seng fought down its early gains to close down .8%. No one wants to make big bets ahead
of today’s Summit meeting, which marks the 20th since late 2009, let’s hope this is the one people
remember.

German unemployment rises and has an inverse effect on the market hitting the German Dax for a
1.7% loss which has a domino effect on many other European countries. The FTSEurofirst shed .9%
enlightened by the German data. European investors do not seem confident that the Summit will
produce any productive results. Maybe a history lesson on the difficulties of interlocking so many
different economies into one currency based group.

Its looking like a grim morning for financials as so many are already being hit during pre-trade; BSC –
8.6%, JPM -5.2%, BAC -1.5%, MS -1.15% and C -1%.

Crude slides this morning down to just above $80, natural gas is down .75% to 2.75, gold and silver also
in the red both under .6% so far.

Contributer Chris Rygh is currently pursuing his MBA in Wisconsin and has a passion for the Market.
Comments can be directed to ryghcw19@uww.edu

Homebuilding stocks were bullish after the increase in pending homes sales data. Homebuilder Lennar (LEN) was up almost 5%, KB Home (KBH) was up 4.19% and D.R. Horton (DHI) was up 3.02%.

O’Reilly Automotive (ORLY) fell over 16% after announcing that 2nd quarter earnings expectations will come in lower than expected as well as lower guidance.

Boeing (BA) rose .89% as it changed their commerical unit CEO.

H&R Block Inc. (HRB) gained 3.38% to $15.60 as higher tax filing volume made up for losses in earnings.

Sealy Corp. (ZZ) rose 8.82% as they posted higher margins based on higher pricing of luxury mattresses.

Fast Forward to 7:42