Tuesday, November 01, 2011


Right now, two critical situations are rocking the financial world:

Greece is holding a referendum for the EU bailout/austerity package.  Seeing how this finishes indenturing the Greek People and they get to vote on it, it means the bailout's doomed.  Which will likely cause the economic collapse of Europe, and a week or so after the rest of the world.

MF Global default.  I'll give you two pertinent articles by Ann Barnhardt:

4. If any of you are doing any futures and/or options business with a broker or office that clears through MF Global, which is basically the old EDF Man merged with what was left of Refco after it imploded, and is the one of the biggest Futures Commission Merchants in the world and in the U.S., I would get my money and positions out of there. It is toast. Here is the story at ZeroHedge:
This is yet ANOTHER glaring testament to the massive corruption and incompetence of the regulatory bureaucracies in the financial industry. The regulators and auditors aren't keeping these monstrosities from happening - they are facilitating it, and then when the company implodes, Goldman Sachs or someone else conveniently shows up to buy the remains for pennies on the dollar. See how that works? Oh, and by the way, Jon Corzine is the CEO of MF Global and is widely understood to be next in line to be Secretary of the Treasury should Timmy Geithner either resign or be thrown under the bus. These people are jackals. Evil, evil jackals.
This is a chart of MF Global's bond yields (aka risk) just since September 1st. That's a move from 6.25% to 18%. That is what is referred to as a "parabolic increase". Things like this never end well.

Look at this lying scumbag on June 30th, 2011. Look at the eyes. He knows the company is going down, and is in it purely for the 8-figure golden parachute. He literally makes my skin crawl. Behold your next Treasury Secretary - if the Republic lasts that long. Either way, with men like this walking the halls of power, this nation CAN NOT SURVIVE. No morality, no justice, no civilization. It is that simple.

That was last Thursday.  Ms. Barnhardt gives a second alert at the end of the week:

4. More MF Global collapse news. Here is a URL to a Reuters story from this morning:
The nutshell is that MF Global is toast and they are working feverishly this weekend to get the customer business sold. Here is the problem. Guess who the potential "buyers" are? Citibank, JP Morgan, Wells Fargo, etc. In other words, MF Global business may end up on the books of the very banks that are quintuple and sextuple insolvent and are absolutely guaranteed to fail in the near future. (Uh, how can insolvent banks bid on, much less buy the largest futures commission merchant in the country? Talk about crack-smoking.) Okay, so when these banks fail, what do you think that "failure" is going to look like? Um, it is going to be a nationalizing of those banks. In other words, Barry Soetoro is going to be your new clearing house. Out of the frying pan and into the fire! Get out of there, y'all.

Yesterday, she nutshells the MF Global collapse:

Nutshelling the MF Global Collapse
Posted by Ann Barnhardt - October 31, AD 2011 11:14 AM MST
Yes, I called it late last week and strongly urged MF customers to make a hasty exit stage right, but I absolutely did not see what happened this morning coming. This is utterly unprecedented. The Chicago Mercantile Exchange issued an email circular this morning (I received mine at 8:39 am MDT) stating that all MF Global positions were limited to LIQUIDATION ONLY and all MF employees and brokers and traders were banned from the floor of the exchange. 1. As I mentioned last week, MF Global came to its present form back in 2005 when the then-biggest clearing firm, Refco, imploded and was bought by EDF Man. The new, huge firm was then renamed MF Global. When Refco imploded in 2005, NOTHING like this happened. It was a relatively smooth transition, trading was not interrupted, and most of the Refco employees were absorbed into the new company. There was absolutely NO interruption of customer access to positions.
2. Shutting off access of customers to their floor brokers and limiting them to liquidation-only is UNPRECEDENTED. If a big account did not have multiple clearing relationships, the risk exposure this morning for those firms is terrifying to ponder. I did not see this coming. The whole industry is pretty much in shock.
3. Let's not forget that a whole lot of people have just lost their jobs. All of the MF clerks, back office staff, everyone who worked for MF on Friday is now unemployed this morning. Those people matter. John Corzine views them as meaningless economic units who exist only to serve him and advance his power and increase his personal wealth, but John Corzine is an evil sociopath who should be permanently removed from society and imprisoned for the rest of his life so that he can do no more damage. Fricking jackal.
4. Speaking of Corzine, more info is coming out in the bankruptcy filings. First, Corzine stands to reap a $12.1 million severance package / golden parachute per the bankruptcy filing. But that isn't the worst. Corzine was hired by MF less than two years ago. He promptly went about loading the company up on European bonds. That in and of itself is damning enough. Remember, Corzine is Goldman Sachs. He knew EXACTLY what was going on in Europe and he knew that European paper was junk. But guess which European countries he loaded up on? Greece, Portugal, Italy and Ireland. The four little PIIGs. Corzine intentionally drove MF into the ground so that someone, and my money is on Goldman Sachs, could come in and buy the remains for 30 cents on the dollar or less. Watch the news. Watch and see who ends up buying the remnants of MF. If it isn't Goldman outright, I'll bet it is a "holding company" that is tied to Goldman. As an astute commenter over at ZeroHedge.com said last night, it looks like Corzine never really stopped working for Goldman. He just moved his office into MF Global's suite.
5. And now, ONE MORE TIME regarding the financial industry regulators in this country. Guys, they are evil, corrupt and incompetent. The regulatory bodies are run by evil, evil people at the top who are complicit in these goings-on. There is NO POSSIBLE WAY that MF Global could have passed any honest audit with the amount of exposure it was carrying in the European bond market. By the way, MF Global's audit would have fallen under the jurisdiction and oversight of the Chicago Mercantile Exchange itself AND the Commodity Futures Trading Commission on the Federal level. It is just impossible that the CME and the CFTC didn't know MF's position and risk exposure all along. The second tier in these regulatory agencies are a combination of evil, greedy and incompetent bureaucrats who could very well be classified as "useful idiots" who will do anything, say anything, or overlook anything just so long as their salary check clears the bank every month. The third tier are full-blown useful idiots - and by that I mean totally, completely and astoundingly unqualified and incompetent "foot soldiers", many of whom are affirmative action hires. When things like this happen (and there are other examples of massive ponzi schemes being ignored in recent history, like the Sentinel Management Group fiasco) what these regulatory bodies do is lay the blame for "missing" the red flags at the foot of the affirmative action hires who are the on-site auditors and who are made to sign off on the audits. Do you see this? Do you see the evil we are dealing with here?
6. And now here is a paragraph that everyone in the financial industry, but most particularly the futures industry, should send viral. Every Introducing Broker and Futures Commission Merchant in the world is being targeted for extinction by the megabanks. They want you GONE. Goldman, Citi, JP Morgan, etc. They are working with and through the financial regulatory bodies and with the Federal Government via such legislation as Dodd-Frank to force out of business every FCM and fold all of that business into the megabanks. IBs like me are also a target, but we IBs are meaningless guppies compared to whale-sized FCMs.
Corzine was SENT into MF Global with the objective of collapsing it and rolling the remains into Goldman (presumably). And he was paid eight figures to do it, AND promised SEC TREAS after Geithner. If you had said six months ago that the largest FCM in the U.S. would be taken down, everyone would have laughed in your face, but here we sit. The only question is, who is next? How long will an FCM like ADM last before looking at Dodd-Frank and saying, "Screw this. We're selling our clearing operations and we'll just go back to straight-up product merchandizing." Why shouldn't they? If the FCM profit center is made impossible by the government and the corrupt regulatory bodies, why would they continue to operate an FCM? Why not sell to Goldman or one of the other megabank entites and then do their exchange-traded hedge business through them as a customer? When will the old Chicago boutique firms be similarly forced out, either through regulation that makes their business impossible, or through outright sabotage as with Corzine and MF? None of you FCMs are safe. THEY WILL COME AFTER YOU AT SOME POINT. You have been targeted for extermination. Either you wake up to this fact and expose these regulatory bodies, megabanks and the Federal Government and fight them, or you are going to end up like MF, being bought by Goldman or one of the other fascist government-connected megabanks for pennies on the dollar. You have been warned.
7. This MF Global collapse is a small-scale (yes, that's right, SMALL-SCALE) foretaste of what is going to happen to the entire system. When I say get your money out of the market, out of paper instruments, and turn it into something real that is physically located on your property, that you can then stand in front of with an assault rifle and physically defend, I'M NOT KIDDING.
**Just for the sake of clarity, I clear exclusively through Penson right now. I have previously cleared RCG, and worked in an RJO branch office which RJO purchased from LFG in 2000, before starting my IB in 2006. That is the extent of my FCM relationship history.

Uh-oh. MF Global has missing Customer Seg Funds.
Posted by Ann Barnhardt - October 31, AD 2011 6:28 PM MST
The Litterbox Liner of Record is reporting tonight that the reason the MF Global 11th hour sale fell apart in the wee hours last night is because due diligence audits have revealed that CUSTOMER FUNDS ARE MISSING to the tune of about $700 million. Yep. It appears that ol' Johnny Corzine moved excess (not tied up in margin) customer cash in order to prop up his proprietary positions.
If this SOB isn't sent to prison for life, then there should be a national general strike. If Corzine is made SEC TREAS, militias should form, muster and march, and states should start seceding from the Union. And I'm not kidding.
New York Times citation HERE.
Here is the URL for a ZeroHedge.com piece citing Reuters stating the MF Global is refusing to turn over its books - even though the company is dead. In other words, Corzine has ordered the shredding in order to protect himself and maintain plausible deniability. My God. If MF Global was tapping what has heretofore been utterly SACROSANCT, namely customer segregated funds, and the Regulators either didn't catch it or allowed them to do it, then the entire system could lose customer confidence and collapse. Every FCM on the PLANET had damn well better be able to prove the integrity of its customer segregated funds IMMEDIATELY.

Then she compares her own commodity margins with MF Globals...

Scoop for a journalist! MF Global Inflated Margins
Posted by Ann Barnhardt - October 31, AD 2011 7:05 PM MST
Um, Journalists? ZeroHedge people? Mr. Denninger? Market-Ticker forum people? You might want to pick this up and triple check me on this. Okay, the NY Times and Reuters are reporting the MF Global was tapping customer seg funds to prop up its proprietary positions, which is just about the biggest crime an FCM can commit, right? I saw in a ZeroHedge thread that back in April MF was charging initial margin requirements at 175% of the exchange. So, I decided to cruise on over to the MF Global website and pull up their latest margin requirement guide and compare that to my clearing firm's rates.
Ho-ho-ho. Johnny Corzine was charging massive overages on margin requirements relative to the Exchange's SPAN requirements. And guys, every SPAN margin that I am quoting below is the HIGHER SPEC MARGIN, not hedge. Um, now we know why. Some comparisons:
Corn: MF $3640 SPAN: $2365 = 53.9% overage
Soybeans: MF $5500 SPAN: $3375 = 63.0% overage
Wheat: MF: $3825 SPAN: $3040 = 25.8% overage
Unleaded Gas: MF: $11340 SPAN: $9115 = 24.4% overage
Crude Oil: MF: $9000 SPAN: $8100 = 11.1% overage
Live Cattle: MF: $3780 SPAN: $1620 = 133% overage
30-Year Bonds: MF: $5208 SPAN: $4185 = 24.4% overage
Note how the smaller ag contracts are more heavily inflated than the uber-competitive HUGE contracts like Crude Oil and Bonds.
Here are the two URLs I used:
Here is the URL for my clearing firm's margins:
Compare and contrast. It looks like MF massively inflated margin requirements so that Corzine could tap the overage between the Exchange's SPAN requirement and the MF Global requirement, and use that difference to prop up his proprietary trades. There ARE NOT WORDS in the English or Greek languages to describe how illegal this is.
Someone please pick this up and run with it. PLEASE.


A collapse will be a good thing.  Wall Street has been destroying our streets, our economy for decades and the sooner it's gone the sooner it's influence over OUR PUBLIC SERVANTS will disappear.  Maybe then with the help of some... encouragement and correction... we can rebuild our nation.

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