"The Entire System Has Been Utterly Destroyed By The MF Global Collapse"

Discussion in 'Wall St. News' started by Tom B, Nov 18, 2011.

  1. Tom B

    Tom B

    This seems to be a glass half full perspective.

    "The Entire System Has Been Utterly Destroyed By The MF Global Collapse" - Presenting The First MF Global Casualty

    Presented without comment, merely to confirm that the market as we know it, no longer exists.

    BCM Has Ceased Operations (source)
    Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM MST
    Dear Clients, Industry Colleagues and Friends of Barnhardt Capital Management,

    It is with regret and unflinching moral certainty that I announce that Barnhardt Capital Management has ceased operations. After six years of operating as an independent introducing brokerage, and eight years of employment as a broker before that, I found myself, this morning, for the first time since I was 20 years old, watching the futures and options markets open not as a participant, but as a mere spectator.

    The reason for my decision to pull the plug was excruciatingly simple: I could no longer tell my clients that their monies and positions were safe in the futures and options markets – because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse. Given this sad reality, I could not in good conscience take one more step as a commodity broker, soliciting trades that I knew were unsafe or holding funds that I knew to be in jeopardy.

    The futures markets are very highly-leveraged and thus require an exceptionally firm base upon which to function. That base was the sacrosanct segregation of customer funds from clearing firm capital, with additional emergency financial backing provided by the exchanges themselves. Up until a few weeks ago, that base existed, and had worked flawlessly. Firms came and went, with some imploding in spectacular fashion. Whenever a firm failure happened, the customer funds were intact and the exchanges would step in to backstop everything and keep customers 100% liquid – even as their clearing firm collapsed and was quickly replaced by another firm within the system.

    Everything changed just a few short weeks ago. A firm, led by a crony of the Obama regime, stole all of the non-margined cash held by customers of his firm. Let’s not sugar-coat this or make this crime seem “complex” and “abstract” by drowning ourselves in six-dollar words and uber-technical jargon. Jon Corzine STOLE the customer cash at MF Global. Knowing Jon Corzine, and knowing the abject lawlessness and contempt for humanity of the Marxist Obama regime and its cronies, this is not really a surprise. What was a surprise was the reaction of the exchanges and regulators. Their reaction has been to take a bad situation and make it orders of magnitude worse. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate. This is unfathomable. The risk exposure precedent that has been set is completely intolerable and has destroyed the entire industry paradigm. No informed person can continue to engage these markets, and no moral person can continue to broker or facilitate customer engagement in what is now a massive game of Russian Roulette.

    I have learned over the last week that MF Global is almost certainly the mere tip of the iceberg. There is massive industry-wide exposure to European sovereign junk debt. While other firms may not be as heavily leveraged as Corzine had MFG leveraged, and it is now thought that MFG’s leverage may have been in excess of 100:1, they are still suicidally leveraged and will likely stand massive, unmeetable collateral calls in the coming days and weeks as Europe inevitably collapses. I now suspect that the reason the Chicago Mercantile Exchange did not immediately step in to backstop the MFG implosion was because they knew and know that if they backstopped MFG, they would then be expected to backstop all of the other firms in the system when the failures began to cascade – and there simply isn’t that much money in the entire system. In short, the problem is a SYSTEMIC problem, not merely isolated to one firm.

    Perhaps the most ominous dynamic that I have yet heard of in regards to this mess is that of the risk of potential CLAWBACK actions. For those who do not know, “clawback” is the process by which a bankruptcy trustee is legally permitted to re-seize assets that left a bankrupt entity in the time period immediately preceding the entity’s collapse. So, using the MF Global customers as an may have had about MFG from, say, watching the company’s bond yields rise sharply, or from purely organic day-to-day withdrawls, the bankruptcy trustee COULD initiate action to “clawback” those funds. As a hedge broker, this makes my blood run cold. Generally, as the markets move in favor of a hedge position and equity builds in a client’s account, that excess equity is sent back to the customer who then uses that equity to offset cash market transactions OR to pay down a revolving line of credit. Even the possibility that a customer could be penalized and additionally raped AGAIN via a clawback action after already having their customer funds stolen is simply villainous. While there has been no open indication of clawback actions being initiated by the MF Global trustee, I have been told that it is a possibility.

    And so, to the very unpleasant crux of the matter. The futures and options markets are no longer viable. It is my recommendation that ALL customers withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity. The system is no longer functioning with integrity and is suicidally risk-laden. The rule of law is non-existent, instead replaced with godless, criminal political cronyism.

    Remember, derivatives contracts are NOT NECESSARY in the commodities markets. The cash commodity itself is the underlying reality and is not dependent on the futures or options markets. Many people seem to have gotten that backwards over the past decades. From Abel the animal husbandman up until the year 1964, there were no cattle futures contracts at all, and no options contracts until 1984, and yet the cash cattle markets got along just fine.

    Finally, I will not, under any circumstance, consider reforming and re-opening Barnhardt Capital Management, or any other iteration of a brokerage business, until Barack Obama has been removed from office AND the government of the United States has been sufficiently reformed and repopulated so as to engender my total and complete confidence in the government, its adherence to and enforcement of the rule of law, and in its competent and just regulatory oversight of any commodities markets that may reform. So long as the government remains criminal, it would serve no purpose whatsoever to attempt to rebuild the futures industry or my firm, because in a lawless environment, the same thievery and fraud would simply happen again, and the criminals would go unpunished, sheltered by the criminal oligarchy.

    To my clients, who literally TO THE MAN agreed with my assessment of the situation, and were relieved to be exiting the markets, and many whom I now suspect stayed in the markets as long as they did only out of personal loyalty to me, I can only say thank you for the honor and pleasure of serving you over these last years, with some of my clients having been with me for over twelve years. I will continue to blog at Barnhardt.biz, which will be subtly re-skinned soon, and will continue my cattle marketing consultation business. I will still be here in the office, answering my phones, with the same phone numbers. Alas, my retirement came a few years earlier than I had anticipated, but there was no possible way to continue given the inevitability of the collapse of the global financial markets, the overthrow of our government, and the resulting collapse in the rule of law.

    As for me, I can only echo the words of David:

    “This is the Lord’s doing; and it is wonderful in our eyes.”

    With Best Regards-
    Ann Barnhardt

  2. "The Entire System Has Been Utterly Destroyed By The MF Global Collapse"

    seems like a gross hyperbole.

    This article alleges that:

    "There is massive industry-wide exposure to European sovereign junk debt. "

    There must be people here who know whether this is true or not.

    Can anyone cast some light on whether most/all of the futures brokerages that so many of us use are massively exposed to European sovereign junk debt?

    One or two counter-examples alone would disprove the generalization.
  3. Specifically, they froze customers out of their accounts WHILE THE MARKETS CONTINUED TO TRADE, refusing to even allow them to liquidate.


    Help me out here. You can't access your funds, you could take a loss on your trade(s) and possibly have a margin call yourself?
  4. AK100


    She makes some good points but charges $27 a round turn and makes it sound like her clients are getting a great deal.

    Hmmm, hard to take a broker seriously who charges such an outrageous amount.
  5. xiaodre


    Another person who seems to be doing God's work! Great choice, Ann. Sit it out on the sidelines. A dumb bitch has got to know her limitations.

    The last thing I want is another government bailout (or in your words, backstop) of any brokerage. Including GS. If it's too big to fail, it's actually too big to keep alive.
  6. Always with women.. a thousand words when a dozen will do
  7. There is nothing at all outrageous at charging such a price for broker assisted futures trades.
  8. Well, it's clear that she has no edge, and was probably looking for a way out anyway. She's a coward, and most likely never had any trading systems to govern her trades. It's amazing an IB would only trade cattle for 8 years <b>and solicit money for those trades...just to quit because she fears the unknown!</b>

    She will be proven as chicken little through and through. I do agree with her assesment of the corruption in the Obama administration but if you really think the President of the United States of America is a criminal...I mean, it's like saying "He wants to destroy the country", when, any man in that position obviously knows he's got to do what he has to do, even if that means doing things for the sake of political expediency that is probably more prevalent with this President than any before him but that doesn't mean he had anything AT ALL to do with what Jon Corzine corruptly robbed from his customers.

    He will be sentenced after a couple years of costly litigation certain to eat into the cash that should have been segregated for use by clients. It's despicable in every way, shape, and, form, but I use that like an old cliche having said it at least 5 or 6 times on ET.

    She doesn't appear to be a rational woman. I don't think either of my two FCMs PFGBest and Interactive Brokers would ever do such things. She is completely mistaken with regard to systemic risk. There is none (with regard to any other FCM bilking people out of investable cash to use as its "personal piggy bank (sorry, another cliche in finance)), and thank god there is not going to be any bailouts. There's no SIPC and there's nothing like the FDIC either. There's only the clearing house, and that's just as much of a guarantee as either. She's forgotten nearly all of her training about market structure, though the material is light, the compliance regulations are crystal clear with regard to customer segregation and misuse of client funds.

    I will note this blogpost, but as far as I'm concerned she appears to want to make political statements rather than try to continue making decisions about the value of the commodities she chose to be an IB for. She might have been sick of paying NFA fees over $1,000 per year to keep her license, or was actually unable to maintain min eq requirements of $50,000 which is the most likely reason even if she doesn't want to admit it, especially when it comes to $27 cattle futures. When it comes to quiting, I'd have to be broke for that to happen, so I don't know what the fuck this woman's problem is, because there is no evidence that any other FCM made such stupidly suicidal leveraged bets. On that I know she is completely wrong, and it's a disservice to her clients. I doubt she'll ever work as a commodities broker again, and having appeared to work over 16 years at that just to quit because an evil, corrupt individual violated his fiduciary duties doesn't add up. In short, she's making a big mistake, but maybe she doesn't feel fulfilled and wanted to leave anyway. Go figure. It's not a smart decision given her employment history which now goes through a certain midlife crisis about the sky falling.

    As far as the government's response to this there will certainly be hearings and investigations along with some seminole legislation. But, what the fuck! We had all these regulations. They knew with absolute certainty they weren't allowed to that. And why they couldn't admit they were wrong and take a loss is mind boggling to me. It doesn't matter what the hell regulations are if the company just figures it can steal customer's cash whenever it has to pay bills. Incorrigible. All the way incorrigible.
    Fucking incorrigible. Jon Corzine will serve at least a 5 year jail term when he's convincted, and if he squeals maybe he'll get a little less jail time. I'm sure he'll say they just made the wrong bet but there isn't any question that they know WHAT THE FUCK SEGREGATION MEANS, FUCKING POS ASS HOLE!
  9. It shouldnt be.

    Corzine's ego was just too big for a small outfit like MF Global.
  10. No, ego gets found out on Wall Street. It wasn't that. It was ethics. He had none. Otherwise any one of his quants or traders on the desk would have told him he's a fucking idiot, but I still think the situation is funny. There's paper trails so long that we should simply declare any of the so-called "lost funds" as previously spent due to excessively leveraged trading in instruments only the stupidest and most arrogant of Wall Street would have tried to call a bottom on. Couple that with the fact that I PERSONALLY GUARANTEE THE TRUSTEE APPOINTED WILL RECOVER ZERO DOLLARS IN NET GAINS FOR CLIENTS WHILE GETTING PAID THE MOST EXORBITANT HOURLY RATE I'VE EVER SEEN ANY CROOKED STREET LAWYER CHARGE, going well passed the hundred million dollar range.

    The last I checked, this guy was billing $897 per hour and his team of supposedly 10-20 crack lawyers and assistants each making $500 an hour AND THERE'S NOT GOING TO BE A FUCKING DIME LEFT BECAUSE OF THIS APPOINTMENT. He was Lehman Brothers attorney billing Lehman personally for up to $160 million about and recovering absolutely squat for funds for shareholders. The man is a complete chyster, and a con artist wearing judicial robes even.
    #10     Nov 18, 2011