On October 26, 2011 Ann Barnhardt began reporting on the MF Global debachal from day one, long before the mainstream media reconized the magnituded of the unwinding of an evil company founded by evil greedy men. Ms Barnhardt labels the men as Marxist. She is absolutely correct. As per her nature she is not afraid to stick her own neck out to tell what is true, while most others cower in a press room corner fearing the Marxist men taking over this country one day at a time. Thank you, LORD, for Ann Barnhardt.
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I will continue to be update A Reasoned Report by adding to this post each time Ann Barnhardt reports more information on her blog: Barnhardt Capital Management, Inc. I want to keep a historical record of all known MF Global crimes as they unfold and are revealed in the days and weeks to come. You can be sure this story will be a sad, sad story by the time the last sentence is written. My confidence in Ms Barnhardt to report this story (although she is not a reporter) can not be matched by any other reporter. Both, her expertise in the world of high finance and her integrity to tell the truth (no matter how painful) can be totally relied on.
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The posts copied from the Barnhardt Capital Management, Inc. blog and reposted on this blog, A Reasoned Report, are listed below.
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October 26, AD 2011 10:44 AM MST - MF Global
October 31, AD 2011 11:14 AM MST - Nutshelling the MF Global Collapse
October 31, AD 2011 6:28 PM MST - Uh-oh. MF Global Has Missing Customer Seg Funds
October 31, AD 2011 7:05 PM MST - Scoop for a journalist! MF Global Inflated Margins
November 2, AD 2011 9:40 PM MST - W.R.O.L. (Part 1)
November 2, AD 2011 9:39 PM MST - W.R.O.L. (Part 2)
MF Global
Posted by Ann Barnhardt - October 26, AD 2011 10:44 AM MST
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:
http://www.zerohedge.com/news/will-goldman-be-mf-globals-executioner-terminal-collateral-calls-yields-explode
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.
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.
And now back to the concept of WROL. I have told the MF Global customers that I have spoken to this week that they should spiritually accept the fact that all of their money is gone. IF there is any reparation, it will take a very long time, and it will be far less than what was stolen from them. This way, if they do get any money back, they will be pleasantly surprised and won't let this consume their spirits and blacken their hearts. And yeah, I'm completely serious. HEAR ME OUT.
Granted, at this, every single person has become upset and said, "There should be a law to keep this from happening! The government should be able to recover our money!"
And here is where the conversation gets really, really unpleasant.
There WAS a law. There WAS a very, very strict law. WAS. Past tense. What we are seeing right now is what every single culture that has been conquered by Marxists has experienced: the elimination of the Rule of Law. This nation is no longer a nation of laws. It is a nation of men. The law no longer matters. All that matters is who you are and who you know. Jon Corzine is part of the Marxist-Obamaist cabal, and therefore laws do not apply to him.
Further, the government that you, up until now, have turned to in order to enforce the Rule of Law is now itself the entity that is stealing from you. In other words, there is absolutely NO ONE to turn to for law enforcement because the is no Rule of Law. Technically, your County Sheriff chould have jurisdiction over this, but in reality if your County Sheriff made any move toward enforcing the law and holding Jon Corzine or any of the rest to account, your County Sheriff would himself be removed, arrested or killed by the lawless Marxist-Obamaist regime.
Do you understand now? Do you understand the gravity of what is happening? Let me tell you about the Ukraine in the early 1930s. Stalin was ruling the Soviet Union with an iron fist, and wanted to get rid of the Ukrainian population which he deemed a threat to his power. Beginning in 1931, local Soviet administrators began refusing to provide the Ukrainian farmers with seed wheat. The farmers, watching the planting window close rapidly, were eventually BEGGING the Soviet administrators and central planners for seed. None was ever provided. When the next harvest came around, the Soviet administrators demanded full-quota harvest production from the Ukrainian farmers. The stunned and livid farmers reminded the Soviets that they had refused to give them any seed at planting time, and thus there was no crop. The Soviets then accused the farmers of hiding and hoarding the wheat harvest from them. The men and working-aged boys were summarily executed on the spot as "counterrevolutionaries". The women and children were left to starve. Cannibalism set in, and many mothers, driven insane with hunger, killed and ate their children. By the end of 1933, millions of Ukranians, both urban and peasant farmers, were dead of a manufactured and completely unnecessary mass starvation, with estimates ranging from 3-5 million dead.
"How can they do this to us? How can they get away with this? Surely there must be someone we can report them to. Surely there is someone who will help us."
Not in a Marxist state. Marxists will rape you and rob you blind and then kill you when you don't display your undying gratitude to them for doing it, and beg them for more. The MF Global victims are learning this lesson right now. Sadly, I fear that what happened to MF is going to eventually become systemic via outright theft and confiscation, and via inflation, which will render all assets held in U.S. dollars essentially worthless. And because this is all being done willfully and consciously by your own Federal Government, there will be no one to turn to to "make it right" or to enforce the Rule of Law.
Welcome to WROL. You MUST keep your wits about you. You MUST accept the reality of what is happening, and prepare and react accordingly. We have one hell of a fight on our hands, and in order to fight effectively we must not be consumed with rage. We must be clear-headed and be able to think rationally and tactically. Consuming rage is extremely detrimental. Righteous anger? Oh, hell yes. Consuming, blinding rage? Absolutely not.
If you haven't purchased long guns and ammunition, freeze dried food, water and fuel, you better be getting about that with a quickness.
Stay tuned!
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.
http://www.zerohedge.com/news/panic-behind-mf-scenes-company-refuses-disclose-information-regulators-even-death
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.
http://www.zerohedge.com/news/panic-behind-mf-scenes-company-refuses-disclose-information-regulators-even-death
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
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.
W.R.O.L. (Part 1)
Posted by Ann Barnhardt - November 2, AD 2011 9:40 PM MST
New acronym for those of you who don't know it already: W.R.O.L. = Without Rule of Law. Sadly, the MF Global clients are learning first-hand what WROL is and what it feels like. This is just the very, very beginning of WROL in (what once was) the United States.
I have talked to several cattle industry contacts who had accounts with MF Global. They have been calling me looking for guidance and assurance that everything is going to be okay and that they are going to be made whole. Sadly, for me to tell them any such thing would be boldfaced lying on my part. And so I tell them the truth.
As of this writing, the amount of customer segregated funds that are missing and have been stolen from MF Global customers stands at a staggering $1.5 Billion, more than double the initial estimate from Monday of $700 million. I will not be the least bit surprised if the $1.5 Billion figure is ultimately revised up even more.
As I laid out earlier, MF was charging very, very high margin requirements relative to the rest of the industry. I suspect that MF (Corzine) was doing this as a means of raising additional interest-free capital.
Quick story. I decided to start my IB in the fall of 2005, and traveled to Chicago to interview FCMs. To my shock, I learned on that trip that the majority of the money made by IBs and FCMs (at that time) was not commissions, but rather the INTEREST on the customer segregated funds. All of the free cash in client accounts, meaning that money not tied up in margin requirements, was invested by the FCM in US Treasury paper. Every month the FCM and the IB would then split the interest income. The FCM I eventually went with offered me a 50-50 split on my office's free cash at the 90 day T-Bill rate. I was very surprised by this dynamic. Having worked in a branch office up until that point, I had always been told that paying interest on customer free cash balances was IMPOSSIBLE, and the only way for customers to earn interest on their funds was to buy T-Bills themselves as initial margin "collateral", if you will. Since T-Bill purchases were in large denomination blocks, all but the largest clients were effectively shut-out of this option. I thought that was just the way it was.
No, no. The reason I was told that interest payments were impossible is because the interest income was a MAJOR income stream for the branch manager. Immediately I was very, very uncomfortable with the idea of clandestinely profiting off of my customers' opportunity interest expense. So, here is what I did. I offered the FCM a 60-40 split, with the FCM getting 60 percent IF and ONLY IF they would calculate and credit my customers' accounts with the remaining 40% every month. I felt it right to pay the FCM more than their usual take for having to go through the extra step and labor of doing these interest credits for each account every month. And, my customers recaptured 40% of their opportunity interest expense (at 90-day T-Bill rates), which effectively cheapened up their commission rate, and in some cases eliminated it completely. It also set me apart, because at that time I was one of the only, if not THE only IB in the United States that paid interest to all of my clients as a built-in matter of policy, and I was able to advertise that fact. And finally, I made exactly the same amount of money that I had initially assumed I would make - namely my commission payout. Win-Win-Win. That, along with a genuine and unique knowledge of my business and field thanks to training I received from an old-timer cattleman, is how a 29 year old girl became a fairly good-sized livestock and grain brokerage firm.
Ever since the last meltdown, the Fed has synthetically suppressed interest rates. T-Bill rates dropped from around 5% to just epsilon above zero and have been that way for years now. I haven't paid any interest to anyone in years because there is no interest income whatsoever from T-Bills.
People are honestly trying to justify MF Global and Corzine's theft by stating that FCMs have sure had it rough these past two years because they have made no money on interest. Uh, like that is some sort of an excuse for STEALING CUSTOMER FUNDS?
As I laid out earlier this week, MF had some seriously inflated margin requirements. It appears that Corzine did this because he viewed the excess cash in the customer segregated accounts as "interest-free capital". Why borrow money from a bank at interest when you can use your customers' money interest free? Who cares if it is illegal? You're Jon Effing Corzine. You are Barry Obama's top Wall Street fundraiser. The laws don't apply to YOU.
I have talked to several cattle industry contacts who had accounts with MF Global. They have been calling me looking for guidance and assurance that everything is going to be okay and that they are going to be made whole. Sadly, for me to tell them any such thing would be boldfaced lying on my part. And so I tell them the truth.
As of this writing, the amount of customer segregated funds that are missing and have been stolen from MF Global customers stands at a staggering $1.5 Billion, more than double the initial estimate from Monday of $700 million. I will not be the least bit surprised if the $1.5 Billion figure is ultimately revised up even more.
As I laid out earlier, MF was charging very, very high margin requirements relative to the rest of the industry. I suspect that MF (Corzine) was doing this as a means of raising additional interest-free capital.
Quick story. I decided to start my IB in the fall of 2005, and traveled to Chicago to interview FCMs. To my shock, I learned on that trip that the majority of the money made by IBs and FCMs (at that time) was not commissions, but rather the INTEREST on the customer segregated funds. All of the free cash in client accounts, meaning that money not tied up in margin requirements, was invested by the FCM in US Treasury paper. Every month the FCM and the IB would then split the interest income. The FCM I eventually went with offered me a 50-50 split on my office's free cash at the 90 day T-Bill rate. I was very surprised by this dynamic. Having worked in a branch office up until that point, I had always been told that paying interest on customer free cash balances was IMPOSSIBLE, and the only way for customers to earn interest on their funds was to buy T-Bills themselves as initial margin "collateral", if you will. Since T-Bill purchases were in large denomination blocks, all but the largest clients were effectively shut-out of this option. I thought that was just the way it was.
No, no. The reason I was told that interest payments were impossible is because the interest income was a MAJOR income stream for the branch manager. Immediately I was very, very uncomfortable with the idea of clandestinely profiting off of my customers' opportunity interest expense. So, here is what I did. I offered the FCM a 60-40 split, with the FCM getting 60 percent IF and ONLY IF they would calculate and credit my customers' accounts with the remaining 40% every month. I felt it right to pay the FCM more than their usual take for having to go through the extra step and labor of doing these interest credits for each account every month. And, my customers recaptured 40% of their opportunity interest expense (at 90-day T-Bill rates), which effectively cheapened up their commission rate, and in some cases eliminated it completely. It also set me apart, because at that time I was one of the only, if not THE only IB in the United States that paid interest to all of my clients as a built-in matter of policy, and I was able to advertise that fact. And finally, I made exactly the same amount of money that I had initially assumed I would make - namely my commission payout. Win-Win-Win. That, along with a genuine and unique knowledge of my business and field thanks to training I received from an old-timer cattleman, is how a 29 year old girl became a fairly good-sized livestock and grain brokerage firm.
Ever since the last meltdown, the Fed has synthetically suppressed interest rates. T-Bill rates dropped from around 5% to just epsilon above zero and have been that way for years now. I haven't paid any interest to anyone in years because there is no interest income whatsoever from T-Bills.
People are honestly trying to justify MF Global and Corzine's theft by stating that FCMs have sure had it rough these past two years because they have made no money on interest. Uh, like that is some sort of an excuse for STEALING CUSTOMER FUNDS?
As I laid out earlier this week, MF had some seriously inflated margin requirements. It appears that Corzine did this because he viewed the excess cash in the customer segregated accounts as "interest-free capital". Why borrow money from a bank at interest when you can use your customers' money interest free? Who cares if it is illegal? You're Jon Effing Corzine. You are Barry Obama's top Wall Street fundraiser. The laws don't apply to YOU.
W.R.O.L. (Part 2)
Posted by Ann Barnhardt - November 2, AD 2011 9:39 PM MST
And now back to the concept of WROL. I have told the MF Global customers that I have spoken to this week that they should spiritually accept the fact that all of their money is gone. IF there is any reparation, it will take a very long time, and it will be far less than what was stolen from them. This way, if they do get any money back, they will be pleasantly surprised and won't let this consume their spirits and blacken their hearts. And yeah, I'm completely serious. HEAR ME OUT.
Granted, at this, every single person has become upset and said, "There should be a law to keep this from happening! The government should be able to recover our money!"
And here is where the conversation gets really, really unpleasant.
There WAS a law. There WAS a very, very strict law. WAS. Past tense. What we are seeing right now is what every single culture that has been conquered by Marxists has experienced: the elimination of the Rule of Law. This nation is no longer a nation of laws. It is a nation of men. The law no longer matters. All that matters is who you are and who you know. Jon Corzine is part of the Marxist-Obamaist cabal, and therefore laws do not apply to him.
Further, the government that you, up until now, have turned to in order to enforce the Rule of Law is now itself the entity that is stealing from you. In other words, there is absolutely NO ONE to turn to for law enforcement because the is no Rule of Law. Technically, your County Sheriff chould have jurisdiction over this, but in reality if your County Sheriff made any move toward enforcing the law and holding Jon Corzine or any of the rest to account, your County Sheriff would himself be removed, arrested or killed by the lawless Marxist-Obamaist regime.
Do you understand now? Do you understand the gravity of what is happening? Let me tell you about the Ukraine in the early 1930s. Stalin was ruling the Soviet Union with an iron fist, and wanted to get rid of the Ukrainian population which he deemed a threat to his power. Beginning in 1931, local Soviet administrators began refusing to provide the Ukrainian farmers with seed wheat. The farmers, watching the planting window close rapidly, were eventually BEGGING the Soviet administrators and central planners for seed. None was ever provided. When the next harvest came around, the Soviet administrators demanded full-quota harvest production from the Ukrainian farmers. The stunned and livid farmers reminded the Soviets that they had refused to give them any seed at planting time, and thus there was no crop. The Soviets then accused the farmers of hiding and hoarding the wheat harvest from them. The men and working-aged boys were summarily executed on the spot as "counterrevolutionaries". The women and children were left to starve. Cannibalism set in, and many mothers, driven insane with hunger, killed and ate their children. By the end of 1933, millions of Ukranians, both urban and peasant farmers, were dead of a manufactured and completely unnecessary mass starvation, with estimates ranging from 3-5 million dead.
"How can they do this to us? How can they get away with this? Surely there must be someone we can report them to. Surely there is someone who will help us."
Not in a Marxist state. Marxists will rape you and rob you blind and then kill you when you don't display your undying gratitude to them for doing it, and beg them for more. The MF Global victims are learning this lesson right now. Sadly, I fear that what happened to MF is going to eventually become systemic via outright theft and confiscation, and via inflation, which will render all assets held in U.S. dollars essentially worthless. And because this is all being done willfully and consciously by your own Federal Government, there will be no one to turn to to "make it right" or to enforce the Rule of Law.
Welcome to WROL. You MUST keep your wits about you. You MUST accept the reality of what is happening, and prepare and react accordingly. We have one hell of a fight on our hands, and in order to fight effectively we must not be consumed with rage. We must be clear-headed and be able to think rationally and tactically. Consuming rage is extremely detrimental. Righteous anger? Oh, hell yes. Consuming, blinding rage? Absolutely not.
If you haven't purchased long guns and ammunition, freeze dried food, water and fuel, you better be getting about that with a quickness.
Stay tuned!
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