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

By | July 5, 2021
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 example, any funds that were
withdrawn from MFG accounts in the run-up to the collapse, either
because of suspicions the customer 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