UPDATE: see ‘MF Global Clients – $3 Billion Frozen‘ below
A dear friend wrote last week,
‘I have been reflecting on some obvious, but often neglected thoughts:
- There can be no morality without authority.
- There can be no authority without fear.
- There can be no fear without accountability.
- There can be no accountability without consequences.
He then goes on to mention Alexis de Tocqueville,
“In his book ‘Democracy in America’ [Alexis] wrote that democracy can only work as long as there is an agreed-upon morality among the people. If that erodes, tyranny will follow as the dictator enforces his standard of morality upon the nation.”
‘[...] Pray that our Heavenly Father will graciously deliver us from ourselves.’
After reading his letter and discussing the arrangement of deck chairs on the Titanic with Jim R [close friend] and Dad – ‘Puritans’ came to mind. Escape being their last resort – a life boat, if you will.
Interesting that the closing paragraph of ‘Puritans’ on Wiki reads…
But with the obvious moral decay of our government and the likelihood of a future dictatorship, unlike the Puritans we have no ‘new land’ to inhabit. And with no ‘life boat’ [new land] for this one-time Republic, our true character will be tempered as we are forced to make a stand — lines drawn.
Oswald Chambers writes,
“Some of us run away instead of standing; when there is a fresh onslaught of the wiles of the devil we lose heart instantly; and instead of standing we scuttle, and others have to stand until we are sufficiently ashamed to come back again. We have to take on the initiative in standing against panic. One strong moral man will form a nucleus around which others will gather; and spiritually, if we put on the armour of God and stand true to Him, a whole army of weak-kneed Christians will be strengthened. Remember, we have to take the initiative where we are, not where we are not.”
Ann Barnhardt got the memo. Her ‘line in the sand’ is somewhat tame compared to previous lines she’s drawn, and I like it.
The Blaze reports,
‘Ann Barnhardt describes herself as a an “an old-school commercial hedge broker specializing in CATTLE and GRAIN.” And she just shut down her business by delivering a passionate and chilling open letter posted on her website.’
The Entire System Has Been Utterly Destroyed By The MF Global Collapse
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 in our eyes.”
With Best Regards-
I’ll end it on this note of true hope and encouragement,
“For our struggle is not against flesh and blood, but against the rulers, against the authorities, against the powers of this dark world and against the spiritual forces of evil in the heavenly realms.” / “Stand firm then, with the belt of truth…and the shield of faith, with which you can extinguish all the flaming arrows of the evil one.” — Ephesians 6:11-18
UPDATE (11.21.2011): MF Global Clients – $3 Billion Frozen
(Yahoo) Three weeks after MF Global’s collapsed, furious former customers are still fighting for access to billions of dollars as they question why as much as two-thirds of their money is still stuck.
While authorities have touted the fact that they are returning 60 percent of the collateral and cash that had been frozen in the wake of the broker’s October 31 bankruptcy, a closer look shows that in fact only about 40 percent of customers’ total funds have been authorized for release so far.
The remainder, more than $3 billion, ostensibly remains on hand to cover a shortfall originally estimated by MF Global to regulators at just $600 million.
Because the bankruptcy trustee, regulators and exchanges have made no comment on the missing funds in weeks — and have given no information as to how much cash they are retaining — customers are left guessing exactly how much might end up in the creditors’ process of the bankruptcy.
After weeks of intense lobbying by customers and exchanges, trustee James Giddens last week won court approval to release another $520 million in funds from MF Global accounts that contained only cash as of October 31.
But that has still left thousands of customers in an uproar. Clients who had a mix of cash and trading positions have yet to see a dime of their excess funds, they say. The trustee is planning a third cash transfer to cover these clients, but no timing for that tranche has been announced.
“The whole process is a mess,” said Jason Skole, a private investor who had invested $200,000 at the start of this year in a small hedge fund who traded through MF Global.
“Those who had just cash positions will get some of their money. All I’ve got is 60 percent of the small amount of collateral I had backing trades,” he said. He says around $185,000 of his money is still frozen at the bankrupt firm.
Giddens said late last week that they were working on a third bulk transfer to “true up” the value of distributions so that all former customers get the total 60 percent of their net equity, but they weren’t yet confident enough in MF Global’s bookkeeping and cash on hand to go beyond that.
“We’ve seen enough (money) to make the 60 percent distributions but we can’t distribute money we don’t have,” Giddens’ spokesman Kent Jarrell told Reuters on Sunday.
Democracy vs. Socialism – nothing in common but one word, ‘equality’: HERE
We are a nation of takers, not makers: HERE
Destroying your hope: HERE
Weak-Kneed Christians: HERE
The And And The Grasshopper parable: HERE
The consequences of entitlement: HERE
Liberty slips away: HERE
A call to Liberty: HERE
A chariot to victory: HERE
God Bless America: HERE