Gold Account emptied by MF global
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Re: Gold Account emptied by MF global
Get physical (gold & cash) and direct (LT & ST Bonds) ladies and gentlemen.
A promise is only as good as the entity that makes it and the government that enforces it.
A promise is only as good as the entity that makes it and the government that enforces it.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
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Re: Gold Account emptied by MF global
What does this whole MF Global incident say about the effectiveness of Dodd-Frank?
It's probably about what the failure of Lehman, Bear Stearns, et al says about the effectiveness of Sarbanes-Oxley.
It's probably about what the failure of Lehman, Bear Stearns, et al says about the effectiveness of Sarbanes-Oxley.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
A: “Not unless round is funny.”
Re: Gold Account emptied by MF global
Dodd Frank and SOX are just "feel good" bullshit measures enacted by impotent politicians that wind up costing the consumer money in the long run.
SOX is the reason why more companies haven't IPOed in the last decade. It costs about $10M to hire company to file SOX paperwork. If you're talking about a $100M IPO, that would destroy 10% of the value, just to file the SEC paperwork.
SOX is the reason why more companies haven't IPOed in the last decade. It costs about $10M to hire company to file SOX paperwork. If you're talking about a $100M IPO, that would destroy 10% of the value, just to file the SEC paperwork.
Re: Gold Account emptied by MF global
I find publicly traded stocks to be such an abhoration in some ways to the natural personal responsibility and contracts of a functioning market that I don't know how to judge the regulation around them.
You are talking about creating a contractual framework around businesses that allows shares to be bought/sold by the minute (or split-second), hoping that management will act in the best medium-to-long-term interests of the company, customers, and the communities they do business in, as well as creating so many layers of contracts of non-responsibility for anything that goes wrong that you are almost guaranteed irresponsible actions at every turn.
The corporate entity as it exists today is not what the founding fathers had in mind, and in few ways represents the reality of what we hope to accomplish through the structure, but many more ways simply allows the funnelling of power, money and influence to the few who can see the holes that are built into the very contracts they write.
This isn't intended to be a commie post... just that we take for granted the corporate structure today as a given right that groups of people (investors) have in society. Contracts between groups are fine, as is organizing a unit (an entity) under which their contract can do business, but a gov't-induced shield to any responsibility around that contract creates moral hazards. Enter contract after contract that muddies the understanding of what the reality of the company is and you get even more moral hazards. Regulation is meant to protect against these things, but when you're dealing with an entity that is built from the ground up on the premise of reducing liability for any actions taken by the owners/managers then you have a garbage-in, garbage-out situation that regulation will never fully fix.
You are talking about creating a contractual framework around businesses that allows shares to be bought/sold by the minute (or split-second), hoping that management will act in the best medium-to-long-term interests of the company, customers, and the communities they do business in, as well as creating so many layers of contracts of non-responsibility for anything that goes wrong that you are almost guaranteed irresponsible actions at every turn.
The corporate entity as it exists today is not what the founding fathers had in mind, and in few ways represents the reality of what we hope to accomplish through the structure, but many more ways simply allows the funnelling of power, money and influence to the few who can see the holes that are built into the very contracts they write.
This isn't intended to be a commie post... just that we take for granted the corporate structure today as a given right that groups of people (investors) have in society. Contracts between groups are fine, as is organizing a unit (an entity) under which their contract can do business, but a gov't-induced shield to any responsibility around that contract creates moral hazards. Enter contract after contract that muddies the understanding of what the reality of the company is and you get even more moral hazards. Regulation is meant to protect against these things, but when you're dealing with an entity that is built from the ground up on the premise of reducing liability for any actions taken by the owners/managers then you have a garbage-in, garbage-out situation that regulation will never fully fix.
Last edited by moda0306 on Wed Nov 16, 2011 4:50 pm, edited 1 time in total.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
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Ad Orientem
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Re: Gold Account emptied by MF global
For a somewhat less hysterical perspective on this see here http://www.businessinsider.com/the-trut ... al-2011-11 .
That said "trading" in gold, which is what Celentes was doing is speculative. That's fine if you can afford to lose the money. The PP gold allocation however should be mostly or (ideally) entirely physical. Of all the asset classes in the PP, gold is the one that would be most critical in the event of a catastrophic crisis that could destabilize the financial system. This is a very timely reminder of the reality of counterparty risk.
Futures contracts etc. belong in the variable portfolio. And when the topic is the variable portfolio every discussion should begin and end with the words "caveat emptor."
That said "trading" in gold, which is what Celentes was doing is speculative. That's fine if you can afford to lose the money. The PP gold allocation however should be mostly or (ideally) entirely physical. Of all the asset classes in the PP, gold is the one that would be most critical in the event of a catastrophic crisis that could destabilize the financial system. This is a very timely reminder of the reality of counterparty risk.
Futures contracts etc. belong in the variable portfolio. And when the topic is the variable portfolio every discussion should begin and end with the words "caveat emptor."
Trumpism is not a philosophy or a movement. It's a cult.
Re: Gold Account emptied by MF global
To add a little perspective to my previous post, here's why I say that the legal structure around corporations is a sham in many ways:
The government recognizes and defend's private property and enforces contracts, even in the most conservative or liberal definition of what gov't should do. So in essence, every time we sign a contract out there, big or small, or even shake a guys hand or understand what a store's return policy is, we are depending on the gov't backing of a contract, whether implied or explicit, for any reliance to be put on it... otherwise it's just black ink on paper.
When a group of investors come together, they are effectively forming a contract with each other to give a certain amount of money, time, property or expertise in exchange for ownership share in a profit-seeking operation. To help this process, the gov't might allow people to put a legal box around these activities for no other purpose than to give it a doing-business name and allow it to enter into contracts under that name.
That's not enough though... many investors wanted limited liability, as they are simply passive investors and don't want to lose $100,000 if they invest $1,000 in a venture. Gov't can help by giving this "box" certain attributes that limit the liability of certain investors.
That's not enough though... eventually everyone, including managers, want limited liability... gov't can add that attribute to the box.
That's not enough though... to make it super easy for VERY large corporations to find investors, corporations want an efficient, reliable legal framework within to chop up their box and sell it to people who are looking for a small piece of limited liability ownership.
That's not enough though... now we can do this with all contracts. Securitize it within this framework and hope that the gov't can enforce the whole thing if push comes to shove. Mortgages, commodity operations... all of it can be securitized under this... even the ownership of companies that do this can be chopped up in the very same way, creating so many contracts between the owner and the customer that we've lost all semblence of who exactly is responsible for what... the gov't not only says they'll recognize these complicated contractual chains, but they design a legal framework around them to make it easier.
Pretty soon, instead of a small group of member/managers in a closely-held business who are responsible for its actions and interact with customers, you have millions of shareholders in contract with the board of directors to pick good management, and the management then is too find good employees to improve profits. This management often doesn't live in the towns in which their stores operate nor hold any personal responsibility for the actions that cause harm. Nor do the investors, creditors, board of directors or employees. The contractual box was designed that way BY the gov't. Add to that the fact that these chopped up shares can be traded by the second, and you'll see that we've gotten very far from the initial purpose of the gov't recognizing contracts to begin with.
All these nuances wouldn't be possible if the gov't didn't say at every step, "Sure, even though this goes beyond our simple duty to enforce contracts, we'll develop a legal framework suited for this activity... streamlining it and making it very easy for it to become the overwhelming way business is done, concentrating and funnelling power to the few, while keeping them as free from responsibility as possible."
The gov't isn't simply some kind of referee on the sidelines here... it's actually making the rules in such a way that increases the efficiencies of these activities, yes, but also creates moral hazards and almost guarantees a concentration of power in the hands of the few, without much responsibility for what they do with that power, and too many contracts in between the owners and customers for anyone to tell WTF is going on.
The government recognizes and defend's private property and enforces contracts, even in the most conservative or liberal definition of what gov't should do. So in essence, every time we sign a contract out there, big or small, or even shake a guys hand or understand what a store's return policy is, we are depending on the gov't backing of a contract, whether implied or explicit, for any reliance to be put on it... otherwise it's just black ink on paper.
When a group of investors come together, they are effectively forming a contract with each other to give a certain amount of money, time, property or expertise in exchange for ownership share in a profit-seeking operation. To help this process, the gov't might allow people to put a legal box around these activities for no other purpose than to give it a doing-business name and allow it to enter into contracts under that name.
That's not enough though... many investors wanted limited liability, as they are simply passive investors and don't want to lose $100,000 if they invest $1,000 in a venture. Gov't can help by giving this "box" certain attributes that limit the liability of certain investors.
That's not enough though... eventually everyone, including managers, want limited liability... gov't can add that attribute to the box.
That's not enough though... to make it super easy for VERY large corporations to find investors, corporations want an efficient, reliable legal framework within to chop up their box and sell it to people who are looking for a small piece of limited liability ownership.
That's not enough though... now we can do this with all contracts. Securitize it within this framework and hope that the gov't can enforce the whole thing if push comes to shove. Mortgages, commodity operations... all of it can be securitized under this... even the ownership of companies that do this can be chopped up in the very same way, creating so many contracts between the owner and the customer that we've lost all semblence of who exactly is responsible for what... the gov't not only says they'll recognize these complicated contractual chains, but they design a legal framework around them to make it easier.
Pretty soon, instead of a small group of member/managers in a closely-held business who are responsible for its actions and interact with customers, you have millions of shareholders in contract with the board of directors to pick good management, and the management then is too find good employees to improve profits. This management often doesn't live in the towns in which their stores operate nor hold any personal responsibility for the actions that cause harm. Nor do the investors, creditors, board of directors or employees. The contractual box was designed that way BY the gov't. Add to that the fact that these chopped up shares can be traded by the second, and you'll see that we've gotten very far from the initial purpose of the gov't recognizing contracts to begin with.
All these nuances wouldn't be possible if the gov't didn't say at every step, "Sure, even though this goes beyond our simple duty to enforce contracts, we'll develop a legal framework suited for this activity... streamlining it and making it very easy for it to become the overwhelming way business is done, concentrating and funnelling power to the few, while keeping them as free from responsibility as possible."
The gov't isn't simply some kind of referee on the sidelines here... it's actually making the rules in such a way that increases the efficiencies of these activities, yes, but also creates moral hazards and almost guarantees a concentration of power in the hands of the few, without much responsibility for what they do with that power, and too many contracts in between the owners and customers for anyone to tell WTF is going on.
"Men did not make the earth. It is the value of the improvements only, and not the earth itself, that is individual property. Every proprietor owes to the community a ground rent for the land which he holds."
- Thomas Paine
- Thomas Paine
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Ad Orientem
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Re: Gold Account emptied by MF global
On a side note I just watched the RT video again and took note that Celentes was alerted that there was a problem when he got a margin call. If I needed any further evidence that this is not a guy to pay any attention to for investing advice, that pretty much is case closed in my book. Anyone borrowing money to play in the world's biggest gambling casino is not someone I want to take instruction from.
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NoRemorse
Re: Gold Account emptied by MF global
You need to re-watch that video. My takeaway is that the cash in his account was seized / stolen. That cash was the collateral / margin requirement. Also, it is my understanding that he would build a futures position in gold and then he takes physical delivery. Seems like a good idea as he's able to accumulate on pullbacks and he doesn't pay a premium for physical gold (with the exception of any delivery costs). He said he's been doing this for over 30 years without a problem and he planned to take delivery in December (December contract).Ad Orientem wrote: On a side note I just watched the RT video again and took note that Celentes was alerted that there was a problem when he got a margin call. If I needed any further evidence that this is not a guy to pay any attention to for investing advice, that pretty much is case closed in my book. Anyone borrowing money to play in the world's biggest gambling casino is not someone I want to take instruction from.
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Ad Orientem
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Re: Gold Account emptied by MF global
NoRemorseNoRemorse wrote:You need to re-watch that video. My takeaway is that the cash in his account was seized / stolen. That cash was the collateral / margin requirement. Also, it is my understanding that he would build a futures position in gold and then he takes physical delivery. Seems like a good idea as he's able to accumulate on pullbacks and he doesn't pay a premium for physical gold (with the exception of any delivery costs). He said he's been doing this for over 30 years without a problem and he planned to take delivery in December (December contract).Ad Orientem wrote: On a side note I just watched the RT video again and took note that Celentes was alerted that there was a problem when he got a margin call. If I needed any further evidence that this is not a guy to pay any attention to for investing advice, that pretty much is case closed in my book. Anyone borrowing money to play in the world's biggest gambling casino is not someone I want to take instruction from.
I think you misunderstood my comment. I am not debating that he was the victim of a crime. Or even the process of buying futures contracts, though I think that is speculative and should be done in the variable portfolio. My issue was that he was buying on margin. How do you get a margin call if there was no margin? At the risk of sounding dogmatic, margin is a big no-no.
If speculating in future's contracts inherently leaves you exposed to margin calls, then I would have to amend my views on the subject and say that the practice should be avoided even in speculative investing.
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murphy_p_t
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NoRemorse
Re: Gold Account emptied by MF global
I don't know for sure but perhaps he wasn't using margin. How do we know that he didn't have enough cash in the account to equal the full contract value? After all wouldn't this be necessary to request physical delivery? But if all of his cash was stolen from his account then the account no longer is valuable enough to own that contract thus resulting in a margin call. So it's possible to have enough cash in the account to not use margin. I have no way of knowing if that's what he was doing or when it came time to request physical delivery maybe he would send in additional capital to cover the costs. But he was clear that his core is in physical and his means of purchasing physical is first by buying the gold futures contract and then requesting delivery.Ad Orientem wrote:
NoRemorse
I think you misunderstood my comment. I am not debating that he was the victim of a crime. Or even the process of buying futures contracts, though I think that is speculative and should be done in the variable portfolio. My issue was that he was buying on margin. How do you get a margin call if there was no margin? At the risk of sounding dogmatic, margin is a big no-no.
If speculating in future's contracts inherently leaves you exposed to margin calls, then I would have to amend my views on the subject and say that the practice should be avoided even in speculative investing.
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jackely
Re: Gold Account emptied by MF global
Amen. I heard of Gerald Celente through some of the same venues I heard of Harry Browne. Listening further I heard that he was doing something with gold "options". I have no friggin' clue about "options" be they gold or whatever but it sounds like gambling to me and I don't think that was what HB was about.Ad Orientem wrote: On a side note I just watched the RT video again and took note that Celentes was alerted that there was a problem when he got a margin call. If I needed any further evidence that this is not a guy to pay any attention to for investing advice, that pretty much is case closed in my book. Anyone borrowing money to play in the world's biggest gambling casino is not someone I want to take instruction from.
Re: Gold Account emptied by MF global
Exactly. If you listen to what he's saying, he bought contracts for December delivery presumably some time ago when the price was probably less than what it is now. He was building up cash in his account sufficient to cover 100% of the contracts he originally bought on margin intending to take delivery. MF Global went belly up and now his contracts BUT NOT HIS CASH were taken over by another clearing house. It's as if you bought a car on which you put 20% down, made monthly payments up to one month before you owned the car, but then the loan company went bankrupt and the original loan but none of your subsequent payments were taken over by another loan company. The new loan company tells you that you are mighty delinquent in your payments, and unless you can immediately come up with 80% of the original price of the car repossesses your car (this analogy is not perfect, since in reality the entire deal involved a promise to deliver the car [gold] at a future point in time).NoRemorse wrote: I don't know for sure but perhaps he wasn't using margin. How do we know that he didn't have enough cash in the account to equal the full contract value? After all wouldn't this be necessary to request physical delivery?
Even if he eventually gets his cash back (which doesn't seem likely), he definitely doesn't get the car (gold) at the original price. If this was a position he initiated 6 months ago, gold was $1500 an ounce (or so). Now (even after the recent drop in the gold price) gold is $1750. I'm not entirely sure, but I think his cash account should have increased by the difference in the gold price (at the expense of whoever was short gold) - so if he gets his cash back he'll have turned a tidy profit but he won't end up owning any gold. The current state is he neither has any gold or access to his cash.
Seems like he has a pretty good reason to be pissed.
[edited]
Last edited by rickb on Fri Nov 18, 2011 10:26 am, edited 1 time in total.
Re: Gold Account emptied by MF global
In the midst of chaos, letters and other pieces of paper regarding gold may be worthless. The HBPP is for any asset you can't afford to lose. Somebody with a legitimate paper claim on PMs is about to lose their gold and silver. This is why Harry Browne said that the gold in the PP should be physical metal, kept under your own control.HSBC Sues MF Global Over $850,000 of Gold
An HSBC Holdings Plc (HSBA) unit sued the MF Global Inc. brokerage trustee to establish whether he or another person is the rightful owner of gold bars worth about $850,000 and silver bars underlying contracts between the brokerage and a client.
Five gold bars and 15 silver bars underlie eight Comex contracts between the brokerage and its client Jason Fane of Ithaca, New York, the unit of London-based HSBC said in a court filing yesterday. Both parties have asserted claims to the bars, creating difficulties for HSBC, which is storing them, the bank said. HSBC asked a judge to decide who the rightful owner is.
“HSBC has received conflicting instructions regarding ownership and disposition of the property,”? it said. “Accordingly, HSBC is exposed to multiple liabilities with respect to the disposition of the properties.”? The unit is HSBC Bank USA National Association.
Bullion is selling for about $1,717 an ounce on the Comex in New York, up about 21 percent this year, as investors bought the metal to protect their wealth from Europe’s escalating debt crisis, and reached a record $1,923.70 in September. Treasuries returned 9.3 percent, a Bank of America Corp. index shows.
‘Bars Are Mine’
“These bars are mine,”? Fane said in an e-mail today. “We had a letter from HSBC that they were on the loading dock to be shipped to our warehouse contractor when there was some action taken by a third party to stop or delay shipment.”?
MF Global bankruptcy may bring forth more of the consequences of the (alleged) 100:1 paper vs. physical metal ratio in the gold market. The 5 gold bars and 15 silver bars have at least two apparently legitimate paper claims on them. Imagine if all 100 showed up to make their claims.
You can read the rest of the article here: http://www.bloomberg.com/news/2011-12-0 ... rs-1-.html
Last edited by smurff on Sat Dec 10, 2011 3:27 pm, edited 1 time in total.
Re: Gold Account emptied by MF global
I think all kinds of promises have the potential to be broken as more and more deleveraging takes place.smurff wrote:
MF Global bankruptcy may bring forth more of the consequences of the (alleged) 100:1 paper vs. physical metal ratio in the gold market. The 5 gold bars and 15 silver bars have at least two apparently legitimate paper claims on them. Imagine if all 100 showed up to make their claims.
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Re: Gold Account emptied by MF global
I found the ZeroHedge take on this case interesting:
http://www.zerohedge.com/news/gold-rehy ... sical-gold
as is this one:
http://www.zerohedge.com/news/why-uk-tr ... anks-jeffe
http://www.zerohedge.com/news/gold-rehy ... sical-gold
as is this one:
http://www.zerohedge.com/news/why-uk-tr ... anks-jeffe
Last edited by smurff on Sat Dec 10, 2011 5:51 pm, edited 1 time in total.
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Ad Orientem
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Re: Gold Account emptied by MF global
Zero Hedge has a long history of supporting the more histrionic elements among gold bugs. For a somewhat more dispassionate discussion of the issue see the latest post on Gold Chat here... http://goldchat.blogspot.com/2011/12/mf ... -case.html
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bronsuchecki
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Re: Gold Account emptied by MF global
Thanks Ad Orientem. Casey Research has also looked at this and supports the less hysterical interpretation: http://www.caseyresearch.com/articles/a ... -need-know
Disclosure: I work for the Perth Mint. What I say is done in a personal capacity and is not endorsed by the Mint.
Re: Gold Account emptied by MF global
This is more evidence that ZH cannot be taken seriously as a news source. I know it appeals to the part of our brain that likes to hear conspiracy theories, but usually there is a far less sinister and more idiotic interpretation of the facts.
Never attribute to malice that which is adequately explained by stupidity. - Hanlon's Razor
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Never attribute to malice that which is adequately explained by stupidity. - Hanlon's Razor
Many journalists have fallen for the conspiracy theory of government. I do assure you that they would produce more accurate work if they adhered to the cock-up theory.
—Sir Bernard Ingham
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Re: Gold Account emptied by MF global
According to this article in Barron's, some clients with receipts for allocated PMs are about to lose their metal, only to have their property comingled by the trustee with all the other assets stolen/lost by MF Global and the cash proceeds divvied up among everyone. Of course, prices of gold and silver have declined substantially since then.
It looks like even if one has ownership of specific bars, there are circumstances under which the property can be confiscated (with no evidence of wrong-doing by the owners), sold and the proceeds commingled. This is awful. Keep your gold under your own control, where you have the key to the vault.
http://online.barrons.com/article/SB500 ... 33760.html
It looks like even if one has ownership of specific bars, there are circumstances under which the property can be confiscated (with no evidence of wrong-doing by the owners), sold and the proceeds commingled. This is awful. Keep your gold under your own control, where you have the key to the vault.
http://online.barrons.com/article/SB500 ... 33760.html
Re: Gold Account emptied by MF global
Wow. Looks like there really is no substitute for diversification, sticking with institutions that are SIPC members and "keeping your gold close" whenever possible.smurff wrote: According to this article in Barron's, some clients with receipts for allocated PMs are about to lose their metal, only to have their property comingled by the trustee with all the other assets stolen/lost by MF Global and the cash proceeds divvied up among everyone. Of course, prices of gold and silver have declined substantially since then.
It looks like even if one has ownership of specific bars, there are circumstances under which the property can be confiscated (with no evidence of wrong-doing by the owners), sold and the proceeds commingled. This is awful. Keep your gold under your own control, where you have the key to the vault.
http://online.barrons.com/article/SB500 ... 33760.html
This kind of thing always makes me look back at pieces of Harry Browne's advice that I might have assumed were "flexible" but could in reality become quite relevant given the right confluence of "unfortunate circumstances"!