"The Entire System Has Been Utterly Destroyed By The MF Global Collapse" - Presenting The First MF Global CasualtyIt 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 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... 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.
Just two charts confirming that we have entered a complete USD liquidity lock up, and that the global coordinated USD swap line rescue operation will be launched any minute: both the US FRA-OIS and the EUR Basis Swap are at multi year extremes. The entire dollar funding market is now at levels not seen since the Lehman collapse and is effectively frozen. Only this time it is much, much worse as never before has the global central bank cadre been assumed and implied to be backstopping the global liquidity cascade. Ex-out the implied backstop by the monetary authorities, and liquidity is now locked up more than ever in the history of capital markets. The liquidity crunch explains why everyone is liquidating the one asset that is performing best YTD to procure much needed dollars - gold.
Now That Greece Has Defaulted, the Default Dominos Are Coming Fast
Is It Time For Jefferies CEO Dick Handler To Put His Money Where His Mouth Is And Buy Jefferies Stock?Last night Jefferies went on a full out media PR blitz in which the firm's CEO Richard Handler told Bloomberg that he "sees the turmoil easing soon" - he will most certainly be right, one way or another. Handler defended his firm's status after Zero Hedge pointed out that its bonds had tumbled to record lows: "It is not surprising that our bonds are under pressure after the assault on our company over the past two weeks,” Handler said yesterday in an e-mail. “Some bond investors sell first and ask questions later. We expect the market to return to normal pricing once we move beyond the ripple effect of the inaccuracies others have recently disseminated and once investors digest all the information” that Jefferies disclosed. Shares of the New York-based firm fell yesterday to close at their lowest since March 2009 and its bonds traded with junk- like yields that were double the level of mid-August. Jefferies came under pressure from short sellers after MF Global’s $6.3 billion bet on European debt led to an Oct. 31 bankruptcy and spurred scrutiny of similar stakes at financial firms. Handler countered by detailing his firm’s European holdings and later cutting the positions by half. Still, the yield on some Jefferies debt hovers near 10 percent and analysts questioned whether the firm needs a more stable funding model. “We have no need to access the debt markets at this time,” Handler, 50, said in a Nov. 15 interview at Jefferies’s headquarters in Manhattan. “By the time we might consider it again, we think yields will be back in a reasonable range.” Maybe, maybe not. Unfortunately, today it is equity investors who are selling first and asking questions later, and at last check have sent the firm's stock to the lowest price since March 2009, last trading at $9.60, down over 7% for the day. Which is why ask: after back on September 22 Dick Handler sold 2 million shares of his stock to Leucadia at a gross proceeds of about $25 million, it is perhaps time he actually put his money where his mouth is and instead of selling, buy some JEF for a change?
Update: CME has just released its response in this issue. Apparently they deny they are at fault.
While we will leave the question of the ridiculous Initial margin cut by the CFTC to the side (an action that should have been since reversed, even using the CME's troubled logic, if it was merely meant to facilitate onboarding of MF Global marginless accounts) a bigger, far more troubling question has emerged, namely whether CME has liability over the MF Global bankruptcy. Goldman's Daniel Harris explains: "CME has been under pressure (-9% wow vs. S&P +1% wow) owing to worries it may face liability over the timing of its communication with the CFTC following discovery of a shortfall in MF Global’s segregated client accounts, given its obligations as the DSRO (designated self regulatory organization). According to the CFTC, a DSRO must provide “immediate notification” when “a member has failed to segregate or has misused customers’ funds.” While details emerge, the stock remain under pressure pending more clarity on (1) the status of the reportedly missing $600 mn in client segregated assets, (2) incremental information on how CME satisfied its obligations as the DSRO with respect to MF Global, and (3) the status of CME/CME Trust’s offer to provide a $300 mn guarantee to the SIPC Trustee for the expedited return of client assets." Perhaps the CME should have stuck to just hiking gold and silver margins...
Update: the Athens crowd has now amassed in front of the US embassy in Athens.
Europe is FIXED!!!! Greek police fired tear gas at black-clad youths on Thursday as thousands marched through Athens to mark a 1973 student uprising against the 1967-1974 military dictatorship and protest bitter austerity measures. Students and teachers, workers and pensioners marched beating drums and chanting "EU, IMF out" in the first public test for a new national unity government charged with imposing painful tax rises and spending cuts to avert bankruptcy.
To most Americans, the stock market is the Dow Jones Industrial Average. Whether professionals follow it or not, it really is what most Americans look at when judging the health of the market. And guess what, it is up over 3% on the year. Yes, the S&P and marginally down on the year, but the DOW, the symbol of the American Market is up.
In yet another example of just what a farce our market has become, it appears that HFT algos, no longer able to freely frontrun the market courtesy of counter HFT-measures offered by major banks and an SEC which has started sniffing around illegal HFT activity, have stooped to the second-lowest rung in the ladder: scouring through momo trader tweets on Twitter, particularly those from the StockTwits network and somehow converting that into actionable "intelligence." Because while until now some amusing attempts at money management using the garbled noise of Twitter had been implemented, all of them relied on human eyes to translate content, going forward it will be robots doing the actual analysis, not to mention sarcasm translation. STM reports: "A Boulder, Colo., collector and redistributor of comment expressed on social media networks Thursday will launch a pair of streams of data from Twitter and the securities discussion site StockTwits that are 'normalized' and ready to be fed to computers for analytical processing. Gnip said it has prepared the streams as part of the launch of a product it calls MarketStream, that is designed for use by hedge funds and high-frequency traders. The move follows the launch in May of a social-media-based hedge fund in London. In that launch, Derwent Capital Markets said the fund it created would try to achieve consistent above-market returns from real-time analysis of comments on social data." Well actually if they really want above market returns they should also add Yahoo Finance message boads to StockTwits: that will really put the bind on Steve Cohen to come up with new and improved ways to generate information arbitrage. At that point the entire momo crowd in the whole world will be swaying the market like an explosive-laden boat full of news reactive lemmings, who believe they move the market, only to receive terminal margin calls within days. But, yes, the safety of the crowd is soooo nice.... Until it isn't. As for the algos, we can bet what side of the trade they will be vis-a-vis the prudent investor subsegment that chases market heatmaps in a market in which VIX 30 is the new normal.
Submitted by RANSquawk Video on 11/17/2011 - 11:28 ETC RANSquawk
Steve Miller is the chairman of AIG. Between 2008 and 2009 AIG received $97.8 billion in loans from the Fed plus four bailouts totaling $69.8 billion in taxpayer money. This is what Steve had to say yesterday when asked by Bloomberg TV’s Betty Liu for his views on Occupy Wall Street.