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 User Rank
Platinum NO RATINGS 
Scott, the first thing to cross my mind after reading this is "So sorry to hear about your loss." This missing money seems less likely to be "found" the longer this travesty continues. It's not like a piece of paper someone filed incorrectly, for God's sake! It's millions of dollars. You think someone would know where they stashed it (unless they spent it, which I think is more likely).
 User Rank
Iron NO RATINGS
Did you hear about the bounced checks? Matthew Goldstein writes:
It appears that 10 days ago, with speculation swirling that the Jon Corzine-led firm would soon file for bankruptcy, a good number of customers started to put in requests to pull their money from the New York-based outfit. But instead of simply wiring that money back to their customers, it seems MF Global tried to buy some time for itself by sending that money back via snail mail in the form of an old-fashioned check.  User Rank
Platinum NO RATINGS
Corzine is a real piece of work. The NYT had a story last week detailing how he lobbied intensely to keep the Commodity Futures Trading Commission from passing a new rule prohibiting firms from using client money to trade for itself.
The story explains, "As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans."  User Rank
Blogger NO RATINGS
Well, I am lucky, it is a relatively small portion of my worth.
But imagine right now there there are people that do this for a living, floor traders, who have their entire nut locked up in court -- some folks like $500,000-$1M. To boot, doesn't this raise serious questions about the integrity of the entire financial system? I don't think that customer segregated money has ever been "lost." Customers of Lehman brothers even got their money back. So the fact that this happened under the noses of the CFTC, CME, and New York Fed and these customers had their accounts sequestered is ridiculous. That is THE POINT. How did this happen? And does it mean that nobody's money is safe from the bankers and the lawyers?  User Rank
Platinum NO RATINGS
But imagine right now there there are people that do this for a living, floor traders, who have their entire nut locked up in court -- some folks like $500,000-$1M.
@Scott, Its really sad to know that this is affecting the livelihood of traders. Do you think these people will sue MF Global over this fiasco ?  User Rank
Platinum NO RATINGS
Anand,
Suing MFGlobal will get them no where.Might as well wait and watch for the dust to settle and see how much cash will be returned to investors. Regards Ashish. User Rank
Platinum NO RATINGS
Suing MFGlobal will get them no where.Might as well wait and watch for the dust to settle and see how much cash will be returned to investors.
@Ashish, you never know. What if court rules in favour investors ? Then MF global will not only pay the cash that is due but it has to pay heavy penalty for causing this disruption to the livelihood of so many investors. User Rank
Blogger NO RATINGS
I did some more work on this yesterday and I will have an update later today. It appears the big problem is that they still have not untangled the accounting of MF Global, and thus they haven't figured out how much customer money is missing. Until they do that, they won't release the funds.
Of course there may also be legal issues as to whether the banks will fight the release of the customer segregated funds in front of the bankruptcy, but lets hope a sensible judge sides on the side of the customers for that. At this point, customers remained frustrated, with little few answers from anybody. The folks at R.J. O'Brien don't have any answers, nor does the SIPC or the MF Global Trustee.  User Rank
Platinum NO RATINGS
Well, Scott, at this point, should we just assume you won't be buying all of us holiday presents? Leave it to crooked bankers to further depress consumer spending (oh wait--they spent it already, right?)
User Rank
Blogger NO RATINGS
As I keep saying, it's not about me... I'm fine. I'm hedged and diversified.
My overall concen is about the entire system which has become increasingly unstable and unreliable. User Rank
Platinum NO RATINGS
Sort of making Las Vegas look like a good place to "invest"!
User Rank
Platinum NO RATINGS
Anand,
What you are talking about is a very nice notion(MFGlobal paying Fines to investors above what they invested). My only question is HOW???? In the event of a bankruptcy(which is the case here);Assets belonging to company are seized and then all claimants see thier claims settled in order of Seniority. There is NEVER enough cash in a bankruptcy proceeding to pay over and above what the bankrupt entity owes[If it did it would never have gone bankrupt in the first place). Especially if the company will not be restarted again(extremely unlikely as there is so much ill-will directed against the brand name);where will this extra cash come from? Even if Court rules in favor of investors it wont be able to pay more than what the bankrupt entities assets are worth.You can't rob from Peter to pay to Paul.... Taxpayers could help compensate?? No I dont think so here. Regards Ashish.  User Rank
Gold NO RATINGS
I'm really sorry to hear about all this Scott. I hope the responsible authorities will at least try to work at getting new regulations in place so that this type of things do not happen in the future. I hope they find a way to repay the affected clients including you.
 User Rank
Iron NO RATINGS Scott I am sorry you are caught up in this, it’s a wakeup call to us all. Where is the SEC in all of this? User Rank
Blogger NO RATINGS
SEC is useless, as witnessed by Madoff.
The primary regulatory agency here is CFTC, run by Jon Corzine's former Goldman Sachs buddy Gary Gensler -- who has had to recuse himself due to conflict of interest. Does that answer your question?  User Rank
Platinum NO RATINGS
Scott,
do you think regulation of any kind would really have stoped MF Global from doing this? They were already in viloation of a number of regulations and laws, and people will more than likely go to jail over this. I think at the end of the day, these same bad choices would be made all over again. User Rank
Blogger NO RATINGS
TelecomFreq,
It's not about regulation its about enforcing existing regulation and it's about rule-of-law, fraud, bankruptcy court. As far as I can tell, customer funds have never been heldback in a bankruptcy proceeding like this. I could be wrong of course. Do you really think our existing system should allow bank debt-holders to come in front of segregated client funds? --Scott User Rank
Platinum NO RATINGS
Scott,
Do you think if there was more oversight of the regulations and the industry this might have been avoided?I am all for regualtion and enforcing it, but I can see the industry banning together and trying to push back as hard as they can to avoide this at all costs. I think the banks customers should be first in line, but it seems that might not be the case. And it hardley ever is the case. User Rank
Platinum NO RATINGS
Telecom,
Most of these companies got this way precisely because of the legislation that was in place.It was laden filled with loopholes,especially of the kind which you can drive a truck through. No I disagree.I dont think it would have made much of a difference to the whole bankruptcy process.The main reason is the people behind this setup were corrupt from the very beginning. Regards Ashish. User Rank
Platinum NO RATINGS
Ashish,
Given the giant loopholes and the corruption in the system do you think it temps those in the industry over to the "dark side" so they try to get away with this stuff and try to push the limits to see how much they can actualy get away with? Also, do you think what is happening with MF now is going to change anything or will it just go back to normal once the smoke clears? User Rank
Platinum NO RATINGS
Telecom,
I am afraid I don't see much change in the behavior of people after this disaster. People will always try to push the system as much as they can. The Regulators at SEC and Federal Reserve were asleep before and will continue to stay asleep frankly because they are in bed with the institutions they are supposed to police/govern. Its just a bunch of revolving doors for most of them-Jump from SEC to Wall Street and Back.Not exactly a great way to deal with this issue. Regards Ashish. User Rank
Platinum NO RATINGS
Ashish,
I really hope you are wrong, and that something will change. Though I fear you are right and things will stay the same.... User Rank
Platinum NO RATINGS
Telecom,
One can always dream.But it makes most sense to live and deal with life with a realistic &pragmatic bent of mind. The Dissapointments are lower then & the flexibility is immense. Regards Ashish. User Rank
Platinum NO RATINGS
Scott,
Just because something has never been done before does'nt mean it can't or should'nt be done. Also,in a Bankruptcy filing,Creditors have first claim on all assets of the asseee. Now the question that arises is this-Is the cash held on hand by MF Global an asset belonging to MF Global or to the Creditors. Once we can answer this question effectively,The whole MF Global circus becomes simpler to sort out. Regards Ashish. User Rank
Blogger NO RATINGS
Ashish,
Agreed.. it always comes down to the lawyers, eh. The line I guess the Trustees are giving now is customer money not covered by bankruptcy proceedings will be covered by the SIPC... we'll see. --Scott  User Rank
Platinum NO RATINGS
Scott- this is a really through analysis of what appears to be a sticky situation. Good job. I hope you are able to recover your funds.
User Rank
Blogger NO RATINGS
I wonder, are Chase JP Morgan lawyers behind part of the customer fund holdback?
http://mfglobalcaseinfo.com/pdflib/14_15059.pdf  User Rank
Blogger NO RATINGS
Sorry for your predicament. Just gets me to wonder: seeems to me that investing in a company headed by Jon Corzine would be a safe bet. No need for due diligence here.
The story is getting uglier by the minute and is another black eye for Wall Street. User Rank
Platinum NO RATINGS are Chase JP Morgan lawyers behind part of the customer fund holdback? Good question Scott. It's been reported that JP Morgan held a $700M account with customer funds from MF Global. You can expect an account like that, from 100's or 1000's of individual investors will move up or down with time. But I'd venture that JPM never expected they'd be asked to liquidate the whole thing over a weekend. And with 9-1 leverage, a $700M loss-of-capital can impact $7B of loans or other leveraged assets. JP Morgan is much bigger than that, of course, but we don't know what other balls they're trying to keep in the air with loans to Italy or Greece etc. It should NOT be up to JP Morgan or MF Global. The Federal insurance programs exist in order to quickly give investors a bedrock-sense of security for exactly these types of events. Why isn't the insurance paying out quickly for anyone who wants to make a withdrawl? It shouldn't takes days and weeks of eroding confidence that causes people to wonder about every other brokrage in the system. And now everyone gets a margin-call?!? It's not just MF Global. The "messy" way this is being handled hurts investor confidence across the board. User Rank
Platinum NO RATINGS
Predictable,
Could it be because the Federal Insurance fund is out of cash? Which is what is most likely to happen given the level of defaults expected all across the Financial SPace in the Western World today. Regards Ashish. User Rank
Blogger NO RATINGS
The insurance is not federal -- this is not a bank convered by FDIC (which is indeed broke), it would come out of the SIPC, a private insurance fund.
 User Rank
Platinum NO RATINGS
If the FDIC is close to bankruptcy, I don't think SIPC is healthy either. Without the protection of FDIC & SIPC, every investor will be spooked, and market can melt down overnight.
It reminds me what happened a decade ago, when investors found that they can't trust the financial reports anymore, big companies like Enron, WorldCom are cooking their books with the help from big name auditor like Arthur Anderson. There is really no place to hide in situation like this. During the weekend, I attended conference held by Charles Schwab. I asked the presenters the details about Schwab's private insurance on client's asset above SIPC limitation, no one can give me a clear answer, it is really scary.  User Rank
Platinum NO RATINGS
I'd argue that the FDIC going down would be far worse than Enron and WorldCom. The average joe could have cared less about Enron, WorldCom. There's already an ingrained mistrust for corporations built into the working class, even the middle class. You'd assume corporate types are up to shenanigans. But if the FDIC goes down? That means average joe's checking accounts, CDs, etc. are at risk and people will PANIC. The FDIC is one thing they understand.
User Rank
Platinum NO RATINGS
Value Hiker,
Thanks for making me even more wary about my investments in the American Financial System. Not exactly encouraging words these are I am afraid to say so.In fact I wouldnt be surprised if lot of people/investors get spooked after understanding/appreciating the magnitude of this statement. After all its all about the trust.If we cant trust that our money will be safe in the safest of situations(like here where the non-leveraged accounts suffered the most)than who/what can we trust? Regards Ashish. User Rank
Platinum NO RATINGS
Anish,
Sorry to get you upset. But it is better than your brokerage gets you upset later on. One sad fact I learned from the history of Great Depression: many extremely conservative investors who put their money in CDs, never touched a single stock or bond, got wiped out because they put their moneys in just one local bank. FDIC & SIPC was invented to prevent such tragedy happen again. But if FDIC & SIPC is insolvent as many experts suggests, there is no prevention of history to repeat itself. I am sure that Government will finally step in to save the depositors and investors, but it may takes months or years before you can get your cash or equity back, what will you do in the between? As Scott suggests, it is better to divide your portfolio into several reputable brokerages, instead put all your eggs in one baskets. If Lehman Brothers, AIG, Bear Sterns can go belly up, I don't know why Citi, Bank Of America can not follow in the future. Actually they were bankrupt if they were not saved by us, taxpayers. User Rank
Platinum NO RATINGS
Value,
I readily accept your assessments here.It is most definitely a worrying sceanario. In addition to diversifying across different banks,why not diversify across different countries and their financial systems. In the event of a Bank run in the United.States the chances that you will see something similar in other parts of the world(say Asia) are limited. Consequently it makes immense sense to park some of your assets overseas say in Singapore,Hong Kong and Australia. Regards Ashish. User Rank
Platinum NO RATINGS
It is a good idea to diversify over different countries. It all depends on how much efforts you want to put on hedging the rare (all not so rare) risk
User Rank
Platinum NO RATINGS
Value,
You cant win everything in life(or cover for every risk in the market). Also,you can always buy the one currency with Zero Counterparty risk and the one currency which will never complain if it goes up too much-GOLD. Regards Ashish. User Rank
Platinum NO RATINGS
I am afraid that I drink too much Buffett's KoolAid to be a gold bug. I can consider Gold as an asset, but not an investment - for it does not generate any income.
User Rank
Platinum NO RATINGS
value,
Question you should ask yourself is primarily this-Why are the institutions behind our money(Worlds Central Banks) buying so much Gold for last two years(in addition to what they already hold)??? Obviously Gold holds some value as a medium of exchange for Goods and Services -Basically as an alternative Money. Regards Ashish. User Rank
Platinum NO RATINGS
Anish
As a value investors, I don't care World Central Bank, Federal Reserve, or anybody else are doning with Gold, I just can NOT evaluate the intrinsic value of one ounce of this shine metal. That is enough for me to toss the Gold into my "Too hard to analyze" basket. :) User Rank
Blogger NO RATINGS
Value,
I think it's becoming clear that the markets see gold as having intrinsic value, as it is currently becoming the ultimate form of collateral and reverting to its historic use as a global currency. And don't you think it's an important statement on the gold market that Germany said that it would not allow its gold reserves to be used as EFSF collateral? And did you notice that the CME recently started to accept gold is collateral? Hmm, why is that? Maybe it's even better than Treasury Bonds? Historically, as I show in my report, you can definitely value gold in relation to the money supply. There are reasonable historical correlations. Please read my Gold report, for which I did a lot of resources: http://www.investoruprising.com/document.asp?doc_id=232695 I believe Mr. Buffet's view has been discredited by the market. Do you really think he doesn't regret not putting some gold away at $500 an ounce? ;-) Finally, if gold is so useless, if I handed you ten Krugerrands, would you throw them in the trash? --Scott User Rank
Platinum NO RATINGS
Scott:
I did read your Gold report, and I shall say it is a wonderful report. I especially like the "How to value Gold part". But I have some concerns about your valuation model: 1. As you pointed out in the report, US left Gold Standard in 1971. The data you provided in the report has less than 40 year tracking record. I am uncomfortable to reach conclusion based on data of such a short time frame. During housing bubble, real estate expert pointed out that house price will always go up in 10 years for major US metropolitan areas. The conclusion is based on the housing data of the past 60 years, but we know how accurate it is in the rear mirror. 2. Based on your data, the current gold price around $1800 is in the low to middle range, then you concluded that it will reach the high end based on historical data. You assume the bull market will reach the high end before going down, which I am not sure. 3. If you asked me whether there are sign of irrational activities, my answer is yes. I do notice the "we pay cash for gold" post on the telephone Poles, like we saw the "we pay cash for house" post during housing bubble. One Wolf Camera Store in my neighbourhood was converted to a "We Buy Gold" store. I believe Mr. Buffet's view has been discredited by the market. Do you really think he doesn't regret not putting some gold away at $500 an ounce? ;-) At this year Berkshire meeting Q&A session, one shareholder told Mr. Buffett, that her Gold Portfolio is performing far better than BRK stock, Mr. Buffett joked that he should hire her to manage BRK portfolio. :) Finally, if gold is so useless, if I handed you ten Krugerrands, would you throw them in the trash? You misunderstood my point: I said that I will toss the idea of investing in gold, not the gold itself. I will be more than glad to grab all the Krugerrands you handed to me. Similar to all alternative investments, the gems, collectible artwork, antiques, they all have certain value, but it is too hard for a layman like me to evaluate them, so I just pass the opportunity over. It does NOT mean these investments are bad choices - Just I am too chick-hearted to jump in. :) User Rank
Blogger NO RATINGS
Value,
Good response. I hold a fairly large portion of my net worth in gold mostly as a hedge against currency devaluation and general mayhem. It is the best hedge against the growing trend of wanton, mad-money printing. In that role, its performance has been stellar -- up an average of over 15% for the last 10 years -- beating every single asset class. My only regret is that I did not buy more of it. As the report shows, the best way to monitor whether gold will "continue to go up" is by monitoring the M1 money supply, which has a 80% correlation with gold. The recent trend is that they have been accelerating the expansion of M1, rather than slowing it, which leads me to believe that the climb in gold will decelerate, not accelerate. As for your point on the data, well, it's a bit of a paradox. The reason we did not have any data before 1971 was because the gold standard meant that CURRENCIES WERE LOCKED TO GOLD. That means they couldn't print money pell-mell, so by definition, gold was always the same as the currency -- it did not fluctuate. I think that's exactly why gold has exploded since 1971 -- once the gold standard was removed it relieved politicians of any monetary discipline or responsibility whatsoever. So, I guess it's a philisophical thing. Do you believe that money supply and irresponsible monetary practices exist now because there is no gold standard -- or is gold just rising in some sort of manic bubble? I actually believe it's rising because the market realizes now that without any kind of gold standard, during a banking crisis, politicians will just print money to infinity... So, in the end, to me, it is a great insurance policy especially in this environment. And unlike many stocks (or an MF Global account), I know definitively that it cannot go to zero. Therefore it's value as an "asset hedge" to me is very high. --Scott User Rank
Platinum NO RATINGS
Scott,
I fully agree that Gold is a excellent hedge against currency devaluation or hyperinflation. But I think I am too late for the game. As it is said, everything can be an excellent investment at CERTAIN price range, or a lousy investment at another price range. I am too ignorant to find the correct price range for Gold investing, but your report definely improve my understanding on how to evaluate gold price. User Rank
Blogger NO RATINGS
>As it is said, everything can be an excellent investment at CERTAIN price range, >or a lousy investment at another price range.
Good point. Actually I think the biggest risk to gold is political. It keeps going up because Bernanke is in charge and they keep printing money. But if there were every some kind of political movement afoot to remove Bernanke, or some kind of Austrian Ron Paul-like person were elected president, gold would get crushed. If Bernanke resigned tomorrow I bet gold would be down $400. User Rank
Platinum NO RATINGS
Value,
To and everyone his own investment system. If nothing else you should own Gold Stocks to prepare for the eventuality of a Fiat Currency crisis. In that event most stocks will get badly hammered(primarily because the underlying currency in which they are denominated gets hammered). Thats why you why you want to own Gold its Money and Insurance-Plain and simple. The thing is Warren Buffet has never been through a Fiat Money crisis so his advice on this issue is irrelevant.For that you need to read the History books/Milton Friedman. Regards Ashish. User Rank
Platinum NO RATINGS
@Anish, Thanks for the advice to hold Gold. My principle is that I don't own anything that I can not figure out its intrinsic value, no matter it is Gold, bond, or Equity. If I step away from this principle, I know I am speculating.
There are some stocks that can hedge the fiat money as good as gold, like good consumer staples companies: KO, PG, JNJ, YUM, & MCD. Even the SPY is flat during the past decade, these stocks doubled or even tripled if you reinvest your dividend in a tax-deferred account. Of course I admit that their returns is nothing close to the Gold's superior 600% return. But they are fairly valued even at today's price. Warren Buffett is older than most of us. If he has not gone through a fiat money Crisis, we haven't either. How can we be so sure that Warren is worse than us? I won't bet on that. User Rank
Platinum NO RATINGS
Scott,
Why am I not surprised? Behind every mess on Wall Street always lie the name of JP Morgan and Goldman Sachs. Regards Ashish. User Rank
Platinum NO RATINGS
Behind every mess on Wall Street always lie the name of JP Morgan and Goldman Sachs.
@Ashish,so true. I think incidents like this will only intensify the Occupy-wallstreet campaign. User Rank
Iron NO RATINGS
We should be watching Corzine very closely...perhaps some of those missing funds will explain how he funds his extravagant lifestyle in the coming months.
User Rank
Platinum NO RATINGS
Driven,
Corzine is the same guy who blew millions of Dollars on a campaign to become Governor of New Jersey. And when he did become Governor he just got into bed with the Unions and totally messed up the States Finances so much so that it is now on the verge of Bankruptcy. After wrecking New Jersey he moved back to Wall Street to wreck MF Global. The pattern is the same,enrich yourself ,destroy your parent company. Regards Ashish. User Rank
Platinum NO RATINGS
Yes, for all the criticism of OWS, the group's basic premise of greed and unethical behavior by the country's top bankers is unarguably accurate. What a shame to see an alleged respected "leader" take advantage of investors/traders...and probably his own mother, too.
User Rank
Platinum NO RATINGS
anand,
I don't know how much the Occupy Wall Street campaign will really establish. I wish it would succeed but the entrenched interests are so huge that the chances of a total and clean reboot of the Global Financial System are remote at best. Regards Ashish. User Rank
Platinum NO RATINGS
I wish it would succeed but the entrenched interests are so huge that the chances of a total and clean reboot of the Global Financial System are remote at best.
@Ashish, true. I agree with what you are saying. But its not impossible task. All we need is will to do that. I hope occupy wall-street will help us enforce that will on authorities. User Rank
Platinum NO RATINGS
Anand,
I hope you are right too.I just prefer to maintain a more pragmatic and realistic state of mind when it comes to Money affairs. Regards Ashish. User Rank
Iron NO RATINGS Scott—sadly it does answer my question, with a resounding nothing is going to happen any time soon….sorry you are in the middle of this. The blogs and comments posted on Investor Uprising do not reflect the views of Investor Uprising, PRNewswire, or its sponsors. Investor Uprising, PRNewswire, and its sponsors do not assume responsibility for any comments, claims, or opinions made by authors and bloggers. They are no substitute for your own research and should not be relied upon for trading or any other purpose. |
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