"The Entire System Has Been Utterly Destroyed By The MF Global Collapse" - Presenting The First MF Global Casualty

Tyler Durden's picture

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 in our eyes.”

With Best Regards-
Ann Barnhardt

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oldman's picture

Robot

I was out with them today, or should I say out with us----I feel like this is true, so---I was out with us today and we are pretty amazing.

I urge all critics of OWS to spend a few hours with these people and I think you will find that 'we' are pretty amazing---young and old people alike.

In any event, at least for now, OWS is the only game in town and any one of us could be a better 'democratically elected' president and leader than anyone of the last five occupants of twh.

No voting needed, however----just see who we are because equipment is needed to continue---a lot of gear was lost this week.

Step up and help out, please, dudes                     om

azusgm's picture

IMO, OWS would have more of an impact if you/they would get organized, set a schedule, have people take shifts for a 24/7 presence. Stay on your feet most of the time. Show up clean and neat and in casual but "respectable" cloths. Pay more attention to details such as posture and diction and vocabulary. Crystalize the message and sell it.

 

Calmyourself's picture

When and where did the Tea party turn its entire agenda over to gay marriage, links please..  If that is the case of course OWS all about hetero rape, prior to the ladies tent being erected of course...

Calmyourself's picture

Oh yeah, the teabaggers in between banning astrolube and gay marriage, managed to put together a draft budget for CONgress..  Looks pretty good but I still cannot find the Anita Bryant memorial funding.   We are hoping to plant an orange grove representing hetero sex penis and vagina stuff only cuz the other stuff is icky..

http://blogs.freedomworks.org/files/TeaPartyBudget.pdf

ReadySteadyGo's picture

Good point; it diluted the message somewhat with that personal focus.  Now some will dismiss the truth because it was personalized.

Bring the Gold's picture

I wish people would quit calling Obama a Marxist. He's a FASCIST. Just like bush/Clinton/bush regimes. Italy France England Germany Russia china and most of the rest. Calling crony fascism Marxist just triggers old boomer prejudices and divides folks. He is a fascist and that is scary. No need to muddy the waters and fall into the left/right paradigm and make it sound like the fascist republicans are any better than the fascist democrats.

percolator's picture

Your comment is 100% spot on.

Spastica Rex's picture

Many people are just waking up and realizing that the world is hostile. Many grab first for enemies they think they already know. Waking up is a really traumatic experience for many. I think the film the Matrix presents a very clear allegorical illustration of where we are now: the whole fucking power structure isn't what most people thought it was and it's 100% ready to destroy anything that threatens it.

Seize Mars's picture

Many people are just waking up and realizing that the world is hostile. Many grab first for enemies they think they already know. Waking up is a really traumatic experience for many. I think the film the Matrix presents a very clear allegorical illustration of where we are now: the whole fucking power structure isn't what most people thought it was and it's 100% ready to destroy anything that threatens it.

Amen to that. The chilling part is when you realize, as you say, it's not what you thought and it's fucking lethal.

Here is a brief history of America:

>>>>>>>>>>

Originally, 20 year charters for corporations (had to be renewed)

1782 Bank of North America - Founder imprisoned for fraud and other abuses
Charter expired in 1802

1791 1st Bank of the US
1811 Charter expired; renewal defeated by a single vote

War of 1812

1816 2nd Bank of the US
1832 President Andrew Jackson promised to veto renewal
1835 Asassination attempt (survived)
1836 Charter expired

Lincoln prints paper money to fund the Civil War
1863 National Banking Act (20 yr charter)
1864 Linclon speaks against paper money banking
1864 Lincoln Assassinated

1881 President James Garfield opposes renewal of the National Bank Act
1881 Garfield Assassinated
1882 Bank charter renewed ("2nd Charter Period" begins)

1901 President McKinley opposes renewal of Nat'l Bank
1901 President McKinley assassinated

1902 President Teddy Roosevelt approves renewal (3rd Charter Period) (He is a member of a NY banking family)

1912 Taft loses election to Wilson (Roosevelt entered and split the ticket)

Dec 23 1913. Permanent Charter of Central Bank.

1962 President Kennedy gives "Secrecy is Repugnant" speech denouncing Federal Reserve
1963 Kennedy authorizes by executive order, Treasury backed "Silver Certificates"
November 1963 JFK Assassinated

>>>>>>>>>>

1 + 1 = 2

 

Milestones's picture

You only got one vote. It seems like anytime Italic's are used the voting, is somehow blocked. I have seen many instances of it here. I know that because I was going green--nada. Don't use italic,s in your first line unless it is a quote and is given the """" around the quote.      Milestones         

Max Fischer's picture

 

 

The fact that this lady was trading in the futures market with, by her admission, high degrees of leverage up until this morning proves that she's just another loser hypocrite who got blown out of the game and is looking to blame anyone other than herself.  For her to begin her article with "unflinching moral certainty" and punctuate it with a Bible quote only proves that she's just another hypocritical, right-wing nutjob who hides behind the thin veil of Christian ethics and morality while, hypocritically, deciding to play the devil's game and then running away calling it unfair.

She's Sarah Palin, the maverick futures trader.

Max Fischer, Civis Mundi

TruthInSunshine's picture

A Paul Krugman tweet just passed the wires. It says:

 

#Sigh. I wish people would listen to my repeated requests that all indebted sovereigns simply print (or counterfeit) an amount of fiat at least equal to the amount of their debt outstanding.

 

It's not that complicated, my non-Keynesian friends.

 

Love,

PK

akak's picture

It's not that complicated, my non-Keynesian friends.

So easy, a Krugman can do it!

CrockettAlmanac.com's picture

The alternate commercial features a tiny Newt-like creature which encourages those representing the taxpayers to buy up lots of Freddie Mac.

Silver Bully's picture

'Why, I can do it with Nobel Prizes, too!'

Larry Dallas's picture

Just looked at this woman's blog. Her Evangelical Christian blog posts I think are just good ways to keep in touch with her investors who are probably also born again. Good marketing, good investor relations. Whether she really feels compelled to write the "Our Father" on her blog posts every other day, I dont' know.

I'm cynical at best, paranoid at worst.

But those Evangelical Christians love to wear their religion on their lapels. And in her part of the country, I'm sure she's smart enough to play along - "Fish-on-the-trunk-of-her-car" and all.

 

Cathartes Aura's picture

b-b-b-but she has a big pink gun :((

never mind her ridiculous beliefs. . .  

+1 Max.

 

markmotive's picture

You know, she speaks the truth.

But have you seen some of her other posts? She's a bit extreme for my taste (I'm talking politics and religion...not economics).

@planbeconomics

 

 

DoChenRollingBearing's picture

Heilige Scheisse is right.  I am off to check where stocks are now.  Gold was getting pummeled.  Would this count, at long last, as our Minsky Momemnt?

john39's picture

this might be a bit premature, but we are finally getting there:  "collapse" by akashic ancestorz

http://youtu.be/sVQE0LPgOIY

Frog-And-Toad's picture

I realized that this game was rigged when Silver fell by 20% in 2 days, ironically enough 2 days before the CME raised Margins... HOw was there NO investigation to insider trading?!? These "markets" need to cleanse themselves, or this theft of the Middle Class is going to run "the Middle Class" dry within 4 years.  I'm not playing this game anymore, and haven't been.  I hope that everyone in DC and in these companies that bought off the system lose everything. Fuck them all. 

Enough people are waking up and seeing through this joke of a system that we will have some type of revolution within the next 2 years.  I pray that it be a bloodless revolution, like that which happened when the DDR finally admitted it was irrelevant.  I pray this happens and we work towards a FREE market system in which everyone competes on fair levels. 

Mr_Wonderful's picture

Peddling something for $30 plus that costs as much as $5 to extract from the ground sounds like an unsustainable scam to me.

redpill's picture

It costs 6 cents to make a $100 bill.

The Navigator's picture

At that price, I'll take a couple hundred dozen - or do I have to be FOB, Freinds of Bennie?

floydian slip's picture

It costs $20 for just the shovel. What a dumbass.

akak's picture

Mr. Wonderful, you're actually not.

I dare you to go to the nearest grocery store and demand that they sell you a $3 loaf of bread for 10 cents because that is all that the wheat and other ingredients in it cost.  Fucking idiot.

Waffen's picture

$5 extraction cost is a fallacy

Lord Koos's picture

The concept of "supply and demand" is apparently beyond your ability to grasp.

Confuchius's picture

No doubt you refer to Saudi crude.

They also may have more assets than you do.

They may even be smarter than you.

You are a whiney little creep.

Kelley's picture

The paint used on the Mona Lisa might cost $5.

 

So you're right, it is worth almost nothing.

Central Bankster's picture

Im assuming this is what Tyler means when he says someone has gone "full retard".

rosiescenario's picture

Yes, and for every bit of rigging that you see, there are 10,000 more that you do not see.....

Crawdaddy's picture

The middle class is getting hammered on purpose...

From Wayne Jett's site: http://classicalcapital.com/

Those protesting Wall Street oligarchs and those protesting Big Government spending have much more in common than even they think. They are all middle class who worry their prospects are suffering, although they propose conflicting political solutions and rhetorically attack each other. Each must awaken to this fact: their common oppressor is mercantilism – not capitalism

His book Fruits of Graft is a great read. 

Idiot Savant's picture

Yes, it's sad that she included partisan politics in her statement. Of all people, she should know that this isn't a dem/rep or lib/con issue.

NotApplicable's picture

Should know. Likely knows. Likely knows enough to blame the facade, rather than those constructing it.

At least she stopped short of endorsing [insert Republicrat of choice here].

buyingsterling's picture

Yes, it goes beyond politics, no, politics are not irrelevant. The left are bent on more regulation on the ground; not only do we all support the leeches at the top, the left would further tie our hands. Look at all the raw food raids. WTF is that? Remember the violent crackdowns on Iraq war protesters? I don't.
Maybe the 'republicans' are the real masters of the system: it's the left that's brought us to this pass, with promises no one can pay for. In typical fashion, their solution is to tax the productive more, dilute our money further, tie our hands so we all become dependents, then rape our women and children while we watch on our way to the pit. Ok, that last part I made up - they generally just starve you to death. The evil republicans supported a SS and medicare program for the very poor, but that wasn't enough for the left; we all had to become dependents. Read the Black Book of Communism - if you can stomach it - and tell me there's no difference between right and left. Anyone who says there isn't is someone's tool, and probably a leftist.

You can start off in a state of nature and everyone can survive who's able. It takes collectivism to change that dynamic to where almost everyone faces extinction.

Bring the Gold's picture

Um, I saw first person a sanctioned Iraq War protest (permitted) that was ending and a couple of people got into the street going to do an unplanned march. IMMEDIATELY the riot cops busted out and proceeded to use rubber bullets on the crowd, a friend and law abiding citizen was hit by one that bounced off the ground and had a deep thigh bruise for weeks.

You are either a liar or totally misinformed/uniformed if you think there were no violent crackdowns on Iraq War protests. You obviously didn't pay a damn bit of attention to it.

This isn't left vs right, it's the VERY tippy top, vs. everyone else. They aren't left or right, they just use that paradigm to trick and control people exactly like you.

Both parties have run up debts, both parties have enabled fraud and bailed out the banks, both parties have engaged in illegal wars, torture and extrajudicial assassinations including recently an American citizen under Obama. Both parties ushered in the blatantly fascist TSA and Homeland security.

The writing is on the wall and the joke is on you and by extension all of us. Nobody will be laughing though and there will be tears all around Republican, Democrat and Independent if we don't get it together and find common cause.

unerman's picture

Exactly. We need to stop the blaming of one of the 2 parties. It does not help us, only makes us fight each other.

It is both parties! It is the entire system!

CrockettAlmanac.com's picture

But that doesn't mean that Obama should remain in office does it? It's one thing to realize the false dichotomy of red v. blue it's another thing to say that a given sitting politician should not be criticized because he only has one party affiliation, not two. If you're going to vote the bums out you'll have to toss out a blue today and a red tomorrow.

Calmyourself's picture

It is both parties, YES, but one is healthier if barely then the other.. .Take it over and eject the losers.. your call..

unerman's picture

Exactly. We need to stop the blaming of one of the 2 parties. It does not help us, only makes us fight each other.

It is both parties! It is the entire system!

unerman's picture

Exactly. We need to stop the blaming of one of the 2 parties. It does not help us, only makes us fight each other.

It is both parties! It is the entire system!

Phil Dupterjaw's picture

I've read this entire thread and there is a lot of two party this or this politician that...but I haven't seen the answer.

 

The solution is clear.

 

***RON PAUL 2012***

 

END THE FED!!!!

Tramp Stamper's picture

I, for one,  would like to give Ann a big thumbs up for doing what is morally correct instead of just churning her clients for fees and commisions.

Jonas Parker's picture

God bless you, Ann! There is (or was) at least one honest person in the markets! You will truly be missed...  JP

sondog's picture

What position? She is a weirdo managing her own 60k from her dining room table. Sad how 95% of people here are acting like Buffett wrote the letter or someone of note.

buyingsterling's picture

Yeas, that's why ZH has featured her before this.

Idiot.