Guest Post: MF Global: Was It A Hit?

Tyler Durden's picture

Submitted By Lawrence Lepard

MF Global:  Was It A Hit?

Imagine you are Ben Bernanke, or on the Board of Governors of the Federal Reserve.  The time frame is July and August of 2011 and the price of gold is on a tear.  Commodities inflation has been persistent and is breaking out everywhere.  Your prediction that inflation “is contained” and is a “temporary phenomena” are beginning to look absurd.    What do you do?

Simple.  Hint that QE3, the primary drive of inflation, is coming and then fail to deliver at the September FOMC meeting.  That takes care of the price of gold and the gold stocks.  Ah, but those pesky commodities speculators keep making money and trading against what you want the markets to do.  So what is to be done there?   Hey Jon Corzine, how about you tank the largest broker for the small commodities punters in the world, and we let them twist in the wind?  That will serve them right.  Teach them to bet against the government approved scenario.

Think it did not happen?  Well think again.  All of the pieces fit.  It sure is convenient that all those commodities speculators are now out of the box.  Also, who will want to speculate on commodities in the future given customer funds are no longer protected.  Furthermore, commodities speculators are not a very “All American” group.  From the authorities point of view they can say: screw them, who will feel sympathy?  Hell, James Bullard, Fed Governor, in an interview on CNBC yesterday said the MF Global collapse proves that the system works.  Yes it does Jim, for you.  Personally, I have $90,000 at MF Global and I would like to have my honestly earned money returned.  Unfortunately, the odds of that happening any time soon seem slim.  In part because when MF Global entered bankruptcy the judge appointed a Trustee whose law firm has done substantial work for JP Morgan, a deeply interested party.  We will probably never find out what happened here.  But for those of us whose eyes are open the results speak for themselves.

This whole mess stinks to high heaven.  I am with Gerald Celente, if the largest commodity broker in America can go bankrupt and nothing is done, then where can you put your money and expect it to be safe?  I, for one, do not accept that Jon Corzine is stupid enough to lever up MF Global 40:1 and use the proceeds and customer money to bet on European sovereign debt.    This was a hit, pure and simple.  That is why there is no resolution to the problem, and it is just another example of the deeply corrupt US political/financial axis.  It may take money away from a bunch of commodities speculators, and it may cool down the perceived inflation, but it is just another hole in the dike which is The US Financial System.   A dike whose life can probably now be measured in months, not years.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
SheepDog-One's picture

Hey I've got it...lets chase every last trader out of the markets forever! 


buckethead's picture

Just reading Ireland/Germany and began to wonder how so much shit could happen so quickly. It seemed convenient for MF and associates (JPM/Fed) to have so much turmoil to distract our attention from their thievery. Good job coming back to this issue.

gmrpeabody's picture

It all sounds too silly to be anything BUT the truth!

BTW..., was it just me, or did Jim Bullard have a very tough time keeping a straight face the whole time he was talking?

Pladizow's picture

At best this would be a short term remedy - Physical says fuck you!

kaiserhoff's picture

Plad.  What's with the generic icon?  Saving something special for the holidays? ;)

Arius's picture

pure paranoia! corzine is such a genius, being Goldman CEO, senator, governor etc... that he makes no mistake ... it is inconcevable for him to leverage 40:1 ... yeah right ... how about 100:1 ... these people believe they are Gods and they can do anything ... it is called GREED .... awake up ... corzine is just as stupid as blankfein, and the next guy sitting next to him .... the whole idea that everything is under control and the big guys know what are doing is just not true!... these are people, plain people - no gods and YES, they do make stupid mistakes ... you wonder how they made it so far ... well, somebody has to, and like everything else, every good thin comes to an end ... sorry you got the end of the stick, but hey may be somewhere you already had a break ... now, its the other side, dont blame it always on some conspirancy ....

just bad decisions by not so smart, very greedy people ... thats the story of MF Global, and the Goldman Sucks world we all live on

AldousHuxley's picture

MF Global  = Goldman Sachs killing off their own to stay alive (ie. lehman)


they are all parasites....parasites are the largest killers of organisms even more than predators because your enemey is within you.

jeff montanye's picture

why there must be a zero hedge: because the icons must be clasted.  well played.

p.s. arius makes a fine point, imo.  the "big surprise" of the next two years will be the impotence of central banks.  again, imo.

these are not incompatible thoughts (hatlo to t.s.).  corzine offered an opportunity to larger predators and their designs.  kind of like keeping lee harvey maybe did for the cia.

strannick's picture

Then there is the CDS insurance he thought he had. I guess CDS only work ('Greece wasnt a default!) when you actually are Goldman, (AIG, TARP), not if you just worked for Goldman. And it of course helps when the Treasury secretary has lots of Options in your company (Paulson, Goldman)

CIABS's picture

if you aren't on the inside and you don't know for sure what happened and why, then you have to practice the art of pattern recognition.  let's start with corzine.  he rises to the top at goldman sachs, and eventually they kick him out.  he becomes a senator.  but he gives that up voluntarily when he runs for governor of new jersey and wins.  at that time, four of the last five presidents had been governors, and none of the last eight presidents had been elected while in the senate.  so it looks a lot like corzine is thinking about running for president.  his presidential prospects dim quickly when he loses his re-election bid for governor, after which he becomes a wall street CEO and a major fundraiser for the democratic party.  word begins to circulate that he might succeed geithner as treasury secretary.

now let's look at chris flowers.  he becomes a goldman partner quickly, without bothering to go to graduate school, and takes over the financial institutions investment banking group.  when the decision is made to take goldman public, he is not appointed to the committee that will manage the IPO.  he resigns from the firm.  presumably corzine favored flowers' inclusion on the committee, but hank paulson, the firm's top investment banker, did not.

so we should ask ourselves whether corzine and flowers remained goldman "agents" after leaving the firm, or were they the opposite.  perhaps not quite "enemies", but not members of the network in good standing, and no longer trusted.  another question is whether corzine is someone who, after being ousted by goldman sachs and then becoming a senator and a governor, would destroy his career and his public image in order to take out a presumed competitor to goldman, namely MF global.  i don't think so.

why was it so important to eliminate MF?  to get rid of smaller speculators?  did the supposed urgency of eliminating MF outweigh the severe blow to confidence in the futures markets?  we all know that the futures are used to suppress the prices of gold and silver, and to prop up equity prices, and perhaps also to prop up the prices of treasury bonds and notes and to manipulate energy prices.  isn't continued confidence in the futures markets essential to these operations?

was corzine lured, or lulled, into his big losing wager on european sovereign bonds?  maybe.  did an institution wait to issue its margin call until it knew that MF would fail as a result?  maybe.  did they want to eliminate corzine as a candidate for treasury?  i'd say probably.  was it a "real" margin call by a creditor who feared losing big if it didn't take action?  i'd say so.

that's the pattern as i see it.

AldousHuxley's picture

some's got to take the bullet.


take the new boys out...

Lehman's CEO with NYU cred? take him down.

MF Global? take them out too.


Nothing but JP Morgan and Goldman Sachs in the old boys club.



Oh regional Indian's picture

Hark, is that farthunder I hear in the distance?

Surely a fecal storm cometh.

A Monster Fecal Global storm.



ToNYC's picture

The essence of Creative Destruction on steroids; or rather the Creative Destruction of Work by superior Intellectual Property. Jon Corzine is quite simply the Gold man-Sacker version of the Trojan Horse sent to the last bastion of Fair dealing for freemen in Chicago. After the Shock,Doctrine will roll out with the Gold man-Sackers in charge of the new free enterprise equipped with Gm-S's embeds for the GovernmentS'edge.It's all GoodS. Rave coupon will be involved for the social net and nit workers and drones.

Bwahaha WAGFDSMB's picture

Or sending in one of their boys to take down a competitor from the inside.

nope-1004's picture

Sure MF was a hit.  Guaranteed.

The entire financial system is an inside job.  Anything that happens in the extreme, good or bad, is an inside job.

Benocide proved his idiocy when he said rising prices of food staples in developing nations was a result of "more sophisticated diets".  Idiot.  Moron.  LIAR.  Inflation was creeping in - something had to be done.

FU Ben.  FU Geithner.  And princess obummer can take a hike.

No leadership anywhere, just casino rigging.

Shame on you America!


NotApplicable's picture

Problem is, physical goes into hiding when the paper price is clobbered, effectively destroying the price discovery mechanism of the market. The only remedy is rising premiums, which gets everyone bitching about "greedy" suppliers/speculators, instead of recognizing it's the only way decrease the spread between buyers looking for paper prices, and sellers who would never go that low.

Antifederalist's picture

Agree,  Bullard was gloating about MF Global.  In fact that is part of what helped me put the pieces together and come to the conclusion arrived at in the essay.

kaiserhoff's picture

Something here is passing strange, and nothing sensible is being said. The silence is deafening.

smlbizman's picture

hey, i was talking to gensler and he informed me that as soon as they wrap up the metals manipulation investigation they are going to start planning to plan how they are going to investigate mf globetrotters....than he gave me the pinky i am satisfied

DB Cooper's picture

Makes sense too with Corzine seemingly disappearing in witness protection.  Or maybe he's with Jimmy Hoffa.  Otherwise, why aren't the news camera's outside his house?

kaiserhoff's picture

No end of news about Penn State, a cruel and stupid crime, but going on since the beginning of time.  No systemic risk.  Laws being enforced.  Just a few pervs who need to be shot.

On the other hand, if the banksters want to see Manhattan look like Detroit, they should just keep doing what they are doing.


FeralSerf's picture

Penn State is a distraction.  I wouldn't doubt that it was known about for a while and it was just made public to distract the public's attention from other high crimes and misdemeanors (like this one).

trav7777's picture

manhattan doesn't have enough black people to look like detroit

Phaethon's picture

Manhattan (and the rest of New York City) still has a strong Third World feel about it.  Where's the middle class in Manhattan?  I seen the extremely wealthy helicopter from rooftop to rooftop, or at least chauffeured about, and then there's everyone else.  Not lots of blacks downtown, but definitely a ton of third world immigrants picking up the crumbs that the big money leaves.  Could've been in New Delhi or any other third world hell hole.

Ahmeexnal's picture

Trav, you are a sad infrahuman being.

ltsgt1's picture

It's indeed very strange that the lamestream media is not on top of it.

NotApplicable's picture

To them it's a win, as he stole from the Street.

In other news, at least Corzine is finally a millionaire.

Buck Johnson's picture

He did, he knew what went down and many in the pits know what happened.  But they can't come out and say it because they would be blackballed and ridiculed out of the profession.  No trust anymore and no justice either.  Our financial system is as bad as any third world banking system.

HoofHearted's picture

Someone with the balls to say what we were all thinking. Fuck them all. Get physical if you can possibly get your cash back and tell them to go to hell. No more counterparty risk, bitchez!


(Oh shit, guess it means I need to take the FAZ bets and JPM, GS, MS, GS, BAC shorts off and get that cash into the shiny stuff.)

Robot Traders Mom's picture

Why was Celente messing around in Corzine's fund? This makes zero sense. A guy who spends countless hours doing research and he doesn't know who has his money?

Lost a TON of respect for the Celente. A former senator, governor, and Goldman Sachs head doesn't make mistakes like this. He should have known.

Amish Hacker's picture

I think Celente's account was with Lind-Waldock, a reputable broker with many retail commodities accounts. Unfortunately, Lind-Waldock ended up being operated as a division of MF Global after being acquired in 2000 by Refco, which was later taken over by Mann Group, which spun off its financial arm as Mann Financial Inc. (That's what the "MF" in MF Global actually refers to.)

So I don't see it as Celente's fault, but he did make the same mistake everyone made (and continues to make): he thought segregation of client accounts was bomb-proof, and it wasn't (isn't).

Robot Traders Mom's picture

Correct, but as much research as Celente does, how did he not know about Lind-Waldock's relationship with MF Global?

Why was Celente even messing around with futures? Because Gold was in backwardization and he wanted to get a slightly better price in December contract delivery? Why would he gamble on futures instead of just owning physical???

I guess my point is that almost all of us are in physical metals and the money we mess around with in the market (IE 401K's we don't want to pay taxes on) is essentially play money. I am completely prepared to see what little money I have in there, magically disappear. Our biggest holdings are physical metals. If we have cash, we go and buy coins or bars. We don't mess around with the futures market or anything run by a Goldman Sachs crony...

seek's picture

Celente has stated he used futures to increase his cash position to the point he could take cheap delivery.

So basically his personal "trading" operation got hammered, but he has a physical for insurance/investment.

So, like you, it was his play money, but it's at a higher level (I think he indicated six figures.) Just because you or I don't trust the system and are prepared to lose any cash holdings doesn't make it right that MF Global stole Celente's money. I'm also presuming the Celente expected normal saftey mechanisms to work before everything breaks completely.

FYI, a former work acquaintence of mine has in hand a MFG client presentation that spells out accounts that weren't as being SIPC insured -- so there's a fraud aspect to this over and beyond the bankruptcy issue. I've suggested he forward it to TD for publicity.

My takeaway from all of this is that we've ratched up the DEFCON level by one: it's clear TPTB are willing to openly abandon financial promises made to the lower classes -- granted it's a select class now, but it's a sign that either they don't have the resources or willingness to intervene to keep the illusion alive. The hypothesis of this story is that it was deliberate as it helps TPTB, but we need to recognize that while it provides some short-term help to TPTB, undermining confidence is insane -- that's how hyperinflation happens.

This is the first major crack in a very big, very old, and very unstable dam of the banking system. This tells me we are much closer to a systemic collapse than we were three months ago. In the summer I though we had 3-5 years left, now I am not so sure, it could very well be less than two.


Robot Traders Mom's picture

Good response. It is just hard for me to stomach that I guy I trusted would let himself get caught with his pants down. He shouldn't have expected normal safety mechanisms when all he talks about is fraud.

Liquidity is definitely drying up, I agree we are close to something.

ToNYC's picture

Actually the segregated accounts are still there if the authorities were to Water-board rather than Air-board the perps as in Bubble-Wrapped.

ziggy59's picture

He wasn't.. the firm he was involved was owned by MF Greedy. He also said he would always take possession when his futures contract was expiring

SpeakerFTD's picture

I don't think you can blame Celente for this one.   Theoretically, if your account at MF Global was in pure cash, you should have slept as soundly as you would with a checking account at any major bank.   For MF to cross the line and dip into customer accounts is, without any ambiguity, completely and totally illegal and incredibly shocking.   Someone at MF will go to prison for this, or maybe I am just so naive as to believe some rusty core of our criminal justice system can still churn through a blatant case like this.

Citxmech's picture

I'll give Celente shit for this. WTF? He's been yelling from the top of his lungs about how all the white-shoe boys are thieves and to buy physical PMs, etc. and he does business with Corzine?

Sorry, but this is just like hearing that Max Kieser has all his money in Berkshire Hathaway and Marc Faber has his in GLD.

eftian's picture

Celente said he likes to take delevery of a gold futures contract which I assume is a 400oz bar. Exactly how much can he really be saving on that 400oz bar over purchasing one from apmex or monex or kitco or wherever?? To risk 6-700k to save a percent or two?? Really? 

Robot Traders Mom's picture

@Citfmax and eftian-good points. Agreed completely.

Bwahaha WAGFDSMB's picture

Probably a lot more than that.  By buying on margin in the futures market he locks in whatever the price was when he bought the contract.  Can you lock in today's price from kitco or apmex then pay and take delivery in a year or two?  I don't think so.

SamuelMaverick's picture

Celente had options  for gold that he intended to take delivery on. He had enuf cash in his account to pay for delivery. When MF Global went bust, the fucking bankruptcy trustees gave his options to a new broker, but did not transfer any of his account cash to the new broker. The new broker gave Celente a margin call, and Celente told them he had enuf money to take delivery, they replied, what fucking money, there is no money..  Trustees have not accounted for MF Globals clients cash, it is all gone.  He refused to cover the margin call because he should not have had to ..    Pure and simple theft of clients cash, and an effective way for TPTB to shithammer commodity prices to pretend that inflation is not exploding------ at least for a few weeks. 

Zero Debt's picture

One big fat red for you.

If all money in Bank of America was stolen by its owners, would you be out screaming shit on all its naive customers?


sullymandias's picture

OMG all these comments saying you can't blame Celente! WTF! "Considered by many to be the top trends forecaster in the world??" He had hundreds of thousands in COMEX futures contracts and doesn't even know the firm he is holding them with is run by Corzine? He can't background check the company that he gives hundreds of thousands of dollars to? What is he doing in the COMEX at all? His hundreds of thousands in the COMEX hurts ALL OF US - more paper money for them to play their damned paper games with! We all know the drill: buy phys, hold it. Celente let us all down, and came out looking like a fool in the process.

sullymandias's picture

Personally, Celente's KWN comments saying he only had money in the COMEX for a December delivery sounds like an attempt to save face to me.