MF Global stored accounts taking big hit?

CaptHenway

linky

Obviously this blogger has a strong agenda, but can anybody wiser than I interpret and summarize what he is saying?

Edited to add: If nothing else, it has a great cartoon!

cladking

<< <i>linky

Obviously this blogger has a strong agenda, but can anybody wiser than I interpret and summarize what he is saying?

Edited to add: If nothing else, it has a great cartoon! >>



I googled mf global and it certainly seems to agree.

I've been warning people for years that keeping metal in a distant fascility is begging for trouble. They can
only honor receipts if the price doesn't go higher. You can't win and can only lose or break even because fraud
and chicanery are the new norms. There is no wealth creation any longer just reappropriation. As the custo-
mer metal was disappearing they still charged people to dust their metal every week and, apparently, paid
bonuses to the big bosses.

This is a wake up call to everyone who still "owns" warehouse receipts. These have no value except what the
issuer deems to grant them and the issuer wil be bankrupt if metals go sharply higher.

derryb

<< <i>

<< <i>linky

Obviously this blogger has a strong agenda, but can anybody wiser than I interpret and summarize what he is saying?

Edited to add: If nothing else, it has a great cartoon! >>



I googled mf global and it certainly seems to agree.

I've been warning people for years that keeping metal in a distant fascility is begging for trouble. They can
only honor receipts if the price doesn't go higher. You can't win and can only lose or break even because fraud
and chicanery are the new norms. There is no wealth creation any longer just reappropriation. As the custo-
mer metal was disappearing they still charged people to dust their metal every week and, apparently, paid
bonuses to the big bosses.

This is a wake up call to everyone who still "owns" warehouse receipts. These have no value except what the
issuer deems to grant them and the issuer wil be bankrupt if metals go sharply higher. >>



Ditto

secondrepublic

As translated above: keep possession of your physical; don't trust a faraway intermediary.

erickso1

Barrons article sums it up quite nicely. Trustee is treating the physical metal holdings as part of the equity of the firm in it's entirety. Easiest way to think about it is, with most firms, there is a giant pool of money (equity) and a share of stock entitles you to a % of that pool. When a firm goes bankrupt, typically the pool shrinks as debts are paid, and the size of your % shrinks. Every share is homogenous so no investor can say, " that is my dollar, not his". At MF you have a two part pool. You have the community pool of equity where all the client funds are pooled, liquidated stock/future positions funds are pooled and any other equity. Same thing here. Homogenous equity where no one is able to identify their specific dollar. At MF you also have actual physical assets (gold bar) being custodied. Warehouse receipts are for that specific gold bar. Not the bar to the left of it, nor the right. The trustee is trying to homogenize these unique assets so that he can include them in the community pool. The holders of the warehouse receipts are angry because they can walk into the warehouse and say "THAT is MY gold bar. That one right there. I have a receipt, now let me take it".

I think that is the jist of what is happening, and I hope this makes sense. If have it wrong I hope someone corrects me.

cladking

<< <i>Barrons article sums it up quite nicely. Trustee is treating the physical metal holdings as part of the equity of the firm in it's entirety. Easiest way to think about it is, with most firms, there is a giant pool of money (equity) and a share of stock entitles you to a % of that pool. When a firm goes bankrupt, typically the pool shrinks as debts are paid, and the size of your % shrinks. Every share is homogenous so no investor can say, " that is my dollar, not his". At MF you have a two part pool. You have the community pool of equity where all the client funds are pooled, liquidated stock/future positions funds are pooled and any other equity. Same thing here. Homogenous equity where no one is able to identify their specific dollar. At MF you also have actual physical assets (gold bar) being custodied. Warehouse receipts are for that specific gold bar. Not the bar to the left of it, nor the right. The trustee is trying to homogenize these unique assets so that he can include them in the community pool. The holders of the warehouse receipts are angry because they can walk into the warehouse and say "THAT is MY gold bar. That one right there. I have a receipt, now let me take it".

I think that is the jist of what is happening, and I hope this makes sense. If have it wrong I hope someone corrects me. >>




I believe this is essentially accurate and that it is blatant theft. According to the author in
the original link funds were being transferred as the company was spiraling down the tubes
to pay bonuses for some of the big bosses. It was shifted out of the metal in storage be-
cause they could loan or sell that metal despite the fact they didn't own it and they were
charging people money to dust and store it for them.

It would hardly be surprising if more money isn't discovered missing as this wraps up and
more people get their hands in the pot. Some assets might be found nonexistennt or de-
pendent on the rightful owner not being able to collect. Liabilities might be greater than
believed at this time. It's still possible that much of the problem is that there simply isn't
the amount of metal that's supposed to be there because of multiple owners.

There are going to be some pretty ticked off rich people this time.

cladking

Here's the Barrons article;

Link

They just don't enforce property rights or laws any longer unless it's for Wall Streets benefit.

1jester

For sure it's blatant theft, and it looks like the thieves are getting away with it again. It's hard to believe that a receipt for your specific bar doesn't actually mean you own your bar. "That depends on what the definition of "is" is." What a crock. I believe Jim Sinclair recently wrote about this failure as the smoking gun of complete systemic failure. If a clearing house isn't able to protect assets of the participants, the system is broken. Kaputt. Finito. It's over, folks! The MF failure is only the beginning.

morgantype

It will be very interesting to follow this and see the outcome.

BTW, isn't the old saw, possession is nine ntnths of the law?!? Drats!!!

JCMhouston

To paraphrase what others have said in the past, if you can't hold it, you don't have it.

cladking

<< <i>For sure it's blatant theft, and it looks like the thieves are getting away with it again. It's hard to believe that a receipt for your specific bar doesn't actually mean you own your bar. "That depends on what the definition of "is" is." What a crock. I believe Jim Sinclair recently wrote about this failure as the smoking gun of complete systemic failure. If a clearing house isn't able to protect assets of the participants, the system is broken. Kaputt. Finito. It's over, folks! The MF failure is only the beginning.

>>



My thoughts exactly.

Civilization had a good run. It was 12,000 years of ups and downs.

gsa1fan

This is the same reason I have NO faith in owning stocks! Rip ~ SORRY, your 401K is worth 50% lesss today.

1jester

<< <i>

<< <i>For sure it's blatant theft, and it looks like the thieves are getting away with it again. It's hard to believe that a receipt for your specific bar doesn't actually mean you own your bar. "That depends on what the definition of "is" is." What a crock. I believe Jim Sinclair recently wrote about this failure as the smoking gun of complete systemic failure. If a clearing house isn't able to protect assets of the participants, the system is broken. Kaputt. Finito. It's over, folks! The MF failure is only the beginning.

>>



My thoughts exactly.

Civilization had a good run. It was 12,000 years of ups and downs. >>



LOL. I am not trying to imply that we're about to negate 12,000 years of progress. But there's no way for the "elites" to band-aid their way out of this.

Fountainhead

If trustees can seize the bars of someone holding a warehouse receipt for it, why can't they seize stuff in a safe-deposit box when its bank goes under?

cladking

<< <i>
LOL. I am not trying to imply that we're about to negate 12,000 years of progress. But there's no way for the "elites" to band-aid their way out of this.

>>




I hope you're right.

I fear you're wrong.