Colonel Mustard With Candlestick In Ballroom

The MF Global collapse is now looking more like a criminal conspiracy than mere incompetence. The first Hello? was the invocation of the SIPC to liquidate MF Global. This is mysterious because MF Global is a commodities broker, not a securities broker, although it apparently did have some 400 securities-only accounts. SIPC’s mission is to protect the securities accounts – some .03% of MF Global’s base – which it duly did, albeit at the expense of the commodities accounts, which became unsecured creditors behind oh, here we are again, J.P. Morgan. As I understand it, in a normal bankruptcy under the CFTC, the commodities clients would have been protected from JPM. The SIPC trustee is now running for cover, using the Nuremberg defense – just following orders.

But then it gets worse. Apparently the trustee is seeking to seize and convert into the companies asset pool, for the general benefit of creditors, e.g. you know who, the precious metals bars owned by MF Global clients that they purchased through MF Global. Now these clients have warehouse receipts and are paying storage fees for these serial numbered bars, which are held in certified warehouses. These clients bought and paid for these bars, but of course kept them in certified warehouses to avoid having to re-assay them when it came time to sell them. If the trustee can seize these bars for the benefit of JPM, then nothing is safe from thieving bankers anywhere, except perhaps under the mattress. These bars are not held in MF Global accounts, they were just bought through MF Global. Watch this one closely.

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Comments

  • donbob  On December 18, 2011 at 12:34 pm

    I am not an expert, just an individual investor. By my reading of these issues I have taken the following steps.
    1. Closed all futures trading accounts.
    2. Cancelled the margin feature on all standard brokerage accounts. If you read your client agreement closely, if you have a margin feature even without a margin loan, the firm can move your assets into the margin portion of your account and that is where re-hypothecation occurs.
    3. Shrunk money market funds to a minimum and put in short term treasury only funds.
    4. Exited all ETF funds with potential counter-party risk of deriviatives. In precious metals, GLD and SLV would be an example.
    5. For precious metals made sure was in an “allocated” vs “non-allocated” account. The MFG customers who held PHYSICAL gold in MFG non-allocated account have lost 28% of their gold as of now

  • reality  On December 18, 2011 at 1:10 pm

    Sounds pretty expert to me.

    • donbob  On December 18, 2011 at 1:54 pm

      That’s what being screwed by MFG and the sham assuarances of segregated accounts does do you. I didn’t used to be this way, but now I I have lost all trust in the rule of law and the financial system.

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