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 Replies: 16 / Views: 3,151 |
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Pillar of the Community
United States
5855 Posts |
So the news is reporting that "Lawmakers Concede Budget Talks Are Close to Failure." I'm guessing that the stock market is going to plunge tomorrow morning as a result. The question, though, is that effect this will have on PMs. I used to think that as the stock market fell, the price of gold and silver rose, but lately the gold and silver market has seemed to move in the same direction of stocks for some unknown reason.
I bought some silver over the last couple of weeks week when it dipped down to $30 and again when it dipped to $31. It's currently at $32 and part of me is thinking I had better buy some more right now before the markets open and it soars to $40+. But, as I said, recently history has shown that it's just as likely to plummet along with the stock market.
Personally, I think the price of gold and silver is going to start soaring as soon as the overseas markets open in an hour or so. My wife disagrees, however, and so I'm not buying anything right now. We'll soon se who's right, I suppose...
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New Member
United States
29 Posts |
i agree with you about the pm prices , when I listen to my wife it costs me money.
go with your gut feeling I would.
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Pillar of the Community
 United States
5855 Posts |
Then sleeping on the couch would I be...
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Valued Member
United States
158 Posts |
Well, I must say....this woman has a set of cahones as big as coconuts. With that, I'll let you read her words and draw your own conclusions. I just wish she'd run for elected office  "Gold is for optimists. I'm diversifying into beans, bullion, and bullets." (me) BCM Has Ceased Operations
Posted by Ann Barnhardt - November 17, AD 2011 10:27 AM
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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Pillar of the Community
United States
5855 Posts |
Amazing how some people place the entire blame for the economic downturn on the current administration. Because, of course, everything was going just perfectly before Obama took office, right?
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Valued Member
United States
158 Posts |
Setting blame aside, I think the larger point one could take away from her writings is that the market is toast. If MF Global is, indeed, just the "tip of the iceberg", the entire derivitives market will collapse.
Then what happens ?
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Pillar of the Community
Canada
1502 Posts |
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Bedrock of the Community
United States
10038 Posts |
I personally believe that as long as people are afraid of the economic trends and mindset, that PM's will continue to become more and more expensive. I also am thinking that when their is a change of the current mindset for the way the economy now is, that the prices will start to go down again. We have to remember the fact that the president is only the one who signs or vetoes the bills. It is the Legislative branch who choose which economic policies will be voted on and then they present them to the president for his signature/veto. And, if the president vetoes the bill, then they can override his veto with a majority vote. So, truly, the president can pass a bill into law or he can strike it down - but with the consequence it will be passed anyway. Here is a very interesting chart showing where the REAL issue behind the way the economy goes:  I do not care which side of the fence you are on politically with this - the numbers do not lie and show how the economy has suffered most when one party has been the majority in the Legislative branch. You will note the current trend in the current admin. Looking at the facts of the chart, it is easy to see which group has a track record of making the federal debt worse - hence a worse economy. This, IMHO, is why the metal markets are doing what they are. Until more time is passed and the current upswing is corrected, I believe PMs will continue to rise. I also think they would, right now, be higher if there were not some manipulation that has gone one. If left to themselves, I think they would be a lot higher right now. |
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Pillar of the Community
United States
4008 Posts |
Quote:
We have to remember the fact that the president is only the one who signs or vetoes the bills. It is the Legislative branch who choose which economic policies will be voted on and then they present them to the president for his signature/veto. We must also remember that the president is not a spectator. He IS the leader of his party and he does sponsor legislation concepts that his party then turns into legislation. At least, that is how it has worked in the past. As to PMs, they will move up and down for general economic reasons as well as for reasons that are specific to PMs. Recent sell-offs, for example, occurred because PMs were big winners and many investors sold them off to raise capital for short covering or to increase their longs in other areas. Other people sold off simply to take good profits. In general, PM price movements do not correlate well with stocks in general, so they make a good addition to a portfolio that consists primarily of more conventional investments. This is, of course, not to say that PMs and stocks never move in the same direction at the same time because they will at times do just that. |
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Pillar of the Community
United States
5855 Posts |
Well, it looks like the stock market is tanking as expected. Gold and silvered dipped a bit, but not dramatically. Certainly no sudden rise, however.
Hmmmm... Maybe my wife was right after all.
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Pillar of the Community
United States
667 Posts |
How to separate PM from Politics? That can be hard.
Lets just say I have bought the most PMs over the past two years than I have over the past 20. I guess you can say that is how my confidence has been over the past two years.
Without the PM's I feel insecure for what could come.
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Pillar of the Community
United States
3670 Posts |
With gold now pulling back to 1677 (huge to fall below that 1700 Mendoza line IMO) and silver to 31 an some change, makes me think it is gonna be a bad week for Pm's, lookout below....
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Pillar of the Community
United States
7840 Posts |
Interviewer: What's your prediction for the fight? Clubber Lang: My prediction? Interviewer: Yes, your prediction. [Clubber looks into camera] Clubber Lang: Pain! Rocky III, 1982 http://www.imdb.com/title/tt0084602/quotes |
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Valued Member
United States
362 Posts |
Yea, and I just bought the most I've ever bought at one time in gold! LoL, but I'm confident in the long run it will pay off! ...hopefully...
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Pillar of the Community
United States
4008 Posts |
Quote:
If MF Global is, indeed, just the "tip of the iceberg", the entire derivitives market will collapse.
Then what happens ? Then what happens will be something that has never happened before. About all we can say with any amount of surety is that it WILL be really HUGE and really UGLY. The biggest problem we all face now is the leverage inherent in the derivatives market. It is HUGE! Way bigger than any bank, market sector, market, economy, or national economy. In fact, the derivatives market dwarfs the entire world economy by a factor of at least 10 to 1. I've been to Reno, Tahoe, and Las Vegas a few times. I have wagered a few hundred dollars per trip. At no time was I ever tempted to wager 10x my total net worth. Yet, this is precisely what the financial companies that use derivatives have done. When a derivative implodes, it is sudden and catastrophic. There is no derivative deal out there that sort of works. What usually happens is that either a great deal of money is made or a great deal is lost. MF Global is a perfect example of a company that appears to have done two really stupid things. 1st, they mixed company and client money into one big pot. This is not only stupid, it may even be illegal. We'll know more as the people shoveling through the debris make their reports to the bankruptcy judge and to the regulators involved. 2nd, they made some VERY large and heavily leveraged bets on European bond spreads. This bet went against them, even though it was supposedly structured to be a near-risk-free bet. Since MF Global was leveraged at least 50 to 1, all they needed to do to bankrupt the company was to have a bit more than 2% of their bets go against them. When they did, MF Global was instantly insolvent. Bad as all this is, MF Global is only 1 company out of many that use derivatives and not a really big one at that. My question is: What other much bigger financial companies out there are making similar bets? B of A? JP Morgan? Citi? AIG? If these companies are into this area of "finance", one can only hope that the government will not let them get away with dumping their blown-up financial mess onto the US Tax-Payer... again.  All of this will be very destructive to the markets and its investors for a period of time. No one knows how long such turbulence will last or how much damage it will do. It is most likely that PMs will come through this storm better than anything else but they will feel the effects of an imploding derivatives market, no doubt about it. |
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Valued Member
United States
302 Posts |
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Replies: 16 / Views: 3,151 |
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Posted 11/20/2011 5:50 pm
