Most iTulipers HAVE jumped aside

[don]

boredom, a side affect of duck and cover, is a price we pay . . .

04 November 2011

Liberty Without Virtue

"But what is liberty without wisdom, and without virtue? It is the greatest of all possible evils; for it is folly, vice, and madness, without tuition or restraint."

Edmund Burke

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GroupOn = LinkedIn?

La la la, whatever. La la la, doesn't matter. As cynical an IPO as seen since 1999 they said today.

Where is the MF Global customer money? First it was missing, and then it was not. And then it was lost (or) missing again, and then found at JPM. And then that was denied, and now it seems to be lost at sea in a financial storm of venality.

Maybe Judge Crater and Jimmy Hoffa took it with them.

Value can be an ephemeral thing, but especially when it is defined at a keystroke from the touch of a faceless bureaucrat. To create and distribute a nation's money at will is liberty without virtue, folly, vice and madness.

I have seen strange markets and economies, and the organizations that ran them, going back to the days of Richard Nixon. But this is one for the record books. As I remarked in the equity commentary:

'Perhaps the disconnected nature of the nation's money, its profound alientation with respect to the real economy, is the key to the market's increasingly erratic behaviour, and the remarkable silence of the lambs.'

Relativism at the extremes has a will of its own. You may wish to grab something solid, and hang on. The trick is to properly define 'solid,' and to stick with it amongst the growing madness.

Expect some serious volatility in the days ahead.

"The race is not to the swift, nor the battle to the strong, but to those who see it coming and jump aside."

Hunter S. Thompson, The Rum Diary

http://jessescrossroadscafe.blogspot...charts_04.html


Jesse - Is the graphic a shot of Obama getting his daily instructions?

[Shakespear]

Re: Most iTulipers HAVE jumped aside

We have convictions.

As in "We spend a lot of time in court"

[don]

Re: Most iTulipers HAVE jumped aside

This is what investors with a sense of self-preservation have to put up with . . .

MF Global Clients Fear for What They Left

By PAUL SULLIVAN

Igor Gavrylov of Kiev, Ukraine, had about $100,000 at MF Global when it collapsed on Monday, although he managed to pull out $150,000 last week.

James Koutoulas, chief executive of Typhon Capital Management in Chicago, said 85 percent of his clients’ money was tied up in MF Global, about $55 million.

About 150,000 accounts — from investors big and small — were left in limbo in the firm’s rapid demise. Regulators are in the midst of trying to transfer about a third of the accounts to other commodities brokers and securities firms. That usually takes place in a matter of days or weeks.

But, as in any bankruptcy filing, there are complications. Regulators say they are looking for roughly $600 million in client funds that they believe are missing. Before clients can get full access to their funds, the regulators are first going to have to determine where that money is and, then, seek to recover it.

Also unresolved is whether the money in some clients’ accounts was mixed in with the firm’s money, as regulators have contended. That could lead to further litigation over the ownership of money in the accounts.

And then there is the fact that most of the firm’s investments were not in securities, where the dollar value of an investment is clear, but in commodities, where investors put up what is essentially a down payment on what a commodity will be worth on a future date. Sorting out who is owed what will also take time.

While MF Global may not have been a household name, it was respected in the commodities and futures markets. It provided the essential service of holding money and clearing trades.

The firm’s brand name was why smaller clients said they did not worry whether their money would be safe. Mark Tucker, who lives in the English seaside village of West Runton, population 1,633, manages rental properties by day. But he said he had been trading options for the last 18 years and had $50,000 with MF Global (and another $50,000 with another clearinghouse).

He has not had access to his account since Monday and was worried about some of the options he bought before the firm’s bankruptcy filing. They are bets that the prices of crude oil, coffee and sugar will fall. “It’s not a comfortable position,” he said. “By definition, the potential for losses on short options is limitless.”

Like many clients, he is trying to separate rumor from reality. He had heard that his account would be moved to another broker. He said his broker had been “trying to reassure me the only reason it hasn’t happened is they have 50,000 of these accounts and it should move over in the next 24 to 48 hours, but that’s what they told me 24 to 48 hours ago.”

James W. Giddens, a partner at Hughes Hubbard & Reed and the court-appointed trustee in the case, said his group was working closely with the Commodity Futures Trading Commission and the Securities Investor Protection Corporation to transfer accounts to other commodity brokers. He said clients would be notified “if and when their accounts have been transferred.” The court has approved the transfer of 50,000 commodities accounts to other brokers because those are the easiest to move and the most likely to be picked up. A spokesman for the trustee said that the selection of which accounts would be moved was led by the CME Group, the giant exchange where MF Global did business. On Friday, the CME Group announced that 15,000 accounts had been moved.

But even the clients whose accounts are transferred will not get all their money back immediately. Given that some of the funds involved are contested, clients will have access to only about two-thirds of their accounts’ value.

MF Global was also a registered broker-dealer, like Fidelity and Schwab. The future of the securities accounts it held is less clear. Stephen Harbeck, chief executive of SIPC, said he believed there were only 6,000 securities accounts. So far, he said, the trustee had not found another home for them because they did not have a large amount of assets and a trading history. In other words, these accounts may not pay large fees and could be more of a hassle than they are worth to another firm.

“If we’re able to find a brokerage firm that is ready and willing and able to take the accounts, the accounts can be transferred quickly,” he said. “The precedent is Lehman Brothers, where we were able to transfer the accounts within seven to 10 days.”

He added, “Failing that, the process can take a few months.”
SIPC offers protection on securities accounts up to $500,000, though it could take years for claims to be paid. There is no equivalent backstop for commodities accounts.

Some bigger money managers said they were confident that they would eventually get their money back, but they have the financial wherewithal to wait years and remain in business.

An investment adviser in Chicago who was not authorized to speak to the media said his firm, which manages about $400 million, had had over $5 million at MF Global but had been able to transfer most of it out last week.

“We got out because of word of mouth only,” he said. “No one knew anything specific. They just knew the run was on and we got out.”

http://www.nytimes.com/2011/11/05/yo...tml?ref=global

[GRG55]

Re: Most iTulipers HAVE jumped aside

There's some things here that don't seem to make sense:

"Igor Gavrylov of Kiev, Ukraine, had about $100,000 at MF Global when it collapsed on Monday, although he managed to pull out $150,000 last week."

If he was worried enough to pull out $150k of the $250k he had with them, why didn't he pull the rest of it out at the same time? [yes, I believe he's probably asking himself the same question].

"James Koutoulas, chief executive of Typhon Capital Management in Chicago, said 85 percent of his clients’ money was tied up in MF Global, about $55 million."

WTF?? The guy stuffs 85% of his clients money into one firm, for the purposes of commodity speculation? And charges a fee as a "financial advisor". Didn't anybody learn anything about financial advisors from the Madoff thing? Apparently not.

"Mark Tucker, who lives in the English seaside village of West Runton, population 1,633, manages rental properties by day. But he said he had been trading options for the last 18 years and had $50,000 with MF Global (and another $50,000 with another clearinghouse).

He has not had access to his account since Monday and was worried about some of the options he bought before the firm’s bankruptcy filing. They are bets that the prices of crude oil, coffee and sugar will fall. “It’s not a comfortable position,” he said. “By definition, the potential for losses on short options is limitless.”

Either the reporter is misquoting this guy, or there really are still people out there that feel compelled to invest in things they don't actually understand: “By definition, the potential for losses on short options is limitless.” Ya, right...


Notwithstanding my surprise at the above admissions, that an MF Global can still occur shows how corrupt and self serving the financial industry really is. And how the authorities deal with this latest scandal will speak volumes...

[GRG55]

Re: Most iTulipers HAVE jumped aside

...And how the authorities deal with this latest scandal will speak volumes...

Others Pay Price for Corzine’s Risky Revenge

In the end, Jon Corzine was little more than an unsupervised rogue trader.

His disproportionately reckless $6.3 billion bet on the credit quality of a few European nations bankrupted MF Global Holdings Ltd. (MF) over the course of three dramatic days after the short-term credit markets quickly lost confidence in him and his firm. His gamble will cost MF’s shareholders and creditors billions of dollars and, virtually overnight, put the careers of MF’s almost 3,000 employees in jeopardy.

MF Global now has the distinction of being one of the largest bankruptcies in American corporate history, with almost $40 billion in liabilities. There is also the matter of the hundreds of millions of dollars of customers’ money that regulators have reported to be missing from the firm’s coffers.

In any case, it’s incredible how little Corzine and his associates learned from the collapses of Bear Stearns Cos., Merrill Lynch, Lehman Brothers Holdings Inc. and American International Group Inc. three years ago. And it now seems very hard to believe that just a few months ago Corzine was considered the front-runner to be the next U.S. Treasury secretary...

...Where were MF Global’s other institutional shareholders, such as Fidelity Investments (which held a 14.8 percent stake, according to the proxy), Guardian Life Insurance Co. (7.4 percent), TIAA-CREF Investment Management LLC (6.6 percent) and Piper Jaffray Cos. (PJC) (6.3 percent)? Were they too dazzled by Corzine’s resume to take a serious look at how he intended to transform MF Global from a backwater to a major player on Wall Street? Where was MF Global’s auditor, PriceWaterhouseCoopers LLP, which managed to pocket almost $25 million in fees from the company over the past two years?

And where, for heaven’s sake, was MF Global’s eight-member board of directors -- a ragtag collection of mostly unknown Wall Street types who had the fiduciary responsibility on behalf of creditors, shareholders, counterparties and employees to make sure Corzine wasn’t taking irresponsible risks? Is it too much to ask a board of directors to take this responsibility seriously?...

...The collapse of MF Global points once again, in the strongest possible terms, to the importance of having a substantive, teeth-bearing regulatory regime charged with overseeing the kind of asynchronous risk-taking that gives people like Corzine the incentive to gamble with other people’s money in hopes of reaping financial windfalls. And yet, more than three years after the collapse of Lehman Brothers and the onset of the financial crisis, we don’t have in place anything close to necessary regulations to try to prevent companies like MF Global from exploding...

(William D. Cohan, a former investment banker and the author of “Money and Power: How Goldman Sachs Came to Rule the World,” is a Bloomberg View columnist...)