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TFC Commodity Trading Forum

MF Global - can this help in the future?

I periodically get an email from a guy named Nick Guarino. It is an advertisement type of email advertising his, expensive news letter (in my opinion) that he wants to sell. I am not sure why I get it. I think about 12 years ago I had a subscription to one he wrote called Wall Street Underground.

Most of the emails the tone is gloom and doom, and we are heading into a deflationary depression. I cut this out of one he recently sent becase he mentioned MF Global. I don't know about him or the accuracy of his emails, but they are interesting to read. I cut a piece out of his email and am posting, so maybe someone can decide, if this can be of benefit to them and would not want to see anyone else go thru a MF Global experience.

For what its worth here is a snippet from his email. The formatting is not the best after a cut and paste.

MF Global is the fifth largest financial-industry public company bankruptcy ever. Just like in the other failures, such as AIG and Lehman, almost no one outside management had an inkling there was a problem. The CFTC audit gave MF Global a clean bill of health, less than a month before it collapsed.

Despite all that, $1 billion in segregated customer funds are missing. MF Global clients never had a chance to get their money out. They are so angry, death threats are being made to CEO Corzine. Quite an extraordinary time. We’re seeing the entire global financial system wipe out. Until recently, nearly everyone believed that was impossible. With every passing day, more and more people come to our point of view.
Incredible challenges and dangers lie ahead of us. Because the information is not widespread—because there is so much bad analysis (most of it intentional) -– the vast majority of people do not understand the depth or magnitude of the problem. Including our leaders. That’s why their “solutions” are so lame and downright dangerous. And why the opportunities for you and me are so phenomenal.

Bullet-proof
How to make sure your broker doesn’t steal your money to make his own high-risk derivatives trades...
It had to happen. Like so many other brokers (and bankers) MF Global used (i.e. stole) its clients’ funds, to make its own highlyleveraged derivatives trades.

MF Global was sure the ECB/IMF/World Bank would not let Greece default on its sovereign default. How stupid. No one could have saved Greece, even if they wanted to.

MF bet 100% wrong. So now, for the first time in commodities trading on the exchanges, the resulting wipeout means clients whose money was supposed to be segregated will take a big hit. At least 50% by the time they scratch their asses and realize the clients took the loss. All on very foolish in-house bets that went bad. Here is a little secret for you. Many, many banks and brokers have made the same “wipe out their customers” bet. As we get closer to the end of financial civilization as we know it, this sad story will be repeated over and over again. In banks, insurance companies, money market funds and brokers.

I know many of you who have trading accounts are worried. You damn well should be. Virtually every firm out there does the same thing. They trade their own account with their clients’ money. They hope (pray) they will bet right, and be able to return the money at the end of the day.
You may know I once owned and ran a commodities firm. We held tens of millions of dollars of customer funds, always strictly in segregation. We never mixed our clients’ funds with ours. I personally used to check the balance of every trade in my firm, every day. I had to make sure client funds never got mixed in with ours. I know how it’s done... I know what happened at MF Global... and I know the best way to protect yourself. Here’s how to make sure your money is safe. Suppose your broker goes bankrupt. The courts have ALWAYS given funds back to the client that were clearly marked “Segregated on behalf of client XXXXX.” You must make sure your funds are clearly marked and segregated in your name. NOT in the name of your broker. Do that and your money should be safe.
I’m sure your broker will protest. I’m sure he will swear a thousand oaths, on a stack of bibles, that they would never ever use your funds. BULLLLLLLLLSHITTTTTTTT!!!!

I don’t want to get in a debate with you or your broker over this. And as for broker insurance... it will not be there when the shit really hits the fan. There is simply not enough money to cover all the coming, hidden losses.
Let me tell you how this works. Your broker obviously wants to play with your money. That is the sad time we live in. He is broke. So is your government, your bank, your brokerage firm and your insurance company.
These guys only have one play left to save themselves. Trade with their depositors’ money. Virtually all of them do so, one way or another.
Why settle for a few points of interest? Instead they can use their clients’ money and make far more trading. And the really good part from their viewpoint? If they wipe out, government will bail them out. Just like it did in 2008. Unfortunately, we taught them the wrong lessons, my friend.

Two iron-clad ways to protect your money

One, wire excess money in and out of your account. Doing that every day is a pain in the butt. But I can tell you from experience it works great. They can only steal what they can get their sticky fingers on.
This is only feasible if you are swinging large amounts of money. In that case, it can save your ass. The wire fees on a big account are chicken feed, next to what you save. Another way, especially for smaller amounts: have your broker buy T-bills with your money and use them to fund your account. Again buy them on a regular basis. These T-bills must clearly be marked “segregated” in your name.
I have had brokers hold trading money in T-bills marked this way. And in my broker days, we held clients’ funds like this, in segregated T-bills.
Please don’t send me emails, asking me which brokers: I make no broker recommendations. I have given you all I can on this. It’s up to YOU to put the pieces together.

Also, if you are trading a really small account, this probably won’t work. The hassle won’t be worth your time or your broker’s. But if you have a medium to big line, use either of these two techniques.
Some firms call the account where you wire money in and out a “sweep account.” They sometimes call putting your money into Treasuries (in YOUR name) a “Treasury set-aside.” Whatever name they call it this month, the mechanisms are the same. On the Treasury set-aside: make sure your broker sends you a receipt that proves he is holding your T-bills as a custodian only, and that the T-bills are segregated, or set aside, in your name. Do this every time you add a T-bill to your account. A friend of mine had a lot of money in an international bank for trading. The bank got shut down, over an entirely unrelated issue. Every account, including his, was frozen.
Some of his money had been invested in T-bills, in his name. That money was returned instantly to him. The rest, left in a deposit account, was lost forever.

Again, I don’t want to debate this. If a broker tells you no, he can’t do it, that’s up to you to work out. Also again, I won’t recommend any brokers. But I have told you all you need to know, to get this going.
I can tell you for a fact they can do this. Despite all their protests. If you’re trading a small account, no one will break their back to help you. So help yourself!

For the last time, I repeat, I know this works. Been their done that and I got the T-shirt to prove it. And no, I have no broker to recommend to you, or name to give you, in any way, shape or form.