Skip to comments.Hillary Rodham Clinton - What Every American Should Know: Chapter 3 (re: cattle futures)
Posted on 06/28/2002 11:22:16 AM PDT by doug from upland
Martha seems to be a capitalist that made her money on her own. Hillary has been sucking on someone's tit for money (and maybe just to suck) for many years and has never run anything, except her mouth.
One woman makes things, the other takes things.
Some of her biggest scores came from selling shorta particularly risky venture because of potential margin calls.
in live cattle, short selling is not "particularly" risky, as the risk of being short is roughly equal to the risk of being long (there is little or no long-term uptrend in live cattle prices, they have fluctuated between about 40 and 80 cents per pound [live cattle futures contracts are for delivery of cattle "on-the-hoof"] for the last 30 years, unlike stocks, which have exhibited a secular tendency to rise when looking at 30 year periods)
and the author isn't talking about pure market risk, but rather about the main risk to commodity brokerage firms, which is that their customer will lose more than the amount of equity in the account and not be able to pay the resulting deficit, which is a primary concern of all brokers
however, risk (if defined as equity being wiped out) is directly proportional to the amount of equity behind a given trade
the current value of a single live cattle futures contract is about $25,600 (currently 40,000 lbs at about 64 cents per)
the current exchange minimum margin for that contract is $810 (and has fluctuated between roughly 500 and 1,000 for 30 years depending on the level of cattle prices)
one can trade one contract with $810 in the account (a little over 3% of the value of the contract, and obviously heavy-duty leverage), or any other larger amount (could be any amount, even $100,000 - just because leverage is available doesn't mean one has to use it)
however, if you have but $810 of equity, about 2 cents of adverse price movement will wipe it out (one one-hundreth of a cent = 4 bucks)
if you have $10,000 of equity you can stand 25 cents of adverse change, with $25,600 in the account, cattle can fall to zero (if long) or double in price (if short) without causing risk to the broker
If the price increases, your liability increases and the new 10 percent is higher than the old one. At that point, a brokerage house will usually issue a margin call, asking you to put in more money to cover what looms as a substantial loss.
first, any loss doesn't "loom", it's already real on a minute-to-minute basis, futures accounts are marked to the market on a real-time basis, and were back in the '80s
more importantly, and beyond the fact that 10% has nothing to do with it, there is no "new" margin comprised of either a percentage or a higher amount
if your equity falls below the maintenance margin level (currently $600 per contract), the broker would (normally, assuming that you're not some priviledged witch) demand that you bring your equity back up to the original margin of $810 per contract
starting with only $810 of equity, this would happen after about a one-half cent of adverse price movement, something which may not happen at all during any given day, or may happen in less than a minute in the live cattle market
On her first ten cattle contracts, she sold shortthe most dangerous kind of trading, since youre betting that prices will drop and risking enormous losses if they rise
a repetition of the mistaken risk concept, and cattle are worth 4 bucks a point whether they're going up or down
Well-informed traders rarely trade with such remarkable success and consistency.
true for the most part, but not as rare as he thinks it is, my experience includes more than one string of over 25 profitable trades, and entire years of 80+% profitable trades
none of which had anything whatsoever to do with reading the wall street journal, whose extremely limited and singularly unincisive futures commentary has been a joke for decades
what is also true is that more than 90% of those who trade futures ultimately lose money, and most of them have probably forgotten more about futures trading than the witch ever knew
Execute buy and sell orders in the same contract. The contract price will eventually go up or go down. If it goes up, assign the profitable buy trades to the favored account and assign the losing sell trades to an account owned by the benefactor. If the price falls, assign the profitable sell trades to the favored account and assign the losing buy trades to the benefactors account.
he's on the right general track, but this was almost certainly not precisely how it was done
because there is no legitimate reason to do so, placing simultaneous orders to buy and sell the same thing attracts way too much attention from both order desks and compliance people, particularly if it is done more than once, and almost certainly if it is done repeatedly
(even standard, legitimate spread trades [long and short different delivery months, i.e. buy june/sell august] wouldn't fail to attract attention, because both sides of a legitimate spread have to go into the same account, not two different accounts)
it was also completely unecessary
refco is and was a major player in cattle, and, at the time, a big cattle bull in what turned out to be a big '80s cattle bull market
ol' red, sitting out there in podunk, arkansas in his little branch office, called his orders directly to the floor in chicago, as probably every branch in the country did
for instance, if he had 20 accounts trading cattle for which he collectively wanted to buy (or sell), for instance, 90 contracts of cattle (and most of his accounts were probably discretionary, with red calling the shots without having to consult the customers), he would pick up his direct line to the floor and give them an order for 90 cattle
while omnibus (branch office) accounts are supposed to give the order desk the breakdown of who gets what at the time the order is placed, in practice during the '80s (and perhaps still to this day in some cases), the account by account breakdown often waited hours or until after the markets closed to actually get done, as carefully recording dozens of account numbers isn't something understaffed order desks had time to do if markets were hopping and the phones were ringing
in most cases, by the time he had to give up account numbers to chicago, the results of the trade would be known, and it was child's play to apportion winners to the witch
in the event of a loser, red didn't even need to create an obvious trail by dropping them directly into a blair or tyson account, as branches have a house account (generally for errors) where he could park them and then work it all out indirectly at his leisure
it's too bad the author didn't have a better understanding of futures trading in general, and of how branch offices operated in particular, his good effort at exposing the witch could have been better
she was the conduit for a bribe
in my considered opinion, of this there can be absolutely no doubt whatsoever, and i've traded this stuff (futures, including live cattle) for 30 years
oh, well, blair is dead, so he ain't talkin', maybe ol' red will do a mcdougal and spill the beans before he goes off to the big branch office in the sky....
not almost, completely
until bone got around to telling them what the account allocation was, all the people in chicago who actually executed any given trade knew was the total quantity for bone's office, and bone's office's omnibus account number
any given trade could be for one or five or 50 different accounts, they would have no way of knowing
Hillary was credited with the gains
only some of the gains
bone could have intentionally increased the quantity on any given order (for instance, when he was confident of the trade he was about to put on) to allow for her to receive an allocation without stealing from his other customers, or he could have just allocated some profitable contracts which would have gone to some other customer in the absence of any need to make sure the witch made money
he probably did both along the way
he had great flexibility, as in all probability, most (if not all) of his other discretionary customers would not know until they get around to calling him that they were even in on any particular trade
while an account of Tyson received the losses
probably only if he had no place else to stick it, and probably only after first allocating it to himself, to hide the trail
he had the same flexibility he had with gains, and he may have stuck a real customer or two (other than blair or tyson) with the occassional unexpected loser
my broker always asks 'which account?' How can an accountless trade be made in the first place?
bone WAS the broker, dealing directly with the trading floor, it was always assumed by all that the broker knows who the trade is for, even if they haven't had time to fill in all of the blanks, they'll get to it later when the phones stop ringing
bone's order tickets were written and time-stamped BY BONE in his little remote office, with the account number/quantity breakdown left blank until he got around to deciding who got what and filling it in, but he was treated like an employee, not a retail customer
and, back in those days, almost no retail customer had direct access to the trading floor
it's hard to imagine, but all of this took place in the days of paper order tickets and telephones, long before any commodity house had any kind of electronic order entry system
practices were extremely loose, it was common for brokers to play these sorts of games, but the object of most brokers wasn't to facilitate a corrupt pay-off to some socialist hag, it was more like trying to help out an account that was in trouble at the expense of an account that could do without a profit
i doubt he could get away with it today
Don't you think it's time you followed through with your reservations? It won't be the same without you at FRiva Las Vegas.
You're closing in on the end. On with you.
Let's not talk, I'll give the clue.
Here's clue two on night Seven.
Clue code: 333 Don't forget, you must copy this code. Write this down."Clue two: Code 333"
Key Words: clinton Veterans
(Set preferences to "match all words" and "order by post time".) (The thread you're looking for will be within the first five choices. Use the clue just below.)
(Use the search engine at the top right of the latest articles page.) LINK HERE
Clue: Here's two words you love to see together. Does this warrant an alert?