Posted on 12/17/2011 8:38:03 PM PST by blam
Liquidation Of Customer Stored Gold And Silver Bullion From MF Global
Commodities / Gold and Silver 2011
Dec 17, 2011 - 12:27 PM
By: Jesse
The bottom line is that apparently some warehouses and bullion dealers are not a safe place to store your gold and silver, even if you hold a specific warehouse receipt. In an oligarchy, private ownership is merely a concept, subject to interpretation and confiscation.
Although the details and the individual perpetrators are yet to be disclosed, what is now painfully clear is that the CFTC and CME regulated futures system is defaulting on its obligations. This did not even happen in the big failures like Lehman and Bear Sterns in which the customer accounts were kept whole and transferred before the liquidation process.
Obviously holding unallocated gold and silver in a fractional reserve scheme is subject to much more counterparty risk than many might have previously admitted. If a major bullion bank were to declare bankruptcy or a major exchange a default, how would it affect you? Do you think your property claims would be protected based on what you have seen this year?
You always have counter-party risk if you hold gold and silver through another party, even if they are a Primary Dealer of the Federal Reserve. As Ben said, the Fed offers no seal of approval.
If a Bankruptcy Trustee can pool your bullion into the rest of the paper assets and then liquidate it at prices that are being front run by the Street, you will have to accept whatever paper settlement that they give you.
The customer money and bullion assets are not lost, or rehypothecated or anything else. This is a pseudo-legal fig leaf, a convenient rationalization.
The customer assets were stolen, and given to at least one major financial institution by MF Global to satisfy an 11th hour margin call in the week of their bankruptcy, even as MF Global was paying bonuses to its London employees. And now that powerful financial institution does not want to give the customer money back. And they are so powerful that the Trustee and the Court is reluctant to try and claw it back. And so in the great Wall Street tradition they are trying to force the customers and the public to take the loss. The regulators and the exchange are aghast, and are trying to imagine how to resolve and spin this to preserve investor confidence and prevent a run on the system.
'Let them eat warehouse receipts.'
For many this would have been unthinkable only a few months ago. They had been cautioned and warned repeatedly, but chose to trust the financial system. And now they are suffering loss and anxiety, frozen assets, and the misappropriation of their wealth.
How more plainly can it be said? The US financial system as it now stands cannot be trusted to observe even the most basic property rights as it continues to unravel from a long standing culture of fraud.
Get your money as far away from Wall Street as is possible. And if you want to own gold and silver, take delivery and store it in a secure private facility outside the fractional reserve system.
Barrons
The Silver Rush at MF Global
By ERIN E. ARVEDLUND
December 17, 2011
It's one thing for $1.2 billion to vanish into thin air through a series of complex trades, the well-publicized phenomenon at bankrupt MF Global. It's something else for a bar of silver stashed in a vault to instantly shrink in size by more than 25%.
That, in essence, is what's happening to investors whose bars of silver and gold were held through accounts with MF Global.
The trustee overseeing the liquidation of the failed brokerage has proposed dumping all remaining customer assets—gold, silver, cash, options, futures and commodities—into a single pool that would pay customers only 72% of the value of their holdings. In other words, while traders already may have paid the full price for delivery of specific bars of gold or silver—and hold "warehouse receipts" to prove it—they'll have to forfeit 28% of the value.
That has investors fuming. "Warehouse receipts, like gold bars, are our property, 100%," contends John Roe, a partner in BTR Trading, a Chicago futures-trading firm. He personally lost several hundred thousand dollars in investments via MF Global; his clients lost even more. "We are a unique class, and instead, the trustee is doing a radical redistribution of property," he says.
Roe and others point out that, unlike other MF Global customers, who held paper assets, those with warehouse receipts have claims on assets that still exist and can be readily identified.
The tussle has been obscured by former CEO Jon Corzine's appearances on Capitol Hill. But it's a burning issue for the Commodity Customer Coalition, a group that says it represents some 8,000 investors—many of them hedge funds—with exposure to MF Global. "I've issued a declaration of war," says James Koutoulas, lead attorney for the group, and CEO of Typhon Capital Management.
At stake is an unspecified, but apparently large, volume of gold and silver bars slated for delivery to traders through accounts at MF Global, which filed for bankruptcy on Oct. 31. Adding insult to the injury: Of the 28% haircut, attorney and liquidation trustee James Giddens has frozen all asset classes, meaning that traders have sat helplessly as silver prices have dropped 31% since late August, and gold has fallen 16%. To boot, the traders are still being assessed fees for storage of the commodities...
I don't recommend holding gold in your basement. Gold should be held as ALLOCATED 400 ounce London good delivery bars, worth about $640,000 each with one of the seven members of the LBMA who are dealers, assayers and storage houses. These are five major banks plus Brinks and Via Mat. Storage and insurance on this basis is cheaper, totaling around 0.12% per year, plus these bars are the most liquid/tradeable form. My preference is HSBC.
So how does corrupting the commodities markets cause the rest of the markets to slither into an abyss?
Kennie, that’s no fun!
24K coins, whatever the size, can be placed in 18k bezels and attached to bracelets, cufflinks, necklaces, buttons, you name it - but I wouldn’t wear them out and about in certain venues lest one be mugged.
I’m particularly fond of the small gold coins minted by the Isle of Mann, the ones with the different cat breeds on them.
If your broker can pledge and lose your assets, and you can't recover, then the brokerage system is broken to the point of unusability.
Bernie needs a room mate. Governor Corzine should fill the bill. But then, we'll have to let them both out, since a broken capitalism can't afford prison screws! (not to mention their pensions.)
A lot of production planning estimates are based on perceived or actual future availability.
For instance might a farmer plow a lot of land to plant if he is unsure of how much fertilizer will cost him?
This type of thinking practice also gets magnified by JIT methods.
And diamonds are a girl's best friend.
Not that I am encouraging any illegal act or retaliation, but this sort of thing will continue until some of the thieves end up like the coyote hanging on a fence. It acts as a deterrent to those who might otherwise consider unacceptable acts.
What? Won’t the govt bail out people that lost a high percentage of their investments.....roflmfao.
‘There came into Egypt a Pharaoh who did not know.’
—Wall Street
Everything old is new again and there is nothing new under the sun. Read Silver Bulls by Paul Sarnoff and some of the musings of Sherman Skolnick (RIP) of Chicago.
Skolnick was a ‘Judge Buster’ in Chicago. When I say Judge Buster, I’m not talking about someone who takes down some night court judge who fixes parking tickets. Skolnick would take down crooked Federal Appellate Judges in Chicago in the early 1970’s.
He also wrote the definitive account of the United Airlines crash which killed the wife of E. Howard Hunt.
Isn’t this the same kind of risk as if you held corn futures and there was a severe drought making it impossible for everybody to get all the corn that was “futured”?
Gold dealers can go bankrupt too.
“Gold dealers can go bankrupt too.”
Buy more food and other necessities.
I guess it is just a coincidence that most of these financial clowns are stong proponents of gun control.
They did raid them during the 1930s. Several things you are not supposed to store in safety deposit boxes if you read the fine print when you opened the box. Also keep in mind if a bank holiday is declared you will not have access to the box either.
“Our anscestors would have been shooting by now”
welcome your comments..
‘Let them eat warehouse receipts.’
For many this would have been unthinkable only a few months ago. They had been cautioned and warned repeatedly, but chose to trust the financial system. And now they are suffering loss and anxiety, frozen assets, and the misappropriation of their wealth.
I am sitting here shaking my head sadly also I am so grateful that I had no personal dealings with this company.
I’ve said it before here on Free Republic: If you can’t reach out and put your fingers on it, you don’t really control it. That goes for Gold, Silver or anything else.
I learned that lesson real well in the military, oh the stories I could tell about my units ‘assigned assets’ that disappeared just as we needed them because they weren’t under our direct control.
>>what is now painfully clear is that the CFTC and CME regulated futures system is defaulting on its obligations.
There is an Ann Barnhardt rant on exactly this theme from a week or more ago. She goes into significant detail on the whole issue, and is quite irate about the whole thing. Watching this happen is what made her shut down her business, as she was unwilling to tell customers to put money into a system with no integrity.
Here, I found it:
Market Has Been Destroyed by the MF Global Collapse (podcast interview w/ Ann Barnhardt)
http://www.freerepublic.com/focus/f-news/2815367/posts
And there is now:
Transcript for Ann Barnhardt Interview
http://www.freerepublic.com/focus/f-news/2818867/posts
On the theme of your comment, we have this from that interview:
"But, yeah, to all the people out there listening—you are going to have to get away from paper and get back into physical commodities, the real deal. Anything that is on paper anything that involves a promise or a commitment is no longer valid because as we said there isn’t a rule of law anymore. People can steal from you. Your money can be confiscated. And think how easy now it is to confiscate people’s wealth. Most of our wealth in this society exists as zeroes and ones on a computer server. It takes no effort whatsoever to steal zeros and ones on a computer server. So what I have been telling people is you need to get into physical commodities. And the rule of thumb is if you can stand in front of it with an assault rifle and physically protect it, then it's real—it's a real commodity."Emphasis added.
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