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Is the CME broke(n)?

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Strongsidejedi
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Is the CME broke(n)?

Some comments on the CME and futures trading.
I watched yesterday's US Senate Agriculture committee meeting in which four panelists discussed the impact of the MF Global Chapter 11 bankruptcy on their firms.  Unsurprisingly, there was no coverage of the panel by any of the major "financial" networks.

The key issue was that the MF Global bankruptcy has sent shockwaves through the agricultural industries.  This includes farms, grain elevator operators, wholesalers, and even brokerages themselves.

I recently found a Jim Puplava interview in which Puplava interviewed Ann Barnhardt who lost confidence in the CME's ability to provide a rational and stable market environment for trading.  Therefore, she closed her brokerage and sent clients back their money.

Then, I see news from the Chicago Tribune that CME's own executive officers (Terry Duffy) are unwilling to assist in the restoration of trading positions and balances to the MF Global clients who had their positions undermined or stolen by MF Global.  Guess who's holding these funds in limbo?  CME????

Then, I hear Jim Puplava's interview with Gerald Celente over the last two weeks.  Celente, the high profile trends analyst, joined tens of thousands of other investors in being sucked in to the MF Global fiasco when MF Global took over Lind-Waldock.

Celente points out that he had sufficient funds to cover delivery of gold contracts.

Next, I look at Harvey Organ's blog and note that his theory is that in November the CME was in crisis and could not make delivery.

With these facts and testimonies in mind, do you believe that the CME is a functioning market or not?

I have concluded that the CME is unable to function legitimately as a futures market.

Therefore, I concluded that none of my family's funds will be permitted to move to any financial institution functioning on the Chicago Mercantile Exchange.

Last night I met with another gentleman regarding these events and we concluded the following analysis:

1.  TBTF banks on Wall Street are actively war gaming the Currency War (see the statement of Dick Lugar at the US Senate Ag Committee MF Global hearing yesterday where Lugar states that he was meeting in NYC with Bankers who were actively war gaming scenarios and impact on the US financial system).

2.  With over 2 Trillion Dollars in US Bonds sitting in Japanese and Chinese institutions/accounts, do you really think that they are NOT going to sell these USD denominated papers?  We think the selling starts in Q1, 2012.  China is slowing and Japan is in clear deflation.  China must sell the UST's because they will need to feed their population.

3.  China was buying farm land in the middle of America.  China was also buying grain and food from the USA.  So, now American farmers will need to lease land from Chinese firms to grow grain to feed China.  Feel wierd?  It should because it is.

4.  With the Euro land disruption and the failure of MF Global, the question was posed - why MF Global and how?  Was this turn of events caused by foreign or domestic power?  The answer was neither and both.  The foreign influence got the USD's.  They're sitting on the funds out in London and Euroland.  After all, MF Global sent the money to London and used it to buy Euro sov debt.  So, the Europeans got the money and they do not appear to be returning it.  Turn about is fair play they say... you sent us MBS crap and now we got the money back and killed MF Global to boot.  Well, why would the US allow it?  The answer was that the Obama Admin needs an unstable economy to win re-election.  It is hard for GOP politicians to win elections unless times are good.

5.  MF Global's disruption causes food supply disruption in 2012 and financial instability in the ag industry and farms by 2013.   Therefore, a deflationary cycle lasting 3-6 months until the food and energy supplies run lower.  But, even if MF Global clients get 100% of their positions and money restored (which they won't), the damage of being locked out of trading capabilities damages the paper futures contracts and derivatives for years to come.  Therefore, people will be defensive in position for many years to come.

Therefore, the conclusion was that USD long positions were holding stable and PM pricing will fall as the USD gets stronger in position.  Deflationary cycle is the key for short-term price action and prediction with continuing USD devaluation over the longer term.

Also, it was concluded that the CME is broke.  period.... dead ... as in... BK.... we will not trade in it, around it, or through it.

We agree with Barnhardt, Puplava, and Celente.

Game over Chicago.  You're the next Detroit.

Edited by admin on 11/08/2014 - 06:02
Doc Scurlock
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China owns US farmland?

As an individual involved in Iowa agriculture, you eloquently expressed a ton of my concerns on this MFG/CME debacle.  The only part of your argument that I don't see (yet) is the foreign ownership of American(or at least Iowa) farmland.  I'm sure they own some, but I don't know of any farmland, much less a significant amount of farmland owned by foreigners.

Granted, I'm pretty low on the totem pole and can't always see past my Turd hat when it falls over my eyes, but the amount of Iowa farmland for sale every year is actually pretty small.  Its a relatively illiquid market in pretty strong hands.  I can't speak intelligently about ag land in other parts of the county.

Otherwise, I share your concerns about the potential train wreck heading for all commodity producers when our primary means of price discovery is compromised.  We all kind of knew it was a rigged game behind our backs, but it is frightening when they rig it in your face. 

Great piece.

PS, lower food and energy prices coincidentally are likely positive for incumbents in an election year.  Just guessing.

Desert Fox
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Trouble Time

I've heard and read these same interviews and reports.

My sense is that you're correct. The fact that these clients will not get {all} their money back is very telling.

I'm not sure that the current administration is in the position to tight-rope walk a wobbly economy without fear of the whole thing flopping over but obviously with his ties to Chicago, anything is possible.

I'm in the camp that sees this MFGlobal incident as the tip of the iceberg.

Can't comment on all the specifics you've laid out but the under lying theme would seem to be,,,,,, TROUBLE!.

Jasper Puddlemaker
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Game over...

Good points all.

I think when we look back a few years from now we will likely view MFing as the final straw that broke confidence in US markets.   The world monetary system is collapsing, will be destroyed and replaced, but it has always been my thought that the world  economic system (stock markets, commodities markets, etc.) would continue to function.  I think they will.  They always have; even in times of war.  But, in the future Chicago and New York will not be the players they are now.  Frankly, I think the US will soon be thought of as the LAST place anyone would want to trust as far as honest and properly functioning markets go.  Hope I am wrong -- but if so it needs to be fixed NOW.  Time has run out.

Desert Fox
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Too Big to,,,,,,Hide?

Good article regarding the ongoing MFing debacle.

Can't quite hide this pig under the rug.frown

http://jessescrossroadscafe.blogspot.com/2011/12/attempt-to-seize-and-liquidate-customer.html

Hammer
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Kim Jung snuffed

Wrong thread, sorry :) Carry on.

__________________

"I found a flaw in the model that I perceived is the critical functioning structure that defines how the world works." - Alan Greenspan, October 2008
WTF ! Now you tell us !!!

Strongsidejedi
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LOL

Max Keiser talks with Gerald Celente about MF Global

Strongsidejedi
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Bill Black on RT

Desert Fox
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Hmmmm??????

 

http://dailybail.com/home/financial-...he-crisis.html

Reuters

Jan 16 (Reuters) - Clearing houses -- the plumbers of high finance -- could become the next casualties of the crisis as regulators insist that banks run their riskiest and private trades through them.

At the moment banks conduct over-the-counter trades between themselves: one to one dealings often involving multimillion-euro bets on differences in interest or other rates, the scale and complexity of which can be difficult to track.

But with the financial crisis still raging and banks, hedge funds and governments alike faced with unforeseen levels of debt, regulators are now forcing this shadowy, $600-trillion industry into the light.

The question being asked by industry insiders is whether the clearing houses, also known as central counterparties (CCPs), are any more secure.

"What happens if they go bust? I can tell you the simple answer: mayhem. As bad as, conceivably worse than, the failure of large and complex banks," Paul Tucker, deputy governor of the Bank of England, said in October.

Clearing houses, such LCH.Clearnet, Deutsche Boerse's Eurex Clearing and the Chicago Mercantile Exchange's CME Clearing, sit between the parties at either end of a trade.

They protect companies from default because they hold collateral on behalf of their numerous members that can be used to reimburse individual firms if one member becomes insolvent -- a standard model used in various exchange-traded markets around the world.

But in taking on over-the-counter (OTC) products the concern is that the clearing houses will not have sufficient collateral to cover the scale of possible future positions.

In the view of International Monetary Fund economist Manhmohan Singh, the central counterparties dealing with over-the-counter derivatives need to hold $2 trillion in collateral if they are to successfully manage this kind of trading.

"The mandated clearing of OTC derivatives is a complex matter on many levels. Derivatives require a lot of collateral because the duration of the contracts can be very long," said Diana Chan, the Chief Executive of clearing house EuroCCP.

Clearing had been a largely overlooked feature of trading on exchanges for decades until it was thrown into the spotlight by the high-profile default of Lehman Brothers in September 2008.

In the aftermath of its collapse Lehman's trading positions in markets that used clearing houses were sorted out in a matter of days. Those in non-cleared markets took months if not years.

Mindful of this experience, regulators in the United States and Europe have urged many of the largest over-the-counter markets to start using clearing houses in order to mitigate against any other default by a large trading firm.

Continue reading...

SE
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My question to you guys,

My question to you guys, especially the farmers and ranchers is, how will you conduct business in the future from now on?  I wish you would not have anything to do with the financial entities AT ALL when it comes to trading food on the markets.  Insist on some company that serves a function of pulling multiple sources of commodities together so that users of these commodities can buy them, but WITHOUT the presence of ANY financial industry company having ANY stake in the production and movement of commodities.  Maybe provide financing, but NO FUTURE, OPTIONS, none of that crap.  What is wrong with the way business was done hundreds or even thousands of years ago (let's assume today's tech in growing food is here, but there is no financial industry present in the agriculture picture)?

Strongsidejedi
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Peter Schiff Radio interview with Ann Barnhardt

Ann Barnhardt interviewed by Peter Schiff on the MFGlobal debacle.

Ann was directly involved in the market at the time of the MFGlobal debacle.
The absence of federal law enforcement action is very troubling.

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