TUESDAY, NOVEMBER 1, 2011
Turmoil at MF Global/Official states firm Co Mingled funds/gold and silver decoupled from the Dow
Good evening Ladies and Gentlemen:
Turmoil continues in the aftermath of the MF Global Bankruptcy. An official from the firm today
confirmed that the company co mingled customer funds with their own. Many will be afraid to invest funds
in the stock market for fear that the management at these financial giants will steal from them. We will discuss this in detail in the body of my commentary:
(courtesy Associated Press)
Official: MF Global admitted using client money
ODANIEL WAGNER, AP BUSINESS WRITER, ON TUESDAY NOVEMBER 1, 2011, 3:47 PM EDT
WASHINGTON (AP) — MF Global, the securities firm led by Jon Corzine, admitted using clients’ money as its financial troubles mounted, a federal official says.
An MF Global executive admitted that to federal regulators in a phone call early Monday after regulators raised questions about the company’s books, according to an official familiar with the conversation.
It is not clear where the money ended up or what it might have been used for, said the official, who spoke on condition of anonymity because he wasn’t authorized to discuss an investigation by federal regulators.
Government rules require securities firms to keep clients’ money and company money in separate accounts. Violations can result in civil penalties.
MF Global filed for bankruptcy protection Monday, after a big bet on European debt threatened to topple it.
The investigation of MF Global Holdings Ltd. is preliminary. A formal investigation by the company’s main regulator, the Commodity Futures Trading Commission, requires a vote by its five commissioners.
It isn’t clear whether the violations could lead to criminal charges. At a news conference, Manhattan U.S. Attorney Preet Bharara would not comment on whether a criminal investigation is underway involving the revelations at MF Global.
Earlier Tuesday, the head of the Chicago Mercantile Exchange said that MF Global had violated rules requiring it to keep clients’ money in separate accounts.
Craig Donohue, CEO of CME Group Inc., which operates exchanges where derivatives are traded, said MF Global was “not in compliance” with requirements set by CME and the CFTC.
“While we are unable to determine the precise scope of the firm’s violation at this time, we are investigating the circumstances of the firm’s failure,” Donohue said.
Derivatives are investments whose value is based on the value of some underlying asset. MF Global was one of the biggest players in the derivatives market.
CME Group is involved in the investigation because it regulates companies that trade on its exchanges. Government regulators empower companies that run exchanges to enforce trading rules. When serious violations are alleged, these companies and regulators both investigate.
The firm did not respond to a request for comment. Interactive Brokers, which was considering buying MF Global until the problems came to light, declined to comment.
Corzine, a former New Jersey governor and chief of Goldman Sachs, took over MF Global last year. He led MF Global to make more trades for the company’s own profits, a practice known as proprietary trading. Proprietary trading helped turn Goldman into a trading powerhouse in recent years.
Under Corzine’s leadership, MF Global bet $6.3 billion on debt issued by Italy, Spain and other European nations with troubled economies. Those bonds have lost value in recent weeks as fears have intensified that some European countries might default.
Regulators said in September that MF Global was overvaluing some of its European debt investments. It required the company to raise more cash, according to court papers filed on Monday.
MF Global reported its biggest ever quarterly loss last week, mainly because of losses on proprietary trading. Credit rating agencies downgraded the company’s bonds to junk status. And business partners demanded that it put up more cash to guarantee its trades. The result was a cash crunch that forced MF Global into bankruptcy court.
MF Global is the first big Wall Street casualty of the European debt crisis, which has roiled financial markets for months. Greece can’t afford to pay its debts without outside help. European leaders have been wrangling over the details of bailouts for Greece, Ireland and Portugal.
Europe’s debt problems threaten the financial system because European banks hold billions in debt issued by Greece and other troubled countries. Losses on those bonds could topple the biggest European banks. MF Global’s failure highlights that threat on a smaller scale.
The Securities and Exchange Commission and the CFTC have said they and other regulators were monitoring MF Global’s situation for days “in anticipation of a transaction that would include the transfer of customer accounts to another firm.”
The regulators said MF Global had reported “possible deficiencies” in client accounts, but they did not reveal that the company had diverted client money.
That proposed deal fell through after regulators and the potential buyer, Interactive Brokers, couldn’t make the numbers add up. The discrepancies led to MF Global’s admission at 2 a.m. Monday, the official said.
Trading of MF Global shares was permanently suspended on the New York Stock Exchange Tuesday afternoon.
ASSOCIATED PRESS WRITER LARRY NEUMEISTER IN NEW YORK CONTRIBUTED TO THIS REPORT.FFICIAL: CORZINE’S MF GLOBAL ADMITTED TO USING CLIENT CASH AS ITS TROUBLES MOUNTED.
end
The price of gold held pretty good today down by $13.20 as the bankers thought that a raid was necessary to dampen the mood of our precious metals. The comex closing price was $1711.00 The price of silver fell badly by $1.64 to $32.77. With the high margin requirements it is quite easy for the bankers to smash silver
as they have no profit motive. We will have to see the OI results tomorrow but I will bet that it did not change at all. This would be a big defeat for the bankers as they lowered the price of the metal which stimulated demand and no silver leaves fell from the comex silver tree.
Right now in the access market:
gold: $1720.00
silver: $33.40
The Dow fell by 297 points. Gold and silver reversed course early in the comex session decoupling from the Dow algos. When we continually see this you know that the game has ended. Bourses around the world suffered huge losses with news on the Greek referendum and the MF Global Bankruptcy.
the Paris Cac: down 5.38%
the FTSE down 2.26%
the German DAX 5%
the Nikkei 1.70%
Let us head over to the comex and see how the deliveries went and any movement of metals.
The total gold comex OI fell by 1352 contracts from 441,687 to 440,335. We had a raid yesterday so we lost very few gold leaves. The front options expiry month of November saw its OI fall from 268 to 77 for a loss of 191 contracts. We had 227 delivery notices yesterday so we gained some gold standing and lost nothing to cash settlements. All eyes will be focused on the big December contract probably because of the financial turmoil which envelopes our globe. Many investors will seek shelter in gold as their currencies crumble. The estimated volume today was pretty good at 154,377 compared to yesterday’s confirmed
volume of 128,995.
The total silver comex OI fell by 1343 contracts from 110,360 to 109,017. We probably lost a few of the newcomers who succumbed to the greed of the bankers. The front options expiry month of November saw its OI gain 3 contracts rising from 36 to 39 despite 32 delivery notices. We gained a huge number of silver ounces standing and lost nothing to cash settlements.
The big front delivery month of December saw its OI fall a bit from 58,816 to 56,341. We will be watching the December contract month in detail as first day notice approaches. The estimated volume today was better than usual but still on the low side at 46,741. The confirmed volume yesterday came in at 40,650.
Inventory Movements and Delivery Notices for Gold: Nov 1.2011:
|
Gold
|
Ounces
|
|
Withdrawals from Dealers Inventory in oz
|
199 (Brinks)
|
|
Withdrawals from Customer Inventory in oz
|
39,147 (Brinks,JPM, Scotia)
|
|
Deposits to the Dealer Inventory in oz
|
nil
|
|
Deposits to the Customer Inventory, in oz
|
nil
|
|
No of oz served (contracts) today
|
16 (1600 oz)
|
|
No of oz to be served (notices)
|
61 (6100)
|
|
Total monthly oz gold served (contracts) so far this month
|
243 (24300)
|
|
Total accumulative withdrawal of gold from the Dealers inventory this month
|
199
|
|
Total accumulative withdrawal of gold from the Customer inventory this month
|
39,179
|
today we again had no gold deposited into any dealer vault but we did have a tiny 199 oz leave
the dealer vault at Brinks.
The customer also had no deposits but did have 3 withdrawals totaling 39,147 oz:
1. 289 oz leave Brinks
2. 96 oz leave JPMorgan
3. 38,567 oz leave Scotia.
total withdrawal 39,147 oz.
We had a tiny addition error whereby 7 oz was added to a customer.
The total registered gold inventory lowers to 2.296 million oz.
The CME notified us that we had 16 delivery notices filed for 1600 oz.
The total number of notices filed so far total 243 for 24300 oz.
To obtain what is left to be served upon, I take the OI standing (77) and subtract out today’s deliveries (16)
which leaves us with 61 notices or 6100 oz left to be served upon.
Thus the total number of gold ounces standing in this non delivery month is as follows:
24300 oz (served) + 6100 oz to be served = 30,400 or .945 tonnes
this number will probably increase as the month progresses.
And now for silver
First the chart: November 1st
| Silver |
Ounces
|
| Withdrawals from Dealers Inventory | 308,850 (Brinks, Scotia) |
| Withdrawals fromCustomer Inventory | nil |
| Deposits to theDealer Inventory | nil |
| Deposits to the Customer Inventory | 1,840,487 (Scotia,Brinks,HSBC,Delaware) |
| No of oz served (contracts) | 0 (nil) |
| No of oz to be served (notices) | 39 (195,000) |
| Total monthly oz silver served (contracts) | 32 (160,000) |
| Total accumulative withdrawal of silver from the Dealersinventory this month | 308,850 |
| Total accumulative withdrawal of silver from the Customer inventory this month | 545,340 |
we had considerable movements today, but still no silver deposit by the dealer.
We had a monster of a day with the silver customer deposit:
1. Into Brinks: 1,150,819 oz
2. Into Delaware: 38,677 oz
3. Into HSBC 618,271 oz
4. Into Scotia; 32,720 oz
total deposit by customer: 1,840,487 oz
We also had a rare dealer withdrawal of silver:
1. From the Brinks dealer: 117,573 oz
2. From the Scotia dealer: 191,277 oz
total dealer withdrawal 308,850 oz.
The registered silver inventory remains at 31.189 million oz
The total of all silver rises to 106.7 million oz.
The CME notified us that we had zero notices so the number of notices remain at 32 for 160,000 oz.
To obtain what is left to be served upon, I take the OI (39 ) and subtract out today’s deliveries (0) leaves us with 39 notices or 195,000 oz left to be served upon.
Thus the total number of silver oz standing from exercised options rises to:
160,000 (oz served) + 195,000 (oz to be served upon) = 355,000 oz
the number of silver oz standing has thus gained from yesterday. This number will rise as the month progresses.
end
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