Most passionate woman I've ever heard.

thanks for the link.

A good supporting 'more mainstream' article from the WSJ:
http://online.wsj.com/article/SB10001424052970204296804577124883014508106.html

The problem with MF global seems to be this from the article:

Commodities accounts face another complication: Even though brokers are supposed to segregate client funds, the CFTC permits them to use the funds to make ultrasafe investments and keep whatever gains come as a result, says a former CFTC official who now represents some firms affected by the MF Global collapse.

The problem: Until recently, the CFTC included foreign sovereign bonds in its universe of safe investments.

Earlier this month, CFTC commissioners passed a rule that would restrict brokers from investing in foreign sovereign bonds with customer funds. Brokerages have until next summer to comply.


There was also commentary regarding customers who engage in futures.

Again i am the first to admit that i dont know alot about all of this.
 
Ive been following MF Globals bankruptcy closely...it is a crack in the facade that your money in any institution, be it trading accounts, saving accounts, whatever, is never really YOUR money. The institutions, regardless of who they may be, consider it THEIR money and have the right to take it and use it to save themselves if they have to. There are no prosecutions, no investigations, nothing, you lose your money without recourse.

This is the basis for all financial markets, TRUST. Trust that the money you place into an account is still yours and can be pulled out at any time, and this trust has now proven to be misplaced.

This is just another instance of a broken financial system. How much longer before everyone stampedes out of the markets?
 
Why wouldn't you buy uranium at $55/lb when it can make energy and nuke the people with gold? And bread.

After all if society collapsed, I'd like some electricity, bread and nukes rather than some hard rock I can't eat.
 
Yes, but there is also an issue for MF Global customers in Oz. They have been caught up in this mess and MFG (Aust) was dragged into it by its US parent.
 
There is always a tipping point, where it lies no one knows, but its always lies where you never would have thought of it.

I heard a statistic that the stock markets is now 75% HFT. That is crazy! That means there is no real market, just computers trading stocks back and forth.

Also, the CME has proven that they can't guarantee every transaction that happens on their exchanges.

Also, there is speculation that for every ounce of gold that exists, there are 100 equivalent paper contracts against it.

In other words, the entire market has become a fraud and a scam, and if any of this is true, if the people get a sniff of this...yeah, mattresses is where all the money will go.
 
That is true about the HFT (High Frequency Trading for the unaware). Most trades these days are done by sophisticated computer algorithms designed to trade and arbitrage a small profit from price discrepancies across different securities.

This is akin to 'picking up pennies in front of a steam roller' - lots of small earnings but if the proverbial hits the fan, it's a big big mess.
 
DanielG said:
Ive been following MF Globals bankruptcy closely...it is a crack in the facade that your money in any institution, be it trading accounts, saving accounts, whatever, is never really YOUR money. The institutions, regardless of who they may be, consider it THEIR money and have the right to take it and use it to save themselves if they have to. There are no prosecutions, no investigations, nothing, you lose your money without recourse.

This is the basis for all financial markets, TRUST. Trust that the money you place into an account is still yours and can be pulled out at any time, and this trust has now proven to be misplaced.

This is just another instance of a broken financial system. How much longer before everyone stampedes out of the markets?
Click to expand...
Bob Moriaty is another outspoken guy who is good value. Here is his simple explanation of re-hypothecation:

If you open an account with a commodities broker or even with a stock broker on margin, you sign a document acknowledging the company has the right to use the securities and the cash in your account as collateral against the financing they get from banks to loan to you. In other words, they borrow money from banks at say, 3% to loan to you at say, 6% and pledge your assets against those loans. It's called hypothecation and is perfectly legal.

They can also make investments in their name using your assets. But the investments have to be in something safe, such as Greek government bonds now paying 352%. That's called re-hypothecation and again, you signed a document when you opened your margin account saying they could do that. It's perfectly legal.

Jon Corzine may go to jail for lying to Congress but he isn't going to jail for stealing your money. What he did was legal.

The whole article is here:

http://www.321gold.com/editorials/moriarty/moriarty121011.html
 
Aaron_C said:
That is true about the HFT (High Frequency Trading for the unaware). Most trades these days are done by sophisticated computer algorithms designed to trade and arbitrage a small profit from price discrepancies across different securities.

This is akin to 'picking up pennies in front of a steam roller' - lots of small earnings but if the proverbial hits the fan, it's a big big mess.
Click to expand...

Not sure but market making may well be counted in HFT stats also. In any case the reason this is allowed to continue is that by & large market making & arbitrage have a stabilising effect on the market. Equivalent symbols can trade at different equivalent prices in stocks vs futures for example. Say one fund dumps loads of a stock because they rotate their list, but there is no news to warrant it & futures price at open isn't equivalent. Arbitrating the difference (buy the lower, sell the higher) brings them together, it is generally stabilising. Unless computer systems fail.

Similar with market makers who are they only ones allowed to take both sides of the market, they do it to compress the spread giving the market better pricing. I'm not saying it's a perfect system, but I think it got the way it is by largely reasonable means.
 
Market makers are certainly fulfilling an important function. Out of the money options can be hard to move but it is the MM's duty to offer you a price. He is not duty-bound to offer a FAIR price but will provide important liquidity.

I am not aware of any connection between this and HFT though. The latter is defended as providing liquidity to the market but I am very sceptical. One part of what the do should be banned: They "front-run" legitimate orders, buying on the market and then "instantly" reselling to you at a fraction of a penny profit. They will call it "arbitrage" but why not simply fill the order for YOU at their buy price? They can make millions of $s a day so you can imagine how many trades they do. I forget the stats (they would be guesses anyway) but HFT is said to account for 70 - 80% of all trades and the average time for a position to be held is measured in minutes.

This is a dangerous distortion which caused the Flash Crash a year or so ago. A computer can do enormous damage before a human becomes aware of what's happening and pulls the plug. The severity of the '87 crash was amplified by 'puter trading.
 
Intrinsic_Value said:
thanks for the link.

A good supporting 'more mainstream' article from the WSJ:
http://online.wsj.com/article/SB10001424052970204296804577124883014508106.html

The problem with MF global seems to be this from the article:

Commodities accounts face another complication: Even though brokers are supposed to segregate client funds, the CFTC permits them to use the funds to make ultrasafe investments and keep whatever gains come as a result, says a former CFTC official who now represents some firms affected by the MF Global collapse.

The problem: Until recently, the CFTC included foreign sovereign bonds in its universe of safe investments.

Earlier this month, CFTC commissioners passed a rule that would restrict brokers from investing in foreign sovereign bonds with customer funds. Brokerages have until next summer to comply.


There was also commentary regarding customers who engage in futures.

Again i am the first to admit that i dont know alot about all of this.
Click to expand...

If anyone needs another example of corruption at the top, that rule would have gone through months ago, potentially saving MF Global's customers if it wasn't for heavy lobbying by...Jon Corzine.

http://dealbook.nytimes.com/2011/11/03/as-regulators-pressed-changes-corzine-pushed-back-and-won/

Months before MF Global teetered on the brink, federal regulators were seeking to rein in the types of risky trades that contributed to the firm’s collapse. But they faced opposition from an influential opponent: Jon S. Corzine, the head of the then little-known brokerage firm.

As a former United States senator and a former governor of New Jersey, as well as the leader of Goldman Sachs in the 1990s, Mr. Corzine carried significant weight in the worlds of Washington and Wall Street. While other financial firms employed teams of lobbyists to fight the new regulation, MF Global’s chief executive in meetings over the last year personally pressed regulators to halt their plans.

The agency proposing the rule, the Commodity Futures Trading Commission, relented. Wall Street, which has been working to curb many financial regulations, won another battle.

Yet with MF Global in bankruptcy and regulators scrambling to find $630 million in missing customer funds, Mr. Corzine’s effort may come back to haunt him.

The proposed rule would have restricted a complicated transaction that allowed MF Global in essence to borrow money from its own customers. Brokerage firms are allowed to use customers’ money to earn interest, not unlike banks, but this rule would have outlawed using customer funds for a loan to the firm itself.

While such financing is not unknown on Wall Street, it carries substantial risk. An outside lender would require a firm like MF Global to produce strict accounting for a loan. Without that oversight, regulators worried that firms could use such internal customer money inappropriately, including bolstering the business in hard times. The proposed rule would have affected several dozen other financial firms.

Regulators are now examining whether these transactions explain the missing money at MF Global, according to people briefed on the investigation.
Click to expand...
 
DanielG said:
I heard a statistic that the stock markets is now 75% HFT. That is crazy! That means there is no real market, just computers trading stocks back and forth.

Also, the CME has proven that they can't guarantee every transaction that happens on their exchanges.

.
Click to expand...

This in itself is not a big long term problem. It creates volume.
The potential short term problem is a crash that occurs because all the HFT try to sell simultaneously at the same time (as what happened in 2010 when the dow fell a 1000 points), but its not long term, as the market will start buying if there is obvious value.

In my opinion investors can benefit from HFT so long as they dont try to play its game. You cant short term out think them, but you can play against them by focussing on value vs share price.

Same applies to ETF's, when the market doesnt like a sector it shorts the ETF's. But within an ETF some companies will be better than others, yet all move with the movement of the ETF
 
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