Turk - MF Global Disaster to Create Another Lehman Crisis

Asheron

With stocks plunging, the dollar rallying, gold and silver pulling back and fears of contagion spreading, today King World News interviewed James Turk out of Spain to get his take on what is happening. When asked about the possibility of contagion and the MF Global situation, Turk responded, “First of all investors should be concerned because everything is so inter-connected today. People call it contagion and this contagion is real because the MF Global bankruptcy is going to have a knock on effect, just like Lehman Brothers had a knock on effect.”

James Turk continues:



“So the contagion is the first reason for concern. The second reason for concern is it’s taking so long for them to find this so called missing money, which I find shocking. It’s been three weeks now since the MF Global bankruptcy was declared and they started talking about $600 million of missing funds.



So I’m not too surprised that now they are talking about $1.2 billion of missing customer funds. I think they are just trying to delay the inevitable as to how bad the situation at MF Global really is.



I go back to compare it to Refco, which I think collapsed back in 2005. The interesting thing is that there were huge losses in Refco and people ended up going to jail as a consequence of the fraud and misuse of funds and faulty accounting within Refco.

But the customer money was safe and was returned to customers within a matter of days, unlike what we are seeing today with MF Global. This thing has been dragging on and contagion is always the real issue in a inter-linked financial system like we have today.



I guess the biggest thing, Eric, is that when you are in a financial bust, promises are always broken and every time promises are broken it erodes confidence and more weak links in the chain are going to break....


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setmefree2

The big question is what was MF Global's auditor, Pricewaterhouse Coopers doing?


PwC should have easily discovered that clients' funds were being commingled with MF's proprietary trading. They should have also raised red flags concerning the enormous debt MF had.

It is very similar to Ernst & Young giving Lehman a clean bill of health shortly before it imploded under mounds of debt.

Shocking.

Asheron

Exactly, sadly most regulators/auditors in Government or Private sectors can easily be corrupted.

The fact is money corrupts people...

chewmylegoff

setmefree2 wrote: »

The big question is what was MF Global's auditor, Pricewaterhouse Coopers doing?


PwC should have easily discovered that clients' funds were being commingled with MF's proprietary trading. They should have also raised red flags concerning the enormous debt MF had.

It is very similar to Ernst & Young giving Lehman a clean bill of health shortly before it imploded under mounds of debt.

Shocking.

Audit is generally a backwards looking tool and cannot detect 'real time' issues. If client money has been misappropriated its likely to have happened right before mf went under, an act of (fraudulent) desperation as its access to funding vanished.

Audit cannot prevent senior mgmt doing stuff like that, it can only find out about it afterwards.

Pete111

My understanding is that MF is a far smaller player than Lehmanns and any direct comparison is unrealistic

I'm meeting a friend who works there this evening however (they are helping wind it down)and will try to find out more!

Generali

Pete111 wrote: »

My understanding is that MF is a far smaller player than Lehmanns and any direct comparison is unrealistic

I'm meeting a friend who works there this evening however (they are helping wind it down)and will try to find out more!

There is absolutely no comparison to be made between Lehmans and MF Global.

In 2008 Lehmans had total liabilities (on balance sheet) of $613,156,000,000 (link).

MF Global had total liabilities of somewhere between $35,000,000,000 and $45,000,000,000 (link) depending on who you believe. Most of that would (should) have been held in 'client money' accounts.

vivatifosi

Generali wrote: »

There is absolutely no comparison to be made between Lehmans and MF Global.

In 2008 Lehmans had total liabilities (on balance sheet) of $613,156,000,000 (link).

MF Global had total liabilities of somewhere between $35,000,000,000 and $45,000,000,000 (link) depending on who you believe. Most of that would (should) have been held in 'client money' accounts.

I think the comparison has been made elsewhere that its more like Madoff (possibly by you, so sorry if I'm stating the bl**ding obvious). However I have to say of all of the failures so far, this is the one that fills me most with dread as a pension fund trustee. We aren't in this position, but the thought that someone, somewhere may have to say "our funds have been defrauded from our account and we may not be able to pay you the pension you think you will get" leaves me cold. People often think failures like this won't hit the little people but they could.

This is why I feel in misappropriation cases that its not just important that people go to jail, but also that their wealth is vacuumed up and away from them too. Without the latter, the former is just a step they need to go through before they get away with it and retire into the sunset.

Get-real-buy-real

Either The ECB Prints And Germany Walks… Or The EU Sees A Domino Debt Collapse Followed By Systemic Failure



By now, even the mainstream media is realizing what I’ve been saying for well over a year: that the EU in its current form is finished.

I initially believed that we would see Greece kicked out of the EU. However, at this point it looks much more likely that it will be GERMANY who leaves.

The reason is quite simple really. Germany WILL NOT tolerate debt monetization. They’ve seen how that situation plays out (Weimar) and will not allow it again, END OF STORY. If the ECB opts to print money, Germany is out.

So… the only other option to save the EU to last would be the leveraged EFSF. However, as we’ve seen, that option is a dead end as well:

No new Euro zone money for debt crisis at G20

The Euro zone won verbal support but no new money at a G20 summit on Friday for its tortured efforts to overcome a sovereign debt crisis, while Italy was effectively placed under IMF supervision.

Leaders of the world’s major economies, meeting on the French Riviera, told Europe to sort out its own problems and deferred until next year any move to provide more crisis-fighting resources to the International Monetary Fund.

“There are hardly any countries here which said they were ready to go along with the EFSF (Euro zone rescue fund),” German Chancellor Angela Merkel told a news conference.

http://www.reuters.com/article/2011/11/04/us-g-idUSTRE7A20E920111104

Remember, the EFSF failed to even stage a 3 billion Euro bond auction without buying some of the bonds itself. And with no one in the G20 wanting to fund the EFSF, the EFSF is in no way going to backstop Europe.

So there are now only two REAL outcomes:

1) The ECB prints (and Germany walks) resulting in the Euro losing at the minimum 30-40% of its value

2) Massive defaults and debt restructuring accompanied by systemic failure in Europe

These are the facts. I know that the mainstream financial media and other “experts” like to proclaim that Europe can somehow muddle through this, but they’re wrong. The EU kicked the can down the road for over a year in terms of debt restructuring for Greece. Now it’s facing a problem it CANNOT possibly bail out: Italy.

In other words, the can has finally hit up against the wall. The market is not willing to lend to Italy at present levels. Nor is the market willing to lend to the EFSF. The only two potential backstops for the EU are now Germany or the ECB. And Germany WILL NOT allow money printing/ debt monetization to take place.

Folks, I don’t know how else to say this, but if Europe experiences just a 2008 type event, it will be LUCKY. The entire European banking system is leveraged at 26 to 1. At these levels even a 4% drop in asset prices wipes out all equity.

Add to this the fact that with unfunded liabilities included, the average EU member states sports a REAL Debt to GDP ratio north of 300%, and you’ve got the makings of systemic failure. Indeed, even Germany, the supposed beacon of fiscal stability has a REAL Debt to GDP of 200% (this data points comes straight form Axel Weber’s mouth) and has yet to recapitalize its banks.

And Germany is THE most solvent major member of the EU.

I cannot say just how bad things will be when the stuff hits the fan in Europe. But the EU is going into a banking/ sovereign crisis with WORSE fundamentals than the US had when it went into its own 2008.

So if you have not already taken steps to prepare for systemic failure, you NEED to do so NOW. We’re literally at most a few months, and very likely just a few weeks from Europe’s banks imploding.

When this happens the entire system could go down temporarily. I’m talking about bank holidays, sovereign debt defaults, retirement accounts and pension funds wiped out, even food shortages in some areas.

So you NEED to take steps now to prepare for all of this. This includes having some cash on hand as well as actual physical bullion. It also means stockpiling some food and water.









A lot of people fall into the trap of thinking they don't actually have to take delivery of their precious metals. Either they can pay currency to someone who will issue them with some fancy paper or email electronic promise of ownership of bullion.

First off if you are reasoning "mining stocks are as good as gold and silver" then think again. Mining stocks are just that "stocks" they are not gold and silver. They are shares in a company that processes gold and silver. As such they are subject to market conditions such as currency crisis or stockmarket crashes that are becoming more probable and looking more likely as the GFC worsens.

Gold and silver on the other hand could rocket to the moon while mining stocks fall.

But beyond that there are a number of reasons physically owning gold and silver bullion that you have taken delivery of is the ultimate safe haven. They are :

1. For all known about human history (6000 yrs) Gold and silver have been money at all times. They have been the only assets that have never failed. Because they are tangible assets of inherent value their purchasing power will never fall to zero.

2. They are financial assets that are completely private (if you have taken delivery) and not part of the financial system. Even real estate requires the financial system to transfer title, gold and silver do not.

3. They are one of the few financial assets that are not someone else's liability. Stocks, bonds and derivatives like futures and ETF's require the performance of the issuers or counterparty. Even cash currency requires the performance of the governments who issue it to have value (Euro anyone?) If the issuers fail so does the derivatives like currency, gold and silver can never fail.

4 They can be wholly owned. You can never really own real estate for instance. If you think you can just try not paying your council tax and income taxes for a few years and see your property taken off you. This can not happen with privately held gold and silver bullion who no one knows you own.

5. They are safe haven investments that rise during economic upheaval, war, terrorism, and natural disasters.

6. They have a proven track record for performing well in inflation and/or deflation.

7. They have high value density. Means unlike copper or oil a very small amount of gold and silver provides significant purchasing power.

8. They have a low bid/ask spread. Unlike diamonds or collectors coins, which carry large premiums.

9. Every ounce of gold and silver bullion has the same value, on the other hand every diamond or collectors coin requires expert to asses the value.

10. Physical gold and silver are money in and of themselves.

Conrad

If you want to loot a Bank, own it.

Conrad

Get-real-buy-real wrote: »

Either The ECB Prints And Germany Walks… Or The EU Sees A Domino Debt Collapse Followed By Systemic Failure

By now, even the mainstream media is realizing what I’ve been saying for well over a year: that the EU in its current form is finished.

All very interesting but far too simplistic. You, like other people with 'one big idea' are ignoring the capacity for Human beings to sculpt and bring about a different outcome.
I could point you to a thousand big picture high profile socio / economic predictions made in the last 30 years that did not come true. Don't forget one of the biggies was where many high profile economists said we'd hit peak oil in 1980 - but instead prices fell and stayed there for 2 decades fueling the American dream.

See beyond the crowd.

According to social scientists your likely reply will include the following words;

'but this time it's different, it really will happen' / 'only a fool with his head in the sand would disagree with me' / 'the facts are out there for all to see'.


They go on to say that if your prediction fails you will revise history an subbtly alter your past prediction to fit a new reality coupled with the phrase 'well, I'm still right it's just my timing was a little off, but I assure you my p[rediction will come true next year'. House price Bears have resorted to this cover for 8 years - the big crash event is always postponed to next year, never cancelled.

purch

Yet again, the only contribution made is stolen.

Yet another Cut and Paste from another website, with no mention of whose words have been stolen and from where.

Plagiarism and Sockies.

Last refuge of Liars and Cowards. :eek: