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.
