Saturday, November 5, 2011

The CME Margin News Confusion

It turns out that once again in the urge to be sensationalistic, Zerohedge shot from the hip and is now getting shot down.  This is EXACTLY why I ALWAYS double-check anything zerohedge reports before I make any comments on it. I didnt even start researching this until a few minutes ago and it was apparent to me that it was a mis-worded statement that the CME clarifiied today. Tyler Durden does a good job with a lot of what he reports but he is an amateur in this market and shoots from the hip all the time.

Here is the best explanation of the situation, which is a non-event. If anything it makes for the MF account transfers to go more smoothly - see the "kid dynamite" write up:   LINK

I will note that I found an article in which IB - Interactive Brokers - has said that they want no part of the account transfers. Being that IB was the firm that almost bought the brokerage business from MF until they looked thoroughly under the hood - it tells me that MF is in much worse shape than can be determined from what is being publicly disclosed. I will say that the fact that the Govt sent the FBI in almost immediately tells me that there will be a cover-up similar to what happened with Solyndra.

In terms of market action on Monday, if the market sells off Monday its because the metals are still highly correlated with the SPX and both are highly correlated with the Europe situation. Also, India is closed Monday and it sounds like from industry reports on Friday that the physical demand is taking a breather. A brief pullback would be welcome in my view from a technical standpoint. I hate it when we go straight up w/out a break to consolidate. I do think we will break correlation in the metals/miners sometime soon, similar to early 2006. That could be the dynamic that takes silver to $60 and gold somewhere over $2000.


  1. Andrew Maguire ex Goldman employee continues:

    “I hold Bart Chilton in very high regard and anyone who casts any doubt on his integrity is mistaken. Without Bart Chilton and Gary Gensler, without their efforts, there would have been no progress.

    Could someone tell me what the progress has been please?

  2. Chilton responded, “I think there has been, Eric. I talked last year about this, I urged the agency to say something. I just think it’s fair that after so long, on an investigation that you’ve publicly announced, that you give some sort of update. I mean nothing that would jeopardize the furtherance of the investigation. We do a really poor job of communication at this agency.

    Ah now I understand!! After more than ten years of criminal activity Bart and Gary have come to the conclusion that they have a communications problem. The solution must be changes in the PR department. Clearly this is what Andrew McGuire ex Goldman trader is talking about as progress.

    Whoever said to control to the opposition we must lead the the opposition knew what they were talking about.

    I think Bart and Gary will come to the conclusion shortly that we new a new all powerful Commission to investigate this matter and we should draw it on the lines of the Warren Commission or perhaps we could recruit members of the 911 Commission to head it up.

    That would be clear progress.

  3. You realize Kid Dynamite works for JPM and has been a long time advocate for the NON manipulation argument? He tries to contradict ANYTHING related gold and silver. He's an idiot. Here's my challenge. Contact kid dynamite and ask him what his views are with the COMEX inventories and the SLV inventories. LOL, report back would love to hear how your convo went.

  4. (Dave)

    Did not know KD worked for JPM but in general I've always thought his views were either simple-minded or wrong. I was going to preface that on my post but decided not to. His explanation of the CME thing saved me from writing lol.

    Anyone who refutes that the gold and silver markets are manipulated are either too stupid to understand the situation or refuse to look at the facts. Even Bart Chilton publicly stated that the silver market is manipulated.

  5. Republic, Lost

    In an era when special interests funnel huge amounts of money into our government—driven by shifts in campaign-finance rules and brought to new levels by the Supreme Court in Citizens United v. Federal Election Commission—trust in our government has reached an all-time low. More than ever before, Americans believe that money buys results in Congress, and that business interests wield control over our legislature.

    With heartfelt urgency and a keen desire for righting wrongs, Harvard law professor Lawrence Lessig takes a clear-eyed look at how we arrived at this crisis: how fundamentally good people, with good intentions, have allowed our democracy to be co-opted by outside interests, and how this exploitation has become entrenched in the system.

  6. Drown out MSM with the TRUTH!

    More Lies: "Stores in Flames"

    With all due respect Mr. Former Mayor you need to have your Thorazine dosage checked.

    First, you might notice that the focus today has been on "Move Your Money" -- specifically from the TBTF banks to credit unions on "Bank Transfer Day."

    And the search results -- why they're terribly subversive.... implying or outright stating that one should put their money in a credit union where they actually own the institution that holds their funds for them! Why what an absolutely communist concept -- doing business with people who don't rip other people off! Never mind that it appears to be.... well, catching on...

    pass it on....

  7. You're completely wrong silvergoldsilver, KD does not work for JPM, in fact he doesn't do anything except raise chickens, make maple syrup and run a popular blog (he used to be a trader). I agree his silver takes are a bit naive, but he's far from an idiot.

  8. Dave,
    You are not 100% right on "India is closed on Monday" statement.

    Indian stock exchange is closed on Monday but, commodity exchanges MCX/NCDEX operate in two sessions. If there is public holiday NSE/BSE (stock exchanges) are closed for the day. And commodity exchanges MCX/NCDEX are open in evening session from 5:00PM till 11:55 midnight.
    So Indian commodity exchange would open just after London AM fix and before NY open. So there is going to be problem in wiring extra margins and funds as banks are closed on Monday.

    But now picture is becoming clear i.e. margins are not raised but lowered for Monday trading. May be positive for the metals !!!

  9. Even Dan Norcini, a commodities trader with more than 20 years experience, thought at first that CME was hiking the maintenance margin to equal the initial margin:

    "...If this is correct, and I think I am reading it correctly, this is the first time that I can recall seeing something like this occuring. It will also precipitate some very volatile trading conditions..."

    If someone with Dan Norcini's experience read it the wrong way, then I'm not going to bash ZH for doing likewise.

  10. (Dave)

    LOL Sumo as a matter of fact Dan and I exchanged several emails yesterday. There's no question the CME issued a revised statement that clarifies what they did and what they did was give the MF accounts maintenance margin reprieve during the transfer process.

    Dan and I are usually of similar view on most issues.

  11. MF Global, NY Fed, Chutzpah?

    The MF Global affair is doubly muddied up by alleged fraud and misuse of client funds. We cannot blame the NY Fed for an alleged fraud. But we can ask if the sanction for a primary dealer that fails the “transparency” and the “accuracy” tests should be limited to getting kicked out of the club. Maybe the $150 million minimum regulatory net capital requirement should be expanded, and maybe the shareholders and debt holders of a primary dealer should be told they are subordinated to claims that will include financial penalties for failure to comply with NY Fed rules. Maybe the NY Fed should take on an escrow safety-cushioning function in the same way a landlord holds a security deposit for a tenant. Maybe this whole system of New York Fed actions and primary dealer status needs reexamination. Maybe the system needs a chutzpah scan to remove the viruses.

    Let’s segue to some questions. More will be revealed on the fraud allegations; nothing for us to add there. But one question haunts us. Will the opacity of the New York Fed and the accountability for its oversight or lack of oversight be made transparent? Has anything really changed since the six-month period between the Bear Stearns merger (March 2008) and the Lehman failure (September 2008)? If the New York Fed was “watching the store,” did they miss the clues for lack of skill, or were they deceived by MF Global? Is the disclaimer of the NY Fed financial chutzpah to the Nth degree?

    Inquiring minds want to know. So should all the others who have to live with the results of the failure of the primary dealer named Lehman Brothers, whose CEO sat on the board of directors of the NY Fed until his firm failed. And so do the creditors of MF Global.

    On Friday, I had some quality phone time with Janet Tavakoli. She alerted me to some details that were new information for me. I’m less sanguine about systemic risk now than I was on Monday.

  12. I know its press tv but you can't find truthful interviews on bubblevision...

    The Illusion is Gone
    On the Edge with Satyajit Das

  13. Nail, Meet Hammer