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Author Topic: Another Segregated Funds Scandle  (Read 1336 times)
doobadoo
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July 09, 2012, 11:59:29 PM
 #1

http://www.zerohedge.com/news/pfgbest-now-mf-global-part-2-220-million-segregated-client-money-has-just-vaporized

Remember when the entire segregated account fiasco was supposedly fixed in the aftermath of the November 2011 MF Global bankruptcy, and where regulators: the CFTC, the SEC, the CME, and anyone you asked, swore up and down this would never happen again? Turns out that 7 months later, the spirit of MFGlobal has struck again and it's name is PFGBest, as we suggested first 3 hours ago when we broke the story. From the just filed affidavit by Lauren Brinati who is working with the National Futures Association, which in turn has just filed notice prohibiting PFGBest from operating futher, and freezing all of its accounts: "On July 9, 2012, NFA made inquiry with US Bank and learned that rather than the $225 million that PFG had reported as being on deposit at US Bank just days earlier, PFG had only approximately $5 million on deposit at U.S. Bank."  Translation: another $220 million segregated account pillage, in the vein of none other than Jon Corzine and MF Global.

The money has now officially vaporized.

For layman:  Futures contracts are standardized contracts where one party must pay the other in the event of a move in a benchmark price.  For example, if i BUY a crude oil futures contract when the price is $85, if the price goes to $90, some one owes me $5, if it goes to $80 I owe some one $5.  Naturally to secure the contract both parties must deposit collateral to prove they are good for it if price moves a  reasonable amount against them.  Now the broker is supposed to keep these fund SEGREGATED from their own financial fate.  But Corzines MF Global and now this firm instead took the customer deposit and speculated with it (and lost).  

Had they been using Bitcoin to place deposit collateral, all they need to is give escrow power to the broker.  OR, they could let the broker hold the money, but ask that they sign the address every day at the close.    Bitcoin will eventually make so many kinds of fraud impossible.  You could demand to know where your funds are, and see cryptographic proof of the same.

Bitcoin is such a big idea, sometimes i have trouble taking it all in!

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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Realpra
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July 10, 2012, 07:18:30 AM
 #2

Futures sounds like pure gambling to me honestly.

Who cares if they cheat while gambling? All part of a good poker game if you ask me.

But yeah sure BTC is nice.

Cheap and sexy Bitcoin card/hardware wallet, buy here:
http://BlochsTech.com
doobadoo
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July 13, 2012, 04:43:06 PM
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Gambling?  Sheesh.  What about the small E&P company that has a few high cost wells it can drill.   They sell some oil futures to protect them from bankruptcy if the price drops.  What about the farmer who's seen half his crop wiped out by drought, decides to hedge what he will be able to harvest.  Sure there are some price speculators who take a position, but do you know how much research they do on inventories and potential deliveries in order to suceed at it?  They bring serious amounts of information to the market, in fact i wouldn't work without them.

A shame how so few understand the importance of price discovery...you think prices should just whipsaw every which way without any one who produces or uses it being able to stabilize it via a mutual contract?

Gambling is done in a vacuum, and doesn't result in price discovery.  Price speculation is an important function of a free market.

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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July 13, 2012, 06:01:30 PM
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Gambling?  Sheesh.  What about the small E&P company that has a few high cost wells it can drill.   They sell some oil futures to protect them from bankruptcy if the price drops.  What about the farmer who's seen half his crop wiped out by drought, decides to hedge what he will be able to harvest.  Sure there are some price speculators who take a position, but do you know how much research they do on inventories and potential deliveries in order to suceed at it?  They bring serious amounts of information to the market, in fact i wouldn't work without them.

A shame how so few understand the importance of price discovery...you think prices should just whipsaw every which way without any one who produces or uses it being able to stabilize it via a mutual contract?

Gambling is done in a vacuum, and doesn't result in price discovery.  Price speculation is an important function of a free market.

But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.

https://www.bitcoin.org/bitcoin.pdf
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doobadoo
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July 13, 2012, 07:15:33 PM
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But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.

So?  Prices adjust to the size of the crop and demand.  The speculators in the futures market facilitate that.  If they were jacking prices around for fun you would see massive surpluses and shortages.  I laugh every time the idiot congressman start trying to talk about limiting speculation in the oil markets.  The Futures market, by definition, needs speculators to finish out the two sides to the trade.  The benefit is competitive system of establishing prices: price discovery.

"It is, quite honestly, the biggest challenge to central banking since Andrew Jackson." -evoorhees
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July 13, 2012, 09:34:28 PM
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But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.

So?  Prices adjust to the size of the crop and demand.  The speculators in the futures market facilitate that.  If they were jacking prices around for fun you would see massive surpluses and shortages.  I laugh every time the idiot congressman start trying to talk about limiting speculation in the oil markets.  The Futures market, by definition, needs speculators to finish out the two sides to the trade.  The benefit is competitive system of establishing prices: price discovery.

So, that's the side of the story the brokers don't tell the farmers.  They only find out when they are bankrupted.

https://www.bitcoin.org/bitcoin.pdf
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July 13, 2012, 11:23:13 PM
 #7

But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.
That sounds like great business opportunity. You should get raise some capital and offer to protect farmers against this very thing. You can charge them a small amount of money periodically based on the risk of drought in their area and pay them a lump sum if they lose an entire crop. As long as you diversify your own risk by making it unlikely that every farmer you protect will get hit with a drought all at the same time it should work.

Too bad nobody is doing this yet.
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July 14, 2012, 01:50:30 AM
 #8

But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.
That sounds like great business opportunity. You should get raise some capital and offer to protect farmers against this very thing. You can charge them a small amount of money periodically based on the risk of drought in their area and pay them a lump sum if they lose an entire crop. As long as you diversify your own risk by making it unlikely that every farmer you protect will get hit with a drought all at the same time it should work.

Too bad nobody is doing this yet.

If you were offering this type of insurance on corn in the US you would be bankrupted this year.

https://www.bitcoin.org/bitcoin.pdf
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justusranvier
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July 14, 2012, 02:38:38 AM
 #9

If you were offering this type of insurance on corn in the US you would be bankrupted this year.
It would be a mistake to assume insurance is impossible in principle merely because you don't know how to do it.
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July 14, 2012, 04:54:10 AM
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If you were offering this type of insurance on corn in the US you would be bankrupted this year.
It would be a mistake to assume insurance is impossible in principle merely because you don't know how to do it.

All I'm saying is this would be a horrible year to have started such an enterprise.  We'll be lucky if half the corn that was planted comes to market because of severe drought.

https://www.bitcoin.org/bitcoin.pdf
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justusranvier
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July 14, 2012, 04:55:51 AM
 #11

All I'm saying is this would be a horrible year to have started such an enterprise.  We'll be lucky if half the corn that was planted comes to market because of severe drought.
I agree with that.
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July 14, 2012, 04:59:07 AM
 #12

All I'm saying is this would be a horrible year to have started such an enterprise.  We'll be lucky if half the corn that was planted comes to market because of severe drought.
I agree with that.

Good.  Glad you decided to quit putting words in my mouth Tongue.

https://www.bitcoin.org/bitcoin.pdf
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July 14, 2012, 05:13:57 AM
 #13

All I'm saying is this would be a horrible year to have started such an enterprise.  We'll be lucky if half the corn that was planted comes to market because of severe drought.
I agree with that.

Good.  Glad you decided to quit putting words in my mouth Tongue.
Crop insurance companies didn't start up this year. If they've been doing proper risk management they'll survive one bad year.
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July 14, 2012, 05:33:46 AM
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Crop insurance companies didn't start up this year. If they've been doing proper risk management they'll survive one bad year.

That sounds like great business opportunity. You should get raise some capital and offer to protect farmers against this very thing. You can charge them a small amount of money periodically based on the risk of drought in their area and pay them a lump sum if they lose an entire crop. As long as you diversify your own risk by making it unlikely that every farmer you protect will get hit with a drought all at the same time it should work.

Too bad nobody is doing this yet.

Hmmm....

Anyway, this has nothing to do with the topic and you just seem to want to argue.  I must be on bitcointalk.org.

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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waltmarkers
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July 15, 2012, 10:21:57 PM
 #15

But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.
That sounds like great business opportunity. You should get raise some capital and offer to protect farmers against this very thing. You can charge them a small amount of money periodically based on the risk of drought in their area and pay them a lump sum if they lose an entire crop. As long as you diversify your own risk by making it unlikely that every farmer you protect will get hit with a drought all at the same time it should work.

Too bad nobody is doing this yet.

If you were offering this type of insurance on corn in the US you would be bankrupted this year.

Actually not, crop insurance is all insured / reinsured by the federal government.
notme
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July 15, 2012, 11:15:27 PM
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But what happens when the corn farmer buys the sell side of a contract, then there is a huge drought and his crop fails.  Not only does he have no crop, he has buy the other side of his contract after the market price has skyrocketed.  He is now royally fucked.
That sounds like great business opportunity. You should get raise some capital and offer to protect farmers against this very thing. You can charge them a small amount of money periodically based on the risk of drought in their area and pay them a lump sum if they lose an entire crop. As long as you diversify your own risk by making it unlikely that every farmer you protect will get hit with a drought all at the same time it should work.

Too bad nobody is doing this yet.

If you were offering this type of insurance on corn in the US you would be bankrupted this year.

Actually not, crop insurance is all insured / reinsured by the federal government.

I need to get into a business with bailouts...

https://www.bitcoin.org/bitcoin.pdf
While no idea is perfect, some ideas are useful.
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