When it comes to the markets confidence is key. Yet obviously if you look at the last 24 hours confidence has been shaken. Whether it be the call for a Greek referendum on the EU bailout or the weakness in the Chinese manufacturing data or the situation with the bankruptcy of MF Global confidence has been shaken. And despite the blow to confidence, the markets are something that you can believe in. You can also believe in the protections offered the customer provided by the exchanges.
The oil market, despite the absence of MF Global traders, had a very low volume and oil prices acted like they would have if all traders were present. They reacted as you might expect to the movement from the Japanese yen and dollar intervention and the economic data. They reacted to strong Libyan oil production that rose 245,000 barrels to 345,000, the highest level since March. Or strong production out of Iraq and the highest OPEC oil production since 2008.
Yet while the markets functioned correctly, a disturbing story by the New York Times is making people nervous. The New York Times reports that, Federal regulators have discovered that hundreds of millions of dollars in customer money has gone missing from MF Global in recent days, prompting an investigation into the brokerage firm, which is run by Jon S. Corzine, the former New Jersey governor, several people briefed on the matter said on Monday. The recognition that money was missing scuttled at the 11th hour an agreement to sell a major part of MF Global to a rival brokerage firm. MF Global had staked its survival on completing the deal. Instead, the New York-based firm filed for bankruptcy on Monday. Regulators are examining whether MF Global diverted some customer funds to support its own trades as the firm teetered on the brink of collapse. The discovery that money could not be located might simply reflect sloppy internal controls at MF Global. It is still unclear where the money went. At first, as much as $950 million was believed to be missing, but as the firm sorted through its bankruptcy, that figure fell to less than $700 million by late Monday, the people briefed on the matter said. Additional funds are expected to trickle in over the coming days. But the investigation, which is in its earliest stages, may uncover something more intentional and troubling. In any case, what led to the unaccounted-for cash could violate a tenet of Wall Street regulation: Customers' funds must be kept separate from company money. One of the basic duties of any brokerage firm is to keep track of customer accounts on a daily basis. Neither MF Global nor Mr. Corzine has been accused of any wrongdoing. Lawyers for MF Global did not respond to requests for comment.
This fear that funds may have been comingled could create more fear. For my clients I want to assure you that things are safe. PFGBEST has significant excess capital. Currently, PFGBEST holds 169% of the net capital required by the CFTC and the NFA. All PFGBEST capital is held in cash or U.S. Treasury bills. PFGBEST does not have any trading accounts with MF Global nor does it have any customer funds at MF Global. PFGBEST does not do proprietary trading; the only exception to this is that in specific instances, the firm may allocate funds (always less than $100K) to emerging CTAs so that they can become products that we in turn are able to offer to customers as part of the PFGBEST Managed Futures Division. These safety nets assure the protection of customer funds.
The other thing to remember, the protections that exist by the CME Group that has an 100 percent track record of protecting customer funds. While it may take time to sort out the MF Global mess I have full confidence in the CME Group that all customer funds will be protected. The markets are much bigger than one firm no matter how large they are. In fact the New York Times said, For now, there is confusion surrounding the missing MF Global funds. It is likely, one person briefed on the matter said, that some of the money may be stuck in the system as banks holding the customer funds hesitated last week to send MF Global the money.
I wish I felt as confident about the situation in Greece. Bloomberg News reported that, Greece's decision to call a referendum on its five-day-old bailout blindsided its European partners and placed another hurdle in the way of efforts to staunch the debt crisis, German coalition lawmakers said. The announcement came out of the blue, it's surprising, very risky, Norbert Barthle, the ranking member of Chancellor Angela Merkel's Christian Democratic Union party on parliament's budget committee, said by phone. There's an enormous amount at stake. Do we know how the Greek people will treat their government in this referendum? No. We have a new unknown. French President Nicolas Sarkozy will call Merkel at midday today to discuss the Greek referendum that sent stocks and the euro tumbling, the Elysee said. Sarkozy is dismayed by the Greek plan, Le Monde newspaper reported, citing unnamed people close to Sarkozy.
Add to that weaker than expected data out of China. Bloomberg News reported that, China's Purchasing Managers' Index fell to 50.4 from 51.2 in September, the China Federation of Logistics and Purchasing said today. That compared with the median estimate of 51.8 in a Bloomberg News survey of 16 economists. The nation is the world's second-biggest oil user, after the U.S.
So much for all the hopium of last week! Now more than ever you need The Power to Prosper by tuning into the Fox Business Network where you can see me every day! It's time to open your account with me today! Just call me - Phil Flynn - at 800-935-6487 or email me at firstname.lastname@example.org.
There is a substantial risk of loss in trading futures and options.Past performance is not indicative of future results. The information and data in this report were obtained from sources considered reliable. Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities. PFGBEST, its officers and directors may in the normal course of business have positions, which may or may not agree with the opinions expressed in this report. Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.