Andrew Abraham

andy-0101 My name in Andrew Abraham. I have been investing in commodities and managed futures since 1994. I adhere to the philosophy of trend following. Trend following stresses a disciplined approach to commodity/ futures trading. Successful trend following and commodity futures investing requires patience, discipline and actively managing the risk. What sets me apart from other traders is that I am not only concerned about the return on investment but how much risk I will have to tolerate to achieve my goals.

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If you are interested in contacting for speaking engagements. Please email me at Andrabr9@gmail.com or call 954 903 0638.

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Futures and commodity trading involve substantial risk. The evaluations of futures and commodities may fluctuate and as a result, clients may lose more than their original investment. In no event should the content of this website be construed as an express or an implied promise, guarantee or implication by, that you will profit, or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance. Information provided on this website is intended solely for informative purposes and is obtained from sources believed to be reliable. Information is in no way guaranteed. No guarantee of any kind is implied or possible, where projections of future conditions are attempted.

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The Fleecing of America The MF Global Debacle

The Fleecing of America article in the Reno Gazette by Robert Baroone

The MF Global story is another chapter in the continuing saga of the fleecing of America. The rules of the game are such that Wall Street is allowed to gamble with assets entrusted to it by an unsuspecting public.

If the bets are successful, the spoils flow entirely to the management and the firm — with nothing going to the clients whose assets are at risk. On the other hand, if the bets fail, the clients take the entire loss!

While Washington politicians continue to “look for” MF’s client assets, those assets will not be found, and, worse, unless the New York attorney general becomes incredibly creative, nobody is likely to go to jail because no laws appear to have been broken.

When clients place their equities in “margin” at their broker/dealer so that they can borrow against them, they also generally grant their broker/dealer the right to “lend” their assets to another investor or to borrow it themselves and pledge them as collateral for low cost borrowings. (See the legal gobbledegook in your brokerage account opening documents!) The everyday American investor is unaware of this, and the assets borrowed from the client earn nothing for the client.

Here is what I think happened. MF borrowed money and, using that borrowed money, purchased the debt of the European periphery (Italy, Ireland, Greece, Spain and Portugal) at very attractive yields. The borrowings and the debt purchased had the same maturity date, so the proceeds of the debt, when it matured, were to be used to pay back the borrowings. MF was to collect the difference between the low rate it paid on the borrowings and the high rate it received on the Euro debt. To do this, MF had to pledge collateral. So, it pledged the Euro debt itself, and, as additional collateral, it borrowed and pledged its clients’ margin assets.

MF did several loans of large magnitude like this in Europe. Then, the unanticipated tail event occurred. When the value of the European debt declined significantly in value, and margin calls occurred, MF did not have the capacity to meet them. All of the collateral, including both the Euro debt and the client assets, were sold to offset the borrowings. The clients’ assets were gone. They are not going to be “found.”

The causes of the financial crisis that appeared in the U.S in 2009 have not been resolved, only papered over (with money printing). Until this excessive use of leverage such that success leads to untold wealth for the managers and failure is directly borne by unsuspecting clients or taxpayers, is addressed, we will continue to experience such debacles. And the volatility caused by them will continue to keep the financial system unstable and limit economic growth.

Robert Barone is a principal and an investment advisor


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