What Really Happened With MF Global? Ann Barnhardt Lays It Out.

I claim no expertise in any aspect of financial matters. The stock market, Wall Street, how all that stuff works is close to a total mystery to me. As such, I rarely participate in discussions about those topics, opting instead, generally speaking, to just read and try to keep up. That gets harder when the discussions go much deeper than a basic level. The technicalities, legalities, and terminology all kind of turns me off, even though I should work harder to understand it all because our personal shot at a reasonably early retirement is wrapped up in a 401K that the following interview with Ann Barnhardt would suggest is an extreme risk for us to be counting on at this point.

I appreciate Barnhardt’s delivery for its directness and her way of distilling it down to simplified terms that even a financial ignoramus like me can understand. I suppose some who disagree with her take might say the reason an ignoramus like me feels he understands her so well is that she herself is a simplistic ignoramus. Maybe, but recognizing my own ignorance on the matters she discusses on financial matters, I have to pick those whose logic, assertions, and accusations make the most sense to me, and nothing I’ve heard from the Corzine or MF Global apologist side comes close to making sense to me. So with that, take it Ms. Barnhardt:

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  1. Seattle Outcast

    One of the things I’ve learned while studying statistics for my job is a comment that so far I’ve yet to see proven incorrect – people would rather believe an answer they know to be wrong than one they don’t understand.

    So, getting things boiled down to the point of making sense to you is good. It means that you are much more likely to get to an answer that is both correct and sets well with you. If someone wants to point out that she’s wrong, they’ll need to reduce their argument to the same level of understanding.

    Of course, this is also why nobody trusts statisticians – they provide you with “answers” that appear (or frequently ARE) totally bogus, and most people don’t have the tools to properly analyze them for legitimacy.

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  2. CzarChasm *

    Thanks SO. I should add also that it isn’t only Barnhardt’s delivery or distillation down to simplistic terms that inspires me to accept her take on the MF Global situation. Equally (at least) important is her work experience, some of which she says in the interview was trading and scrutinizing MF Global for her clients. Her take in the interview is the result of an extensive investigation that triggered her adherence to a deep commitment to fulfilling obligations, both fiduciary and ethical, that she had to her clients. She’s believable and credible on many levels, not all of which have anything to do with simplifying things for financial neophytes like me.

    CC

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  3. Section8

    My prediction: Corzine gets away with it, some new law will be passed to make it look like “something was done” rather than enforcing the gazillion laws already out there. This shit has become so predictable now, It ranks up there with strongly worded letter response from the UN whenever some dipshit tinpot dictator violates whatever 10 million previous resolutions were issued against him.

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  4. AlexInCT

    Remember how Madoff was news 24/7, how he was basically called a republican stooge despite the fact that he had bought & paid for politicians in both parties, and how the LSM could not get enough of the story? Corazine is a stone cold democrat. It is the likely explenation why you don’t hear much more than the minimum about this case. Rich democrats that steal $1.2 billion, oops Corazine says he just doesn’t know where the money is, are not going to help the narrative so they are not interesting.

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  5. Tripper

    I just got around to listening to the Barnhardt interview from the OP this morning.

    It all comes across as a bit crazy to me.

    Some of the highlights I took away were:

    Ann predicts civil war in the United States within the next few years, or at least thinks it’s fairly likely (not sure how strongly she predicts it from her statement)

    She will be amazed if the global financial system survives till Christmas

    Her advice to anybody with a 401K plan is to pull the money out now, don’t wait, pull it out now. Take the 10% penalty since it’s better to lose 10% now than all of it in the coming melt down she is predicting.

    Get your investments out of paper assets and into physical commodities. This she describes as anything you can stand in front of with a gun and defend.
    I couldn’t quite tell if she’s still trading on behalf of clients or not, (I know she closed her firm, so perhaps not) but it would seem that physical commodities (cattle and grain) just happen to be her area of expertise.

    All financial regulation in the US is “a joke”, this includes all government regulation but also all private or industry regulation bodies.
    She elaborates:
    The top tier of regulators are “Evil evil people”
    The middle tier are 50% stupid and 50% evil
    The lower tier or “the grunts” are all incompetent and are all or mostly “diversity hires” or kids 15 minutes out of college.

    The only way to fix things is to start from scratch with a new exchange. She predicts that in the next 10 years (not clear if this will be longer due to civil war) there will be a new exchange created in the US and rumblings she hears are that it could be in Dallas.

    Along with that there were repeated allegations of all kinds of people being various combinations of evil, incompetent and marxists and of course she believes a big part of everything going on right now is Cloward Piven being put into action.

    At least it was an interesting 30 minutes.

    So, a question for everybody here: Does anybody plan to liquidate their 401k now based on Ms Barnhardt’s advice?
    Czar, did she worry you enough to do that?

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  6. CzarChasm *

    Well Tripper, you’ve summarized most of her statements fairly well, but offer no rebuttal to speak of, other than characterizing it as “crazy” or whatever. Not sure what the purpose of reciting selective lines that she says in her own voice in the interview is, but whatever.

    Barnhardt is hardly the only one to strongly recommend that investors get their assets out of paper in this environment. It’s a very common recommendation among preppers, which Ann Barnhardt obviously is, and preppers likely make up the bulk of her former client base and current target audience. If you find it “crazy” for someone to make such a recommendation, you are likely oblivious to who preppers are, or how many of us there are. And you probably think that preppers are “crazy” too, and that the only motivations we have for our stockpiling of resources such as silver, gold, food, fuel, weapons and ammunition are political upheaval and economic melt-downs. That might be an easy conclusion to come to so you can dismiss us as crazy, paranoid, a threat to civil society blah blah blah, but it’s hardly reality based. The kinds of events that inspire me to listen to folks like Ann Barhardt’s recommendations vary widely, and most have nothing to do with political upheaval or economic melt-downs. As I found out last April, one major storm can overwhelm local government in a matter of a couple of hours. Our debit cards were useless for more than a week. Power was out everywhere within a 30,000+ square mile area. Ice was hard to get even if you had cash, impossible to get if you didn’t, so food started spoiling within a couple or three days for those who failed to prepare with generators and fuel, which, statistically-speaking, was nearly everyone.

    We didn’t lose an ounce of meat. Even our ice cream survived. My wife’s job closed down until the power came back on, but my job puts much more demands on me in emergency situations than in normal times, and I made it back and forth to work and many trips back and forth to help in the cleanup effort without ever having to stop at a gas station, which would have taken literally hours away from the cleanup if I had anyway as most stations were running only one or two pumps on a generator, and the lines were reminiscent of the OPEC oil embargo in the 70s . Prices skyrocketed with every merchant that managed to get a generator system up and running, so the reliance on debit cards was exacerbated as the cash-strapped unprepared tried to get at their “assets” that are no assets at all if you’re dependent on government keeping the power on to have access to it. I didn’t need to, but I’ll guaran-damn-tee ya that if I needed gas or food and showed up with a hand-crank pump with a 15′ stand-pipe attached at a station that had gas in the ground but no power, and a handful of silver coinage or a few hundred rounds of ammo, I’d leave there with a full tank and enough food to get me through the next few days. Or pick your poison. Maybe it’s not silver or ammo, but barter will be the order of the day if (or when, depending on your point of view) an economic collapse or widespread riots in the streets or civil war or what have you happens. And good grief, Greece, Egypt, Libya, and many other current events ought to prove that it’s not such a far-fetched (or “crazy” if you prefer) idea that it can happen.

    Anyway, to answer your question directly Tripper, yes, my wife and I are looking at the best strategy to divest out of her 401K. It’s quite a bit more expensive for us than the 10% penalty Barnhardt mentions, but the equation is still basically the same: Something vs. nothing if it all goes bad before you get out of the market. Yeah, call me crazy all you want, but I’d rather have something than nothing, and holding onto FRNs that have no intrinsic value even now as things are some degree of “stable,” is just stupid when you know without a doubt that their worthlessness will be the death of those who depended on government to keep them “valuable,” and who stockpiled them rather than real, intrinsically valuable goods in preparation for whatever disaster might require their usage. We can’t completely extricate ourselves from the FRN system, but we can minimize our dependence on it, and that’s all we’re doing, and all Ann Barnhardt is doing. We’ve been working in the same direction for over 20 years now, so no, Ann Barnhardt did not “worry us enough to do that.” She just articulated many of the reasons we prep and consolidated it into a 30 minute interview, so I posted it. Crazy stuff, ain’t it though?

    CC

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  7. Tripper

    I’m not sure how I’d even start going about refuting that there will be civil war in the US within the next few years. I suppose I can’t, though I’ll say that I doubt it very much.
    Lets be even handed though, Barnhardt doesn’t really offer any evidence that there will be.
    Similarly I can’t refute that the global financial system will collapse by Christmas but that’s close enough that we can play a wait and see game.
    I’m willing to take wagers on it though, either in silver, ammo or straight cash homie.

    You’ve opened my eyes to the prepper culture though, I was unaware of the phenomenon but I’ve read a couple of pages about it this morning. Obviously I’m by no means an expert on it, but I can say I’ve got a bit of an idea of what you’re talking about now. I’ve seen similar ideas over the years.

    I wouldn’t make any general statements about preppers as a group being crazy, there’s certainly a good bit of common sense to it. I’d guess a lot of people, myself included, could be considered to have prepped to some degree or another, though I doubt I could really claim to be a full out prepper.
    The wife and I have a certain amount of preparation in place for dire circumstances, though it’s much more focused on the short term, a couple of days to a couple of weeks, as far as food and water goes. Frozen food isn’t really a big deal to us, we only have one of those small on top of your fridge freezer and it’s rarely full, but we do have a good supply of dried goods (grains, beans, pasta etc.) and canned veggies / beans that would keep us going for a while, along with some bottled water. I’ve also always got an additional stock pile of water, which is primarily prep for when the home brewing mood takes hold of me, but obviously would be handy in dire situations too.
    None of this is really done with a focus on long term survival, it’s just basically how our pantry is regularly stocked, and at this time of year in Minnesota it’s just handy since we could potentially get a snow storm for a couple of days that makes it unwise, if not impossible to get out and about.
    Cooking wise we’ve got a gas grill and burner and a couple of propane tanks. No generator yet but I’ve been seriously giving it some thought for the past few years.
    It’s not going to save us from the apocalypse, the collapse of the global financial system or civil war, but it will get us through a serious storm assuming we’re not too badly damaged but the initial hit.
    I can all but guarantee my office will be open if the power goes out, and if I’m out of gas I can bust out the trusty old pedal powered transport, though it wouldn’t be too much fun at this time of year but I can do it.

    Anyway, the point of all that is to illustrate that no, I don’t think having some sensible preparation for bad circumstances is crazy. Obviously there are some people who take it further than I do, and while I might think it’s likely unnecessary I still wouldn’t call it crazy.

    But none of that is anything I highlighted as crazy from my original post on the topic.
    What I think is crazy and probably irresponsible, is advocating that people take out all their 401ks and invest it in a heard of cows or a bar of gold or whatever physical commodity you may choose.
    I can certainly see some value in having some of your investments in such commodities but liquidating your 401k now (after it’s likely lost a good bit of value in the past few years anyway) and plowing it all into these items is what seems crazy to me.
    Like you Czar, I’m no financial expert, and nor are the people I work with, but we’ve all got something in the market, either 401ks, Roth IRAs some stocks we’re trading, HSA account etc. I just did a quick survey on people’s thoughts of the idea of liquidating that and investing it all in physical assets. It got chuckles all around, but no takers. I dare say our chuckles may give you a bit of a chuckle yourself though.

    I also don’t care who it is though, if you’re predicting the collapse of the entire global financial system by Christmas, Civil war in the US within the next couple of years and calling all of the people involved at the top of any kind of financial regulation as ‘evil’ then you’re crazy in my book.

    A couple of questions I have for you out of curiosity, but I’ll understand if you’d rather not answer them of course.
    Are you de-leveraging all of your paper assets? or just some of them as insurance (insurance either way)
    What sort of prepping do you do fuel wise? I thinking generator fuel, what you run your vehicle on etc.

    Thanks

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  8. CzarChasm *

    A couple of questions I have for you out of curiosity, but I’ll understand if you’d rather not answer them of course.
    Are you de-leveraging all of your paper assets? or just some of them as insurance (insurance either way)
    What sort of prepping do you do fuel wise? I thinking generator fuel, what you run your vehicle on etc.

    I don’t mind talking about our preps in general terms, and don’t mind the questions you asked here, though I won’t go into much detail.

    Like I said, it’s impossible to extricate ourselves from the FRN system altogether, so no, we have no intentions of divesting completely. It’s a balancing act just like trying to put a time-frame on how much food you should have put back etc. Your formula, such as it is, is obviously very different than ours, just as ours is very different than Ann Barnhardt’s or other preppers that we know. Without going into any personal details, we try to get by with as little dependence on banking institutions as possible. That’s really the bottom line right there, and strategizing for divesting GW’s 401K is just part of that long-term plan.

    You pretty much nailed the idea behind our fuel stores. Ive got some industrial 55 gallon drums that I put 5 gallons in every week or so, and draw from at least once a month so the gas doesn’t turn to varnish or have sediment build up that might get pumped into our cars or small engines. We keep four cords of firewood on hand and use two of the drums for kerosene. It’s harder to rotate that stuff through normal use with the super-hot summers and mild springs and falls around here, but we’re the only family I know whose electric bill goes down during the winter because that’s almost all we use is the alternative heat sources.

    I won’t be taking that bet you offered umm….homie(??). Not a betting man to begin with, and of all the predictions Barnhardt made, I was rather incredulous over the “by Christmas” thing too. I don’t see that as invalidating all that she had to say though. The statements you recited of hers were almost all in answer to the interviewer laying the foundation for her words. Taken by themselves, it’s easy to dismiss them as loony tunes I suppose, or to say she didn’t really offer any evidence of her predictions. I took most of what she had to say as answering a question or thought articulated by the interviewer of some state of affairs or event or failed leadership that they both understood as a given, and she just expounded on it. Whatever. I didn’t expect everyone to think it was awesome, and I did expect some to be dismissive and derisive towards it. Let’s just say that your post presented no surprises to me in that regard.

    CC

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  9. Tripper

    Thanks for the answers. It was genuinely of interest.

    I won’t be taking that bet you offered umm….homie(??)

    No offence intended with the “straight cash homie” statement, it’s an old Randy Moss statement that has become common use with some folks up here, me included, but I forget sometimes that the rest of the world don’t recognize it (I actually forget where got it much of the time)

    Let’s just say that your post presented no surprises to me in that regard.

    I’m not too surprised either.

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