Originally posted by coldkidc
I sincerely doubt that it's not at least going to be a wild next couple of trading days...many many many stunned traders are going to be getting
margin calls, closing positions, moving large sums of money, having collateral auto-sold, assets liquidated, or just doing everything they can to save
their ass - all at the same time.
There was no warning on this move by the CME and that's going to be a huge issue for anybody with an open position.
I am tending to agree with you.
It's clear from this announcement, that it is meant to be unclear. That is to say, it is the kind of memo that goes out, in a coded fashion, such
that anybody who works in a market making house is going to ask their boss for clarification. What does it mean when they say the ratio for "new"
is to be 1.0? There is too much ambiguity here. It appears on the face of it, that this is the CME utterly destroying their traders, and that seems
a bit too crazy, one assumes.
Originally posted by ogbert
I'm a real estate guy, so anyone feel free to correct me. The way i understand it is that, you can control $1,000 worth of stock for only $500. If
the maintenance margin is 25%;and, the stock falls below $250.00, then you get a margin call and have to add more money to keep your investment;
otherwise, the stock is liquidated.
If the CME raised the maintenance amount; this would put many in a position of having to add money to their position, when liquidity is scarce.
Yes, traders are at risk as anyone who speculates on credit. The extenders of credit, can kill the credited-persons, at any time, by seizing the
account for margin failure, and issuing them a bill, etc. In 1929 that's what happened, dudes got rich on credit speculation, then got massive
bills, which caused them to jump from ledges. But the non-speculators also lose, when this game is played, as with farms that did not hold title, and
were seized by the lenders.
The whole key to this is MF Global, run by ex Goldman Sachs CEO, ex-Senator, ex-Governor. The death of MF causes their funds to be frozen due to chap
11 proceedings. At this time, they say only 700 million may be lost, and yet that's preliminary. I think last week was epic for the market makers.
If this is true doom, then it means the clearing houses themselves are being pinched, which means yes, that all market makers will lost the
'middle-man' security of their clearing houses. There is a reason why drug money floated the world economy in 2008 under the scenes, and that's
because in truth, the black markets are the real bull markets and also, cash is essentially now a criminal instrument. Go try and withdraw 20k in
cash from your bank account and you will look like a criminal. And yet, in the early 90's when the ruble collapsed, criminals were literally trading
shipping containers full of rubles. Hence, one of the end-game facts is that just before a nation's paper ignites into dust, it is used in mass
amount to launder wealth, which in a way, is what causes it to ignite, and die. So when your government trie to keep cash out of your hands, and they
call you a criminal for wanting cash, it's fairly certain that the currency is being used for large scale laundering.
Prior to the 500 Euro note, it was the 100 USD note which was the prime choice of drug fund launderers. Last time I checked, the Euro and the dollar
are both acceptable currency for when you loan shark calls you up and says you owe him an "unforseen" 100k. I am sure any good loan shark will
accept 500 euro note or 100 USD note, but it'll take days for the bank to have that cash shipped in. So when crime becomes the only way to profit
(trickle down effect), then simply owning the tool of crime (cash) will make you a criminal.
The cash printing machines do print a lot of cash, and yet how much cash do you ever see? Huge loads of cash are meant to be used by drug-channels,
and this means cash itself is combustible, eventually, and also it means that if you have large amounts of cash, you are ipso facto, a criminal, in
the eyes of some authority.