Denver based Barnhardt Capital Management is a futures brokerage firm that focuses on agriculture, round-the-clock broker access, and inexpensive commissions. At least, it used to be.
Barnhardt shuttered its operations yesterday after six-years in the business. The firm’s founder Ann Barnhardt posted the reasons online for the entire world to see:
“I could no longer tell my clients that their monies and positions were safe in the futures and options markets, because they are not. And this goes not just for my clients, but for every futures and options account in the United States. The entire system has been utterly destroyed by the MF Global collapse.”
Ms. Barnhardt further explains that markets are completely fractured… that the rule of law in the United States no longer exists. She decries Jon Corzine of MF Global for having outright stolen customer funds, and various exchanges and government regulators for having frozen out customer accounts as a result.
Given that the entire industry is “suicidally-leveraged” and exposed to “European sovereign junk debt,” Barnhardt recommends that ALL customers “withdraw from all of the markets as soon as possible so that they have the best chance of protecting themselves and their equity.”
We couldn’t agree more with this sentiment. Our Chief Investment Strategist Tim Staermose wrote just last week that cash is a great place to be right now… and we’ve been arguing for months that markets are completely broken. The market’s price discovery mechanism has given way to rumor and political innuendo.
A real economy cannot function under such circumstances. With Europe on the precipice and roughly $600 TRILLION in global derivative notional value lurking in the system, can a real collapse be that far off?
Famed hedge fund manager Mark Mobius recently said, “There is definitely going to be another financial crisis around the corner because we haven’t solved any of the things that caused the previous crisis.”
Not only have the major issues not been resolved, but governments continue making things worse. More bailouts, more printing, more deficits take an enormous problem and make it unfathomable.
As we discussed yesterday, though, most people are completely unaware. Everything ‘feels’ normal, so there’s no cause for alarm. They’re just going on about their lives while Rome is burning all around them.
At least a handful of people are paying attention. We received a note this morning from a subscriber in Portugal who writes,
“Very well-informed people in Portugal are withdrawing money from the banks and either keeping it at home or buying gold. In fact, I heard on the news yesterday that we are breaking records in Portugal in terms of gold purchases.”
Meanwhile, the government of Spain insisted, rather emphatically yesterday, that it has absolutely no need of being bailed out… all while its borrowing costs shot up to record highs.
Given Spain’s debilitating debt and deficit woes, this is obvious nonsense; the government is simply trying to put on a brave face and restore confidence just three-days before the election.
Our entire financial system, in fact, is based on confidence. Our currencies are backed by nothing but empty promises by politicians. Our banks barely have any cash on the books as a percentage of deposits. Most western nations are completely insolvent. And EVERYONE is exposed to EVERYONE else.
Everything can ‘feel’ normal as long as that trust and confidence is still in-tact. But it’s a frail, razor-thin breaking point. And when people lose confidence in the system, things can collapse very, very quickly.
To paraphrase the late German economist Rudi Dornbusch, the loss of confidence takes longer than you think it should and happens faster than you thought it could.