The Doc sat down with Ann Barnhardt of the former Barnhardt Capital Management Tuesday night for an exclusive interview discussing the shocking precedent set by the 7th Circuit Court of Appeals’ decision last Friday essentially making segregated client funds theft perfectly legal.
Ann went on a 20 minute ALL-OUT RANT, stating that the decision means that ‘All property rights in the United States are gone. Up in smoke. The 7th Circuit Court decision means customers have absolutely no right to their segregated funds held in any depository or financial institution!‘
Barnhardt states ‘We’re seeing the complete disintegration of the financial system before our very eyes! It’s Soviet! It’s truly, truly Soviet!! You’ve got to get your money out of the financial system! Nothing is safe! Not just the futures markets, but the entire thing! Stocks, 401k, IRA, deposit accounts. GET YOUR MONEY OUT OR ELSE IT IS ALL GOING TO BE STOLEN FROM YOU! IT’S ALL A PONZI!!!
The owner of the former BCM brokerage states that JP Morgan knows the end is in sight, and they know that in a lawless environment, possession is EVERYTHING!
SilverDoctors’ MUST LISTEN Exclusive 1-on-1 FULL interview with BCM’s Ann Barnhardt is below:
This is The Doc with SilverDoctors.com, we’re please to welcome Ann Barnhardt of the former Barnhardt Capital Management today.
Ann was light years ahead of just about everyone in recognizing the implications of MF Global’s outright theft of supposedly segregated client funds, instantly telling anyone who would listen to immediately get out of all paper markets. Ann went so far as to instantly shut down her brokerage out of concerns for the safety of her client’s funds.
Ann: Thanks for having me, it’s a pleasure to be with you.
Doc: Before we talk about the Sentinel bankruptcy case Ann, we’ve already seen lightning strike twice in the form of the segregated client theft of $200 million of PFG. What are your thoughts on the latest vaporization of client funds at PFG?
Ann: It’s just par for the course, and really the big news within the last few days relative to the PFG case is the 7th Circuit Court of Appeals decision- relative to (and I know we’re getting into lots of different companies and lots of different outfits here) the Sentinel Management Group, which was a non-clearing FCM, that was a Ponzi, that crashed all the way back in 2007. So this happened 5 years ago, and they’re just getting the stuff adjudicated- like I said, the decision from the 7th Circuit Court of Appeals just was published on Friday.
What that decision said, unbelievably, is that basically all property rights in the United States are gone. Up in smoke. The court ruled that if you have money with an FCM and they fraudulently used YOUR MONEY that they’re holding as a custodian- if they use your funds to go and borrow money to finance their own in-house proprietary trading desk, when that Ponzi collapses, the customers have absolutely no rights to their own property, and that the counter-party- meaning the mega-bank that lended the FCM the money fraudulently, they stay at the front of the line!
Absolutely STUNNING! So what this does is it trickles all the way back down through the system to both MF Global and PFG, and basically tells the customers ‘Sorry, you’re screwed.’ Not only are you screwed, but we now have a legal precedent that is going to be used by every executive in every one of these companies to say ‘Hey! The 7th Circuit Court of Appeals just ruled that using customer segregated funds as collateral on your own loans to fund your prop trading desk is completely legal and doesn’t constitute fraud.’
So what we’re seeing is the complete disintegration of the financial system before our very eyes!
It’s Soviet! It’s truly, truly Soviet!! You couldn’t even make stuff like this up! If you told me a year ago that any of this would be going on, and that we’d have court decisions like this, I would have told you that you were completely out of your mind.
Now here we are, it’s happening, you’ve got to get out of the financial system! Nothing is safe!
Doc: I couldn’t agree more. For clarification because this story hasn’t been picked up at all really in the MSM or even the alternative sites like ZeroHedge, so let’s give a little bit of a background for those unfamiliar with the story, Sentinel Management Group imploded in 2007 with over $500 million in segregated client funds vaporizing when Sentinel rehypothecated their client’s assets in order to secure a line of credit from the Bank of NY Melon.
So now we’re 5 years into the bankruptcy court proceedings and BNY Melon has sued to get in the front of the line ahead of segregated customers, essentially stays ahead of customers. So Friday’s court ruling essentially means that the Federal Appeals Court has ruled that the Bank of NY Melon gets to jump in line ahead of segregated customers.
Ann: Exactly! And this despite the fact that the Bank of NY Melon executives who testified at the trial LIED, and it even says in the decision- the exact words that are used was that they were ‘heartless liars’, and the decision goes so far as to say that because the bankers lied so blatantly and egregiously, that that must somehow be proof that they weren’t actually complicit in the fraud!!
TOTALLY SOVIET, we’re through the looking glass, none of this makes any sense.
The other big point about Sentinel, is what Sentinel was- it was a hedge fund for other FCM’s.
So when other FCM’s had excess proprietary cash, what they would do is they would send it to Sentinel and park it with them, and then Sentinel said that they were acting as a hedge fund and they were investing the funds, so that the FCM’s could generate some sort of return in excess of the rapidly falling interest rates that were going on in 2007 and before.
So what Sentinel was- it was a non-clearing FCM. Who has the regulatory and auditing oversight of all non-clearing FCM’s in the US? Well ladies and gentlemen, it’s the National Futures Association.
The same National Futures Association that apparently just completely missed the fact that PFG Best only had $5 million in it’s segregated account, when it was telling them that it had $225 million.
But I guess that’s what you get when you’re sending account balance confirm requests to unverified post-office boxes. I guess that’s also what you get when a 9 figure FCM has some gal working out of her house on the West side of Chicago acting as their auditor. The fact that an FCM that size has thousands of journal entries per day, and that one gal working out of her house is doing all of the accounting and all of the in-house auditing?
We couldn’t possibly expect the NFA to investigate that or follow up on that, and we couldn’t possibly expect the NFA to be sending account balance confirms to anything other than an unverified post-office box, even though you can’t even buy a .99 piece of crap on E-bay if you’re doing business through an unverified post-office box!
Look. The NFA is a CRIMINAL MAFIA! The upper management of the NFA and the upper echelon of these auditors should do hard time. I’m not talking camp cupcake. I’m talking about DECADES OF HARD TIME THESE PEOPLE SHOULD BE DOING! Because they are completely complicit in this, there is NO REAL REGULATORY OVERSIGHT OF THE FINANCIAL INDUSTRY IN THIS COUNTRY!!
The NFA isn’t auditing anybody in any realistic sense. If you’re in the NFA’s mafia, they’ll coast you right through. If you’re not in the NFA’s mafia, they will tear you apart and destroy you with malicious auditing and malicious litigation.
Who was the auditing oversight body for MF Global? Well it was the CME. Again, they weren’t doing any realistic auditing oversight, you know, ‘we’re not gonna mess with Corzine, we’re not gonna mess with MF Global, just sign off on them’ and now the coup de grace is that THE COURTS ARE NOW COMPLETELY COMPLICIT IN ALL OF THIS!! The courts facilitated the fraudulent bankruptcy filing of MF Global, and now the 7th Circuit Court of Appeals- upholding a decision from the District Court- has now made this absolutely MIND-BLOWING decision, setting precedents that say customers have absolutely no right to their segregated funds held in any depository or financial institution!
I don’t know what else people need. MF Global stole $1.6 billion, PFG Best is $225 million gone, who’s going to be next? It’s clear there’s no regulatory oversight. If you’re still in these markets you’re either stupid or on drugs! That’s the only conclusion that I can come to.
Doc: I wanted to get your thoughts on one aspect of both MF Global and PFG Best. I don’t particularly believe that it’s much of a coincidence that the customer accounts at PFG just happened to again be held at JP Morgan.
I don’t know if you saw this or not, but JP Morgan filed a request with US bankruptcy court last week attempting to limit the subpoena power of PFG’s bankruptcy trustee Ira Bodenstein!
Basically JP Morgan is doing everything in their power to keep their dealings with PFG client funds under lock and key. Are we reading too much into this, or should we be focusing on JP Morgan’s role in both of these bankruptcies?
Ann: Oh no, not at all. I’ve got another one for you. JP Morgan has just announced that it wants to hold customer collateral. It wants to be the body that holds customer collateral for FCM’s.
Now the argument they’re making is, ‘look at these FCM’s. You can’t trust them, so now we need a third party to hold customer collateral’. Guess who’s going to get to be that third party?
IT’S GOING TO BE JP MORGAN!! Look, they know that the end is in sight, and they know that in a lawless environment, possession is EVERYTHING! They want as much in their physical possession as they can possibly get because they know that when the poop hits the fan and this whole deal collapses, they’re going to be able to keep everything that they have. They want as much as possible!
No, this is all completely revolving around JP Morgan and Goldman, and I would personally be looking for within the next few weeks to months- I think that what they’re going to try to do is to try to consolidate these mega banks even more, and I think that JP Morgan is probably going to end up making a play for Citi at some point, and they are just going to try to have as much as possible under Jamie Dimon’s roof, because I think they know that the end is coming. It’s rotten to the core!
Doc: I think both Citigroup, as well as I can see them making a play for Bank of America as well. It’s almost like these banks are zombie corpses- without new infusions of blood capital the zombie can’t pretend to be alive walking around any longer.
Ann: Exactly. We’re in the end game, no question.
Doc: Really what you described from Sentinel, the court’s decision last Friday being shocking, I couldn’t agree more. When I saw the news I really had to read it twice, and when I actually first read the ruling my first thought was ‘ forget wabbit season, This is open hunting season on segregated client funds all year round.’
Ann: Absolutely! That’s all it is! Like I said, it basically destroys all property rights that anybody has with any financial institution or depository institution. I’m with you. I cannot figure out why the Tylers have not posted this at ZeroHedge! This is HUGE! What the hell is going on!?!
Denninger hasn’t said anything over at Market Ticker. As far as I can tell it’s me, and then some metals websites and Warren Pollock- we’re the only people who are talking about this!
This isn’t speculation! This is a 7th Circuit Court of Appeals decision! This is in black and white! This is setting massive legal precedent and nobody’s picking it up, even on the alternative side of the media! It’s truly bizarre, I don’t know what’s going on.
Doc: I look at it that not only does it set a precedent for ongoing bankruptcy proceedings with PFG and MF Global, but essentially it gives the bankers a green light to steal as much segregated client funds as you want because you know you just rely on the precedent and ‘we’ll just jump back in line ahead of the clients if anything happens’.
Ann: That’s exactly right. The other thing people have to remember is people are focused on all this as happening exclusively inside the futures industry. This has ramifications throughout all financial markets, every sector of the financial industry, and even into simply street corner depository banking.
They’re all doing this rehypothecation. They’re all doing this, and now they’ve just been given a green light that they are legally protected, and the depositors or investors who are sending their margin to be held in these customer seg accounts have been completely, legally hamstrung! There is now no legal recourse whatsoever!
The court has explicitly stated that taking somebody else’s money, and using that as collateral on your own personal loan is not fraud!
I don’t even know what to say! What in the HELL IS GOING ON!?! – OTHER THAN THE ONLY EXPLANATION- WELCOME TO MARXIST FACSIM LADIES AND GENTLEMEN!!! It’s here! Welcome to hell!
Again, reiterating, you have got to get your money out of the financial system! Not just the futures markets, but the entire thing! Stocks, 401k, IRA– and so help me if one more person emails me or calls me and says well what about my 401k with such and such a firm? I’m going to just go and stick my hand through the wall! What is the matter with you people? What part of GET THE HELL OUT are you not understanding? What is so difficult about this? It’s the ENTIRE FINANCIAL SYSTEM!
GET YOUR MONEY OUT OR ELSE IT IS ALL GOING TO BE STOLEN FROM YOU! IT’S ALL A PONZI!!!
The only way that you can survive a Ponzi scheme is if you get the hell out before it implodes and crashes! That could be any day now ladies and gentlemen! You have had so much warning and so much lead on this, there is no way that you can make any argument that ‘I didn’t know!’
I’ve been here for 9 months screaming at the top of my lungs GET THE HELL OUT! And people are so stuck in their sophomoric normalcy bias that they literally send me emails and they have no idea what I mean by that. If you are so far intellectually far gone, if you are such a coward that you cannot comprehend what the words GET THE HELL OUT OF THE FINANCIAL MARKETS mean, then you deserve to lose all your money, and don’t you dare call or email me whining about it!
Doc: We strongly advocate physical precious metals as one of the only remaining assets that have zero counter-party risk, and we’re talking physical gold and silver held in your own personal possession.
What are you recommending to clients and former clients now with your strong recommendations to get out of all markets- and as you’ve mentioned now you’re not only talking the futures markets, you’re talking stocks and even deposit accounts. Are your recommendations focusing on physical precious metals like gold and silver or also real estate? What are you recommending people protect their wealth with?
Ann: I’m not a metals person, I was a cattle and grains person so metals aren’t my forte, but absolutely metals. Gold and silver, some of both. I’ve had people email me and say ‘Well I have $150,000, what could I possibly do with $150,000?’ OK, $150,000 people, do you know how to do 3rd grade division?
If gold is at $1600 an ounce, and there’s 16 ounces in a pound (editor’s note: there are actually 12 troy ounces in a pound, but Ann’s point remains the same) that comes out to less than 6 lbs of gold.
You can’t carry something that weighs 6 lbs?
So you have gold for very compact storage of wealth, you have silver for barter, I’d have some of both, I would probably keep some cash around. I don’t know exactly how the collapse of the US dollar is going to play out but I think it would be wise to have some actual paper cash.
From my perspective, a lot of my clients are agricultural people, and there are still lots of places in the central US where farm ground is still very much a buy. I wouldn’t be buying farm ground in south central Illinois where there’s just been a massive bubble for the last 4 years and it just keeps going and going- that would make me nervous. But there’s plenty of good productive farm ground in Kansas, Nebraska, Oklahoma, Texas, and South Dakota that is still very much in play and would be an excellent store of wealth.
Long guns- Rifles and shotguns. You can’t have too many long guns or too much ammunition.
If we’re wrong and there isn’t a hot war, and everything cools off and reverts to normalcy (I think the odds of that are extremely slim) but if I’m wrong about all of this, your long guns and ammunition are still going to have resale value. It’s not like it’s just money into a black hole if you buy these things.
Gold will still have value. Silver will still have value. Farm ground will certainly still have value.
From the survival perspective, dehydrated food. You can go online and buy that years at a time, and you can burn through thousands of dollars just buying food. Water. Fuel. Generators.
Needless to say, if you’re carrying any debt whatsoever, mortgage, car- anything, PAY IT OFF!
Own as much as you possibly can outright so you are as nimble and as removed from the system as humanly possible.
Doc: Along with your statement about buying food, with your background in agriculture, what is your outlook for food prices over the next 6-12 months with the historic drought we’ve been experiencing?
Ann: Oh it’s going to go up baby. It’s going to go up, up, up, up, up!
Just looking at what corn has done- corn has made new highs, probed above $8.15. Ok, when your feeding corn to cattle, hogs, and poultry, that translates directly into the price of those protein products, and we’re so mentally retarded that we’re turning corn into rot-gut gasoline substitute, which is about the dumbest thing that we could possibly be doing. It’s all part of this Marxist/ Fascist attempt to completely destroy this economy.
Oh, FOOD PRICES ARE GOING UP! TRUST THAT! TRUST THAT!
Doc: Before we let you go Ann, how can listeners follow your work?
Ann: Just at my website which is http://barnhardt.biz/
Doc: Ok, great. We really appreciate your time and insight today Ann, and we look forward to talking to you again soon.