Tuesday, October 23, 2012


I was happy today to see an article about the new regulations unanimously approved by the CFTC 

until...... I read the article


It is almost impossible as I get older to have any optimism that our government who is supposed to look out for us, will ever do so. I read through the items in here just expecting that they were building up to something really significant. At this point hours after reading them I am still hoping to find something. These new things with one exception will do absolutely nothing AT ALL to prevent another MF Global or PFG or Sentinel from happening.

The problems in all of these situations were top executives from Corzine to Wasendorf on down, acting improperly. The new regulations put the onus on middle management not to do the wrong thing. They are inviting comment so I am going to definitely send something to them. The one aspect of things which shockingly has not been put into effect is the electronic monitoring of the seg account balances. What this will do is catch the criminals after client money is already gone. It will not prevent a theft and once a theft happens POOF the money is gone.

It is only the fact that this blog is being read all over the world that keeps me in check from a swear word filled explosion. There is a saying in problem solving where you eliminate all the things that are clearly not explaining what is happening and what is left is what explains it. In this case that means that they want these type of things to continue to happen. It is what is left. They do not want to do anything to prevent a CEO from stealing clients money. How many instances in all aspects of the business world do we need to see where law abiding innocent people have their lives ruined by crooks? Mark my words there is at least one if not more than one more of these going on right now that has not as yet been discovered. Oh wait we are going to say middle managers have to do a few things that will solve the problem.

The problem is greed and egos of CEO's not mid level managers who have no power to do anything except take the fall for someone above them.

They need to make it physically impossible for the companies to have direct access to the frickin money


What to do?

First, if you are at all concerned about this write something to the CFTC

Second, take it upon yourself to take care of you, screw the CFTC.

Here is what I am doing. I am only having money in places where there are daily sweeps of excess margin into FDIC or SPIC insured accounts. The two firms currently offering this as standard protocol are TD Ameritrade and Interactive Brokers. I have been told by a reliable source that Vision plans on offering this in the near future. I asked Vision about this today and the person I talked to was not familiar with this new option, but they are buried just dealing with all the new accounts that were transferred to them.

We now know the CFTC and NFA will do absolutely nothing at all to help us. Even  though this is frustrating it is on us to do something about it. If you happen to live in Canada use local firms and you will get the best insurance in the world of up to 1 Million dollars against fraud. If you have the option of forming a company up there with someone who lives there do it. You have to have a Canadian address so you could form an LLC with a member who lives up there that has 1% and use their address to form the business. I think you should ask your accountant as how to best proceed, but do not put your head in the sand. If you are serious about trading you don't want to ever go through what I have believe me. It very nearly ruined my whole life.

In my mind I am sure I will have another segregated account stolen so at least I am going to be covered to some degree by some insurance. It will take time to get FDIC or SIPC reimbursements but they will come. I don't believe the insurance for the industry will ever happen. I would love to start a new exchange and try to run the CBOT/MERC out of business but I think that is impossible.

There is one other thing you can do but it will make your life very hectic and it will also become very expensive. You can keep very small balances and constantly wire money in and out of your account to meet margin calls. At $25 or more per wire this will wind up adding up to a lot of money over time but it may be worth it to save your financial life. The problem is that if you are ever are going to be a big time trader you have to have a decent sized account to support your trades. I can't trade the way I know to, doing this type of thing.


I get questions every day on things and I don't mind them at all since I love talking with people and also when people are paying you for things they have a right to have access. However, here is something I do not have the time or desire to do. I am not going to explain every trade. We are now up over $5000 of profit this month in the swing trades so for $100 I know of no deal anywhere on the web that comes even close to that. We have not been perfect we have had some crappy trades and we had a great short in Crude that was exited today. Keep in mind if you have been reading here for a long time some of the things I have written.

If we see Silver and Gold and stocks correlating like they are now we are not going to short all 3 that is tripling the risk in the exact same trade. We will try to select the one we think is the weakest if we are shorting or the strongest if we are buying. Crude was the weakest of all of them to us so that is what we shorted and it worked like a gem.

If we don't have a trade in a market that does not mean we don't have a view on that market. We are being responsible about not giving a huge number of trades for everyone to go hog wild. That is not how I trade and it is not how we will do the services. I am more than willing to give an opinion on a market we are not in if someone wishes to ask. Trading is about grinding it out and that is what we are doing. If we made this level of profit every month for a year I would be thrilled to say we made $60k on a one contract basis for this low fee. I do not know where we will wind up but I do know that I am giving my maximum effort.

The Bond System had another huge winner today so it keeps rolling along.


I am going to start using twitter my name is on the upper left hand part of the page so if you wish to follow me please do so. I may be busy so I can't sit there all day long and play but will try to be prompt and twit things I think are valuable.

I don't have much in the way of market insights today I thought it was important to cover this area once I saw the CFTC story come out today. I think we are in the bounce zone here in most places then we can look for another short term selling spot.

Good Trading


Anonymous said...

Do you have any idea about this proposal? Don't know if there's any updates on this stuff. It should better protect against frauds.



John M said...

One more quick question, Chris. I signed up for the monthly newsletter a few weeks back and confirmed, but haven't received anything yet.

Just checking in case there's a problem. Thanks.

Daniel said...

Hi Chris,

Good day.

Just read your article today regarding the new regulations of the CFTC and your two preferred brokers, where you felt the most safest with your money..
Choosing the right broker is indeed crucial and I believe I got better advice from your blog compared to the numerous broker reviews I've read.

Currently I am using Global Futures & Forex, Ltd or GFT as a broker and would like to hear your opinion about them? What do you think of market makers as a broker?

Nice call in shorting oil, it was a very good trade. Did not expect the target to be hit so soon.

More power!

Chris Johnston said...


The risk with market makers is what we saw with Knight Capital they are potentially a 30 minute window away from being out of business due to HFT. What we have seen is companies when they get under duress go take client money to survive. I will not have any of my money at any place that does not have a sweep into an insured account ever again.

In the case of Knight they did not dip into seg money when they got into trouble but I think there was likely a back door deal sponsored by the government due to MF and PFG. They did not want a third one that quickly following the other two. Who knows what would have happened had MF and PFG not happened when Knight got into trouble. I am not familiar with your firm so you might want to find out where the funds are held. If they are at the Merc that would be better than if they are in company seg accounts.

John I will check but I think you are on the list it should be automatic when you confirm with Aweber. You probably just came in after the last one went out and there is not an automatic send after the initial date of release. It just defers to the next one.

As far as forex, they need to make that segregated money not company money. I don't know why anyone would trade Forex with it's status being what it is. A company can just take it basically. Perhaps the judge in PFG will set a precedent for a different outcome we will have to see what happens there.

There are people like the CCC trying to influence things but they are just going to be ignored most likely. I don't think in the end the CFTC really wants to protect the money otherwise the draft for new rules would be completely different.

John M said...

Thanks, Chris.