Post-Thanksgiving Thoughts on the Future of US Futures and Markets

I'm reflecting on the state of American markets after Thanksgiving, and not sure I like what I see. The MF Global meltdown and closing down of Barnhardt Capital Management are two major events that show eroding confidence in the US (and probably global) financial system. The only collateral that financial paper assets (which include futures and options contracts) have are the public's confidence in those assets.

These two events may be key turning points looking back on this time in American financial and political history. Unfortunately, the government and politicians are joined at the hip with big business and US financial markets; and there's no such thing as truly free markets anywhere in the world. Central banks and financial regulators are constantly intervening to prop up (or knock down) certain markets to benefit their contributors, boost or dampen confidence in specific markets.

The MF Global event may be a combination of an unexpected "Black Swan" event (name of the Nassim Taleb book) and a modern-day canary in the coal mine. I don't know many financially-astute people who were concerned about the solvency and legitimacy of US futures and options markets before now. Right now, anyone who trades futures and options should make damn sure the company they trade through is financially sound and solvent.

If this has been happening at MF Global, who's to say that it hasn't been (or isn't happening) at other commodity brokerages? If so, how safe are your funds and positions?

As I'm thinking out loud, US and EU government officials may have ran out of suckers to buy their Euro-trash debt. In order to fill the gap, the Federal Reserve could either print money out of thin air - or, they could find the most liquid markets and source of funds on the planet, such as commodity brokerage firms.

If (more likely when) Greece is officially declared bankrupt, and the Euro and EU can no longer be functioning, long-term entities, this will probably set off a daisy-chain of financial events - and they won't be good ones. Almost the entire world is leveraged to the hilt with debt at the government, corporate and household levels.

Trying to borrow and spend your way to prosperity and freedom is like trying to drink yourself sober - it's impossible. The biggest financial hangover in the history of the world is descending upon us, and there's no avoiding it. No more financial Bloody Marys or "hairs of the dog" to avoid the pain.

I want to envision a positive future financial scenario, but I'm having a difficult time doing so. This massive amount of debt will have to be resolved either through repayment or default (probably more of the latter), and in America we won't see the easy or profligate use of credit for a long, long time - probably for decades.

Residential real estate has a few strong headwinds: 1) A sluggish economy, which doesn't appear to be coming back for awhile, 2) Tightening of credit standards, and lending to home-owners, and 3) Issues with determining title, generally due to MERS - which allowed transfer of a mortgage without having to pay transfer taxes and fees to cities and counties.

What's the bright side of this current recession/depression? It's that most of the knuckleheads in business are being flushed out, and the better business owners are staying put. The cream is rising to the top, and the fools are being dealt with. Common sense and good financial values are (hopefully) returning to America, and people are re-gaining their senses from the days of day-trading dot.com stocks, and flipping houses.

It's a painful lesson to learn, but one that our country has had coming for a long, long time. Unfortunately, it's time to pay the piper and endure the pain; but we could see a nice rainbow after all this rain - that's my hope for the U S of A.