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October 10, 2005

Refco in trouble, Mon., Oct. 10, 2005, 1:05 PM

Never in good times, always in bad times. That seems to be the repeating story of the collapses of trading-based financial services companies.

People get offside. They decide to cheat. There are ineffective checks and balances in the internal management accounting and control systems, including lack of independence and objectivity in the board of directors. And next thing you know... bang!

Before I get into the sad case of Refco (NYSE: RFX), please read my story of another commodities and futures trader by clicking on the topbar tab for Futures".

You see, these stories are all too frequent.

My experience is based on that story back in the 1980s to the one that just happened in the past month, which is the infamous Bayou hedge fund collapse.

You see, I had been pegged by a reputable group of NYC investment bankers who dealt with Bayou to head up their new combined offshore operations as CEO. Yes, I went to New York, and then to Stamford, and yes I met the principals, sat in their boardrooms and trading room, and prepared myself for a contract that, luckily, never came. The registration application was pulled a few weeks before its likely approval.

And thankfully, I have no knowledge as to how that situation collapsed. But, just like my futures trading associate from 20 years ago, and Refco today, you have to be aware that when markets trade in the extreme, and senior executives are pushed in the extreme to out-perform, there will be collapses.

Refco shareholders today are feeling the effects of just that kind of situation. I'll leave it to readers to check the news stories. I'll pass because I've been around long enough to know that the media never gets it right initially in these reports. It usually takes a while for the truth to come out.

But, isn't that usually the case?

Refco (RFX) trading today:

Posted by Posted by Bill Cara on October 10, 2005 01:08:01 PM | Category: 40 Financials , Cara Today in the Market , Commodities

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