Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Reverse REPO Market Brewing Financial Crisis Black Swan Danger - 29th Jul 21
Next Time You See "4 Times as Many Stock Market Bulls as There Are Bears," Remember This - 29th Jul 21
USDX: More Sideways Trading Ahead? - 29th Jul 21
WEALTH INEQUALITY WASN'T BY HAPPENSTANCE! - 29th Jul 21
Waiting On Silver - 29th Jul 21
Showdown: Paper vs. Physical Markets - 29th Jul 21
New set of Priorities needed for Unstoppable Global Warming - 29th Jul 21
The US Dollar is the Driver of the Gold & Silver Sectors - 28th Jul 21
Fed: Murderer of Markets and the Middle Class - 28th Jul 21
Gold And Silver – Which Will Have An Explosive Price Rally And Which Will Have A Sustained One? - 28th Jul 21
I Guess The Stock Market Does Not Fear Covid - So Should You? - 28th Jul 21
Eight Do’s and Don’ts For Options Traders - 28th Jul 21
Chasing Value in Unloved by Markets Small Cap Biotech Stocks for the Long-run - 27th Jul 21
Inflation Pressures Persist Despite Biden Propaganda - 27th Jul 21
Gold Investors Wavering - 27th Jul 21
Bogdance - How Binance Scams Futures Traders With Fake Bitcoin Prices to Run Limits and Margin Calls - 27th Jul 21
SPX Going for the Major Stock Market Top? - 27th Jul 21
What Is HND and How It Will Help Your Career Growth? - 27th Jul 21
5 Mobile Apps Day Traders Should Know About - 27th Jul 21
Global Stock Market Investing: Here's the Message of Consumer "Overconfidence" - 25th Jul 21
Gold’s Behavior in Various Parallel Inflation Universes - 25th Jul 21
Indian Delta Variant INFECTED! How infectious, Deadly, Do Vaccines Work? Avoid the PCR Test? - 25th Jul 21
Bitcoin Stock to Flow Model to Infinity and Beyond Price Forecasts - 25th Jul 21
Bitcoin Black Swan - GOOGLE! - 24th Jul 21
Stock Market Stalling Signs? Taking a Look Under the Hood of US Equities - 24th Jul 21
Biden’s Dangerous Inflation Denials - 24th Jul 21
How does CFD trading work - 24th Jul 21
Junior Gold Miners: New Yearly Lows! Will We See a Further Drop? - 23rd Jul 21
Best Forex Strategy for Consistent Profits - 23rd Jul 21
Popular Forex Brokers That You Might Want to Check Out - 22nd Jul 21
Bitcoin Black Swan - Will Crypto Currencies Get Banned? - 22nd Jul 21
Bitcoin Price Enters Stage #4 Excess Phase Peak Breakdown – Where To Next? - 22nd Jul 21
Powell Gave Congress Dovish Signs. Will It Help Gold Price? - 22nd Jul 21
What’s Next For Gold Is Always About The US Dollar - 22nd Jul 21
URGENT! ALL Windows 10 Users Must Do this NOW! Windows Image Backup Before it is Too Late! - 22nd Jul 21
Bitcoin Price CRASH, How to SELL BTC at $40k! Real Analysis vs Shill Coin Pumper's and Clueless Newbs - 21st Jul 21
Emotional Stock Traders React To Recent Market Rotation – Are You Ready For What’s Next? - 21st Jul 21
Killing Driveway Weeds FAST with a Pressure Washer - 8 months Later - Did it work?- Block Paving Weeds - 21st Jul 21
Post-Covid Stimulus Payouts & The US Fed Push Global Investors Deeper Into US Value Bubble - 21st Jul 21
What is Social Trading - 21st Jul 21
Would Transparency Help Crypto? - 21st Jul 21
AI Predicts US Tech Stocks Price Valuations Three Years Ahead (ASVF) - 20th Jul 21
Gold Asks: Has Inflation Already Peaked? - 20th Jul 21
FREE PASS to Analysis and Trend forecasts of 50+ Global Markets by Elliott Wave International - 20th Jul 21
Nissan to Create 1000s of jobs with electric vehicle investment in UK - 20th Jul 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Depositors Require More Secure Financial Institutions

Personal_Finance / Savings Accounts Jul 29, 2008 - 12:23 PM GMT

By: Paul_Lamont

Personal_Finance Best Financial Markets Analysis ArticleAs we referenced last April , it is very important in a deleveraging environment to hold your U.S. Treasury Bills at a secure financial institution. Calling brokers and reps up and asking them if your funds are safe at their institution is like asking the fox if the chickens he is guarding are safe. What do you expect them to say? Since we are independent and only work for our clients, we have been diligently researching the different types of asset custodians. Here is what we found:


***We caution that this is not legal advice, so please consult your own legal representative and your own account agreement.***

Trust Company - According to the American Bankers Association : “Assets held in custodial accounts in the trust department of a bank do not become assets of the bank and are segregated from the bank's assets.” More importantly, “Account ownership in the assets remains vested in the individuals or entities for whose benefit the bank is acting as custodian and the assets are not subject to the claims of creditors.” The FDIC has confirmed this. Since this is the strongest claim of ownership, retirement and high net worth accounts are held in custody accounts at a Trust Company when you open a LTA U.S. Treasury Bill Account.

Brokerage Firm – A conservative brokerage firm is the next step down in ownership claim. Only two brokerages in the country have made it through our selection process (the third we had to pull accounts from due to a merger). Why is this even a concern? Securities held at a brokerage firm are in ‘street name.' This means they are registered under the name of the brokerage at the DTC, the system-wide clearing company. Brokerages then record on their books that they hold securities for the ‘benefit of the owner' held at the DTC. What an individual client of a brokerage firm really owns is a percentage of the securities held in the client pool. This is not full ownership. If an investor has a margin account, the brokerage company may lend out those securities. (Even if you do not, but the brokerage firm promotes margin accounts, securities lending could diminish the client pool in a systemic crisis.) Also highly leveraged client bets may create losses that affect the entire client pool, as happened in the failure of MJK Clearing . So in our view, accounts held at Wall Street investment banks and brokerage firms that deal with leveraged players are not secure. When presented with the evidence, most folks would prefer to deal with only highly rated financially stable brokerage firms.

Bank – Frankly, we do not want to be depositors or creditors at any bank. Banks are even wary of lending to other banks. Instead, cash can be held at more secure institutions. Debit card and check writing capabilities can also be obtained at institutions less likely to be ‘bailed' out by the government. As John Bovenzi, the FDIC's chief operating officer, recently stated: IndyMac bank “is as safe and as sound as any bank in the country right now.” (Cough.) As we discussed two months ago , comparing bank stock prices is the best determinant of financial health if you have to have a bank account. While stock prices can change, perceptions do create reality.

Worst Case Scenarios

We will continue to search for higher ground during this seventy year flood. If you have read our past reports , you know that we try to stay out ahead of the herd. But we also have to admit, that while we are doing everything we can, something may happen that we cannot stay ahead of. This credit crisis is one for the history books. Funds may be unavailable for extended periods of time. So with that, we give you the worst case scenarios:

Trust Company

“Since assets held in trust, fiduciary and custodial accounts do not become assets of the bank (title is held by the account's owner(s)), it follows that none of this property is subject to the claims of the bank's creditors. As a result, a failure of a bank will have no adverse effect. In the event that a bank with trust, fiduciary or custodial powers fails, the FDIC will seek to transfer responsibility for administration of the accounts to a successor trust institution as quickly as possible. Provided this effort is successful, the account beneficiaries would need to either accept this new arrangement or make provisions with the successor bank for alternative arrangements. Therefore, the safety of trust, fiduciary and custodial assets is not dependent upon whether the bank has assets greater than its liabilities. Property held in these accounts belongs to the owner(s) of the accounts and would be unaffected by a bank failure.” - American Bankers Association

Brokerage Firm

“When a brokerage firm is closed due to bankruptcy or other financial difficulties and customer assets are missing, SIPC steps in as quickly as possible and, within certain limits, works to return customers' cash, stock and other securities. Without SIPC, investors at financially troubled brokerage firms might lose their securities or money forever or wait for years while their assets are tied up in court. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non-negotiable securities - such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash.” - SIPC

Bank

“Since deposit account assets become assets of the bank, it follows that the depositor would become a creditor in the event a bank failed. However, the FDIC insures depositors for up to $100,000 per individual per bank.” - American Bankers Association

Over-the-limit depositors are at the mercy of the FDIC.

What's Next

We have had quite a move down in the major stock indices over the last two months. We wouldn't be surprised if we corrected upwards or for a few weeks. This would set up the major down wave for the fall. We hope you are able to secure your funds. If you would like assistance, please contact us . Expect Friday afternoons to get more exciting, as that is when the FDIC historically announces bank failures. The fire sale forecast last October continues .

We are conducting a quick survey to better understand our current online readership. This will allow us to improve The Investment Analysis Report. We appreciate any feedback.

By Paul Lamont
www.LTAdvisors.net

At Lamont Trading Advisors, we provide wealth preservation strategies for our clients. For more information, contact us . Our monthly Investment Analysis Report requires a subscription fee of $40 a month. Current subscribers are allowed to freely distribute this report with proper attribution.

***No graph, chart, formula or other device offered can in and of itself be used to make trading decisions.

Copyright © 2008Lamont Trading Advisors, Inc. Paul J. Lamont is President of Lamont Trading Advisors, Inc., a registered investment advisor in the State of Alabama . Persons in states outside of Alabama should be aware that we are relying on de minimis contact rules within their respective home state. For more information about our firm, or to receive a copy of our disclosure form ADV, please email us at advrequest@ltadvisors.net, or call (256) 850-4161.

Paul Lamont Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in