Once More, With Urgency
January 2, 2012 in Finance
I’ve written this article before.
This time, I write it with great urgency.
A few weeks ago, I told you about a broker, Ann Barnhardt of Barnhardt Capital Management, Inc, who closed her business because she said she would no longer put her clients’ assets at risk because, as a result of MF Global’s practices, she could no longer trust those people who were managing the funds.
I realize now that I may not have been as clear as I needed to be because I didn’t completely understand what happened at MF Global. This article is my attempt to try again.
MF Global managed investment funds until they went bankrupt.
The rules state that, during a bankruptcy, financial brokers are supposed to keep clients’ funds segregated from their business funds.
Yeah, MF Global didn’t do this.
When I wrote a few weeks ago, I didn’t have the specific information I have today. Here is what they did.
They took their clients’ funds and used them to pay their debts to JP Morgan.
I’ll say that again.
MF Global took client funds, which are supposed to be segregated and, by law, untouchable, and used them to pay business debts. That is like a bank raiding your safe-deposit box to pay its electric bill. The details are laid out for you in this well-written article.
Once again, I have some advice for you. Before I give the advice, let me put my disclaimer in here: I’m not a CPA or attorney or financial advisor. I have provided tax and accounting services for more than twenty years. At one time, I was licensed as an insurance agent and securities representative. However, I have none of those credentials today. I’m just a consultant, a researcher, and a writer with lots of life experience.
With that out of the way, here is my advice.
I am begging you.
If you have money in the market, find a way to pull it out and gain control of it. Put it into a real asset that you can touch. Whether that is real estate, gold, silver, or something else of value to you (like a home for your adult child), determine what it is and use your money for that.
I believe the next financial crisis is just around the corner and if you don’t do this, you may lose that money.
Granted, the next financial collapse may not hit your bank or brokerage house and you may be OK.
However, you have no guarantee that the next financial collapse won’t be your bank or brokerage house. In addition, in spite of all the promises made to you, you have no guarantee that your bank or brokerage house will follow the rules and not use your money to pay its debts in the midst of a financial challenge.
When you pull your money out of the market, you may need to deposit large amounts of cash somewhere. If you do, limit it to $250,000 per FDIC or NCUA insured institution. That offers some protection although, in my opinion, even that isn’t guaranteed.
This sounds like it isn’t peaceful. It sounds like I’m in a panic.
I’ve acquired knowledge that tells me that if you want to keep the money you have, this is the time to act if you haven’t acted already. Of course, even your best laid plans may not allow you to keep it.
I’ll tell you why tomorrow.
In two days, I’ll give you the peaceful response.