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December 19, 2011 – Comments (6)

I'm finding the whole MF Global story interesting, especially how money from people's accounts was transferred to MF's trading accounts against rules.

I've simply always been concerned about brokerage accounts and what's really protecting your interests there?  Rules that if not followed totally screw you?

I've also expressed huge concern over derivatives, as the Buffet quote that lives on my Making Sense of My World blog says:  "Derivatives" are "financial weapons of mass destruction."

MF Global is but one victim of derivatives blowing up, but what is interesting to me is people are suggesting that this is putting so much more at risk, whereas I'd suggest the risk was already there.  

Our financial system is at risk of a domino effect of financial disasters from things that have been allowed without fully understanding the consequences.

6 Comments – Post Your Own

#1) On December 19, 2011 at 4:19 PM, Jbay76 (< 20) wrote:

In many cases in the USA, individual's investment accounts managed by a brockerge firm is protected by the SPIC, the investment version of the FDIC protection, FWIW...

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#2) On December 19, 2011 at 4:53 PM, dwot (67.78) wrote:

Ok, I did not like what I was finding when I did research on them in Canada.

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#3) On December 19, 2011 at 5:58 PM, Frankydontfailme (27.34) wrote:

You can always directly register your shares (take physical ownership of the certificate): http://www.jsmineset.com/2011/12/03/direct-registration-faq/

I'm not so sure how liquid this would be though. 

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#4) On December 20, 2011 at 12:38 PM, rfaramir (29.37) wrote:

"Interesting" is quite the understatement. "Rude awakening" is more like it.

http://www.zerohedge.com/news/gold-rehypotecation-unwind-begins-hsbc-sues-mf-global-over-disputed-ownership-physical-gold

Rehypothecation looks, to me, like the same kind of fraud that fractional-reserve banking is. Physical possession of a certificate of ownership is no protection. Physical possession of the actual property is the only protection, and then, only as far as you can physically protect it from robbers (including agents of the State).

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#5) On December 20, 2011 at 1:47 PM, amassafortune (29.45) wrote:

As Yossarian said, "They have a right to do anything that you can't stop them from doing." 

If segregated customer account balances are no longer safe, then safety deposit box contents (not FDIC insured) are no longer safe.

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#6) On December 20, 2011 at 4:25 PM, leohaas (32.77) wrote:

It certainly is cause for concern. Being able to do business is very much at the core of our capitalist society. And trust is at the very core of doing business. Without trust, the whole system collapses. Even if you have stuff in physical possession.

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