Your peace of mind: What your banker (probably) has not bothered to tell you
Summary
We are not going to bore you with iteration 3,556 about our view of Dr. Obama's victory, except to say: here is the American genius at work. If you work hard and believe, America (and Hong Kong!) allow you to realize your dream. We already have passed our newest book to Dr. Obama's key Asia advisers, and hope that it will contribute to making a difference by stemming the rise in protectionism.
I am surprised in my talks with perfectly intelligent people how little their bankers tell them how to protect their money. So I will be the Boy Scout and do this work for you. What I am sharing is in no way comprehensive or binding, but I am trying to build a circumference of ignorance for you so that when you go to your banker, you will confront him/her knowing what you don't know. In America we called this "asking the right questions." Under von Hayek I learned that you have to question assumptions. You can ask the right question only when you know what you don't know. That is what I have dubbed the "circumference of ignorance". Do you have one when it comes to the safety of your hard-earned money at the bank? Mine is tiny and growing...
Here is a sketch - not a portrait - of a circumference of ignorance...
Topics Covered
- What is the riskiest investment of them all?
- What about other instruments lodged with your bank?
- How about stock lending?
- How to save money off these ideas
Background
1. What is the riskiest investment of them all?
Your time deposits held at your bank.
We have told you why before, so review this for your own peace of mind.
2. What about other instruments lodged with your bank?
There are two issues here.
First, do you still retain title to your stocks, bonds and other instruments ("instruments"). You should do so, but check what happens if the liquidator moves in: can he freeze your assets until he has sorted everything out?
Crucially, next to ownership there is the issue of access: how quickly can you grab your instruments? Normally: immediately. But, what if the liquidator decides to freeze all matters until he has understood the bank's situation? You may be stuck in the unenviable position of owning the instruments, but not having access to them.
Oh, and I nearly forgot: if the liquidator freezes access, he can do so for all income streams derived from such instruments, e.g. your dividend and dividend income. How long? How long is a piece of string?
3. What about stock lending?
No doubt your bank is using your stocks and bonds to lend to the boys in the shorting department.
Beware! If they are doing this, the bank, not you, owns these instruments while they are on loan!
4. How to Save Money Off This Idea
1. Always consult your financial adviser first.
2. We have given you some ideas already. Click for some more here. Good luck: this is time for fear, not greed!
