Saturday, December 10, 2011

Q&A With The Doc: Who the HELL Can We Trust as a Broker!?!

Mark writes:

I just came across your website today as a reference regarding an
article about the "re-hypothecation" of assets by the on-line brokerages; SCHWABB, ETRADE, FIDELITY, etc.
My first question is: Who in the HELL can we trust for use as a broker? Any recommendations, or is having just a "cash" account safe?
Second Question: I have been trying to "donate" to you site but the "DONATE' button doesn't take me to a page to contribute! I think it is broken. I would like to contribute if possible.
Thanks for all your work!

Excellent question.  If you haven't already, please read this article by Jim Willie , as well as listen to this interview by Jim Sinclair .  As Sinclair says, the system is broken.
Every securities broker I have researched this week states in their fine print that they rehypothecate your margin collateral. This means that they use it to back up their own risky trades in the derivatives market.  Thanks to the new bankruptcy legislation passed by Congress in 2005, credit default swap holders are SENIOR to all other creditors, even bond holders and senior even to brokerage customers whose assets the brokerage rehypothecated to purchase the derivative.
This means that in the event of a bankruptcy/ failure of your bank or brokerage, the counter party to the derivatives your bank/brokerage rehypothecated your funds with will seize your assets as your broker's collateral- as per bankruptcy law, they hold senior status. This is what we saw with JP Morgan seizing MF Global clients' assets within 30 minutes of MF Global's bankruptcy.  Look for this to happen to every single Bank of America savings/checking account holder when BOA finally blows due to $50 billion in bad Merrill Lynch derivatives.
I have received numerous reports from readers that their 401k, IRA, and even general savings accounts allow the rehypothecation of their assets in the fine print. 
As far as whether your personal bank/ brokerage has rehypothecated your assets, I would start by pulling up the online version of your account agreement at your bank/ securities brokerage, and do a document search (control + F) for the word hypothecate. 
Personally, it appears to be time to get the heck out of Dodge.  I am working on extracting the 8% or so of my assets that remain in paper mining shares into physical metal.  Trust in the clearing system is evaporating, and once confidence is broken, the system will continue to rapidly implode.  MF Global had over 140,000 clients whose assets were stolen.  Do you think these 140,000 investors will be opening any new paper brokerage accounts in the near future?  No, they will be holding cash and the smarter ones will be going to PHYZZ.
Ultimately, as Jim Sinclair has recommended, you need to be YOUR OWN CLEARING HOUSE AND YOUR OWN CENTRAL BANK.  This means holding your own physical gold and silver in your own personal possession.

To answer your second question, we have had reports that the Donate button sometimes does not work with certain browsers when viewing the site using  It should work fine when viewing through .  If not, The Doc's email address is , the donate button simply takes you to the paypal donate page with already populated. Here's a direct link:

Or you can simply use and type in

Hope this helps, ultimately you need to take the necessary steps to protect yourself and your loved ones from the coming complete collapse of the system.