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« GOLDMONEY: Physical Gold or Paper Gold? | Main | The US Government Is Bankrupt »
Friday
Jan132012

Who Really Owns Your Gold Stocks? 

Jim Sinclair

The following is a missive that we received from Jim Sinclair this morning, who is the host of a web site called Jim Sinclair's MineSet

He sums up the situation much better than we can so its well worth the time spent on reading what he has to say. The above link will take to his site and his updates via email are free, so you have nothing to lose by signing up for them.

Dear CIGAs,

Please do not sleep on my dear friends. If you do nothing, you may very well have nothing in the end.

If you do not want to get it in the end you will have to act now on what I have already told you. The material contained in here concerning the system and market events is correct, even though it proposes its own solution. I should know. I have owned brokerage and clearing houses.

The answer lies, in my opinion, in going to direct registration at the transfer agent and out of the clearing agent and ultimately, where possible, to paper certificates. If the company you are invested in does not participate in direct registration and also does not issue paper certificates, raise hell with them.

Who Really Owns Your Gold Stocks? 
Jeff Berwick 
Published 1/11/2012

Do you own gold and silver mining stocks?  Or any stocks for that matter?  Even if you say, "yes", chances are you don’t really own them.

It is one of the dirtiest little secrets in the brokerage business.  And 99.9% of people have no idea it is even being done to them.  It’s called "street name registration" and it’s how the brokerage where you hold your stocks "registers" your shares.  To save money and time, and to allow your shares to be included as assets that they can use to do what they want with, your brokerage never actually registers you as an owner of the shares.

Street name registration allows your broker to lend your shares to short sellers, thereby driving down the price of your own stocks. Additionally, this method allows your broker to “re-hypothecate” your assets–meaning it allows your broker to borrow money against your shares and speculate in the derivatives market.

These hidden risks are planting the seeds of tomorrow’s ultimate collapse – In which there may be a system-wide collapse of broker dealers, taking down millions of investors, and ensuring permanent non-recoverable losses to an entire generation!

MF Global Was Just the First to Go Down

MF Global investors found out first hand just how secure their funds were.  Most don’t realize it, but MF Global was a clearing house for both stocks and futures.  Like many/most brokerages, they "invest" their own funds, often on a highly leveraged basis, to earn income.  But, with the recent collapse of Greek government bonds and with MF Global’s highly leveraged position in them, MF Global was bankrupted in an instant.

The problem is, they tried to cover their losses with their customer’s own funds. You see, unless your shares are registered in your own name – a process that isn’t that difficult or costly – your brokerage considers it as assets they can use for their own needs.

Plus, once a brokerage goes bankrupt (which is something we expect to happen very often over the coming years) if you hadn’t personally registered your shares then your shares go down as assets of the brokerage and are used to pay off their creditors.

“Several million private accounts may vanish – brokerage accounts, pension funds, mutual funds, they’re all at risk. We are getting into the middle stages of implosion, where I believe the public will not wake up until at least one million private accounts are stolen, and completely vanish.”  – Jim Willie, The Hat Trick Letter

The Western Financial System Is In A State Of Collapse

The reason for this coming broker-dealer crisis is simple. The entire western financial system is built on debt – it’s an anti-capitalist system set-up to make the rich richer and the poor poorer. It started in 1913 with the founding of the Federal Reserve, it went further down the slippery slope with gold confiscation in the US in 1933 and reached the beginning of the end in 1971 with Nixon closing the gold window, turning the US dollar (officially called the Federal Reserve Note) into a completely fiat currency.

In more recent times, it was the repeal of the Glass-Steagel act that allowed investment banks to acquire broker-dealers, and pass the risks of 100-1 leverage downstream to all client accounts. Therefore, your stock investments are now only as safe as the speculative portfolio of your broker-dealer. Considering most Western Investment Houses are leveraged at least 40-1, this means your stocks are no safer than a 40-1 bet on European bonds (with which most western investment banks are leveraged to the teeth).

Some believe their stocks will be protected by the Securities Investor Protection Corporation (SIPC), which insures stocks accounts from broker collapse up to $500k for securities, and account cash balances up to $250k. But what if you have more than $250k in cash and/or more than $500k of securities in your account? What if one of the largest broker dealers in the country went bust, bringing down thousands of accounts and depleting the entire reserves of the SIPC? What if the SIPC itself goes bankrupt? What few people are aware of, is that the SIPC only carries about $1 billion in funds to cover investors! This means only one or two high profile broker dealer bankruptcies will be enough to completely wipe out the SIPC.

Some may claim the US government will bail out the SIPC to whatever extent needed. But what if two major broker dealers went bust while at the same time the US government suffers a major Treasury bond auction failure? This is all but a certainty in the coming years.

And the same thing applies in Canada to Canadian brokerages and Canadian stocks. The Canadian economy is intricately tied to the US. In fact, not many people are aware, but all that backs the Canadian dollar is the US dollar. The Canadian Government sold all its gold decades ago.

The entire monetary & financial system is headed for its final destination – total collapse… and 2008 was just the beginning.

“If you were lucky enough not to be a customer of MF Global … then you should view the MFG episode as a warning shot. You might not get another warning shot.” -Steven Saville, The Speculative Investor

One Last Bubble?

But, we’ve been predicting there are still a few more years left… not 10. But maybe two to three more years… or a little more. We believe the Federal Reserve and all western central banks will print enough money to get the system through for another few years… just enough for them to get out of office and retired to their Caribbean island villas before all the western fiat currencies enter hyperinflation.

And, we believe this will create one final bubble. The tech bubble is dead. The housing bubble is dead. And the bubble in government debt is in its death throes. What will be the final bubble?  It will be in gold and silver mining stocks.

But the question remains — how can we safely invest in gold and silver mining shares and avoid the collapse brought on by the coming broker dealer crisis?

There are two methods of owning stocks your broker-dealer will never tell you about.  These two methods completely remove the broker dealer counter party risk attached to your shares – effectively removing them from “the system.”

These two methods deprive your broker dealer the abilities to sell your stocks short and to “re-hypothecate” them. Your broker dealer will never willingly tell you about these methods – because they make more money when your shares are in their hands – precisely where risks are greatest to you.

These methods are so safe, that even if your broker dealer collapsed tomorrow, and stole every penny from every client investment account you would be able to sleep safe and sound, knowing your stocks are far out of reach, and legally unavailable to access by your broker-dealer.

This means everyone – all brokers in the Unites States and Canada. If every broker collapsed tomorrow due to waves of bankruptcies, these ownership methods will protect you 100%. You will be able to sleep safe and sound at night, knowing your shares are carrying zero counter party risk.

To read the article in full please click here.

Regarding www.skoptionstrading.com. Our portfolio has now generated a profit of 399.82% since inception and we hope to keep it going that way in 2012.

Please be aware that discussions are taking place regarding an increase in the price for this service for new members, so if you are thinking about joining us, then do it sooner rather later in order to avoid this additional expense.

Our model portfolio is up 399.82% since inception

An annualized return of 93.60%

Average return per trade of 36.33%

94 completed trades, 86 closed at a profit

A success rate of 91.48%

Average trade open for 50.61days

So, the question is: Are you going to make the decision to join us today?

Also many thanks to those of you who have already joined us and for the very kind words  that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. Winners of the GoldDrivers Stock Picking Competition 2007  

For those readers who are also interested in the silver bull market that is currently unfolding, you may want to subscribe to our  Free Silver Prices Newsletter.

For those readers who are also interested in the nuclear power sector you may want to subscribe to our Free Uranium Stocks Newsletter, just click here. 

 

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Reader Comments (2)

How can people protect themselves if the equities they own are in IRA's? Looks like all of that money is going to get flushed!

January 19, 2012 | Unregistered Commenterfoggygoggles

Bob,

Mr. Jim Sinclair always emphasizes on taking delivery. If I buy the bullion through a bank (discount brokerage), I'll take delivery too. There is a fee though. My question is how easy is it to sell when gold is close to the top? Also, who would give a better price? Can you discuss this too?

Thanks.

January 19, 2012 | Unregistered Commentere

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