On steve's newsletter he suggested that getting money back from
the brokers might be difficult if we do the shorting of etf or the
highly leveraged short etfs. What was that about? What
caused Steve the concern that we might not get the money back?
thanx to all who have responded on the board and PMs.
I personally think we are due for a big drop but perhaps not
right away. I am currently thinking we will pull back and
then continue up into next summer and then it will be the big
drop. Possibly due to Fed printing press + the White House's
willingness to sacrifice the dollar and balance sheet to keep the
appearance of prosperity going until they get nationalized
healthcare, cap and trade, union check etc. After they get
all their devastating programs in place they can then let
everthing go to hell.
And when it goes it should be a doo-esy. I was hoping to
be able to use the short ETFs to catch what I think will be a
monster ride down. But if not short ETFs - then what? I
know steve will be addressing this in upcoming emails, and I look
forward to what he has to say. But I thought I would through
out an idea to get the discussion going...
1. Buying puts - buying puts would presumably have
counterparty risk too, but would it be as much as short ETFs.
if you buy a put and the market tanks (perhaps due to failing
banks) you would then sell the put to someone else - perhaps by
that time the failing counterparties would have already failed.
2. Selling calls - If the market corrects here and you buy
divident paying stocks that run up into end of summer as I
suggested above then instead of selling the stock, you sell deep in
the money calls to get your principal back. then you have
cash to take out of your account or convert to
gold. If the big three wave occurs the option is
worthless and you keep the stock and the dividends.
You can sell calls again and again until you get your principal
back if you didn't the first time. This might not have as big
a problem with counterparty risk because you have the cash in hand
and if the other party fails you keep the stock.
3. GoldMoney.com - If banks start going belly up, would
this be possible alternative to grow the money (in gold) while
keeping it safer. They offer delivery of gold, silver and
platinum now too so if you want to hold it yourself, you can.
4. Any long stocks that we own (possibly for income), how
can we protect them? My understanding is that we can't get
certificates anymore. Would registering them in our name as
opposed to street name help?
5. I've already cashed in one of my IRAs December 2008 and
paid the penalty in order to get the stock certificates and avoid
Obama's future tax rates. Waiting to see outcome of 2010
election before deciding whether to cash in the wife's IRA.
Posted by dallassteve on 2nd of Nov 2009 at 12:23 pm
Steve, thanks for thinking about what brokers will do if we have
a really severe decline. I look forward to your ideas.
I am even contemplating liquidating my IRAs at some point and
paying the penalty. Too extreme?
I was glad to read your post, bgrateful4.
I have been doing exactly the same thing, and have
communicated in PMs on this blog, but thought this was kind of off
topic. Maybe it will become more important if the economic
landscape changes.
I am a small fish, but I have three brokerage companies, and I
have one third of my assets in physical gold and silver. I
want to add more if we get a pullback in gold.
WOW, 1/3 of you assets in Gold! That's a lot but man you
have been right over the past years. I read an article once
that I thought was somewhat apropo which said have about 3% of your
net worth in gold or like physical asset (silver, tin,
copper). I would even argue that 1% could be enough because
if the world got to the point where we were shaving our gold bars
down to pay for things, the value of gold would be 100-300 times
today's value. The rise would be uncharted because think of
what happened in the meantime - the world would have
collapsed. Which then you can argue the most valuable assets
would be food, shelter, water. Anyway I dropped my crystal
ball a few years back so I cannot be of any further assistance.
Posted by harveyrb708 on 2nd of Nov 2009 at 11:47 am
One potential scenario might be that the broker's clients
talking the long side of the market might not deposit funds to pay
for the buy order, thus causing balance sheet distress for the
broker who in turn might pass this on to the short ETF buyer.
In today's environment this does not seem impossible.
he's talking about if we're in wave P3 down and the market
really tanks and the banks are in trouble and the economy is
depressed -- then you'll have to be on guard because any bank
or broker might fail, on the order of what was happening a year
ago, only more so. And -- reminding myself of this as
well -- now's the time to be researching and preparing and making a
plan. Maybe it doesn't happen -- but nice to have a plan if
it does. Personally I think the odds of it happening are
pretty good. They keep sweeping everything under the rug and
finally the floor will rot out.
Posted by bgrateful4 on 2nd of Nov 2009 at 11:53 am
Considering your statement, how diversified are U in brokerage
houses and do U limit the amount of $$ @ each institution?
I also have had this on my radar screen and was comforted that
Steve is concerned also.
I have been buying physical hard assests but not enough. I have
also been putting $$ into tangible items of value such as "greening
up" my place with solar PV, water catchment and a growing
dome for food year round. I do not see things getting better
for several years. I look forward to hearing what Steve has in
mind.
I have active accounts at tradestation, IB and Ameritrade.
Waiting for gold to drop to add physical. Sounds nice what
you're doing. We're looking for a house now -- just looking
and waiting and looking and offering and waiting -- prices are only
going lower -- and I hope we end up with at least a few acres to be
able to do a large garden, etc.
I am no big fish but I keep 3 accounts currently as well
although one of them is Scottrade and I really need to move that to
Ameritrade. I am becoming more and more impressed with their
platform. Also you can ask if the account is insured.
Not that in a complete collapse. Its, funny Michael because I
am also in the market for a home and a must for me is enough room
for a greenhouse and a well or stream nearby is a plus. I am
the same way - sounds crazy but a plan isn't a bad idea to
have.
Newsletter
Subscribe to our email list for regular free market updates
as well as a chance to get coupons!
Title: Getting money back from
Posted by doodlebug on 2nd of Nov 2009 at 11:34 am
On steve's newsletter he suggested that getting money back from the brokers might be difficult if we do the shorting of etf or the highly leveraged short etfs. What was that about? What caused Steve the concern that we might not get the money back?
thanx,
doodlebug
Title: options v. short ETFs thanx
Posted by doodlebug on 2nd of Nov 2009 at 01:36 pm
thanx to all who have responded on the board and PMs.
I personally think we are due for a big drop but perhaps not right away. I am currently thinking we will pull back and then continue up into next summer and then it will be the big drop. Possibly due to Fed printing press + the White House's willingness to sacrifice the dollar and balance sheet to keep the appearance of prosperity going until they get nationalized healthcare, cap and trade, union check etc. After they get all their devastating programs in place they can then let everthing go to hell.
And when it goes it should be a doo-esy. I was hoping to be able to use the short ETFs to catch what I think will be a monster ride down. But if not short ETFs - then what? I know steve will be addressing this in upcoming emails, and I look forward to what he has to say. But I thought I would through out an idea to get the discussion going...
1. Buying puts - buying puts would presumably have counterparty risk too, but would it be as much as short ETFs. if you buy a put and the market tanks (perhaps due to failing banks) you would then sell the put to someone else - perhaps by that time the failing counterparties would have already failed.
2. Selling calls - If the market corrects here and you buy divident paying stocks that run up into end of summer as I suggested above then instead of selling the stock, you sell deep in the money calls to get your principal back. then you have cash to take out of your account or convert to gold. If the big three wave occurs the option is worthless and you keep the stock and the dividends. You can sell calls again and again until you get your principal back if you didn't the first time. This might not have as big a problem with counterparty risk because you have the cash in hand and if the other party fails you keep the stock.
3. GoldMoney.com - If banks start going belly up, would this be possible alternative to grow the money (in gold) while keeping it safer. They offer delivery of gold, silver and platinum now too so if you want to hold it yourself, you can.
4. Any long stocks that we own (possibly for income), how can we protect them? My understanding is that we can't get certificates anymore. Would registering them in our name as opposed to street name help?
5. I've already cashed in one of my IRAs December 2008 and paid the penalty in order to get the stock certificates and avoid Obama's future tax rates. Waiting to see outcome of 2010 election before deciding whether to cash in the wife's IRA.
diversifying brokerages
Posted by dallassteve on 2nd of Nov 2009 at 12:23 pm
Steve, thanks for thinking about what brokers will do if we have a really severe decline. I look forward to your ideas. I am even contemplating liquidating my IRAs at some point and paying the penalty. Too extreme?
I was glad to read your post, bgrateful4.
I have been doing exactly the same thing, and have communicated in PMs on this blog, but thought this was kind of off topic. Maybe it will become more important if the economic landscape changes.
I am a small fish, but I have three brokerage companies, and I have one third of my assets in physical gold and silver. I want to add more if we get a pullback in gold.
WOW, 1/3 of you assets
Posted by tom on 2nd of Nov 2009 at 12:46 pm
WOW, 1/3 of you assets in Gold! That's a lot but man you have been right over the past years. I read an article once that I thought was somewhat apropo which said have about 3% of your net worth in gold or like physical asset (silver, tin, copper). I would even argue that 1% could be enough because if the world got to the point where we were shaving our gold bars down to pay for things, the value of gold would be 100-300 times today's value. The rise would be uncharted because think of what happened in the meantime - the world would have collapsed. Which then you can argue the most valuable assets would be food, shelter, water. Anyway I dropped my crystal ball a few years back so I cannot be of any further assistance.
One potential scenario might be
Posted by harveyrb708 on 2nd of Nov 2009 at 11:47 am
One potential scenario might be that the broker's clients talking the long side of the market might not deposit funds to pay for the buy order, thus causing balance sheet distress for the broker who in turn might pass this on to the short ETF buyer. In today's environment this does not seem impossible.
he's talking about if we're
Posted by Michael on 2nd of Nov 2009 at 11:39 am
he's talking about if we're in wave P3 down and the market really tanks and the banks are in trouble and the economy is depressed -- then you'll have to be on guard because any bank or broker might fail, on the order of what was happening a year ago, only more so. And -- reminding myself of this as well -- now's the time to be researching and preparing and making a plan. Maybe it doesn't happen -- but nice to have a plan if it does. Personally I think the odds of it happening are pretty good. They keep sweeping everything under the rug and finally the floor will rot out.
Michael
Posted by bgrateful4 on 2nd of Nov 2009 at 11:53 am
Considering your statement, how diversified are U in brokerage houses and do U limit the amount of $$ @ each institution?
I also have had this on my radar screen and was comforted that Steve is concerned also.
I have been buying physical hard assests but not enough. I have also been putting $$ into tangible items of value such as "greening up" my place with solar PV, water catchment and a growing dome for food year round. I do not see things getting better for several years. I look forward to hearing what Steve has in mind.
I have active accounts at
Posted by Michael on 2nd of Nov 2009 at 12:00 pm
I have active accounts at tradestation, IB and Ameritrade. Waiting for gold to drop to add physical. Sounds nice what you're doing. We're looking for a house now -- just looking and waiting and looking and offering and waiting -- prices are only going lower -- and I hope we end up with at least a few acres to be able to do a large garden, etc.
I am no big fish
Posted by tom on 2nd of Nov 2009 at 12:11 pm
I am no big fish but I keep 3 accounts currently as well although one of them is Scottrade and I really need to move that to Ameritrade. I am becoming more and more impressed with their platform. Also you can ask if the account is insured. Not that in a complete collapse. Its, funny Michael because I am also in the market for a home and a must for me is enough room for a greenhouse and a well or stream nearby is a plus. I am the same way - sounds crazy but a plan isn't a bad idea to have.