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| As many of you are aware, before I throw much into a position trade I take a step-by-step look at the facts plus a selection of other conditions before I start to ‘think about where the price might go.”
Recent subjects & events motivate me to expand a little and do it carefully so I do not sound like a “wingnut.”
When I first entered the brokerage world, I brought considerable hands-on business and trading experience to the table. One afternoon the CEO dropped by my office and asked if I would “go to the bank with him” on the following day. I agreed.
The next morning we marched into a very large bank, entered a secure area, took an elevator down two stories (underground) –went through an ID process and were escorted into a cavernous vault. Several large safety deposit boxes (bottom row) were opened & the person then left us alone with two chairs and a large table. The CEO handed me a thick pad of computer printout and began to sort through stock & bond certificates.
My task was to put a check mark by the owner’s name & verify the number of shares or bonds (I mentioned to the CEO my primary interest was futures & I was removed from the action whilst sitting in the basement of the bank-he did not seem to care).
This exercise continued for the balance of the four days of that week. The bulk of the shares & bonds were held in ‘street name’ & the boring part of my task-requiring a sense of accuracy- was to match the names of individuals, to that number of shares in ‘street name.’
A greenhorn in the business, I used this opportunity of sitting with the CEO for several days-interrupted only by lunch (he was not a coffee drinker so there was no coffee break)- “What is this street name? I pursued.
As I learned, the principals of the firm encouraged all their brokers to encourage all of the clients to ‘keep their shares of stock or bonds in street name’ (the pitch being “slows the transaction process if you have the shares in your own name (client) and allows ‘us’ (the Firm) to monitor for dividends & stock splits & etc.
The reality of the situation however, was the ability of the “Firm” to use the stocks and bonds held in Street Name as collateral for the “firm’- The experience of that week confirmed to me “I would never allow any of my purchases to be held in street name…I want it in My Name.”
On that Friday afternoon, after 3 ½ days in the basement with the CEO, when we returned to the office and handed me a copy of the financial statement of the FIRM (not to keep of course) in order to show me ‘how the accounting worked’—The CEO was quite proud of the firm’s net equity—I was (on the other hand) shocked, as I had seen plenty of individual farmer financial statements and I had seen many farmer financial statements with a far greater equity than HIS FIRM. And those were the days of $400 per acre land prices!!
Now, let’s take a moment and roll over to the ‘den of snakes’ side (lawyers). When I opened my first commodity futures account, the FORM was identical in size to one of my mother’s recipe cards. Hardly any fine print!
In the early 1970’s the account forms grew in size to a couple of pages. In the 1980’s the account forms grew to the size of a 35 or 40 page book.
“Why so much paper (you might ask)?
You are told –the CFTC, the NFA, the NASD, the SEC & all of the PC’s (subsidiary regulatory steps) REQUIRE this paperwork FOR YOUR PROTECTION AS A CLIENT.
TRANSLATION: “Your money (you & me) is OUR MONEY” (them) as long as the funds sit in a segregated funds account OR STREET NAME.-take a moment now –put on your bifocals and spend the rest of the day and read the fine print in your brokerage account agreement.
REALITY NO. 2-The regulatory agencies exist to Protect the dealer, Not the customer.
REALITY NO 1- The Flat Shoe crowd (dealers) have nightmares about State & Federal Courts….not so much fear with Arbitration….in an arbitration proceeding the arbitration panel contains a few ‘experts.”
OKAY, now let’s look at this property deal.
If any one of us is going to purchase a farm, or house, a step before any closing is a ‘Title opinion.’ I am familiar with some lawyers & is all they do…all day long is “title search & prepare a title opinion.”
SITUATION OVERVIEW: If you survey the legal profession who employs most of the lawyers?
Banks Brokers
To quote W. Buffett “If you are sitting in a poker game & cannot identify the “mark”- IT IS YOU.
SITUATION OVERVIEW NO. 2: 1) The smart guys-flat shoed brokers (the boys in fancy suits).
2) the pigeons – us.
3) the Sitting Ducks (Pension fund managers, Municipalities, bank trust departments, State Treasurers or Controllers)…..the process: drag those boys into town…show ‘em a good time…a few drinks & what all & a little power point presentation and BINGO- you get the big check.
NOW…the point of my rhetoric….my question…”Are we (you, me & the rest of the sheep) supposed to believe (knowing THEY have all the expensive lawyers) this mortgage mess was simply a mistake? Or, careless behavior?
Again, trying not to sound like a wingnut….this whole deal smacks of a need to order a giant supply of handcuffs—in my opinion, we are at about mile marker 30 on a 100 mile trip to a disaster the result of the greatest RIP OFF of the Public in history.
I hope, for OUR sake, the Alpha sheep of our herd is on alert—I think the wolves are drawing closer.
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Alpha Sheep
