Since becoming concerned by the unnatural imbalances being placed upon the financial system in 2002 and becoming outright alarmed by 2004, I have done all I can do to get my house in order, so to speak. This, as a normal citizen and business owner has included normal things like paying off debt and seeking out the safest cash vehicles (and for this I'll always thank Robert Prechter, no matter what criticism is launched his way from casino patrons), and some abnormal things like becoming a gold bug and a financial market writer.
Today, the requested change (to revoke margin 'privilege') has gone through on our brokerage account, which doubles as the NFTRH 'capital preservation' portfolio. I mean, in the wake of MF Global and years of knowledge that the modern financial system is ultimately sitting on a foundation built of Balsa Wood and Duct Tape, who needs the convenience of margin anyway? Routinely shorting the stock market is a fool's game anyway. I'll use options or those inefficient short funds if I feel a need to hedge. But this account is for 'preservation' after all, as it is balanced by actual things of value in real life, so going high cash and T bills - as it is now, along with a very few investments - is by far the preferred route.
So this morning I pulled up Fidelity and looked at the new, margin-free brokerage account and had a familiar feeling. It is the feeling of having taken yet one more small step away from the casino and its wild eyed patrons. I'll speculate along with the best of 'em, but at the same time I will never get lost in being a patron at a rigged game.
Sometimes I get caught up in market management in the newsletter and even here on the blog. But the reminder is that all of this comes after the house is put in order with regard to debt, physical property, cash, monetary stores of value and now, a limiting of the damage that the institutions I deal with can do to my personal financial health.
Again, this is not to say that Fidelity acts in a manner that some brokers do, re-hypothecating peoples' money all over the global casino, but I am a 'if it even has the slightest chance of going wrong, ELIMINATE it' kind of guy. One more thing was eliminated today and the mind is freer still to do what I enjoy doing.
http://www.biiwii.blogspot.com
http://www.biiwii.com
Today, the requested change (to revoke margin 'privilege') has gone through on our brokerage account, which doubles as the NFTRH 'capital preservation' portfolio. I mean, in the wake of MF Global and years of knowledge that the modern financial system is ultimately sitting on a foundation built of Balsa Wood and Duct Tape, who needs the convenience of margin anyway? Routinely shorting the stock market is a fool's game anyway. I'll use options or those inefficient short funds if I feel a need to hedge. But this account is for 'preservation' after all, as it is balanced by actual things of value in real life, so going high cash and T bills - as it is now, along with a very few investments - is by far the preferred route.
So this morning I pulled up Fidelity and looked at the new, margin-free brokerage account and had a familiar feeling. It is the feeling of having taken yet one more small step away from the casino and its wild eyed patrons. I'll speculate along with the best of 'em, but at the same time I will never get lost in being a patron at a rigged game.
Sometimes I get caught up in market management in the newsletter and even here on the blog. But the reminder is that all of this comes after the house is put in order with regard to debt, physical property, cash, monetary stores of value and now, a limiting of the damage that the institutions I deal with can do to my personal financial health.
Again, this is not to say that Fidelity acts in a manner that some brokers do, re-hypothecating peoples' money all over the global casino, but I am a 'if it even has the slightest chance of going wrong, ELIMINATE it' kind of guy. One more thing was eliminated today and the mind is freer still to do what I enjoy doing.
http://www.biiwii.blogspot.com
http://www.biiwii.com
Confused here as the brokerage accounts I've looked at in Canada require a margin account? Is it common for US brokers to allow options with cash accounts?
ReplyDeleteI am not sure, but I am able to trade options in my IRA as well, which is obviously not a margin account either. I think this may be relatively new though, as Fidelity only offered it within the last couple of years.
ReplyDeleteI hate to be stupid, but how does removing the ~ability~ to use margin, in your own account, protect your account any more than it already is (or isn't)??
ReplyDeleteI understand if it's a "matter of principle" thing, but I don't understand how your account is any more "safe" by you electing not to have the ability to use margin in your own account..
I have both regular (including margin) and retirement (non-margin) accounts with Fidelity, so you certainly have my interest here...
And for sure, I am NOT trying to say I have any fears or concerns that Fidelity is in any way like MFG, but as you noted, in this day and age, any potential issue you can avoid is a very good thing... ;-)
Thanks...
Hey Barry, there are no stupid questions... if there were I'd have already asked a million of 'em.
ReplyDeleteI am no expert on this. Far from it. But when you have margin, your broker can lend out your shares (assets) into the wild blue yonder. That is my understanding, and that is how stocks are shorted and why you need a margin account to short stocks.
I would rather sacrifice a little convenience and know that my assets are in a CASH account, with no borrowing, lending or anything else going on. Just settled cash.
Okay, did not know that...
ReplyDeleteI've shorted stocks before, but I just presumed they were borrowed from somebody else's Fidelity account, margin or non-margin...
Did not know there was a "margin account only" aspect to the borrowing...
Interesting... Thank you for giving me something to think about...
Barry