Monday, June 4, 2012

Thinking about the safety of your money

MF Global Trustee Can Transfer $520 Million to Customers
Some of MF Global Inc.’s commodity customers can get an immediate distribution of $520 million, or about 60 percent of their cash collateral, a judge ruled.
U.S. Bankruptcy Judge Martin Glenn yesterday approved a request to transfer the funds from James Giddens, the trustee overseeing the liquidation of the brokerage. The distributions may begin by Nov. 24, said Kent Jarrell, a spokesman for Giddens. The parent, MF Global Holdings Inc., filed for bankruptcy to apportion returns to creditors. Nov. 24 is Thanksgiving Day in the U.S.

At least 22,000 customers who only had cash in their MF Global accounts as of the time of its bankruptcy on Oct. 31 will get 60 percent of their $869 million on deposit. The transfers will now include investments considered ‘‘cash equivalents,’’ such as Treasury bills. Glenn urged the trustee to seek a similar solution for customers who have a mix of cash and open positions in their accounts.

The cash distribution approved yesterday follows a first transfer of around $1.5 billion in 14,500 customer accounts to other commodities futures merchants, and the total number of commodity customer accounts is around 38,000, according to Jarrell.
About $593 million of MF Global customer funds, or 11 percent, are unaccounted for, according to a person with knowledge of probes of the firm’s collapse. Some customers had objected to yesterday’s motion, saying they should get closer to 80 percent distributions given the alleged 11 percent shortfall.

Separately, Scott D. O’Malia, a CFTC commissioner, said MF Global’s frozen funds have affected confidence in the markets and customers in Australia, Canada, Germany,Singapore, the U.K. and other countries. Although the trustee has been working to return funds faster, it still hasn’t happened quickly enough, he said.
‘‘The livelihood of market participants has been dangling by a thread for over two weeks,” O’Malia said, according to a speech posted on the CFTC’s website.
The brokerage case is Securities Investor Protection Corp. v. MF Global Inc., 11-02790, U.S. District Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is MF Global Holdings Ltd., 11-bk-15059, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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This was the news that has set me thinking about the safety of your money in nominee accounts or trustee accounts in global banks. If there is a crisis, you never know which one of the banks did something stupid. If not supported by the government, the financial institution will declare bankrupt and returned you a pro-rated amount of your CASH. Strange... but you are individuals helpless against the might of the financial regulators and institutions. 
The current europe crisis has made me even more jittery about the safety of my money in the wealth managers like UBS and CS. They are very close to the epicenter of europe and although I am "re-assured" of their strong credit ratings. When it comes to the crunch, I think I can only bail myself out to the safety of the Singapore banks. Though, it is just transferring the counterparty risk from a foreign bank to a local one. 
It's no wonder people are buying properties. You get the title deed(if fully paid), if not, a caveat is lodged against your deed. But it's alright, you still control the property. Maybe it's time to rethink the strategy of placing so much faith in the financial system and move more towards the real assets. Unfortunately, the timing might not be the best now.. lol.. 
Thinking ..thinking... thinking...


CreateWealth8888 said...

Can buy Gold, Sliver, Vineyards???

Anonymous said...

i always dream of putting all my assets into dividend generating income stocks, and live on the dividends. But then down the road, who knows what is going to happen to some of the companies i invested. Bricks & Motar should always be there. Even if it's not (need maitenance/replacement) the title deed should be worth something. Especially freehold.

Wealth Journey said...

I've got gold and silver (around 3%). But vineyard ?? lol... I go buy a landed and turn it into a vineyard :) Think I can grow mango and durian also.

ya.. u can be sure your rental and capital appreciation on a piece of land will keep up with inflation or deflation and it will be around 20yrs from now. You cannot be so sure of companies doing that. Anyway, it's the real assets path I'm going towards with a little bit in stocks.

YJ72 said...

I share the same view on CS and UBS. I leave no cash with them and even closed one of the account and transfer the AUM to a local bank.

The ABSD has dampened my desire to buy my third properties for long investment. However, your confidence in property has really rubbed on to me. Maybe I should reconsider reducing my weightage on bonds and and shift it to property.

Wealth Journey said...

Smart move :) Local banks are indeed "safer" for now.

But property is safest. Though I would still prefer asset allocation and not too concentrated in SINGAPORE properties.

Anyway, I am now trying to do landed development and make it a business going forward.

We have holding power, so if market crash, just treat it as a bond that pays a variable interest rate.

Greatsage said...

Great post! Keep it up!