OT (health of brokerage system):
My last note on this subject, I promise.
I talked with my other broker this morning (the one with my cash) and it looks like my fears are unfounded, at least with respect to that firm. She told me the firm had gotten into some difficulties in 87 and now is ultra-conservative about margin accounts. She told me she personally has no clients on margin.
She also said that since my assets are not "co-mingled" with those of the firm, I'd be OK in any case. I'm not quite sure I understand this, but unlike a bank brokers do not loan your cash to other clients, it's invested as you've indicated when you open your account. Leaves me wondering where they do get the money to loan on margin, but anyway.
She said she would not be at all surprised if there are some failures, but they'll be isolated events, none of the big names will be hit, and the SPIC is quite capable of handling this scenario. Whew!
She did confirm CJ's hunch that cash might only be insured up to $500K, so I'm glad I checked. I will buy some short-term federal paper to make sure my balance stays below that level, and I'll rely on the SPIC for the rest.
At least one reader sent me mail saying she did not realise brokerage accounts weren't government-insured, which, besides seeking advice, was the reason I posted it.
Well, looks like the Nasdaq's bouncing a bit today. Time for a mocha! |
