Minimizing counterparty risk

Discussion of the Stock portion of the Permanent Portfolio

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murphy_p_t
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Minimizing counterparty risk

Post by murphy_p_t » Tue Apr 20, 2021 12:35 pm

I am interested in minimizing counterparty risk for the stock portion of the pp. Using a fund or ETF.

VTI is commonly referenced on this forum.

The equivalent mutual fund at vanguard is vtsax.

It seems that holding a mutual fund at vanguard has lower counterparty risk then owning vti. Perhaps there is no difference?

Is there any difference in counterparty risk of owning vti within the vanguard brokerage account versus owning vti within a fidelity account?

For example, does vanguard keep the component shares of vti in their vault? so if the New York stock exchange went out of business, vanguard could distribute shares, or dividends, to the vti owners?
whatchamacallit
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Re: Minimizing counterparty risk

Post by whatchamacallit » Tue Apr 20, 2021 3:16 pm

Most extreme example may be to use direct stock purchase plans if corporations offer it. I bet they outsource to a holding company if if they do offer it though.

https://www.investopedia.com/terms/d/di ... seplan.asp

Holding a Vanguard mutual fund at Vanguard does at least feel safer than holding Vanguard etf at Fidelity. I do try to do that myself but it may not really matter.
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Re: Minimizing counterparty risk

Post by boglerdude » Tue Apr 20, 2021 9:22 pm

When in doubt, Vanguard. Too big to fail.
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I Shrugged
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Re: Minimizing counterparty risk

Post by I Shrugged » Wed Apr 21, 2021 6:12 am

boglerdude wrote:
Tue Apr 20, 2021 9:22 pm
When in doubt, Vanguard. Too big to fail.
That’s a perspective I had never considered.
murphy_p_t
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Re: Minimizing counterparty risk

Post by murphy_p_t » Wed Apr 21, 2021 7:06 am

Here's a short Wikipedia relating to the subject

https://en.wikipedia.org/wiki/Cede_and_Company
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I Shrugged
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Re: Minimizing counterparty risk

Post by I Shrugged » Wed Apr 21, 2021 8:29 am

murphy_p_t wrote:
Wed Apr 21, 2021 7:06 am
Here's a short Wikipedia relating to the subject

https://en.wikipedia.org/wiki/Cede_and_Company
Well, that's fascinating. ???
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I Shrugged
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Re: Minimizing counterparty risk

Post by I Shrugged » Wed Apr 21, 2021 8:31 am

I would be 99.999% sure that Vanguard held stocks underlying the index are simple book entries for Vanguard. Apparently through the entity you brought up.
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Re: Minimizing counterparty risk

Post by I Shrugged » Wed Apr 21, 2021 8:34 am

Paywall article, but you can see enough to get the drift, from an industry publication.

https://www.americanbanker.com/news/you ... s-fix-that
murphy_p_t
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Re: Minimizing counterparty risk

Post by murphy_p_t » Wed Apr 21, 2021 2:12 pm

Yes... The entire publicly traded equity market in the US is dependent upon something called "Cede"... Which very few have ever heard of.
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