Gyroscopic Investing

I'm assuming that some companies still issue physical stock certificates to shareholders.

I imagine that HB being as distrustful of people as he is, he might choose to hold physical stock certificates as some portion of his portfolio. Perhaps 5% of the overall PP, or 1/5 of the stock portion could be physical stock certificates of DJIA 30 Blue Chip Companies. Did HB ever mention anything like this?

The theory being that you have some protection if your financial accounts were frozen, perhaps because in a few years when it's illegal to post videos of police pepperspraying protesters on YouTube (since it's already illegal to actually take the video, it's not long until it's illegal to post it).

I see it as holding physical gold coins. It's riskier, it's inconvenient, and it's harder to trade/rebalance with but it does provide more protection.

I'm pretty clueless about how physical stocks work. Perhaps no one uses them anymore?

What happens if you lose them? Is it like a bearer bond where you lose it, and it's gone? Or is the share registered to you with the company? I assume it must be registered to you for voting and paperwork purposes.

Suppose Fed Gov decides to freeze your Schwab brokerage account. That's one subpeona and one phone call. Now suppose they decide to freeze your 30 individually held stocks. First, they have to figure out you're holding them (which might just be looking through your checking account records to see where money went). But then they have to subpeona 30 companies for their records, and try to freeze them all.

Nothing is 100%, but I'm all about putting up barriers and layers between me and people who might try to injure me, whether it be a future subversive government, a pissed off relative, or a greedy parasitic creditor.

Is there merit in this idea?

TripleB wrote: I'm assuming that some companies still issue physical stock certificates to shareholders.

I imagine that HB being as distrustful of people as he is, he might choose to hold physical stock certificates as some portion of his portfolio. Perhaps 5% of the overall PP, or 1/5 of the stock portion could be physical stock certificates of DJIA 30 Blue Chip Companies. Did HB ever mention anything like this?

The theory being that you have some protection if your financial accounts were frozen, perhaps because in a few years when it's illegal to post videos of police pepperspraying protesters on YouTube (since it's already illegal to actually take the video, it's not long until it's illegal to post it).

I see it as holding physical gold coins. It's riskier, it's inconvenient, and it's harder to trade/rebalance with but it does provide more protection.

I'm pretty clueless about how physical stocks work. Perhaps no one uses them anymore?

What happens if you lose them? Is it like a bearer bond where you lose it, and it's gone? Or is the share registered to you with the company? I assume it must be registered to you for voting and paperwork purposes.

Suppose Fed Gov decides to freeze your Schwab brokerage account. That's one subpeona and one phone call. Now suppose they decide to freeze your 30 individually held stocks. First, they have to figure out you're holding them (which might just be looking through your checking account records to see where money went). But then they have to subpeona 30 companies for their records, and try to freeze them all.

Nothing is 100%, but I'm all about putting up barriers and layers between me and people who might try to injure me, whether it be a future subversive government, a pissed off relative, or a greedy parasitic creditor.

Is there merit in this idea?

I'm not sure I would say that HB was distrustful of "people". He didn't trust governments. He was also aware of counter party risks.

There are bearer stock certificates and registered stock certificates. Stock certificates are a huge pain to deal with, and brokers will often charge you hundreds of dollars to deal with them. It's not worth it, in my opinion.

Also, HB never recommended individual companies for the PP stock allocation, and most of his financial literature was written during a time when stock certificates were the norm. The world transitioned to e-trading during the 90s, and I'm not aware of HB having mentioned anything about certificates since e-trading become commonplace.

I think you'd have to be pretty paranoid to worry about a (democratic) government freezing your stock portfolio. If that happens, capitalism will officially be dead, and I doubt your stock certificates will do you much good. Not to mention that stock certificates can easily be seized by anyone. HB once said that stocks, bonds and real estate are "paper promises." Paper can (and will eventually) fail.

But, keep in mind that it doesn't take much to prove your ownership of stock shares. Keep a hard copy of your statements in a safe place, and you should be fine.

I'm copying part of a report which my be useful...i have no experience with any of this...

SWISSQUOTE
www.swissquote.ch
SWISSQUOTE is part of Swissquote Group and headquartered in Gland (in canton
Vaud) with offices in Zürich. Launched in 2000, it has rapidly grown into Switzerland’s
leading online broker and lists on the Swiss Market Exchange (SIX: SQN).
Electronic share dealing is available on the following exchanges: Switzerland (SIX,
SWX), U.S. (NYSE, ARCA, AMEX, NASDAQ), Germany (XETRA), Euronext, Canada
(TSX, TSX-V), London (LSE), and Stockholm/Helsinki/Oslo/Copenhagen on the pan-
Nordic OMX trading facility. Another 60 markets in 40 countries, including Brazil, S. Africa,
EU, Middle East, Asia and Australia are traded via phone-executed orders. Trading in
options, futures, warrants, bonds, structured products and forex is also available
Commission on ETFs and over 3,000 funds is a flat 9 francs/9 euros/9 dollars.
Commissions for stocks are higher, ranging between 25-35 CHF/GBP/USD/Euros for a
$10,000 order. Accounts can be held in Swiss francs, Euros or USD.
International Brokers – A Quick Review Page 6 of 6
By Kevin Brekke www.internationalman.com
Nationality Restrictions: U.S. citizens/residents accepted as clients but are barred from
trading U.S. securities listed on any world markets.
* Contracts for Difference. A CFD is a derivative product mirroring the movement of an underlying share
or index or commodity. It works like a futures contract in that there is no limit to the gain or loss that can
be realized by the holder, and the contract has no expiry date. It works like an option in that it has a time
decay aspect, but with a twist: whereas for an option you pay a set price and the option is either sold or
it expires and you lose your premium, a CFD is bought on margin, long or short, and the holder is
assessed a daily interest fee against the holding’s value. So the longer you hold the CFD the higher
your cost basis.
** Exchange Traded Commodities. Similar to ETFs, they track the performance of an underlying
commodity index. You can take short and long positions and employ varying degrees of leverage either
way.
*** Extended Settlement contract. An ES contract is a contract between two parties to buy or sell a
specific quantity of shares, of a specific underlying stock, at a specific price, for settlement at a specific
future date when the contract matures or expires. Translation: this is an option contract.
Do you have experience with one of these brokers, good or bad? Know of a better broker?
E-mail us at service@internationalman.com with your comments or suggestions.



iOCBC
www.iocbc.com
Started in1986 as Oversea-Chinese Banking Corporation Limited, in 2001 this
Singapore-based company acquired UBS Warburg & Associates (Singapore) Private
Limited and Keppel Capital Holdings. The acquisitions propelled OCBC Securities into the
ranks of Singapore's leading stock broking firms.
iOCBC is the company’s online trading division offering commodity futures, forex,
ETFs, shares, warrants, and Extended Settlement contracts***. Although the depth of
products offered is comparatively shallow, the breadth of exchanges traded is impressive:
Australia (ASX), Hong Kong (HKEX), Indonesia (IDX), London (LSE), Malaysia (BURSA),
Philippines (PSE), Shanghai (SSE) & Shenzhen (SZSE) B-shares only, Singapore (SGX),
Thailand (SET), Tokyo (TSE), and U.S. (NYSE, AMEX, NASDAQ).
Marginable securities, product availability, commissions, and settlement currencies
depend on the exchange being traded and account type. Complete mobile trading from an
iPhone is available. Consult the website for details.
Nationality Restrictions: U.S. citizens/residents accepted as clients but barred from
trading on U.S. exchanges. All non-Singapore citizens/permanent residents must make a
US$2,000 deposit to open an account.

It seems to me that Wall Street has a great setup with the current system where people are gradually relieved of their money through the normal churning of investment accounts (i.e., investors buying high and selling low).

Why would anyone want to mess up this arrangment by making people afraid to invest in stocks?

Given Wall Street's influence over public policy, I would be surprised if the government ever did something that would make people fearful of buying stocks.  The casino only works if people can be lured inside.  Since both Wall Street and the government have a stake in people continuing to frequent the Wall Street casino (Wall Street likes it when you trade because it collects fees and the government likes it when you win because it collects taxes), I would think that entry to and exit from the casino would continue to be pretty easy.

My "irrational" fears of the government were only made worse today in the Wall Street Journal, reporting of a Motel owner who had his motel seized by the government through asset forfeiture "laws" because allegedly, a few people he rented rooms to, used the rooms to sell narcotics.

The motel owner is not charged with any crimes. However, Asset Forfeiture laws state that the government can seize any property or assets that are involved with crimes, even if the asset owner is not involved in the crime.

My thought of removing stocks from a brokerage is to add a layer between myself and the government. It would be trivial to seize a single brokerage account. Seizing multiple paper-held stocks and gold coins is another matter.

There is of course a cost to doing anything like this (if it's even possible to assemble a portfolio of paper stocks in reasonable diversification), and that cost needs to be weighed against the risk of asset forfeiture, which is likely very low now.

However, 220 years ago, if a federal politician proposed asset forfeiture (without due process) they would likely be carried from the Capitol in several pieces. Today it's just another news article. Maybe in 20 years, asset forfeiture will expand into due-process-free seizures of anything, for any reason.

According to the WSJ article, asset forfeiture is allowed for Fish Poachers. If you illegally fish somewhere you aren't supposed to, whether you know it or not (because intent is no longer a part of the law), you can have ALL of your assets seized, and bank accounts frozen, and you will have to legally prove those assets were not acquired through sales of your illegal fishing activities. Of course you won't be able to hire an attorney, because your assets are frozen.

This almost seems to ridiculous to be true, but it is. It's not a conspiracy theory. We can go online and find the actual several thousand page federal criminal code document and show that this is true. Of course, it was attached to legislation that built a $10M bridge over a swamp-filled city (population 600) in one Senator's jurisdiction and also filled with some law to mandate reduced pollution into the ozone layer. And none of the congressmen who signed the legislation read any more than 5% of it. But, it's the law.

Is it really that weird to want to hold physical stock certificates outside the reach of the government? Given today's circumstances, I don't think so.

TripleB wrote:According to the WSJ article, asset forfeiture is allowed for Fish Poachers. If you illegally fish somewhere you aren't supposed to, whether you know it or not (because intent is no longer a part of the law), you can have ALL of your assets seized, and bank accounts frozen, and you will have to legally prove those assets were not acquired through sales of your illegal fishing activities. Of course you won't be able to hire an attorney, because your assets are frozen.

This almost seems to ridiculous to be true, but it is. It's not a conspiracy theory.

Would you mind sharing the link to that article? I did my best to find it, and I turned up nothing.

TripleB wrote:We can go online and find the actual several thousand page federal criminal code document and show that this is true. Of course, it was attached to legislation that built a $10M bridge over a swamp-filled city (population 600) in one Senator's jurisdiction and also filled with some law to mandate reduced pollution into the ozone layer. And none of the congressmen who signed the legislation read any more than 5% of it. But, it's the law.

Again, if you could point us to a source for this, it would be appreciated.

TripleB wrote:Is it really that weird to want to hold physical stock certificates outside the reach of the government? Given today's circumstances, I don't think so.

If government asset seizures are as invasive as you claim, then the government doesn't need the original stock certificates. There is still a record of the original stock transaction and they can just invalidate the certificate and take ownership by calling up the stock transfer agent and taking control of the shares directly (i.e. your stock certificates become invalid). Stock certificates are just pieces of paper. Paper can be lost, stolen, burned, destroyed or invalidated. I really don't think they offer much security.

If the government is getting grabby above and beyond the tax code, ownership documents are probably as much a hindrance as a defense.  Proof of ownership is for contractual purposes.  The government enforces contracts.  If the government is taking your wealth, those contracts are no longer really contracts, and are now just a bright green arrow to your assets.

This is why I don't understand those who think government is a confiscatory, evil entity to the extreme who then decide to go out and buy a bunch of land to live on.

In times of government confiscation, I'd rather have as little evidence of ownership as possible, and be able to easily hide something (I'm thinking gold and currency, mostly).  This is why I don't think we can view foreign-held assets the same way we used to.  With financial institutions easily giving into government demands for client disclosure, I'd much rather have the assets in my pocket.  People will scream much louder about bodily searches than the "soft-confiscation" via financial institutions, where $ for $ the value is much easier to get at.

I think the single best way to protect yourself against some of this confiscatory craziness is to buy currency (mostly US, but maybe some others too) and gold to be held in a couple different places (safety deposit box (though this obviously has its problems), and in your home), and trade as little of it as possible on a regular basis (you don't want collectible gains on physical gold showing up on your tax return every year... use your ETF for this if possible).  This is especially valid in our ultra-low interest rate environment where the opportunity cost of holding cash physically is practically nil.  These are assets you can put in your pocket and/or duffel bag and leave with without anyone knowing about it.

If the "great confiscation" ever comes there will be very little paper record of these assets.  Wasting your time with the stock portion of your portfolio (which will likely be hurting bad in this environment anyway) is too much effort IMO, since the very government that is supposed to enforce the contract you hold is corrupt in our example.

Gumby wrote:
Would you mind sharing the link to that article? I did my best to find it, and I turned up nothing.

http://online.wsj.com/article/SB1000142 ... 04000.html

TripleB wrote:

Gumby wrote:

TripleB wrote:According to the WSJ article, asset forfeiture is allowed for Fish Poachers. If you illegally fish somewhere you aren't supposed to, whether you know it or not (because intent is no longer a part of the law), you can have ALL of your assets seized, and bank accounts frozen, and you will have to legally prove those assets were not acquired through sales of your illegal fishing activities. Of course you won't be able to hire an attorney, because your assets are frozen.

This almost seems to ridiculous to be true, but it is. It's not a conspiracy theory.

Would you mind sharing the link to that article? I did my best to find it, and I turned up nothing.

http://online.wsj.com/article/SB1000142 ... 04000.html

I read that article. It was just about the Federal seizure of a $58/night motel that was the site of hundreds of crime-scene investigations. According to the article, the Federal seizure is likely unconstitutional — most likely violating the 10th amendment.  

It's terrible that government overstepped its bounds — and hopefully the courts return the property to the rightful owner — but I hardly see this as evidence that the government is going to raid everyone's Vanguard accounts one day.

And I didn't see any mention of people's entire estates being seized for fishing in the wrong lake.

Gumby wrote:
And I didn't see any mention of people's entire estates being seized for fishing in the wrong lake.

The article mentions Halibut Poaching as an allowable offense for asset forfeiture. According to a cursory google search, it appears there is federal legislation called Northern Pacific Halibut Act that outlaws a certain type of fishing, and that is tied to asset forfeiture.

There was another WSJ article within the last month about how many federal laws in recent years have removed "intent" (mens rea) from the qualification for a conviction.

Combine these two governmental concerns, and we basically have fishing in the wrong lake, and not knowing it, is grounds for asset forfeiture. Is it something that has happened? Probably not. Is it something that could happen in a few years? Definitely.

Policing for Profit: The Abuse of Civil Asset Forfeiture chronicles how state and federal laws leave innocent property owners vulnerable to forfeiture abuse and encourage law enforcement to take property to boost their budgets.  The report finds that by giving law enforcement a direct financial stake in forfeiture efforts, most state and federal laws encourage policing for profit, not justice.

Policing for Profit also grades the states on how well they protect property owners—only three states receive a B or better.  And in most states, public accountability is limited as there is little oversight or reporting about how police and prosecutors use civil forfeiture or spend the proceeds.

http://www.ij.org/images/pdf_folder/oth ... oemail.pdf

MG

TripleB wrote:

Gumby wrote:
And I didn't see any mention of people's entire estates being seized for fishing in the wrong lake.

The article mentions Halibut Poaching as an allowable offense for asset forfeiture. According to a cursory google search, it appears there is federal legislation called Northern Pacific Halibut Act that outlaws a certain type of fishing, and that is tied to asset forfeiture.

There was another WSJ article within the last month about how many federal laws in recent years have removed "intent" (mens rea) from the qualification for a conviction.

Combine these two governmental concerns, and we basically have fishing in the wrong lake, and not knowing it, is grounds for asset forfeiture. Is it something that has happened? Probably not. Is it something that could happen in a few years? Definitely.

Policing for Profit is not new nor limited to asset forfeiture.

How many DUI stings are there? TONS! To "keep streets safe." Oh, and to make $5k+ on fees because if you don't pay them, you can't drive, and driving is a necessity to engage in employment in 99% of the country. Why do you think we keep reducing the legal Blood Alcohol Level every year? Why is it illegal to fall asleep in your car while drunk, in a parking lot? Yes, people get DUIs for falling asleep in their cars, parked, in a parking lot. That's a DUI. Pay $5k.

How many Anti-Rape stings are there? Anti-Murder stings? I've never seen any.

How about anti-drug stings? TONS! Oh and police get to keep any cash and vehicles seized.

How many Anti-Child Abuse stings are there? Anti-Woman Beating Stings? I've never seen any.

How many Anti-Terrorism task forces exist in various levels of municipal, state, and federal LE? TONS! Because Congress approved funding for this.

Policing is NOT about public safety. It's about money. If it was about safety then we would have lengthened red-light times, rather than shorter ones that allow higher churning of tickets.

If it was about safety, we would have higher speed limits, because speed is not the cause of accidents. Variance of speed is the cause. Artificially reducing speed limits causes some people to drive slow to avoid tickets, while reasonable people drive 10MPH to 15MPH above the speed limit. This variance in speed, created solely by law enforcement's desire to generate revenue, is what causes accidents.

Texting while driving. Illegal. $200 Ticket. Good idea, right? Sure, until you realize that people will still text while driving, but now will hold the phone under the dashboard to avoid getting a ticket. What's a safer world?

Option 1) No Law Against Texting While Driving: 10% of the population texts while driving; 90% dont because in spite of no law, they realize it's unsafe.

Option 2) Law Against Texting While Driving: 90% still thing it's unsafe. 8% think it's OK, but won't risk a ticket and stop doing it. 2% of the population continues to text while driving, but holds the phone under the dashboard.

We've shifted the behavior to being much more dangerous, even if it's in a reduced volume.