patrick.net

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Al_Sharpton_for_President says

Because while you think you own the securities in your 401k, you do not. You have a “security entitlement.” Your securities have been lent out as collateral and rehypothecated numerous times. You own a subordinated claim to the securites, behind creditors, and if Fidelity goes bankrupt, you get nothing.

Please read and decide: https://img1.wsimg.com/blobby/go/1ee786fb-3c78-4903-9701-d614892d09d6/taking-june21-web.pdf

Thus Bullionvault.

I own the shares of my mutual funds and stocks.
From time to time there's a proxy vote.
I can redeem shares anytime and the cash is in my bank in a few days.
Fidelity and similar are the least likely business to have a problem.
Managing money is a fantastic business.
1. Hire an MBA and some other guys as manager of your fund.
2. Take in money; no credit is given to buy mutual funds.
3. What's the overhead? A few salaries and rent for an office.
4. Example: Fidelity makes 0.55% of 110 billion managing one fund (contrafund)

Mutual funds is an all cash business, no need to borrow to expand nor lend money to the customer.

When I worked at Schwab, I was surprised to find that Schwab lends out the shares that you "own" to make extra cash on them.

I guess this is standard practice, but most people are not aware of it and think that they literally have the shares in their account.

You can ask to get the actual paper shares in the mail, but they charge you extra for that.

Patrick says

When I worked at Schwab, I was surprised to find that Schwab lends out the shares that you "own" to make extra cash on them.

Isn't that just how short selling works?

People like to think that there is a fixed number of shares. There is not and the internet is replete with examples and it always stuns folks when it is revealed.

The most common times of the reveal is during proxy votes for takeovers. The number of votes is always more than the shares outstanding.

When a takeover for cash does occur, well things get balanced out for the purchaser.

I believe that the shares in a margin account can be lent, not all shares.

It's irrelevant; you can sell everything and get the cash in a few days because someone else bought your shares, wherever they are.

The CEO of Overstock in the 'naughties was adamant that brokerages invent fictitious shares which hedge funds use to assault companies. There have been multiple articles over 30 years documenting the abuses by the exchanges vis a vis "phantom shares."

One CEO actually bought up all the "registered" shares of his company, so that there were supposedly no more shares to trade. To his (not so) surprise, shares in the stock of company were still being traded.

Coincidence?