The entire banking insurance schemes created during the aftermath of the Great Depression, are predicated upon an ASSUMPTION that a bank failure is a single isolated event. The contingency plan for a wide-scale banking collapse will default to a “per person” basis despite what anyone else says. I have been in meetings and that is the stated fallback position. The closest example was the S&L Crisis of the late 1980s caused by Congress raising taxes changing the tax credits for real estate which led to a sell-only market.

The S&L institutions were insured by the Federal Savings and Loan Insurance Corporation (FSLIC) which was established to provide insurance for individuals depositing funds into S&Ls. When S&L banks failed, the FSLIC was left holding a $20 billion check. They inevitably left the FSLIC corporation bankrupt. The Federal Deposit Insurance Corporation (FDIC) that oversees and ensures banking deposits today is what also comes into play. During the S&L crisis, the deposits of some 500 banks and financial institutions were backed by state-run funds. The collapse of these banks cost at least $185 million and destroyed the concept of state-run bank insurance funds since they could not cover the losses.

If we look at the fine print of the FDIC, the limit isn’t “per person, per bank,” as is sometimes stated. It’s “per depositor, per insured depository institution for each account ownership category.” So what does that actually mean? This turns on account ownership category and therefore checking, savings, and money market accounts all fall into this category. Therefore, the insurance depends upon the title of the account. Dodd-Frank raised the limit on FDIC from $100K to $250K. Therefore, the same individual can have $250,000 in each of these three types of accounts but that is considered all the same category so the individual accounts all contribute toward the same limit. The exception to this “category” would be an IRA account. There we have the risk of states trying to lobby to take those accounts to manage in order to bail out state pension funds. Therefore, you can exceed the $250,000 limit by placing a part in a spouse’s name or children’s names. Of course, that introduces other risks with divorce being as high as it is. You can create an irrevocable trust, but keep in mind that as governments become desperate for revenue, they can always change the trust laws as well. Splitting funds also into corporate accounts changes the legal status of a “depositor” to increase the limit.

However, the assumption that you are insured and will receive your money in a timely manner is dead wrong. There are countless lawsuits during the S&L Crisis by people trying to get paid. There is the Supreme Court decision of Coit Indep. Jt. Venture v. FSLIC, 489 U.S. 561 (1989) even stating that there should be some reasonable time limit that was absent in the legislation.

What government states on their websites is really immaterial. He who controls the pen controls reality. The government can change the law at any time whenever it goes against them. They can revert to the definition of income taxes which is applied to “household” income. Look at Obamacare. The IRS website clearly states that everyone in the household is responsible for everyone else. “The individual shared responsibility provision of the Affordable Care Act requires you and each member of your family to have qualifying health care coverage (called minimum essential coverage), qualify for a coverage exemption, or make an individual shared responsibility payment when you file your federal income tax return.”

Then there is the kiddie tax, which the Democrats introduced to get at the rich. On May 17, 2006, the kiddie tax was altered by the Tax Increase Prevention and Reconciliation Act designed to keep the parents’ tax rates in effect until the child turns 18. That was still not punishment enough, so they revised it again with the Small Business and Work Opportunity Tax Act of 2007. They extended the kiddie tax age limit to 19 and then made it even worse. After the child turns 19, the kiddie tax still applies to his or her investments if he or she is between ages 19 and 23 and a full-time student.

Keep in mind, under the tax code, the government does not look kindly upon trying to avoid taxes by giving assets to family members. Years ago, when I bought a house in New Jersey in 1991, I simply added my children’s names to the deed. There was no issue. When I purchased my place in Florida last year, I could not do so for they would have to pay tax on the value I was giving them. So many governments are targeting children and family members (see Canada). Australia is stalking children on their way to school to collect taxes.

When it comes to actually collecting on insurance from the FDIC, (1) you may starve to death before you get the first dime, (2) they can simply revert to the tax code and accuse you of trying to get more insurance than you are entitled to by dividing it among family members, and (3) they will no question limit it to “per depositor” which does not expressly guarantee per bank or institution. When push comes to shove, they hold all the cards, guns, and tanks as well as the courts. On a single bank failure, there is no real problem. A contagion eliminates all rules!

QUESTION: Mr. Armstrong; Your post of November 16th where you state that the ECB is looking to freeze accounts in a banking crisis, does that mean they will no longer honour the claimed insurance of €100,000 per account?

PH

ANSWER: No. They will not pretend to eliminate that insurance, they just will “suspend” it as a bank holiday. But you gloss over another problem. The insurance of  €100,000 is NOT per account, but PER PERSON. So taking €1 million euro and spreading among 10 banks does not thereby provide insurance for the whole lot. The same is true in the USA. The ECB is proposing supplementing it with discretionary powers to suspend bank withdrawals. To say that the entire program will be terminated is an exaggeration. Nevertheless, it reflects the realization that the European banking system is in serious trouble. I recommend that Europeans should have a stash of cash, and if you have a lot of cash in your account, put some into dollars in the States before it is too late.

It has come to our attention that there are individuals soliciting clients for money to trade on their behalf claiming they have mastered our system and will use it. These people have NEVER managed money and handing them money is no different than asking a cab driver to conduct surgery on you because he sounds like he knows something about medicine. Managing money is a difficult task, to say the least. It takes nerves of steel and every study has shown that someone who trades a small amount of money even successfully, loses money when they try to trade size. In fact, 66% of large-cap active managers failed to top the S&P 500 in 2016. Some 58% of hedge fund managers reported a decline in assets under management in 2016 and 63% of funds-of-fund firms also reported a decline in assets under management.

Handing money to anyone without a LIVE TRADING background is suicidal!!!!! Emotion will ALWAYS overrule their decisions when it counts most! This is why I have NOT endorsed anyone. I am at that stage in life that money does not impress me. I am interested in demonstrating that there is a better way to manage our economy and our future. This service is about trying help clients stay on the RIGHT side of the market. I need not push any philosophy religious or otherwise.

Life is a journey of learning. We have all made mistakes in life. If you learn from your mistakes, that is the path to wisdom. If you fail to learn, that is the path to ruin. Most losses take place in trading because people try to find a trade or they are listening to the TV. There is far more at stake here than personal OPINION. A trader who follows his opinion and tries to claim he is better than someone else is a total fool. Success requires always assuming you are wrong and that demands you constant recheck what you are doing. NEVER marry a trade or form an inflexible opinion.

Historically, my best trades in life were usually the hardest to do. You have to fight your inner gut to stay calm and do what has to be done in the middle of everyone in a state of panic and chaos. If you have never been there, you will not know how to survive. Emotions will get the better of you every time.

When I shorted the markets for the Russian collapse that manifested into the Long-Term Capital Management Crisis, that was easy to initiate. The hard part came when to take profits and reverse. I sold $1 billion against the Yearly Bullish Reversal in the yen at 147 and had to cope with a contagion that hit every market contrary to all fundamentals. It was a liquidity crisis so everything was sold without logic.

The Japanese yen fell to 103. I covered all my shorts in everything, flipped, and then left the office. It was a gut-wrench trade for I was truly alone. I put in my stops and it would work or not. Very black and white. This was a discipline that I knew I had to walk away and not second guess myself, which would be a disaster. The market would decide. The New Yorker Magazine reported:

“The hedge-fund manager who used to work for Armstrong remembers him coming out of his office in September, 1998, two months after he’d got short in front of the ruble crisis. Monica Lewinsky was on TV. “My oscillators just turned,” Armstrong announced. He booked his profits, pulled out of the market, and went to his beach house, on the Jersey Shore.”

Lithium is known and “white gold” since electric cars require a lot of batteries. This has resulted in transforming the metal into a valuable and sought-after commodity. The demand keeps rising as there is a need for energy storage that can only be produced if lithium is available in sufficient quantities.

The price has soared from $1,550 to $9,100 a metric ton. This interesting metal was once used as a treatment for brain disorders. It was also the title of a song by Nirvana for its effect on the brain. Lithium is often found in salt flats when water repeatedly evaporates from a shallow lake, leaving behind a crusty layer of salt minerals. Consequently, Lithium is unique because it is the lightest known metal.

During the 1790s, it was a Brazilian naturalist who discovered the mineral called petalite on an island in Sweden. Then in 1817, a chemist in Sweden discovered that petalite contained a previously unknown element. He was able to isolate one of the salts, but he could not isolate the mineral itself. Nevertheless, he gave it its name – lithium, which meant “stone” in Greek.

Finally, 1855 a British and a German chemist were able to separate the metal from the salts. Once this was accomplished, commercial production of the lithium metal began in Germany in 1923. Because it is so light, it is known for its wide use in batteries.

The latest story involved a pair of exploding headphones on a plane. That incident came after the Samsung’s Galaxy Note 7 recall of their phones, which ended that line. You can’t chalk it all up to incompetence, either. At the famous Jet Propulsion Laboratory, a robot named RoboSimian blew-up thanks to a lithium battery. So what is so dangerous? Inside, there is a thin and porous slip of polypropylene that normally keeps the electrodes from touching. If that separator is breached, the electrodes come in contact, and things get very hot very quickly. So why even use them? Lithium-ion batteries are indeed the most efficient battery. They hold an amazing amount of energy in a tiny package that is light. They can keep a laptop running all day.

They have been used in batteries going back 25 years ago by Sony. However, they seem to get more volatile as time goes on because we are pushing the envelope. We want lighter products to last longer and they have to be cheap.

Devices containing lithium metal or lithium-ion batteries (laptops, smartphones, tablets, etc.) should be carried in carry-on baggage. Most airlines will not allow you to check them in baggage.