Tuesday, September 14, 2010


I refer to your financial world - don't fall for all that advertising for one-stop 'shopping' for financial products. If you want to be able to survive hard times, which we now all know DO occur once in a while, you need to keep strong barriers between your various assets and financial tools.

Why ?

The main reason is the "Right of Setoff". Financial institutions have this legal right. Suppose you have a bank account, a small CD and a credit card all at the same bank. You borrow on the credit card to pay for something needed - like to repair your car. Then you lose your job and eventually can't pay the credit card. Then the bank can take your CD, take all your funds in your checking account and apply it to the credit card balance, and then close your checking account.

Now they've really screwed you. You have to go to check cashing services to cash checks from part-time jobs now.

BUT, suppose you applied Bunkerman's strategy to your financial life. Your checking account is at one bank, your small CD at another and your credit card somewhere else. Now you have bad luck and lose your job. Eventualy the credit card payment can't be made, but you are much better off. They can put it out to collection and harrass you, BUT that bank will have much trouble getting access to the funds in your CD and your checking account. They have to sue you first - and that costs money and takes time. You can get that CD out and convert it to cash and put it under your mattress. You can keep small balances in your checking account and it can be protected, too. That bank really won't care that you defaulted on a credit card, so long as you don't bounce a check.

You are far, far better off. You have islands of safety. You can still live a normal life.

Separateness applies to mortgages, too. Don't get a mortgage from your own bank, OR from a bank from which you have a significant credit card or CDs. Same reason.

Have several credit cards from different places - you don't have to use them, just have them. I have several and rotate my usage to give them all a bit of business.

Don't open a brokerage account at any bank that you do other business with.

All this especially applies to business accounts. Keep that bank separate, too. These walls will protect you if trouble hits.

By the way, all this separateness helps you maintain privacy, too.

Do I trust banks ? Nope, no way ! Keep them at arm's length.

EXCEPTION: you can get a home equity loan from the same lender as your first mortgage. That is a bit of an advantage for you, as you can refinance the first mortgage leaving the second mortgage in place (IF you have enough equity & income). Why ? The home equity lender can re-subordinate the second lien of the home equity loan and let the new first mortgage step to ahead in lien priority. That will never happen if the home equity line is with another bank.


Still riding my Brontosaurus, waiting for a sighting of that water hole out there.

PS: Checked with Krypto .. she wants me to sell a bit of Euoprean stocks. A weak signal, but I'll comply given where the markets are. Also, I see TIPs is over 108, so I'll sell more of those, too. All proceeds to cash as no buy signals exist.

Word of the Day

"Maugre" - preposition [$100] archaic - used by George Washington in private letters, a person who had no formal schooling. Related to the French word, malgré, of same meaning.
Maugre means in spite of, notwithstanding.
Sentence: Maugre all those ads from banks, never give them more than one piece of your financial business. They will stab you in the back at the worst possible time.


Spin-em said...

Cuba announced Monday that 500000 government jobs will be cut by next year to spur growth.....as we add.....loool USA USA

Bunkerman said...

lol, yup, spin

"Are we on the right path, or the wrong path"

Fidel says we are wrong


Spin-em said...

Bunk ..is that how you "acquired" the clubs??..lol...just askin

Bunkerman said...

did the TIPs and VGK (Europe index fund) trades.

Bunkerman said...

got them for almost nada out of a bankrupcty in the early 1990s, nursed them along for years reinvesting all cash; paid off all debt and now they're great cash cow


Bunkerman said...

by not being a pig, sold a chunk of them in 2006 for big bucks & paid off all debt; the rest are free & clear.

have to muscle some people once in a while to keep them in line, and plan to sell all to the "gals" around 2017 at good prices (must wait for tax reasons).

Till then, I run then .. well ... I keep a couple layers between the ops and self.


Bunkerman said...

if hadn't sold that chunk in 2006, would certainly have gotten wiped out in Panic.

Don't be a pig ...

Spin-em said...

I bet you can tell some stories around the camp fire..LOOL

mfl59 said...

Bunkerman are you from New Jersey sir? just askin...

Frosty said...

perfect fried egg, perfect business timing, perfect pemmican....trifectawheelerdealer.

Bunkerman said...

nope, I'm from Ohio

Frosty said...

"Then the bank can take your CD, take all your funds in your checking account and apply it to the credit card balance, and then close your checking account."....this by the way...is not legal sir.

Bunkerman said...

sure they can do that frosty - right of setoff.

I know a person who had that happen to them.

Frosty said...

that must be some fluke of a state level law then or they had a judgement against them.

Bunkerman said...

nope. It's all over the country - look up "Right of setoff" in Internet.

The situation was exactly as I described.

I had heard about it years ago, too. That's why I ordered my financial life with complete separateness among instititions.