Today we’re diving into the nitty-gritty details of those elusive ‘senior claims’. Remember how in part one we discussed the shocking revelation that you don’t actually own your stocks and bonds?
Yeah, that was a shocker for me too.
Instead, you’re just a subordinated claimant with a neutered position as the holder of a ‘security entitlement.’ It’s like you’re forced to play blackjack because the Federal Reserve has made it its mission to slowly destroy the value of your savings via inflation, but there are other people seated at your table who can bet massive amounts secure in the knowledge that if they lose their chips tey can always reach over and help themselves to yours. Bizarre, right?
But hang on, it gets even more intriguing. Those senior claims? They’re mostly held by the big boys – the major banks and financial institutions. As long as ‘they’ hold a “qualified financial contract” (QFC) with the failed brokerage or clearing house, their claims come before yours.
Ad what are these QFC’s? Mainly derivatives, but also margin debt, and virtually anything else you could think of that sounds like a financial instrument.
We’re going to dig into this mystery together, peeling back the layers of legal jargon and financial terminology to uncover the truth. And while we’re at it, let’s not forget about the process of dematerialization, where your private property rights do a Houdini and disappear into thin air. Spooky, huh? But hey, don’t worry. We’re all in this together, so let’s dive in and start connecting the dots.