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MF Global Lesson: Avoid margin trading. Independent Financial Advice


MF Global Cash Clients to get Partial Release of Frozen Money


     The WSJ said today MF Global’s Trustee today released 60% of the “cash only” accounts’ assets, keeping $349,000,000 in reserve until the Trustee’s auditor can find the missing $600,000,000. So the MF Global customers who had cash accounts were at least able to get some money but the ones without a cash account did not get their money back. I have written an article that cash accounts are safer than a margin account. The article was referring to securities Brokers and is not literally the same at a Futures Broker. My company does not recommend futures trading due to the extreme leverage and risk, and that has helped people to avoid the risk of a Futures Brokerage bankruptcy. When you have a securities account the SIPC insures it to $500,000.

    When you lose money in a bad investment your tax deduction is limited to $3,000 a year plus an offset against any capital gains. But if you loss was due to theft, fraud, etc. then you may use the casualty loss deduction to get almost a full deduction against your total income. For example, if you lost $1,000,000 and have income from other sources of $100,000 then you won’t be getting the full value of the loss deduction. But a tax deduction is not the same as getting a complete refund from the Trustee. And there is no SIPC insurance for Futures markets, unlike securities.

    I have written an article “Will 401k’s be hurt by MF Global bankruptcy?” and “MF Global bankruptcy scary implications of Eurozone may cause global crash”.

    Investors should seek independent financial advice.


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Mayflower Capital

Donald Martin, CFP®

1000 Fremont Ave. Ste. 260H

Los Altos, CA 94024

(650) 949-0775

Donald Martin is a NAPFA-Registered Fee-Only financial planner and investment advisor.