Bear Stearns closed at $30 on March 14, 2008. It failed that weekend, and if the govt sponsored JP Morgan bailout hadn't happened there would have been no company to pull your money from that Monday. Stocks closing above $5 per share one day and going bankrupt by the next have happened dozens of times in recent history and probably hundreds if not thousands of times over the past 100 years. I know, facts like that can appear as "drivel" if you're just learning something new. Just keep at it, you can do it!
You are caught up on the specific prices I mention instead of realizing the truth behind what I am saying. Look at this chart of Bear Sterns: You are telling me if you had an account at Bear Sterns that you wouldn't be getting nervous when it gets cut in half from say $90 to $45 in a handful of days? Personally, I would be wiring money out to a different financial institution that didn't have such a horrific looking chart. The market always knows before you do. I find it odd that you are unwilling to even entertain this simple rule for your own financial security. You seem to want to argue with me just for the sake of arguing. Now let's get back to Interactive Brokers: I have an account at Interactive Brokers. You make it clear that you have problems with them but they are a great broker for my purposes. However, if IBKR were to fall to $30 in a week from $60+, I would cut my exposure to them. It's not that hard to understand. During the financial crisis, I did cut my exposure when IBKR started to fall (as did many other account holders - I remember receiving a reassurance e-mail from Interactive Brokers stating that they would accommodate all transfers but that they were in no danger of going out of business). If you don't have some sort of contingency plan based on the stock price of your broker, then you aren't being prudent.
It's important when you look at graphs, in both finance and science and engineering, to pay close attention to the scale of both the x and y axis. You'll see that the scale in the chart you posted of Bear Stearns is in years, it shows a period from 1992-2008. As such, the minimum resolution is too low to determine if it did fall by half in a few days. I've attached two graphs that show the actual time period in question, rather than an entire decade and a half: So it looks like for a month it traded in the $80 range and not until the very last day did it drop to what would hit your new moving goalpost trigger of not $5 per share but 50%. Could you have pulled all your funds out that Friday? Unless they were all in cash, no, because you wouldn't have had time for your closing transactions to clear. Not to mention you'd have to make sure you weren't on vacation or otherwise occupied. And the fact that it's only human to delay when facing an actual situation, hindsight is always 20/20 especially for armchair warriors. Listen, it's simply a fact that not every bankruptcy is telegraphed by a low stock price in sufficient time for you to do something about it. That's called counterparty risk, it's present with every counterparty, and it's what finance professionals deal with every day. To deny the presence of counterparty risk is hopelessly naive, to double and triple down on that denial is....just some pathological need to always be right I guess. It's clear you haven't lived through unexpected bankruptcies as a trader, many people on this board have. It's clear you have very little background in finance, many people on this board do. If you want to step on your own dick by ignoring that as well as the actual examples presented, be our guest, the only one in pain will be you. However there are lots of people who, unlike you, look to posts on this board to learn something, I certainly do. For us it's important that incorrect information that can get you in trouble is discounted for what it is. The incorrect assertion that financial troubles in a company are always telegraphed in the stock price is a prime example of the kind of incorrect information that can get one in trouble, so hopefully we've put that incorrect assertion to bed.
You must be looking at a different chart than I am. You also appear to never be able to concede on any valid points made by others when you feel you have an axe to grind. You are also vulgar. It is what it is. If you ignore the stock price of a financial institution that you have money with, then you are a fool. And I contend that if you had been paying attention to Bear Stearns, you would have been able to get your money out before that day. You are nitpicking about specific prices or percentages that I mention but you are missing the point completely. Enough on this topic.
You IB fanboys are too much. I need to post. And no, I am not Sig, don't know him, don't even care much about this topic. But ----- Correct. The main point of his post was about the importance of looking at a different chart. Did Sig's post suggest differently? That's just false. Because you have been exposed as being wrong in stating that Bear's stock price was cut in half over "a handful of days" before they disappeared?
Again, you are calling me out on details that don't make a difference to my argument. The fact is, you look at that Bear Stearns chart and the market is clearly telling you that something is wrong and that you should consider cutting exposure to that institution. The nitpicking about the details that I mentioned have no relevance to this argument.
Take a look at this chart for a well known broker: The market is clearly telling you something is wrong, no? Or how about this one: Again, clearly the market's telling you something is wrong? The first is an Interactive Brokers chart and the second is a GS quote, obviously neither failed. The point being that your hindsight is 20/20, especially having never experienced this first hand. In the real world, stocks have large drops all the time. At the time Bear Stearns failed pretty much every brokerage stock had seen a decline similar to theirs. If you had been actually experiencing the situation in real time, you would have seen nothing to indicate that Bear Stearns was in any worse shape than any other broker out there until it was too late, just like the thousands of professional investors who were caught by surprise at the time but you apparently feel you're superior to. Your constantly changing criteria and scoffing at "nitpicking about the details" are pretty clear indicators that, when faced with an actual situation in real time without the benefit of hindsight, you'd have no solid exit criteria and most probably get caught up like everyone else. And to be clear, Bear Stearns is just one of numerous examples over numerous market crashes. And it doesn't touch the entirely separate field of accounting and financial scandals which also often give no actionable warning in stock price. Or the fact that many of us like to occasionally go on a two week vacation out of touch of the internet and would like to not have to obsess about our broker's stability based on their stock price. Should you keep an eye on your broker's stock price and pull money out of it if it falls significantly and unexpectedly while the rest of the broker stock universe is stable? Absolutely. Will you always be able to correctly anticipate a broker's failure based on stock price and therefore scoff at anyone wishing to discuss broker counter-party risk? Absolutely and demonstrably not. So it's not at all unreasonable to care about things like SIPC insurance and taking measures like purchasing treasuries in your name to reduce your counter-party risk exposure to your broker, whoever that broker may be. Again, until you've experienced this first hand it's difficult to grasp the difference between armchair quarterbacking and actually living through an unprecedented situation. While you may not be able to grasp it, if everyone who has lived through such a situation says the same thing and backs it up with data, a little humbleness on one's lack of omniscience never hurts.
One big big difference which is not in the charts is tha Bear and Goldman and the other ibanks had and still have major off balance sheet obligations. IB doesn’t. Push comes to shove your money is safer at a broker that has prudent risk management and is well capitalized and doesn’t have off balance sheet obligations 2008 was a layup for long term purchases of strong firms being that we’re oversold.