Posted on 02/27/2009 7:14:30 PM PST by quesney
How many banks in Canada failed in the 1929 crash?.......
And no gold was confiscated either
The vast majority did not either. There we a few of us on here who did see the signs. When warning statements concerning the over-inflated housing situation was creating a bubble which would inevitably burst, coupled with a meltdown in the sub-prime heavy banking system, overlapping on the inflated stock indexes, that same vast majority said not to be concerned, as they continued flipping houses like baseball cards, along with feeding their stock brokers commissions.
"I will say my gold hedged against my stock loss. I’m about even."
Good call!
Watch those stock indexes to decline another 50%.
bookmark
It would do an end run around the illegal drug trade, burglary and the stolen property market, too. If you can’t sell drugs, pawn, fence or steal things of value for coin of the realm, those things become impossible to trade - unless another item of barter arises. However, carrying around a keg of beer or two to make a transaction can become tiresome (not to mention needing a bigger wallet).
Converting earned income to passive income
I’m a bit surprised that no one else has chimed in to outline the substantial and uncontrollable risks in such a strategy.
First you have the currency risk: if unhedged holdings are dominated in a foreign currency and the dollar moves the wrong way relative to your holdings, you have lost value losing value if your holdings must converted back into dollars for US purchases. Essentially an unhedged bet on such holdings in foreign currencies is a bet against the dollar and against the US economy, which is still the 400 pound gorilla in the room.
The second is liquidity risk: If major economies become substantially more disrupted than currently, will there be a ready domestic or international market market for (for example) preferred shares in a foreign bank? You might have to end up selling at a very deep discount if you need to liquidate such holdings on short notice.
The third is sector risk: Investments in the preferred stock of any bank is in part a bet on the general health of the banking portion of the financial sector as the preferred stock of a sound bank will almost certainly lose value irrespective of its objective worth as subjective opinion devalues the entire sector.
The fourth is diversification risk: To the extent you have concentrated your net worth in any particular asset class or sector of the economy, you’ve “bet the farm” on its fortunes at the point at which you must liquidate your investment. A sound investment program attempts to minimize the risks of over-concentration in any particular asset class, and an investment program that recommends over-concentration on any asset class is inherently risky.
The fifth is confiscation risk: if the economy gets bad enough in any advanced economy the government is eventually going to consider bank nationalization, which will wipe out - or at least greatly reduce - shareholder and bond holder value.
None of this is a reason not to hold foreign investments including foreign currencies in reasonable proportion in a diversified portfolio.
But IMO a recommendation for wholesale conversion of personal wealth into holdings in foreign banks is extremely risky strategy, and almost certainly runs much higher real risk of substantial losses than the possibility that the FDIC will fail to reimburse insured depositors in US institutions.
ping to #80.
So what do you recommend? This is about offering other Freepers options and alternatives.
Very good! Seriously though, I'm absolutely no money expert, and am only operating from common sense. We are in a buyer's market now, which is course bad for sellers. My wife and I were considering moving to cut down on my commute. Not any more. We're going to sit tight and ride this thing out. It may get worse before it gets better, but it will get better. We're fortunate in that our house is about 90% equity (even in this market). I feel more comfortable with that as an asset than cash. Again, just the opinion of somebody who probably has no idea what he is talking about.
Depends on you age, current situation, and responsibilities, IMO there is little *blanket* advice that one can give, but here are a few general observations:
1) IMO, betting on a sustained collapse of a modern industrial society is to be betting against pretty steep odds. It didn’t happen here even during the Great Depression, and it hasn’t happened anywhere else in a modern well-organized society since World War II. It’s one thing to take prudent and relatively inexpensive steps to be able the tide yourself over a few weeks of disruption in distribution systems, it’s quite another to start planning your entire life in such a way as to survive the far less likely event of general societal collapse - especially is as it is extremely expensive and disruptive for most people to attempt this, and since it’s hard to determine in advance exactly what sorts of challenges you will be facing.
In this regard it’s worth considering the experience of Japan and Germany toward the end of World War II: it’s easy to imagine various kinds of collapses of modern infrastructure, but few of them even approach the scale and duration of the Allied bombing campaigns in the closing years of World War II. These societies were under intense economic stress, but social cohesion and central control and command of the economy and society persisted until the very end in areas not under Allied occupation.
2) Keep in mind that the future is largely unknowable, even to those more intelligent and better informed than most readers here.
Late last summer I had lunch with a former CEO of a major corporation, an individual who has made three separate fortunes, and an extremely intelligent and well-informed man with the global economic perspective. We were discussing the question of individual investment, and I asked him if a market were almost every asset class appeared to be overvalued he saw any bargains at the moment. His reply was he thought that likely non-banking financial stocks were at or close to their bottom.
As it turned out of course this asset class was on perched on the brink of what was to be precipitous loss of value over the next six months; it was literally about the worst asset class in which one could possibly have invested at that moment.
Which is why this man - with a net worth greater than all but a few tenths of a percent of Americans, who could afford to gamble substantial amounts of money if he wished - has the vast proportion of his wealth conservatively deployed across a wide range asset classes and economies, and does his “gambling” with the assets in a 401(k) plan funded years ago when he was first starting out in someone else’s employee, and containing assets not much greater than my own.
I doubt he it is happy about the results of that strategy, but what I have lunch with him next summer, and I ask him, I’m virtually certain that he’ll say that given the difficulty of predicting the future this was likely the most rational investment choice, and that he hasn’t much altered it.
3) With this in mind, other than such obvious strategies as paying down high interest rate debt if you can it’s very difficult to know what one can do in unsettled economic times that would not be generally good advice at any time.
To some extent you can protect a portion of your wealth against inflation by holding hard assets and by investing in inflation protected asset classes such as inflation linked government bonds, however it’s much harder for average individuals to protect themselves against deflation except by having little personally guaranteed debt - the problem there is that almost all substantial lending for the purchase of assets such as a personal residence to fund the growth of a small businesses requires a personal guarantee. Unfortunately there are few small businesses that can be successfully grown to a reasonable size on cash flow alone, meanwhile the people “underwater” on their mortgages are getting a highly unpleasing lesson in the realities of indebtedness in a deflationary housing marker.
I have virtually the entire movie (GWTW) memorized line for line.
Another thing we middle-class homeowners need to do, with our house probably being our biggest “investment,” is keep a sharp eye out for any indication that Obama and the Democrats will bring back that outrageous Capital Gains tax on sale of primary residence. (Now if you live there 2 years and sell, no tax on “profit”).
If they start making noise about doing so, we have to fight, but if they pass it, depending on one’s equity, etc, it might make more sense to sell the house before it goes into effect, rather than sell when the law changes, and give 1/3 to 1/2 your profit to the government.
That tax, plus the cost of realtors, cost of move, closing fees, money put into house for improvements, etc, can actually result in a LOSS - maybe not in the view of the IRS, but in the reality of our pocketbooks.
Then we’ll be saying, “As God is my witness, I’ll never go hungry again!”
[Ping to my post #47]
Thanks Candor, will look very seriously into it.
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