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Safe Banking when facing Long Term Severe Social or Environmental Challenges

(c) 2012 by John W. Apsley, II, MD(E), ND, DC www.drapsley.com

 

The key to safe banking is to keep safe cash equivalents in proven safe locations.

 

During the early stages of a catastrophic market/economic crash, "flight to safety" has always meant folks domestic or abroad buy U.S. dollars and U.S. Treasuries. Under Economics 101, according to the Law of Supply & Demand, the value of the U.S. dollar will necessarily increase (not decrease) in value as everyone demands them, while precious metals will likely plummet in value along with all commodities and supplies choke the marketplace due to a scarcity of buyers. This is a true "Depression" as opposed to just a bad recession.

 

Just prior to this phenomenon (where demand causes the value of the U.S. dollar to skyrocket as well as the cost (price) of short term U.S. Treasuries), precious metals may spike in value, like a light bulb on the verge of burning out. It grows super bright just as it prepares to collapse. When this spike ends, all precious metals and foreign currencies typically plummet in value in favor of the U.S. dollar. This is exactly what happened going into the 2009 crash from late January into early March.

 

So, with folks flooding to buy short term U.S. Treasuries, they will go negative for a time (they already have several times since early 2009). This means that if you initially buy $1,000 of short term U.S. Treasuries, after a month or more your statements may reflect you own slightly less than $1,000 of U.S. Treasuries. The increased strength of the dollar will tend to buffer this loss as people sell everything else to obtain U.S. dollars (Federal Reserve Notes) in their flight to safety. But this is why it is even better to hold cash at safe locations since dollars themselves will not drop even one millmeter below their face value. Perhaps best of all safe cash equivalents are Certificates of Indebtedness. If my understanding is correct, Certificates of Indebtedness do not decay in value in this regard and are held by Treasury Direct (arguably the safest place in the world unti such time asl the U.S. faces bankruptcy). Check with an experienced financial advisor on this subject.

 

The following is provided below for those who are considering global near term financial crises and/or collapse:

 

First - Safe banks would include the small number which have no or little exposure to private or commercial mortgages and healthy deposits on hand. Veribanc is an excellent company I have repeatedly relied upon in the past to locate and confirm safe banks/credit unions in my state. See: [HERE]

 

Second - Short term U.S. Treasuries are excellent cash preservation vehicles if held in a safe rated bank or a top rated safe insurance policy (such as Mutual of Omaha). See Treasury Direct: [HERE]

 

Next - I recommend you investigate:

  • Fidelity's (FSBAX or FSBIX) liquid short term U.S. Treasury Mutual Fund
  • VanGuard's (VFISX) liquid short term U.S. Treasury Mutual Fund
  • American Century's (CPFXX) liquid short term U.S. Treasury Mutual Fund

All are composed of ~99% short term treasury notes (3, 6, 9, 12 and 24 month bonds), making them highly liquid when it is time to switch over to other forms of safe cash equivalents & AAA investments (i.e., ~2016).

 

In Summary - Talk to your financial advisor about:

  1. Holding U.S. cash in safe places, with good access
  2. Holding Certificates of Indebtedness owned via Treasury Direct. See: [HERE]
  3. When prices drop in metals and all commodities, own physical metals and hold them in safe locations.
  4. For those not averse to risk, shorting the market at least down to the half-way meltdown point (~6,500 for the DOW, 700 for the S&P) may prove profitable so long as the equity shorts can be cashed in during planned profit taking into safe cash equivalents
  5. Later, cash which will be king can buy long term U.S. Treasuries and AAA Corporate bonds yielding very high 20 year payouts above 15% annually as access to cash vanishes along with most banks in the U.S. and the EU.
  6. Or to buy physical metals when they bottom (maybe below 650/oz. for gold or more). Holding your physical metals held for you in secure off-shore vaults, such as:
    • Central Fund of Canada, Ltd (AMEX ticker - CEF) - see: [HERE].
    • Euro-Pacific Capital (Peter Schiff): [HERE]

 

 

Avoid most all other investments till ~2016, except short positions and U.S. dollar cash flow investments such as rent property already owned free and clear.

Most importantly, experts who see a near-term market crash (hihgly likely to start between late September 2012 to first quarter of 2013) suggest to avoid:

  1. Real Estate holdings
  2. Government agency debt (foreign and domestic except for short term U.S. Treasuries)
  3. Most Banks
  4. Most Credit Unions
  5. Most Savings & Loans
  6. All bank CDs
  7. Stocks
  8. Commodities
  9. Municipal debt
  10. Corporate debt
  11. Consumer debt
  12. Non-U.S. dollars
  13. Commodities
  14. Insurance and annuities that are backed by all of the above Avoid vehicles!