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# It's just getting started folks....

Author Message
Senior Manager
Joined: 30 Jul 2007
Posts: 385
Location: Europe
Schools: St. Gallen '09
Followers: 6

Kudos [?]: 59 [0], given: 5

It's just getting started folks.... [#permalink]  15 Jul 2008, 09:22
During the past year, a major bank run and failure happened in the UK, and now we have the first major retail bank run and subsequent failure of Indymac.

Is all this panic foreboding a bottom? It's really anyone's guess, but I sure would check your banking institution's balance sheets (if they are publicly traded) and/or contact them directly in order to inquire about their exposure to derivatives, especially those that are OTC. You don't want to be the person with a large amount of "virtual" cash in a checking, savings, or brokerage account, and then find out that you no longer have access to it. I am aware that FDIC insures deposits up to $100k (if your institution is a FDIC member), but one needs to think about future access to those supposedly insured funds. How long will it actually take to get access once your bank fails and you can no longer withdraw those funds? What happens if there are massive bank failures and the total amount of deposits which actually exceed the cash balance that FDIC relies on to honor your insured deposit? I'm not advocating to pull all your money out of financial institutions and stuff the cash and/or gold under the mattress. However, it may be wise for everyone to really start questioning the health of your financial institutions which hold your assets and take prudent measures to ensure that you will as much unlimited access to your assets (cash) that you may need in certain unexpected situations that may ever come up in your life. http://www.latimes.com/business/la-fi-i ... 1088.story Banks hit by fallout from the crisis at IndyMac Some depositors at the failed thrift, seized by regulators, leave without all of the funds that were in their accounts. Bank shares slide, but institutions say they are well-capitalized. By E. Scott Reckard and Andrea Chang, Los Angeles Times Staff Writers July 15, 2008 As thousands of customers waited hours in the heat Monday to withdraw deposits from failed IndyMac Bank, investors dumped the stocks of many mortgage lenders, precipitating the steepest one-day decline in banking shares since 1989. Southern California fixtures Downey Financial Corp. and FirstFed Financial Corp., specialists in the nontraditional mortgages that fueled the housing boom, were among the hardest hit, with their stock prices down 24% and 19% respectively. Shares of Washington Mutual Inc., the biggest savings and loan, fell nearly 35%. SVP Joined: 30 Apr 2008 Posts: 1889 Location: Oklahoma City Schools: Hard Knocks Followers: 36 Kudos [?]: 485 [0], given: 32 Re: It's just getting started folks.... [#permalink] 15 Jul 2008, 09:34 While I agree it is a concern, I equate you with the guy on the corner shouting "Getcha money out now! Getcha money out now! This bank is going under!!" It's a self-fulfilling statement. The only difference is there are high-tech ways to get the message out. This could get to the point where the Feds have to come in and stop it. Hope not, but it's always possible. I've laughed at people I've heard before say "We'll never see a bank run like there were in the 30s" PS - I live in Oklahoma and it seems everyone here had some relative that experienced it back in the 30s, couldn't get their money out, so they moved to California to start a new life. Now the decendents of those people are getting their California houses foreclosed on. Life is cyclical. _________________ ------------------------------------ J Allen Morris **I'm pretty sure I'm right, but then again, I'm just a guy with his head up his a$$. GMAT Club Premium Membership - big benefits and savings Senior Manager Joined: 30 Jul 2007 Posts: 385 Location: Europe Schools: St. Gallen '09 Followers: 6 Kudos [?]: 59 [0], given: 5 Re: It's just getting started folks.... [#permalink] 15 Jul 2008, 11:52 jallenmorris wrote: While I agree it is a concern, I equate you with the guy on the corner shouting "Getcha money out now! Getcha money out now! This bank is going under!!" It's a self-fulfilling statement. The only difference is there are high-tech ways to get the message out. This could get to the point where the Feds have to come in and stop it. Hope not, but it's always possible. I've laughed at people I've heard before say "We'll never see a bank run like there were in the 30s" PS - I live in Oklahoma and it seems everyone here had some relative that experienced it back in the 30s, couldn't get their money out, so they moved to California to start a new life. Now the decendents of those people are getting their California houses foreclosed on. Life is cyclical. i gotta say...the profile pic is hilarious! you're right though about self-fulfilling prophecies. but, perception is reality. whatever reality really is... SVP Joined: 31 Jul 2006 Posts: 2304 Schools: Darden Followers: 40 Kudos [?]: 446 [0], given: 0 Re: It's just getting started folks.... [#permalink] 15 Jul 2008, 18:30 You only need to worry about this if you have more than$100k in a single institution. Nobody has ever lost a penny of FDIC insured funds, and they won't now. It's not gonna happen. If you do have more than $100k, the you might think about spreading it around to various banks. If you have so much money that you can't find enough places to spread it around, well you're too rich to worry about. Senior Manager Joined: 30 Jul 2007 Posts: 385 Location: Europe Schools: St. Gallen '09 Followers: 6 Kudos [?]: 59 [0], given: 5 Re: It's just getting started folks.... [#permalink] 15 Jul 2008, 22:15 pelihu wrote: You only need to worry about this if you have more than$100k in a single institution. Nobody has ever lost a penny of FDIC insured funds, and they won't now. It's not gonna happen. If you do have more than $100k, the you might think about spreading it around to various banks. If you have so much money that you can't find enough places to spread it around, well you're too rich to worry about. How sure are you that it's not gonna happen? Nobody really knows. I bet not many people in 1929 America thought the Great Depression was just around the corner. Senior Manager Joined: 30 Jul 2007 Posts: 385 Location: Europe Schools: St. Gallen '09 Followers: 6 Kudos [?]: 59 [0], given: 5 Re: It's just getting started folks.... [#permalink] 16 Jul 2008, 03:29 The following comes from a man I know and respect greatly. He has great wisdom about the financial markets, although I don't agree with everything he says nor have I taken all of the steps he lays out to protect yourself. With that said, I only provide it FWIW: http://www.jsmineset.com/ARhome.asp?VAf ... _ARID=6440 Posted On: Tuesday, July 15, 2008, 4:05:00 PM EST It Has Hit The Fan Author: Jim Sinclair Dear CIGAs, The financial system is broken and all that can be done by the US Federal Reserve and the US Treasury is monetize all major financial entities. The reason that all this has happened is the$1.114 QUADRILLION dollar mountain of crap paper made of unfunded, unlisted, unregulated and non-transparent financial specific performance contracts called OTC derivatives.

Those that create and peddle OTC derivatives are guilty of financial murder one.

I cannot imagine you reading the information above and failing to protect yourself, but knowing mankind, I doubt many did.

1. You should hold no dollars except what is required to pay bills for six months. You know now that FDIC is grossly under-financed compared to potential claims. Get all your money out of financial entities now before you have to stand in line to get it. Screw interest rates. Keep six months of cash in your safety deposit box, invest the balance in short term treasuries of other currencies.
2. You should put a minimum 1/3 of your LIQUID net worth in gold and gold equivalents.
3. You surely know by now that SIPC is grossly under-financed when it comes to covering potential claims. The secondary insurance held by brokers is written to them for you, but not for you.

There are three ways you can protect your securities:

1. Have your shares delivered to you as paper shares registered in your name.
2. Have your shares put in direct registration as a book entry at the transfer agent of the company you are invested in.
3. After consulting a tax counsel and receiving their blessing, order your retirement 401K, Roth and other like investments transferred into the name of your Trust Company, for the benefit of you.

Failing to do this because your broker disagrees or makes a fuss is you becoming complacent.

The basic thesis is please distance yourself and your assets from financial agents.

Monty Guild wrote the following excerpt in early April of this year:

"REMINDER--HAVE YOU CHECKED THE SAFETY OF YOUR CUSTODIAN? HAVE YOU CAREFULLY READ THE LANGUAGE OF YOUR CUSTODIAN'S AGREEMENT WHICH GOVERNS THE DISPOSITION OF YOUR ASSETS IN THE CASE OF SERIOUS FINANCIAL PROBLEMS IN THE WORLD ECONOMY, OR WITH THE CUSTODIAN ITSELF?

In our opinion, all investors and all recipients of pension plans or holders of IRAs should check the financial stability of the custodians of the assets that they own. Equally important, is the legal wording of your relationship with your custodian. Have your attorney look over the wording and make sure that the custodian is segregating your assets and will audit your assets annually to make sure that they are segregated from other clients and from the assets of the firm itself.

We have spent money on attorneys who review the legal language in our custodial agreements as we believe that it is essential knowledge. We are money managers, not attorneys. Please have an attorney look over the legal language of your relationship with your custodian...what you find may surprise you."

That which remains in any bank or trustee financial agency should be in true custodial form. Assuming you have your tax counsel bless the above actions with regards to your 401K, Roth, and other similar investments, the end result will be the trustee acting as a true custodial-ship.

You must own gold and gold equivalents. Gold is headed to a minimum of $1650, a number that now looks quite low. Gold is a currency. Do not forget that. The US Budget Deficit is going ballistic. The US dollar will trade at .5200. The Euro will trade at$2. The collapse of banks is far from over. Default derivatives will fail to function when called upon to function in any significant amount. Many major companies will fade away due to hidden OTC derivatives.

Pakistan will take crude up \$100 from the point it is trading at now when the event occurs.

Monetization of all primary dealers of US Treasuries and all major manufacturers of OTC derivatives will be bailed out.

If you delay or do not act by doing the above simple and easy steps you will be financial finished. Mark my words. Those of you out there who freeze up make yourself targets.

Monty Guild’s commentary on Bernanke’s testimony before the senate banking committee:

Dear CIGAs,

Chairman Barnacle made it clear today that he will do nothing but increase the liquidity in the system. He will not raise interest rates and he will make the loan window available to all important institutions that need it. He is saying, in our opinion, that he recognizes the system is deeply damaged and in danger of total collapse. Later on TV a former Fed bank president confirmed his approach.

To us this means more liquidity will be pumped into the system. The future will see more inflation, more demand for currencies other than the dollar, more demand for gold and a continued weak US banking system .To protect oneself is, as Jim has constantly pointed out, the major responsibility of CIGAs. We believe the solution is to own gold, foreign currencies, food related investments and to have your assets in a secure institution which will not commingle your funds with theirs in case of their solvency problems.

Respectfully yours,
Monty Guild
http://www.GuildInvestment.com
Manager
Joined: 06 Jan 2008
Posts: 215
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Kudos [?]: 39 [0], given: 1

Re: It's just getting started folks.... [#permalink]  28 Jul 2008, 17:03
Jeez Trader1, sure sounds like a good time to get further into debt with the approaching hyperinflation.

I'm good friends with a guy who has invested everything he has in physical delivery of silver and gold for the past 5 years. Obviously he has done well "on paper", but the problem is his portfolio is buried in his backyard.

My point is, if things ever got that bad, having cash or treasuries, or even gold coins are going to be worthless. You're better off taking physical delivery of wonderbread, peanut butter, and a shotgun.
Senior Manager
Joined: 30 Jul 2007
Posts: 385
Location: Europe
Schools: St. Gallen '09
Followers: 6

Kudos [?]: 59 [1] , given: 5

Re: It's just getting started folks.... [#permalink]  29 Jul 2008, 04:17
1
KUDOS
Manbehindthecurtain wrote:
Jeez Trader1, sure sounds like a good time to get further into debt with the approaching hyperinflation.

I'm good friends with a guy who has invested everything he has in physical delivery of silver and gold for the past 5 years. Obviously he has done well "on paper", but the problem is his portfolio is buried in his backyard.

My point is, if things ever got that bad, having cash or treasuries, or even gold coins are going to be worthless. You're better off taking physical delivery of wonderbread, peanut butter, and a shotgun.

Well, I have some friends that have a bit more than wonderbread and a shotgun in their bunker

But, I don't agree with you that gold coins would be worthless if we experience hyperinflation. (I agree that it would be great to be in debt in dollars, but good luck getting credit and/or a loan). The hyperinflationary scenario wouldn't be the worst of it, but rather the ensuing deflationary depression that would follow. As gold is the ultimate barometer of inflation, its value will simple increase as inflation increases and the value of the fiat currency would decrease. Ultimately in a depression scenario, logic dictates that gold's value would also decrease. However, as gold is the ultimate currency, its value would simply be determined by people's willingness to accept it as a medium of exchange. I think gold coins would be impractical to use for exchange during an inflationary or deflationary environment, whereas junk silver coins might be a better medium. The denominations would be smaller and more viable to exchange for essentials. But, even fiat currency could still be a viable medium of exchange if people are willing to accept it (just more of it perhaps). Guns and/or ammunition could also be a medium exchange!
Senior Manager
Joined: 02 May 2004
Posts: 313
Followers: 1

Kudos [?]: 6 [0], given: 0

Re: It's just getting started folks.... [#permalink]  21 Feb 2009, 06:42
Yes..I would be more concerned that the money would lose value that not being able to get any cash at all
The 100k may suddenly become worth 20k..
Re: It's just getting started folks....   [#permalink] 21 Feb 2009, 06:42
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