"Do not panic! Once all the media are full of doomsday scenarios it‘s usually a good time to invest."
Oct. 03, 2011
Over the course of the summer our group discussions were, not surprisingly, dominated by questions on how to deal with the crisis in the financial markets and, in particular, on how to protect assets from a possible melt-down in asset prices and currencies.
Member Discussions: Safety of deposits
Our member Garbo is “getting more concerned about the safety of deposits in banks. That the banks are US or Swiss or another nationality is irrelevant. Of particular interest is the protection of cash deposits or commodities held in a bank trust account.” In his view, to avoid a financial panic, some very strict political/legal decisions should be implemented.
catturo01 is rather pessimistic on the impact that political and legal actions would have:
“I doubt that when things really get worse any financial and legal decisions will cool down a panic. In particular, looking back over the last years it became obvious that any political or legal decisions taken a week ago might be changed a gain next week. That´s what happened all the time in this incredibly poorly managed process of the Greek bail-out. At the end in several countries not even the parliament was consulted and the supreme courts had no other change than to shape their verdict after a few politicians in Brussels had come together and made decisions overnight. So why should an investor trust any political/legal decisions?”
A valuable input to broaden these discussions comes from marks, who recommends taking matters in our own hands and restructuring the asset allocations rather than waiting for regulatory actions:
“I think a lot depends on the country/jurisdiction and the kind of deposit insurance that is mandated. In addition, I guess it is much safer to keep securities like stocks or funds in an account rather than cash in a checking account (as these securities are not part of what goes down the drain when a bank goes bankrupt). “
Member Discussion: How do you prepare for a breakup of the EURO?
On broadly similar lines to the previous discussion on the safety of deposits was the exchange in this group. vinoepane kicked it off by stating that in his view “..it seems that politicians are unable to find a solution to the debt crises of the PIGS countries. At least, this is what the market signal. It seem not too far fetched that at some point the euro might break up and countries like Greece could be forced to leave the Eurozone. What does this mean for private investors?”
The respondents had a clear view on the consequences that should give all long-term investors some reassurance:
catturo01 stated “One short answer: Do not panic! Once all media are full of doomsday scenarios it is usually a good time to invest. And not in asset classes that are overheated such as Gold and Swiss Francs, but the "bad guys" such as banks and the Euro. Economically Greece is completely neglect able. Will the global sales of Siemens, Nestle or Google be affected when Greece goes bankrupt ? No way. Do not panic!”
Garbo fully agreed with Catturo: “No panic. I do not believe in a break up of the Euro. The next "crisis" (and there will be one), will affect all countries (Switzerland included) and will be essentially monetary + political. I do believe that currencies will be realigned etc but it is correct that companies like Nestle, Procter & Gamble etc.. will still do business. It is also true that people still need to be fed and live somewhere. Remember, better to hold stock of great cos than cash with brokers/banks. If you own gold, better get it in a vault than keep it in custody with any banks.”
Member Discussions: Charter for Ethical Wealth Management
The editorial board of MyPrivateBanking has discussed and drafted a “Charter for Ethical Wealth Management” and thrown it open for comments and questions within our networking platform. We appreciate the insights and opinions we got!
Geneva4 is optimistic wealth managers have a chance to improve but reckons this initiative may take a long time to bear fruit:
“Banks have no genuine interest is such a charter - yet! As always an idea will take time to become reality and it takes a few pioneers. I am sure there are wealth managers out there that see the opportunity such a charter would bring for them to differentiate their services from that of thousands of others. And then the pressure will rise for others. It is a long-term play and ultimately the demands from the clients will decide where it is heading. And I am sure over time the new generation of clients will wake-up and demand the transparency they already request for all other products and services they buy. Great idea! Have patience!”
Rather pessimistic on the success of this voluntary initiative is hotmillions:
“Nice try but only if such an initiative is backed by the clout of the regulator will it change things. The banks are just laughing at a voluntary charter. So my take is: the content of the charter is spot-on, totally right, absolutely necessary but the banks won't care (most of them anyway) because such rules (e.g. the kick-back rule) will severely limit their profitability. So I guess with the exception of a few independent boutiques nobody cares. You have to make it law to change the world.”
Our member Alexarnback disagrees with hotmillions viewpoint:
“I agree with you that banks have no interest in changing things, as they are making much more money with the status quo. I am personally very suspicious about potential regulatory changes due to the power of the financial services lobby… however, I have a lot of faith in the actions of the consumer. I strongly believe that initiatives such as MyPrivateBanking, Wealthstandards.org and others which contribute to consumer education and knowledge sharing. The client can then force change through his educated choices.”
We appreciate the excellent postings over the summer and we would like to thank our members for sharing their insights and views. In particular in times of high uncertainty independent peer advice can hopefully provide a valuable, different viewpoint to the bombardment of bad news and Armageddon scenarios in the mainstream media.