Global Courant 2023-05-12 16:35:00
Macro guru: The US government can ‘restrict your right’ to withdraw money from banks if panic escalates – here’s what it wants for protection. Plus 2 other anti-shock agents
By The collapse of the Silicon Valley Bank until the demise of First Republic, the US banking crisis may not be over.
Hedge fund manager and macroeconomic expert Hugh Hendry recently expressed concern that the government could step in to prevent US bank withdrawals in an interview with Bloomberg Markets.
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“I would advise you to panic,” says Hendry, pointing to what he calls “the biggest waterfall fall” in the M2 money supply – which consists of cash, checks and other types of deposits that are easily converted to cash, such as A certificate of deposit.
“That could reach a crescendo where the Treasury and the Fed may have to step in and effectively limit your right as a U.S. citizen to withdraw money from the U.S. banking sector.”
Here’s why he’s concerned – and what he recommends you put your money into.
Why the government should intervene
Hendry believes the panic and “capital flight from the banking sector” is in fact justified and fears that the Fed and Treasury officials are putting a “gate” or “lock” on bank deposits.
To be safe, the Federal Deposit Insurance Corporation (FDIC) insures deposits of up to $250,000 per depositor, per insured bank, per category of property. But Hendry believes it won’t solve the deposit flight problem because people are “looking for returns” with their money.
Hendry says, “I would imagine there will be a rule from the federal government or the Treasury saying, ‘You can’t get your money out of the banking sector for the next 180 days.'”
Hendry compares this to the Gold Reserve Act of 1934, which banned private ownership of monetary gold to raise its price, control the dollar’s value, and bring more money into circulation.
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Hendry says it’s time to turn to “the most reviled security in the universe”: the ultra-long Treasuries. He explains that ultra-long, T-bonds with longer maturities — about 20 to 30 years or more — trade two to three standard deviations among bond ETFs, which invest in a variety of fixed-income securities, including T-bonds.
Treasuries are also considered more reliable and safe because they are backed by the government and have a fixed interest rate for the life of the bond.
Hendrik adds Bitcoin could also be a potential winner, predicting it could trade three or four times higher over the next five years. “There’s no other asset class that would allow me to make that decision.”
Here are 2 other shockproof assets
1. Real Estate
Real estate has long been an excellent hedge against inflation – and it could be a safe bet when other financial assets run into trouble.
While you could become a landlord and rent out a guest room for some passive income, there are other ways to invest in real estate without the hassle of hosting.
For example, real estate investment trusts (REITs) own various properties such as apartment buildings, shopping malls and cell towers, and many are traded on the stock exchange
You could also look into it crowdfunding platformsallowing investors to own a percentage of physical real estate, rather than buying a second home, for example – which usually involves a hefty down payment and a mortgage.
2. Gold
Humans have been hoarding this precious metal for thousands of years – and now they are here different ways to bank on gold while cash can get out of reach.
The first proven method, of course, is to simply buy sold gold, whether in jewellery, bars or coins. Keep in mind that prices are notoriously difficult to predict, and if you keep your gold with a special custodian or broker, you’ll also incur additional fees.
Your next option is to buy gold mining stocks or invest in gold ETFs through a investment app or broker.
Or think of gold futures, contracts in which you agree to buy a certain amount of gold at a certain price sometime in the future. However, futures typically require a minimum purchase of 100 ounces of gold, which significantly increases your risk level since you are borrowing a large amount.
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This article provides information only and should not be taken as advice. It comes without any kind of warranty.
