Monday, June 10, 2013

Junior Lenders

Hi Junior, how's it going?

Imagine if you walked into your plush local bank today and was greeted by a happy faced young lady in such a friendly way? Would you be confused? Well, you needn't be, because it is true. If you have a savings deposit account at that bank, you are a junior creditor to that bank. You have loaned them your savings and if that bank gets into financial trouble, you are the first cab off the rank to get screwed.

Perhaps a good reponse would be; "Fine thank you. Now can I get all my money out as I have problems with what you just said?" Great answer, just don't say it too loud. As you may recall in Mary Poppins, bank runs start on very small rumours. But I jest slightly.

Not many people know this about their status with their bank, or even care for that matter. Until it happens to them. Ask Joe Blow Cypriot if he cares. Just make sure you stand a wee way away from him, his spitting vitriol is likely to be unhealthy on your face.

So what do you do?

Some would say only have an amount in your bank account sufficient for everyday transactions; going to the supermarket, buying gas etc. The rest? Try to protect is as well as you can. Is gold an option? Yes. Even Nouriel Roubini, the 'gold bug name-caller' still recommends a 'modest' amount of gold in every portfolio.

Get out from underneath the leveraged balance sheets of institutions that are vulnerable and in the system. Look at assets that can be stored, insured, located in multiple jurisdictions and is allocated to you alone.. Come to think of it, gold comes to mind again.

Gold
in New Zealand dollars: $1760.900 per oz
Previous all-time high: $2311.02 per oz (15 Nov, 2011)

Silver in New Zealand dollars: $27.70 per oz
Previous all-time high: $59.19 per oz (30 Apr, 2011)
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The Anglo-Far East Company
AFE is the gold bullion custodial provider of choice for the sophisticated investor,
families, and institutions that require the highest level of discretion, competence,
safety, and service. Your reference when you order: an-001
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