Is Your Money Safe?

hobokenkitchenMarch 13, 2008

If we go into a full blown depression as some economists are forecasting, where will our cash be safe?

I know that each bank account is insured up to $100,000. So should we divide up our cash into lots of different accounts? Would that insurance still be valid if the government starts freezing accounts like they did recently in Argentina?

Should you spread the risk further by keeping cash with lots of different banks in case one particular bank goes under?

We decided to rent for the next 12 months as we didn't get the house we wanted. Now we have our cash in a savings account with interest currently at 3.89% and dropping (it was at over 5%).

What should we do with our cash and where will it be safe?

The stock market is dropping like a stone, we're out of the real estate market for at least another year - do we just leave it in the bank? Divide it up into seperate $100,000 accounts? Take it out and stick it in the mattrass : ) ? What?

I realize this all sounds a bit extreme, but with the recent economic climate paired with what we've seen in Argentina and even runs on banks in the UK, one starts to wonder where your money is safe - especially if things get significantly worse.

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If we have a depression like we had years ago, the banks fail also. I think property is a very good investment against that kind of problem, but then you have to have money to pay the taxes. It would be a no win for everyone. I have a good pension, but if the stock market and banks go down, my pension goes to. The only sure thing is cash in the mattress. I would change that to cash in a fire box in the basement.

    Bookmark   March 13, 2008 at 4:41PM
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Bonds are usually a good bet as they're less likely to be affected the same way as the market. They don't pay the same returns, but they're better than a regular bank acct. and usually a lot safer than foreign, futures, mutuals, or trust funds.

    Bookmark   March 13, 2008 at 5:26PM
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how liquid do you need it to be?

Will you want to buy in a year or two?

i can't see America following Argentina's lead.

But I also think you shouldn't have accounts larger than the insurance amounts. At the very least, I'd do that.

    Bookmark   March 13, 2008 at 5:33PM
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Hi Hobokenkitchen,

If we go into a full blown depression as some economists are forecasting, where will our cash be safe?

I've got bad news unfortunately.... as long as we extend money printing (liquidity infusion) privileges to the Federal Reserve, our cash (dollar value) is going to continue to decline.

As long as you are storing (saving) in dollar-denominated accounts, the rate of REAL inflation will deteriorate your account value in real dollar perspective.

We have TWO issues at hand;
A) Protection of net worth,
B) Protection of ability to cover living expenses.

What should we do with our cash and where will it be safe?

The "worst case" planning would be to build a "ladder of security" in the cascading order;
A) Cash (the least you can safely keep in cash,) in insured interest-bearing accounts,
B) Easily liquidated hard assets (gold, silver, and similar,)
C) Maximum leveraged primary residence real estate,
D) Maximum leveraged cashflow real estate.

The stock market is dropping like a stone, we're out of the real estate market for at least another year - do we just leave it in the bank?

Your cash, by itself, will decline over the coming year much more than the net value of a maximum leveraged piece of real estate.

This is because the dollar decline will apply equally to your cash in pocket, AND the "other people's cash" that is borrowed for the real estate ownership.

Real estate that yields cashflow (rentals) are particularly strong right now due to the mortgage collapse, and the upward pressure on the rental markets from that.

Of course, this is a "best use" strategy, which requires strong credit, strong money management, and a willingness to manage your properties.

Anything "saving" money in a dollar-denominated account is a net worth loser in the coming decade, unfortunately.

Dave Donhoff
Strategic Equity & Leverage Planner

    Bookmark   March 13, 2008 at 6:13PM
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I remember just after I learned to ride a bike down our country road, aged 9, looking at the stones and gravel on the road and thinking how great it would be if they were gold!

It took me about 5 minutes to conclude that, if it were gold for me, it'd be gold for everyone else, too.

And it would almost immediately take a lot of gravel that had become gold to buy a loaf of bread at the store.

Your government owes huge debt.

They're running deeper into debt every year - recenty did so even more to give (mostly rich) folks a tax cut!

They're printing money.

There is a large amount of consumer debt in the U.S.

Many U.S. homeowners are walking away from their homes because they can no longer afford them - a substantial number of them due to funny-business mortgages put in place a few years ago by somewhat duplicitous lenders.

About five or six years ago CA$1.00 would buy me US$0.65 - 0.69. Now, CA$1.00 will buy me US$1.01.

My foreign assets have grown - but they're worth less than they were, to me ... because they're denominated in U.S. Dollars.

I've heard some suggestion that, as the U.S. Dollar declined, that some financial experts felt that the British Pound wouldn't do as the world's residual currency, nor would the Swiss Franc. A few years ago, possibly the Yen might have ... but then the Japanese had that prolonged recession that changed that.

That the Western financial people didn't like the idea of it possibly becoming the Ryal ... or Yuan ... or the Rupee.

That part of the reason for instituting the Euro was that some of the financial experts felt that it might be a replacement for the U.S. Dollar, on its decline, maybe becoming the world's residual currency (for a while).

I thought that sounded pretty far-fetched at the time.

But some areas of the world, especially the oil producers, are becoming unhappy about their valuable product being paid for with U.S. Dollars.

Imagine you were the leaders of the Government of China ... who own, one way or another, billions of U.S. Dollar-denominated bonds ... each of which'll buy less, every year.

What are they doing with them?

Using them to buy resource-producing companies in various parts of the world.

With some of the governments in those countries rather uneasy about that change in ownership - and the reality of the new ownership.

Have you seen how Russia uses their oil to wave a political stick around Europe?

Good wishes for increasing shrewdness in the use of your income and assets.

ole joyful

    Bookmark   March 14, 2008 at 12:28AM
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I respect Martin Weiss. He has been right about so many aspects of this shaky market. This is what he sent less than an hour ago. This is NOT meant to be an endorsement. Just what I agree with.

Flash: Bear Stearns nearly bankrupt!
More failures coming!
by Martin D. Weiss, Ph.D.

Today marks the first day of the next phase of the credit collapse we've been warning you about: The failure phase.

The first victim: Bear Stearns.

Bear Stearns is the nation's fifth largest investment bank. For 86 years, it has been a venerable bulwark of Wall Street.

Bear Stearns is also the same firm that shocked Wall Street last year when it was one of the first to reveal mega-losses from mortgage-related disasters. Now it's doing it again, but this time, in a far more advanced stage of the crisis � the threat of bankruptcy.

Right now, virtually everyone on Wall Street is stubbornly trying to avoid that "b" word. But the undeniable reality is that:

* Bear Stearns is in serious trouble � so serious, in fact, that it has required the emergency bail-out by both the Federal Reserve Bank of New York and JPMorgan Chase. To us and anyone who will level with you, that means that bankruptcy was � and is � very close.

* Bear Stearns is not alone. As we warned our subscribers in our latest issue of Safe Money Report, other major Wall Street firms could be headed for bankruptcy. Indeed ...

* Major, Herculean rescue efforts � whether by the Fed, by big banks or both � are not going to stem the crisis. They're not going to stop home prices from falling. Nor will they prevent debts from defaulting or the economy from sinking into recession. Quite to the contrary ...

* The Fed's cures are worse than the disease, driving the U.S. dollar into a new, dizzying tailspin. And ...

* As the dollar falls, our favorite counter-dollar investments are surging.

Bottom line: This is not the climax of the story. It's just the beginning. When it strikes with full force, watch out below!

What To Do Now

Step 1. If you own vulnerable assets, don't be afraid to dump them. If you're taking a profit, pay the taxes. If you're taking a loss, bite the bullet and move on. In either case, just sell. And if you have a personal adviser, be sure to work as a team to reduce your exposure.

Step 2. Get your money to safety as quickly as possible. Years ago, for maximum safety and liquidity, short-term U.S. Treasury bills would have been all you needed. Today, given the threat to the dollar, we feel you need a prudent balance among:

* U.S. Treasury bills or Treasury-only money market funds such as American Century Capital Preservation Fund (CPFXX), Dreyfus 100% U.S. Treasury Money Market Fund (DUSXX), Fidelity U.S. Treasury Money Market Fund (FDLXX) and Weiss Treasury Only Money Fund (WEOXX) plus ...

* Strong foreign currencies like the CurrencyShares Japanese Yen Trust (FXY), plus ...

* Gold, using an ETF like streetTRACKS Gold Trust (GLD).

Step 3. For protection � and profit � seriously consider inverse ETFs. For months now, I've been sending readers a link to my special report on what they are, who they are and how to use them. I've posted it prominently on our Web page. And I have made it free.

Did you use it to build a firewall of protection around you? If so, great. If not, what are you waiting for?

The title is How to Protect Your Stock Portfolio From the Spreading Credit Crunch.

To review it immediately, along with the accompanying list of inverse ETFs, just pull it up on your screen with this link:

Step 4. Register for our emergency online teleconference. It will be held this coming Tuesday at 12 noon Eastern Time. And it's designed specifically to help you in these difficult times.

Today's already Friday. So if you delay your registration, I'm afraid you may miss it.

Don't do that. It's too important, especially with everything that's happening now. And it's absolutely free.

I leave you with one final thought you should never, never forget: No matter how dark things get in the days and weeks ahead, it's not the end of the world. Our country has been through worse, and we survived, even thrived.

You can do the same, especially if you take prudent, protective action today.

Good luck and God bless!


Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:
This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit

    Bookmark   March 14, 2008 at 3:33PM
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One thing you can do is move your cash to a better paying bank. Right now, Countrywide Bank is paying 4.05% APY. At that rate, you'll be earning an extra $160 annually per $100,000. It's not a lot, but it's worth it imo. Wherever you keep your cash, I would break it up into insured amounts. For a couple, that can be 3 accounts per institution. I think the guaranteed amount is the initial deposit plus interest.

Is the maximum guaranteed amount still $100,000? I thought it had gone up. You could find out for sure by checking the FDIC's website.

I've kept my cash savings in an internet bank for years, though I've moved it every year or two. There are a few sources to check for best bank rates, whether local banks or strictly online banks. Try If that's not it, it's something like it.

    Bookmark   March 17, 2008 at 12:55PM
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I prefer to give my business with those banks who DIDN'T play clam shell games with their depositers/investors money.

We have moved money to banks that were never involved in the subprime debacle. Especially in light of what the FDIC is doing.

"FDIC is looking to hire 25 staffers to deal with an anticipated increase in failures, a move that would increase its staff by 11%. Among those it hopes to hire are recent retirees who worked through the S&L crisis. Jaret Seiberg, the financial services analyst for policy research firm Stanford Group, said it appears that regulators are expecting about 200 bank failures in the coming year or two.If that occurs, it could rival the flood of bank failures seen during the S&L crisis. In 1989, the nation saw a post-Depression era record of 206 bank failures.

A link that might be useful:

    Bookmark   March 17, 2008 at 1:59PM
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The FDIC's maximum guaranteed amount is $100k - it did not go up. One thing that will insure bank failures is some of the more unfounded fear mongering resulting in runs on the banks. (For the sake of argument, not ALL the fear mongering is unfounded.)

It would be naive to think things aren't bad, and that things can't get worse, but I'm not ready to yank money out of banks just yet - and I'm careful not to go over the guaranteed insured maximums. At the moment, a bank seems almost as good a place to park extra money as anyplace else until a better investment comes along: stockmarket, Treasuries, municipals, etc. are all doing gornisht. Cash stockpiles do even less, but cash is about as liquid as you can get.

It's a waiting game, we've gone through crises before. We seem to come through with a few bruises, but never totally broken.

    Bookmark   March 17, 2008 at 3:23PM
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"One thing that will insure bank failures is some of the more unfounded fear mongering resulting in runs on the banks. (For the sake of argument, not ALL the fear mongering is unfounded.)"

Bank failures aren't caused by fear mongering, they are caused by poor managers. At least that is what the Comptroller of the Currency says.

Like they say "If it looks like a duck, swims like a duck and quacks like a duck, then it's probably a DUCK."

    Bookmark   March 17, 2008 at 7:06PM
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Personally, I've moved most of my money into short term treasuries. You can do this by opening up an account at When it matures, you can have the proceeds deposited into a zero account there, instead of deposited back to your bank. Thus you bypass banks for maximum safety. Inverse ETF's are a good hedge as well.

For me, return OF capital is more important to me than return ON least for the next year as we wait to see how this thing plays out. Interesting article at spiegel on how the Germans are scared, too/.

    Bookmark   April 1, 2008 at 6:27PM
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The actual value of the U.S. Dollar is shrinking.

When the value of your asset is shrinking ... change it for an asset that isn't ... insofar as is possible.

Five years or so ago, you could have bought CA$1.00 for 65 - 69 US cents.

Now it'll cost you 98 US cents - US$1.02.

Check the exchange rates of several basic world currencies in relation to the U.S. Dollar in recent years.

That should tell you something. How about buying shares of strong, quality companies, abroad, in stable, growing markets?

Had you bought some of those (cheap) Canadian dollars back a few years ago ... and used them to buy some oil and gas shares, you'd be smiling now.

I think it's true that more of Alberta oil and gas goes over the border than stays in Canada.

There's talk of the Chinese gov't.-related agencies using some of their U.S. dollar bonds (the value of each of which has been suffering annual shrinkage on the world markets) to buy Canadian oil and gas producers and build pipelines to Pacific tidewater.

Paid for, originally, by some of the cheap Chinese-made products that you've been buying in the "Dollar" stores.

In fact, if you had enough for a down payment on your house in a year or so large enough to avoid buying mortgage insurance, you might well decide that it would be wise to just let those oil and gas shares (or other resource-based shares) just sit there and keep earning ... and growing.

In fact, if you had the certificates issued, and used them as additional collateral to back your house loan, you might get by without mortgage insurance on an even smaller down payment than is usually required.

My daughter, currently buying a house, is leaving some of her assets inherited from her mother to keep on running rather than liquidating to reduce her mortgage (the mortgage interest being deductible in the U.S., as it is not here).

Go to Yahoo or another financial agent and ask for ECA.TO (large natural gas producer), SU.TO (oil, involved with the tar sands), IMO.TO (major shareholder is Exxon), POT.TO (produces potash fertilizer), etc. (interlisted on NYSE, IMO on AMEX - but apparent growth won't be as large, there, due to exchange losses) as some examples, then check their 1-year, 5-year, etc. increases in share prices ... and factor in the exchange rate to find what your gross rate of return would have been.

Then you figure your tax load, and the effect of inflation to calculate your real rate of return ... that is, current rate of return. To figure your actual result, figure in the rate of growth, if any, of the asset for that year, as well ... and if you want to be more accurate, reduce that amount by the reduction that you would have suffered due to tax, had you cashed the asset now.

Sometimes an additional, e.g. 3% gross rate of return will double your real rate of return, for the amount of tax will usually be a percentage of it - but the rate of inflation is a direct deduction, and is the same for each asset in any year as you go, but does not vary depending on the type of asset.

Good wishes for managing your money wisely - in a worldwide market.

ole joyful

    Bookmark   April 4, 2008 at 3:18PM
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Am I correct? Two people in a joint MM account are insured for $200,000.


    Bookmark   April 7, 2008 at 11:54PM
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Not knowing how you hold title to your accounts I can't say whether you're insured for over $100K. But, here's the FDIC brochure...


Here is a link that might be useful: FDIC Insurance Brochure

    Bookmark   April 8, 2008 at 12:03PM
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I said a joint account, is that what you mean?
Here is the blurb from FDIC

Joint Accounts
These are deposit accounts owned by two or more people. If both owners have equal rights to withdraw money from a joint account, each persons shares of all joint accounts at the same insured bank are added together and the total is insured up to $100,000.

Example: John and Mary have a $220,000 CD at an insured bank. Under FDIC rules, each person's share of each joint account is considered equal unless otherwise stated in the bankÂs records. John and Mary each own $110,000 in the joint account category, putting a total of $20,000 ($10,000 for each) over the insurance limit.

I just want to make sure we can hold $200k and be insured. These two sentences seem to contradict each other.

    Bookmark   April 8, 2008 at 7:30PM
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I found the answer on, thanks.

    Bookmark   April 9, 2008 at 12:54PM
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A little more food for thought.

Maxing out FDIC coverage
Ask Dr. Don by Don Taylor, Ph.D., CFA ⢠

Dear Dr. Don,
How do my wife and I structure accounts at one bank to keep more than $100,000 insured?
-- Scott Saver

Dear Scott,
You can each have $100,000 insured as a depositor with a single FDIC-insured financial institution. The accounts can be held individually as single accounts or jointly. Here are some excerpts from the FDIC guide, Insuring Your Deposits, about structuring your accounts to maximize the insurance coverage:

The FDIC insures deposit accounts such as checking, NOW and savings accounts, money market deposit accounts, and certificates of deposit (CDs). The basic insurance limit is $100,000 per depositor per insured bank.

If you or your family has deposits at one insured bank totaling more than $100,000, you should know that different ownership categories of accounts are separately insured up to $100,000. You may qualify for more than $100,000 in coverage at one insured bank if you own deposit accounts in different ownership categories.

The most common ownership categories are:

* Single accounts
* Self-directed retirement accounts
* Joint accounts
* Revocable trust accounts

The FDIC Web site also has EDIE, the Electronic Deposit Insurance Estimator, that will allow you to input the particulars concerning your deposits and estimate your insurance coverage.

A new approach to arranging insured deposits with one bank is CDARs, which is the acronym for Certificates of Deposit Account Registry Service. You can deal with just one bank, but have your money fully FDIC insured up to $10 million. A Bankrate feature has more information about this approach to insured deposits.

-- Posted: April 7, 2005

Links that might be useful:

    Bookmark   April 10, 2008 at 10:37AM
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tenkids -- are you still around? I saw this thread only last night and was interested in your comment regarding Zero-percent Certificate of Indebtedness. They are available through Treasury Direct, but not Legacy Treasury Direct. Are you happy with online investing without being able to speak to a live representative? Why did you choose Treasury Direct over Legacy Treasury Direct? I'm confused as to why both are offered, because I thought they were both ways to purchase securities directly from the government.

    Bookmark   April 10, 2008 at 12:01PM
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