tag:blogger.com,1999:blog-8305505968390768234.post2118028706857763612..comments2023-08-10T11:39:24.714-04:00Comments on fdralloveragain: How to Protect Yourself From the Federal Reservefdralloveragainhttp://www.blogger.com/profile/03488923148019117760noreply@blogger.comBlogger25125tag:blogger.com,1999:blog-8305505968390768234.post-1144254260517941052010-01-25T11:55:38.700-05:002010-01-25T11:55:38.700-05:00FDR, What do you consider to be a reasonable amou...FDR, What do you consider to be a reasonable amount of gold insurance to have on hand?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-8497262620469969442010-01-25T03:00:01.051-05:002010-01-25T03:00:01.051-05:00"Do I understand rightly that you do not cons..."Do I understand rightly that you do not consider holding actual bullion as dumb, because though it's price will fall, it's value will rise in the coming mega deflation?"<br /><br />I recommend holding a reasonable amount physical metal (I do) as insurance or a hedge against disaster. Just realize that all insurance must cost you money. Never expect to make money on a hedge--it's intended to be written off as a total loss. <br /><br />Virtually by definition, a hedge must be MUCH higher leverage than the primary position to work. Otherwise, you'd simply be holding both the winning and losing side of the same trade. <br /><br />So you don't need much money stored in physical metal, if you think you do, then it can't function properly as a hedge.<br /><br />That is why most people buying gold today are holding a non-nonsensical position. That is like expecting to make money on both your car and your car insurance policy. <br /><br />It is entirely possible that a given insurance policy might increase in value as the insured position also increases in value. That should set off an alarm because you aren't insured, whether you know it or not.fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-51667683336092685972010-01-25T00:46:31.986-05:002010-01-25T00:46:31.986-05:00Hello kcb,
Regarding your question about:
&quo...Hello kcb, <br /><br />Regarding your question about: <br /><br />"There are risky banks and their are extremely risky banks. The safest banks are extremely over-leveraged. You can get relative ratings here:<br /><br />http://www.thestreet.com/bank-safety/index.html"<br /><br />I think FDR meant that based on the ratings provided by The Street.com, it seems they are grading with an "A" banks that in FDR's opinion are over-leveraged.<br /><br />So, just imagine how bad are the banks that are rated below "C".......JAM123noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-80785846648581202442010-01-24T20:56:37.250-05:002010-01-24T20:56:37.250-05:00Hi FDR,
You said: 'With the dumb money still ...Hi FDR,<br /><br />You said: 'With the dumb money still fully vested in stocks, paper gold, and banks'.<br /><br />Do I understand rightly that you do not consider holding actual bullion as dumb, because though it's price will fall, it's value will rise in the coming mega deflation?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-40806422507303322822010-01-24T18:29:39.093-05:002010-01-24T18:29:39.093-05:00FDR;
A possibility in lieu of treasury and/or cash...FDR;<br />A possibility in lieu of treasury and/or cash seizures during a crisis<br />I haven't seen you address is placing an expiration date on circulating cash. This may not have been possible in 1913, but with current technology of embedding nan-size filaments in newly printed cash, they could simply devalue bills held by hoarders 'forcing' the bills back into circulation. Here is how it could work: A 6-month window would be called to redeem all currently held cash for a rfid'd <br />bills that would need to be re-depsoited into the bank, otherwise would expire worthless - all this of course a stepping stone to their much planned cashless society.<br /><br />Going one step further, foreigners could have a different maturity.<br />Someone at Goldseek predicted the 'multi-colored' bills we now see over a decade ago and this was his hypothesis. If this were to come to pass, would there be any warning signs to look for? You say the 'smart' money is pouring into near zero interest rate treasuries to protect cash - do you have a breakdown of the weight held by forgeiners vs. Americans? Do you see any validity to this hypothesis and if so do you see it as a low med or high probability?<br />thanks - have enjoyed all your posts since the mw days.<br />Appreciate the service you're providing.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-57064213278661241142010-01-24T18:27:51.395-05:002010-01-24T18:27:51.395-05:00"Why do you believe that's not a realisti..."Why do you believe that's not a realistic option?"<br /><br />because its "very unusual", of course ;)<br /><br />---<br /><br />EVEN the safest banks are extremely over-leveragedAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-66755507895684040322010-01-24T17:53:19.100-05:002010-01-24T17:53:19.100-05:00kcb, if the government starts to issue super senio...kcb, if the government starts to issue super senior/preferred treasuries, they might be getting ready for what you're talking about ;-).<br /><br />But who knows, maybe the gov would default on c-of-i's before other treasuries. It's hard to game these things out. At some point, I would just take cash out of the bank and put in under my mattress. For the moment though, I like the idea of keeping the money in c-of-i's.djrichardhttps://www.blogger.com/profile/15687024819979476984noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-44189306963247091652010-01-24T17:36:38.457-05:002010-01-24T17:36:38.457-05:00kcb, I think the safest banks are the ones that ar...kcb, I think the safest banks are the ones that are TBTF (too big too fail) - the government won't let them fail. And those all happen to be extremely over-leveraged (the best way to get big is to be over-leveraged).djrichardhttps://www.blogger.com/profile/15687024819979476984noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-28199257157250030462010-01-24T11:27:07.762-05:002010-01-24T11:27:07.762-05:00In response to my assertion that the government co...In response to my assertion that the government could preferentially seize smaller treasury accounts, FDR wrote: <i>"I don't think that's a realistic option."</i><br /><br />Why do you believe that's not a realistic option? There's no technological or logistical reason they can't do such a thing, so the only thing left is political. And as I said, the government answers to the wealthy much more than it answers to the not-so-wealthy, and therefore such a thing is also a political possibility. Remember, we're talking about a U.S. government that, if it doesn't do this, will cease to function.<br /><br /><br />In response to my question about the safest banks being the most over-leveraged, FDR wrote: <i>"I don't remember saying that."</i><br /><br />You didn't say exactly that. Here's what you did say, in your first response to my questions (emphasis mine):<br /><br /><i>"There are risky banks and their are extremely risky banks. <b>The safest banks are extremely over-leveraged.</b> You can get relative ratings here:<br /><br />http://www.thestreet.com/bank-safety/index.html"</i><br /><br />So I suppose I extrapolated where perhaps I shouldn't have, and my question should be: why are the safest banks so extremely over-leveraged? Is that what makes them safe? If so, why? If not, what <i>does</i> make them safe (relatively speaking, of course)?kcbhttps://www.blogger.com/profile/16129427343119498596noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-32161737256969464782010-01-24T09:30:52.851-05:002010-01-24T09:30:52.851-05:00"What do you mean by every time prices half, ..."What do you mean by every time prices half, safe cash returns a cool 100%?"<br /><br />Panda, when an asset falls 50% in value it takes a 100% return to break even. Your cash can buy twice as much of it in other words.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-79589896228086522992010-01-24T07:16:19.026-05:002010-01-24T07:16:19.026-05:00FDR
What do you mean by every time prices half, s...FDR<br /><br />What do you mean by every time prices half, safe cash returns a cool 100%? <br /><br />Do you mean most asset prices, stocks, RE etc?<br /><br />Also, i got my Treasury Direct card and placed my first order. For example if i bought 1000 dollars of T'bills, will they debit my account for 999 dollars?<br /><br />Thanks in advancePandanoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-9333229327057317112010-01-24T05:51:10.749-05:002010-01-24T05:51:10.749-05:00"Therefore, the government knows with ease wh..."Therefore, the government knows with ease which accounts have how much money in them, and can preferentially seize the smaller accounts while leaving the larger ones alone."<br /><br />I don't think that's a realistic option.<br /><br />"Also, why are the most over-leveraged banks also the safest?"<br /><br />I don't remember saying that.fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-66224107627703095482010-01-23T22:52:20.575-05:002010-01-23T22:52:20.575-05:00In answer to my question about the risk of the gov...In answer to my question about the risk of the government seizing treasury assets, FDR wrote: <i>"Yes, that's possible. At least you're in the same boat as the filthy rich and politically influential. Like I said, it's the best risk:reward trade, not necessarily a safe haven."</i><br /><br />This (being in the same boat as the rich and influential) doesn't follow at all.<br /><br />The accounts are named and individual. And electronic, of course. Therefore, the government knows with ease which accounts have how much money in them, and can preferentially seize the smaller accounts while leaving the larger ones alone. Since the smaller ones are likely to outnumber the larger ones by a couple of orders of magnitude or more, the number of smaller accounts makes up for their small size. Why would the government do that? Because it answers to the wealthy to a much greater degree than it answers to the rest of us.<br /><br />Additionally (or, at least, as an alternative), the extremely wealthy almost certainly have connections that will alert them to the pending action and will thus be able to transfer their money elsewhere before the seizures occurs.<br /><br />Either way, the end result is the same: the wealthy keep their assets, while the not so wealthy do not.<br /><br />Where would you place the risk versus reward of treasuries for someone who doesn't qualify as one of the wealthy?<br /><br /><br />Also, why are the most over-leveraged banks also the safest?kcbhttps://www.blogger.com/profile/16129427343119498596noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-72929568750182257112010-01-23T22:39:49.530-05:002010-01-23T22:39:49.530-05:00"The FED has created $trillons to refloat the..."The FED has created $trillons to refloat the big banks and prop up asset prices. Surely they will just continue this to whatever lengths are needed?"<br /><br />The money supply has been plunging for nearly 2 years because the Fed has been draining as hard as they can. The US dollar has never strengthened faster than the past 22 month bull market surge.fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-63382930694111630582010-01-23T22:37:09.839-05:002010-01-23T22:37:09.839-05:00"Most other commentators are suggesting cash ..."Most other commentators are suggesting cash is trash."<br /><br />Most = guaranteed wrong.fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-38947247091287745052010-01-23T21:05:10.181-05:002010-01-23T21:05:10.181-05:00The FED has created $trillons to refloat the big b...The FED has created $trillons to refloat the big banks and prop up asset prices. Surely they will just continue this to whatever lengths are needed?<br /><br />Most other commentators are suggesting cash is trash.UK savernoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-46094483206101026582010-01-23T20:21:08.612-05:002010-01-23T20:21:08.612-05:00Hi FDR,
What about credit unions? Specifically t...Hi FDR,<br /><br />What about credit unions? Specifically thinking of Pentagon Federal credit union.<br /><br />Keep I bonds... redeem I bonds?<br /><br />Best,Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-47754478454363581812010-01-23T17:48:16.690-05:002010-01-23T17:48:16.690-05:00FDR,
How about brokerage accounts? Do the main b...FDR,<br /><br />How about brokerage accounts? Do the main brokerages keep their money or "float" in TBTF banks?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-78918786664152777942010-01-23T14:42:46.196-05:002010-01-23T14:42:46.196-05:00Banks are of course the most likely entities to cr...Banks are of course the most likely entities to crash and burn if it gets as bad as you're suggesting because of their diversified investments in bloated assets. However, credit unions, although definitely not exempt from credit risk, seem to be faring much better than banks right now. Many are much more conservative with loan qualifications and seem to be positioned well for the coming depression. <br /><br />On that note, maybe Obama's proposal to limit banks' equity positions seems rational afterall. (I'm sure it's Volcker's anyway, but we'll give BHO credit)Joe Shareholderhttps://www.blogger.com/profile/17147606389622294202noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-32532159233045449662010-01-23T13:39:19.703-05:002010-01-23T13:39:19.703-05:00Cramer also says avoid any bank below C. I prefer...Cramer also says avoid any bank below C. I prefer to avoid all banks, except to hold pocket money. <br /><br />Why give your money to a compulsive gambler in distress when you can store it more conveniently in the Treasury?fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-16562081668544223642010-01-23T13:36:21.689-05:002010-01-23T13:36:21.689-05:00"Why do you believe treasuries to be a safe h..."Why do you believe treasuries to be a safe haven in the face of a bankrupt U.S. government? Wouldn't the government simply seize the treasury assets for its own use under those circumstances, similar to how it went door to door and confiscated everyone's gold during the Great Depression?"<br /><br />Yes, that's possible. At least you're in the same boat as the filthy rich and politically influential. Like I said, it's the best risk:reward trade, not necessarily a safe haven.<br /><br />There are risky banks and their are extremely risky banks. The safest banks are extremely over-leveraged. You can get relative ratings here:<br /><br />http://www.thestreet.com/bank-safety/index.html<br /><br />Consider an A+ to be like a C- and anything below C-, an F.fdralloveragainhttps://www.blogger.com/profile/03488923148019117760noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-31117979497066569262010-01-23T13:34:11.376-05:002010-01-23T13:34:11.376-05:00FDR as a Canadian I am inelegible to participate ...FDR as a Canadian I am inelegible to participate in Treasury Direct (sigh). Who exactly qualifies? For now buying US Dollars from my bank and Treasuries through my broker is my only option. <br /><br />Ah the Dollar and Treasuries. When was the last time something so widely disparaged and hated was in a bubble? (Answer: never).hettygreenhttps://www.blogger.com/profile/02942359318618747424noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-73579819238462722482010-01-23T13:23:41.546-05:002010-01-23T13:23:41.546-05:00any comments on Operation Stillpoint?any comments on Operation Stillpoint?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-21661299433644345372010-01-23T13:14:26.045-05:002010-01-23T13:14:26.045-05:00Thanks so much! The pointer to C of I was very hel...Thanks so much! The pointer to C of I was very helpful. I was just about to pull the tigger on moving money into treasury direct and I wasn't sure how to derisk through maturies and ladders. This solves a lot of the headache.<br /><br />And I take great heed to everything else you're saying too.<br /><br />Thanks!djrichardhttps://www.blogger.com/profile/15687024819979476984noreply@blogger.comtag:blogger.com,1999:blog-8305505968390768234.post-66793579579371295032010-01-23T12:28:46.678-05:002010-01-23T12:28:46.678-05:00Thanks very much for posting this. I would reques...Thanks very much for posting this. I would request that you also link to it in your "Read Me First" section.<br /><br />Now to the big question I have about them:<br /><br />Why do you believe treasuries to be a safe haven in the face of a bankrupt U.S. government? Wouldn't the government simply seize the treasury assets for its own use under those circumstances, similar to how it went door to door and confiscated everyone's gold during the Great Depression?<br /><br />Given the risk of seizure of treasuries, isn't a foreign bank a <i>safer</i> location for one's cash? Yes, it won't increase in buying power at the same rate that the U.S. dollar does, but the risk is lower as well. This smells like a traditional risk versus reward setup to me.<br /><br /><br />That said, I do see treasuries as one of the many hedges one can use to protect one's assets. But as with any hedge, I'm skeptical of the wisdom of putting the bulk of one's assets there.<br /><br /><br />Oh, one other question: do there exist any banking institutions in the U.S. that <i>aren't</i> over-leveraged? If so, what/where are they?kcbhttps://www.blogger.com/profile/16129427343119498596noreply@blogger.com