Most Popular
1. THE INFLATION MONSTER is Forecasting RECESSION - Nadeem_Walayat
2.Why APPLE Could CRASH the Stock Market! - Nadeem_Walayat
3.The Stocks Stealth BEAR Market - Nadeem_Walayat
4.Inflation, Commodities and Interest Rates : Paradigm Shifts in Macrotrends - Rambus_Chartology
5.Stock Market in the Eye of the Storm, Visualising AI Tech Stocks Buying Levels - Nadeem_Walayat
6.AI Tech Stocks Earnings BloodBath Buying Opportunity - Nadeem_Walayat
7.PPT HALTS STOCK MARKET CRASH ahead of Fed May Interest Rate Hike Meeting - Nadeem_Walayat
8.50 Small Cap Growth Stocks Analysis to CAPITALISE on the Stock Market Inflation -Nadeem_Walayat
9.WE HAVE NO CHOICE BUT TO INVEST IN STOCKS AND HOUSING MARKET - Nadeem_Walayat
10.Apple and Microsoft Nuts Are About to CRACK and Send Stock Market Sharply Lower - Nadeem_Walayat
Last 7 days
Is the US Yield Curve Inversion Broken? - 3rd July 22
New Signs Economic Turmoil Will Prompt Fed to Lose Its Nerve - 3rd July 22
Stagflation With Powell Could Make Gold Price Happy - 3rd July 22
UK Housing Market Analysis, Trend Forecast 2022 to 2025 - Part 2 - 30th June 22
Stock Market Turning the Screws - 30th June 22
How to Ignore Stocks (and why you should) - 30th June 22
Top Tips For Getting The Correct Insurance Option For Your Needs - 30th June 22
Central Banks Plan To Buy More Gold In 2022 - 30th June 22
AI Tech Stock PORTFOLIO NAME OF THE GAME - 29th June 22
Rebounding Crude Oil Gets Far Away from the Bearish Side - 29th June 22
UK House Prices - Lets Get Jiggy With UK INTEREST RATES - 28th June 22
GOLD STOCKS ARE WORSE THAN GOLD - 28th June 22
This “Bizarre” Chart is Wrecking the Stock Market - 28th June 22
Recession Question Answered - 28th June 22
Technical Analysis: Why You Should Expect a Popularity Surge - 28th June 22
Have US Bonds Bottomed? - 27th June 22
Gold Junior Miners: A Bearish Push Is Coming to Move Them Lower - 27th June 22
Stock Market Watching Out - 27th June 22
The NEXT BIG EMPIRE WILL BE..... CANZUK - 25th June 22
Who (or What) Is Really in Charge of Bitcoin's Price Swings? - 25th June 22
Crude Oil Price Forecast - Trend Breaks Downward – Rejecting The $120 Level - 25th June 22
Everyone and their Grandma is Expecting a Big Stocks Bear Market Rally - 23rd June 22
The Fed’s Hawkish Bite Left Its Mark on the S&P 500 Stocks - 23rd June 22
No Dodging the Stock Market Bullet - 23rd June 22
How To Set Up A Business To Better Manage In The Free Market - 23rd June 22
Why Are Precious Metals Considered A Good Investment? Find Out Here - 23rd June 22
UK House Prices and the Inflation Mega-trend - 22nd June 22
Sportsbook Betting Reviews: How to Choose a Sportsbook- 22nd June 22
Looking to buy Cannabis Stocks? - 22nd June 22
UK House Prices Momentum Forecast - 21st June 22
The Fed is Incompetent - Beware the Dancing Market Puppet - 21st June 22
US Economy Headed for a Hard Landing - 21st June 22
How to Invest in EU - New Opportunities Uncovered - 21st June 22
How To Protect Your Assets During Inflation - 21st June 22

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

What Cyprus Taught Me About Retirement Savings

Personal_Finance / Credit Crisis 2013 Apr 03, 2013 - 06:37 PM GMT

By: DailyGainsLetter

Personal_Finance

John Whitefoot writes: In light of the events that occurred in Cyprus over the last couple weeks, many investors may be wondering if it’s safer to hide your retirement savings under a mattress. After all, what’s to say it couldn’t happen here?

In June 2012, Cyprus, like many members of the European Union (EU), sought a bailout after suffering heavy losses. The company’s banking sector was hit by the economic crisis that crippled Greece. Cypriot banks had made loans to Greek borrowers that were worth 160% of the country’s gross domestic product (GDP).


In mid-March, the EU and the International Monetary Fund (IMF) agreed on a bailout for Cyprus, which included Cyprus raising billions of euros of its own money by taxing bank deposits—essentially seizing money. The government said it would impose a one-time tax of 6.75% on savings of $26,000–$130,000, and would tax higher savings at 9.9%. Not surprisingly, this didn’t sit well with wealthy Russians who shelter their money in Cyprus. It also didn’t sit well with the rest of country.

As one would expect, Cyprus managed to cobble together an 11th-hour deal with the EU and IMF, taxing only those accounts with deposits over $130,000.

Could it happen here? What couldn’t? Since 2008, the U.S. and much of the Western world have experienced an economic implosion no one would have otherwise thought possible. In response, governments around the world have taken unprecedented action to “remedy” the situation.

Cyprus aside, there are many reasons why we shouldn’t stash our retirement savings under the mattress.

First, cold-hard cash provides little protection against inflation and increases in the cost of living. While the markets experienced deflation after crashing in 2008, there is the fear of inflation in the long run.

Since 2008, the Federal Reserve has printed roughly $3.0 trillion in an effort to stimulate growth. The extra dollars also have the reverse effect, shrinking the buying power of each dollar—which is the driving force of inflation.

Sitting on cash right now probably isn’t the wisest choice if you’re looking to increase your wealth. Keeping it in a bank with a 0.05% interest rate isn’t either. To hedge against inflation, you might want to consider gold—one of the world’s oldest, borderless currencies.

Before September 11, 2001, gold was trading below $300.00 an ounce. While gold is trading off its August 2011 highs, it’s still trading up over 435% since 2001. Thanks to continued uncertainty in Cyprus and the EU as a whole, gold continues to look good long-term.

Investors looking to add gold to a diversified retirement portfolio might want to consider these securities.

iShares Gold Trust (NYSEArca/IAU) is a trust that generally corresponds to the day-to-day movement of the price of gold bullion. The company has 6.8 million ounces of gold, or $10.99 billion in assets under management.

Goldcorp Inc. (NYSE/GG; TSX/G) is the fastest-growing, lowest-cost senior gold producer, with operations and development projects in politically stable jurisdictions throughout the Americas. It produces more than 2.5 million ounces of gold annually and has more than 60 million ounces in proved and probable reserves. It also owns 1.3 billion ounces of proved and probable silver reserves and 5.4 billion pounds of copper reserves.

It could be argued that a government that is willing to seize its citizens’ cash could also conspire to take its gold. It’s happened before. In 1933, Franklin D. Roosevelt, signed into effect Executive Order 6102, making it a criminal offense for U.S. citizens to own or trade gold anywhere in the world. While the law was obviously relaxed, it does illustrate that the government can do whatever it wants, whenever it wants.

Still, in this day and age, it would be easier to take money sitting in a bank than stock certificates or hard assets tucked away at home.

By John Whitefoot

The Daily Gains Letter provides independent and unbiased research. Our goal at the Daily Gains Letter is to provide our readership with personal wealth guidance, money management and investment strategies to help our readers make more money from their investments.

Copyright © 2013 Daily Gains Letter – All Rights Reserved

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in