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January 17, 2013

January 17, 2013

January Fund Flows Move Markets 

This is the time of year that pensions put new money into the world markets; for the last several years, both these assets as well as the assets of the public itself have been going out of stocks and into bonds.

This year, the selection has reversed — and thus far, billions have been pumped into global equities.  More money has flowed into stocks than into bonds and this has been a worldwide phenomenon with equities in many parts of the world accumulating money.  Accordingly, many global markets have begun the year with a move upward.  We believe that this new investment period will last for a few more weeks at least, and some countries will continue this rally after the new investment period ends.  We have several favorite countries for investment, countries which we believe will rise for the year as a whole, and one of our big favorites has been…

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U.S. Bank Deposits: Disappearing Deposit Insurance Exposes $1.5 Trillion

On several occasions, we have written on the subject of the safety deposits at financial institutions.  We will continue to revisit this topic, as we believe it is imperative that investors understand their exposure in the event that their financial institutions run into trouble.  Today, we want to discuss the expiration of certain Federal Deposit Insurance Corporation’s (FDIC) protections that leave about $1.5 trillion in the banking system without protection.

During the financial crisis in 2008, dozens of banks became insolvent and were taken over by the FDIC.  The U.S. government took some very important steps to protecting bank depositors, and to help preempt a run on the banking system.  One of the most important moves was to increase the level of FDIC insurance on depositors’ cash at banks to $250,000.  For nearly three decades, the limit on insurance per depositor’s account was $100,000.

This increase in insurance limits was originally intended to be a temporary move, but was made a permanent increase in 2010.  Some accounts, such as over 800,000 non-interest bearing accounts and lawyer trust accounts held at banks were actually given unlimited insurance.  This unlimited insurance has now expired, and hundreds of thousands of non-interest-bearing bank accounts are now only covered up to $250,000.

This means that in early 2013 as much as 1.5 trillion could move be moving to new accounts at different banks, could move into money market funds, and some could even move into bonds, stocks, CDs, gold, or other securities in 2013.  If it is smart money, it is likely to move somewhere.

Some of this money should also seek a true custodial arrangement with a bank.  As we have written before, for example in our letter from July 12, 2012, we discussed in detail the different types of financial institutions, and our preference to have custody accounts with a bank in those cases where the amounts exceed insurance coverage.  Custody may cost more, but the protections it affords are a service worth paying for, in our opinion.

When choosing an institution, investors should carefully read the account agreement to understand his/her/its rights and risks as a depositor.  We, along with our legal counsel, have done a tremendous amount of research on the subject of safety of assets over the past few years.  If you have hundreds of thousands of dollars in uninsured assets at banks or brokerage firms, and it makes you uncomfortable, please contact us.  Perhaps we can be of assistance.

Please email guild@guildinvestment.com if you have any questions or call (310) 826-8600.

 


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Guild Basic Needs Index (November 2012)

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In this week’s Premium Global Market Commentary available to Gold Subscribers, we discuss:

  • U.S. Equities: Avoiding Future Flash Crashes

    FINRA Pledges Increased Surveillance of Dark Pools

    The New Year has brought a spate of electronic trading hiccups on major exchanges.  BATS Global Markets, whose own IPO was derailed by computer mishap last year, announced that it had uncovered a programming error which had cost traders $420,000 in the four years it ran undetected…

    A New Eye on Dark Pools

    What is new is Ketchum’s announcement that FINRA will be using the same analytical surveillance to improve its oversight of so-called “dark pools” — opaque trading venues outside public exchanges where buyers and sellers can transact anonymously…

    What’s Lurking at the Bottom of the Pool?

  • Italy: Bond and Stock Markets Love a Technocrat

    Mario Monti’s recently announced centrist coalition has staunch adversaries to the left and right in Italy’s February 24/25 elections…

    The Markets Like Monti’s Talk

    “Preserving a Crystallized Labor Market”

  • China

    Are we bullish or bearish on China?

  • Guild Investment Management Weekly Global Market Summary

    Read our point by point analysis on Gold and what investments Guild Investment Management is bullish on. 

Please click the button below to learn about the benefits of Gold Subscription, or contact our office at (310) 826-8600.

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