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Why You Should Create a Financial Safe House

by Albert Goldson

posted in Finance

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Bubbles are fun when you're sipping champagne, or soaking in the tub, or when your toddler gurgles or perhaps when you're hand-washing a vehicle you love dearly. However when these bubbles occur in the financial markets, it's the equivalent of a mutating virus. That's why you should seriously give thought to becoming a financial prepper before everything goes south and everyone jams the exits to liquidate their holdings.
Little substantive work has been done to overhaul the financial infrastructure to make it more durable and to make corporations ethically responsible so that we can weather the next economic downtown, an inevitability in a capitalistic society, yet one which will not severely impact society like the Great Meltdown and subsequent 2008 Great Recession. Unfortunately the financial structure is still a house of straw, not brick, and is highly vulnerable to the next economic tempest.
Large corporations have been hoarding unusually amount of cash since the Great Recession however their cache is far and beyond what would be considered a normal financial cushion. They have invested sparingly this overwhelming cash hoard into development and the creation of quality jobs, let alone maintaining jobs. Their financial restructuring has benefitted primarily the shareholders through the sale of operations and laying employees off to increase shareholder returns.
According to the Financial Times article "US Companies Hoard $1.7 Trillion in Cash But Tap Debt Markets" dated May 11, 2015, of this amount, five US firms: Apple, Microsoft, Google, Pfizer and Cisco, hold $439 billion in cash.
The nation's financial structure has not been overhauled because these same large corporations' powerful lobbying groups prevent the introduction and implementation of stronger financial supports. Any changes are aesthetic akin to the application of fresh paint on a wobbly building.
Additionally China is in a similar economic position as the US was in 2007. And because of their lack of transparency and heavy government control, no one, not even Chinese insiders, know the true values of these investments. This means that two economic superpowers which are dangerously highly dependent on each other, face enormous risks simultaneously. And finally the shadow market, a world in which billions of investments are conducted legally but are off-the-blocks with no oversight, compound the problem.
Cash is a de facto insurance policy in a highly unstable and volatile economic environment when investment values can plunge rapidly as clearly demonstrated by the 2008 meltdown. For this reason, it's prudent to allocate considerably more into cash and any other investment instrument which can be converted quickly into cash such as short-term government bonds and money market accounts. When the next economic avalanche occurs most people will get buried under the rubble.
I certainly encourage consumers to continue to invest in those fields with stock purchases which they have researched so diligently and feel will provide solid returns. However for the purposes of greater financial security as an insurance buffer and overall peace of mind, consumers should boost their cash allocation or any quick-to-cash financial instruments such as government securities to be available during any future economic meltdown.
About the Author: Copyright Indo-Brazilian Associates LLC 2015. All rights reserved.
Indo-Brazilian Associates LLC is a NYC-based global advisory service and think tank with connections at the highest levels. We provide you the tools to successfully negotiate cross-culturally in your global business endeavors. Tell us about your challenges. We'll get you on the "Short List".
Available for speaking engagements and workshops. Check out my international media profile as TV panelist, published articles and contact information:
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