Holding Different Currency

We’ve got our fair share of risk at the moment. More than our fair share, really.

In private conversations with Glenorchy Capital clients, one topic that often comes up is how to manage currency and banking risks. Say, for example, you’re banking in Germany, and you’re worried about the euro (as you well should be). Now, you say to yourself, “Well, that’s fine. I’ll open a foreign currency account with my bank and shift some cash into USD.” Or maybe some rubles, or whatever takes your fancy.

🤔The problem with this has been highlighted many times in the past, and that problem is that in a currency crisis it is typical for bank depositors to have their assets confiscated and then converted to the failing shitty currency. If you thought this sort of thing only happens to people in countries where kids have flies on their face and walk around barefoot, I’d encourage you to reconsider. This happens in countries where their governments are bankrupt.

And THAT, my friends, is a place we call home.

There have been countless examples of this in the past, but one reared its ugly head recently, which is what made me think, “Aha, I need to point this out to those who may not have thought about it.”

🛑 Manage currency and banking risks

Lebanon plan sees 93% currency slide, turns bulk of FX deposits to pounds | Reuters

A government plan for tackling Lebanon’s financial crisis projects a 93% devaluation of the Lebanese pound and converts the bulk of hard currency deposits in the banking system to local currency, according to a blueprint seen by Reuters.

🤔+🤔Realising that when they come to steal your money (unless you’ve already gotten out), you’re likely fresh outta luck and about to be Cyprus’d. So what to do?

For one, the jurisdiction of one’s bank plays an important role. Secondly, the currency in question is what most people focus on. Just keep in mind you may “protect” yourself on the currency only to have it nicked from you and converted into the rapidly depreciating toilet paper the government in question determines is for your best use. Personally, I don’t see any reason to hold much capital in bank accounts at all. Honestly, why take the risk when we know we’re on the cusp of and really have entered the first inning of a global financial crisis the likes of which we’ve never experienced before? Why risk it?

Really, what you’re trying to accomplish is having some wealth in a liquid easy to access form which isn’t at risk.

💡 Some options to consider:

  • Naturally, our portfolios we’re more than comfortable with. This is both the asymmetric portfolio, which largely is what we speak about most of the time, and the other is the dividend deep value income portfolio.
  • Precious metals in physical form where you can get your grubby hands on it makes a lot of sense, as does silver. You can buy them from a local dealer or through government mints. No need to delve deeper here. You’ve got fingers, a search engine, and a keyboard.

❓ What else?

  • OneGold (check it out here) allows for you to own fully backed gold which you can redeem in multiple locations. Seems potentially useful for anyone that’s planning on moving about (me, for example) and doesn’t particularly want to be the guy with a briefcase handcuffed to your wrist.
  • Cryptocurrencies. Certainly useful for holding assets outside of the traditional financial system. Please, please don’t hold anything on exchanges. Get those stubby fingers out, do some research, and learn how to buy, sell, and store your crypto. I’ve got a Trezor, but you do you and do whatever works for you.

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