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There have been a flurry of posts from some who sound like their hair is on fire with sermons ranging from the coming of deflation, the explosion of the national debt and so on. We have Jim's taking a responsible position which finds the US "redundant" to his requirements (and personal ethics). We have Wendy's evaluation of current macroeconomics with surgical precision. And so on.
I've posted a number of times about how important it may be, should the worst come upon us (whether caused by a government shut-down, the explosion of crypto or any number of "movie plots"). The reason why black swans are identified that way is because they are never expected (other than a lucky few).

The US is currently embarked on a trajectory which is unique in its history (if my history books were actually telling the truth), but has plenty of pretty parallel analogs - both in the past and in the present. This has affected our internal politics, our rule of law, our treatment of both our trading and our political/military allies. The replacement of income tax revenue with a combination of tariffs (essentially a consumer sales tax) in parallel with cuts of services, both charitable and previously deemed desirable. I'm not going to enumerate the various changes made by the new administration, but rather ask what proactive actions can be taken to protect one's wealth (possibly by shifting assets) during potential future upheavals.

I've explained how my portfolio has (for decades) been largely been international in nature - in both equities and currencies. I know that, for possibly other reasons, Jim does as well. I'm wondering what the viewpoint of others is and I'm curious about whether they have addreesed the possible futures differently and, if so, in what fashion.

Jeff

Jeff,

Fair enough

Some institutions are far less leveraged and far more regulated. The question with this much government debt is which will survive without a government bailout or the FDIC?

I've explained how my portfolio has (for decades) been largely been international in nature - in both equities and currencies. I know that, for possibly other reasons, Jim does as well. I'm wondering what the viewpoint of others is and I'm curious about whether they have addreesed the possible futures differently and, if so, in what fashion.

I wish I knew. I hear the DANGER DANGER WILL ROBINSON voice in my head, and am looking around for how to respond to it. So far that is taking the form of simply becoming more nimble, with our primary residence under contract and moving our things we can't yet bear to part with into storage at our vacation home, that costs us less than $4K in costs per year to own. From here on out it is an existence as global citizen, as we figure out where we want to investigate in depth, really hoping that things improve enough in 2026 that we can go home again. With each place we travel to, we narrow down the criteria for the future a bit more.

Stay tuned, I guess. Paradigm shifts aren't easy.

IP

So these two types of institutions MIGHT be the safest.

1. State level Credit Unions because they have low amounts of leverage and are heavily regulated. PenFed would have a lot of Pentagon paper.

2. Uk has some brokerages not allowing margin debt. Good sign. These brokerages also are much more heavily regulated.

The idea, you can invest as you like, but the trades won't be bargain basement e brokers. You get an advisor and insist on what you want other than his or her mutual funds etc. Then you need to be nibble if things get bad. If things get bad and you are reduced to cash only, your banking/brokerage institution might not be wiped out. It is supposed to withstand hell freezing over by design.

If you know of such institutions outside of those two please add to the list.

Ireland is a hotbed for gambling at financial institutions. I have Irish citizenship but not until after the dust clears and I know what survives would I touch them. Remember during the Great Depression banking failures went on for years.

European and other governments are very leveraged as well. Their respective financial institutions maybe equally dangerous.

There are various kinds of risks.

At a top level, there are risks to your portfolio coming from three main directions:
* The jurisdiction you're in, which has the ability to tax or restrict the assets, or even confiscate them.
* The financial system(s) through which you access the assets in which you're investing. These are subject to the issues of #1, but with their own potential frailties. This covers brokerages, custodians, counterparties and intermediaries.
* The underlying asset itself.

For example, for someone not primarily concerned about #1 or #2, I would argue that the safest possible single security is probably WIP, an ETF of inflation-protected government bonds issued by a mix of non-US governments, and/or a mix of TIP and WIP if you want the US in the mix. Currencies can do unpleasant things sometimes, but it can't really happen to all of them at the same time other than inflation, which you're protected against. A few countries might cook their inflation figures at the margin, and one or two might even default, but that's about it for risk. The #2 risk of the financial intermediaries failing could be mitigated by buying the underlying bonds yourself, but that is spectacularly inconvenient. At the very least you'd need a multi-currency wealth management brokerage account. (WIP is also an interesting investment for someone who is bearish on the US dollar, as it actually has a positive real yield. Measured in US dollars it looks poorly in the last 4 years, but that's because the US dollar is higher than it was then)

For a "US Person" (in the meaning of US tax law), it is very hard to get around #1, or even #2. Having accounts outside the US is to varying degrees either prohibited or impractical either due to US rules or the rules of the non-US bank or brokerage itself.

In a way, the most robust thing to do is probably just plain a lot of work: don't limit yourself to public markets. Buy (or start) a dry cleaning business in Manchester, and pocket the modest profits. Choose line(s) of business and jurisdiction(s) to suit your tastes--there are surprisingly few restrictions on foreigners starting or owning private businesses in a lot of countries if you stay away from finance and news.

A note on brokerage failures: in most cases, your assets are theoretically safe in rich countries. However, two concerns: (1) depending on jurisdiction, that may not include cash balances which are in effect unsecured loans to your broker, and (2) even if you get everything back, it may be years later. Most investors have investments that might need attention before then (bonds?), and you might need some of your money. I generally keep half my portfolio in each of two brokerages based in two different jurisdictions for that reason. They change from time to time. Inevitably, one will be easier to deal with and trade at than the other, so I keep my more active investments there and the more buy-and-hold stuff at whichever one is more of a pain to deal with. I feel safer with this than trying to assess deeply the "type 1" and "type 2" fragility above for a single brokerage. For me, maybe a so-so risk of losing half is better than a slightly lower risk of losing it all, since it is so darned hard to assess the true tail risk of any one group.

Jim

Jim has laid this out far more eloquently than I could have. I have been working with the assumptions he laid out all of my adult life.

My being a US citizen (domiciled in the US) presents some unique limitations. While I currently hold bank accounts in thee other countries (essentially zero-balance to minimize paperwork) holding significant balances (let alone foreign brokerage accounts) became a Quiotian task. I was cast from Switzerland by two different banks, despite my providing them with proof that I had reported both the accounts and paid income tax on the interest. So, I then moved my Swiss francs to a bank in New Zealand which announced they would start charging rent. The CHF then migrated to a US broker and were used to purchase stock on the Zurich exchange.

I currently use three US brokers - one for US-listed equities, a second one is generally where I buy individual bonds and acts as my "bank" (I have a local bank with minimal balance to act as a "gateway" to deposit cash and use the broker's ATM/debit card to get cash world-wide as they convert at the bank rate and credit back any local ATM charges) and the third is used for my foreign stock trading as Forex is integrated into the trade. While the third broker also has separate offices in a number of countries, if the fit hits the Shan (thank you Roger Zelazny), I'm betting it would be difficult to move between jurisdictions if the US government suddenly turned nasty

I have resigned myself to the jurisdictional risk which Jim outlined by the half-assed rational that, in a pinch, I can transfer funds (and hopefully securities) to one or more of my foreign accounts. It's kinda kluged, but unless I want to spend a significant amount of time and effort supporting a more elaborate solution, it's the best I could come up with.

In the meantime, the majority of my equity holdings (some as ADR's, but much in native currencies) is of non-US companies and the majority of my US bond holdings are "inflation protected".

Jeff

In a way, the most robust thing to do is probably just plain a lot of work: don't limit yourself to public markets. Buy (or start) a dry cleaning business in Manchester, and pocket the modest profits. Choose line(s) of business and jurisdiction(s) to suit your tastes--there are surprisingly few restrictions on foreigners starting or owning private businesses in a lot of countries if you stay away from finance and news.


PS, fascinating site.
businessesforsale.com
Pick a country and start browsing!
They even have a category for companies with management in place.

Not a recommendation, I've never dealt with them.

Jim

While I currently hold bank accounts in thee other countries (essentially zero-balance to minimize paperwork)
...
(I have a local bank with minimal balance to act as a "gateway" to deposit cash and use the broker's ATM/debit card to get cash world-wide as they convert at the bank rate and credit back any local ATM charges)

I don't know if it's applicable to you, but one thing I found handy: the Wise card. It's available for "US persons".

It lets you hold a large number of different currencies, and it's a Visa card you can use anywhere, including on line. Things you charge in different currencies aren't converted at a horrible 3% fee, they just debit that currency in your account. They do forex at very good rates. (better than banks, not as good as Interactive Brokers). International payments are generally instantaneous and either free or nearly so. Unlike most brokerages, you can pay bills and transfer money to companies from it. Most conveniently, they give you a local bank account number in any country you want, which is part of the same account. So, for example, if you have a cottage in France or wherever, you can give the French "account number" to the local utilities for direct debit from your euro balance and never need a true bank account in France. The utility never knows you don't have a "true" bank account.

There is a way to tightly link an Interactive Brokers account to a Wise account, but it seemed to entail a degree of privacy/trust issues that I wasn't immediately comfortable with--giving one access to the payment history at the other, IIRC--so I haven't done that, at least not before reading more.

Jim

Powell weighs in again, and it is beginning to sink in.

https://finance.yahoo.com/news/feds-powell-sees-no...

Federal Reserve Chairman Jerome Powell said there is "no risk-free path" for the central bank's next policy move as inflation remains elevated while the job market weakens.

It's "a challenging situation," Powell said during a speech in Rhode Island on Tuesday, reiterating that the Fed must balance its dual goals of maximum employment and price stability.


My point is that Powell was not supposed to sound like Greenspan. Something happened. He sounds just as nebulous.

There is nothing nebulous going on.

I hadn't heard of the Wise card. It sounds very interesting, especially the ability to have a virtual bank account wherever you need one. Where is it domiciled?

The Visa ATM/Debit card I use is issued from Fidelity. They have an arrangement with an external bank who supplies a "Fidelity" (their name in tiny font) checkbook.
Fidelity does not charge a currency conversion when their card is used abroad and in all domestic and foreign transactions immediately refunds all the assorted service charges that banks/ATM's tack on.

From a nuts and bolts standpoint they have a unit trust money market account and a "trading" account for cash (which pays a slightly lower interest rate. They have a bill-pay function on the trading account to send out checks and payments and which accepts various payments made to me (exactly like a bank account). What is a bit unique is that should the trading account balance run low, they immediately add the required funds from the money market account. It works very well, pays higher interest than local banks and now takes on their function.

Jeff

In a way, the most robust thing to do is probably just plain a lot of work: don't limit yourself to public markets. Buy (or start) a dry cleaning business in Manchester, and pocket the modest profits. Choose line(s) of business and jurisdiction(s) to suit your tastes--there are surprisingly few restrictions on foreigners starting or owning private businesses in a lot of countries if you stay away from finance and news.

Interestingly, you can often buy small private businesses like restaurants for two to three times earnings. You're buying a job too of course. But it is much cheaper than buying public companies most of the time. I think this is why we've been seeing waves of private equity buying up what were typically independent business like HVAC contractors and vet clinics. You can manage them all the same way, so scales easily.

I hadn't heard of the Wise card. It sounds very interesting, especially the ability to have a virtual bank account wherever you need one. Where is it domiciled?

UK.

The cheap and fast international transfers are done by a simply brilliant (but old fashioned) method: they don't depend on how fast a bank can do it because they don't actually move your money. They have a balance in every country, and when you say "move this money to Greece", they just take your money where you are and have their Greek account send the money to your payee simultaneously. From time to time they rebalance their own country accounts asynchronously. This is more or less an automated version of the traditional hawala network, still in use after about 700 years.

The credit card is not available to 100% of the countries in which you can get an account. I had to wait a few years for it to be supported for Monaco residents.

Jim

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