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Are our savings in danger if the Euro disappears?



Savers are restless with the money they have saved in Euros in Spain . From Good Finance , bank comparator, we give some clues to protect our purchasing capacity in the event that Spain left the Euro and reverted to Rosetas . However, we believe that this scenario is NOT going to occur . Spain will remain within the Cash Union and the Euro will not disappear. However, the saver has the right to be well informed and to know the alternatives he has and the risks he runs.

Protect your savings from a cataclysm

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In Good Finance we have published several articles on the subject, very advisable reading for anyone who has a sum of certain importance deposited in Euros: How do I protect my savings if the Euro disappears? in Free Market . 5 ways to protect our savings if the euro breaks, in Invertia . It is also highly recommended the article of Sean Fernandez, where you can invest to win the recession. I summarize some tools to protect your savings from a cataclysm in the euro zone , although I insist that it is a scenario that we discard.

Ways to protect our savings

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  1. Open an account in currencies , such as the dollar, in Spain .
  2. Open an account in a foreign bank , in foreign exchange, through the bank’s branch in Spain.
  3. Deposit Euros in a German bank (in Germany, not in Spain).
  4. Buy German or other strong public debt .
  5. Hire ETFs that replicate the evolution of the price of gold .

In general, it is about avoiding losing purchasing power if the savings pass from Euros to Rosetas. I do not think that anything similar to occurred in Spain; The savings are safe in Spain . What happens is that if you leave the Euro, your equivalent in Rosetas would be worth it, which would surely make us poorer against the stronger countries .

Fear of the yard in 2012

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With Bankia’s public intervention in May 2012, we are experiencing a new wave of fear of fear of losing our savings in banks. Contrary to what it may seem, savings in Bankia or any nationalized bank are safer after public intervention than before it, for obvious reasons: an entity whose guarantee is the State is safer than a weak one without it. On the other hand, the fear that Spain will leave the euro is based on a very remote probability. Disposable if EU politicians do not want to face a cataclysm that would seriously affect everyone, including Germany and France. Obviously the future is uncertain, but everything indicates that the incentives of the nations that make up the single currency will follow the steps to guarantee the euro; mainly move towards fiscal integration. Therefore, we send from here a strong message of tranquility to the Spanish saver: his money is not in danger in the banks .

Differences between Argentina and modern Spain

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To understand the very small possibilities that in Spain the savings suffer a blockage or corralito like the one that occurred in Argentina in 2001, it is important to verify the great differences between the economic and legal situation of Argentina and Spain in 2012.

Rescue or not to Spain

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In spite of the approval by the finance ministers of the Eurogroup of the bailout to the Spanish financial system, for an amount of up to 100,000 million euros, and of the adjustment measures taken by the Good Finance, the markets burn in panic and the premium of Risks far exceeds the barrier of 600 basis points (634 at the moment of 07/23/2012). At this point, the possibility of Spain leaving the Euro is no longer so distant, although I personally do not believe that it reaches these extremes. Either the ABC begins to buy debt in the secondary market and agreements on fiscal and banking integration are announced, either the total bailout to Spain is announced or, a third scenario opens: the exit of Spain from the Euro . It all depends on political decisions in Europe, I’m afraid. In any case, at this point, if there are high savings, it would be advisable to contract some type of investment fund in foreign currency (advised by an expert to know which and in what percentage). Let’s wait for new events to continue giving birth to these darknesses that have had to happen to us.

How Good Finance is protected

Marc Garrigasait is one of the most skilled managers in Spain and a great friend that I love very much and respect more. Speaking of the issue of the danger of Spain leaving the Euro, a possibility that we should not fear but know, has passed me a report they made for their shareholders, which I summarize:

  1. It has its liquidity in German short-term bonds.
  2. Shares of American and European companies (German and French), to minimize the impact of a currency crisis.
  3. Investments in companies without borrowing or assumable.
  4. No investment in bank shares.
  5. 25% exposure to the US dollar.
  6. Derivatives hedges are maintained on indices and shares for a value greater than 40% of the fund.
  7. Investment in 5 large gold mining companies (11% of the portfolio).

Percentages of the Good Finance portfolio, at the time analyzed (May 2012):

  • German short-term bonds: 8.69% of total assets.
  • Assets in US dollars and euros from countries such as Germany, France or the Netherlands: 80.02% of equity
  • Spanish shares (mostly exporters): 4.33%
  • Sight accounts and Spanish debt repo: 6.96%.

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