Securing deposits, would this actually work?

[kevp]

This may be a strange question but I was just curious as I don't have a clue if it'd work.

I was talking to a friend about the current situation with Ireland, the euro etc. and he out of the blue said that he made a major change to his deposits lately.
This guy is working a long time and has made very sensible decisions over the years which have made him very comfortable, he said he moved about 70% of his savings to rabodirect and that if he got afraid of the situation with Ireland, the euro and a chance of withdrawing, then he would split his deposit in rabo between a few of their most conservative funds and just wait it out until he felt it was a safer time to cash out.

He felt that this way if in the unlikely chance of a new currency, he had more control over when his money was switched to punt nua, worst case scenario the funds could do very poorly but he reckons he'd still be unlikely to do worse than a quick devaluing of 10-30%.
I wouldn't dare try to advise him on his own money as I don't think he has made anything but smart decisions regarding money over the last few years.

I was wondering would that work? the choosing when the conversion would take place.
I asked him if it was because he was concerned, and he said he wasn't really but just liked to cover himself if things turned worse.

 

[Lightning]

It depends.

A EUR based fund would obviously hold the risk of currency conversion.

A USD/GBP etc based fund is likely to have a lesser exposure to a EUR currency conversion.

In Greece, there is currently, according to Bloomberg, a massive EUR deposit flight going on. Interestingly, according to Dow Jones NewsWire, a lot of Greeks are choosing to put their money into USD mutual funds.

 

[sunnygirl]

Reports on last nights news of Greeks moving up to €800 million per day from Greek banks.....

 

[kevp]

It depends.

A EUR based fund would obviously hold the risk of currency conversion.

A USD/GBP etc based fund is likely to have a lesser exposure to a EUR currency conversion.

Its interesting, I suppose its similar to opening an account in a different currency and playing the waiting game until things settled out again.
He reckoned that if it ever came to that situation, that all bets would be off and almost anything could happen, could even be heavy taxes put on deposits held foreign banks.

Reports on last nights news of Greeks moving up to €800 million per day from Greek banks.....

Seen that, as bad as things are here if I was in Greece I'd be very nervous of any deposits I had.

 

[Chris]

This is actually why the only cash I have in the country is in Rabo. My thinking is the same, if Ireland leaves the Euro I hope to have enough time to buy into funds. The main issue I see with this is that it is likely that leaving the Euro would coincide with capital controls by the central bank. So it could be that I would not be able to buy into funds with Rabo because the central bank forbids such transactions.
It's a good plan but not fail proof. Just remember, desperate politicians will do incredibly desperate things.

 

[kevp]

This is actually why the only cash I have in the country is in Rabo. My thinking is the same, if Ireland leaves the Euro I hope to have enough time to buy into funds. The main issue I see with this is that it is likely that leaving the Euro would coincide with capital controls by the central bank. So it could be that I would not be able to buy into funds with Rabo because the central bank forbids such transactions.
It's a good plan but not fail proof. Just remember, desperate politicians will do incredibly desperate things.

Its something for people to consider so, but what funds would you be inclined to go with? if we're in the scenario of a collapsing euro and all bets are off, is it likely that what would have been safe funds could become unstable and unsafe or would there likely still be the safe funds that are unlikely to get hit much?

 

[Chris]

Its something for people to consider so, but what funds would you be inclined to go with? if we're in the scenario of a collapsing euro and all bets are off, is it likely that what would have been safe funds could become unstable and unsafe or would there likely still be the safe funds that are unlikely to get hit much?

This is something you will ultimately have to figure out yourself. Personally I believe that in a situation of currency collapses the best thing to own will be commodities where I would focus on gold, oil/gas, mining, etc.