Credit Suisse Does Not Mean the Danger Has Passed. Banking Turmoil Has Dangerous Undercurrents

Measures provide reassurance. This truth held during the 2008 banking crisis, the benchmark for stress in the financial system. Then as now, senior representatives from politics and regulatory authorities attempted to prevent a widespread crisis.

The takeover of Credit Suisse by UBS over the weekend was the largest forced bank merger at least since the financial crisis 15 years ago. It marks the end of a 167-year-old financial institution that was both a central wealth manager and one of 30 systemically important banks. However, this does not resolve the banking crisis. The true cause of the downward spiral is not a lack of liquidity, but a lack of confidence. And the latter has been profoundly shaken among investors.

To prevent a global crisis, the Fed and other controlling central banks responded to the panic with a coordinated action. This essentially involves the Fed pumping dollars into the financial system to provide liquidity. Yet despite these measures, the DAX is experiencing volatility and the oil price is collapsing.

How things proceed depends essentially on the interest rate strategy of the US Federal Reserve. Financial analyst Egmond Haidt describes in the online business magazine Stock3 that the S&P 500, Nasdaq, and DAX could recover in the short term. However, should the Fed raise the key interest rate even slightly, massive sell-offs can be expected again. The banking crisis would then gain real momentum.

Should investors be afraid? We believe panic is never a good response. “Re-action” already implies that something external becomes the cause of one’s own actions and one surrenders completely to this cause. Vigilance is more appropriate. It enables one to keep a cool head in such times. What should one invest in during this situation to be prepared for all eventualities?

One solution can be seen in the rising price of gold. Gold does what it has promised to do for thousands of years: it stores value. It has this in common with commodities, whose good prospects can be seen in the price of the precious metal. The commodities of the future are technology metals and rare earths. With no counterparty risk and pure commodity value, they stand for security. Investing in these commodities gives you the chance of attractive returns, including tax-free storage and tax-free gains after a holding period of one year.

PS: Unlike gold, technology metals and rare earths are not intended to be included in the asset register planned by the EU. Therefore, they offer even higher protection.