Banking Crisis Fallout – Hard Assets for Diversification

COIN MARKET INSIDER • VOLUME 33 • ISSUE 1


Banking Crisis Fallout – Hard Assets for Diversification

With the collapse of the Silicon Valley Bank and its subsequent bailout, pundits from Warren Buffett to JP Morgan Chase CEO Jamie Dimon have been warning that the banking crisis is not over and that there will be more failures.

But then, almost in the same breath, they tell people not to worry because the FDIC has everything insured. While technically true, this ignores the economic and financial fallout from the banking crisis. These are factors that investors simply cannot afford to ignore.

Following the latest rescues of big banks at the same time the Federal Reserve is warning of a recession that could put more than a million Americans out of work, economists, historians, and market commentators are drawing comparisons to previous eras of global capitalism when the government and the banking sector were more officially entwined.

As the Fed responds by punishing not firms and their managers but workers and employees through the labor market, some are even saying that the age of true capitalism is dwindling, being replaced by “Crony Capitalism.”

Moreover, the banking sector is in such trouble that, even without raising interest rates, they are pushing the country toward recession through a credit crunch, essentially refusing to lend money.

According to Morgan Stanley’s Mike Wilson, the credit crunch has begun. Wilson pointed to a significant drop in bank lending and tightening credit standards in recent weeks. The data fuels Wilson’s view that the stock market is in for more pain in 2023.

Once again, the best defense for investors from the economic and investment fallout from the ongoing banking crisis is diversification.

Investing in gold can be a good way to diversify your investment portfolio and hedge against inflation. It’s a tangible asset that can provide long-term value and stability.

True diversification doesn’t just mean owning different stocks or even owning stocks and bonds together. After all, 2022 was a terrible year for both stocks and bonds as rising interest rates and inflation tend to impact both negatively.
► True diversification means owning investments across different asset classes. Investors must own assets that “zig” while other assets in their portfolio “zag.”
► This tends to reduce the overall volatility of an investment portfolio.

Hard assets are an ideal diversification vehicle because they tend to move independently of paper assets, responding differently to factors that impact stocks and bonds.

Diversification is also important within a hard asset portfolio with options ranging from gold and silver to rare coins. Finest Known can help you understand which options are most suitable for your objectives and budget.