How to protect your savings in the present time?

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Some may object that this reallocation is not so easy to implement in the current situation. This is actually true. In times of crisis, some popular forms of investment fall through the cracks and it is difficult to find the right ones. We filter a bit at this point:

What tangible assets are there?

Precious metals: Are certainly number 1 here and must not be missing in any crisis precaution. However, it is advisable not to put all your eggs in one basket and buy only gold and silver. My recommendation is to invest about 30 to 50 percent of disposable assets in precious metals, divided into one-third gold and two-thirds silver.

Real estate: is not recommended for several reasons. The danger of a state seizure by means of a forced mortgage, as happened after the Second World War, can no longer be ruled out. The state itself does not earn money and must refinance itself again and again. Real estate is, as the name suggests, not mobile and therefore the owners cannot withdraw these values from the grasp of the state. Data collection through surveys (most recently the 2011 census) provides the authorities with the basis for such a measure. It could happen that the state registers a mortgage on each property and plot of land, which the owner must subsequently pay off. Regardless of whether the house is paid off or not.

In addition, there is the danger that the over-indebted municipalities will want to increase their revenues by raising fees and charges, thus burdening the property owners. Potential additional expenses may arise as a result of government requirements for thermal insulation or other mandatory refurbishment measures. In the event of an economic slump, rent defaults and damage caused by rent nomads become more frequent. Real estate should therefore be treated with caution. Exceptions could include real estate purchased debt-free for owner-occupancy or farmland and forests. A good possibility are also hobby rooms, which are suitable as an external storage.

Diamonds, art, vintage cars, jewelry, etc.These investment options are not crisis-proof stores of value, as they are more of a hobby and do not have a concrete and stable value.

Read my special report

"Why an XXl crash is looming and how you can protect yourself"

Shares: These are tangible assets, since an investment in companies. From my point of view, however, the disadvantages outweigh the disadvantages for most values, since the prices are currently very high and a sharp drop is possible at any time – at the latest when the downward trends in the economy can no longer be whitewashed. In addition, in the case of heavily indebted businesses (e.g.B. EON with over 30 billion. Euro, as of 2015) the debts acquired along with the stock.

A largely unknown alternative is available for this purpose:

Company participations in established and debt-free companies: Basically, when it comes to company investments (shares), approx. 80% of profits to be generated before going public. The wealthy thus use a knowledge advantage and increase their money in this way. This way is closed to most people due to lack of knowledge and possibilities.

However, there is an opportunity – even for small investors – to join an association of ca. 50 German medium-sized companies to participate. This holding captivates u. a. Through strict criteria in the selection of companies. These must meet the following requirements:

The companies are absolutely debt-free, d. h. they have no bank liabilities (independence in the crisis)
They have worldwide patents and they are successful in their market, they are not startups (risk too high)
You follow a clear code of ethics (only companies and patents that work for the benefit of people and the earth are eligible)
German companies (jobs, tax revenues, etc.) will be lost.) strengthened. 80% of the world's patents are produced in Germany, but unfortunately only a fraction is successfully marketed here, because usually the money for it is missing.

Ulrich Heider, a long-time acquaintance of our crisis table in Planegg, is an expert in this regard and has already helped countless readers. You can contact him about this and also consult him about any questions about other savings and investment options. You can reach him:

Vienna (APA) – Austria's presidency, led by Chancellor Angela Merkel, is presenting itself as a pro-European and bridge-builder to the restive eastern member states .

Vienna (APA) – The black-blue federal government led by Chancellor Sebastian Kurz (oVP) presents itself as emphatically pro-European and as a bridge-builder to the restive eastern member states. However, with its plan to index family allowances, which apparently contradicts EU law, the bank is putting itself in a difficult position before the start of Austria's EU presidency.

"Under current legislation, this is not allowed," EU Social Affairs Commissioner Marianne Thyssen made clear back in December 2016. At that time, still under red-black, the oVP had launched a first attempt to cut family allowances. Austria would save only a fraction of the total child allowances and at the same time incur a higher administrative burden, the Belgian Christian Democrat argued. It did not want to "sacrifice the principle of fairness for a few peanuts," it told its Austrian party colleagues.

Last March, the EU Commission used the cost argument to reject a German move to make family allowance cuts possible. Without a change in EU law, which Austria also plans to seek, it risks condemnation by the European Court of Justice (ECJ). In any case, the EU Commission reacted coolly to Thursday's black-blue agreement. It said it would examine the relevant "laws for their conformity with EU law once they are adopted".

While Wolfgang Mazal, a social expert representing the Austrian People's Party (oVP) in the government negotiations, considers the planned indexation of family allowances to be in line with European law and draws a comparison with private-law alimony payments, a report by the German Bundestag's scientific service is clearly negative. In 2014, the German legal experts stated that adjusting the state child benefit to the cost level in another member state would be "incompatible with Union law". Even more, it violates provisions of several directly applicable EU regulations. Those affected would be able to sue for their rights directly in domestic courts.

Above all, however, Austria is threatened with a weakening of its political position at a time when, as a future EU Council presidency, it is dependent on the broadest possible recognition among EU member states. For example, Hungarian Prime Minister Viktor Orban, with whom Kurz wants to build bridges, has spoken out sharply against Austria's plans for cuts.

Austria wants to change the EU treaties "in small partial regulations in a deceitful way step by step," Orban insisted last February on the principle of equal treatment of EU foreigners. It is a "modification" of EU treaties that Hungary does not accept, said the right-wing conservative politician, himself pilloried for flouting EU law in the areas of justice and migration.

The plans, which have been criticized as discriminatory, seem to be just set up for the "problem children" Hungary and Poland, who repeatedly complain about unfair treatment in the EU. A Council presidency Austria testing the limits of EU law itself would not make it any easier to insist on adherence to basic EU values vis-A-vis Budapest and Warsaw. At the same time, the Austrian presidency already has two tough tasks waiting for it in the second half of the year: The negotiations on the EU financial framework and the conclusion of the Brexit talks.

Austria's plans to cut family allowances also have to do with Brexit. After all, it was the British government that had wrested a concession to this effect from its EU partners in the run-up to the Brexit referendum. Among the "goodies" agreed by EU leaders in February 2016 for British Prime Minister David Cameron was permission to bring family benefits to immigrants from poorer Eastern European EU countries in line with living standards there. As foreign minister at the time, Kurz immediately jumped on the bandwagon and demanded that this exemption should also apply to Austria.

However, the British put a spanner in the plan's works by voting against the country's continued EU membership in June 2016. The February summit decision has thus officially become obsolete. A large proportion of EU states, which reluctantly agreed at the time to avert the threat of Brexit, now want no part of the exemptions. Kurz's reaction was quite different.

Measures aimed against "immigration into the welfare system" will have to be implemented all the more after the UK's vote to leave, the then foreign secretary has said. If the EU does not comply with this "implementation mandate," "moods and developments such as those that have taken place in Great Britain will also take place in other member states," he warned at the time of a disintegration of the European Union.

In most cases, recessions are relatively short episodes of economic weakness, even in Switzerland. (Image: ZVG)

As history shows, economic downturns are usually over by the time they are recognized. From a portfolio perspective, according to Peter Bezak of Zurich Invest AG, bonds have generated positive returns in past recessions. Another insight: even when interest rates are low, bonds can stabilize your portfolio.

It is the most reliable leading indicator of economic activity in the U.S. and is even considered a gauge for the entire global economy: the Purchasing Managers Index (PMI), also known as the ISM Purchasing Managers Index. The PMI is published by the Institute for Supply Management (ISM) and is a weighted index consisting of the sub-indices new orders, production, employment, shipments received, and inventories. A value above 50 points signals rising industrial production and a value below 50 points signals declining industrial production. During the past recessions, this value has always fallen to around 40 points or even lower.

US ISM Purchasing Managers Index

Generally, an economy is said to be in recession when it experiences two consecutive quarters of negative gross domestic product (GDP) growth figures. According to this definition, the economic history of Switzerland over the last 35 years reveals a surprising number of recessions, nine to be exact. "It is notable that each of the last seven recessions in Switzerland lasted only two quarters. In view of the dynamics in the financial market crisis in 2008, this is particularly remarkable. However, the further back in history we look, the longer the recessions lasted", explains Peter Bezak, investment expert at Zurich Invest AG.

Clear majority for positive growth

The longest recession in Switzerland in the past 35 years was that of the early 1990s, when growth was negative for four consecutive quarters. But in most cases, recessions are relatively short episodes of economic weakness, even in Switzerland. In the past 35 years, with 140 quarters correspondingly, GDP only developed negatively in 21 quarters, or about one-seventh of the time. About six out of seven quarters had positive growth rates.

Bezak goes on to explain how various asset classes, such as stocks and bonds, as well as a diversified portfolio, performed from the perspective of a Swiss investor during and after the most recent deep recessions of the past 35 years.

Bonds provide stability during periods of recession

The following chart compares the annualized returns from the perspective of a Swiss investor, which various asset classes and a balanced portfolio generated during the last three deepest recessions. It can be seen that during the respective periods, government bonds and also corporate bonds generated positive returns, while equities, as measured by the global equity market index MSCI World, generated weakly positive to significantly negative returns.

Returns during recessions

Twelve months after the end of a recession, it is clear that in all three recessions, stocks in particular have recovered unmistakably (cf. following chart). What does it mean for the investor? "If the investor remains invested in a diversified portfolio of stocks, bonds, real estate and alternative investments, he can benefit from the stability of bonds during periods of recession and from the usually expected market recovery of stocks afterwards", says Bezak.

Yields after periods of recession

Risks of a rise in interest rates

As the investment expert continues, bonds are considered a relatively safe form of investment during a recession. "But they are also subject to various risks and one significant risk is the change in interest rates. In the current low interest rate environment, these risks are asymmetrically distributed. While interest rates are unlikely to fall much further, leaving bonds with little upside potential, the value of bonds would fall significantly if interest rates rose sharply. Even corporate bonds are not immune to a rise in interest rates, but the risk premiums over safe government bonds provide some "buffer" in the event of a rate rise, says Bezak.

Improving the risk-return profile

While it is almost impossible to earn a reasonable minimum return in a portfolio today with bonds alone due to the low interest rate environment. Still, from a correlation perspective, both corporate bonds and government bonds were suitable for improving the risk-return profile of a mixed portfolio. A fair amount of bonds can protect a portfolio during a recession, even when interest rates are low, he said. Neither government bonds nor corporate bonds have had negative returns in the three recessions considered in the past. "In other words, corporate bonds reduce a portfolio's volatility, but not its return", Bezak points out. Based on the current low interest rate level and the low interest rates expected to remain low, corporate bonds are therefore preferable to government bonds, she says.

What tangible assets are there?

"Why an XXl crash is looming and how you can protect yourself"

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