Investors: What’s Going to Happen to Me?

Eric King: “John, I have to ask you about this Cyprus disaster and the fears all over the world now that theft of bank deposits has become a reality?”

Mauldin: “It (Cyprus) seems to be on everybody’s mind and for good reasons. This was not expected. And I really think the EU was pretty ‘ham-handed’ (in how they have handled this crisis). There was an implicit, it wasn’t explicit, it wasn’t in the rules, but there was an implicit understanding among everybody that 100,000 euros was sacrosanct.

Then you have the EU, the IMF, and the ECB all saying, ‘Well, not so much. We’re going to take a 10% tax on tiny little Cyprus.’ This of course makes everybody else think, ‘Well, what about us?’….

“What’s the principle of what we are establishing here? In theory, what’s good-for-the-goose is good-for-the-gander when you are dealing with European countries.

Even the Dutch Finance Minister, Jeroen Dijsselbloem, says, ‘Well, Cyprus is a one-off. But wait a minute, it is a template, but we’re not going to do this again.’ It’s a very, very confusing and mixed message that we’re getting from Europe.

If you are say in Slovenia or Malta right now, you’ve got to be looking over your shoulder because Slovenia is a little bitty country that is a member of the EU, and they are about 7 billion euros down in their banking system. They will have to be asking for assistance pretty soon.

Is the EU going to go after their depositors? When was the last time a depositor said, ‘I think I want to go make an investment in a bank. And I’m going to put my 150,000 euros in a bank as a deposit that I’m going to be working out of. That’s my checking account. That’s my savings. And I’m going to see that as an investment in a bank.’

That’s not what you do. So now you are seeing that money as yours, and now you look over your shoulder and think, ‘Well, maybe I shouldn’t have that much in there.’ Let me just add that is not unlike what we do in the US. We all know that with FDIC insurance if you put more than $100,000 in a bank you are technically at risk.

So people say let’s pay attention to who our bank is and make sure we don’t have more than $100,000 (in that bank). That’s what they are going to have to do in Europe. It’s just the transition from where they are today to where they need to be.

The Dutch Finance Minister was right. This is what they need to do. But getting there and saying it out loud is problematic.”

Eric King: “So, John, investors fears around the world regarding bank deposits is very real and they should be careful going forward?”

Mauldin: “I would be. And if you are a family office or a corporate treasurer, and you’ve got $500,000 in a bank, you’ve got to be looking at who is this bank and what country is it in? Let’s look at what the EU did. They came in to Cyprus and said, ‘We’re not just going to go after the bad banks here. We’re going to go after everybody.’

So, let’s say you were in a middle-sized bank in Cyprus, and understand it’s solid. You’ve got no concerns. You are not like those other banks that are lending money to the Greeks. You’ve got a solid little bank. Your solid little bank was thrown to the wolves just like the big, bad banks. Everybody got tagged.”

Eric King: “John, are you still a buyer of gold every month, and what gold going forward in light of this?”

Mauldin: “I still buy gold. It is central bank insurance. Maybe we need to think of it as bureaucrat insurance if you are in Europe. I mean you had a bunch of guys get together in Europe and go, ‘Well, let’s do this. Don’t you think it’s a good idea?’ So they just ran off and they are confiscating bank deposits.

If you had gold and gold coins you are looking a lot better today. You need some government insurance. You need some central bank insurance. I don’t think of gold as an investment. I keep saying that. I hope I never use my gold, but I still buy it every month.”