Bankers’ hours: Don’t bet the farm on a trendy investment

Pat Dalrymple

Once again, we hear investors bemoan their decision to bet the farm on the latest investment fad, complaining that their kids’ college fund is gone.

The allure is irresistible for many of us, whether it’s the Dot Com frenzy of the 90s, real estate every 10 years or, more recently, cryptocurrencies.

Specifically, the complaint comes from investors who put all their marbles into cryptocurrency, only to see those marbles clatter down the drain as crypto values ​​plummet. Virtual currency operations are filing for bankruptcy and others are freezing assets and blocking withdrawals as their new billionaire founders try to right the ship.



This is not a piece about crypto money, which I don’t understand, nor do I offer investment advice, which I couldn’t give because I don’t know much more about investing than I do about virtual money. But this column has, perhaps, an even you can keep.

It’s about keeping the nest egg you absolutely don’t want to lose in a safe place. Think “life savings,” or the kids’ college fund.



The founder of Celsius, an outfit that lends bitcoins to other crypto companies, and has now frozen investors’ assets, had made t-shirts bearing the slogan “Banks are not your friends.” He is absolutely right; banks are “profit enterprises” and they are as focused on the bottom line as any other business on the planet. But if a bank fails, the money you have in your checking or savings account, or in a CD, is insured up to $250,000.

What this means is that you get yada, yada, yada from the executives of a failed crypto company, which will almost certainly translate to “nada”. In the busted bank example, you get a check. And, since banks will provide almost ad nauseum, you can have multiple accounts for family members and spread your dollars with different institutions to provide very large amounts.

The US federal government does at least one thing very efficiently, unmatched except, perhaps, by the strike on Osama Bin Laden. When an insured financial institution fails, the suits show up at five in the afternoon on Friday, change the locks, send the executives home, and work through the weekend to set up the depositor’s payment plan to open for business on Monday morning. The Federal Deposit Insurance Corporation may operate the bank for several weeks under a temporary name until it can transfer the deposits and loan assets to another bank, or that transaction may be completed over the weekend. Either way, as far as the customer is concerned, it’s business as usual: your credit and debit cards are working fine, your checks are clearing, and if you want to withdraw all or part of your money, a check is immediately issued to you. there are no questions.

In fact, an account, or accounts, at a federally insured bank, thrift or credit union can be the linchpin of a solid investment strategy. Once, in the last century, Mike Conviser, chairman of the board at Aspen S&L, where I worked for 12 years, told me about a conversation he had with John Ma, an investment adviser in Manhattan who counted John Denver. the late popular music singer, among his clients.

Mike said he asked Mr. Ma, “How do you grow John’s investment portfolio?” Mr. Ma’s response was reportedly revealing.

“My job is not to increase John’s fortune. He does this well with his income. My job is to protect the principal.”

This concept gained some credence in my mind when, back in the last century, I asked someone who, unlike me, knew a lot about making money from money, “What is the first rule of investing?”

Answer: “Save the director”. Maybe it means, don’t bet your life savings or college fund on a trendy or risky investment.

Then, I: “What’s the second rule?”

Him: “Everyone forgets the first rule.”

Pat Dalrymple is a native of western Colorado and has spent more than 50 years in mortgage lending and banking in the Roaring Fork Valley. He will be happy to answer your questions or hear your comments. His email is [email protected].

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