Assumptions:[/backcolor]
1. cause of financial crisis is similiar to 08 crisis[/backcolor]
2. effects of financial crisis spread to entire US economic system[/backcolor]
3. Chinese local government debt crisis is unrelated to US financial crisis[/backcolor]
4. disintegration of Euro is unrelated to US financial crisis[/backcolor]
5. high inflation in Japan is unrelated to, or not solely relat ...
Assumptions:
1. cause of financial crisis is similiar to 08 crisis
2. effects of financial crisis spread to entire US economic system
3. Chinese local government debt crisis is unrelated to US financial crisis
4. disintegration of Euro is unrelated to US financial crisis
5. high inflation in Japan is unrelated to, or not solely related to,US financial crisis
Options:
currency/cash
a. USD: likely to be depreciating heavily due to the financial crisis
b. RMB: the 100k USD used for working capital still needs to be converted to RMB; Chinese local government debt crisis is unliklely to affect value of RMB in international markets
c. Euro: no go
d. Swiss franc: CHF has shown its strength against the Euro. The recent removal of CHF cap against Euro serves a good example to show that when Euro weakens, Swiss franc strengthens.
e. other currencies: if they are linked to the USD, especially in economies with floating exchange rate, they are no-go.
2. gold and other defense goods(value preserving)
Best defense goods during times of uncertainly would be gold and other similar goods. However, similar rationale by all investors would lead to surge in demand for gold and hence surge in price.
3. stocks and other financial assets
No go. Financial assets are the first to be sacrified during financial crisis. Besides, there is liquidity issue.
4. real estate and other real asset investments
Transactions take time. However, some of these assets are likely to decrease in value due to distress sale("fire sale"). If you do have spare funds(after taking care of your living needs and maintenance of your factory), you could consider investing here.
Conclusion:
1. Of the 300k USD, 100k USD is used as working capital. However, during the crisis on a global scale, demand for electronic goods is likely to go down, hence you no longer need 100k USD for working capital. Assume 50k USD is needed as working capital--it still needs to be converted to RMB for operations needs.
2. Of the remaining 250K USD, convert them to Swiss francs if you wish to keep them liquid; otherwise invest in real estate(look for distressed assets). This allows you to preserve the value of your wealth. In addition, you could now have your own home!
Depends on what triggered the crisis:
1. oil crisis: alternative energy developers would benefit the most
2. USD crisis: developing economies, including China, would benefit the most
3. financial crisis: gold is the safest value preserver
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