How to Protect Assets During Turbulent Times

Throughout the long river of history, wars and turmoil have been the norm, while peace and prosperity have been the exception. In the past 3,500 years of human history, there are fewer than 300 years without a recorded war globally. In the face of potential turmoil, how to protect one's wealth has become a question worth pondering. Here are some historical experiences and suggestions:

Geographic location is crucial

Choosing the right geographical location can determine property and even life safety. During World War II, a Jewish family fled to France and Portugal respectively, and as a result, all members who went to France were sent to concentration camps, while those who went to Portugal survived. In 1943, some Nazi members began to transfer funds to South America instead of the Eurasian continent or the United States, which was a wise move at the time. When the Soviet Union collapsed in 1991, many ordinary citizens went bankrupt overnight because all their assets were in the country.

Maintain Independent Judgment

Even in difficult times, one must maintain a clear mind and think independently about who will be the ultimate winner. In 1942, Nomura Securities anticipated Japan's possible defeat by observing details such as food shortages and officer casualties. They began to gradually sell off stocks and redirect their funds towards land and real estate in preparation for post-war reconstruction. This decision allowed Nomura to rise rapidly in the post-war period.

In contrast, many wealthy German Jews in the 1930s were overly trusting of the state and missed the opportunity to evacuate in time. By the time they realized the situation was critical, it was already too late. This reminds us that when we think "there is no need to leave now," it may actually be the last chance we have to make a choice.

Avoid Betting on a Single Asset

During turbulent times, never invest all your funds in a single asset. In 1937, even Churchill was tempted by the American bull market, and as a result, he faced a margin call in 1938. The wealthy Jews in Germany found it difficult to escape unharmed due to most of their assets being concentrated within Germany. In modern society, changes happen even faster; the average lifespan of companies in the S&P 500 index has decreased from 61 years in 1958 to about 18 years in 2020, and it is expected to be around 12 years by 2030.

Beware of Custody Risks

In major transformations, existing property rights documents may become invalid. Bank deposits, gold, real estate, etc., are actually some form of "third-party custody." During World War II, the estates of Polish nobility were confiscated by Germany, and after the war, they could not be recovered due to changes in government. In recent years, the assets of Russian billionaires in NATO countries have been frozen, with real estate being the most difficult to deal with. During World War II, the United States also froze Japanese assets in America, and many Japanese Americans were sent to internment camps, losing their property. In 1945, the Yugoslav government stripped German nationals of their nationality and property rights within its borders.

Gold Custody Strategy

Regarding gold storage, self-custody may be safer than third-party custody. During World War II, gold stored in safes at French banks was confiscated by the German army, while gold that was secretly buried was preserved. Interestingly, a Jewish family converted 10% of their wealth into coins rather than gold bars, as coins were more convenient for small payments during turbulent times and easier to pass through various checkpoints.

In 1939, many French families converted 20% of their wealth into gold bars, either storing them in Switzerland or burying them in their castle backyards. However, under the circumstances at the time, gold trading faced many risks, including difficulties in finding reliable buyers, significant discounts on trading prices, and security issues related to concealment. Nevertheless, compared to other assets, gold buried in the backyard remained a relatively safe choice in the last years of the war.

Conclusion

In the face of an uncertain future, we recommend:

1. Achieve diversification: including diversification of asset classes, geographical locations, and custody methods.

2. Be prepared: Don't have a false sense of security; when the situation deteriorates to the point where everyone wants to leave, it may already be too late.

Protecting wealth requires not only wisdom but also courage and vision. By preparing in advance during times of peace, one can remain undefeated amidst turmoil.