Market Upside Down: How to Invest Profitably in a Shrinking Economy

8. Beware of the Risks

Bank certificates of deposits have been considered safe investments—or so it seemed until the collapse of Washington Mutual, Wachovia, and other banks in the banking crisis. The fact that consumer deposits in banks (and savings associations) were guaranteed up to $100,000—this limit was temporarily raised to $250,000 until 2013—by the Federal Deposit Insurance Corporation (FDIC) did not seem good enough to many depositors. They feared that their money would nevertheless be lost or tied up too long in a busted bank, at least until the mess was worked out. And when a money market fund like the Reserve Primary Fund “broke the buck”—that is, its Net Asset Value dipped below the $1 threshold expected of money market funds—it ...