Why is there discussion about “wartime asset allocation”?
The geopolitical tensions often have profound impacts on the economy and financial markets. The relationship between Taiwan and China has long been the focus of geopolitical attention in the Asia-Pacific region and even globally. Recently, a netizen posted on the PTT stock forum under the title “Asset Allocation During War,” sharing their current asset allocation, which sparked extensive discussions among users.
In simple terms, the core strategy of this netizen is to convert assets from New Taiwan Dollars to US Dollars and transfer funds to overseas accounts for international use.
The reason for the so-called discussion on “wartime asset allocation” arises from the reality that if war were to occur, Taiwan’s financial system would face multiple shocks, including panic-induced bank runs, leading to liquidity crises and bank failures; significant declines in stock and real estate markets; a temporary sharp devaluation of the New Taiwan Dollar, which could potentially become worthless if defeated; and disruptions in the operations of financial institutions due to physical damage or cyberattacks.
These various issues could not only lead to substantial assets “evaporating” but could also result in the inability to withdraw funds held in banks. To avoid such scenarios, many Taiwanese investors are beginning to consider how to diversify their assets, hold hedging assets, and understand potential government responses.
Is the netizen’s strategy good?
This netizen’s strategy primarily includes the following steps: holding an iPhone for FaceID login to software, opening an IBKR account for securities trading, linking a Taiwanese bank account for quick transfers, opening a HSBC Taiwan Premier account for global services, opening a HSBC Singapore account as a safe haven for funds, and ultimately transferring assets overseas quickly in the event of a crisis while using a Debit Card to maintain living expenses.
The author states that their strategy mainly considers “ensuring asset allocation does not go to zero,” thus focusing on complete online operations, using FaceID verification technology to bypass SMS transmission issues, and avoiding bank run problems in Taiwan. Whether to escape or stay in or out of the country is not within their consideration.
However, for general investors, attempting to replicate this strategy presents certain challenges:
First, since this strategy almost entirely relies on the operation of the internet and mobile phones, although it ensures asset safety abroad, it cannot be operated until internet connectivity is established.
When war breaks out, communication infrastructure is likely to become a primary target for attacks; the collapse of Chunghwa Telecom could prevent the receipt of SMS verification codes, which is just one aspect; internet disruptions, unstable mobile signals, or even complete outages are highly probable. At that point, even with a FaceID-enabled iPhone, without internet access, one would naturally be unable to log into online platforms for any operations.
Secondly, this strategy is quite time-consuming and requires “prior asset allocation.”
Because once war occurs, the operation of the financial system will be severely impacted, foreign exchange controls and currency devaluation are unavoidable issues, and wartime international financial transactions may also be restricted. Additionally, according to current Taiwanese regulations, converting NT dollars into US dollars requires reporting if the cumulative amount exceeds 500,000 on the same day, making it challenging to execute this strategy quickly in a short time frame.
Most importantly, this strategy almost completely ignores personal safety and mobility constraints.
While asset allocation is important, in a war-torn environment, personal safety is the primary concern. Even if assets are successfully transferred overseas, if one cannot safely leave Taiwan or maintain basic living standards, the significance of those assets diminishes significantly.
Thus, this asset allocation strategy may not be suitable for everyone.
Is gold a good choice?
Under this PTT discussion, many netizens believe that regardless of how asset allocation is conducted, gold remains the best choice.
“Gold is still universal,” “This has been discussed to death; just ask for physical gold, what use are those accounts,” “Just exchange some gold and hide in the mountains for a few days until it’s over.”
Gold demonstrates strong hedging characteristics during times of war and geopolitical instability. Throughout history, gold has proven its resilience during wars and conflicts, maintaining its intrinsic value even when local currencies depreciate or become worthless due to political and economic instability.
Moreover, wars can trigger inflation due to supply chain disruptions and increased government spending. Gold has always been an effective tool against inflation; as the purchasing power of fiat currencies declines, gold tends to become more expensive.
One netizen pointed out that a red brick weighs about 2 kilograms, and at today’s gold price, 2 kilograms of gold is worth approximately 6 million New Taiwan Dollars. It is not “so heavy that it cannot be moved” and can ensure a substantial amount of asset safety.
However, the drawback of gold lies in how to “physically store and move” it.
After all, carrying gold abroad during peacetime requires declaring any amount exceeding $20,000 to customs, and during wartime, stricter restrictions will likely apply. Additionally, carrying such a large amount of gold while fleeing during a war may also face the risk of robbery.
Related Reading: Gold vs. Bitcoin, which one can truly save lives when war breaks out?
Is cryptocurrency a good choice?
Besides gold, some netizens highly recommend cryptocurrency, stating “cold wallets are also good,” “I will go directly for cryptocurrency…,” “I have FT and Crypto.com cards, living freely abroad.”
In the event of war, cryptocurrency does have potential advantages as a wartime asset allocation option, but it also presents some risks and challenges that cannot be ignored.
Potential advantages of cryptocurrency as a wartime asset allocation:
Decentralization and borderless nature: Cryptocurrencies do not rely on any central government or financial institution for issuance and management, theoretically avoiding the risks of a financial system collapse in a single country or region. Its borderless nature makes cross-border asset transfers a potential alternative when traditional financial channels are blocked.
Portability and anonymity: Compared to physical assets like real estate or gold, cryptocurrencies exist in digital form, making them easy to carry and hide. In situations requiring emergency evacuation or avoiding asset confiscation, this is a significant advantage.
Potential value storage: When traditional currencies face devaluation or hyperinflation, some believe cryptocurrencies may serve as a value storage tool, although their price volatility is significant.
Bypassing traditional financial systems: In situations where banks close or international remittances are hindered due to war, cryptocurrency transactions may become an alternative for maintaining economic activity and making payments.
However, cryptocurrency as a wartime asset allocation also faces severe challenges and risks:
High dependence on internet and power infrastructure: Cryptocurrency transactions and management heavily rely on internet and power supply. During wartime, these infrastructures can be easily damaged; once interrupted, cryptocurrencies become difficult to use. This is similar to the risks faced by smartphones and online trading systems mentioned above.
Security risks: The security of cryptocurrencies relies on the protection of private keys. In the chaotic environment of war, the risks of losing, stealing, or hacking private keys will significantly increase.
Extreme price volatility: The price volatility of cryptocurrencies is already high, and during wartime, this uncertainty may exacerbate, diminishing their reliability as a value storage tool.
Acceptance and liquidity issues: Although the popularity of cryptocurrencies is increasing, whether merchants and individuals are willing to accept cryptocurrencies as a payment method during extreme situations like war remains questionable. Their liquidity may also significantly decrease due to market panic.
Technical barriers: Using cryptocurrencies requires a certain level of technical knowledge and operational skills; for those unfamiliar, learning and using them in emergencies may be very difficult.
What does AI suggest?
“If war breaks out, how should Taiwanese people prepare for wartime asset allocation?” Faced with this challenging question, the AI software Gemini offers the following suggestions.
Suggestion 1: Cash buffer reserves for daily use
Establishing an easily accessible cash buffer reserve in a separate bank account is a basic and prudent step to protect financial assets during uncertain times (such as potential war). This cash reserve should ideally be sufficient to cover a few months of basic living expenses, providing a financial safety net in case of income disruption or the inability to access other funds.
Suggestion 2: Open overseas funding accounts
Opening a second bank account in a neutral and financially stable country can provide a safe place for funds and ensure access to money even if the domestic financial system faces interruptions or restrictions.
For individuals holding precious metals like gold and silver, considering secure and prudent storage facilities outside Taiwan (such as in Switzerland or Singapore, known for their stability and financial security) can further mitigate risks related to domestic instability or potential asset freezes.
Suggestion 3: Understand Taiwan’s asset transfer regulations
Taiwan residents must thoroughly understand and strictly adhere to Taiwan’s regulations regarding the holding and transfer of foreign currency. This includes reporting requirements for carrying more than $10,000 in cash when entering Taiwan and obtaining prior approval from the Central Bank of Taiwan for foreign exchange transactions above a certain amount.
Suggestion 4: Develop a financial plan
Creating a comprehensive and well-documented financial plan that clearly addresses potential conflict scenarios is a key step in protecting personal assets. Seeking guidance from experienced financial advisors specializing in international investments and geopolitical risk can provide tailored advice and support for making informed decisions regarding asset allocation, risk management, and long-term financial security.
Suggestion 5: Carefully review insurance policies
Taiwan residents should carefully review their existing insurance policies to determine the coverage they provide in the event of war or armed conflict. Although comprehensive war risk insurance for individuals may be limited in availability or scope, understanding potential options may provide additional financial protection against certain types of loss.
Regardless, when facing the extreme risk of war, a more comprehensive consideration should include personal safety planning, emergency supplies preparation, and diverse asset holdings, such as allocating a reasonable amount of physical precious metals and even considering broader asset distribution across different countries or regions.
Of course, we all hope for lasting peace and that war will never occur. However, being prepared and planning in advance to address extreme risks undoubtedly reflects a responsible attitude towards oneself.