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Is Your Money Safe? Big Banks Are the "Riskiest," Prechter Says

Posted May 24, 2010 07:30am EDT by Heesun Wee in Investing, Recession, Banking
Related: xlf, ^gspc, ^dji, bac, gs, CPFXX, jpm

Longtime bear Robert Prechter of Elliott Wave International sees depression and deflation on America's economic horizon. So what's an investor to do?

"My whole case is what to get out of," says Prechter, author of Conquer the Crash. "Find a refuge," he tells Aaron in the accompanying segment.

"Probably the safest place for most people's money is in Treasury bills or a fund that specializes only in Treasury bills," says Prechter, citing American Century's Capital Preservation Fund as an example. "That's as close to cash as you can get. Actual cash is not a bad idea either," he says.

While bullish on the dollar, Prechter says there are still plenty of U.S. banks that are unsafe because mortgage delinquencies and foreclosures are rising. "And guess what? That's the asset base for virtually the entire banking system in the U.S.," he says. "So there's no question that banks are under severe stress right now."

Prechter isn't optimistic the FDIC will be able to rescue all of the risky institutions and says bigger definitely isn't better. "We have felt all along that the riskiest banks were the largest," he says.

But aren't the biggest banks 'too big to fail'? Won't the government bail them out?

"Whether that continues I don't know," Prechter says. "There's already been the beginning of voter backlash on this very question."

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