Last week I talked about how the Republican/Democrat Regime and the Federal Reserve have made it extraordinarily difficult for investors to find any kind of reasonable yield without taking on very high risk. You’ve heard it called “The Risk Trade” and it simply means that anybody who has any savings at all is being forced to invest in risky assets like stocks and the junkiest bonds or yet-to-be-discovered Ponzi schemes.
Like I said, I don’t have any simple solutions to finding yield in this environment and that’s because there isn’t one. You have to be vigilant and you have to continue to educate yourself with sources you can trust (like yours truly, frankly, and unlike most newspapers or cable news). If you use a financial advisor, make sure their incentives are aligned with yours and make sure you’ve gotten lots of references before sending any of your money in.
This week, let’s talk more about how to buy precious metals and further educate ourselves on this topic.
First off, let me be clear that we are talking about a process of buying only physical gold and silver coins and bullion that we can hold in our own hands, safety deposit boxes, safes, and backyards. I don’t want to invest in “paper silver” or Exchange Traded Funds (ETFs) or even silver futures contracts. In short, that’s because the brokers and dealers of those products have far overpromised the amount of physical gold and silver they will likely ever be able to get their hands on.
Think of investors in a Gold or Silver ETF as somewhat like a bank’s depositors, with the firm which created and controls the ETF being the bank and you the “owner” of the ETF paper being the depositor. If and when the next true financial crises explodes here in the US, there’s probably about as much actual physical access to your investment in those ETFs as the Cyprus bank depositors had to their cash this past month. And since we’re talking about gold and silver as a relatively “safe” investment against inflation, money printing, currency wars, devaluation and so on, being unable to access the physical assets sort of defeats the purpose of investing and gold and silver.
For those of you who are little less paranoid about needing to physically touch the bullion you own, you can find a few firms that promise to buy physical bullion for you and then store it for you in a vault. Here’s one for example, that promises “distinct serial numbers on any variable weight bars, held in an allocated account in fully insured vaults operated by the world’s most trusted vaulting firms and audited regularly by a Big Four accounting firm.”
Personally, I don’t trust anything audited by the Big Four accounting firms either, but you might have a little more faith and therefore be willing to take the risk of such a “hard asset in somebody else’s vault” approach to building your own silver and gold reserves.
Next point to make is that we are going to be slowly but surely accumulating this physical gold and silver bullion and coins over the next few months, quarters and years. We’re not looking to go in and plump down 10% of our savings on gold coins at the local pawn shop tomorrow. We’re talking about finding ourselves a reputable dealer or two over the next few months and then continuing to scale into more physical gold and silver bullion and coins over the next couple years.
On that note, let me be clear that I’m also not talking about trying to call a bottom in gold or silver here and expecting that we can flip this stuff for a huge profit this time next year or something. If you are looking to make a quick flip here or there by taking advantage of short-term spikes or crashes in the metals markets, well, that’s what the aforementioned ETFs are actually good for. I just wouldn’t want to be caught holding those contacts when the crap hits the fan like it did in 2008’s financial meltdown.
We’re truly being Revolution Investor with this approach.
The longer interest rates stay at 0%, the more the US will borrow. We don’t blink at multi-trillion dollar bailouts and wars and deficits while the dollar remains the world’s reserve currency and the cost of that capital is zero. And the longer rates stay this low, the more money the Fed pumps into the system, the more the Republican/Democrat Regime borrows and spends on balance sheet and off-balance sheet, gold and silver the more likely our long-term holdings in these physical precious metals will be important to our retirements in five or ten and also decades from now.
I think most investors should build up about 5-15% of their assets into physical gold and silver over the next couple years and then keep it at that level forever.
Here are some additional resources for you on this topic:
- The Chess Game of Capital Controls
- The Great Disconnect Between Paper & Physical Silver
- Gold Daily and Silver Weekly Charts – Currency Wars
- More On the German Gold Reserves Controversy – Where Is the Gold?
- It’s all good, right up until it isn’t.
Next week I’ll go through a list of the (relatively) safest, (relatively) high-yielding stocks for long-term investors and retirees.