The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Captain Cactus on January 20, 2021, 01:56:47 PM
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I was listening to a back episode of the Radical Personal Finance podcast the other day and the guest was talking about non-cash stores of wealth (ie buying honey, blocks of stainless steel for machine tooling, firewood, a million pounds of lead, etc...). Of course gold figured into the conversation as well, being a relatively small, concentrated store of value.
Something they didn't mention was buying loose precious gems, ie emeralds, sapphires, rubies. Or even precious stones in jewelry form.
Seems to me it would be in the same category as fine art or gold coins, ie it's not gonna produce dividends but you could sell it at some point down the road and get cash if needed/wanted.
Anybody ever buy precious stones or jewelry as a non-cash preservation of wealth? Thoughts?
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I got interested in gemstones as a kid. I loved all the folklore behind the wearing of certain stones and the symbolism and they were pretty and colorful. I have some very old and cool things. I also have a whole lot of silly wastes of space that I really should see what I could dump them for as I'll never wear them again and don't really see the point in keeping them. I do not have anything that would be considered a real investment because I didn't buy them for that so the stuff I have is a mix of vintage/antique and modern.
All that is to say I have a basic knowledge of what is and isn't potentially valuable and the way gems were/are marketed (oh my goodness there are sooooo many stories besides the obvious "diamonds aren't rare or valuable, just great marketing" one. PT Barnam wasn't wrong.)
In the event of an economic crash, I really don't think selling shiny stones will be a good solution.
In the event of world meltdown - dogs and cats, living together mass hysteria - shiny stones also will not likely be in great demand.
And in the same vein as coins or fine art or stamps or whatever - collectors that buy these things strictly as investments are literally either mega-wealthy to afford the really expensive/hold-their-value goods, or folks that are just dabbling and likely to waste more money locking up $ into inflated priced non-liquid objects than preserve any actual wealth.
You'd essentially need three things: deep background/knowledge of the commodity, the luck to buy something that will truly hold its value and most importantly/most difficult: a buyer that is willing to pay your price exactly when you need to sell. Sounds simple, but there is so much research/work involved to make this worthwhile that I can't imagine using this as a viable investment.
There are better things out there if you are looking for true investments.
My 2˘ anyway. ;)
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I was listening to a back episode of the Radical Personal Finance podcast the other day and the guest was talking about non-cash stores of wealth (ie buying honey, blocks of stainless steel for machine tooling, firewood, a million pounds of lead, etc...). Of course gold figured into the conversation as well, being a relatively small, concentrated store of value.
Something they didn't mention was buying loose precious gems, ie emeralds, sapphires, rubies. Or even precious stones in jewelry form.
Seems to me it would be in the same category as fine art or gold coins, ie it's not gonna produce dividends but you could sell it at some point down the road and get cash if needed/wanted.
Anybody ever buy precious stones or jewelry as a non-cash preservation of wealth? Thoughts?
I would tend to avoid precious stones. The miners/producers of gemstones are very cartel-like and do not structure the market for the stones to be bought back.
If you want an alternative store of wealth, look to high end watches. There is actually an active an lively market for used ones. While they are absolutely not an investment in the traditional sense, they tend to hold their value and can be easily exchanged for cash at a fair price in a reasonably short amount of time.
The big second-hand markets for watches are on chrono24 and ebay. And watchrecon is a good aggregator for person-to-person sellers on various sales corners of different watch forums.
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You'd essentially need three things: deep background/knowledge of the commodity, the luck to buy something that will truly hold its value and most importantly/most difficult: a buyer that is willing to pay your price exactly when you need to sell. Sounds simple, but there is so much research/work involved to make this worthwhile that I can't imagine using this as a viable investment.
This.
If gemstones are an interest/hobby for you unto themselves, then have at it. But compared to gold or silver, there's so many factors that could raise or tank an individual stone's value that you'd really need to educate yourself to have an expectation of turning any kind of long-term profit. Or even having whatever you buy hold it's value.
Plus, gemstones can't be melted down like metals can. In many cases the value of an old silver or gold object isn't the finished object but the raw material that it's made from. With stones you'd need a buyer interested in your specific stone or jewelry piece vs. someone looking for X lbs of metal. Finding that buyer for your stones will likely be comparatively difficult.
And where would you be buying from? Do you have/would you be able to get a wholesaler's license? Diamonds and diamond jewelry in particular that's bought retail has as bad a reputation as new cars for losing resale value immediately after you purchase them. Maybe you could get lucky scooping up some deals at pawn shops or estate sales, but again, you'd really need to know what you are looking for, and be comfortable dealing with sellers who even if they are honest may not know themselves exactly what they have.
In short, buying gemstones could be fun if you have money to play with and want to learn a new market, but as a long-term investment, it seems to me that it would be far safer and easier to take whatever money you were thinking of using to buy stones and just keep it in financial investments, or even cash, instead.
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TBH I would consider them heirlooms rather than investments.
Same with any other collectibles - baseball cards, vintage toys, etc.
Sure they have worth, but their lack of liquidity makes them impossible to accurately value.
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My grandparents invested in jewelry with the intention of passing them on as inheritance. I even had a granduncle who was a jeweler.
The idea didn't work out anywhere as well as they hoped it would, because some of the gems didn't hold their value so well over the years and the heirs got into huge fights about who got to keep what. Not just because of the monetary value, but also the sentimental value of the items involved.
Some of the jewelry went to my parents. Over many years, whenever money was tight, they pawned the jewelry. That happened a lot. I tried many times to convince them to sell the jewelry because we would get so much more from selling than pawning. But they always refused. They couldn't bear the thought of letting go, not even when their bank account was almost zero.
So yeah, the jewelry was a store of wealth, and got my parents out of some difficult financial situations. But I wish my grandparents had just invested in stocks, or land, or anything else that could have been a better store of value.
If you want to buy gemstones, go ahead. If you have the time, expertise and connections, you could definitely make a killing. But if your goal is to preserve wealth, and to preserve it specifically for your heirs long after you're gone, there are so many other, better options.
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Ever actually tried to liquidate gemstones or jewelry???
I have.
It's a shit investment.
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Keep in mind if somehow you do manage to sell in the future at a profit the IRS will tax your gains at a flat 28%, just like other collectibles.
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Also, the technology for producing perfect diamonds in the lab is only improving. Other gemstones will likely follow. Real diamonds could be as cheap as CZ soon.
Gold, so far, does not face this threat, but its value is still highly dependent upon cultural norms such as Indian wedding traditions or the popularity of cryptocurrency.
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Also, the technology for producing perfect diamonds in the lab is only improving. Other gemstones will likely follow. Real diamonds could be as cheap as CZ soon.
Gold, so far, does not face this threat, but its value is still highly dependent upon cultural norms such as Indian wedding traditions or the popularity of cryptocurrency.
It also has actual practical uses as well.
The big issue with gemstones is that their worth isn't even remotely stable or objective. Also, their value in a downturn takes a hit, as with all luxury goods, and with the glut of supply as people desperately try to offload them. This is how in 2009 I got an antique 3 carat Burmese ruby and diamond ring for $2500 when it was "valued" at well over $10,000.
Also, the value of stones depends on trends.
A local estate sale was offloading an enormous amount of very high quality rubies, including one that was over 100 carats, but the seller couldn't get shit for them compared to their "value" because rubies aren't overly popular right now.
For awhile emeralds were way out of fashion, and sapphires got a huge boost when both when Diana got her ring, and then again when Kate got the same ring.
Certain cuts go in and out of style as well, so that's a factor too.
Overall, yes, I would put them in the category of "collectibles". Hermes Birkin bags would be a much, much better investment than gemstones.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
But why? That's like, the most anti-mustachian sentiment ever.
It's one thing to say you love jewelry or art and love the idea of an "investment" also being a beautiful part of your life, but it's another thing to just want to own beautiful things, like some kind of weird pirate with a secret stash of treasure.
Feel free to correct me if I'm interpreting wrong.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
One popular example that comes to mind from the past century is the Holocaust. If you've ever seen the movie Schindler's List, there is a famous end scene (and true story) where Schindler contemplates the value of a gold ring and how many lives he may have saved with it:
https://www.youtube.com/watch?v=vOoWpTxKJGA&feature=emb_logo
Throughout WWII Schindler saved about 1,200 Jews by giving massive bribes, often in gold and other luxury goods, to Nazi officials.
Granted, the global financial system is not the same as it was in the 1930s and 40s, but I imagine there will always be some kind of demand for traditional stores of value like precious metals and gemstones. I don't think of them as an investment but rather as a last-ditch emergency fund to barter with. The gold chain or watch I wear won't pay me dividends but may get me out of a sticky situation one day. Who knows?
In a case of zombie apocalypse, I would rather have bullets, batteries, medicine and MREs.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
You can't think of one? It's a scenario that has played out pretty memorably at least once in the past 100 years. Some country gets into massive financial trouble (e.g. by getting into a fight with their neighbors, losing said fight, and getting slapped with punitive reparations). Banking in that country starts tanking. Said country blames a subsection of its population for their woes. The fortunate ones read the air early, grab their stores of value that aren't denominated in the failing/failed currency and which are easily convertible in the neighboring countries, and get out.
Gold being a larger store of value than silver makes it better for this job of getting the hell out in an emergency. If you're stuck in the area with a failed currency, a store like silver might be better because you'd necessarily have more of it to represent the same value, leading to not have to chip off bits. Why would it be valuable in this case? Well, it wouldn't per se, but seeing as we have money because bartering sucks, the failed currency would probably have been printed in quantities that necessitate wheelbarrows to buy a loaf of bread, and people recognize precious metals as an historic store of value that would still be worth something if the outside world were to come in and stabilize the situation, it isn't the worst bet a person could make.
I'd be willing to bet common sizes of ammo would be a better store of value in the early days of such a scenario. It'd be rather deflationary though, with potentially large losses to its increasing value if society rights itself. Not to mention destabilizing when used not as currency.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
You can't think of one? It's a scenario that has played out pretty memorably at least once in the past 100 years. Some country gets into massive financial trouble (e.g. by getting into a fight with their neighbors, losing said fight, and getting slapped with punitive reparations). Banking in that country starts tanking. Said country blames a subsection of its population for their woes. The fortunate ones read the air early, grab their stores of value that aren't denominated in the failing/failed currency and which are easily convertible in the neighboring countries, and get out.
Gold being a larger store of value than silver makes it better for this job of getting the hell out in an emergency. If you're stuck in the area with a failed currency, a store like silver might be better because you'd necessarily have more of it to represent the same value, leading to not have to chip off bits. Why would it be valuable in this case? Well, it wouldn't per se, but seeing as we have money because bartering sucks, the failed currency would probably have been printed in quantities that necessitate wheelbarrows to buy a loaf of bread, and people recognize precious metals as an historic store of value that would still be worth something if the outside world were to come in and stabilize the situation, it isn't the worst bet a person could make.
I'd be willing to bet common sizes of ammo would be a better store of value in the early days of such a scenario. It'd be rather deflationary though, with potentially large losses to its increasing value if society rights itself. Not to mention destabilizing when used not as currency.
Yes, I understand that, but if the US is the country in question, doesn't that point to a larger collapse?
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Yes, I understand that, but if the US is the country in question, doesn't that point to a larger collapse?
If the US is that country, quite likely there is a larger collapse. A global one where there isn't a single surviving economy you might be able to get to where metals are still worth something, though? I don't know. If so, everything is screwed for a while anyway. In not, it might be hard to walk there and would probably be pretty desperate attempting to sail across a sea if you don't have good information about the state of your destination. But that's assuming not being proactive and only trying to escape after the fact. Which, admittedly, if ahead of the curve enough might mean conversion of dollars at a depressed but not worthless rate, leading to a far better result than having a little gold.
Still, if I thought it bad enough to flee, would I rather have a physical store of value in my pocket just in case I was on the last plane out and the whole thing collapsed during my flight? Sure. Assuming I wasn't immediately dispossessed of them on landing, it'd be a leg up over the other new refugees that would have only their luggage. Might be able to hold out long enough to find work that way rather than end up in a camp somewhere. Worst case in that scenario is that it's worth exactly what my other investments were.
Definitely agree it's a total long shot, as in, percentage of population that will ever face such a situation is (hopefully) practically negligible. Lots of ifs and a pretty desperate state anyway. Time is likely better spent worrying about whether one has any fall hazards in their living area. Or building strong community with one's neighbors.
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I agree there are far more important things to worry about. But in terms of brainstorming, you don't have to go all the way to a total collapse and normal money being worthless. Could be more of a slow slide into authoritarianism with capital controls (no wiring money out of the country).
-At the moment US hundred dollar bills about $45k/lb and gold is $27k/lb. So if I was trying to assemble as much of my net worth before trying to sneak across the border and flee the country, I'd prefer cash to gold.
-But in a scenario where the government is imposing and enforcing an official exchange rate that doesn't have any relationship to what the dollar was worth outside the country (similar to what is happening in Venezuela, and since we already have to assume capital control for the idea of physically carrying large amounts of savings out of the country to be plausible), that might tip the scales in favor of gold.
-Of course at this particular moment in time, I could do even better in terms of value per pound by converting my networth into bitcoin and memorizing the twelve word seed phrase for the wallet. In principle that'd let me escape across the border with nothing but the clothes I was wearing and still have access to my savings in some new country. Will that'll remain an option long term? No way to find out but to wait and see.
If I do ever need to flee the country with only what I can carry on my back or in my memory, I'll figure out the most effective strategy when it comes time. In the meantime, honestly, the easiest thing to do if you're worried about not being able to buy groceries because your country's financial system is collapsing: Get a bank account in a second country denominated in that country's currency. At least in the USA, UnionPay logos are popping up on everything from ATMs to grocery store self checkouts. If you start looking for it you'll be surprised how common it is.
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A big argument against investing in gem stones as opposed to precious metals is "fungibility," which is a word which means each of an item is identical to and perfectly interchangeable with another of its type. Gold is highly fungible: each ounce of gold has the same value as any other ounce of gold, and can readily be verified by pulling out a scale. Other volumetric, magnetic, and mechanical tests are also very easy. Cut a gold coin in half with some television scissors and its total value is minimally reduced, you have two half ounces of gold and maybe lost 1% of the value to the inconvenience. Hit it with a hammer and its weight has not changed, and hence neither has its value.
Diamonds are not fungible. Each one has very specific characteristics which arbitrarily affect its value and are difficult for an ordinary person to discern without long training and a loupe. Attempt to cut a 2 karat diamond in half, and the results will not have anywhere near the value of the original. Rattle it around in a pocket with some other things for a while and its edges may become chipped, greatly reducing its value. Hit it with a hammer and the result will have no value at all, even though its weight remains the same.
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A big argument against investing in gem stones as opposed to precious metals is "fungibility," which is a word which means each of an item is identical to and perfectly interchangeable with another of its type. Gold is highly fungible: each ounce of gold has the same value as any other ounce of gold, and can readily be verified by pulling out a scale. Other volumetric, magnetic, and mechanical tests are also very easy. Cut a gold coin in half with some television scissors and its total value is minimally reduced, you have two half ounces of gold and maybe lost 1% of the value to the inconvenience. Hit it with a hammer and its weight has not changed, and hence neither has its value.
A very important point. I would just add the distinction that not all gold objects are valued as fungible gold. A lot of people who decide to buy gold get sucked into the avenue of buying specific gold coins which are valued above their weight in gold based on their rarity/condition/etc. Gold currently trades for about $1,870 oz. You can buy a physical 1 oz gold bar for around $1,910 or sell one for about $1,860. Or alternatively you could go out and buy an uncirculated "proof quality" 1 oz 2020 American gold eagle coin for $2,540. Unlike the gold bar, the american eagle is not fungible. If you cut the american eagle gold coin in half with some scissors it'll lose a lot of or all of the value it has in excess of the gold bar of equal weight.
I bring this up only because lot of places that market and sell physical gold try to steer people in the direction of collectables (like the eagle coin) rather than towards simple fungible pieces-of-gold. I assume this is because the profit margins are higher.
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I agree there are far more important things to worry about. But in terms of brainstorming, you don't have to go all the way to a total collapse and normal money being worthless. Could be more of a slow slide into authoritarianism with capital controls (no wiring money out of the country).
-At the moment US hundred dollar bills about $45k/lb and gold is $27k/lb. So if I was trying to assemble as much of my net worth before trying to sneak across the border and flee the country, I'd prefer cash to gold.
-But in a scenario where the government is imposing and enforcing an official exchange rate that doesn't have any relationship to what the dollar was worth outside the country (similar to what is happening in Venezuela, and since we already have to assume capital control for the idea of physically carrying large amounts of savings out of the country to be plausible), that might tip the scales in favor of gold.
-Of course at this particular moment in time, I could do even better in terms of value per pound by converting my networth into bitcoin and memorizing the twelve word seed phrase for the wallet. In principle that'd let me escape across the border with nothing but the clothes I was wearing and still have access to my savings in some new country. Will that'll remain an option long term? No way to find out but to wait and see.
If I do ever need to flee the country with only what I can carry on my back or in my memory, I'll figure out the most effective strategy when it comes time. In the meantime, honestly, the easiest thing to do if you're worried about not being able to buy groceries because your country's financial system is collapsing: Get a bank account in a second country denominated in that country's currency. At least in the USA, UnionPay logos are popping up on everything from ATMs to grocery store self checkouts. If you start looking for it you'll be surprised how common it is.
Oh, I agree on that front. What I couldn't quite wrap my mind around was the sudden need in the current financial climate to evacuate the house and gold being tremendously valuable to my survival in that scenario. If things start changing such that it starts making sense to keep a stash of gold, then yeah, if have it and have to flee, I'll be grabbing it on the way out.
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Oh gotcha. Yes, you are right the sudden and unexpected need for gold on short notice is a lot harder to justify.
I can come up with scenarios where a person would need to flee their house on short notice taking only what they can carry (wildfires, earthquakes, chemical spills, volcanos, hurricanes), and scenarios where it'd be useful to have gold or other valuable physical objects (run on the banks, hyperinflation, capital controls, prolonged power or internet outage).
But, like you, I cannot come up with any situation which would be both at the same time.
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Another fun thing to consider: fake/imitation/mass produced low quality jewelry is more plentiful than real/quality stuff. There are businesses that do nothing but sell cheaply made, mass manufactured disposable jewelry that is dumped by the bucketload at thrift stores every week. Chain jewelry stores are all over the place selling mass produced "real" gems and gold/silver items. There is gold and diamonds and other certified stones sold at Walmart for goodness sake... that stuff is technically real, but it's not really valuable. Jewelry/precious stones/metals just doesn't hold the same cachet as it used to.
In the now times, how many people are going to have the ability to tell fake/plated/lab created from real/rare if you're holding them to trade in the event of a total breakdown of world economy? I have read and idly collect these sort of things over the years, and I know even with that very minor leg-up, I wouldn't be able to tell the difference. The average person would need to find a jeweler or metalsmith to do tests. Hallmarks and stamps can be easily faked, gems can be really nice glass, lab created, etc. and even the hardest rated real gem might fracture if struck wrong (and would you really want to risk someone smacking it with a hammer?)
I can tell by sound the difference in a silver quarter coin and a regular amalgam; it's a fun party trick. There are silver quarters (pre 1965 mint, have one on me in my wallet always) that are still in circulation and they "ring" higher when you flip them onto a table or other hard surface, and can also look at the edges for the absence of the copper colored strip. I would not expect that to help me at all in detecting whether a coin or any piece supposedly containing precious metal is real or not. I have a reproduction ancient greek coin that came with a book when I was a child. I'm pretty sure that would fool most anyone that didn't know ancient coins well and didn't have the ability to test to see if it isn't a precious metal at all.
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I bought some sapphires as an investment. They were beautiful. More beautiful than any sapphires I had ever seen; a pretty low bar if you consider I had never really seen any, to pore over. When I had them appraised years later they had so many inclusions they were worth a humbling fraction of what I had paid. The assessor tactfully suggested I might have them set, since almost nobody would be able to tell they were junk when set off by gold or silver. Never again. Which elicits the issue of mistrust. Two thousand years ago the more pinched or grasping emperors learned to adulterate their coinage, and their subjects figured out the cheat almost immediately. (The origin of Gresham's Law.) In the event of a social dislocation nobody is going to believe your gemstones are real, nor will you have a way to establish that they are. (The certificates that came with my sapphires were bogus.) There will be no way to establish that your silver bars, stamped 999 fine, are. Who in that transaction - you or the buyer - will have a scale that can measure the weight, compare it to volume, and show it is silver, not an amalgam? Would you be willing to let the buyer hacksaw through it to be sure you are not selling a lead core coated with silver? How can you establish that the gold you want to buy is not amalgam? It is also the case that in a real social dislocation, gold that cost you $1750 an ounce prices you completely out of the market for necessities like quarters of venison or loaves of bread. There are work-arounds that would let you pay for ordinary subsistence like buying a supply of junk silver - bags of old heavily circulated US coins - though again, mistrust: would you even in comparatively good times accept that the whole bag you just bought contains old US silver coins and not a mixture of the old and the current wafer coins? Is there any intrinsic reason for a baker to see enough value in a chip of worn silver to swap a perfectly good, heavy whole-grain loaf for it?
The same mistrust will appear with another attractive trade medium mentioned above. Let us say - it is true - I can make ammo equal in quality to the current highest-standard commercial match ammo. Would you believe that without being allowed to shoot some of it first before buying? Would I be disposed to let you shoot up enough to reveal reliability and preferably accuracy, with the risk that you'll then refuse to buy? Would you be able to detect it if I put 20 of my reloads in a commercial cardboard box that I carefully glued shut and claimed was Federal Gold Medal Match?
It seems to me that in the event of social dislocation your best investment is skills, and the cultivation of a Jeff Cooper perspective: "Be polite to everyone, and have a plan to kill anyone you meet."
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Another fun thing to consider: fake/imitation/mass produced low quality jewelry is more plentiful than real/quality stuff. There are businesses that do nothing but sell cheaply made, mass manufactured disposable jewelry that is dumped by the bucketload at thrift stores every week. Chain jewelry stores are all over the place selling mass produced "real" gems and gold/silver items. There is gold and diamonds and other certified stones sold at Walmart for goodness sake... that stuff is technically real, but it's not really valuable. Jewelry/precious stones/metals just doesn't hold the same cachet as it used to.
In the now times, how many people are going to have the ability to tell fake/plated/lab created from real/rare if you're holding them to trade in the event of a total breakdown of world economy? I have read and idly collect these sort of things over the years, and I know even with that very minor leg-up, I wouldn't be able to tell the difference. The average person would need to find a jeweler or metalsmith to do tests. Hallmarks and stamps can be easily faked, gems can be really nice glass, lab created, etc. and even the hardest rated real gem might fracture if struck wrong (and would you really want to risk someone smacking it with a hammer?)
I can tell by sound the difference in a silver quarter coin and a regular amalgam; it's a fun party trick. There are silver quarters (pre 1965 mint, have one on me in my wallet always) that are still in circulation and they "ring" higher when you flip them onto a table or other hard surface, and can also look at the edges for the absence of the copper colored strip. I would not expect that to help me at all in detecting whether a coin or any piece supposedly containing precious metal is real or not. I have a reproduction ancient greek coin that came with a book when I was a child. I'm pretty sure that would fool most anyone that didn't know ancient coins well and didn't have the ability to test to see if it isn't a precious metal at all.
Also, most gemstones can actually be synthesized now so even if you could test them, they would test as genuine emeralds, rubies, and sapphires. Funnily enough, the reason the lab grown gems look so fake is because they're too perfect.
You can buy a huge, genuine ruby made in a lab less than $100, and it will look like a friggin' Jolly Rancher.
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All this precious metal talk reminds me of a Planet Money episode called "Libertarian Summer Camp." The podcast producers visit a libertarian festival where at least some of the vendors only take silver rather than US dollars as currency. But some stalls will only accepted laminated silver strips, others only take silver coins, etc. And a silver "bank" is created to convert USD and large pieces of silver into various smaller denominations of silver. It was interesting to hear what problems and workarounds people came up with in their efforts to go "off the grid" with their monetary system, at least for the length of the event.
https://www.npr.org/sections/money/2017/06/28/534735727/episode-286-libertarian-summer-camp
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
I would say the biggest risk is a volatile political situation in a country that is correlated with hyper inflation. Adoption of far leftist policies has had this effect over and over again throughout history. It goes like this:
1) leftist ideology takes over that views people as members of an assigned identity group.
2) certain groups are held responsible by the leftists for real or perceived social problems,
3) individuals from the condemned groups are viewed as being individually culpable and their persons and property are targeted. Obviously its time for these individuals to get the hell out of dodge,
4) leftist policies are also generally cause of rampant inflation since property rights are ignored, the economic supply is disrupted, and the most successful people are usually the ones fleeing. So that paper cash may loose value very rapidly.
Hence owning a small bit of gold as an insurance policy makes some sense, I think.
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It goes like this:
1) leftist ideology takes over that views people as members of an assigned identity group.
2) certain groups are held responsible by the leftists for real or perceived social problems,
3) individuals from the condemned groups are viewed as being individually culpable and their persons and property are targeted. Obviously its time for these individuals to get the hell out of dodge,
5) leftist policies are also generally cause of rampant inflation since property rights are ignored, the economic supply is disrupted, and the most successful people are usually the ones fleeing. So that paper cash may loose value very rapidly.
Hence owning a small bit of gold as an insurance policy makes some sense, I think.
So your scenario is basically Galt's Gulch/Atlas Shrugged?
I disagree*, but at the same time you've got me so curious what step #4 was going to be.
*I think this reflects the same misunderstanding I had. This isn't a scenario where you need to flee on short notice with only what you can carry. The risk in such a scenario isn't whether you can leave fast enough, but as things get slowly worse and worse actually hitting a decision point where you decide things have gotten bad enough that it makes sense to abandon your life and leave before it is already too late and you've lost the ability to leave.
Historically as various nations slide into totalitarianism, many people with the financial resources to leave didn't. It wasn't because they didn't have their wealth in portable forms, but because leaving your country is a hard and big decision and things get worse oh so gradually. By the time the secret police are coming to take you away (regardless of the color their uniform or which extremely of the political spectrum they report to), the best opportunity to flee the country would already long past.
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
I would say the biggest risk is a volatile political situation in a country that is correlated with hyper inflation. Adoption of far leftist policies has had this effect over and over again throughout history. It goes like this:
1) leftist ideology takes over that views people as members of an assigned identity group.
2) certain groups are held responsible by the leftists for real or perceived social problems,
3) individuals from the condemned groups are viewed as being individually culpable and their persons and property are targeted. Obviously its time for these individuals to get the hell out of dodge,
4) leftist policies are also generally cause of rampant inflation since property rights are ignored, the economic supply is disrupted, and the most successful people are usually the ones fleeing. So that paper cash may loose value very rapidly.
Hence owning a small bit of gold as an insurance policy makes some sense, I think.
Inflation isn't only caused by "leftist" policies. Ever heard of the Weimar Republic?
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Thanks all, certainly appreciate the insight and feedback. I will not be "investing" in precious gems, lol! Gold might be the better option for this kind of thing.
I've been on the fence about buying a gold coin (specifically a 1oz gold buffalo) for a long time. I just can't seem to bring myself to pull the trigger. I've spent about $2500 on a stack of silver coins over the years. A very small percentage of my total index fund portfolio.
I do enjoy the idea of possessing beautiful things but in practice it's better to think about these things, knowing that I could buy them if I wanted to vs actually buying them.
Go for it. There may come a day when some people have to leave their homes very quickly with whatever they can carry. It has happened often enough to people throughout history that the risk cannot be ruled out. In such times having some gold is immeasurably useful.
In your hypothetical scenario, the entire banking industry has also collapsed, right?
Because otherwise I can't think of a single scenario where I would be grabbing gold while running out of my house in an emergency.
Seriously, what kind of plausible scenario does gold actually help someone when money can't? How do they use it? Do they chip off bits of it to trade for food? How will bits of gold be valuable to the other zombie apocalypse foragers?
I'm not actually being as asshole, I'm asking honestly, because I cannot come up with a scenario where I need a block of gold unless I can sell it. And if I can sell it, then what does it have to do with leaving the house quickly??
I would say the biggest risk is a volatile political situation in a country that is correlated with hyper inflation. Adoption of far leftist policies has had this effect over and over again throughout history. It goes like this:
1) leftist ideology takes over that views people as members of an assigned identity group.
2) certain groups are held responsible by the leftists for real or perceived social problems,
3) individuals from the condemned groups are viewed as being individually culpable and their persons and property are targeted. Obviously its time for these individuals to get the hell out of dodge,
4) leftist policies are also generally cause of rampant inflation since property rights are ignored, the economic supply is disrupted, and the most successful people are usually the ones fleeing. So that paper cash may loose value very rapidly.
Hence owning a small bit of gold as an insurance policy makes some sense, I think.
Inflation isn't only caused by "leftist" policies. Ever heard of the Weimar Republic?
This is true. I never said it was only leftist policies. I think they are just the most common in history for ushering in this type of situation. But you are correct. It could be worth owning gold due to inflation caused by the adoption of very far right policies.
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I agree there are far more important things to worry about. But in terms of brainstorming, you don't have to go all the way to a total collapse and normal money being worthless. Could be more of a slow slide into authoritarianism with capital controls (no wiring money out of the country).
True.
-At the moment US hundred dollar bills about $45k/lb and gold is $27k/lb. So if I was trying to assemble as much of my net worth before trying to sneak across the border and flee the country, I'd prefer cash to gold.
Yes. But gold is much denser. So it takes up less volume. It is also malleable and divisible. A piece of gold melted down, hacked to pieces, ground to dust, or dissolved is still worth the weight of the gold. Whereas physical cash must be kept whole.
-But in a scenario where the government is imposing and enforcing an official exchange rate that doesn't have any relationship to what the dollar was worth outside the country (similar to what is happening in Venezuela, and since we already have to assume capital control for the idea of physically carrying large amounts of savings out of the country to be plausible), that might tip the scales in favor of gold.
Agreed.
-Of course at this particular moment in time, I could do even better in terms of value per pound by converting my networth into bitcoin and memorizing the twelve word seed phrase for the wallet. In principle that'd let me escape across the border with nothing but the clothes I was wearing and still have access to my savings in some new country. Will that'll remain an option long term? No way to find out but to wait and see.
What if you need to bribe someone on the spot? Are you going to get out your phone and ask for the guard’s bitcoin wallet address? Or what if you are killed or detained and the rest of your family presses on?
If I do ever need to flee the country with only what I can carry on my back or in my memory, I'll figure out the most effective strategy when it comes time. In the meantime, honestly, the easiest thing to do if you're worried about not being able to buy groceries because your country's financial system is collapsing: Get a bank account in a second country denominated in that country's currency. At least in the USA, UnionPay logos are popping up on everything from ATMs to grocery store self checkouts. If you start looking for it you'll be surprised how common it is.
Have you tried this? I’d be interested to know more about your experience. My understanding is it is not so easy to open a bank account in a foreign country if one is not a resident. Also I believe union pay is a Chinese affiliate. Not sure that would be my go-to for safeguarding my SHTF/WROL bug-out money.
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Really the point of owning gold is as a final backstop when all else is failing.
1.) gold should only be a small portion of one’s investible wealth. 1-5%. I aim for 3%.
2.) gold will not and should not produce spectacular returns. If it does in the short term, this is a sign something is rotten in the state of Denmark. Normally, gold will hold its real value over time.
3.) no one has ever been harmed by owning a few gold coins. And, in some extreme circumstances they have become very, very useful.
4.) gold is relatively easy to buy and sell or trade. The amount over the spot price it is bought at is called the premium, and beyond that there might be some numismatic or collector value.The amount below the spot price it is sold at is the discount. Together they make the spread, which is how dealers stay in business. Shop around if you feel you are not getting a fair price. Lots of people buy or sell gold every day.
5.)at one point in time less than a hundred years ago the crazy cooks were arguing that money should be fiat and unbacked, and the masses believed in the gold standard as the true foundation of money. Why couldn’t it go back to that view?
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-Of course at this particular moment in time, I could do even better in terms of value per pound by converting my networth into bitcoin and memorizing the twelve word seed phrase for the wallet. In principle that'd let me escape across the border with nothing but the clothes I was wearing and still have access to my savings in some new country. Will that'll remain an option long term? No way to find out but to wait and see.
What if you need to bribe someone on the spot? Are you going to get out your phone and ask for the guard’s bitcoin wallet address? Or what if you are killed or detained and the rest of your family presses on?
I agree. If you're trying to bribe a border guard to let you through cash > gold > bitcoin. You obviously cannot pick the border guard who stops you. Almost everyone in the USA has a sense of the value of cash so almost any guard will at least understand the value of a cash bribe. Perhaps half (less?) would have any sense of how much value they were being offered if you slipped them a gold coin. The last numbers I saw said maybe one in fifteen americans own or have owned any bitcoin.
However, honestly if you're in this position the odds are not in your favor to begin with, particularly in a country like the USA which doesn't have nearly as established a culture of bribery as, say, the government service in India. In attempting to bribe a US guard to not detain you, you are rolling the dice that they aren't honest enough to report it and have more reason to arrest you but ALSO not so dishonest that when you bring up having cash, gold or other valuables they won't just search you, take the money/gold, then arrest you anyway. "Captain, this fellow's passport is invalid. And then he accused us of taking his money even though he's only got $6 in his wallet." Who is his supervisor going to believe, the guard or the person trying to sneak across the border with a revoked passport?
It is a narrow sweet spot of dishonestly you'd have to luck into. So while cash gives the best odds, even there the odds are poor enough that I wouldn't hold my breath.
When it comes to being killed while attempting to escape, I think a memorized set of words is superior to physical objects. With physical objects (cash, gold bars) you and your spouse could divide them so if one of you doesn't make it, the other will still arrive with half of your savings which is a lot better than penniless. With the word list, each of you could memorize the list so that if either of you make it through whoever survives would have access to the entire amount to start a new life and you're less likely to be stopped in the first place, as you won't be lugging around a heavy suitcase full of wads of hundred dollar bills.
Overall my advice remains to get out sooner rather than later if it comes to that rather than trying to optimize your guard bribing strategy or how resilient your family's net worth would be to the death of one of its members. Money, regardless of the form it is in, is not nearly the get out of jail free card (get out of bad consequences of society taking a big turn for the worse card) many people seem to consider it and the idea of buying your family's freedom with a few gold coins folded up in your passports as you hand them to the border patrol makes a much better scene in a movie or thriller novel than it does a real world strategy to insure the safety of yourself and those you care about.
If I do ever need to flee the country with only what I can carry on my back or in my memory, I'll figure out the most effective strategy when it comes time. In the meantime, honestly, the easiest thing to do if you're worried about not being able to buy groceries because your country's financial system is collapsing: Get a bank account in a second country denominated in that country's currency. At least in the USA, UnionPay logos are popping up on everything from ATMs to grocery store self checkouts. If you start looking for it you'll be surprised how common it is.
Have you tried this? I’d be interested to know more about your experience. My understanding is it is not so easy to open a bank account in a foreign country if one is not a resident. Also I believe union pay is a Chinese affiliate. Not sure that would be my go-to for safeguarding my SHTF/WROL bug-out money.
I've paid with UnionPay at my local grocery store and can confirm it works. Have also withdrawn USD from at ATMs. Some places the chip works, some places you still need to swipe. Some banks charge a big fee to take out cash, but others do it for free. Just takes a little research.
You are right UnionPay is based in China and I certainly wouldn't recommend Chinese banks as the place for someone outside of China to put a big chunk of their net worth. Also if you have too much money in overseas accounts anywhere in the world you have to file extra tax paperwork each year reporting it and can get in a lot of trouble if you don't so it's not a place to put hundreds of thousands of dollars regardless.
But keep in mind we're specifically discussing what types of money would be most likely to still be available in an acute crisis where the US financial system comes crashing down. In the hypothetical -- and unlikely -- world where the US financial system has collapsed, I'd say the odds that Chinese banks continue functioning to the point I can buy groceries and gasoline or pay for medical care, whether here in the USA or having crossed the border into some 3rd country, are higher than for European or Canadian banks which are more entangled with our own banking system. Alternatively if the US were to take a severe authoritarian turn, I'd argue Chinese banks would be the less likely to cooperate in freezing bank accounts at the request of the US government than most alternative options.
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-At the moment US hundred dollar bills about $45k/lb and gold is $27k/lb. So if I was trying to assemble as much of my net worth before trying to sneak across the border and flee the country, I'd prefer cash to gold.
Yes. But gold is much denser. So it takes up less volume.
Agreed it is denser. But in either case I suspect you'll find you find yourself weight limited before you find yourself volume limited.
Personally, I figure if I'm trying to flee the country 50 lbs is an upper limit on how much weight I could devote to carrying physical stores of wealth without drawing attention to myself (and that may well be optimistic). That's about $1.35M of gold. Yet the same value in 100 dollar bills would weigh 20 lbs less while still fitting comfortably into a 20L backpack with room for a layer of dirty cloths on top. YMMV.
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Another fun thing to consider: fake/imitation/mass produced low quality jewelry is more plentiful than real/quality stuff. There are businesses that do nothing but sell cheaply made, mass manufactured disposable jewelry that is dumped by the bucketload at thrift stores every week. Chain jewelry stores are all over the place selling mass produced "real" gems and gold/silver items. There is gold and diamonds and other certified stones sold at Walmart for goodness sake... that stuff is technically real, but it's not really valuable. Jewelry/precious stones/metals just doesn't hold the same cachet as it used to.
In the now times, how many people are going to have the ability to tell fake/plated/lab created from real/rare if you're holding them to trade in the event of a total breakdown of world economy? I have read and idly collect these sort of things over the years, and I know even with that very minor leg-up, I wouldn't be able to tell the difference. The average person would need to find a jeweler or metalsmith to do tests. Hallmarks and stamps can be easily faked, gems can be really nice glass, lab created, etc. and even the hardest rated real gem might fracture if struck wrong (and would you really want to risk someone smacking it with a hammer?)
I can tell by sound the difference in a silver quarter coin and a regular amalgam; it's a fun party trick. There are silver quarters (pre 1965 mint, have one on me in my wallet always) that are still in circulation and they "ring" higher when you flip them onto a table or other hard surface, and can also look at the edges for the absence of the copper colored strip. I would not expect that to help me at all in detecting whether a coin or any piece supposedly containing precious metal is real or not. I have a reproduction ancient greek coin that came with a book when I was a child. I'm pretty sure that would fool most anyone that didn't know ancient coins well and didn't have the ability to test to see if it isn't a precious metal at all.
Also, most gemstones can actually be synthesized now so even if you could test them, they would test as genuine emeralds, rubies, and sapphires. Funnily enough, the reason the lab grown gems look so fake is because they're too perfect.
You can buy a huge, genuine ruby made in a lab less than $100, and it will look like a friggin' Jolly Rancher.
My partner used to work in the industry at the top lab in the field testing colored gem stones. This isn’t really true. The experts can tell the man made stones from the natural stones.
Gems aren’t a good investment for many reasons as others have mentioned. The industry is very tight knit. You would be buying at retail prices and be lucky to get wholesale when you want to liquidate. Ask anyone who has inherited a jewelry collection or tried to sell an engagement ring after a divorce about how little they can get for the pieces.
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Really the point of owning gold is as a final backstop when all else is failing.
1.) gold should only be a small portion of one’s investible wealth. 1-5%. I aim for 3%.
2.) gold will not and should not produce spectacular returns. If it does in the short term, this is a sign something is rotten in the state of Denmark. Normally, gold will hold its real value over time.
3.) no one has ever been harmed by owning a few gold coins. And, in some extreme circumstances they have become very, very useful.
4.) gold is relatively easy to buy and sell or trade. The amount over the spot price it is bought at is called the premium, and beyond that there might be some numismatic or collector value.The amount below the spot price it is sold at is the discount. Together they make the spread, which is how dealers stay in business. Shop around if you feel you are not getting a fair price. Lots of people buy or sell gold every day.
5.)at one point in time less than a hundred years ago the crazy cooks were arguing that money should be fiat and unbacked, and the masses believed in the gold standard as the true foundation of money. Why couldn’t it go back to that view?
1.5-3% is a bit low.
10% is a more commonly accepted minimum. "Put 10% in gold and hope it does badly" is pretty good advice for the layman. However you can even use the tools of MPT to show that anything up to 30-35% is not a gross overallocation.
Remove the cash component of the permanent portfolio and put a third into stocks/bonds/gold each and you would have done absolutely fine.
The idea that gold is a defensive investment or crisis insurance is a very negative view that I don't subscribe to.
Gold is money. One of the defining roles of money is the provde a store of wealth. In a capitalist society money itself should provide a reliable way of storing at least some pf the wealth created though capitalistic ventures of that society. Therefore a prosperous society is one where both equities (wealth creation) and gold (wealth storage) can work together.. they don't need to be seen as antagonistic.
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h doesn't
But keep in mind we're specifically discussing what types of money would be most likely to still be available in an acute crisis where the US financial system comes crashing down.
Not really. Clearly it is what you would prefer discuss, though. I did not mention the US. You did.
I was asked under what circumstances one would find gold useful. I said it was a volatile political situation correlated with hyper inflation. Then I specifically referred to far leftist policies taking root.
In my opinion this situation has repeated enough times in the 20/21st century for it to be taken as a serious but remote risk anywhere in the world. Someone pointed out that far right policies could lead to hyper inflation and I agreed.
I do not think that stable western democracies are currently at a tipping point. That being said, someone once quipped that recorded History is essentially a list of things that caught most people by surprise. We spend much of our time on this forum discussing the merits of diversification to mitigate risk. I see this issue no differently. I have identified a risk — Probably won’t happen. I believe physical gold ownership in the form of a small stack of coins which represents maybe 3% of ones wealth as an effective way to try to mitigate the risk.
And so if nothing happens I will have to suffer keeping pace with inflation and a 28% tax rate instead of the LTCG rate on this small portion of wealth. Seems like a small price to pay for also being able to leave at a moment’s notice with something of actual, sustainable, portable value.
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Another fun thing to consider: fake/imitation/mass produced low quality jewelry is more plentiful than real/quality stuff. There are businesses that do nothing but sell cheaply made, mass manufactured disposable jewelry that is dumped by the bucketload at thrift stores every week. Chain jewelry stores are all over the place selling mass produced "real" gems and gold/silver items. There is gold and diamonds and other certified stones sold at Walmart for goodness sake... that stuff is technically real, but it's not really valuable. Jewelry/precious stones/metals just doesn't hold the same cachet as it used to.
In the now times, how many people are going to have the ability to tell fake/plated/lab created from real/rare if you're holding them to trade in the event of a total breakdown of world economy? I have read and idly collect these sort of things over the years, and I know even with that very minor leg-up, I wouldn't be able to tell the difference. The average person would need to find a jeweler or metalsmith to do tests. Hallmarks and stamps can be easily faked, gems can be really nice glass, lab created, etc. and even the hardest rated real gem might fracture if struck wrong (and would you really want to risk someone smacking it with a hammer?)
I can tell by sound the difference in a silver quarter coin and a regular amalgam; it's a fun party trick. There are silver quarters (pre 1965 mint, have one on me in my wallet always) that are still in circulation and they "ring" higher when you flip them onto a table or other hard surface, and can also look at the edges for the absence of the copper colored strip. I would not expect that to help me at all in detecting whether a coin or any piece supposedly containing precious metal is real or not. I have a reproduction ancient greek coin that came with a book when I was a child. I'm pretty sure that would fool most anyone that didn't know ancient coins well and didn't have the ability to test to see if it isn't a precious metal at all.
Also, most gemstones can actually be synthesized now so even if you could test them, they would test as genuine emeralds, rubies, and sapphires. Funnily enough, the reason the lab grown gems look so fake is because they're too perfect.
You can buy a huge, genuine ruby made in a lab less than $100, and it will look like a friggin' Jolly Rancher.
My partner used to work in the industry at the top lab in the field testing colored gem stones. This isn’t really true. The experts can tell the man made stones from the natural stones.
Gems aren’t a good investment for many reasons as others have mentioned. The industry is very tight knit. You would be buying at retail prices and be lucky to get wholesale when you want to liquidate. Ask anyone who has inherited a jewelry collection or tried to sell an engagement ring after a divorce about how little they can get for the pieces.
Yes, I know the experts can tell. A lay person who knows gems can tell because they look like hard candy. My point was not that they can't be distinguished but that they are chemically the same gemstone, just minus the impurities and flaws. They aren't inherently worth less because of their composition, it's totally arbitrary why they're worth less, because they're technically perfect.
Natural gemstones are expensive for the same reason that the Hermes purse I mentioned above is worth 15K next to a fake that's made of the exact same materials with the exact same level of craftsmanship and is only worth about $500.
That "value" comes crashing down if the systems that support the concept of luxury also crash.
I don't know what risk OP was proposing to hedge, because they also talked about art, etc, and then said that they just liked the concept of owning beautiful things. So I don't even think this is a rational thing, I think they just like the idea of owning a pirate's-treasure and are imagining some way to justify it. Which is fine, if that's what they want to spend on, that's their business.
FTR, I own a decent amount of very expensive jewelry. It's very very pretty and I like owning it, not that I would spend my own money on it, mind you.
I have also liquidated several pieces of very, very expensive jewelry in a personal financial crisis. No bribing of border guards to get me to safety in another country or anything, just needed to pay my rent, that's all. And I can tell you, they're a FUCKING SHIT resource to try and liquidate.
Oh, I've also helped family liquidate fine art in a crisis. Also a FUCKING SHIT resource to try and liquidate.
Unless you are ultra rich and dealing with resources that are truly rare and well known items that curators and collectors around the world would care about, then nobody cares about our stupid necklaces or paintings, even if we paid a relative fortune for them.
Gold? Well, gold is a different matter and there are multiple threads on this forum about it. I was just surprised when PP made it sound like it was so wise to keep gold on hand in case you need to run quickly from your house.
In my mind, 99% of scenarios that have me abandoning my house still have the financial world intact, so I just couldn't see the correlation between gold and running away, except in an event of global financial collapse. Because if I'm living in a small country where my currency is vulnerable, wouldn't it make more sense to hedge by investing in a more stable foreign country?
Anyway, my point is that there are countless options for hedging risk. It's important to actually understand ones own risk and develop the appropriate hedges. Gold might be an appropriate hedge, but probably not because it's easy to carry in the event of the total crash of civilization. That seems like a pretty odd risk to try and hedge with a chunk of metal.
So, if OP wants to own pretty, pretty, expensive things, that's cool, that's their choice. I just don't see much of an economic case to be made for them.
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In the meantime, honestly, the easiest thing to do if you're worried about not being able to buy groceries because your country's financial system is collapsing: Get a bank account in a second country denominated in that country's currency. At least in the USA, UnionPay logos are popping up on everything from ATMs to grocery store self checkouts. If you start looking for it you'll be surprised how common it is.
Have you tried this? I’d be interested to know more about your experience. My understanding is it is not so easy to open a bank account in a foreign country if one is not a resident. Also I believe union pay is a Chinese affiliate. Not sure that would be my go-to for safeguarding my SHTF/WROL bug-out money.
I've paid with UnionPay at my local grocery store and can confirm it works. Have also withdrawn USD from at ATMs. Some places the chip works, some places you still need to swipe. Some banks charge a big fee to take out cash, but others do it for free. Just takes a little research.
You are right UnionPay is based in China and I certainly wouldn't recommend Chinese banks as the place for someone outside of China to put a big chunk of their net worth. ... But keep in mind we're specifically discussing what types of money would be most likely to still be available in an acute crisis where the US financial system comes crashing down. In the hypothetical -- and unlikely -- world where the US financial system has collapsed, I'd say the odds that Chinese banks continue functioning to the point I can buy groceries and gasoline or pay for medical care, whether here in the USA or having crossed the border into some 3rd country, are higher than for European or Canadian banks which are more entangled with our own banking system.
Not really. Clearly it is what you would prefer discuss, though. I did not mention the US. You did.
Huh? You asked me about using UnionPay in the USA, brought up your concern about it being Chinese based and I answered. If you don't want questions answered don't ask them.
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Really the point of owning gold is as a final backstop when all else is failing.
1.) gold should only be a small portion of one’s investible wealth. 1-5%. I aim for 3%.
2.) gold will not and should not produce spectacular returns. If it does in the short term, this is a sign something is rotten in the state of Denmark. Normally, gold will hold its real value over time.
3.) no one has ever been harmed by owning a few gold coins. And, in some extreme circumstances they have become very, very useful.
4.) gold is relatively easy to buy and sell or trade. The amount over the spot price it is bought at is called the premium, and beyond that there might be some numismatic or collector value.The amount below the spot price it is sold at is the discount. Together they make the spread, which is how dealers stay in business. Shop around if you feel you are not getting a fair price. Lots of people buy or sell gold every day.
5.)at one point in time less than a hundred years ago the crazy cooks were arguing that money should be fiat and unbacked, and the masses believed in the gold standard as the true foundation of money. Why couldn’t it go back to that view?
1.5-3% is a bit low.
10% is a more commonly accepted minimum. "Put 10% in gold and hope it does badly" is pretty good advice for the layman. However you can even use the tools of MPT to show that anything up to 30-35% is not a gross overallocation.
Remove the cash component of the permanent portfolio and put a third into stocks/bonds/gold each and you would have done absolutely fine.
The idea that gold is a defensive investment or crisis insurance is a very negative view that I don't subscribe to.
Gold is money. One of the defining roles of money is the provde a store of wealth. In a capitalist society money itself should provide a reliable way of storing at least some pf the wealth created though capitalistic ventures of that society. Therefore a prosperous society is one where both equities (wealth creation) and gold (wealth storage) can work together.. they don't need to be seen as antagonistic.
Hmmm.. that is good advice. I think I am going to work on upping my gold holdings this year. Certainly would make sense to get started before the next round of helicopter money stimulus.
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@Malcat You cracked me up with your weird pirate comment. In a way I suppose this is true, I do get excited about the idea of having a stash of beautiful, valuable things that I can see/hold, etc... With over 99% of my net worth in Vanguard index funds it's fun to have something tangible on hand. I have some silver coins that I've purchased over the years, and even with these I have most that went right into protective plastic capsules and a couple Peace Dollars that I've kept out to see, hold, flip, etc...
I'm glad that I got everyone's feedback on the gems and jewelry. I will not be collecting a hoard of jewelry for my treasure chest. Going forward I think it'll be gold buffalos, if I can ever get my mind around the price per ounce. I was looking back at my notes last night and I see the gold buffalos were going for under $1400 each just a year or two ago...now they're up to around $2050 each. For the gold fans out there...do we anticipate prices dropping at some point, or are we looking at $2000+ as the norm going forward?
Regarding the 10% in gold philosophy... that seems like a high amount... $100,000 in gold for a hypothetical (NOT my situation) $1,000,000 portfolio? That's like 50 gold buffalos...which would look cool in the treasure chest but perhaps a little excessive. Thoughts?
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Last year’s film Uncut Gems is pretty entertaining. While it’s not my kind of film and I characterize it as an hour and 40 minutes of New Yorkers screaming at each other, it covers a gem dealer and his obsession with a particular gem and turning that into a big profit.
My family does not get into jewelry. We have a couple of family diamond rings floating around, but those are not investment pieces. I hang out on a ring Board in a forum, but I’ve always told that group my family invests in farmland not in jewelry. We are strongly middle class and always have resources. I think there’s a correlation.
I am always a little sorry for people who speak of their mom’s or grandma’s diamond that they keep the bank vault for an emergency sale. They they have imbued that piece of jewelry with an outsize expectation of value. That seems naďve to me.
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@Malcat You cracked me up with your weird pirate comment. In a way I suppose this is true, I do get excited about the idea of having a stash of beautiful, valuable things that I can see/hold, etc... With over 99% of my net worth in Vanguard index funds it's fun to have something tangible on hand. I have some silver coins that I've purchased over the years, and even with these I have most that went right into protective plastic capsules and a couple Peace Dollars that I've kept out to see, hold, flip, etc...
I'm glad that I got everyone's feedback on the gems and jewelry. I will not be collecting a hoard of jewelry for my treasure chest. Going forward I think it'll be gold buffalos, if I can ever get my mind around the price per ounce. I was looking back at my notes last night and I see the gold buffalos were going for under $1400 each just a year or two ago...now they're up to around $2050 each. For the gold fans out there...do we anticipate prices dropping at some point, or are we looking at $2000+ as the norm going forward?
With the $2T stimulus looking more and more likely, I don’t see how the price of gold comes down from here. The purchasing power of an ounce of gold remains relatively constant over time. When more cash is injected into the system, it would be expected to increase the nominal price of gold denominated in that fiat currency. That being said, it is worth averaging into a gold position to mitigate some of the effects of volatility.
Regarding the 10% in gold philosophy... that seems like a high amount... $100,000 in gold for a hypothetical (NOT my situation) $1,000,000 portfolio? That's like 50 gold buffalos...which would look cool in the treasure chest but perhaps a little excessive. Thoughts?
You don’t need to start at 10%. Buy a buffalo, or two, or three and see how it sits with you.
Also if you want to get the best deal, consider buying pre-‘33 gold. I find the best way to purchase these is through ebay. Sign up for ebay bucks and use a CC card with good rewards (I use fidelity rewards with 2% cash back). pre-33 coins in the US coins section are eligible for ebay bucks, whereas coins listed in bullion (i.e. buffalos, modern gold eagles,etc) are not. However these pre-33 coins are basically bought and sold for the metal value as bullion. Periodically, ebay will run ebay bucks promotions that offer 5%, 8%, or sometimes even up to10% ebay bucks on a transaction (capped at $100). On top of this, certain vendors will offer special price promotions with very good discounts while the ebay bucks promotions are occurring. Stack all of these promotions and cash back rewards and it is possible to get gold for very close (or sometimes below) melt value.
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
Again, such a weirdly specific scenario.
What movies are the people in this thread watching???
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
Again, such a weirdly specific scenario.
What movies are the people in this thread watching???
Song. "She's a rich girl, don't try to hide it,
Diamonds on the soles of her shoes."
- Paul Simon
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
Again, such a weirdly specific scenario.
What movies are the people in this thread watching???
... don't knock it...it's probably the strongest argument for "investing in precious gems" in the whole thread!
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
Again, such a weirdly specific scenario.
What movies are the people in this thread watching???
... don't knock it...it's probably the strongest argument for "investing in precious gems" in the whole thread!
Truth
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...... snip......
Going forward I think it'll be gold buffalos, if I can ever get my mind around the price per ounce. I was looking back at my notes last night and I see the gold buffalos were going for under $1400 each just a year or two ago...now they're up to around $2050 each. For the gold fans out there...do we anticipate prices dropping at some point, or are we looking at $2000+ as the norm going forward?
Regarding the 10% in gold philosophy... that seems like a high amount... $100,000 in gold for a hypothetical (NOT my situation) $1,000,000 portfolio? That's like 50 gold buffalos...which would look cool in the treasure chest but perhaps a little excessive. Thoughts?
With gold bufflos, you're paying for the "Brilliant Uncirculated condition", the pretty pictures, and the "collectable" spin sellers are putting on them.
My local gold dealer sells for $50 over spot (1849.05) and buys for $50 under for bullion or regular rounds (they are not coins). Bars might not be as pretty (PAMP Suisse though has some cute designs on bars), but you are saving up $100 per ounce per transaction.
Edit for typo
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
I've lived in countries in which economies and governments collapsed. In my experience, if a person thinks something like this is likely enough to want to prepare for it, having gold coins or gemstones is at best inefficient and at worst dangerous. Better options include:
--Have an education that gives you useful skills. If you have to flee your own country and go somewhere else, a good diesel mechanic can find a job in minutes anywhere in the world. A medical doctor, CPA, or engineer will probably get a job eventually, but will probably have to get local certifications first. This can take a long time.
--Don't flaunt your wealth before things collapse. If you're living large, you make yourself a target.
--Have money and property overseas before things go bad. Set up a foreign bank account and deposits in a currency that gives you confidence. Better yet, invest in income-producing property in a foreign country (preferably one with an investor visa program) in which you have confidence and keep the earnings in that country.
--When fleeing a country, high value items don't give you power, they make you a target. If you are planning to bribe a border guard, you offer him a large pile of rapidly devaluing cash that will buy a "real" hundred dollars of goods and he/she will probably be happy. If you offer a one ounce gold coin, not only will you not get change, you'll probably get pulled into secondary to search for all the other gold coins they hope you're carrying. And don't assume that you will be able to "waltz through" a border with millions of dollars of commodities on your person. When things are going bad, corrupt officials get very motivated to identify people who are leaving and to find their money. In the movies, there's honor among thieves.
In the real world, the people who will sell you two dozen 2-carat diamonds will also happily rat you out for a percentage of the take. And when you do get caught violating currency export laws, you may well lose everything, including your chance to escape.
The real key is getting out early. The earliest refugees are almost always the most successful because they leave early while they can do so with a plan and with assets. Once things go really bad, very few people get out with much.
There are similar problems with trying to use gold, gemstones, or collectibles in a collapsing economy. When you want to buy a few gallons of gas for your car, a loaf of bread, or a pack of toilet paper, you can't pay for it in gold coins. The guy at the gas station doesn't know what a gold coin or a diamond or a Rolex is worth, can't be sure it isn't fake, isn't going to take a small fraction of the coin or diamond, and can't make change. And if he does believe that your gold coin/diamond/Rolex is real, he's going to be tempted to call someone who will just rob you and give him a finder's fee.
FWIW, I have made no preparations. The US has made it through almost 250 years of challenges without collapsing and I believe it will continue through at least my lifetime. But if you want a contingency plan for a collapse, there are far better tools than gold coins and gemstones.
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@ROF Expat
As someone living in a country actually teetering on the brink of martial law and economic depression, and actively planning to move assets to a safer country, I agree 100% with your assessment.
Skills, connections, advance planning, and good timing are all far more valuable and portable assets.
Buy the gold and precious gems to satisfy your deep unacknowledged Smaug-like urges. Not as an insurance policy in case your country goes south.
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Love the conversation, keep it coming!
As an aside, I didn't start this thread because I feared imminent collapse of civilization... simply exploring a non-cash store of wealth.
From what I gather so far...
1) Precious gems are a no. Even though they are pretty.
2) Gold is a yes (for some), but not in a SHTF scenario.
3) Premium gold products (ie Gold buffalos or eagles) are more expensive than generic bullion (ie APMEX gold bar).
4) It's kind of weird to want a pirate's hoard of treasure.
5) If the SHTF you want to get out early and go somewhere else.
6) You won't be successful at bribing border agents.
What are some other non-cash, non-equities, non-bond stores of wealth that you all believe in? I've always liked the idea of owning some land, but have been discouraged because 1) it's generally a large outlay of cash to buy vs buying some silver or gold coins and 2) the taxes can add up over time...see those as expense ratios?
As another aside, learning to become a diesel mechanic is actually quite intriguing but I don't know much about the learning process for that skill. Might google that later for kicks... Anyone know anyone who's done that?
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...Snip... I've always liked the idea of owning some land, but have been discouraged because 1) it's generally a large outlay of cash to buy vs buying some silver or gold coins and 2) the taxes can add up over time...see those as expense ratios?
As another aside, learning to become a diesel mechanic is actually quite intriguing but I don't know much about the learning process for that skill. Might google that later for kicks... Anyone know anyone who's done that?
I remember my uncle who said "they are not making land anymore", but I held off on real estate until I and DW wanted a house.
Lucked into exactly what I wanted. Some of the criteria were not known to DW, like a huge master bedroom, as I hate bumping my shins at night in a small room. Separate garage exit door for the motorcycles, etc.
Current house expense ratio (local taxes/value) 0.8%-1.4%/year depending on valuation of house.
Physical gold expense ratio (safe deposit box rental/value) is 0.04%/year.
Any mechanic/ carpentry/ electrician/ plumber/ general skill would be valuable in most places.
I was amazed when our company went overseas to perform a service and realized the local labor was not up to the mechanical standards that we took for granted.
I was a chemist and I had to demonstrate the correct hose flange connection techniques to some locals (star pattern tightening). Don't forget the gasket was a key point :-)
Other places, the distinctions between a valve being OPEN (handle parallel to pipe) and closed (handle at 90 degrees to pipe) had to be explained on a regular basis.
The distinctions between pipe (tapered thread) and Swagelok(R) and straight thread were often lost in translation or just regular skills.
*Uncle was wrong, the Big Island of Hawaii added ~700 acres in 2018. However, that land added cost hundreds of people their homes in the process, and thousands of acres of usable land. The land is not really livable yet.
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
I've lived in countries in which economies and governments collapsed. In my experience, if a person thinks something like this is likely enough to want to prepare for it, having gold coins or gemstones is at best inefficient and at worst dangerous. Better options include:
--Have an education that gives you useful skills. If you have to flee your own country and go somewhere else, a good diesel mechanic can find a job in minutes anywhere in the world. A medical doctor, CPA, or engineer will probably get a job eventually, but will probably have to get local certifications first. This can take a long time.
--Don't flaunt your wealth before things collapse. If you're living large, you make yourself a target.
--Have money and property overseas before things go bad. Set up a foreign bank account and deposits in a currency that gives you confidence. Better yet, invest in income-producing property in a foreign country (preferably one with an investor visa program) in which you have confidence and keep the earnings in that country.
--When fleeing a country, high value items don't give you power, they make you a target. If you are planning to bribe a border guard, you offer him a large pile of rapidly devaluing cash that will buy a "real" hundred dollars of goods and he/she will probably be happy. If you offer a one ounce gold coin, not only will you not get change, you'll probably get pulled into secondary to search for all the other gold coins they hope you're carrying. And don't assume that you will be able to "waltz through" a border with millions of dollars of commodities on your person. When things are going bad, corrupt officials get very motivated to identify people who are leaving and to find their money. In the movies, there's honor among thieves.
In the real world, the people who will sell you two dozen 2-carat diamonds will also happily rat you out for a percentage of the take. And when you do get caught violating currency export laws, you may well lose everything, including your chance to escape.
The real key is getting out early. The earliest refugees are almost always the most successful because they leave early while they can do so with a plan and with assets. Once things go really bad, very few people get out with much.
There are similar problems with trying to use gold, gemstones, or collectibles in a collapsing economy. When you want to buy a few gallons of gas for your car, a loaf of bread, or a pack of toilet paper, you can't pay for it in gold coins. The guy at the gas station doesn't know what a gold coin or a diamond or a Rolex is worth, can't be sure it isn't fake, isn't going to take a small fraction of the coin or diamond, and can't make change. And if he does believe that your gold coin/diamond/Rolex is real, he's going to be tempted to call someone who will just rob you and give him a finder's fee.
FWIW, I have made no preparations. The US has made it through almost 250 years of challenges without collapsing and I believe it will continue through at least my lifetime. But if you want a contingency plan for a collapse, there are far better tools than gold coins and gemstones.
^ This is quite good advice.
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
I've lived in countries in which economies and governments collapsed. In my experience, if a person thinks something like this is likely enough to want to prepare for it, having gold coins or gemstones is at best inefficient and at worst dangerous. Better options include:
--Have an education that gives you useful skills. If you have to flee your own country and go somewhere else, a good diesel mechanic can find a job in minutes anywhere in the world. A medical doctor, CPA, or engineer will probably get a job eventually, but will probably have to get local certifications first. This can take a long time.
--Don't flaunt your wealth before things collapse. If you're living large, you make yourself a target.
--Have money and property overseas before things go bad. Set up a foreign bank account and deposits in a currency that gives you confidence. Better yet, invest in income-producing property in a foreign country (preferably one with an investor visa program) in which you have confidence and keep the earnings in that country.
--When fleeing a country, high value items don't give you power, they make you a target. If you are planning to bribe a border guard, you offer him a large pile of rapidly devaluing cash that will buy a "real" hundred dollars of goods and he/she will probably be happy. If you offer a one ounce gold coin, not only will you not get change, you'll probably get pulled into secondary to search for all the other gold coins they hope you're carrying. And don't assume that you will be able to "waltz through" a border with millions of dollars of commodities on your person. When things are going bad, corrupt officials get very motivated to identify people who are leaving and to find their money. In the movies, there's honor among thieves.
In the real world, the people who will sell you two dozen 2-carat diamonds will also happily rat you out for a percentage of the take. And when you do get caught violating currency export laws, you may well lose everything, including your chance to escape.
The real key is getting out early. The earliest refugees are almost always the most successful because they leave early while they can do so with a plan and with assets. Once things go really bad, very few people get out with much.
There are similar problems with trying to use gold, gemstones, or collectibles in a collapsing economy. When you want to buy a few gallons of gas for your car, a loaf of bread, or a pack of toilet paper, you can't pay for it in gold coins. The guy at the gas station doesn't know what a gold coin or a diamond or a Rolex is worth, can't be sure it isn't fake, isn't going to take a small fraction of the coin or diamond, and can't make change. And if he does believe that your gold coin/diamond/Rolex is real, he's going to be tempted to call someone who will just rob you and give him a finder's fee.
FWIW, I have made no preparations. The US has made it through almost 250 years of challenges without collapsing and I believe it will continue through at least my lifetime. But if you want a contingency plan for a collapse, there are far better tools than gold coins and gemstones.
God I love a good bit of common sense.
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I don't advise investing in precious gems, but I do advise doing so vicariously by watching the brilliant (and brilliantly stressful) film Uncut Gems. It's full of wonderfully antimustachian characters engaging in gemstone hustles of various legalities. Also, it was the last movie I saw in theaters before covid.
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Love the conversation, keep it coming!
As an aside, I didn't start this thread because I feared imminent collapse of civilization... simply exploring a non-cash store of wealth.
From what I gather so far...
1) Precious gems are a no. Even though they are pretty.
2) Gold is a yes (for some), but not in a SHTF scenario.
3) Premium gold products (ie Gold buffalos or eagles) are more expensive than generic bullion (ie APMEX gold bar).
4) It's kind of weird to want a pirate's hoard of treasure.
5) If the SHTF you want to get out early and go somewhere else.
6) You won't be successful at bribing border agents.
I think it is this type of thread that separates the MMM forum from Bogleheads.
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@ROF Expat
As someone living in a country actually teetering on the brink of martial law and economic depression, and actively planning to move assets to a safer country, I agree 100% with your assessment.
Skills, connections, advance planning, and good timing are all far more valuable and portable assets.
Buy the gold and precious gems to satisfy your deep unacknowledged Smaug-like urges. Not as an insurance policy in case your country goes south.
If you're in the Philippines, I wish you and the people of the Philippines nothing but good luck and success. Lovely people, lovely country.
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@ROF Expat
As someone living in a country actually teetering on the brink of martial law and economic depression, and actively planning to move assets to a safer country, I agree 100% with your assessment.
Skills, connections, advance planning, and good timing are all far more valuable and portable assets.
Buy the gold and precious gems to satisfy your deep unacknowledged Smaug-like urges. Not as an insurance policy in case your country goes south.
If you're in the Philippines, I wish you and the people of the Philippines nothing but good luck and success. Lovely people, lovely country.
I am, born and bred. Thank you.
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Love the conversation, keep it coming!
As an aside, I didn't start this thread because I feared imminent collapse of civilization... simply exploring a non-cash store of wealth.
From what I gather so far...
1) Precious gems are a no. Even though they are pretty.
2) Gold is a yes (for some), but not in a SHTF scenario.
3) Premium gold products (ie Gold buffalos or eagles) are more expensive than generic bullion (ie APMEX gold bar).
4) It's kind of weird to want a pirate's hoard of treasure.
5) If the SHTF you want to get out early and go somewhere else.
6) You won't be successful at bribing border agents.
What are some other non-cash, non-equities, non-bond stores of wealth that you all believe in? I've always liked the idea of owning some land, but have been discouraged because 1) it's generally a large outlay of cash to buy vs buying some silver or gold coins and 2) the taxes can add up over time...see those as expense ratios?
As another aside, learning to become a diesel mechanic is actually quite intriguing but I don't know much about the learning process for that skill. Might google that later for kicks... Anyone know anyone who's done that?
What is your goal for the proposed non-cash store of wealth?
Cash is generally unproductive, but there's a good case to be made for having some of it around. Personally, I think that money that isn't needed in cash should be held in equities. Equities are backed by underlying assets, so they're largely protected from inflation. And the S&P 500 involves a lot of investment and earnings outside of the US. If you are concerned about the dollar, investing more specifically in international funds can provide an easy hedge against a weakening dollar. There's a lot to be said for income producing property.
I have accumulated a lot of collectibles over my lifetime (including gemstones). Some of them have increased in value considerably, but I wouldn't consider any of them good investments or even useful stores of wealth. Most of them would involve high costs and/or a lot of time to convert into cash. I buy collectibles that I love and can afford and don't care whether they go up in value. When they do, it is a pleasant surprise. Sometimes, it isn't so pleasant. Insuring high value jewelry will cost you about 1% of value per year, and getting it appraised will cost hundreds of dollars every few years. Costs like those add up over the years for something I don't ever intend to sell.
I can't speak to buying honey or lead.
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I don't advise investing in precious gems, but I do advise doing so vicariously by watching the brilliant (and brilliantly stressful) film Uncut Gems. It's full of wonderfully antimustachian characters engaging in gemstone hustles of various legalities. Also, it was the last movie I saw in theaters before covid.
I Recommended this film up thread. It made me uncomfortable during the entire thing because all the characters were screaming at each other throughout. But it was a good film.
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I don't advise investing in precious gems, but I do advise doing so vicariously by watching the brilliant (and brilliantly stressful) film Uncut Gems. It's full of wonderfully antimustachian characters engaging in gemstone hustles of various legalities. Also, it was the last movie I saw in theaters before covid.
I Recommended this film up thread. It made me uncomfortable during the entire thing because all the characters were screaming at each other throughout. But it was a good film.
I turned it off, I got too agitated
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On the topic of most value per weight or volume, or "what would I choose if I had to flee the country", gemstones might still be the best choice. I recall reading that some people fleeing the Nazis through Antwerp choose gemstones for this reason. Even now they have some advantages. You could glue two dozen high quality 2-karat diamonds in the soles of your dirtiest shoes and waltz through any X-ray, scanner, or other search without a fear, and they could be worth hundreds of $ each after you were through. Granted you should assume a 75% loss of value or something, but in this case you would be happy to have any value. Gemstones still seem to come out ahead of gold or paper money for this use.
I've lived in countries in which economies and governments collapsed. In my experience, if a person thinks something like this is likely enough to want to prepare for it, having gold coins or gemstones is at best inefficient and at worst dangerous. Better options include:
--Have an education that gives you useful skills. If you have to flee your own country and go somewhere else, a good diesel mechanic can find a job in minutes anywhere in the world. A medical doctor, CPA, or engineer will probably get a job eventually, but will probably have to get local certifications first. This can take a long time.
--Don't flaunt your wealth before things collapse. If you're living large, you make yourself a target.
--Have money and property overseas before things go bad. Set up a foreign bank account and deposits in a currency that gives you confidence. Better yet, invest in income-producing property in a foreign country (preferably one with an investor visa program) in which you have confidence and keep the earnings in that country.
--When fleeing a country, high value items don't give you power, they make you a target. If you are planning to bribe a border guard, you offer him a large pile of rapidly devaluing cash that will buy a "real" hundred dollars of goods and he/she will probably be happy. If you offer a one ounce gold coin, not only will you not get change, you'll probably get pulled into secondary to search for all the other gold coins they hope you're carrying. And don't assume that you will be able to "waltz through" a border with millions of dollars of commodities on your person. When things are going bad, corrupt officials get very motivated to identify people who are leaving and to find their money. In the movies, there's honor among thieves.
In the real world, the people who will sell you two dozen 2-carat diamonds will also happily rat you out for a percentage of the take. And when you do get caught violating currency export laws, you may well lose everything, including your chance to escape.
The real key is getting out early. The earliest refugees are almost always the most successful because they leave early while they can do so with a plan and with assets. Once things go really bad, very few people get out with much.
There are similar problems with trying to use gold, gemstones, or collectibles in a collapsing economy. When you want to buy a few gallons of gas for your car, a loaf of bread, or a pack of toilet paper, you can't pay for it in gold coins. The guy at the gas station doesn't know what a gold coin or a diamond or a Rolex is worth, can't be sure it isn't fake, isn't going to take a small fraction of the coin or diamond, and can't make change. And if he does believe that your gold coin/diamond/Rolex is real, he's going to be tempted to call someone who will just rob you and give him a finder's fee.
FWIW, I have made no preparations. The US has made it through almost 250 years of challenges without collapsing and I believe it will continue through at least my lifetime. But if you want a contingency plan for a collapse, there are far better tools than gold coins and gemstones.
OK, everyone wants to argue with this one, but I wasn't really looking for an argument, so... no argument.
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What are some other non-cash, non-equities, non-bond stores of wealth that you all believe in? I've always liked the idea of owning some land, but have been discouraged because 1) it's generally a large outlay of cash to buy vs buying some silver or gold coins and 2) the taxes can add up over time...see those as expense ratios?
As another aside, learning to become a diesel mechanic is actually quite intriguing but I don't know much about the learning process for that skill. Might google that later for kicks... Anyone know anyone who's done that?
I have some pretty good experience with both those.
Buying a quadruplex, triplex, duplex, or house with ADU (accessory dwelling unit, casita, inlaw suite, whatever) is probably easiest and can also have excellent return on the money. MMM wrote a recent article on this https://www.mrmoneymustache.com/2020/10/23/house-hacking/. These types of houses are generally treated the same as single family when qualifying for a loan, so you can get a nice low interest rate on a 30-year. State and local governments will also generally treat them favorably, but this varies greatly. I do this. We bought a duplex in 2013, and when we moved a couple years ago we kept it and now rent out both units. We recently bought a house with ADU, which we are renting out. Between the two we own two houses but have our mortgage payments fully covered.
The program I am familiar with is through a local community college which trains diesel mechanics, welders, millwrights, electricians, etc through a full time 1-year program which results in either a certificate or associate degree, depending on whether the person desires to take writing and humanities classes. They try to work with local companies to place their graduates, so typically a graduate with a 1 year certificate can earn at least $60k/yr immediately, and generally higher. Within ten years I would guess that most have doubled or tripled their starting income. I imagine there are also apprentice programs, but I am not familiar with those. You need five or more years experience to become really valuable and flexible I imagine.
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I don't advise investing in precious gems, but I do advise doing so vicariously by watching the brilliant (and brilliantly stressful) film Uncut Gems. It's full of wonderfully antimustachian characters engaging in gemstone hustles of various legalities. Also, it was the last movie I saw in theaters before covid.
I Recommended this film up thread. It made me uncomfortable during the entire thing because all the characters were screaming at each other throughout. But it was a good film.
Apologies for the repost! I felt the same way watching the film; if I had it alone instead of with friends, I'm not sure I would have made it. But I was definitely invested (pun intended) in the story.
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Whelp. Just bought a St. gaudens double eagle. I think the Current administration is going to borrow/spend huge amounts of money to prop up the economy. This can only mean one thing for gold.
Should be here soon.
Thankfully, I’ll have something to bribe those peevish border guards with. And in the meantime I can squirrel it away in my private “pirate” booty stash.
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Whelp. Just bought a St. gaudens double eagle. I think the Current administration is going to borrow/spend huge amounts of money to prop up the economy. This can only mean one thing for gold.
Should be here soon.
Thankfully, I’ll have something to bribe those peevish border guards with. And in the meantime I can squirrel it away in my private “pirate” booty stash.
That’s cool, been reading up on those. Looks like they’re typically going for around the same amount as some of the gold buffalos, give or take. But you can leverage the eBay bucks with the pre 1933 coins. Any advice for getting the first bank of eBay bucks to leverage? I guess an initial purchase has to happen right?
I’m your opinion, does it matter if the coin is cleaned? Cleaned brings down the numismatic value but not the gold vale so maybe buying cleaned is the way to go?
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Whelp. Just bought a St. gaudens double eagle. I think the Current administration is going to borrow/spend huge amounts of money to prop up the economy. This can only mean one thing for gold.
Should be here soon.
Thankfully, I’ll have something to bribe those peevish border guards with. And in the meantime I can squirrel it away in my private “pirate” booty stash.
That’s cool, been reading up on those. Looks like they’re typically going for around the same amount as some of the gold buffalos, give or take. But you can leverage the eBay bucks with the pre 1933 coins. Any advice for getting the first bank of eBay bucks to leverage? I guess an initial purchase has to happen right?
I’m your opinion, does it matter if the coin is cleaned? Cleaned brings down the numismatic value but not the gold vale so maybe buying cleaned is the way to go?
Definitely sign up for eBay bucks before purchasing. Purchases will not earn the rewards if the buyer's account is not enrolled. eBay bucks accrue through a quarter and then after the quarter closes they are credited as a sort of gift certificate or voucher. eBay makes them easy to use when checking out.
The listing for the st. guadens double eagle that I bought is no longer active -- so the vendor must have sold out of the lot which they had discounted. It was an AU/Random Date I ended up snagging for about $2,010.
Sending two listings via PM of pre-33 coins which would appear attractive to me if I was going to buy another coin.
I have bought cleaned coins when the price was very attractive. Some looked very good, others not so much. For things bought near melt value, there is no numismatic value. The risk with a harshly cleaned or really worn coin is that they may have lost some gold.
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Whelp. Just bought a St. gaudens double eagle. I think the Current administration is going to borrow/spend huge amounts of money to prop up the economy. This can only mean one thing for gold.
Should be here soon.
Thankfully, I’ll have something to bribe those peevish border guards with. And in the meantime I can squirrel it away in my private “pirate” booty stash.
And your bet on this theory takes the form of... one coin?
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Whelp. Just bought a St. gaudens double eagle. I think the Current administration is going to borrow/spend huge amounts of money to prop up the economy. This can only mean one thing for gold.
Should be here soon.
Thankfully, I’ll have something to bribe those peevish border guards with. And in the meantime I can squirrel it away in my private “pirate” booty stash.
And your bet on this theory takes the form of... one coin?
I never said that.
Laugh all you want. Gold has had value for thousands of years. And even modern times an allocation of 3-10% gold (my personal aim is ~5%) has enhanced the returns of portfolios. It is one of the easiest commodities to buy and sell and in recent history has maintained it’s true value in case of high inflation.