Physical alternatives to precious metals?

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Sam Brazil
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Physical alternatives to precious metals?

Post by Sam Brazil » Mon Jul 13, 2015 10:37 am

Part of the PP theory's gold value isn't just that it responds to certain economic conditions, but that it's physically in your possession and "outside the system" which means it's safe from certain black swans.

If I'm looking to invest in physical assets, but hedge away the risks of precious metals as an asset group, what's left?

- Jewels: I'm scared away from this because I understand that these are way overpriced at retail...which would be fine if I could confidently buy them at wholesale value at a reasonable spread, but everyone and their brother "knows a wholesaler" to where over 50% of the people I know supposedly buy diamonds from wholesalers now, even though it's blatantly retail. I suspect this is pure marketing and they're paying retail possibly at a discount.

- Art: How is it possible to do this smartly without millions? Sure, a famous Picasso probably will retain value over time, but what could a person do in a smaller price range that's not a pure gamble?

- Guns: Regular guns depreciate if you buy them new and I'm assuming used non-collectible guns depreciate over time as gun technology improves. Pre-19xx machine guns are another story, but any possession of them is begging to be outlawed eventually.

- Ammo: A pure commodity...this is potentially interesting because it's less subject to crazy retail or resale markups, and there's a very defined liquid market for it...on the other hand it has a shelf life which sort of defeats the purpose of hard assets.

- Physical cash: Loses value over time all over the world...are there any non-fiat paper notes that aren't guaranteed to depreciate?

- Historical or any other collectible: Same as art...unless it's a million dollar sure thing, what is a smaller timer to do?

- Bearer notes: Do bearer bonds even exist as a practical option anymore? Something similar?

- Bitcoin: Who knows what will happen with cryptocurrency...huge risk that you can't easily/cheaply hedge.

- Apocalypse supplies: Medicine, Jack Daniels, canned food, toilet paper...all useless unless we are nuked, which is too remote a possibility...the hard asset needs a reasonable chance at appreciation even without a black swan happening.

Others?
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Stewardship
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Re: Physical alternatives to precious metals?

Post by Stewardship » Tue Jul 14, 2015 4:14 am

I like nickels.  With 75% copper and 25% nickel, they have built-in inflation protection.

But they are heavy, bulky, and currently not as easy to spend as paper notes.
In a world of ever-increasing financial intangibility and government imposition, I tend to expect otherwise.
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Re: Physical alternatives to precious metals?

Post by barrett » Tue Jul 14, 2015 6:55 am

Stewardship wrote: I like nickels.  With 75% copper and 25% nickel, they have built-in inflation protection.

But they are heavy, bulky, and currently not as easy to spend as paper notes.
Ah, the Kyle Bass solution! He's got 20 million nickels stored somewhere. Great potential ROI probably if you can somehow keep them in one of your super secure outbuildings.
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Greg
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Re: Physical alternatives to precious metals?

Post by Greg » Tue Jul 14, 2015 7:13 am

barrett wrote:
Stewardship wrote: I like nickels.  With 75% copper and 25% nickel, they have built-in inflation protection.

But they are heavy, bulky, and currently not as easy to spend as paper notes.
Ah, the Kyle Bass solution! He's got 20 million nickels stored somewhere. Great potential ROI probably if you can somehow keep them in one of your super secure outbuildings.
http://www.usmint.gov/about_the_mint/?a ... ifications
Any reason why Nickels over any other coin? Also there are the pre-1964 coins with silver in them.
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barrett
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Re: Physical alternatives to precious metals?

Post by barrett » Tue Jul 14, 2015 7:25 am

1NV35T0R (Greg) wrote: Any reason why Nickels over any other coin? Also there are the pre-1964 coins with silver in them.
It's likely Bass has just done this just because he can. The reason he gives is that the metal in the coins is worth more than 5 cents. I believe when he bought all those nickels several years ago, the value was about 6.5 cents each. So an instant 30% profit if he can unload them without blowing much of his $300,000 gain.

My source for this is the Michael Lewis book Boomerang. It's right at the beginning of the book, I believe.

Ah, here is a short link:

http://www.cnbc.com/id/44788851

Friggin' Internet makes all of the stored minutiae in my brain useless.
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Greg
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Re: Physical alternatives to precious metals?

Post by Greg » Tue Jul 14, 2015 8:14 am

barrett wrote: Friggin' Internet makes all of the stored minutiae in my brain useless.
Ahh but you still have to remember the Google search terms you used to find a particular article, or where you saved the article to in your favorites. The brain is still needed, it just has a crutch now ;)
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Mark Leavy
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Re: Physical alternatives to precious metals?

Post by Mark Leavy » Tue Jul 14, 2015 8:43 am

Great question - I've asked myself this a few times and never came up with a good answer.

I think you have to define the parameters of a good physical investment before you can evaluate whether or not you should buy stamps or Jack Daniels or classic cars.

For me - I want a reasonably liquid market.  I.e. if I had to sell tomorrow, do I know what price I could get?

Also, is the spread tractable?  What is the cost of buying and then selling 100 cases of fine wine?

And what is the cost of holding?  Do I need a climate controlled cellar or staff of armed guards?

If I know that the spread is tractable and the market is reasonably liquid, and the cost of holding isn't excessive, then I might consider it as a store of value.

So far, I haven't bought any cases of Jack Daniels.
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Greg
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Re: Physical alternatives to precious metals?

Post by Greg » Tue Jul 14, 2015 8:54 am

Mark Leavy wrote: Great question - I've asked myself this a few times and never came up with a good answer.

I think you have to define the parameters of a good physical investment before you can evaluate whether or not you should buy stamps or Jack Daniels or classic cars.

For me - I want a reasonably liquid market.  I.e. if I had to sell tomorrow, do I know what price I could get?

Also, is the spread tractable?  What is the cost of buying and then selling 100 cases of fine wine?

And what is the cost of holding?  Do I need a climate controlled cellar or staff of armed guards?

If I know that the spread is tractable and the market is reasonably liquid, and the cost of holding isn't excessive, then I might consider it as a store of value.

So far, I haven't bought any cases of Jack Daniels.
Are there any Jack Daniels ETFs? Rather than selling off some of the assets every month/year to pay for expenses, the custodians just drink some of it as pay.
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Re: Physical alternatives to precious metals?

Post by Xan » Tue Jul 14, 2015 9:45 am

This kind of thing could be very useful as your kids approach college and you're filling out FAFSA.  IIRC, "collectibles" don't count as assets, only financial assets do.
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Re: Physical alternatives to precious metals?

Post by Kriegsspiel » Tue Jul 14, 2015 4:41 pm

Any kind of household good that you use regularly, a la the Alpha Strategy?
I hated all the things I had toiled for under the sun, because I must leave them to the one who comes after me. Who knows whether that person will be wise or foolish? Yet they will have control over all the fruit of my toil into which I have poured my effort and skill under the sun. . . Nothing is better for a man than to eat and drink and enjoy his work.
- Ecclesiastes
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Re: Physical alternatives to precious metals?

Post by fishdrzig » Tue Jul 14, 2015 8:37 pm

Pull and save as many of your kids primary teeth for future stem cell research auctions.
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Re: Physical alternatives to precious metals?

Post by Stewardship » Wed Jul 15, 2015 4:33 am

1NV35T0R (Greg) wrote: Any reason why Nickels over any other coin?
Yes.  Since the metal value in nickels is so close to their face value, they will appreciate by either a strengthening dollar or increasing metal value, whichever performs better.

Now if only we could always invest in something that would always give us the best performance between two non-correlated markets.  Oh well...
In a world of ever-increasing financial intangibility and government imposition, I tend to expect otherwise.
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