Gyroscopic Investing

craigr wrote: But when Browne was alive opening overseas accounts was still relatively easy and cheap. Now it's very expensive and many Swiss banks won't accept any US citizen customers regardless of wealth. A lot has changed in the past five years.

Adam1226 wrote:

craigr wrote: But when Browne was alive opening overseas accounts was still relatively easy and cheap. Now it's very expensive and many Swiss banks won't accept any US citizen customers regardless of wealth. A lot has changed in the past five years.

This is one of the only valid things-have-changed-since-Harry-Browne-died concerns that I have heard.  The restrictions on Swiss Bank accounts occurred rapidly, and make it so difficult (practically and financially) to open an account that's it's just not worth it.  

Do you think that this is just the "camel's nose under the tent?"

Could be. The U.S. government's requirement that owners report annually any accounts they have at foreign financial institutions does not inspire confidence.

rickb wrote: Would goldmoney.com fit Harry Browne's criteria for holding gold in an overseas account?

Hell no.

Harry Browne's idea of gold is gold you can hold in your hand.  Wherever it is, you can go there and HOLD IT IN YOUR HAND.  You may not have immediate physical possession of it, but you know for sure it exists, and that you own it, and that if all hell breaks loose (even in a biblical sense) you, and no one else, can put your hands on it.

Compare the ownership chain.  With gold you can hold in your hand it's

you -> gold

Very direct.  Very simple.

With goldmoney.com it's (at least theoretically)

you -> goldmoney.com -> gold

How many intermediaries do you have to trust with gold you can hold in your hand?  0

How many intermediaries do you have to trust with gold at goldmoney.com?  at least 1

The difference between 0 and 1 intermediaries is HUGE.  With 0 intermediaries there's no chance whatsoever that any intermediary will rip you off.  With even 1 intermediary the chance goes from 0 to something that's not 0 (infinitely greater).

Assuming you trust goldmoney.com (and remember, this creates an infinitely greater chance that you'll be ripped off), then you need to think about costs.

You can buy gold you can hold in your hand for a 1-3% premium.  Goldmoney.com charges (see http://www.goldmoney.com/fees.html) between 1% and 2.5% to "buy" gold and then 0.18% (or 0.15%, depending on how much gold) per year.  The yearly fee pays storage costs and "insurance".  I don't know about you, but I can easily fit at least $100,000 of gold coins in a $20/yr safety deposit box so my storage costs scale out to way less than .18% per year. (more like .02%)  Insurance is another matter, but what exactly does goldmoney.com's insurance cover?  If a nuclear bomb blew up their vaults would you get your money back?  If an invading army confiscated goldmoney.com's gold, would you get your money back?  If you were an invading army looking for gold, would you go to where you know goldmoney.com keeps lots and lots of gold, or to some random bank in Podunk, Nowhere?

Another thing to consider is the possibility of fraud.  A goldmoney.com account is inherently accessible over the internet.  If they get an order to transfer your funds to another account, they'll do it and even if this was fraud (someone stole your login credentials or was able to break into your account by whatever means) I believe their stance is "tough luck".

BTW I am not in any sense knocking goldmoney.com.  I sincerely believe they are exactly what they claim to be.  However, they are infinitely far from "gold you can hold in your hand".

rickb wrote: Would goldmoney.com fit Harry Browne's criteria for holding gold in an overseas account?

Hell no.

TBV wrote: Harry Browne's criteria for holding gold overseas does not call for a total absence of intermediary risks or risks arising from marauding armies or nuclear war.  So those considerations really don't fit into a discussion of his PP strategy.  He did suggest that a portion of one's assets be held overseas, so a decision NOT to do so clearly fails to meet HB's criteria as well.

Hiding coins or bars close by, or trusting that one's safety deposit box won't get robbed, or that one's insurance carrier won't default, may work just fine.  But it seems no more preferable than other available options, of which GoldMoney is one. 

Harry Browne wrote: Since gold is the last line of defense for you portfolio, you have to be sure to handle it properly.

Don't throw away the benefits of gold by treating it too casually.  Don't put too many pieces of paper between you and your gold.  Buy gold that you can hold in your hand.
...
Gold coins and gold bullion are the only two gold investments appropriate to the Permanent Portfolio.  Each gives you possession of the metal itself, rather than someone's promise to deliver it later.
...
I believe the following storage arrangements are the only ones to consider:
1. Gold coins in your own possession;
2. Gold bullion or coins stored in a Swiss bank;
3. Gold coins stored in a safe deposit box;
4. Gold bullion or coins stored with a U.S. bank acting as a custodian or trustee.

rickb wrote:

TBV wrote: Harry Browne's criteria for holding gold overseas does not call for a total absence of intermediary risks or risks arising from marauding armies or nuclear war.  So those considerations really don't fit into a discussion of his PP strategy.  He did suggest that a portion of one's assets be held overseas, so a decision NOT to do so clearly fails to meet HB's criteria as well.

Hiding coins or bars close by, or trusting that one's safety deposit box won't get robbed, or that one's insurance carrier won't default, may work just fine.  But it seems no more preferable than other available options, of which GoldMoney is one.  

I disagree, especially about total absence of intermediary risks.  From "Why the Best Laid Plans" (chapter 25):

Harry Browne wrote: Since gold is the last line of defense for you portfolio, you have to be sure to handle it properly.

Don't throw away the benefits of gold by treating it too casually.  Don't put too many pieces of paper between you and your gold.  Buy gold that you can hold in your hand.
...
Gold coins and gold bullion are the only two gold investments appropriate to the Permanent Portfolio.  Each gives you possession of the metal itself, rather than someone's promise to deliver it later.
...
I believe the following storage arrangements are the only ones to consider:
1. Gold coins in your own possession;
2. Gold bullion or coins stored in a Swiss bank;
3. Gold coins stored in a safe deposit box;
4. Gold bullion or coins stored with a U.S. bank acting as a custodian or trustee.

In the chapter on Swiss Banks he specifically mentions Switzerland's long-standing policy of neutrality, and that storing some gold there would protect you from losing everything in the advent of war, civil disorder, or natural catastrophes in the US.  My takeaway is that these are things he absolutely worried about.

TBV wrote: In his later radio shows, HB emphasized the need to place some assets beyond the control of the US government.  So, choices #1, #3 and #4 don't meet that criteria, and #2 is no longer a realistic option. So, we're left with making the most of what we have.  Your earlier post glossed over the issue of insurance.  Placing $100,000 in a $20 deposit box exposes you to considerable risk.  I dare say that whatever insurance you might obtain will not be free nor will it protect you against the calamities you criticized GoldMoney for not covering.  So, that means the insurance argument is off the table.

The truth is that placing one's possessions in the hands of an agent is risky.  
(snip)

TBV wrote: Let's back up a bit.  The original question was whether goldmoney.com would meet Harry Browne's criteria for holding gold in an overseas account.  I think the answer is unquestionably no.  On the other hand I definitely agree that placing one's possessions in the hands of any agent, including a Swiss bank, is risky.  If we want to speculate about what Harry Browne would recommend given today's options, I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Again, I'm not knocking goldmoney.com (or bullionvault).  I just think it's reasonably obvious Harry Browne would not have recommended either of them.

rickb wrote: I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Adam1226 wrote:

rickb wrote: I'd bet any alternative where the foreign agent is not simply holding coins or bullion that are unquestionably owned by you wouldn't be on his list.

Isn't that what goldmoney does?

fnord123 wrote: My impression is goldmoney has a pool of gold, to which you, as an account holder, have a claim of a certain portion of it, measured in grams.  Contrast this to a safe deposit box somewhere overseas - the bank owns the box, but the actual coins inside are yours.

murphy_p_t wrote:fnord, you may wish to look at this site:  http://www.goldmoney.com/complete-ownership.html

fnord123 wrote:

murphy_p_t wrote:fnord, you may wish to look at this site:  http://www.goldmoney.com/complete-ownership.html

I've seen their stuff, including calling customer accounts "holdings" rather than accounts.

They don't make available their audit forms (SAS 70 Type 2) to non-customers.  Furthermore, I cannot find anywhere an audited 10-K like form (they are private, so it isn't legally required).  In the absence of a 10-K or an externally audited equivalent, it is impossible to see their balance sheet to see if they list the gold holdings on the balance sheet or not.  I know their website says they do not, but stuff on a website doesn't impress me much without legal documents to go with it.  At the minimum I would want to read the SAS 70 Type 2 to verify the procedures being audited are specifically the ones that the website claims ensure individual ownership / no pooling.

TBV wrote:Link: http://www.goldmoney.com/control-reports.html

I understand your concern.  However, isn't it better to open an account and read the SAS-70 report than to spread FUD?  Better still, how about some GoldMoney customers chiming in to clarify the situation?

TBV wrote:One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold. That differentiates it from gold held in-the-hand.  However, it also makes it no worse than any other traded security.

TBV wrote: One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold.

Adam1226 wrote:

TBV wrote: One issue that remains should GoldMoney go bust is this one: all but the very biggest customers will get paid in cash rather than gold.

How do you know it's only the very biggest customers?  How do they decide who gets gold and who gets cash?