Gyroscopic Investing

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?

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.

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.

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.

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.

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

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.

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.

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.

Any kind of household good that you use regularly, a la the Alpha Strategy?

Pull and save as many of your kids primary teeth for future stem cell research auctions.

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...

I think you will find that gold has the best tradeoff between convenience, spread between buy and sell, ease of storage, track record of keeping value through disasters, and all the other reasons to own tangibles.

A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

Longstreet wrote: A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

Another suggestion is purchasing pre-1965 Quarters and Dimes due to the 90% silver amount in each of them. These would be much easier for paying for things. For instance, a pre-1965 Dime is worth around $1.09 based on current silver and copper prices.

Longstreet wrote: A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

Why not just hold 1/20 ounce gold coins?

Longstreet wrote: A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

Purchasing some goods and services is the last thing you want attempt in a time of crisis.  If you get desperate enough to, then having denominations that are too large would be the least of your worries...

Longstreet wrote: A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

HB recommended junk silver for that eventuality.

Libertarian666 wrote:

Longstreet wrote: A basic question.  Two of the reasons for holding physical gold is that it will hold some value in a catastrophe and it will allow me to purchase some goods and services in a time of crisis.  However, if everyone has lost nearly everything, what will I be able to buy with a $1000 gold piece - food, fuel, energy?  It seems to me that one would want to hold a smaller valued item to enable barter and exchange.  Thus, nickels sound reasonable for a small percentage of one's holding?

HB recommended junk silver for that eventuality.

Still seems like 1/20 gold maples or gold eagles would be a better option...you get small amounts + highest assurance that it will be recognized as valuable. You go around after the apocalypse with a bunch junk grey matter that looks sorta like silver, who knows what will happen...it's not like you can expect ever barterer to carry metal testing kits.

Sam Brazil wrote: Still seems like 1/20 gold maples or gold eagles would be a better option...you get small amounts + highest assurance that it will be recognized as valuable. You go around after the apocalypse with a bunch junk grey matter that looks sorta like silver, who knows what will happen...it's not like you can expect ever barterer to carry metal testing kits.

It's actually pretty easy to tell the difference between a 90% silver coin and a fake.  For one approach see https://www.youtube.com/watch?v=FvmfTApZZsM

fishdrzig wrote: Pull and save as many of your kids primary teeth for future stem cell research auctions.

Cool!  I'm glad I saved my baby teeth and wisdom teeth!