I always seem to be different, and I can’t help it. Being an only child Aquarian, (if you go for astrology), maybe that’s par for the course. I always seem to disagree with the mob on CNBC, Wall Street Journal, and Barons. I seem currently to be at odds with the crowning masters of advice. I mean Richard Russell and others, for whom I have the deepest respect. I have been reading Russell since the 70’s, and I practically worship the man. Like a few others in the field of advising and predicting the future, Russell et al, say surplus assets should be kept in “cash.” You know, the “cash” which has lost 30% in value over the last couple of months. “Cash,” that is green paper dollars with no backing, and little future. I hate cash! I have as little cash as is possible, and still operate a household.
Please excuse me, you nabobs of finance, but I think “cash” is a certain road to insolvency. The risks are incredible. Overnight, another 10% or 20% in value could be lost in “cash.” Holding cash, pending another better venue of investment, seems OK, because you have those crisp hundred dollar bills in your hands or in the bank, and they won’t “go down” like gold and silver did a month ago. Except “cash” DID GO DOWN, while the hundred dollar bills were in your hands, buried under your mattress or in the bank. While you held them, they lost value against all other currencies in the world, and just plain lost spending power by themselves. Imported goods cost more. Oil, gas, and even water costs more now. Groceries, fertilizer, and tires cost more now. Everything costs more now, which is known as “inflation,” by the ignorant, but in reality increases in prices aren’t inflation. Price increases are caused by inflation.
The problem in the entire world today, is that every single currency is cloud-like. Clouds can dissipate quickly, and airplanes can fly through them, because they are fluff. (My 6th grade teacher gave me a definition of a preposition, which I have never forgotten. “Anything an airplane can do to a cloud.”) The entire earth’s population is at the mercy of “cash,” regardless of the nation or currency. Tangibles of any kind, do not change, except in their purchase prices in “cash.” A gallon of 91 octane gasoline is exactly the same gasoline, whether it costs a quarter of 40 years ago, $1.50, or $2.50. It hasn’t changed! Only its price has changed. So, as an example, if you stored your surplus assets in 91 gallon octane gasoline, rather than “cash,” you would have reaped a nice reward. Naturally, storage is a problem with gasoline. But consider the facts of oil. China’s imports of oil are up 33%, Venezuela’s oil reserves and political atmosphere looks glum, and it is said that the Saudi glut is no longer a glut. Oil is becoming a bit short in supply, causing the price of it to go up, as is typical of all markets. As if that weren’t bad enough, there hasn’t been a single new refinery built in the US in 20 years, thanks to the greenies and EPA. There can be no shortages of anything, unless there are price controls. Oil will never be scarce unless a Nixon price control situation happens only more expensive in “cash.”
Where to place surplus assets is the problem, and especially short term. Gold and silver won’t do, because of the spreads, cost to buy and ship. For periods of a few months or longer, gold and silver are OK, especially now that prices are about to climb, but for less time, it is a risk. I am a gold and silver dealer, so I might as well admit it, for less than a few months, keep away. How about money markets? What most do not realize, is that money market funds are not insured by anyone, and can be a risk if the managers do the wrong thing. Most think money markets are as solid as Gibraltar, but they can go the way of all flesh quickly, if not well managed. Savings accounts or CD’s? At 1% interest, that’s hardly a profitable thing. Short term government paper? Probably for short term, they’re the safest, even though they are now a hair less than 1%. The question begs itself then, why get out of something that allows one to have a lost of “cash?”
“Cash,” is the reason in itself to get out of it. “Cash,” is the reason for buying gold and silver, because “cash” is a shrinking measurement. If you were a designer of buildings, engines, or airplanes, and the device you measured with, was of uncertain length, or shrank every week, how could you build or design anything? A solid measuring instrument, is at the heart of all inventions, designs, buildings, machines, or virtually everything in the world, no matter what they are. The dollar, or other currencies, which everyone measures their wealth by, are as stable as a wave in the ocean. Since the buck is the US measuring device of wealth, how does it make sense to store surplus assets in them? Why watch one’s assets shrink, and consequently buy less? Storing assets in hundred dollar bills, bonds, or “cash,” is like storing an ice cube at 32.5 degrees.
Why not do this: If you come on a lot of cash, proceeds, dividends, inheritance, or results of a sale of anything; buy or invest in something tangible. Tangible things, be they a piece of antique furniture, an original oil or watercolor, old car, Lionel electric trains before 1960, or whatever. A Picasso just sold for over $100 million at Sothebys. Something that will give you pleasure, and as the “cash” goes down in purchasing power, your tangible will “go up,” while remaining exactly the same thing. Be careful though, as art and antiques require knowledge to purchase at good prices. Your tangible will be as stable as any tangible could possibly be, while it goes up in dollars, pesos, francs, yen, or pounds. Your tangible isn’t “going up,” it is the currency which is going down. Going down, because whichever government issued it, no matter which, it’s just paper and ink. All national governments seem to operate at a loss. Virtually no national government ever collects enough taxes to meet its budget, so they print and print and print. Storing surplus assets in their bonds, paper and ink, long term, is a guaranteed loss. Why store assets in a failing, decreasing measurement? Why store surplus assets in a leaky bucket?
Gold and silver had an incredible drop in price over the past month, but they’ll come back, just as certain as the sun will rise. Manipulation? Of course, but like a cloudy day, the sun will shine again, and the manipulators are rapidly running out of steam. To say that a tangible item, be it a diamond, board foot of lumber, gallon of milk, gold, or silver will change in value as do all paper monies, defies reason. It’s the same tangible, even though the manipulators may screw around with currencies, giving one a boost, and another the dump. Saving in dollars or bonds, long term, is plain silly, because they are going down in value. 99% of the world believes in the “full faith and credit” of their individual governments, and saves in their currencies or bonds. 99% of the world is dead wrong. The majority is always wrong, at any place in history. Don’t follow the crowd. The crowd is always wrong.
Those detractors of gold and silver, point out that in 1980 they were much higher in dollar prices, which is true. This was caused by Jimmy Carter’s idiocy, and Bunker Hunt’s attempts to corner the world’s silver supply, to name just two. I also may point out that non-manipulated tangibles, such as antiques of all types which couldn’t be manipulated, and had no bubble in 1980. Tangibles have just kept rolling along all of them upward in dollar prices, with the exception of gold and silver. Gold and silver are sure bets now. To you detractors, remember the NASDAQ at over 5,000? Try 1900 now. Remember the 91 octane gas at a quarter a gallon? I do. “Cash” has decreased in purchasing power over the years, hasn’t it? Protect yourself.