We all need to economize, no matter what our income is. Well, maybe not, but I was raised to make do with what I have, and never to squander dollars on un-needed things. I haven’t bought a bar of soap in years, because I always save it at hotels where we stay. Cheap? I guess. No, I don’t change my own oil any more, but I did for years, just to save a few bucks. My house is 100% outfitted with those funny spiral fluorescent bulbs, a 92.5% efficient furnace, plus a tankless water heater, and they save a lot of dollars each month. I bought a used Sears 38″ riding tractor-lawnmower for $150, put a new tire, seat and spark plug in it and used it for over ten years, till it finally wore out, and I gave it away. I could have bought a new one for $1400 more than ten years ago, so I saved probably $1200. So much for that.
Out of the 99% of Americans who save in dollars, perhaps half of them use a ’licensed financial advisor,’ to manage their money and investments. Generally, these professional advisors charge about 1% per year for their advice. If someone has $500,000 invested, using the advice of these fellows, he will pay $5,000 for the advice, and of course the brokers make their own commission buying and selling for you, which makes ’churning,’ a temptation. Is it worth it? I say usually not. These ’professional, licensed financial advisors’ have lots of study under their belts, and have taken tests to allow them to be a licensed advisor, and therefore really believe that they earn their 1%. All of their advice however, is re-arranging the deck chairs on the Titanic…for a 1% per year fee. All of the advice, for 1% a year, is how to re-arrange dollars (deck chairs), while the dollar plummets in value. They do the best they can, re-arranging the deck chairs, but they don’t realize that the boat is taking on water.
These professional advisors probably don’t know what causes inflation, even though the dictionary tells it as it really is. Inflation has nothing to do with prices going up. It has to do with the dollar going down. Is the water level going up, or is the ship sinking? These 1% per year advisors may not make a single trade in a year, but still collect 1% of your money. They may make a lot of trades in dollars, (deck chairs), making commissions, and even make bad ones, and still charge you 1% of the remainder. So, lets see what I would advise, and with no yearly charge. I’ll use examples. Here’s one fellow who I have never met, but from 5/12/06 to 11/19/07, he spent $506,354 with me, plus $3700 for delivery and commissions. His current worth from these purchases, is $782,371, a 56% increase in dollars. On April 2nd, he spent another $277,000, which will do as well as his former purchases, I am sure. Other than the initial commission and shipping charge of less than 1% for him, there is no yearly charge. How could there be? He has it stored somewhere, which I am sure is safe. He bought a tangible item, and how could I charge for selling him something he just keeps and watches it go up in dollars?
I couldn’t charge a yearly fee, any more than a car salesman could charge a yearly fee for selling you a car. You bought it, he made a commission, and it’s yours for as long as you wish to keep that car. (Only the license is the yearly fee). I have been told by responsible people, that “index funds” are the best way to invest US scrip, but that generally gives a maximum of 15%, less that 1% a year fee, if you’re lucky. My client earned 56% in a year and a half! Suppose my client had taken his $502,654 and invested it in index funds at 15%, less yearly 1% fee. He would have netted $572,271.58, and continued to pay 1% a year ($5722.72 first year) for his money to sit there. My client has his $782,371 worth of gold and silver, going up in dollars, and he can keep it as long as he wishes, with no fees, and if anytime he wants to sell it, I charge no commission when he sells. He will bear the expense of shipping only.
It’s fun to leaf through my client cards to see what has happened to them. Many bought Krugerrands at $260, less than 6 years ago, which means they have made over 42% a year. Understand, it’s the SAME GOLD. Krugerrands haven’t changed in appearance or weight. They’re still one ounce of pure gold, plus .09 oz of alloy to make them hard. They have gone up in scrip by 42% a year, but far better said, is that their increase in scrip has outpaced inflation by a good margin. I am sure that gold and silver will continue to outpace inflation, because no one really knows what the inflation rate is anyway. I estimate it to be currently, about 14%. There’s a limit on the amount of gold and silver on and in the earth, but there’s plenty of trees to print scrip. The inflation rate is limitless, as in Zimbabwe, where it currently is 150,000%.
No fuss, no mess, no phone calls, no buy and sell, no annual commission of 1%, no ’churning,’ and no apprehension. Suppose gold and silver just sit there and go up in dollar value? Suppose you don’t need the dollars, but love the security of owning tangible, historic money? Then, when you die, you just leave it to your kids with no inheritance taxes. If you have it in a safe deposit box, you place their names on it as well as yours, maybe even without their knowing it, and it automatically becomes joint property, so there will be no taxes if you die. If you need some dollars, you just sell a bit here and there as you need it.
I have a client, who never bought a dimes’ worth of anything from me. When gold was $250, he took every cent he had and bought all Krugerrands. Now, he just sells a couple a month, and has plenty to live out his life in comfort. He’s a happy guy. Buying and holding gold and silver, is sort of like a “reverse mortgage,” which seems to be popular now-a-days, in spite of the fact that it is a racket. I won’t go into that, but needless to say, with a reverse mortgage, you have taken your home out of your name, and are immediately in debt! With gold and silver physical holdings, you have the initial investment, which could be compared to buying a home. You then sell some of it as you need the dollars, all the while it has gone up in dollars, in excess of inflation. If you die before you have cashed it all in, it’s a wonderful inheritance for your kids. Let them fight over your home! Simple?
Now you guys have a great weekend, and naturally, protect yourself.