This is a guest post by financial expert Craig Hill of Low Load Gold.
In this article, I’ll be discussing what I feel to be some of the more important points relating to precious metals and their use in prepping scenarios. There seems to be lots of confusion regarding the metals and hopefully this will help some of you form a rational view that can be deployed in various scenarios with success. Before I get to the heart of the article, I’d like to take a moment to tell you about my background as I believe doing so will help you understand how I came to form my opinions on the subject matter at hand.
My background is in finance. Specifically, it’s in investments and financial planning. I studied financial planning at Texas Tech University and have worked in the field for over twenty years. I’m a Certified Financial Planning™ practitioner and have worked extensively with financial markets over my career. You might be wondering what a guy like me is doing working in the precious metals space and why I might be writing an article for preppers. Let’s just say that, like you, I have concerns related to the overall structure of our economy. I am concerned that things might not be as solid as the government, press and financial industry want you to believe. I’m not saying everything is falling apart, but like you, I am concerned that trouble may come and it might be severe.
With that in mind, I personally began to look at my own situation and started doing things that were out of the norm for those in the financial industry. I had questions that I had to get answers to and as I got those answers, I became more concerned not less. In 2007, I began to look closely at precious metals and with my financial background driving me, I put together a list of best practices for owning them. I can assure you that you probably won’t agree with everything I suggest, but for me, these points became important. I’ll get to the specifics on my “best practices” later in the article.
Before I get to that, I want to go through a few of the common arguments I hear when dealing with my financial industry pears. Hopefully you’ll find this informative and somewhat humorous. Let me begin with the most common arguments.
Argument number one; you can’t eat gold and silver! You can’t? Are you sure? Have you ever tried? Perhaps they taste like chicken! This argument alone makes me glad I’m bald. If I weren’t, I’d walk around with a bleeding scalp from ripping my hair out. True, you can’t eat gold and silver but the fact is you can’t eat paper money either!!!!!! The argument being made here isn’t really about the nutritional value of precious metals. The real argument being made suggests that precious metals will do nothing for the holder in a collapsed economy. This argument is both right and wrong in my opinion. Let me explain why.
The argument is right IF the scenario being put forth is a completely collapsed economy with no order whatsoever. In that type of collapse, you can show up to the grocery store with gold, silver, dollars, euros, francs, etc. and none of them will buy anything. The reason for that is that there will be nothing to buy. If supply chains are down and inventory has run out, the grocery store is now just an empty building. You can go back home and look at your shiny metal but you’ll still be hungry.
The argument is wrong, however, in that the metals, in that scenario, may have some value in helping you get relocated. You might be able to buy your way to an area less affected and more stable. Perhaps you can get across a border or even into another region. History contains stories of people doing just such a thing during times of war and economic duress.
The argument is also wrong in that it assumes that if you can’t eat the metals they have no value at that point or at any point forward. As good preppers, we are intelligent enough to know that metals alone aren’t preparation. Proper prepping protocol calls for a holistic approach which includes planning for water supplies, food stores, defensive tools, medical supplies, money, etc. etc. I don’t know why those outside the prepping community think that we as preppers ever planned to eat the metals. I mean, don’t those people watch TV? Don’t they see our gardens, chickens and food pantries? While it is a mistake to demean preppers, it’s a greater mistake to assume that gold and silver will be worthless in the scenario we are discussing. The precious metals may have very little use in the initial stages of a collapse but they have never failed to re-establish their value once the next economy is established. Those with nothing but paper money in a collapse will be left completely de-capitalized while those with precious metals will still have some capital.
Lastly, the argument MAY be wrong in the assumption that the metals will not feed you. It may be that the collapse comes but some supplies are still available. Ask yourself this question, if the economy of my government has collapsed, what is the likelihood that the prevailing government money will still be exchangeable as legal tender? It may be, in that scenario, that the only form of money accepted by merchants is true money comprised of gold and silver.
The next argument I hear is “I don’t think precious metals make a good investment because the price is volatile and the metals don’t pay income.” Again, this argument is both right and wrong.
The argument is right in that, in comparison, precious metals have been bested by many different investment opportunities that have come along over the years. One would only need to consider the amazing returns made in certain companies like Amazon or the appreciation in San Francisco real estate to find better “Investment” alternatives. On the flip side of that coin, one could also consider the complete loss of value of companies like Enron or how certain mortgage backed securities lost all value in the great financial crisis. For both of those reasons, I don’t particularly consider gold and silver as investments. I consider them to be more like insurance.
If we take the investment view for a moment however, we see that gold and silver over long periods of time have been very consistent in preserving purchasing power. Gold and silver are boring in comparison to certain stocks. However, I don’t know of any stocks that have as lengthy a track record as gold and silver. Also, there are times when the precious metals way outperform stocks. An example would be the financial crisis of 2008/2009. The metals act as a hedge vis-à-vis modern equity markets. Thus, the metals have had some respect among certain investment professionals and large endowments.
Taking my view, the view of the metals as insurance, we see that gold and silver really shine in times of economic storms. If you think about it, your homeowners insurance and your car insurance really don’t have any value to you most of the time. They are just there, costing you money but providing nothing. However, if a hurricane comes and levels your house and throws your car up against a tree, your insurance is suddenly very valuable. This is how I view precious metals. Of the metals I own, I hope to never use them. I hope I die with them in the same place they are now and I hope my kids go and get them, split them up and feel comforted by them being in their possession. If an economic hurricane comes and we need them because the economy has collapsed, then I will deploy those assets to hopefully protect myself and those I love. Like a good boy scout, I’d rather have them and not need them than need them and not have them.
The last argument I’ll discuss goes something like this, “I don’t want to buy precious metals because I don’t know where to store them to keep them safe.” I understand that. It takes work, thought and usually some trust to get those issues worked out. However, if you take time to do the homework, you can come up with a good plan for safekeeping. I have this conversation all the time with folks. I’m happy to help you think through the issues. If I can be of help, give me a call or drop me an email.
So, with the above in mind, what are the “Best Practices” I mentioned earlier? I’ll go through these one by one and hopefully they’ll give you some insights that are helpful.
Thoughts on Portfolio Design for Preppers:
• Gold is for holding large amounts of capital in small packages. Gold is not for trading and bartering. You do not want to try and use gold to buy bread. Even 1/10th ounce coins equate to about $120 of value today. This is not the money you take to the farmers market.
• Silver is for trading and bartering. 90% silver coins, dimes, quarters and half dollars made prior to 1964 are excellent forms of silver for these purposes. A 1964 US Quarter today is worth about $3.25. If you wanted to buy a loaf of bread in a collapsed economy, it would be safer to show up with a couple 1964 quarters. Also, people in collapsed economies learn quickly about authentic coins. 90% silver is easy to identify and verify. You can use silver rounds as well and these have less premium when you purchase. However, rounds aren’t as easily identified and verified.
• Diversify your portfolio as you would a stock portfolio. In building out a portfolio, I think it best to use a small amount of money to buy highly liquid, well known forms of metals and then use the rest of the money to buy more utilitarian forms of metals. For instance, let’s say you have $10,000 that you want to use for metals purchases. I would buy at least one 1 oz US Gold Eagle. The US Gold Eagle is the most popular, most liquid gold coin in the world. You can take it almost anywhere and find a market for it. The drawback is, it’s expensive and can have significant premium in it. If it’s too expensive for you, consider a Canadian Maple Leaf instead. You might want to take a few bucks and buy some US Silver Eagles as well. With the rest of the portfolio, look for lower premium, high quality forms such as Mexican 50 Peso coins and Austrian 100 Corona coins for gold. For silver, consider private minted silver rounds, Canadian Maples or even 1 oz silver bars. 90% silver coins usually come at a high cost but not always. My firm works on a straight markup so we make the same regardless of what you buy. If you want to know more, just call the office.
• Consider geography as you construct the portfolio. I have several clients that live near the Canadian border. I always suggest they buy some Canadian gold and silver. Should you need to leave the US, the Northern border may be more accepting of you if you show up with some of their motherland metal. Canadian gold and silver maple leafs are popular coins and are highly liquid. They are more expensive than some but less expensive than US Eagle coins. If you live in the southern US, consider the Mexican 50 Peso gold coin. It’s 1.2 oz roughly and is usually offered with very little premium.
• Stay away from numismatics. Numismatics are coins with collector value premium in them. Nobody will care about collector value in a collapse, they will only care about gold and silver content. Also, numismatics are often used to lure less educated buyers into making a mistake. Less scrupulous dealers will talk of the possibility of great returns with these coins. I know of one woman who bought $125,000 of numismatic coins only to find out they were really only worth about $75,000. Don’t get taken.
• Own enough to help but not enough to hurt. I’ve seen people put ALL their money into metals. This is not wise. The fact is, metals prices can go down and they can stay down for a long period of time. As indebted as the US dollar is, other countries globally are worse off. For instance, Japan is 240% debt to GDP on balance sheet and that’s not taking into account future liabilities. The US dollar is probably not going to collapse against the Japanese Yen. That said, could the dollar weaken? Sure, anything is possible. However, as I write this, the US dollar is trading where it was in early 2003. I say that to say this, dollar strength and reserve currency status can last a lot longer than you think. Do not over-commit to metals. On the flip side, owning five ounces of silver isn’t going to do much for you in a collapse. My goal personally is to own a meaningful amount. Not too little and not so much that I’ll be badly hurt if metal prices fall significantly.
• There are other considerations that will apply to your personal situation. There are so many, in fact, that I don’t have the time to go into all of them in this article. However, I love discussing these nuances with people and our company offers a free consultation with no commitment. If you have questions, call me.
Storage Considerations for Preppers
• Most safes are not safe. Most safes sold today give the illusion of security but are not secure. Educate yourself on this topic by searching the web and talking to high end providers. My feeling is that a safe alone is insufficient protection unless that safe is very expensive.
• Your mind and creativity can create security. Consider your situation and think through the issues. You have to protect personally held metals from theft, fire and windstorm. That may seem like a daunting task but you can do it. Thousands of people before you have already done it. If you feel overwhelmed, call me and let’s talk about it.
• Be quiet! To quote the immortal Matt Foley, motivational speaker, “I wish you’d shut your big YAPPER!” Please, whatever you do, don’t go around telling people you bought precious metals. Keep that fact very quiet. Tell only those people you need to and don’t brag about it. You may be thinking to yourself, “Well, gee Craig, didn’t you just write a whole article about how you bought metals?” Yes, I did, but I’m in that business and people would logically assume I eat my own cooking. I thought through the security issues when I started and I’ve taken lots of security measures to keep my family safe. Most of what I own is held out of state and none is held on site. I’m not wealthy so I don’t own much anyway, but like you, I had to do some major thinking before I bought my first coin.
I could go on about different things you need to consider and all the nuances that go into acquiring precious metals. In the interest of brevity, I’ll come to a close shortly. Before I do, though, I’ll leave you with these finals thoughts. First, the arguments against owning metals don’t hold water. I firmly believe that if you are concerned about economic extreme scenarios, owning the metals makes a lot of sense. History has proven that the metals are a wise holding. Second, you can do this. You might be intimidated by making that first purchase so get good guidance and start small. Take time to think through the issues. Thirdly, prepping is more than metals, much more. That said, don’t ignore precious metals. While I do not sense trouble being imminent, nobody really knows what tomorrow holds. As was said earlier in the article, it is better to have precious metals and not need them than to need them and not have them.
Craig Hill is a Certified Financial Planning Practitioner™ with over twenty years of experience in finance. He, his wife Rebecca and two daughters make their home in Punta Gorda, Florida. In his spare time, Craig enjoys fishing, hunting and horses. You can reach Craig through his website (found here) or by emailing him at firstname.lastname@example.org.
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