Old clothes are hard to die for. They always do it. Especially when it comes to money and investments. We tend to spend as we have always spent and invest as we have always invested.
Take gold and silver. Here are investments whose time has clearly come. All signs point to it. All the stars seem aligned for it. Whether hyperinflation is knocking at our doors, politicians are spending like last month’s mega-lottery winners, or socialism is once again trying to kill off democracy, there’s never been a smarter time to own precious metals. .
But just when victory is within our grasp and an investment in precious metals seems like the easiest thing to do, those old habits kick in and, well, we blow it.
Blame it on the “paper mentality” carried by many US investors. For those of us so afflicted, it’s not an investment unless it’s denominated on paper or in digits, not worth our consideration unless it can be folded or stored on someone’s computer. So when these sadly biased people correctly identify the exciting opportunities in store for gold and silver, they are almost always thinking incorrectly in terms of paper versions of these precious metals.
They think about ETFs.
No one knows why some people are born with this aversion to literal investments (things with actual value rather than merely represented value). In this case, these investors prefer ETFs over, say, a strong $20 St. Gaudens Double Eagle or a well-matched Morgan silver dollar, ostensibly for safety and convenience.
Safety and comfort. As a result, that’s pretty ironic.
Hitting a paper investor’s fantasy
Gold and silver ETFs-gold and silver traded funds-were created, according to Wikipedia.com, “to give financial institutions and private investors the ability to own [precious metals] and gain price exposure, without the hassle of storing physical bars or opening a futures trading account.” in hard assets.
How nice. Other companies soon moved a step further in the direction of supposed security by developing physical gold and silver ETFs, funds backed by “uniquely identified” bars of precious metals.
Sounds great, right? Pretty foolproof? And it is…unless, apparently, you actually have to account for the gold and silver in these funds.
What’s a silver bar or two between friends?
Enter the Mayhem Research Project. This is the company that developed a computer program to perform data mining on the inventory of publicly available silver ETFs.
The company published its latest findings in late July, and what these researchers found was pretty heartbreaking. From the inventory of numbered silver bullion held by two known ETFs, Project Mayhem Research discovered “internal duplicates, approximate internal duplicates, weight duplicates, statistical pooling, and cross-reference duplicates.”
In other words, the people in these funds simply did not have all the money they claimed.
Project Mayhem Research concluded with this: “In our opinion, the only way for all of these anomalies to occur together, as noted in this paper, is through systemic fraud or gross accounting error bordering on staggering incompetence.”
Oh! Not exactly a strong endorsement of trading precious metals ETFs.
There’s nothing like the real thing
All of which underscores an important principle in investing in tangible assets: You really own the hard asset!
There have been countless variations of the “you can trust me” gold and silver fraud, schemes in which your precious metal is supposedly stored in a secure, high-tech vault located inside the remote granite mountain of a politically stable and audited country all and each one. day by a reliable three-letter government agency, or something of the sort. Unfortunately, now it seems that you can list some ETFs among these creative scammers. Remember, for a legitimate ETF to really work, it would take something even rarer than gold:
Integrity would be needed.
Not that owning and storing gold and silver is the incomprehensible and inconvenient task it appears to be. That is laughable misinformation. It’s that easy: you go to the same bank you now trust for your day-to-day finances and ask if you can rent one of their safe deposit boxes; they rent you one for next to nothing; you put your precious metals inside your box and close it; they close and lock those big vault doors behind you; you wipe your hands and head to your car (perhaps grabbing a lollipop from the bank on the way) and, really, that’s about it.
Or, if you’re more adventurous, there are an almost endless number of ways to keep gold and silver hidden and safe within the safe confines of your home. It could even be a fun project to undertake.
Either way, it’s a tremendously smart move to own some precious metals in the economic and geopolitical mess we find ourselves in right now. Just make sure you trust the one person in the world you know you can trust.
Yourself.
