The Gathering Storm: Interesting Email from the Director of BullionVault
August 26th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
As you probably know, I use BullionVault to hold a small quantity of gold for diversification and cash hedging purposes. Several Cryptogon readers also use BullionVault for their professional gold vaulting needs. I have heard from some of them in private, and, like me, they are also very pleased with BullionVault. If you are looking for professional precious metal vaulting services (that includes Switzerland as a vault location), I know of no better option than BullionVault.
Click here to see what BullionVault has to offer. If you decide to sign up, Cryptogon will receive a small commission on your transactions. Note: I will receive no information about you at all if you do this, and your costs are the same whether you choose to sign up using the above affiliate link or not.
Paul Tustain’s email follows:
Dear BullionVault user,
Once everyone gets back from vacation and starts to focus on
what’s really going on, we may be in for a torrid few months in
the financial markets.
I believe the current lull in gold prices could offer a good
opportunity to defend yourself before the real trouble begins.
Since the end of June there has been huge damage done to the finances
of hundreds of organizations worldwide. But much of this pain is
still hidden inside investment funds holding obscure financial
instruments which are now unmarketable.
Too many investment professionals have been backing the same
short-odds gamble – residential housing – and the aggressive
financial arrangements they set up are unravelling a little more
every day.
The underlying problem of non-paying U.S. mortgage debt is getting
worse, not better, but this fact is being forgotten in the current
rate-cut induced rally in shares and bonds. Short of organized
double-digit inflation I don’t believe there is a force capable of
halting the slide in subprime U.S. property prices.
On top of that, we still have the extended pain of increasing
rates hitting more U.S. home-buyers as their “teaser” deals end.
The Financial Times says this trend has barely begun. It won’t
peak until the end of summer next year.
The world’s largest financial organizations have already taken
big hits – quietly, for the moment – but it really is hurting, and
we are seeing things that just shouldn’t happen in a well-ordered
financial world.
** Fund managers are not producing credible fund valuations; they
have frozen values using old prices, and are forbidding the normal
result, which is investors exiting.
** No-one can price mortgage-backed derivatives at the moment,
and no-one really knows how the underwriters of credit default
swaps are pricing the insurance time-bomb they’re sitting on.
These horrible investments are in many cases worth nothing, and in
the case of credit-default swaps, less than nothing.
The current lull might prove an opportunity for the prospective
gold buyer. Gold has not yet moved up – in fact, it has dipped a
little as stretched investment funds have sold whatever they can
to raise cash and reduce their margin calls.
I cannot sign off without remarking on the apparent “flight to
quality” which on Monday this week saw U.S. Treasuries put in their
strongest day since Black Monday 1987.
U.S. Treasury bonds are part of the fast-growing and utterly
irredeemable $9 trillion public debt now outstanding in the
United States. The U.S. trade deficit was also on record-breaking
form again last month. Only a few short weeks ago these dreadful
statistics drove the U.S. Dollar to record lows against a basket
of major world currencies.
Only a lack of imagination would allow investors to think suddenly
of the U.S. Dollar as today’s “quality” refuge. Any respite for
the Dollar will surely be temporary; indeed, the bounce we saw
during the sharpest stock-market losses so far may have simply
been short-covering by Dollar bears (of which there are plenty)
rather than fresh buying of “qualityâ€.
Everything that has just happened in fact makes things worse for
the U.S. currency. At the heart of this current crisis lies the
bubble in poor-quality U.S. home loans. It is U.S. consumers who
are being pinched; it is the return on invested U.S. Dollars which
is now being cut.
Lower U.S. rates on the back of America’s weakening domestic economy
will re-kindle a Dollar slide in due course. So the current lull
may offer only a brief window, in which fewer, stronger Dollars
buy more gold than they soon will.
Don’t forget about your opportunity of owning gold bullion in
a secure, professional vault in London, New York, or Zurich.
It’s easily and safely done through BullionVault.
Kind regards,
Paul Tustain
Director, BullionVault
Risk Warning: Investment ‘experts’ are frequently wrong. Markets
are confusing places reflecting thousands of opposing views. This
email contains opinion about future market moves, and these are
inherently unpredictable. Everything written here is fallible. Gold
prices may go down, and may go up. This email encourages you to
think and act for yourself. Only you can accept responsibility for
your investment or dis-investment actions which might follow.
I’m undoubtably ignorant about such things but it feels weird to me to buy gold on the internet and then have it stored on the other side of the world – especially given how unpredictable the future is looking.
I imagine people will only want to talk about the gold they have stored in a well-guarded vault but I am interested to know how secure people feel this option is and for long they expect to feel this way.
Aaron, I’m in the same boat. I’m leaving this comment as a request to hear more from Kevin on this topic.
If the poop really hits the fan, I’d assume transnational iWithdrawals of iGold would be difficult, especially if the power grids, and thus the internets and phone networks, are down.
That said, I’m very interested in buying me some gold at that there BullionVault. Just want to see what kind of sense we can make of the idea here in the comments section with our collective genius.
Guys, this has been discussed in great detail. I should have posted the links to the relevant threads.
In summary: There is no right answer for everyone. There are only partial solutions that will work for some and not for others. Diversification—in terms of assets and geography—is critical. Nobody is saying to put all of your eggs in any one basket. That would be stupid. Keeping all of your wealth in BullionValut would be as stupid as keeping it all in gold coins under your bed. Keeping the majority of your wealth in any one asset—gold, sea shells, stocks, bonds, real estate, cash, cows, etc—would be stupid. (Frankly, the best suggestion I read in the links below for a fungible commodity in a collapse situation was pallets of booze. Vodka, whiskey, gin.)
I operate with the assumption that I don’t know what’s going to happen. Anything can happen. I spread risk and exposure around.
If the crash scenario you envision involves the collapse of electricity, transportation, the Internet, etc., gold, whether it’s in your pocket, or a vault in Switzerland, isn’t going to help you. Someone (links below) wrote about an old German man trying to exchange a gold watch for food when people were starving; no takers for the gold watch. That’s a good lesson to learn before you’re actually faced with the situation.
Anyway, these threads are really good. Lots of very pertinent issues are discussed:
https://cryptogon.com/?p=525
https://cryptogon.com/?p=548
I can say that BullionVault might not make sense for people who are holding currencies other than USD, GBP and Euro. BullionVault only deals in USD, GBP and Euro. Clients holding other currencies would face FOREX inefficiencies with transferring money in and out of BullionVault.
For example, I didn’t send any of my NZ$ to my BullionVault account. I used funds from my U.S. bank account.
The Bullion Vault letter sounds exactly like what’s been going on in my head and gut lately. The latter is screaming get out of the dollar and the market entirely! My head tries to ignore it. My family doesn’t get it. Ride it out. Sheesh.
Personally, I think I need to hold a seance with my grandparents, all immigrants to this country, and my father. The grandparents lived through the trauma of moving to this country; and Dad and Mom, Aunts and Uncles lived through the Depression. My Aunt told me several months ago about having lived through the runs that occurred on banks. I asked her what did you do? She said, well what could you do? The banks had no money!!
Somehow they thrived. It wasn’t through buying gold (except I don’t know how they transferred their wealth – Dad’s parents went back to Europe after making $$$ in the U.S. – then decided they wanted to return).
Turns out both grandparents made a lot of money buying real estate and renting it. Mom’s parents also made their own booze in a tub and sold it during the Prohibition. Grandpa went to jail for it a few times.
Seems to me to survive these times you will have to put your money in assets that you believe will have value beyond whatever happens to the dollar and the market. Things that have intrinsic value – like providing roosts/housing for the many that will be homeless. A good buzz for sale. Putting food on peoples families ( an actual GW quote).
Gold is a good thing, but so is silver. Also, most likely a wine press, an apple grinder, and/or a still and good bottles to sell your product in. Or dare I say growing some weed?
These potential moneymaking assets are of course over and above any other life sustaining needs you have. As the fed sheds its role of providing (can’t afford it anymore – for example, Mom’s Medicaire charges from May are just now being paid in late August) many more U.S. dollars will go to supporting the state one lives in. I believe the U.S. government will become even more paranoid, and will operate ever more undercover in secure, undisclosed locations. Got to hide from the anger of the unwashed millions.
Anyways, I guess all I’m saying is that survival isn’t just about money.
Kevin, thank you for the links and overview. You are a very patient teacher and I appreciate all the work you are doing to bring us along on your path of exploration of these crucial issues.
I did my homework and have thoroughly read the past discussions on the gold, “all your eggs in one basket”, and diversification topics. I highly recommend everyone else do this, as it is an important set of ideas you should become familiar with.
I haven’t read through all the links yet but here’s an additional perspective from someone who’s already experienced a crash in Argentina. The entire article makes for riveting reading if you haven’t already seen it but this is what he has to say about gold:
“Since it is impossible to determine the true mineral percentage of gold, small shops and dealers will pay for it as regular jewelry gold.
What I would do if I were you: Besides gold coins, buy a lot of small gold rings and other jewelry. They should be less expensive than gold coins, and if the SHTF bad, you’ll not be losing money, selling premium quality gold coins for the price of junk gold. If I could travel back in time, I’d buy a small bag worth of gold rings.
… Even though things are bad, I can go to a bank down town and get paid for what a gold coin is truly worth, same goes for pure silver. But where I live, in my local are small time dealers will only pay you the value of junk gold, no matter what kind of gold you have. So, I’d have to say that if TSHTF bad, gold jewelry is a better trade item than gold coins.”
The link: http://www.peakoil.com/fortopic25613.html
Eileen–
My impression is that almost everyone was a bootlegger during Prohibition. Out in rural areas, there were probably few farmers who didn’t run a still. You would have been crazy not to, since it was the best, and perhaps the only way to get a decent price for your corn crop.
My grandfather ran a still during Prohibition–and my mother told me that when the county sherrif came by, he was served a drink of moonshine. (There was probably a bit more to the payoff than that.)
Dmitry Orlov’s writings suggest that, in a Depression or collapse, booze is the currency of choice. People who are preparing for strange times ahead, might be well advised to diversify a bit: After stockpiling a bunch of food and a bit of gold and silver, a nice stash of Jim Beam might turn out to be the soundest investment of all.