It’s a beautiful day: silver and gold are burning. I believe that a reasonable price for silver is $12-15/oz, and that gold is reasonable at $600/oz. I don’t care what Mr. Market says; Mr. Market is an idiot. Don’t try and tell me how Mr. Market is wise, swift and sure, all hail Mr. Market. When some money market funds broke the buck, panicked investors fled to safe havens: to money market funds! That’s what an idiot Mr. Market is.
Would you like to know how to tell if a precious metal hoarder really believes his or her own philosophy? Most don’t believe theirs. Many bought piles of gold at $1800/oz and silver at $40/oz. The enormity of those prices tells me that the reason was not long-term profit, but fear of some Grand Calamity. I’ve had the same discussion with many of them, and I’ll share it with you.
PMB: *grumble grumble* “I don’t trust any banks or any government or any anything. It’s all going to hell. I’m going with gold and silver, it’s the only thing you can count on.” *mutter mutter about socialism*
Me (drawling a bit): “Okay. Mind if I ask you a question or two about your philosophy?”
“Cool. First off: are you still putting money in a 401K?”
“Well, of course! The job matches my contributions and I get a tax benefit!”
“Seriously. So you believe everything is going splat, but you still put money into this. You don’t even believe your own philosophy.”
Or, they may answer: “Hell, no! None of that is going to be around!”
Me: “Makes sense. I don’t have an issue with anyone’s philosophy as long as they believe it. So you are loading up on metals; fair enough. Without being specific, of course, can you tell me where the metal is, very generally?”
“Well, I bought it through Edward Jones.”
“Really. So you don’t even have possession of it?”
“Would you want all that in your house? Criminals are getting bolder every damn day! Anyone who isn’t afraid is an idiot!”
“Really. So in your apocalyptic scenario, with civil disorder and everything in collapse, you truly think you are going to be able to go down to your local Edward Jones office. And the pleasant receptionist is going to be at work, smiling, ‘Yes, Mr. Smith, right away, Mr. Smith.’ You do not even believe your own philosophy.”
Or, they might respond: “I got it at the metal trading place, and it’s in my safe deposit box.”
Me: “You’re serious? So let’s draw this all in a picture. It’s the day of the Great Collapse. You need your gold! And you imagine that you’re going to go down to your B of A branch and the smiling teller will gladly let you into the vault. What are you going to do when you find out that, under martial law, there’s a platoon of the regular Army guarding it with automatic rifles and fixed bayonets? ‘The bank is closed, sir. Please step back to the sidewalk.’ ‘But you don’t understand! I need my damn gold and silver!’ ‘Sir, this property is under martial law. I have authority to use deadly force. Now please step back to the sidewalk, or lay down on the ground with your hands clearly visible. I would rather not use that deadly force.’ You don’t even believe your philosophy.”
Or, they might respond: “Well, I’ve got it in a few locations, easily landmarked. All of them are within a day’s hike of each other, none are subject to being in the same nuclear blast, and none are endangered by significant natural disasters like floods.”
Me: “Okay. Sounds like you’ve thought this through. Just out of curiosity, what’d you buy?”
“Mostly 1-oz Krugerrands and 10-oz bars.”
“Seriously. So, how many cattle can you pasture at once in your yard?”
“What the hell do you mean by that?”
“Suppose we are on this post-apocalyptic barter economy and you want to use your metal to trade for stuff. How easy do you think it will be to make honest change using big gold to buy small amounts of food from farmers and ranchers? How fast do you think your stock of gold coins will evaporate at that rate? You really have not thought this through.”
Now and then I’ll meet someone who truly has thought it through. “I bought old US gold coins which were worn, selling close to melt, and a bunch of old US junk silver. Rolls and rolls of 1964 dimes, quarters, halves. Some wartime silver nickels. If things go to hell, I can barter and preserve my resources. If they don’t, what the hell; I can become a coin collector and hang onto some of the value.”
Me: “Okay. Then you’re doing the right thing for you. I hope it doesn’t all fall apart, but if it does, you’ve at least thought about what it’d mean. Good luck.”
Those are rare.