Be aware of the risks when considering precious metals
I am going to tell some stories, with some key details changed to protect privacy. If my tone sounds like a bit of a lecture, it is, so take it as you will.
If you've been reading the column for a while, or had a cocktail with me on a Friday night, or were privy to my YouTube feed then you know that I am a curious student of apocalyptic theories. I am fascinated by economic collapse, currency crashes, depressions, world war and other improbable and terrifying topics. I've read the books, watched the podcasts and allowed my mind to wander in the dark hours of the night. So, for those of you who also allow their minds to drift deep into the rabbit hole, I get it.
In my opinion, there is an entire industry set up to indulge people like us. Freeze dried food, survival gear, solar generators and even firearms companies craft effective messages to get us worked up. In this regard, without a doubt from me, the foundation of this tradecraft is the precious metals business.
With serious personalities like William Defoe and Bill O'Reilly as their spoke persons the precious metals companies create the most compelling commercials both on TV and online. They talk about the insanity of the national debt, the mess that is Washington DC and the scourge of inflation, and present the clear solution as gold and silver coins. It's effective stuff, I'm sure the message is effective because I have seen the results first hand, commence the lecture.
I am not going to weigh in on the merit of these urgings, the investment value of these products or the value and price of precious metals. My opinions probably wouldn't matter anyway. What I want to talk about is the actual physical risk and logistics of owning material amounts of physical gold and silver and some real life experiences my team at Oak Partners has encountered with people we work with.
The first tragic story involves an older couple from outside the Region. The husband had worried about economic collapse for decades and had been regularly purchasing gold coins from a metals broker over the phone. This accumulation over time had resulted in over $100,000 in family wealth being held in gold coins. The coins were stored in a safe in the master bedroom closet.
No one is still quite sure how this information got out, could have been a repair person who had visited the house, could have just been random, but somehow the presence of this value became known. One weekday afternoon thieves clearly waited down the street for the older couple to leave in the car, they then broke into the house, removed the entire safe and got away with a huge amount of gold. Because the metals had been purchased over such a long period of time, purchase records were not great and the homeowner's policy did not cover the entire loss. More importantly however, I shudder to think what would have happened if the couple would have returned from their errands before the thieves' job, which must have taken close to an hour, was complete. The loss was devastating for the family and for the elderly husband's self-esteem.
The second story is not as tragic, but it should make us think. In this story, a father had been accumulating precious metals for decades. Always buying, never selling, his hoard eventually equated to $300,000 in value and weighted in my estimation 50-60 lbs. The metals were also stored in a safe in his home, and then he passed away, leaving the metals to his daughter, who herself was in her 60's when he passed.
When the daughter realized the extent of the value held in the safe, she understandably became very, very nervous. She had no interest in owning the metals and reached out to my team to for a solution. We first suggested she call the local metals dealer her father had dealt with for many years. She tried, the store had closed when the owner had retired. Without this personal relationship to rely on (who knows if the store could have processed this much value anyway), she came back to us again.
Fortunately, our securities firm has a partnership with a precious metals dealer, and we were able to help her navigate the sale. The process took weeks of inventorying, photographing and evaluating complicated bids for the metals. All this while this concentrated value continued to sit in her home, causing stress to both her and us. Eventually after completing a fairly complex process, she ended up taking the metals for shipping to the dealer. Imagine the stress of driving down the road with $300,000 of value in the trunk that she couldn't even move on her own. Yeah, it was that stressful.
So, for those of us who ponder the potential risks of terrible things happening, let think about the odds. Collapse of the dollar, never happened. Default on the national debt and hyper inflation, never happened. World War III, never happened. Eventually dying and leaving our hoard to loved ones who are subject to physical risk and stress of products they may not even understand, 100% probability. Maybe we should plan accordingly.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. Stock investing includes risks, including fluctuating prices and loss of principal. No investment strategy can guarantee a profit or preserve against loss. Past performance is not a guarantee of future results. Marc Ruiz is a wealth advisor and partner with Oak Partners and registered representative of LPL Financial. Contact Marc at marc.ruiz@oakpartners.com. Securities offered through LPL Financial, member FINRA/SIPC.
