Guess What Cooper Asked Santa?

Cooper’s 1st Christmas, and the very first opportunity for Raylene and I to take Cooper to see Santa Claus.  We went last night, and Cooper did everything he could to impress Santa at this first meeting. Check out his outfit which you can see in the picture below – this kid is on the ball!  (actually it was his Auntie Rylea that dressed him up so smartly) And you’ll never guess what Cooper asked for — that’s right .. he asked for some physical gold!  Apparently he’s been reading my blog lately.  Damn smart kid if you ask me. We’re going to have a ball this Christmas season with him.  Of course, he’ll enjoy the wrapping paper and boxes much more than the presents themselves, but his Nana Habstritt is beside herself, this being the first ever Christmas she gets to celebrate with a grandbaby.  And Grampa Habstritt is almost as excited. We’ve received a huge dump of snow and very cold temperatures so our plan is to huddle up at home and enjoy a quiet Christmas, and then to head to Canmore for several days and to celebrate New Year’s. In any case, I promised in my last blog post that I would talk about Cooper, so this was about as creative as I could get mentioning him, while still working in the topic of gold because I’m getting so many questions about it. I have a more thorough piece written on gold that’s for another day, but for today, I just wanted to speak to one critical concept related to gold, and a misconception that many people have. Most people assume that when I talk about buying gold, I’m suggesting it is a good investment.  That’s actually not the reason I think it’s prudent to have some physical gold. I look at gold as insurance, not as an investment.  Holding some physical gold is a good way to hedge against the possibility that we see hyper inflation, and the value of currency falls through the floor.  If that happens, then yes, the value of gold soars exponentially and appears to be a great ‘investment’. However, my thinking is not to buy it and hope it goes up in value so I can sell it for a huge profit.  I have no intention of ever selling it.  I believe it will continue to go up in value as we see inflation erode the value of all fiat currency. The great thing about gold is that I see it having very little downside.  The likelihood of it dropping signifcantly in value is very low, given the current fundamentals at play.  However, the possibility of it soaring in value – by 10 or even 100 times – is there.  The most likely scenario is that we’ll see gold in the $1,500 range in the next year or two. If you are an investor trying to make a killing on gold’s move, then it may make more sense to play some of the ETFs and funds that are based on the value of gold.  Some of them are supposedly back by real gold.  The problem is, if things go hay wire, you won’t be able to run down and exchange your shares in the fund or ETF for physical gold. The reason to invest in PHYSICAL gold is if you believe that hyperinflation will seriously erode or even collapse the US dollar.  Again, it’s an insurance play, not an investment.  Owning physical gold is more challenging because it’s difficult to find these days and you pay a premium for it.  On top of that, you need to store it somewhere. Investing in “gold paper”, such as Gold stocks, ETFs, mining companies, etc., is  lot easier to get in and out because it’s just stock trading.  For the investor, that can make some sense.  But if the economy really goes bad, you’ll have nothing in your hand to be able to use as currency. So in terms of physical gold, how do you buy it?  The absolute best way is in physicall bullion, which is gold bars, or minted coins (such as the Canadian Maple Leaf from the Royal Canadian Mint).  The coin face value has nothing to do with the real value, because they’re solid (99.9%) gold and therefore valued based on their metal content. I don’t recommend getting involved in collector coins or jewelry, or anything like that if your purpose is to hold physical gold.  Buy it in the format that it is most likely to be accepted best, which is bullion or minted coins. You can buy it from a variety of dealers/brokers, as well as some financial institutions that sell it.  It depends where you are, but whatever you do, ensure you’re dealing with a legitimate and reputable dealer who isn’t going to play around with the true content of the metal. There are some brokers who sell it online such as www.goldsilver.com, the site run by Mike Maloney who wrote “Guide To Investing In Gold & Silver”.  I had lunch with Mike a couple of months ago, and HIGHLY recommend his book if you really want to learn more about gold.  He’s a brilliant guy and while he’s a little more doomsday than I am, he provides a great history of money and why so many people, him included, expect gold to soar. Where do you store it?  I believe if you’re going to go as far as to own physical gold, storing it in a safety deposit box at the bank is a bad idea.  Again, if you think that there’s a chance our economic system collapses, then the government is going to seek to recover and take as much gold as it can from its citizens.  That means banks will be one of the places they’ll go first to try and hoard any gold stored there. That’s also why I don’t like the idea of buying it through a company that also stores it for you, regardless of how secure they claim it is.  Again, worst case scenario, if the government decides to make owning gold illegal, the major secure depositories will be among the first places to go to seize the gold. What’s that?  You can’t imagine the government making it ILLEGAL to own gold? I know.  This seems like crazy talk.  And if it hadn’t already happened in the U.S. in 1933, where it was outlawed to gather or hoard gold, then I wouldn’t believe it either.  Here’s a wikipedia article on the details of what happened in 1933 when President Franklin D. Roosevelt passed the order. So the fact is, it HAS happened before.. so that proves that even though it sounds “out there”, it is quite possible to happen again. Whoops .. that might shock or even disturb some people to find out that things like this not only COULD happen, but HAVE happened in the past! My point is, we are in the midst of some spectacularly serious and unpredictable times.  In 30 years from now, we’ll all reflect on 2008 and 2009 in much the same way people now reflect back on the Great Depression, Black Monday, and the Dot-Com Meltdown. NOW is the time to really understand how money works because if you don’t, I think there’s a good chance that you can get sideswiped if you think it’s business as usual today.]]>