This Markets and Money comes to you from Berlin, Germany.
Each year, Jim Rickards hosts a conference for all of the staff that work on his publications around the world. The idea is to get this far flung team together to share ideas and investment strategies for the year ahead.
Last year, we were at a private ranch in Nicaragua. This year, we are staying about 100 metres from the Brandenburg gate…
In one simple graphic, here’s the Japanese ‘growth’ story since 1990:
Source: Your editor
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At check in, the hotel kindly informed me I had been upgraded to a suite. My temporary dig is bigger than my apartment back home in Melbourne!
I guess that’s how you’re treated when you’re a guest of Jim’s!
The conference officially kicks off tomorrow. Next week, I’ll give you a rundown of some of the things we’ll have covered.
Before arriving in Berlin, I spent a few days wandering around the picturesque city of Salzburg, Austria.
Wandering up and down paths — some were possibly 600 or 700 years old — there was the usual souvenir junk for tourists. I’m not a particularly sentimental person. A snow globe with the Hohensalzburg Fortress set amongst the Eastern Alps isn’t for me.
My meandering led me past a numismatic dealer. A numismatist is someone who collects and studies old coins and paper money.
It was here that I found the perfect trinket for my travels. A silver coin circa 1200–1246…
Source: Your editor
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Even with my love of all things bullion, it’s never occurred to me to buy old money.
This isn’t an expensive coin. It set me back only 35 euros (AU$50). I didn’t buy it thinking one day it will be worth much more. It’s in pretty rough shape. In fact, the low price of a seven centuries old coin tells me there’s hundreds, if not thousands more just like this one.
No. I bought it because it’s silver. The coin has passed through thousands of hands. It’s been traded at markets, stored in jars, carried on horseback, won and lost gambling, survived countless wars, and possibly been the last coin someone once had in the their pocket to buy food with.
It’s smaller than my thumbnail. But this tiny piece of history is evidence of how enduring precious metals are.
Wasting money on gold and silver
Investing in bullion takes a little bit to get your head around.
After discussing the value of silver bullion in an interview with Jim Rickards at our Great Repression conference, I bought a few silver coins. I was on the phone to a colleague as I was putting the online order through.
He asked me if I was buying it because I thought there was going to be a spike in the silver price. ‘No.’ I told him. ‘Then why buy it?’ he asked me. ‘Because, like gold, silver is a form of money too.’
A similar situation occurred when a new staff member at Port Phillip Publishing asked me how he should go about buying gold. After running through the basics, he said it was something he wanted to do, but he was still coming to terms with the idea of investing in gold, when he may never use it. After all, he wanted to buy a house first. Then, perhaps put some money into gold. Er, maybe after upgrading his car.
This is the worst outcome of our modern day investing attitudes. We are always on the lookout for ‘inflation beating investments’, or annualised returns, or short term strategies that will make us money.
It wasn’t so long ago — 70 years ago in fact — that gold was treated as money. Somewhere between the baby boomers and generation X, gold stopped being a store of wealth and became a confusing and irrelevant investment.
So much so that no one sees the point of investing in gold.
Instead, modern investing has shuffled us into paper money and binary code. People consider that money, investing and wealth. Today, this is an acceptable way to spend your cash. But locking your money into a rock that you may never use in your life time? Pfft, what a waste of your digital numbers.
The thing is, bullion is money. If it helps, stop calling gold and silver ‘bullion’. Call them what they are. Gold and silver are just different currencies.
That’s the only way to look at it.
Yet, investors are being trained to question and ignore precious metals’ value. The less valuable they are to you, the less likely you’ll spend your money on them. If you don’t think they’re worth your time and money, then you’ll keep your investments in paper money…or as a digital asset.
I know there’s a chance I may never use the gold and the silver I have accumulated over the years. That’s OK.
It’s like the farmer that plants the seed knowing he’ll never rest in the shade of the tree he’s growing. He’s not looking for an immediate fix. Rather, he’s looking to ensure the longevity of the farm and the livestock.
That’s why you buy gold and silver. It’s not for today, or tomorrow. It’s to ensure the long term protection of your wealth.
For Markets and Money
Editor’s Note: This article was originally published in Money Morning.