For the Love of Gold

Signalling a desperation for tangible wealth, customs officials arrested eight South Korean men for smuggling gold out of the country…in their rectums. Wire services reports

South Korean customs officials say they have arrested eight men over a scheme to allegedly smuggle gold out of the country by hiding it in their rectums.

The Korea Customs Service said Monday the men allegedly transformed $260,000 in gold bars into small beads and smuggled them in their rectums to Japan two times in 2010 to avoid import taxes.

South Korea says Japanese custom officials caught the men on their second attempt and sent them home after imposing fines. Later, one of the suspects allegedly orchestrated an unsuccessful bid to smuggle gold bars from Mongolia to Hong Kong using a similar method.

We love gold as much as the next gold bug. But probably not THAT much.

But more seriously, you know people are losing confidence in financial assets when they begin taking such…risks…in order to retain ownership of tangible assets. We wrote about capital flight in the November issue of the Australian Wealth Gameplan (The Great Escape of the Blue Panda). The story tracked the movements of the Rossi family in their attempt to get their cash and valuables out of Italy and across the Swiss border…while they still could.

We fear for the Rossis. The Italian government is cracking down on tax evaders to scrounge money for its budget. It’s also guarding the borders. According to one report, “Special dogs capable of sniffing bank notes have recently been stationed at Italy’s borders to detect people trying to smuggle out their savings in attaché cases and suitcases.”

You can expect to see more of this sort of thing in Europe as the Euro cracks up.

In Australia, things aren’t nearly so bad. But we’d suggest there’s a useful idea buried in the story of the currency sniffing dogs: tangible assets are gaining in value every day relative to financial assets. For us, that means looking at energy as a strategic asset…and finding companies with large resources or reserves of energy. These companies make attractive takeover targets.

Of course, a simpler strategy is to focus on cash. After all, the Rossis stuffed their suitcase with cash. As people turn on stocks and bonds and derivatives, and as debt deflates, cold hard cash has a value all its own. It’s liquid. And that’s better than locking your cash up in an asset of dubious value, like a Greek government bond.

But in most places around the world, cash doesn’t yield much (it does alright in Australia, even after taking inflation into account). The better investment idea is to find companies that actually PRODUCE cash. Not literally, of course. But we’re talking about cash flow, specifically about companies that can produce it in almost any environment and don’t require more debt to increase sales. More on these companies tomorrow…


Dan Dennning
for Markets and Money

Dan Denning
Dan Denning examines the geopolitical and economic events that can affect your investments domestically. He raises the questions you need to answer, in order to survive financially in these turbulent times.

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Ouch!! and,
We have our own ‘sniffer’ dogs, they’re called Austrack, for the uninitiated,

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