How much of your total wealth could you fit into the boot of your car at a moment’s notice?
5%? 10%?
If you’re anything like “the everyman”, the figure will be very low.
Putting some of your wealth into physical assets is an alien concept in this digital era. Now that everything is on a computer, the “tangibility” of wealth has been hugely reduced. Who owns physical share certificates or bearer bonds these days? The last remaining bastion is property, and physical cash is dying.
Wealth has never been more ethereal. Its numbers on a screen, words over the phone with a stock broker. It may even be in a cryptocurrency named “ether”!
There are advantages to this digitisation of wealth of course. Faster transfer of ownership and lower transaction fees, being able to see all your assets in one place, etc.
But there are also advantages to owning physical investments – advantages you won’t hear about from the financial industry (I should know – I used to be a financial adviser).
When I say physical investments, I’m not just talking about gold. There are many tangible investment opportunities out there – fine art is a common example. I recently had the great pleasure of meeting a Capital & Conflict reader with experience investing in fine violins. And in the next issue of Zero Hour Alert that I’m currently writing, we’re going to recommend three others – I can almost guarantee you’ve never heard of these investing opportunities. I can’t share much with you today, but I can give you a clue for one of them:
This is part of a larger image that has major historical significance. Can you guess what tangible investment it relates to? [email protected].
An asset you hold in your hand cannot be defaulted upon. It can’t be “bailed in” to capitalise a failed bank. You can own and transfer it anonymously, preventing a future government from stealing it. As a bonus, you don’t need to fill out countless forms to prove to the government that you know what you’re doing and that you aren’t a money launderer.
And no matter the state of the financial system, you bundle it into the boot of your car and drive off with it without anybody knowing.
One of the main reasons you don’t hear about physical investments from the financial industry is because it doesn’t make the industry any money. My colleague Tim Price wisely points out that the world of finance is full of “asset gatherers”: fund managers endlessly searching for more and more of other people’s money to manage. This nets them more money through management charges.
But the larger the fund, the less nimble it becomes – which is why true asset managers like Tim have a limit as to how big their fund gets. Tim will shut his door to new clients (and thus to greater management fees) in order to stay nimble and do well for his original clients.
Another reason you don’t hear much from the mainstream regarding tangible wealth is because it undermines faith in the financial system as a whole. If people don’t have faith in the financial system, they won’t deposit their money at the bank or take out loans. This would cause deflation and would be a catastrophe for those running the financial system and the government. All of the crazy measures we’ve seen employed since the financial crisis, from low interest rates to quantitative easing, are an attempt to create the opposite of deflation – inflation.
But those with tangible wealth are protected from the bankruptcies that deflation causes, and the currency devaluation of inflation – a win-win in my book. Which is why I’ve been loading up on tangible wealth for years. No government looking over my shoulder – no asset gatherer charging me fees.
I’m confident my “car boot portfolio” will do me well in the times ahead. And if you’re sceptical about the health of the financial system, and like to keep your wealth private, I recommend you look into getting one. It needn’t be huge – small allocation of your capital, just in case. And should things go awry, you’ll be glad you did.
All the best,
Boaz Shoshan
Editor, Southbank Investment Research
Category: Investing in Gold