Thursday, August 7, 2008

More on gold and other concerns

Hi FerFal,

I'm posting this here, although it should go under the "gold and jewellry" discussion. I just wasn't sure if you can see the posts on the older topics and reply to them...

I'm just looking to buy some gold on my savings (given that the price of gold is skyrocketing anyway). You suggested buying a bag of golden rings formerly, but also said that a necklace is easier to be split up if needed. I shopped around a little and compared the prices of jewellry to the global gold price. I found that the price of golden jewellry can cost even 5-6 times more, than the price of its gold content. Obviously it depends on the specific product. Simple rings, like wedding rings are cheaper, as are the jewellry made from bigger chunks of gold like bracelets. Necklaces seem to be quite expensive, however - taking only the gold content into account. Buying these toys and selling them later at the price of scrap gold is not the greatest idea. I also looked at buying scrap gold on the first place: I cheched out a refining/casting company to see how much they ask for jewellry gold. It is available in even 9 carat wires, which I think would be the most appropriate for this purpose (them come in any profile you want; you can have them in a thin enough diameter to make it possible to be rolled up, and later cut off the promptly required amount with simple pliers). 9 ct gold is the purity used most commonly here in New Zealand for manufacturing jewellry, so it would be just the thing I'm after. On the phone they quoted a quite reasonable price for the gold wire (less than a 20 percent cost for refinement). However when I went to buy some, it turned out that it is GST exclusive (Goods and Services Tax, or VAT in Britain; I don't know what it's called in Argentina; you know the shit...) Adding the GST on top of it makes it a much less nice offer: it comes to about a 36 percent of extra cost altogether - we have a 12.5% GST rate.

A guy at the refinery company suggested buying internationally recognised gold coins instead (I just told him I'm after some form of investment); the coins are pure gold and they are not GST taxable; also everybody knows what they are. This takes us back to the original problem you already talked about: good quality coins are hard to sell (?) at their actual value after the SHTF (well; even in peaceful times...), and you can't chop them up as you like.

What do you think about all this? (I have some savings to devote some money to secure it, but paying 36% is too painful for me; I'm not a rich guy).

However, I'm also convinced that in the not too distant future the world will be facing a global economic crash. I know you said you wouldn't worry too much about peak oil, because your country has enough crude. Even then, I don't think ANYONE is able to measure the consequences of it (don't be sure your country will be the one enjoying the remainder of its oil...). I'm sure Argentina is a tough place to live in, but what you guys have been experiencing for the last couple of years is just the beginning... Even though I live in a well-off country like New Zealand, I wasn't born here: I'm from a country going through a breath-takingly similar curve to that of Argentina (first being the richest country of the region, then free trade came along, the devastation of local enonomy, diminishing mid-class, unemployment, deepening poverty, famine). Thus I know what hard times are like, and try not to underestimate the End Of The WHOLE WORLD.

So. I know the 36 percent is nothing if we consider a potential 500-600% inflation rate, but still it feels painful to cough up when everything seems so peaceful... What do you think?

Btw. I'm a big fan of you; this blog is really invaluable. I especially respect you for putting peace and freedom above the cheap work due to the misery of others (I'm referring to your post about your aunt... :)
I wish you all the best! Sorry about my verbal diarrhea... ;)


August 7, 2008 12:40 AM

Hey Joe, thanks for the compliments.
Hope it’s ok I posted this here in case others have a similar doubts.

I understand New Zealand is a beautiful place. I have a friend living there, works as a “consierge”(?spelling) at a Hyatt hotel.

He says he fit well there ( he’s a very nice, outgoing kind of guy) and he says he gets greats tips for his ability to get things done. (also acquires tickets, reservations, “good company”, he’s the guy) It’s a nice skill to have, I guess.:)

Joe, nothing I say should be taken as written on stone, it’s mostly advice, things I do myself, but also things that work given the right context. You still have to come up with your own conclusions.

In places such as your country, of course, jewelry will have an added cost because of the craftsmanship involved.

Over here it’s pretty different. The “art” involved adds little cost to jewelry, unless you are talking about a real intricate item with n undeniable artistic value, because artisans make little money and have to charge little for their work, at least in most cases.

Things like chains and weeding rings ( mostly 18 k here) are bought and sold calculating its gold content plus a relatively small premium.
That’s why I said that I’d get a small amount of wedding bands if I could go back in time to pre 2001 times.

In shanty towns and improvised markets, people often buy and sell, (mostly sell) this kind of jewelry. People pulling a gold ring from their finger and selling it is something common around here, specially right after the crisis, and even now several years later.
You’ll rarely ever see a gold coin among the more common folk.

I understand that in America you can sometimes find wedding bands in pawn shops for little money, but, if this isn’t your case, then definitely DO NOT pay for jewelry gold when you have to pay so much for it’s artistic value.

The smaller gold coin or bar (there are some 1g peaces, very small) or better yet silver, would be more appropriate.

One other thing. Don’t confuse buying gold for a form of investment. It really isn’t. It’s more of a form of protecting your savings, which still is a good thing.

An investment generates money for you. May it be a small investment pool or portfolio, an apartment you rent, a cab you bought and hire someone else to drive it, or a 25% share in a small drug store down the street. It makes money for you.

About peak oil and the end of the world, I try not to worry much about it.
Other than having food stocked, having investments that generate money for you, having a home and plan B in some other country, I’m not going to run up the hills and set camp there waiting for the end of the world. :)

Mostly I’d worry about adapting appropriately to the changes on our current world.

Even among survivalists and prepers, I often find people that got robbed because they left their car, even their house! with unlocked doors.

Today, you get robbed.

Tomorrow, you make that same mistake and you’ll pay it with your life.
Sucks to sound all melodramatic but it’s the true. A mistake like that in a place like Argentina has cost the life of more than a few.

It’s not about being paranoid or anything, it’s about being cautious, and doing what we as a specie are designed to do:

Adapt to the new reality our world has become.
Everything is more expensive?
You need to make more money, find a way to get that done.
Things aren’t that safe any more?
You need to move somewhere else safer and have means to defend yourself and so on.

You can still enjoy the heck out of life and do these things at the same time.:)



Anonymous said...

Buying jewelery retail for investment purposes is a mugs game, as you said the mark up is 5X the price of the gold.

I don't know what women are like down your way, but I don't know any woman that would put a ring on their finger that belonged to another. (Unless it was a family heirloom or belonged to Liz Taylor or Shirley Bassey (ie worth a small fortune).

Buy used wedding/engagement rings etc from pawn shops, ebay and the like, you can buy for little more than scrap prices because there's little demand for them.

Anonymous said...

Here in America there is a 300% mark up on jewelry. I am a silversmith and I buy various types of gages of silver and any scrap will be used in the centrifuge and cast. Lately I have been modifying silver dimes into buttons for clothing. I use old damaged dimes that have no value to coin collectors. When I cast from a mold I make belt buckles. I truly believe that when the dollar disappears my silver will be in demand. I have very little scrap gold at this time. Having too much gold in your possession can get you killed in my neighborhood. Since the collapse has not happened here yet I don't feel comfortable advising folks on investments. Securing the value of your savings is another matter as you point out Ferfal. I wish you all much luck in the days to come.

Anonymous said...

When folks talk about buying 'gold rings for investment' they usually don't mean jewelery.
'gold rings' are simply rings of gold used for commerce in China.
think gold coins with holes in them.
i don't how one goes about buying them in online.
good luck

GunGeek said...

The biggest problem I see with jewelry of any kind as a means of gold exchange is that it is virtually impossible for the average person to know if it's really what someone says it is. 14K, 18K, 10K HGE- how does someone know what it is? Well, you look at the stamp on the back or the little tag on the end of the necklace or somesuch. I can go buy a bunch of low purity necklaces and replace the little tags with ones that say 18K and most people can't tell. So, they're going to place very very little stock in the purity you're claiming it has. Pieces of an unmarked necklace? Even worse.

Even with gold coins, most people are going to be a little cautious since they have never seen one before. However, they realize that it's a lot harder to make fake coins (and the penalties are much higher for doing so) than to claim that jewelry has a lot more gold in it than it really does.

That's also the problem with silver US coins (and probably other countries as well)- most people do not know that they stopped making them out of 90% silver after 1964 (and to confuse things even more, the half-dollars out of 40% silver after 1970) and would be hesitant to take your word for it. You'd have to carry around some sort of coin book to prove it to them.

Anonymous said...

Joe from NZ blames free trade for poverty when free trade and capitalism are the only things that create wealth. I hope he loses everything for being such an enemy of freedom.

Anonymous said...

FerFAL-Thanks for another awesome & insightful post...what do you make of this article?

All the Best,

Jax, FL


Why Argentina is the best place to buy property Aug 11, 2008
I've been to about 175 countries, and lived in 12. All the while, I've felt the US and Western Europe in particular (but also Canada, to a somewhat lesser degree) are on a slippery slope. So I've always had an eye open for a real second home.

My longtime subscribers will recall my enthusiasm for New Zealand back in the late '90s. Since then, its currency has risen about 75% against the dollar, and well-selected property has roughly doubled or tripled in addition.

New Zealand is still a great place to hang out. I bought a bunch of property and still go there about three months of the year, mainly to play polo and just enjoy the mellow lifestyle. But New Zealand is no longer the bargain it once was; far from it.

I think it's imperative to have a crib outside your home country in today's world. I don't want to get into a detailed discussion of all the possibilities here; that would take a book. But my bottom line is that Argentina is simply the best place in the world right now, all things considered.

It's certainly the cheapest "nice" country in the world. Indeed, Buenos Aires is absolutely one of the world's greatest and most livable cities. The country is running a massive balance of trade surplus. The government (most surprising of all) is running a big fiscal surplus. Rich Europeans are piling in, since Argentina is now ethnically and culturally the most European country in the world. And it should be fairly insulated from WW3. All the stars are aligned for this place. Even as stupid as Argentina's government has traditionally been since the days of Peron, the bull market has a long way to run.

So I'm looking to spend around half the year there. Along with a partner, I bought a ranch in Patagonia 10 years ago, and it's been a spectacular investment.

But if I'd been familiar with Salta province – in the northwest – at the time, I'd never have bothered. The province averages about 5,000 feet in altitude, but is at about the same latitude south as Cuba is north. As a consequence, the climate is perpetually mild. And it's dry. Most of it is indistinguishable from Northern Arizona, New Mexico, or Colorado.

It's possible to buy huge parcels of land very cheaply (e.g. 100,000 acres for US$1,000,000), but that's literally in the middle of nowhere and of very little practical value. You're a feudal lord for the people living there. But if you want a latte and an International Herald Tribune, or anything to eat besides an animal some of the peons have butchered, forget about it.

It's a long-standing tradition at Casey Research that we eat our own cooking, so we've bought a lot of property in Argentina in the last few years. But frankly, I wasn't looking for a bunch more trading sardines; that's what stock certificates are for. I really wanted something I could personally use and enjoy. What we did, therefore, was buy 1,200 acres on the edge of the town of Cafayate, in the south of Salta.

Like San Martin de los Andes in Patagonia, Cafayate is going to become another Aspen. Or maybe the resort town of Taos, New Mexico, is a better analog. Located in a huge bowl, surrounded by the high Andes, it's quaint and picturesque. Especially since it's the center of a large wine region. So the area is really more like a "Taos meets Napa."

What we're doing on this land is putting in a world-class golf course, spa, health club, vineyard, equestrian facilities, and, in fact, lifestyle amenities of all types. A library, billiard room, cigar bar – you get the idea. Since good workers go for $200 a month, costs will be low, and services will be excellent. My personal vision is to take the best features from developments I know all over the world and put them together here.

I think we've got the right place, the right idea, and the right time. I also think the cost will be right. I expect it will, initially, go for something like 10%-20% of what something similar – but not even close to as nice – would go for in the US

I hope early buyers will be successful people of a libertarian character; no jerks need apply. Then, as soon as possible, we're going to raise prices as high as possible to keep out the riff-raff.

So that's the story right now. For travelling or an outright real estate purchase, Argentina, all things considered, is my favorite place in the world.

This article was written by Doug Casey of The Casey Report for the Daily Wealth newsletter.

FerFAL said...

Just saw the article.

What can I say? If the guy loves the country, let him knock himself out.

Some people love Nigeria, Colombia or God knows what else.

He loves Bs As? Fine. People are beautiful here, and you wont find black people here and that seems to be a big deal to some folks.
The city is dirty and unkept, but otherwise it is an interesting place and was once the jewel of south America.

Safe? No its not. Tourist have no idea of what it’s like to live here.
He thinks it’s a safe investment? No, it is not.

From a financial point of view, Argentina is a high risk investment country.
I’m not just inventing this. Every financial bulleting report says so.

I love my country. I do, I love that we just beat Brazil 3-0, I love its criollo culture, but I’m not blind to it’s many downfalls. Downfalls that are one too many to ignore.

Anonymous said...

why do so many Argentinian people think there pure European when most of them have some Indian ancestry just not viable n put European culture as the highest ideals.the Americas are the new world for a reason to make a new culture n name for its self thats why no one should hate USA its is truly genuie and different

Anonymous said...

Argentina had very few Indians to start with, didn't inter-marry like in Brasil, and killed off most of those natives who remained.

The phemotype IS, indeed, mostly European.