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SOVEREIGN MAN

Four alternative stores of value

alternative-stores-of-value

October 9, 2012
Santiago, Chile

One of the most successful con jobs in the history of the world has been the concept of unbacked paper currency… or fiat money.

Over the last 100-years or so, governments have been able to convince people that their pieces of paper, backed by nothing but promises, actually have ‘value’. This seems truly bizarre when you think about it. Governments tend to be untrusted, serial failures. Yet people readily accept their guarantees the world over.

The history of fiat money has proven to be an almost uninterrupted period of inflation, asset bubbles, booms, busts, bailouts, panics,and other crises… and thankfully, it is an experiment which seems to be quickly nearing its end.

As such, it’s high time for creative, thinking people to consider their options and start trading their pieces of paper for something of value.

We all know the familiar story about precious metals– gold and silver have a long-standing tradition as stores of value dating back thousands of years.

But did you know, for example, that in the early days of the United States, whiskey was both a store of value and a medium of exchange? At the time, the US had among the highest alcohol consumption per capita in the world… and people knew they could always trade whiskey for something else. As such, whiskey had significant value.

Now, today’s liquor fundamentals may not warrant rushing out to buy a home-brew distillery kit… or stocking up on Johnnie Walker. But there are a number of other alternative stores of value worthy of your consideration:

1) Ammunition and Firearms may be the new whiskey, especially in North America. FBI firearm checks have been going through the roof in the US over the last few years, and each one of these represents another buyer of weapons and ammo.

Consequently, both have handily withstood the effects of inflation. According to ammo.net, for example, the price of Remington .223 rounds rose 224% from 1999 through 2011.

2) Watches. A single watch can be worth tens of thousands… even hundreds of thousands of dollars. Imagine putting $200,000 on your wrist and leaving the country– it’s an easy way to move wealth.

As with most collectibles, scarcity drives prices higher in the watch market. Most watches are like cars, they depreciate. But scarce models (of cars, or watches… like a Patek Philippe) hold value.

3) Rare coins. Gold and silver are excellent, traditional stores of value. But while millions of new ounces are pulled out of the ground year in, year out, there are only a certain amount of 1907-1933 St. Gauden $20 gold pieces in the world… and they can’t go back in time to make more of them.

4) Agricultural property. Few asset classes are as inflation-proof as high quality productive land… because, no matter what, it will always have value. Human beings will always need to eat.

Farmland prices around the world have been rising rapidly over the years and have hit all-time highs in places like the US and UK. But farmland in Chile, Uruguay, Paraguay, and select other markets is still quite reasonable.

Like anything, you wouldn’t want to hold any of these assets without first educating yourself and becoming an informed owner. But given that the paper currency sitting in your bank account is depreciating rapidly… or at best, generating a tiny fraction of a percent in interest, it’s definitely worth looking into alternatives right away.

Our goal is simple: To help you achieve personal liberty and financial prosperity no matter what happens.

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About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

Comments on this entry are closed.

  • diamondfather

    1,2,3 kt flawless D colour Investment Grade Diamonds

  • meow

    The idea of watches is very interesting. What complexities are involved with buying a 200,00 dollar watch, flying abroad with it on your wrist, and putting it in a safety deposit box in another country. Do you have to declare the watch or the amount of a good to anyone? Does the US (if you’re American in this scenario) require you to declare a safety deposit box (as opposed to money in an account)?

    • ggr

      Keep in mind you’re buying retail and will almost certainly take a huge hit on selling.
      AFAIK it doesn’t need to be declared on export. Whether the receiving country requires declaration, varies by country. In some cases you may have to post a bond refundable when you take the watch out after your trip, or pay an import duty.
      AFAIK you do not need to declare a SD box, but you likely will find it extremely difficult to get a bank SD box without an account. Personally I wouldn’t feel safe with a $200K watch in a non-bank box, or even a bank box in many countries.
      Also keep in mind the risk of having the watch stolen, losing the watch, or damaging it while it’s on your wrist. Or even getting your sweat on the watchband which will likely drop its worth to someone so exacting as to buy a $200K watch from you.
      Finally, a watch that is desirable today may become somewhat less fashionable tomorrow.

  • gridflash

    Who do you sell the watches to?

  • http://profiles.google.com/madnumismatist Mad Numismatist

    Good stuff Simon, one of the few publications brave enough to
    be open about the potential of rare coins. As I have commented elsewhere on
    your site, truly RARE coins are essential, but your readers should discern what
    rare coins are. They are not the junk pumped out by the mint, telemarketers,
    online promoters or the home shopping channel. By definition they are not rare.

    If you are open to knowing the real insider facts, I am more
    than happy to spill the beans with an anonymous article on the mistakes and
    pitfalls to avoid. Far too many innocent people are being misled. You have my
    email, let me know if you are open and I am happy to submit a draft.

    • clueless

      Hi Mad Numismatist,
      I would be interested in any info you may have. I have mostly ancient coins, some rare (defined as 75 or fewer known to exist, according to the Sheldon rarity scale), some scarce (defined as 500 or fewer known to exist, according to the Sheldon rarity scale). Do you think those would be a good store of value if the dollar crashes?

      • http://www.facebook.com/lawrence.milos Lawrence Milos

        500 or fewer is pretty darn rare to me.

      • http://profiles.google.com/madnumismatist Mad Numismatist

        I suggest you be careful with ancients as a potential investment/
        store of value. Over the very long term they can be good, and they are very
        interesting. The problem, generally, is that they are found in hoards of
        hundreds if not thousands. Another point to note is grading by NGC etc is
        helping with these problems, but it is relatively new and has not settled down.
        To give you an idea, maybe just 10% have been graded; which makes them appear
        rare, but leaves a lot of overhang to come to light.

  • http://www.facebook.com/lawrence.milos Lawrence Milos

    Yeah, rare coins need to actually be RARE. I tell friends that a 2011 MS70 eagle (silver or gold) is NOT rare.
    For the new physical “stackers” out there, be sure you understand what rare actually means.
    Last thought, art is another

  • Sebastian

    My farmland is Colombia is doing well as is my US based online biz, but Chile is sounding more and more interesting. Even President Sebastian Pinera is in agreement with you. http://edition.cnn.com/2012/10/01/business/pinera-chile-president/index.html?

  • frg

    What’s wrong witht he above?
    Whisky: You’re buying retail. Storage cost higher than gold. Cost to transport higher than gold. Lasts long but not forever, especially in a bottle. Possible breakage of bottles. Selling is regulated, taxed and licensed.
    Ammo: As above. No bottles to break but needs to be protected from fire.
    Guns: As above. Also need to be oiled, you can’t just let it sit for decades. Subject to technological obsolescence.
    Watches: Buying retail, selling wholesale, not divisible (you can’t sell half a watch.) Scarce ones may hold value but it will fluctuate.
    Rare coins: Buy retail, sell wholesale. Grading is somewhat subjective; risk coin being downgraded when sell for real or imagined scratches. Collector value often way higher than bullion value; subject to fluctuations in demand from collectors.
    Farmland: May go up or down in value; property tax; maintenance costs (if you levae it fallow for a few years you’ll find a forest needing to be cleared.) Needs to be guarded, in the US from illegal chemical dumping or illegal marijuana farming (could cost you the land, and legal fees, and maybe your freedom.) In other countries needs to be guarded from squatters, government seizure, especially if you’re a foreigner. At the mercy of weather (drought, flood) and pests. NOT portable or concealable from foreign government seizure.
    Having said all that these are alternative stores of value, better than Zimbabwe currency, not as good as precious metals. Then again, land prices may go up when gold goes down.
    In short, not a panacea.

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