Are there any negatives for holding all of your wealth in physical?

Hey all,

Just wondering if anyone can think of any negatives of holding JUST physical metals?

Eg; not really any fiat in the bank, no unallocated bullion, no shares etc.

Just a safe somewhere with a stack of physical.

Any thoughts?

Cheers Jimmy

 

liquididty

 

IF you are wrong.

 

There's absolutely no liquidity problems in Sydney.
One of my suppliers will give you 98 cents in a dollar for kilogram gold bars and you will get the transaction done in 10 minutes tops.
I have seen someone come into his store with 2 x 1kg Pamp gold bars and the entire transaction took less than 10 minutes once the seller accepted his offer.
Walk in with 10 kilograms of gold and he could easily accomodate you

 

Yeah, they tend to liquify at 1000 degrees Celsius.

 

More thinking of moving $$ large distances i.e. wire transfer/DD/CC transaction vs driving to storage location driving to purchaser waiting for funds to settle and then transferring OS/interstate

 

If silver is going to $400 and gold to $8,000 (James Turk's figures) - no, unless you get robbed. You'd need total conviction that's going to withstand doldrums like the last year or so. Meanwhile you get no dividends, no interest, so you'd need to be totally sure it's the best investment. Also how're you going to feel if there is another correction and you have no dry powder with which to buy? Or as thatguy touched on, you need cash, and its a bad period to be selling AU or Ag?

 

A shower of gold meteorites one fateful day
Black Swan Government action disguised as public good
Robbery and Storage issues

vs
Profligate governments stealing your stored fiat through a variety of time tested methods.

The only issue to consider is time imho.

 

Some negatives for silver:

Portability - If you need to move house.
Liquidity - If you want out, you may need multiple trips to the dealer(s) (e.g 15kg per trip).
Security - Do you seriously want a lot of physical in one place?
Estate Planning - Do yo tell anyone where it is? If you get run-over by a car, can you be 100% sure that your immediate (but least favorite) family member won't take it all before anyone else.

There's also a few positives:

Good form of asset and wealth protection.
No counter-party risk.

 

I would debate this

a) my bank wont let me withdraw more than $10k/day without notice
b) my bullion dealer will cash as much as I can carry in
c) Gold is the most liquid asset I know of

 

Tax

 

I agree. My bank won't allow any more than $5K cash per customer per day (unless you arrange it days in advance).

However if you had 100s of kg of silver, the logistics of getting it to the dealer could cause issues. I guess you could always use a commercial trolley. Still it'd be a nice problem to have.

 

Guys, I don't own this gold bar however the dealer was kind enough to let me fondle it.
It's a kilogram bar and I can store 10 of them in a Commonwealth or Westpack bank safe deposit box for around $120 a year. (storage cheap and safe)
Dealer will direct debit payment into my bank account immediately once I agree to sell it (funds available within 24 hours or less)
You can move 1/2 million dollars worth of gold bars (10kgs) in your backpack with absolutely no problems. (distance from bank to dealer 1/2km)

 

Stocks are more volatile, and therefore HAVE to provide a higher rate of return over a long enough period, otherwise there would be no incentive to invest in them.

If you had to hold one asset for 1,000 years, you would do best in stocks.

That is the only negative.

Reference:

 

The only two downsides I know of is Security and Leverage

You can get more Leverage not in Physical but you then introduce Counter-Party-Risk

Personally I prefer what you can hold in your hand but at the same time I don't completely dismiss the Paper side of it either

 

Agreed, and good post, but that part about holding a stock for 1000 years is crap. I agree if you assume constant rate of return, but the reality is most stocks/companies won't even last 100 years. I read somewhere that GE is the oldest US company still listed, but it is a rarity as most other companies folded or got bought out in that time.

Happy to be corrected though, my "i once read" evidence is not too solid.

 

Being more volatile does not logically imply better returns.

Here's a couple of examples:

Jumping over crocodiles is more volatile than walking across the bridge. Therefore jumping over crocodiles HAS to provide better returns than walking across the bridge.

Playing the poker machines is more volatile than betting on the horses. Therefore poker machines HAVE to provide better returns than betting on horses.

 

Nothing wrong with having a lot in metals, but having some cash is definitely worthwhile. IMO, metals are for the long term (until the mania/bubble pop stage anyway), in the meantime, we will most likely see falls and another crash. That's when you want cash so you can snap things up on the cheap. I roughly have 50-60% of asset value in metals and will keep it that way, with whatever cash I have left over from living expenses I distribute between cash, metals and shares.

 

Sorry but this question doesn't make sense without any context.

It depends on what your purpose is for holding physical (inflation hedge, speculate, shtf scenario),
time frame you are talking about (1 year or 50 years?),
your age, housing/financial situation (rent, mortgage, other debts) etc.etc.

 

You get no passive ongoing earnings from holding bullion. You have to sell which is a diminuation of your assets. Contrast that with an unencumbered commercial property where the tenant pays all the outgoings except land tax. If the tenant is a publically listed company they also pay the single unit land holding component of your land tax bill.

So the unencumbered property is a golden goose that just keeps producing

Property :lol: a steady income while retaining the asset. Holding 100% of your assets in gold bullion is a bit like a nocturnal wet dream makes you feel warm and fuzzy but in the hard light of day you have pi$$ed away a passive compounding income stream & future capital gain on the mistaken belief that a capital gain will out perform.

I call that fools gold because the owner has had to hold the bullion in a secure vault for a cost while earning no income.

Wealth creation is all about having your wealth do the heavy lifting while you sit on a beach knowing what the poor people are doing today, slaving away at a job they hate.

Kind Regards
non recourse