Sunday, April 12, 2015
WEALTH PRESERVATION DURING A CRASH
During a crash everything gets sold. It's a buyer's market. Only there tend to be very few buyers, because everyone is in need of liquidity in order to purchase necessities.
Yet if the currency itself is being sold, where does liquidity lie?
And what, if anything, will retain value?
There have always been two fundamental components to Value:
A) UseValue: food, water, shelter, guns, energy etc -
B) Historical Intrinsic Value (which Marx called Fetish Value) Artifacts, Artwork, Historical Documents, Gold bullion, Golden Objects, Jewlery, Gems and Real Estate.
Now, there's no sense in examining Use Value unless you're a hard cor Prepper, preparing for the End of the World. Obviously you need a common sense stock of stuff for your house or apartment that serves for a bridge during interruptions of services. But This is about preservation of Wealth, not of Life and Limb.
For Preservation of Wealth, you need items of Historical intrinsic value. These items will have three basic components:
The most liquid item will obviously by gold and silver bullion coins from recognizable mints. These can be traded in any major city in the world for any other local form of currency, as well as for certain goods and services. This is so now. This has been so for Five Thousand Years of recorded history. This will be so during any crash.
At the same time, this item is very heavy and easily detected in transport. Your wealth here can be preserved, but it is somewhat anchored to a location.
It is also highly Visible, meaning everyone knows what it is and what it looks like, and thus Everyone will be looking for it.
At the other end of the spectrum you have Historically Important Art and Artifacts which can be very difficult to recognize for your common thief, and can have varying degrees of transportability but are relatively illiquid.
To sell such an object you must know where and who the buyers are. And you must be able to get the object to the buyers. But if you know how to do this these objects can preserve tremendous wealth if often very small portable, durable, packages.
For example, an historically important object like certain Ancient Coins, might be worth a million dollars and can be stored in a small plastic flip inside your wallet. They can be sold to any major dealer in most major cities of the US and Europe, for example. But if you don't know the dealers, you might have a tough time indeed.
If you are not concerned with the liquidity but only in riding out the crisis with a preserved wealth, these objects can also be extremely valuable.
The key is to know your markets extremely well and only invest in those markets you know. Because every single market is manipulated in some way. Diamonds, for example, are heavily manipulated by a very few very large companies. What you feel may be rare, may not be so rare, unless you have inside information.
The same is true in Post Modern Art. How valuable is your Warhol in a crisis when 100,000 other sellers with substantially similar objects are all trying to liquidate at the same time? How many are being held back off the market by dealers who also may need to liquidate during a crisis?
These markets are all very tricky. Pick one. Learn it. Love it. It may be the only thing to preserve your wealth during the next crisis.