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Question: Safe, precious metal or commody backed Checking Account or...?

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Tue 30 Sep 2008 - 12:24 am UTC

Question

bruce7006
Customer

Actually, this is Cynthia, typing for my brother, using "I" as if I am he.

I own a business in WA state and have assets, Both in real estate and liquid cash in 3-4 checking accounts. My sister, an ExGAR, is concerned about the financial climate and sounded the alarm that I need to get an education NOW and make a decision. She is suggesting that in the event of a financial collapse, indeed, with the falling value of the dollar, that the FDIC would not be able to cover all the losses resulting in my losing everything I have saved, my liquid cash, my retirement, etc. I know this is unlikely, but I have enough reserves that I can move a substantial amount into another venue. I have no stocks.

I am looking for some way, some where to move money where it will be backed by GOLD, SILVER, EUROS, something that is stable.

I have found Kitco: http://www.kitco.com/
What would you suggest, what type of account here?
Are there other companies like Kitco?

An acceptable answer will result in links to web sites that allow access to cash, but is backed by something tangible that allows the option of physically taking possession of the Gold, Silver, etc.  I don't even know if this is possible.

Thank you in advance, I will be here all day to answer Q's/Clarification Requests.

Thank you,
Cynthia
...for my brother Bruce, who will be monitoring this exchange in his email.

 
 

Tue 30 Sep 2008 - 12:35 pm UTC

Uclue Researcher Request for clarification

David Sarokin
Researcher

Might cynthibrucea be interested in gold coins:

http://www.cmi-gold-silver.com/american-eagles-gold-coins.html

The coins are both legal tender as well as holding investment value.  Let us know if that's on the right track.

 

Tue 30 Sep 2008 - 8:29 pm UTC

Question clarification

bruce7006
Customer

I was hoping for a method to keep the funds liquid, but still backed by something tangible.

I have a lead from a friend: http://eaglesup.com/ I'm going to call them today.

I think what I am looking for is unavailable, but I was hoping that *someone* out there knew of something. Your lead is similar to the eaglesup site. I think I am going to lookup Tutuzdad's OLD posts at GARtalk, he has a fabulous idea some months back, buying limited release coins, get certified and hold to resell.

~~C

 

Tue 30 Sep 2008 - 9:49 pm UTC

Comment

myoarin
User

Hi Bruce and Cynthia,

I can understand your concerns.  This is, unfortunately, a prime time for people to prey on folk's uncertainty and fears.

Perhaps it would reassure you somewhat to read about FDIC coverage of bank deposits:
http://www.fdic.gov/deposit/deposits/insuringdeposits/index.html

You can find more information by clicking back on the blue line above the text.

The ABSOLUTELY LAST thing the banks and government want to let happen is that customers' deposits are affected by the current problems  (worldwide  - I'm just hearing an interview about the German bank deposit insurance fund).

As is already happening with securities accounts with stockbrokers (investment banks), if a bank fails, the deposit accounts will be taken over by another bank.

Okay, I can't promise that, but my language suggests how convinced I am, as a retired banker.

Here is the FDIC's site on which you can check out how your bank is insured  - and much else:
http://www.fdic.gov/deposit/index.html

Regards, Myo

 

Wed 1 Oct 2008 - 2:23 am UTC

Question clarification

bruce7006
Customer

I've seen the propaganda...

http://myfdicinsurance.gov/
http://www.fdic.gov/edie/calculator.html

I'm more concerned about the FDIC being able to cover losses in the event of a catastrophe. Certainly with such an inflated economy there is not enough to cover losses if the dollar crashes and our currency doubles at butt-wipe. In that event, not even the FDIC can help. Only people holding something of value, like gold or silver will be worth anything.

Again, I understand it is unlikely, but if one HAS resources, it certainly can't hurt to prepare for the unlikely, and if it did, the foresight could make a huge difference.

I'm not trying to be talked out of it, I want options for Bruce to consider. He will make the final decision, and he knows I am a bit of an alarmist (cough cough)!

 

Wed 1 Oct 2008 - 3:20 am UTC

Uclue Researcher Request for clarification

David Sarokin
Researcher

Guys,

I don't 100% get what you're after.  If Bruce isn't looking to take physical possession of gold, then some firm has to be holding it for him.  That firm can go belly up, just as readily as can a bank (maybe even readilyer) and then where are you?  Assets go poof!

Can you elaborate a bit more.

David

 

Wed 1 Oct 2008 - 3:57 am UTC

Question clarification

bruce7006
Customer

Actually, I read about that very option, late last night. A third person holds the money. I'm *trying* to do bookkeeping right now, so I'll look for it later.

 

Wed 1 Oct 2008 - 4:03 am UTC

Question clarification

bruce7006
Customer

The other cool thing is http://eaglesup.com/ has no minimum purchase. Even poor folk like me can own gold! David, would you consider doing a mini due diligence on the company, check licensing, no lawsuits, BBB, etc for me for the Q amount?

I can see this coming... Yes Bruce!  I'll reimburse you for the question amount if I buy gold and you don't!!

 

Wed 1 Oct 2008 - 6:39 am UTC

Comment

probo
User

Hello Brucey and Cyndy

A Word of Caution!

How do you know for sure that you are buying REAL GOLD and not some fake stuff?

It's at times like this that the fraudsters flourish.

A friend of mine in the gold business always does an ACID TEST before he buys anything - even Krugerrands (gold coins) for example.

I bought some gold in 1973 (at a time of uncertainty here in the UK) and it was the most boring investment I ever made.

Things are MUCH worse the world over this time round and I am now putting the finishing touches to an Ark - just in case.

And, in case you wondered, admission tickets will not be sent to any cats, alligators, crocodiles, elephants (too big), lions, giraffes, bankers, politicians, weather forecasters or bagpipe players.

We shall be a VERY EXCLUSIVE group and only a few places are still available for serving wenches and the like - who must be Drop Dead GORGEOUS.

So who needs money?

Boah

 

Wed 1 Oct 2008 - 2:45 pm UTC

Comment

myoarin
User

I have to stick up for the FDIC:
http://www.msnbc.msn.com/id/26947643/

As David points out, buying gold  - if you don't take possession of it -  can be risky  - and maybe even if you do, sending money to someone and trusting that he will then send you the goods, OR send you money after you send your gold back to him.  Reminds me of all those GA questions about Indonesian and other websites purporting to sell electronic goods.

Of course it is a lot more convenient to leave the gold with him, get some kind of account or statement that it is yours, and trust that when you want to sell, you will get your money, which could be less than you paid, if the price of gold falls; hopefully more, if it has risen. 

There is a natural attraction for "him" to invest your dollars in something that earns interest, rather than paying fees for physical security of bullion or coins, speculating that he will be able to repay you and earn something from the interest.

I am not saying that websites offering gold are fraudulent or could be a Ponzi Scheme, But there are risks.
I notice that a couple of the pages on the website of eaglesup.com are not yet active, which is a bit unusual for an older site. 

http://whois.domaintools.com/eaglesup.com

Who is Robby Noel in Scottsdale AZ?

Alexis via "wayback" reveals that eaglesup.com started as the website related to an apparently conservative radio political analysist program of Robby Noel.  Early in 2005, the website started to include a link to gold selling, which seems to have become the primary interest.
http://web.archive.org/web/*/http://www.eaglesup.com

Myo

 

Thu 2 Oct 2008 - 9:17 am UTC

Comment

frde
User

I've been thinking since I first saw this post a few days ago.

To me gold stinks, checking out the atomic weight of depleted uranium is high on my 'do do' list - faking ingots should be easy for a novice, and faking coins is an established art form.

I've long reckoned that Signet (once Ratner) does a nifty trade in ornamental gold ingots in the USA - and that they are used as an informal currency - at a deep discount.

Say in WWII, quite a lot of people would have a sort of racial (Jungian) memory of gold coins - just like currently some places like Afghanistan and bits of Africa are reputed to understand silver Marie Theresas.
That memory is unlikely to be widely present in the USA or UK, which means that coins (like jewelry in Germany shortly after WWII ) will get a deep discount.

The diversification from USD is not necessarily wise, as a one time economist who has worked for the City I have a few fews on relative currency values.

IMO by commodity arbitrage £1 = $US = 1 Euro
In other words the £ is grossly over valued against the Euro and the Euro is over valued against the USD.

A bit over a year ago circumstances made me 'go liquid' and I decided to put some money where my mouth has been for some time.  Consequently I converted £100k to USD and left them in a USD deposit acount.  The experience I've had with my bank is another story (Probo & MyOarin would die laughing), and the interest is lousy, but so far I've done Ok on the exchange rate movement - a lot better than UK interest (not counting tax). 

I'm not closing my position as despite the USA's astonishing ineptitude and Brown having unexpectedly kept his foot out of his mouth for a bit, things are going my way.

The reason why the USD has not dropped off a precipice is what the commentators call 'flight to quality' - it is a reserve currency, it has one central bank unlike the Euro (in reality) and it is not run by jokers like the UK.  Personally I've always been suspicious of things like JPY and CHF (Swiss).

As for bank failure and lost customer deposits, I like most customers would delight in literally tearing bankers and politicians apart if that happened - screwing shareholders is Ok, so is screwing punters via institutions, but letting normal depositors lose their dosh is just seriously dangerous.  I wonder how much disaffection the BCCI failure produced ... probably quite a lot.  To do that to upright citizens, rather than [*] shopkeepers etc in the UK, is not contemplatable.

Personally I think that deposits in a reputable bank are safe, and that the USD is the best currency I would wish to hold as a partial investment.

Not exactly an answer, but to me gold, coins and non USD currency don't seem a good idea - and are potentially a very bad move indeed.


[*] one adjective was removed by Uclue admin due to legal concerns - please accept our apologies, frde.

 

Thu 2 Oct 2008 - 12:14 pm UTC

Comment

myoarin
User

It's good to see that you are still around, Freddy,
and, of course, nice to read your comment.

Myo

 

Thu 2 Oct 2008 - 1:54 pm UTC

Comment

probo
User

Freddy, Myo?

FP is Freddy;

FRDE is Jerry.

Such ******* confusion is enough to make an angel swear.

Probo

[*] Twentyone adjectives were removed by the Uclue Adminbot due to legal concerns. Probo, you really should know better. The Big Bot.

 

Thu 2 Oct 2008 - 2:32 pm UTC

Uclue Admin Comment

:-)

 

Thu 2 Oct 2008 - 7:49 pm UTC

Comment

myoarin
User

Bryan, if there are 21 adjectives justifying removal for legal reasons, I seriously doubt that you know them all.  But I will be happy to be disabused of my underestimation of your ex-hussar vocabulary.  Let me know elsewhere, and I will come back here an recant in public.

FRDE-ga never complained the couple of times I addressed him as Freddy.
(Just checked -  a nice trip down memory lane.)

Jerry, my apologies,

Myo (aka Ratty)

 

Fri 3 Oct 2008 - 5:32 am UTC

Comment

probo
User

Myo

Jerry is an English gentleman and as such he has been brought up to keep a stiff upper lip.

Complaining is simply not in any Englishman's vocabulary.

Consequently I am not going to complain about your totally unfounded allegation that I do not know 21 adjectives.

Here are a few, for starters, with apologies to the Adminbot:

形容词
bijvoeglijk naamwoord
Adjektiv
επίθετο
aggettivo
形容詞
형용사
adjetivo
прилагательное

Probo

 

Fri 3 Oct 2008 - 8:24 am UTC

Comment

myoarin
User

Good morning, Probo  Up very early, as usual.

Very polyglot, but not justifying removal for legal reasons. 
Taunt, taunt!

Let that stiff upper lip curl and lay loose in your best barrack*-room language.

Myo

*NOT to be confused with Barack H. O.

 

Fri 3 Oct 2008 - 7:58 pm UTC

Cancelled

bruce7006
Customer

Why did I cancel the question? I found a forum where questions like this are understood and taken seriously, and the thread is not filled with personal opinions and jokes (not sure what to call the unrelated comments) from Commenters (frde excluded) about what I consider to be a very serious matter.

~~C

 

Fri 3 Oct 2008 - 9:18 pm UTC

Comment

myoarin
User

Bruce, Cynthia,

I apologize for our getting off the thread,
BUT, Probo, FRDE and I did post honest and concerned comments to your question, albeit not in support of your idea of buying gold and questioning your distrust of holding deposits in US banks.

We all remember from Google Answers that answers that did not support the questioner's premise were often not well received, with hindsight, a reason to avoid anything that could be considered flippant.  Sorry!

I hope that forum provides a balanced view of subject.

Best wishes, Myo

 

Sat 4 Oct 2008 - 8:46 am UTC

Comment

frde
User

@Admin - I understand your edit - I've no wish to create problems for UClue

@Cynthia - I'm very concerned about gold and gold derivatives
- a UK scandal down to Barlow Clough springs to mind
- I'm also wary about currencies

It would be interesting to hear what you have decided to do

Regards to all - Jerry

 

Sat 4 Oct 2008 - 1:03 pm UTC

Comment

probo
User

For the benefit of any other new Uclue users, I should explain:

1: That the introduction of regular Comments - however 'irrelevant' - has the merit of keeping a Question near the top of the Recent Activity listing. This should help to get the Question noticed.

2: There is an agreed Protocol among Commenters (such as Myoarin, FRDE and myself among others) NOT to steal the thunder of any Real Researchers. Accordingly, we always allow a decent time to elapse before providing what we might consider to be a definitive answer. Of course, Questioners might disagree but, importantly, our Comments are ALWAYS FREE.

3: It should not normally be necessary to cancel any question because (a) if it doesn't get answered by a Real Researcher a Refund will be given automatically after the Question has expired and (b) if the Questioner is not fully satisfied by the given answer then (hopefully after an exchange of 'Clarifications') a Refund will be given upon request.

Happily, most users find that Uclue provides an excellent service.

Probo

 

Sat 4 Oct 2008 - 2:21 pm UTC

Uclue Admin Comment

Uclue wouldn't offer a "Comment" box unless we wanted it to be used, although we do prefer it when comments are directly for the questioner's benefit.

Overall, commenters add a lot of value to Uclue. If Uclue had also been able to post a researched answer then I think this question would have had a happier outcome.

 

Sat 4 Oct 2008 - 3:54 pm UTC

Uclue Researcher Comment

Roger Browne
Researcher

Hi Bruce,

Yours is an important and interesting question, but unfortunately it has no ideal answer. Nevertheless, it should be possible to clarify some of the issues.


GOLD BACKED DEPOSITS
--------------------

You asked about "web sites that allow access to cash ... backed by something tangible that allows the option of physically taking possession of the Gold, Silver, etc". The e-gold service comes pretty close to that.

You pay your money into e-gold through one of their exchange providers. This gives you a balance in an e-gold account. You can think of it as being a bit like a PayPal account, except that it is denominated in grams of gold rather than in dollars. Actually, you can choose between gold, silver, platinum and palladium, and can easily move between these metals.

Real gold is held in e-gold's vaults. The idea is that if e-gold were to become insolvent there would still be enough gold in the vaults to cover the deposits. You can take delivery of and hold the gold yourself if you like, provided you have at least a kilogram of gold in your account (because that's the smallest gold bar they keep).

Because e-gold holds the gold and doesn't lend it out, it can't pay interest to its depositors. In fact, it charges an annual fee to cover the costs of holding the gold.

E-gold has had a few run-ins with the authorities, some of which are ongoing. In some ways this says more about how regulations do not really take this business model into account, than it does about e-gold itself, but it's still of some concern.

So would your money be safe in e-gold? It's not possible to give an unqualified "yes". As far as I can tell, the gold holdings are independently inspected and externally audited. Some years ago, when I answered a question about e-gold at Google Answers, I read through one of these audit reports in its entirety and had no concerns, but I have not viewed a more recent report.

In the back of my mind is the Standard Transactions debacle from 2002. Standard Transactions advertised a somewhat similar service to e-gold, where gold was held to back up customer deposits. The only problem was that Standard Transactions didn't buy enough gold (and never had their gold backing audited). When their operating expenses overtook their income, they spent the customer deposits, and some people lost their life savings. (I had provided two months' of software consultancy to Standard Transactions, for which I didn't get paid, so it wasn't a happy time for me either.)

If I were holding gold to protect against an uncertain future, I'd probably split it three ways - a third in e-gold, a third as bullion in a bank safe deposit box, and a third in gold coins stashed away somewhere secret. But that's just me. It reflects my risk profile, and it's not advice to anyone else.

e-gold... internet payments, 100% backed by gold
http://www.e-gold.com/

e-gold - Wikipedia
http://en.wikipedia.org/wiki/E-gold

Google Answers: Best way to invest in gold and other precious metals online?
http://answers.google.com/answers/threadview/id/29294.html

Standard Transactions Worldwide - The Story
http://www.mail-archive.com/e-gold-list@talk.e-gold.com/msg11194.html


HOLDING GOLD
------------

Is it even a good idea to hold gold?

In the past, gold has been a dependable asset to hold in times of uncertainty. In times of crisis, gold increases its value. In times of inflation, gold holds its value while paper depreciates.

There are scenarios which would wreck this, for example if huge and easily-extractable gold deposits were discovered. But that's unlikely, and gold looks to be a good "safe harbor in a storm".

There's just one problem - it's probably too late.

The price of gold typically languishes during good times, then shoots up in times of uncertainty and crisis. Unfortunately, the price of gold started to rise substantially a few years ago. So, if you were to buy gold now, you would buy at a high price compared to the long-term average. You might weather the financial storm only to find that when good economic conditions return the price of your gold drops back to its "normal" price, way below what you paid for it.

Take a look at this chart showing the price of gold over the past few decades. Notice how it peaks during the 70's oil crisis, and again during the current crisis. The time to be buying gold was probably no later than 2005, before the rapid rise. If you buy now, you run the risk that the gold price will do as it did after the 70's oil crisis: drop back and stay low for a few decades, forcing you to sell low. Of course, if the current crisis turns out to be just the "tip of the iceberg" then the gold price may rise much higher yet, but the current indications are that the taxpayer will bear the brunt by bailing out many of the failing businesses, taking some of the pressure off the gold price.

Incidentally, the charts for silver and other precious metals show a broadly similar pattern to that of gold.

London Fix Historical Gold
http://www.kitco.com/scripts/hist_charts/yearly_graphs.plx
(click on "Historical Charts - Gold", then scroll down to
"Multi Year Gold", select 1975-2008 and click "View Charts")


COUNTER-CYCLICAL INVESTMENT
===========================

There are always some investments that are profitable in tough times, although it's not possible to guarantee in advance which they will be. (We can be pretty sure that accountants and lawyers specializing in insolvency and bankruptcy will do well, though, but I don't any way to invest in them.)

You could consider investing in food production and distribution, because even if people give up their gas guzzlers or their overseas holidays, they still need to eat. Many basic commodities also have the potential to be robust in tough times.

Or you could invest in developing countries that do not have a banking crisis. This is a high-risk area, but it's possible to diversify by spreading investments across a number of very different countries.

Counter-Cyclical Stock: Definition from Answers.com
http://www.answers.com/topic/counter-cyclical-stock


HOLDING EUROS
=============

You mentioned moving money "where it will be backed by GOLD, SILVER, EUROS, something that is stable".

I should mention that bank bail-outs are also occurring in various Euro countries. I don't think you can assume that the Euro will be immune from the current uncertainty. I should also mention that the US dollar has actually risen relative to UK pounds sterling recently.


SHARES
======

Historically, shares are one of the few investments that yield a positive long-term return even after allowing for inflation and taxation. When share prices have fallen is generally a good time to buy (because you get more shares for your money). Every time the stockmarket has crashed, it has bounced back a few years later. But you do need to be in the market long-term, because there have been short-term periods of downward movement, and it's hard to pick the bottom of a dip with certainty.


PROPERTY
========

A fundamental basis of property investment is that the human population is growing, and no more land is being made, so it's sure to be a good long-term investment.

One flaw in that argument is that much of the value of land is based on its zoning, i.e. the permission to build on it. An acre of farmland is worth a tiny fraction of the price of an acre of suburban building land. Therefore, there's a slight long-term risk in holding land, in that a political decision to free up zoning rules could result in a big price drop. I think that's very unlikely though, because the authorities like to hold on to power, but it's not impossible.

A way around that is to invest in land which has as much intrinsic value as possible, outside of the value that is given to it by its zoning. I like the idea of investing in prime waterfront property for that reason (perhaps on rocky land to avoid the risk of erosion, and a few meters above sea level to reduce the risk due to climate change).

The current drop in property prices could provide an opportunity to move cash into some highly desirable property at a relatively favorable price.


Anyway, those are my thoughts. I hope they're of some interest. The final decision is yours though, because nothing is guaranteed, and the final outcome will in many cases depend on arbitrary government decisions which we can't foresee and over which we have little control.


Good luck!

Regards,
eiffel

 

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