A Letter to a Friend about the role of Gold, Silver and Land for Surviving the Collapse

This installment includes my response to a dear friend who sent me an email debate between her brother Josh and their financial advisor Jim. All three of these people are super bright and understand the world situation to varying degrees, but better than most. Nonetheless, they wanted my opinion which differed dramatically from theirs. Please read on.

"First, cutting to the chase, my top picks for investments:
1. Energy - Nat. gas, small/mid tier Oil producers and services, Uranium plays.
2. PM's mining co's- Jr. producers that are growing reserves and will be bought out by the majors.
3. Equatorial Ag land.
4. Large Cap infrastructure companies - GE, Bechtel, Halliburton (politically and morally not appealing but a strong business nonetheless), etc.
5. Physical bullion and sovereign coins held allocated offshore if possible.

Now the discussion and philosophy behind my recommendations, along with some comments regarding Josh and Jim's line of reasoning.

1. Currency values are relative to each other these days along with gold. Rather than supply and demand driving the "value" of a fiat currency, (they are all valueless as Fiat) the difference in interest rates between countries levers one currency higher or lower than another depending of course on the underlying fundamentals of the issuing countries economy. High interest rates attract capital and raise the value of a currency eventually. Low interest rates have the opposite effect. Underlying all that is the rate of money and credit growth compared to the growth of good and services being produced, otherwise known as inflation. Sadly, the whole planet is inflating at near double digit rates - including the Euro, GBP, RNB, Yen, etc. The strongest currencies will be resource rich countries - Canada, Australia, etc.
All currencies are headed down relative to the ultimate currency - Gold. You can hop from one dropping currency to another, but eventually, gold will be the final stop. Since we have a gov't out of control, they could make gold illegal to own or trade or attempt to lock the price. Unlikely, but a consideration.

2. Foreign bonds can be a good currency play and I have enjoyed the returns for a while. One of the best is Loomis International Bond fund. I do not favor bonds and #3 explains why.

3. Even a ragingly successful investment in the stock or bond markets of the world has one critical weakness. Politicians control the worth of the currency the gains are denominated in. Zimbabwe's stock market has rocketed while the currency has depreciated even faster, leaving a net negative return. In my opinion, the considered course of action allows that the dollar may disappear within 3-5 years, leaving all investments open to any revaluation the politicos choose to assign. $1000 USD may become 1 Amero. You then have rescaled the investment into nonsense. So that leaves moving from the ether world of digital investments of paper stocks and bonds, into real valuables of gold, silver, oil, productive agricultural land, and commodities of all stripes.

Jim, the C.F.A., probably expects tomorrow to be pretty much like to day with some volatility. He probably did not encourage clients to lever into PM's in 2001 or 2002 or possibly even today - too risky according to his training.
He is not anticipating the Black Swan event that we will be swallowed by within a short period of time ranging from 6 - 24 months. Perhaps I misjudge him, though I think his recommendations bear my opinion out.

The bottom line is performance. Last year the S&P500 returned about 6%, the NASDAQ about 10%, the Dow around 9%. Inflation, as measured by M3 plus Shadowstats.com who calculates it based on Fed data that is now withheld from us, runs around 11%. Take away taxes also, and everyone invested with the herd lost about 5% of their money if not more.

Through some luck, long range planning, and a steady hand on the wheel, my portfolios returned from a low of 15% to a high of 37%. All while remaining risk averse.

For those willing to step from the make believe world of electronic digits and fiat currency, into the world of real metals, real land, and real values, the leap will be rewarded beyond your imagination.

While I could be wrong, that is where my money and efforts are invested."

Gold and silver are great, but not all there is in the investment universe.