What Percentage of My Assets Should I Hold in Precious Metals?
What Percentage of My Assets Should I Hold in Precious Metals? by Catherine Austin-Fitts for Solari
*Solari Note: We are now republishing Catherine’s commentary so it can be viewed by all Solari Readers, original publishing date was November 11, 2013*
By Catherine Austin Fitts
I am often asked what percentage of their total assets or liquid portfolio a person or family should hold in precious metals. I find it impossible to answer this question generically. What I can do is describe the process I use to help determine the ideal amount of holdings in a specific situation.
Individual holdings in precious metals can be divided into two categories, a core position and an investment position.
A core position in gold and silver is one that is held as insurance for protection in a worst-case scenario. As the old saying goes, “Always keep enough gold on hand to bribe the border guards.”
In this instance, the owner is not focused on generating returns on their investment or diversifying a balanced portfolio. Rather, they wish to ensure that they have a currency that is likely to hold some value and liquidity (so they can use to transact) under extreme political or economic conditions.
Gold and silver are chosen as one such asset because they are not dependent on a government or military for their value. They are tangible. They are liquid. You can put them in your pocket and walk away. Their value is recognized globally.
This means that the core position must be held in physical form by the owner and/or in depositories or storage considered by the owner to be safe and accessible in the event of one or more worst-case scenarios.
The variables to consider when determining a core position include:
- How many people do you want to provide for in your worst-case scenarios?
- How much purchasing power do you want for each person in your worst-case scenarios based on how many months or years you want to be able to provide funding?
- How much in reserves do you want to provide additionally as capital to start a business or to be able to reinvest at that time to generate an income?
- In how many locations or jurisdictions do you wish to provide your per person and additional reserves? For example, do you want a “stash” in another country or continent in addition to your home or local area?
- As you do your scenario planning, what are the percentage chances in your opinion of each and all of your worst-case scenarios coming true? What percentage of your assets do you want to hold to protect yourself for those scenarios as opposed to support you and provide income and resources for your other scenarios?
- Of the amount of assets that you feel are useful to hold in the worst-case scenarios, how much do you want to hold in precious metals (as opposed to local currencies, or tangibles such as food?)
- What are your total available assets, including the amount currently available to invest in liquid assets?
As you can imagine, the size of core positions varies widely, depending on how many people will be covered by the “insurance,” the total liquid assets available, and the person’s concerns about and desire to protect themselves in a worst-case scenario.
Some people are certain that economic collapse is around the corner. Some people think it will come years from now. Some consider the notion absurd.
Of those who consider a worst-case scenario likely, some think gold and silver will be invaluable to have. Some think that only food, water, shelter and other practical assets will be worth having. Some think that the chances of survival are so small, they might as well use all their assets to thrive and enjoy life in other scenarios. They would rather deploy their assets to productive uses that build financial or human wealth – to build a business or send children to college. Their feeling is that the cost of insurance is too expensive given their immediate alternatives.
We live and transact in the midst of ongoing economic warfare. Information is inadequate. Participation is involuntary. This means you are on a chessboard. You need to allocate your assets to take advantage of your opportunities and protect you and those you love from risks. Your assessment of what core position you want is a decision regarding political and social strategy rather than economics.