Private wealth: a thing of the past

Private Wealth
A thing of the past
By David Bradshaw
Editor, Real Money Perspectives

Your right to privacy has been called "the civil rights issue of the information age," reports Minnesota Public Radio.

Today Americans enjoy unlimited benefits from new technologies in our wired world. But those wires send information in two directions, and the access to our personal data is very vulnerable.

"The all-you-can-eat packages of voice, video and Internet services offered by phone and cable companies may be convenient, but they represent a potentially significant threat to people's privacy," reports LA Times.

The same is true of your financial information. Your holdings in stocks, bonds, cash, even gold (in most cases) are literally on display for the world to see today, unless you take some specific (and legal) steps to privatize your wealth.

Businessweek reports an "Invasion of the Stock Hackers"… "An alarmed SEC says that teams of thieves are lifting passwords from home PCs -- and emptying online brokerage accounts. Consumers have $1.7 trillion worth of assets with online brokerages, says TowerGroup, a financial research and consulting firm."

Owning paper promises for real assets can pay off, but in today's increasingly paperless world, your assets could also be wiped out with the stroke of the key on a computer keyboard. At least temporarily your wealth could become illiquid at the very moment you most need it, unless you have something "outside the system" so to speak.

While gold bugs boast of the wonders of gold ownership in today's mixed-up financial world, those who stick with only gold stocks, gold or silver ETFs or even gold and silver bullion coins have no more privacy than equities, bonds, real estate or cash.

A shining alternative

In today's world of ultra-transparent investment, it may surprise you to discover that there are only a few legitimate investment niches that offer the small investor 100% privacy of ownership.

An excellent example is investment-grade United States gold and silver coins. In addition to being completely invisible to anyone’s prying eyes, these gems provide better average returns than gold and silver bullion historically.

Unlike most other major asset classes, investment-grade U.S. coins do not require a Social Security number or 1099 IRS reporting upon either the purchase or sale.

The U.S. Patriot Act, Section 352 covering "Anti-money laundering and terrorism," the government states; "Anything that derives 50% or more of it's value from it's metal content is covered or reportable." Translation: your bullion holdings are not private!

However, under the authority of the Emergency Banking Relief Act of 1933, President Roosevelt issued Executive Order No. 6102, which specifically exempted gold coins having a recognized special value to collectors of rare and unusual coins.

Treasury claims power to seize bullion -GATA

The U.S. Government has the authority to prohibit the private possession of gold and silver bullion coins by U.S. citizens during wartime, and, during wartime and declared emergencies, to freeze their ownership of shares of mining companies, the Treasury Department has told the Gold Anti-Trust Action Committee in August 2005.

But gold and silver owners aren't alone in such jeopardy. For the U.S. Government claims the authority in declared emergencies to seize or freeze just about everything else that might be considered a financial instrument.

The government's authority to interfere with the ownership of gold, silver, and mining shares arises from the Trading With the Enemy Act, which became law in 1917 during World War I and applies during declared wars.

When the Trading With the Enemy Act was passed in 1917, gold and silver formed part of the official currency of the United States and were essential to ordinary commerce, so perhaps an argument could be made then against "hoarding," even if "hoarding" could not be well defined. That is no longer the case; the United States has officially disavowed gold and silver as money and they no longer have a meaningful role in commerce.

So gold and silver investors may want to ask their members of Congress to seek repeal of the statutes that give the government the authority to interfere with the private ownership of gold and silver, emergencies or not. Full story.

In addition to offering privacy, U.S. rare coins are also very portable. You could easily put a million dollars worth of rare coins in a briefcase and go anywhere in the world to liquidate them in a pinch.

What other tangible asset offers such a great combination of 100% privacy and 100% portability? I can think of none, except perhaps diamonds or other raw gems, but they are not nearly as liquid, with over 5,000 U.S. rare coin dealer in the U.S. alone.

Gold stocks may be a great long-term growth asset, but whenever you are dependent upon a company's solvency or a mutual or exchange fund to maintain liquidity, you have added another layer of risk and given up privacy.

Physical ownership of rare gold alone allows you the opportunity to have 100% ownership and 100% control of your gold assets without a single worry that your gold may also become someone else's liability.

A collectible, not a commodity

chart Investment-grade U.S. gold and silver coins are not a commodity, they are a collectible. So while the bull market in precious metals may help to propel rare coin prices upward, buying an investment-grade coin is not the same as buying a commodity, like sugar, wheat or even gold bullion.

Have you ever seen a 100 oz. bar of gold? Some bars are ugly and beat up and some bars are brand new and shiny -- but they both trade for the exact same value. Not so with collectible coins. High quality and rarity are the primary drivers.

Because the investment-grade coin market is smaller than the bullion market, it is less prone to speculation and more geared toward being a long-term hold. This means rare coins are one of the least volatile forms of gold to own.

Every person in America has the ability to put them self on a personal gold standard by simply purchasing some physical U.S. rare gold and silver coins.

Virtual gold may be a great new product, but I'm recommending that clients hold physical gold at the foundation of their diversified portfolio.

Charts illustrate that gem-quality numismatic gold and silver coins are in a long-term bull market, like precious metals -- but rare coins tend to move up and down more gradually. Perhaps this stability is one of the reasons WSJ, Marketwatch and other mainstream news outlets have been so positive about this market niche over the last year or two.

As technology brings us closer together, the fragments of information about you are becoming much easier to piece together, revealing the most intimate details of your life, unless you take steps to privatize a portion of your wealth today.

Maintaining private wealth in the future may require owning collectibles from the past. Investment grade U.S. gold and silver coins are fast becoming a new American icon because they offer investors financial stability, profit potential AND privacy! -db

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DISCLAIMER: All of the provided information is believed to be accurate, however errors are possible. The opinions in the Commentary section do not necessarily reflect the opinions of Swiss America. Past performance of any investment is no guarantee of future performance. All investments have risk.
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