I'd like to initiate this thread to fish some wiser commentary from our more seasoned PM aficionados.
What have you found to be the most common argument against holding physical metals like gold/silver, and what is your best refutation in defense of your acquiring physical?
Let me couch it with my scenario.......a friend of mine is on the fence about holding physical, primarily because he is seeing holding physical gold as an "investment" as opposed to seeing it as money (a "sterile asset" not generating a stream of income, a la James Turk, and others) and a preservation of wealth.
He recently cited this article regarding capital gains taxes when selling gold and that we are not thinking or at least speaking to the taxable reality when we go to sell it. Of course we are presuming certain conditions upon that time we sell it too.
I wonder, how would you respond to this kind of rebuttal? How would you carefully craft a response to someone you care about and has honest inquiry into the situation?
All we can do is point out the undoubted, mathematical fact that the Federal government is bankrupt and going rapidly more bankrupt with every passing day. And he needs to ask himself the honest, serious question whether the currency continually issued in larger and larger amounts by a totally and completely bankrupt sovereign is really going to be worth anything 2, 3, 5, 10+ years down the road.
Deep down, if we allow ourselves to really think about this one, the answer is beyond obvious.
And once that question is answered, all the issues around "tax treatment" and the like simply fade away in the bright and obvious truth of oncoming and inevitable dollar catastrophe.
Good question. To a certain extent I have stopped trying. Most people d o not want to hear the doomsayer speech, it is unpleasant to think about. If they can't see the problem it is hard for they to actively prepare. You can present any argument you want, but so long as e other person values dollars more than gold you will never convert them. The only person I have converted is my mother and it was only because her father started buying in seventies. She had some of his old collection and when explained the similarities between now and then and told her what she had she was intrigued. Evev so the first time we went to the shop and bought an eagle she said she felt a little angst handing over all those 100s.
1 graph of the devaluation of the dollar from 1913 to the present. Usually gets a "whoa.. I didn't know that".. followed by the reasoning of buying insurance. They buy insurance as a hedge against what they're buying for..right? You buy house insurance just in case your house gets damaged. Car insurance... life insurance... when you look at the trend of the dollar, why on earth would you NOT "buy insurance" against your hard work? buy physical and you will ... then if they still disagree, they have to disprove the reasoning behind insurance and you just say "Then...get rid of your policies on everything because apparently you don't need them". When they look at you funny again, tell them that the value of metal NEVER changes but their 401k can tank any day.. buy insurance against that with physical. Challenge them a bit on why they won't do it, but you cannot make them feel stupid.. just uninformed. If you make them feel stupid, they will become very defensive.
"a friend of mine is on the fence about holding physical, primarily because he is seeing holding physical gold as an "investment" as opposed to seeing it as money..."
I echo what the other posters above have suggested.
Also, I get the sense that your friend might be looking at gold and silver at least partly from the "collectible" standpoint -- numismatic values rather than straight intrinsic metal/melt value.
If so, he's got a point. Agree with him that the historical interest/rarity aspect of coins could fly out the door in tough times, just as the "value" of Hummel figurines or Manolo Blahnik shoes will be dubious when one's only concern is shelter, food, and clean water.
But with coins and bullion, of course, the metal value remains.
Oh...and it is hard to wrap our heads around how to value something in a metric other than the fiat currency we've grown so attached to. That's an objection not at all easy to overcome.
I usually point out a few things to them concerning PM's.
They have been used as money for close on 5000 years by choice not force.
They are money because they perform the store of value function of money better than anything else.
They are no one else's liability, and do not rely on a counterparty to ensure performance.
I point out that the FRN$ is a "faith based" currency that is rapidly losing the faithful. Since 1971 it has become an instrument based solely on CONfidence, and then I make the observation that the root of the word is also used to describe CON men, or CON games, and that a lack of CONfidence or the ability to cheat marks out of their labor in return for .gov paper promises is rapidly approaching. As George C. Scott famously said in the film "The Flim Flam Man" you can't cheat an honest man, and I get the feeling that people worldwide are increasingly feeling cheated and are desirous of honest money.
I point out that a break in CONfidence doesn't have to happen here in the US, but anywhere in the world, as the FRN$ is the "reserve" currency, and a lack of CONfidence in the ability of the US Government to meet its obligations and at least service its debts are being increasingly questioned by our trading partners. Should any one of them publicly refuse to accept the FRN$ in return for goods, it's game over, especially as the ability to send in the military to enforce compliance is rapidly coming to an end.
I point out that the debt metrics make the ability of our government to pay its debts are impossible, and that there are but two ways out of that box, default or inflate-which is default by another means. Then I give them the amount of debt/currency that has been created, especially in the last 10 years, along with the loss of purchasing power by the FRN$ resulting from that monetary excess using the POSX as a proxy.
I also give them the number of hyperinflationary events which have occurred in the last 100 years, and why.
If all of that doesn't convince them, I essentially say that I hope that they are correct in their faith in the government and the promises of politicians and bankers, and wish them well.
You can lead a jackass to water, but you can't make him think.
I'm done trying to convince people or win their vote. Either they will find it themselves or they won't. You can lead a horse to water but you can make'm skip stones.
The really sad part about it that I see the mass of people putting their life savings in retirement accounts in the hands of shit-for-brain 'financial advisors' or brokers. They're just going to get cleaned out.
Thank you all for the insightful gleanings on the question!
I have found the easiest way when dealing with people who don't understand, is the silver dime I carry in my pocket, I carry it always. I show that dime to them and tell them that back in their parents or grandparents day (age dependent), that dime would buy them a gallon of gas, today that dime would also buy them a gallon of gas.
This causes a brain freeze for a few seconds........and I never get questioned about it again unless they are buying.
How timely! From Preparedness Pro