Introductory Note: This is an update and substantial expansion to an article that I posted to SurvivalBlog back in 2018.
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I often have people ask me: “Why do you stress tangibles investing, Mr. Rawles?” In my estimation, tangibles always trump intangibles. I have three primary reasons why I distrust intangibles:
First: Nearly all intangible investments are denominated in fiat currencies. Because of this there is an underlying currency inflation, revaluation, or repudiation risk. Even when buying stock in the safest, most secure and impeccably-managed company it still has some risk when the investment is denominated in Dollars. Ditto for Dollar-denominated bonds. Ditto for redeemable life insurance policies and annuities. Ditto for business investments. Ditto for money market funds. Ditto for certificates of deposit (CDs). Whenever you have any investment that is denominated in a fiat currency, there is the risk of degradation of the currency unit itself. It is only tangibles that have innate, intrinsic, and intuitively obvious value that is not vulnerable to the whims of international currency markets, interest rate changes, political charades, or government insolvency.
Second: Most intangible investments represent a debt taken on by someone else. When you deposit funds in a financial institution, nearly all of it is loaned to a private party, a company, or a government. So your investment’s security is dependent on someone or some entity having the willingness and ability to earn a profit and consistently pay down that debt. In essence, the vast majority of investments are buying someone else’s liability. But a personally held tangible is something of substance that has true intrinsic value — in and of itself. That rock-solid value is not dependent on the action or inaction of any individual, corporation, or government.
Third: Intangibles are outside of one’s personal control. Your good intentions have little or no influence on the bad intentions of others. The news headlines are replete with tales of how people have their investments wiped out: Bad corporate management, government ineptitude, corruption, pilfering, swindling, embezzling, “official” confiscation, and wholesale larceny. We also live in the electronic age, so many investments are mere digits in computers. Thus, they are vulnerable to hacking, EMP, solar flares, and various other risks to the power grids. In contrast, a tangible that you keep at home in your personal control is only subject to your own failings. Granted, there are vulnerabilities to rust, mold, and theft. But each of those can be mitigated with proper planning, secure storage, waterproof containers, and some concealment. (And in the modern context, I would add: Concealment of the paper trail of your acquisition of a tangible. I recommend that you pay in cash or in wallet-to-wallet cryptocurrency for most of your investment tangibles. This will minimize the risk of confiscation by thieves with badges.)
The Tangible Difference
In a world of ongoing currency inflation, tangibles make sense. Whether you are buying Colt Python revolvers, slabbed rare coins, Beta C-MAG drum magazines, bags of pre-1965 “junk” U.S. silver coins, stripped AR-15 or AR-10 lower receivers, Swiss self-winding wristwatches, or case lots of .45 ACP hollowpoint ammo, there is not very much that can go wrong with buying tangible investments. With proper storage, the downside risk is minimal, and the upside is almost always pleasing. Just be sure to do your research first and buy low. By “low”, I mean buying at or below wholesale. Divorce sales, estate sales, gun shows, and business liquidations sales are often the best places to “buy low”.
The Rise of Unscrupulous A.I.
One of the trends we are witnessing in the 21st century is the rapid rise of artificial intelligence (AI). There are plenty of frightening prospects for AI that have been well-publicized, particularly in the area of Deep Fakes. However, the AI threats to the banking, investing, and currency realms have not yet been fully appreciated. For now, AIs are being directed by human actors, within a limited range of capabilities. The incremental advances in program trading since the 1990s have just been baby steps. But as AI progresses, the scope of influence for AIs will surely increase. Consequently, the rate of change will probably occur at an alarming pace.
Imagine a tech corporation mogul setting an AI loose in the financial arena, with an investing budget in the hundreds of millions of dollars, just vague instructions, and no moral compass. The A.I. is simply told: “Make me a lot of money.” AIs gather knowledge in a geometric progression. They are active 24 hours a day. They can make lightning-fast market trades. They are not bound by a conscience. If an AI makes trades that destroy a century-old company and that results in thousands of layoffs, it could care less. It has no scruples. If an AI makes farm commodity trades that result in huge shortages and a famine, it could care less. It has no scruples. If an AI makes trades that give an advantage to a foreign country, it could care less. It has no scruples. If an AI makes a series of trades that accumulate the lion’s share of a commodity, it could care less. It has no scruples. If an AI makes a series of trades that ruin individuals, companies, or even entire nations, it could care less. It has no scruples. If an AI makes a series of trades that ruin individuals, companies, or even entire nations, it could care less. It has no scruples. If an AI makes a series of trades that result in another country instituting sanctions, tariffs, or trade embargoes, it could care less. Again: no scruples. And no patriotism. Nor any root loyalty. In essence: no conscience, whatsoever.
The key takeaway from all of this is that the advent of full-scale, fully-empowered AI in banking, corporate investing, commodities trading, and currency trading in the next few years will undoubtedly lead to huge swings in markets, at an increasingly rapid pace. If you think that markets are volatile now, then just wait until AIs are at the helm. Imagine an AI manipulating credit derivatives with just profit as its key goal, regardless of the damage that it does to the investors in countless banks, credit unions, hedge funds, insurance companies, or pension plans.
I have spelled out the preceding to illustrate that living in the age of AI will be incredibly hazardous to the majority of intangibles investors, and even to the holders of fiat currencies. (“Money” that is not silver or gold or freely redeemable in silver or gold is an intangible.) With AIs making the trades, watch out! Your life savings could be wiped out in just a few hours. Your nation’s currency unit could suffer a death blow on the COMEX and be subsumed in just a few days.
Investing In Your Education
I’d like to end this essay with an aside: In my estimation, there is only one intangible investment that comes close to investing in a tangible, and that is investing in your own education or the education of your children. A well-educated individual betters himself and hence his prospects for earnings–whether self-employed or employed by others. That is why I’m a proponent of both homeschooling and continuing education well into adulthood. One of my lifelong friends was conferred a Doctorate (PhD) by the London School of Economics when he was 54 years old. That is commendable. Once a body of knowledge is between your ears, you own it. Only senility can take it away. Personal knowledge is invulnerable to market cycles or currency fluctuations. It is also fully portable, and cannot be confiscated.
That, in a nutshell, is my tangibles investing rationale. – JWR