Gem of the interview:
Why we’re currently experiencing inflation & deflation at the same time: our monetary policy is pushing more and more money into short-term investments, driving up the price of the things we use today (food, fuel, etc) and and lowering prices of the things we finance over longer periods (like houses)
Another view of this is supply an demand. Food and fuel are limited commodities in a finite world with an increasing population. Houses can generated in an almost unlimited fashion. The exception to lower prices for things we finance over longer periods of time is farmland.
jturbo68 hit on a key point for me:“I think one can potentially sidestep the problem (perhaps) by going to gold and waiting for things to stabalize, or by becoming more self reliant in terms of Land, Food, Water and the like.
If one goes to Gold, then the play would appear to be a bet that after 10-20 years of riding it out, the world will stabalize and there will be cheap investments to be had by converting the gold. Another assumption is that things are stable enough in general to live while the transition is taking place.
If one goes to Land and self sufficiency, the play would be more along the lines of a belief that things may not transition to recovery mode for a long time and that a different way of life is needed. With this case, a way to hopefully survive the transition is needed.
Of course, one can persue both strategies as a hedge.”
I would like to hear other CM’ers to weigh in on this.
If you get in touch with support@BullionVault.com they’ll tell you the US firms which are currently administering 401Ks in gold at BullionVault. I can’t remember who they are. Paul Tustain
Paul Tustain exercising my right of reply :)Internet failure. We use the internet to communicate. Your gold is not stored in the internet, it’s stored in a vault. The internet is a remote communications mechanism, and quite a good one. We can connect with 1,000 customers at the same time, with only about 20 staff. That’s much better than phones. People don’t usually ask what happens to our world if the telephone systems fail. (And they’re all digital now). The point here is that your gold survives, and we survive, if the internet fails. I expect we’d get quite a lot of people visiting our office, and of course communication would be harder. But as a gold holder you are better placed than almost anyone. Your gold is in physical form in a vault. We retain a hard copy of every customer’s id. The failure of the internet doesn’t change that. Neither does a widespread digital system meltdown. So, you are safe, but things would become inconvenient and slow because we’d be crocked by stone-age communications.
I’ll discuss some fraud aspects now. Our first defence is transparency. Every day we publish the bar lists which are issued by Via Mat, a third party. Next to it we publish a list of all our holders. The two match to the gram. On this public page - which anyone can look at - your holding is listed against your public nickname, which only you know. So you know that your gold is included in the count, and you know that anyone whose gold was not included would be making lots of noise. BV is the only custody business in the world which does this daily public reconciliation. It is the only gold business which ever does a reconciliation down to client level. That should give you reasonable confidence that as of yesterday things were solid.
So what about the last 24 hours? Well, there are several extra safeguards. The first is a contractual restriction on withdrawal. ViaMat are not allowed to remove gold from the vault without first checking that on our website’s front page the withdrawal has been openly declared 24 hours before it is actioned. And that public declaration identifies how much gold is being removed, and the nickname of the person whose gold is leaving. So you can then go straight to the daily reconciliation to see that they have that gold. That’s the first control. The second is a sort of catchall. Under no circumstances are ViaMat ever allowed to move more than 5% of the gold out of a vault on one day. On top of that there are private controls which mean that at least five individuals from two separate companies have to acknowledge a withdrawal before it is allowed to go ahead.
Now, what if the gold is lost or stolen. That is covered by the insurance. Insurance is the major part of the cost of the custody service. The storage contract with Via Mat contains a warranty by Via Mat that the insurance refers exclusively to BullionVault owners’ gold, and that all the value arising on a claim would be paid to BullionVault. As regards the length of cover it is standard procedure for Vault operators always to renew insurance and keep it current. It’s another contractual responsibility of Via Mat or - I believe - any other accredited professional bullion market vault.
The gold is insured with Marsh - one of the biggest insurance companies. Their logo is on the evidence of cover we publish. They are participants in the Lloyds marketplace. As I think you noticed we publish the evidence of insurance on the site. You are right to question exclusions. Nuclear attack is excluded - for example - on all the insurance agreements I’m aware of in the bullion industry. I’ll come to what we do about nuclear attack in a moment. But while we’re on insurance the reality is that all insurance depends on the vendors creditworthiness. So we are at risk. We are at risk that the gold is stolen at the same time as the insurance company goes belly up. The two could be causally related too! But these markets do re-insure to spread risk, and I’m satisfied that in Marsh Via Mat have gone to the right place. Does this make us all 100% safe? No. Of course not. I do not believe any form of savings or security can be 100% safe. The best we can do is go much further than anyone else, be very transparent etc. Here are a few more of our measures.
We send assayers in to check all the bars every year. They report directly to the auditors, not to us. The auditors publish on their own site (where we couldn’t tamper) their report on our own systems, as well as the assay report received from the assayers. Both are 100% independent of us.
We send out to two secret locations a full listing of all BV holders, every day. The listing location is separated by 1,000 miles. The network addresses of the files are written in sealed envelopes held at our auditors and the vault operators. But the files themselves are deeply encrypted, and only our lawyers have the passwords (in Escrow) held in London and New York, only to be released - and only to the auditors and Via Mat in that order - in the event of our annihilation.
There are other important security issues too. Our Burglar Alarm systems and your Linked Bank Account are important. So is our use of international vaults, our instantaneous settlement (sell in Switzerland, buy in New York takes less than a minute) which means if you start getting nervous about one country you can switch quickly (in seconds) to another. There’s a shipping right between international vaults too, so do check them out.
More importantly though we must come back to 100% security. It does not exist. I want to find the strongest compromise between security, accessibility and cost effectiveness. I think BullionVault’s insured, Swiss stored, daily reconciled, allocated, good delivery bullion in a system which offers instantaneous settlement across three linked international vaults is as good as it currently gets. We’re covered against so many risks. Bad bars, exchange controls/confiscation, theft, balance sheet failure, data centre failure, unexpected miltarism, office annihilation - and you’re even very safe from having someone guess your password! There’s not much they can do but sell your gold and send the money back to your linked bank account, and when they try the Burglar Alarm will sound, telling you on your cellphone that someone is in your BullionVault account…
It’s not perfect because nothing is. But it’s a whole lot safer and cheaper than owning coins at home, just check out the insurance rates if you’re not sure about that! BV insurance is included in your custody charge at 0.12% per annum. You need to get a quote for a coin hoard to compare. And local storage (i.e. in your own country) has proven the undoing of many an investor who saw the economic writing on the wall, but didn’t have access to the sort of international services we can now so easily locate and use via the internet.
I hope that covers most of it. If you’d like to talk further I’m in the office most days, and when I’m not my staff will be pleased to answer your questions.
Paul Tustain. BullionVault
You are right I was not near Argentina. My business partner was though. He went for a holiday to Buenos Aires, because we’d been discussing what life would be like in an economic meltdown. He found it extremely agreeable. I guess part of that was because he wasn’t in a panic trying to get his money out. Your comment powerfully illustrates why you should not keep your riches at home if your country is descending into monetary chaos. Get the money out in good time. Then, when the shutters are coming down, saunter off to the airport with empty pockets. No-one will stop you.
Paul,
Do you know if your service is acceptable for within a Canadian RRSP (the equivalent of the US 401K)?
And regarding the money laundering issue you mentioned, what are the implications of transferring a chunk of Canadian dollars into your account, and then if the Canadian situation gets bad and we decide to move to say New Caledonia (who knows), what are the implications of then taking it out in another currency somewhere else?
Thanks
[quote=SailAway][quote=robbie]
Agree…very informative and useful. This interview series was good to begin with, but now it is superb.
Two questions:
- Anyone care to share any perceived negatives or potential problems with the BullionVault model?
- Is there any way for the prototypical Fidelity/ Vanguard 401K/ 403B retirement account holder to utilize BullionVault? Anyone else feel trapped?
Rob
[/quote] - I opened a BV account a few months ago and so far it has worked well for me. Being new to PM, I thought it was a great model since I didn’t have to worry about the quality of the product, insurance, Vault etc… The gold (or silver) is allocated but at the same time you can get in cash instantly 24/7 so it’s a great model I think. I was actually happy to hear that Chris also has an account, it reinforces my opinion about BV.
- My self-directed 401-K owns a BV account so that is possible for sure. So if you have an old IRA/401-K you would need to roll over them first to a self-directed one, otherwise I would think you can’t open a BV account in a regular 401K
[/quote]
Fidelity says a self-directed IRA (Roth, etc.) may only hold gold coins, not bullion. Can you point me to a resource for learning more about setting up a BV account in a self-directed IRA?
Thanks,
Rob
[quote=robbie]Fidelity says a self-directed IRA (Roth, etc.) may only hold gold coins, not bullion. Can you point me to a resource for learning more about setting up a BV account in a self-directed IRA?
[/quote]
Fidelity seems to tell people that, but the IRS Publication 590 says on page 48, under Investment in Collectibles (emphasis mine):
If you look at Notice 98-49, it says, on page 5, question C-4 (emphasis mine):
So the question is what does it mean to be in the physical possession of an IRA trustee? The Self Directed IRA folks I use have an arrangement with a Brinks storage facility. Any bullion purchased is stored in the facility under the IRA trustees name. I hope this is valid. I may just purchase Eagles for any further investments to be on the safe side since it appears the rule does not require the listed coins to be in possession of the trustee.
One place I talked to said you can set up an LLC that is a IRA trustee. You can then be an officer of the IRA trustee and can then take physical possession in the LLCs name. That one seemed really questionable and I wasn’t willing to try it.
Don’t you just love the IRS and rules designed to make you a criminal or require you to hire lawyers!
One needs to remember that there is no “perfect” way to hold gold or precious metals - every method of gold ownership is susceptible to entirely valid critiques or “down sides.” In that respect, both Bullion Vault and James Turk’s vehicle, GoldMoney, both share the same inherent deficiency. Alan Greenspan is on record as having said that gold is considered the “ultimate form of payment.” What he is referring to is the actual metal itself - not a promise to deliver the metal (however good or reliable that promise may be). Whatever strenuous objections to the contrary that might emanate from either Bullion Vault or GoldMoney about the reliability of their services (and I have no reason to doubt the veracity of any of it), those promises will never and can never live up to the standard of physical metal in one’s own possession. Despite the best of intentions, promises are merely that. While often kept, in extraordinary times promises are sometimes not kept. On such an occasion, will it matter to you, the intended beneficiary of one of these promises, whether the promise was not kept for justifiable or unjustifiable reasons? I doubt it. At the end of the day you simply want your metal.
Ironically, it is for just such a reason - the abrogation of promises - that precious metals exist in the first place. Because of this, one might even say that Bullion Vault and GoldMoney (as well as all manner of other “paper gold” contrivances such as ETFs) are antithetical to gold.
While I think Bullion Vault and GoldMoney have a place in the modern world, it’s important to distinguish that they are not - nor will they ever be - replacements for real metal in one’s possession (which, not surprisingly, has its own set of down sides).
[quote=rhare]
Don’t you just love the IRS and rules designed to make you a criminal or require you to hire lawyers!
[/quote]
What did people use to do with their time before they had to spend it all protecting themselves from the IRS?
SS
[quote=rhare][quote=robbie]
Fidelity says a self-directed IRA (Roth, etc.) may only hold gold coins, not bullion. Can you point me to a resource for learning more about setting up a BV account in a self-directed IRA?
[/quote]
Fidelity seems to tell people that, but the IRS Publication 590 says on page 48, under Investment in Collectibles (emphasis mine):
If you look at Notice 98-49, it says, on page 5, question C-4 (emphasis mine):
So the question is what does it mean to be in the physical possession of an IRA trustee? The Self Directed IRA folks I use have an arrangement with a Brinks storage facility. Any bullion purchased is stored in the facility under the IRA trustees name. I hope this is valid. I may just purchase Eagles for any further investments to be on the safe side since it appears the rule does not require the listed coins to be in possession of the trustee.
One place I talked to said you can set up an LLC that is a IRA trustee. You can then be an officer of the IRA trustee and can then take physical possession in the LLCs name. That one seemed really questionable and I wasn’t willing to try it.
Don’t you just love the IRS and rules designed to make you a criminal or require you to hire lawyers!
[/quote]
Rhare,
Thank you very much for the comprehensive response. There’s obviously a strong disincentive (social engineering?) for the public to set these entities up. That said, these gray areas sound quite perilous from a legal perspective. Do I really want the IRS chasing me? I think one needs to contemplate the level of societal decay expected in choosing the mode of storage. I am trying to find the happy medium between buying gold coins at a 7% markup and burying them (ultrasafe), and holding GLD which should be suitable under most circumstances…until there’s a problem ( fully understand the concept of unallocated paper obligations) BullionVault seems to be somewhere in the middle. Holding 95% of my net worth in a few bank safety deposit boxes seems pretty risky too (theft from bank employees…I know some of them!) . I would be very curious to know how people choose to diversify their gold “stockpiles”. CM has mentioned that he holds coins and bullion off site and participates in Bullionvault. I’m interested to know if people tend toward one mode, or actually spend the money to use many. My inclination would be to divide a hypothetical 100K as follows: 50% physical hidden on site (coins and bullion, I get nicked for the 3-7% over spot but it’s in hand) 30% BullionVault (cheaper to buy, but no guarantee you’ll ever see it again despite the best intentions) and 10% GLD ETF (easy access but still a 40 basis point management expense and no claim if the TSHTF). Perhaps 50% of the BullionVault allocation would be silver.
Lastly, I’m still looking for a way to get EXISTING holdings out of a Fidelity Roth IRA into a cost effective gold solution. I’m worried that setting up an LLC may cause future problems. Anyone else have any experience with Rhare’s method? Maybe I shouldn’t be putting any additional funds into a Roth IRA? I’m paying the taxes up front anyway so maybe I should just receive it as income and dollar cost average into one of the modes listed above from a non-IRA account. Granted I would give up some special provisions of the Roth (loans, etc.). Any one see this as a viable alternative?
Thanks,
Rob
Well said, and not only because I agree completely and poached a line from you for my prior post below :).
I’m curious to know if you ultimately decided to hold gold in the diversified vehicles listed above, or decided on a 100% in hand allocation
despite the downsides alluded to above and increased cost.
Rob
[quote=robbie][quote=rhare]
Fidelity seems to tell people that, but the IRS Publication 590 says on page 48, under Investment in Collectibles (emphasis mine):
If you look at Notice 98-49, it says, on page 5, question C-4 (emphasis mine):
So the question is what does it mean to be in the physical possession of an IRA trustee? The Self Directed IRA folks I use have an arrangement with a Brinks storage facility. Any bullion purchased is stored in the facility under the IRA trustees name. I hope this is valid. I may just purchase Eagles for any further investments to be on the safe side since it appears the rule does not require the listed coins to be in possession of the trustee.
One place I talked to said you can set up an LLC that is a IRA trustee. You can then be an officer of the IRA trustee and can then take physical possession in the LLCs name. That one seemed really questionable and I wasn’t willing to try it.
Don’t you just love the IRS and rules designed to make you a criminal or require you to hire lawyers!
[/quote]
Rhare,
Thank you very much for the comprehensive response. There’s obviously a strong disincentive (social engineering?) for the public to set these entities up. That said, these gray areas sound quite perilous from a legal perspective. Do I really want the IRS chasing me? I think one needs to contemplate the level of societal decay expected in choosing the mode of storage. I am trying to find the happy medium between buying gold coins at a 7% markup and burying them (ultrasafe), and holding GLD which should be suitable under most circumstances…until there’s a problem ( fully understand the concept of unallocated paper obligations) BullionVault seems to be somewhere in the middle. Holding 95% of my net worth in a few bank safety deposit boxes seems pretty risky too (theft from bank employees…I know some of them!) . I would be very curious to know how people choose to diversify their gold “stockpiles”. CM has mentioned that he holds coins and bullion off site and participates in Bullionvault. I’m interested to know if people tend toward one mode, or actually spend the money to use many. My inclination would be to divide a hypothetical 100K as follows: 50% physical hidden on site (coins and bullion, I get nicked for the 3-7% over spot but it’s in hand) 30% BullionVault (cheaper to buy, but no guarantee you’ll ever see it again despite the best intentions) and 10% GLD ETF (easy access but still a 40 basis point management expense and no claim if the TSHTF). Perhaps 50% of the BullionVault allocation would be silver.
Lastly, I’m still looking for a way to get EXISTING holdings out of a Fidelity Roth IRA into a cost effective gold solution. I’m worried that setting up an LLC may cause future problems. Anyone else have any experience with Rhare’s method? Maybe I shouldn’t be putting any additional funds into a Roth IRA? I’m paying the taxes up front anyway so maybe I should just receive it as income and dollar cost average into one of the modes listed above from a non-IRA account. Granted I would give up some special provisions of the Roth (loans, etc.). Any one see this as a viable alternative?
Thanks,
Rob
[/quote]
Robbie,
I used this company: http://www.pgiselfdirected.com/ to setup my self-directed 401K (with “checkbook control”) last year. I know there is another CM member who uses them as well. This is exactly the method that Rhare mentioned above except that I didn’t setup the LLC, it is not mandatory to do it. In a nutshell this is how it works:
1- You roll over your existing IRA/401K to your self-directed IRA/401K account. If you qualify for a 401K it’s a better option. You should qualify if you or your spouse has 1099 income (self employed), otherwise it would be an IRA.
2- The account is help at a brokerage firm (like Scwhab for instance) so you have access to any investment vehicles available. But you can wire money in/out (or write checks) of the account to invest in other assets under the trust name. I for instance opened a BV account and also bought a rental property, your option are really limitless so long as you follow the IRS rules. The main one being that you cannot benefit from the account otherwise it becomes a distribution. And any income generated by your investments must return to the account.
3- The account can be Roth or traditional (or even both at the same time) and if your are self employed you can continue to contribute within the IRS limits.
PGI Self Directed is just the legal firm that help you setup the account, there is a 1 time fee and that’s it. Once your account is setup then they are out if the loop and you are in control. You can still contact them for advices if you want to. You should find most of your questions answered on their web site
I hope this help.
[quote=SailAway][quote=robbie]
Rhare,
Thank you very much for the comprehensive response. There’s obviously a strong disincentive (social engineering?) for the public to set these entities up. That said, these gray areas sound quite perilous from a legal perspective. Do I really want the IRS chasing me? I think one needs to contemplate the level of societal decay expected in choosing the mode of storage. I am trying to find the happy medium between buying gold coins at a 7% markup and burying them (ultrasafe), and holding GLD which should be suitable under most circumstances…until there’s a problem ( fully understand the concept of unallocated paper obligations) BullionVault seems to be somewhere in the middle. Holding 95% of my net worth in a few bank safety deposit boxes seems pretty risky too (theft from bank employees…I know some of them!) . I would be very curious to know how people choose to diversify their gold “stockpiles”. CM has mentioned that he holds coins and bullion off site and participates in Bullionvault. I’m interested to know if people tend toward one mode, or actually spend the money to use many. My inclination would be to divide a hypothetical 100K as follows: 50% physical hidden on site (coins and bullion, I get nicked for the 3-7% over spot but it’s in hand) 30% BullionVault (cheaper to buy, but no guarantee you’ll ever see it again despite the best intentions) and 10% GLD ETF (easy access but still a 40 basis point management expense and no claim if the TSHTF). Perhaps 50% of the BullionVault allocation would be silver.
Lastly, I’m still looking for a way to get EXISTING holdings out of a Fidelity Roth IRA into a cost effective gold solution. I’m worried that setting up an LLC may cause future problems. Anyone else have any experience with Rhare’s method? Maybe I shouldn’t be putting any additional funds into a Roth IRA? I’m paying the taxes up front anyway so maybe I should just receive it as income and dollar cost average into one of the modes listed above from a non-IRA account. Granted I would give up some special provisions of the Roth (loans, etc.). Any one see this as a viable alternative?
Thanks,
Rob
[/quote]
Robbie,
I used this company: http://www.pgiselfdirected.com/ to setup my self-directed 401K (with “checkbook control”) last year. I know there is another CM member who uses them as well. This is exactly the method that Rhare mentioned above except that I didn’t setup the LLC, it is not mandatory to do it. In a nutshell this is how it works:
1- You roll over your existing IRA/401K to your self-directed IRA/401K account. If you qualify for a 401K it’s a better option. You should qualify if you or your spouse has 1099 income (self employed), otherwise it would be an IRA.
2- The account is help at a brokerage firm (like Scwhab for instance) so you have access to any investment vehicles available. But you can wire money in/out (or write checks) of the account to invest in other assets under the trust name. I for instance opened a BV account and also bought a rental property, your option are really limitless so long as you follow the IRS rules. The main one being that you cannot benefit from the account otherwise it becomes a distribution. And any income generated by your investments must return to the account.
3- The account can be Roth or traditional (or even both at the same time) and if your are self employed you can continue to contribute within the IRS limits.
PGI Self Directed is just the legal firm that help you setup the account, there is a 1 time fee and that’s it. Once your account is setup then they are out if the loop and you are in control. You can still contact them for advices if you want to. You should find most of your questions answered on their web site
I hope this help.
[/quote]
Thanks very much! I’ll look into it.
Rob
So if I’m understanding this correctly, metal held through BullionVault would not be prohibited because one is NOT technically holding “metal” in the self-directed IRA? RobWhat are Prohibited Investments?
The Internal Revenue Code does not specificallyauthorize investments within an IRA; rather, the code outlines what types ofinvestments are not allowed. The Prohibited Investmentsinclude:
Artwork
Rugs
Antiques
Metals
Gems
Stamps
Coins
Beverages
Stock in a S-Corporation
And certain other tangiblepersonal property
When I setup the 401K I discussed with the attorney about holding PM using BullionVault or GoldMoney and it was not a problem. The account is open under the 401K trust name and it seems to be enough to meet the IRS rule.According to the attorney anything that is not prohibited is allowed. There are also the notion of “prohibited transactions” that essentially defines how you cannot (or some family members) benefit from the plan until you reach the distribution age.
As in 1933, the USA are financially in great danger, investors are encouraged to buy gold and the price of gold is rising . But we must remind investors of a historical event mentioned by only a few History books, the worst trick a former US president could play on the American citizens :
“The Gold Confiscation Of April 5, 1933
From: President of the United States Franklin Delano Roosevelt
To: The United States Congress
Dated: 5 April, 1933
Presidential Executive Order 6102
Forbidding the Hoarding of Gold Coin, Gold Bullion and Gold Certificates By virtue of the authority vested in me by Section 5(b) of the Act of October 6, 1917, as amended by Section 2 of the Act of March 9, 1933, entitled
An Act to provide relief in the existing national emergency in banking, and for other purposes~',
in which amendatory Act Congress declared that a serious emergency exists…”
In 1933, the USA was in danger of financial bankruptcy . Thus gold was confiscated from the citizens for a small money compensation, reduced to nothing by inflation, and the country’s economy could rebound at the expense of the citizens .
Today, the US economic circumstances are the same as in 1933 . In 2011, the economic and financial situation of the USA and all the Western countries is similarly in danger and Roosevelt’s Gold Confiscation Act is still in use …The question is not whether the Federal Government will use it but when they will use it .
Should sensible investors buy gold likely to be legally confiscated at any time to save the Federal Treasure ?
“If the American people ever allow private banks to control the issue of their money, first by inflation and then by deflation, the banks and corporations that will grow up around them, will deprive the people of their property until their children will wake up homeless on the continent their fathers conquered.”
- Thomas Jefferson (1743-1826), US Founding Father.
All you need to know about the NWO here:
The monetary system is ALWAYS in grave danger… it is only as strong as the weakest part of any society. Buying and selling gold and silver bullion is a great hedge, but never a sure bet. Hint, places like eBay are the "great equalizer"
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