Thursday, August 29, 2013

The Other Precious Metals

Lately I have written about the more famous and prized of the precious metals, today I want to take a fast look at other metals, precious to me and mine, that are worth thought and entertainment.  These, of course, are steel and lead.


We are having an excellent year selling bearings (made of very precious "52100 steel") in Peru.  Bearings earn us money, and so are precious!  They even might have a Relative Value...  As of last week, August was our best selling month ever:

XMonth Total_Sales 2011 2012 2013
01-Jan $269,546.94 $58,127.08 $126,166.70 $85,253.16
02-Feb $165,923.97 $68,872.18 $42,748.30 $54,303.49
03-Mar $314,224.48 $72,955.65 $123,310.15 $117,958.68
04-Apr $261,498.87 $56,166.43 $65,222.28 $140,110.15
05-May $286,818.82 $111,495.39 $87,667.94 $87,655.48
06-June $313,603.64 $80,380.35 $106,563.17 $126,660.12
07-July $265,510.18 $72,940.05 $143,142.52 $49,427.60
08-Aug $326,300.09 $85,978.95 $63,859.25 $176,461.89
09-Sept $236,831.64 $85,842.93 $150,988.71
10-Oct $183,862.02 $97,094.43 $86,767.58
11-Nov $124,654.14 $68,989.57 $55,664.57
12-Dec $142,333.36 $67,523.49 $74,809.87

August will likely close out at some $195,000 (Friday and Saturday are holidays there), August looks like it will beat our previous best month by around 25% (see the two months highlighted above).

Even though steel is essentially ubiquitous, in bearing form it generates income for us, we bring these needed pieces into Peru, and our customers buy them.  Peru being slightly more capitalist than the USA (yes, I argue that it is), our customers have the option of taking their business elsewhere...  But, they buy from us.  Why?  Because our quality:price ratio is favorable to them.  Here are the most popular pieces from August only:

Codigo Qty Sales
50-E90A/40202   665 $25,186.02
02-6007-RS      5210 $17,755.88
50-E100A        167 $7,714.85
11-IJ-212001    119 $6,051.27
50-54KWH02      238 $4,814.24
50-ATP-BD07     446 $3,958.06
50-NAVARA 4X4   53 $3,318.36
13-38BWD22      214 $2,983.38
50-DAC387139    545 $2,848.83
50-28BWK15      148 $2,779.39
50-DAC458048    199 $2,571.21
02-6000-2RSC    1633 $2,486.95
02-68149G/11    559 $2,468.54
11-IJ-111001    171 $2,419.30
50-ATP-BD09     259 $2,118.80
50-DU5496-5LFT  84 $2,048.17
02-6007-ZZ      600 $1,862.40
50-ATP-BD04     157 $1,756.12
50-ATP-BD03     216 $1,729.58
50-ATP-BD06     195 $1,727.64
50-512371/42450 39 $1,699.58
50-ATP-BD08     205 $1,680.72
02-6205-RSC3    696 $1,672.53
02-6204-2RS     683 $1,476.04
50-3DACF026-20  35 $1,429.09
50-ATP-BD13     117 $1,423.01
50-ATP-BD11     163 $1,387.17
50-27BWK04      98 $1,384.48
50-DAC428240    125 $1,365.48
50-ATP-BD10     155 $1,348.49
13-510055       88 $1,347.19
02-DT-255237    89 $1,332.86
02-DT-498448    50 $1,331.60
50-DAC255237    250 $1,256.98
02-6302-2RS     627 $1,235.08
50-52730-38000  40 $1,229.87
50-S11-3301030  49 $1,163.67
50-27BWK06      56 $1,162.99
02-6002-2RS     753 $1,069.79
50-27BWK04-2A   52 $1,030.90
50-ATP-BD12     114 $1,016.58
50-512374       20 $1,013.08
50-DAC498448    94 $1,006.10
11-IJ-113015    23 $1,005.87

All pieces highlighted in yellow are KBC pieces that went on sale last week, and almost all of them are our bread & butter pieces for the Daewoo Tico.  The two pieces highlighted in orange are KBC as well, but very few makes these special pieces (for Korean vehicles).

The pieces highlighted in purple (and with prefix "50") are our recently arrived Delfu pieces (see my containerload of bearings piece here: that are special pieces that they made for us, we asked them to make them, and they did!  We did not have to offer to buy 5000 pieces either...  Delfu piece 50-E100A (third best seller in August) is a new piece for us (for Nissan) and Delfu piece 50-S11-3301030 is a new piece for us for a Chinese car called the "Zotye" (think "sautier" in French).  Our company is venturing into new territory, we are bring surpise to Peru, new pieces that no one else has done.  (I will likely have more to write on the notion of NEW and SURPRISE in business when I finish George Gilder's new book: Knowledge and Power, review coming as soon as I can finish it!)

A picture of some products made of precious 52100 steel:

Top left piece is a "Third Generation" wheel bearing ("Hub and Bearing Assembly", for rear wheel of Hyundai Sonata), if you look carefully you can see two flanges with holes.  Top right is a "Second Generation" piece (rear wheel Hyundai Accent).  Both Hub & Bearing Assemblies are Iljin (Korea).  Lower right is a ball bearing, by careful inspection you can see a groove around the outer surface (transmission of a Hyundai car).  Bottom in the middle is a "Generation One" wheel bearing (a "double row angular contact" type, this one for front wheel of Hyundai Accent).  The lower left is a tapered roller bearing ("Timken" type), it is two pieces: a "cone" and a "cup".  Here is a more detailed look at that last piece:

The narrow end of the "cone" fits right into the cup.  This type of bearing, for reasons I do not fully understand, are often harder for us to get than any other type.


In addition to the unfortunate boating accidents and other tragic losses that many of us have read about losing precious metals, there is one other consideration: defending our precious!  Guns & ammo are owned (and used!) by some 80 million Americans, with about as many firearms here as there are people (300 million plus).

Ownership of firearms is protected by the Second Amendment to the Constitution.  Woe be unto you, confiscators!  Molon Labe!  CATIYMF's!

Yesterday a friend and I went "training" with our weapons (this had absolutely nothing to do with entertainment or fun or anything, NOTHING!).  We both brought an "assault weapon" (mine an AK-47"semi-auto and he brought his Bushmaster AR-15 clone) and a sidearm (my a 9 mm Beretta, he brought his .38 Special).  I shot some low quality (but cheap!) Russian ammo, Russian AK bullets are made of steel (not lead).  Steel is cheaper...  Steel, however, offers one property that lead does not: it is (almost) armor-piercing!  But shooting cheapo Russian ammo makes a gun dirty fast, and it was time to clean my AK anyway (I have shot almost 2000 rounds through it, this was the third time cleaning it).

Here are my two "precious metals delivery devices" (note genuine Russian sling on the AK and brown rubber recoil reduction sleeve at the butt-end):

My AK "field-stripped":

Some things to note:

1) It is a lot easier to strip the rifle than put it back together...
2) I could not have done this without the instructions (upper right)
3) It took six gun patches (and gun oil) and four napkins for me to get everything clean
4) There are seven pieces, that includes the cleaning rod (left)

It took me about an hour to strip, clean and re-assemble the rifle.  Check out this video of Russian high school kids who do it much faster (a part of their HS curriculum):

And what do our high schoolers learn?

My Beretta, field-stripped:

Any well prepared gun owner knows that it is important to have a lot of rounds loaded up and ready to go (you do not even have to be from Texas to know that, but it helps!).  So every time I go to shoot (and afterwards clean my weapons), I try to reload magazines...:

The bottom five magazines ("clips") hold 10 rounds each of my 9 mm Luger rounds, the capacity of each magazine is 13.  The top two "banana magazines" at left hold 7.62 * 39 mm ammo, "Fiocchi' brand (made-in-Hungary), if you look closely you can see the cartridges are made of brass (yellow color).  The upper-right two magazines hold Russian steel-cased (and steel bullets w/ a copper coating) ammo.

The total number of rounds loaded into the above magazines is 130.  I have a few more loaded as well, but I would be in "last place" among red-blooded Texas guys, I used to live in Texas (long ago) so I would know, and my Texas friends tell me that not having thousands of rounds loaded up makes one suspect...

Saturday, August 24, 2013

Gold, Fishez! -- Is A Reset Coming Soon?

                                            "All the gold in California
 Is in a bank in the middle of Beverly Hills 
 In somebody else's name.
 So, if you're dreaming
 About California
 It don't matter at all where you played before
 California's a brand new game."

-- Gatlin Brothers, 1979

There have been a few developments in the world of gold lately that I thought were worth taking a look at.  Two blogs I regularly read have somewhat raised the possibility that big and ugly changes are dead ahead, and that buying gold was the best defense.

Also, in recent weeks and months I have run into more bloggers who think gold will indeed have its reset to the $55,000 range.  There are now four knowledgeable bloggers who are looking at $50,000 or higher gold prices!


FOFOA lately (in various pieces so far in 2013) writes that he thinks that we are fairly close to his Freegold reset.  Snippets (FOFOA in beige/olive background, bold emphasis mine) from his latest piece, and this piece is relatively short! (Link here:  In this article of his, (his blog's fifth birthday, by the way), he is explaining how it is at the very top (central banks) there appears to be a growing gold supply problem, and what this will mean...  And remember, this is a very short version (smile, LOL...):

So once those reserves at the top are gone, what happens?  

(R. Mix: comment: next paragraph, in italics, is FOFOA's follower "Edwardo" (part of an email from Edwardo to FOFOA), recently featured on RT television (!) discussing Freegold, the show was broadcast worldwide...)

"The top tier not getting physical will require something like a Def Con 1 response. The bombers will have to be let loose and the world as we knew it can never be the same again." 

Yes. But do you see how the Def Con 1 response has a lot of moving parts and detailed resolution? We can't know exactly what has transpired at the top, except for what ANOTHER alluded to. But just imagine that 100,000+ tonnes of promised or at least expected gold (that's marginal-flow-gold, not global-stock-gold, so a simple doubling of the price would never suffice) never flowed. 

(R. Mix comments: (1) When FOFOA writes the "top" here, remember that he means the central banks, only those who own tremendous amounts of physical gold and (2) that 100,000 tonnes is the amount "expected, but not produced" since anonymous "ANOTHER" predicted all of this long ago...)


What is the price that will unlock the gridlock at the top level, convincing those who have no reason to sell and every reason to buy more to sell? Who can act first, and what would that action necessarily entail? Here's what I think. The first to act would have to not only understand what is happening, but also be willing and able to sell or buy any amount of gold. This eliminates the Giants, SWFs and oil states because, even though they have plenty of gold, they don't have the printing press the way the CBs do. And that's why I think the CBs will be the first to act, probably under the auspices of the BIS. 

In order to break the gridlock, they will have to announce a very high spread, a bid price and an ask price, either of which can be voluntarily accepted by the other top "savers", the Giants, SWFs and oil states, or "arbed" by the top "dealers". It would look something like this: "We will buy any amount of your gold that you are willing to sell at a price of $55,000 per ounce, and we will sell you any amount of gold that you would like to buy at a price of $56,000 per ounce." How's that for a Def Con 1 response? 

Here's the key. Which do you think you need to lend credibility to a really high revaluation price, a buyer or a seller? The answer is you need a buyer, and not just any buyer, an unlimited buyer. The physical gridlock requires a physical seller to unlock it, but the revaluation that will make that happen requires an unlimited buyer. So the "first to act" can't just be a willing seller at a high, revalued price, it must also be a willing buyer at that same price and in any quantity offered. 


I think the draining we see today at the top via daily GLD inventory updates is just buying enough time to divvy up the few remaining scraps. At some point you're giving away the scraps by buying more time to divvy up the scraps, so where's the point of diminishing returns? Is it now? Is it next week? Who knows?

An even shorter version ("Robert's Version") is that once the flow of gold stops at the very top, THAT is when all Hell will break loose, and some BIG player (central bank level) will offer to resolve the gold flow problem in one fell swoop, raising the price of gold (by offering to buy it) to what seem now to be astronomical levels.


Jim Willie (link here: writes that gold will sharply rise to $5000 or more, but for a variety of reasons.  He distills this down into 13 reasons in his latest (free) article.  I will examine the parts of his article that seem to offer reasons why his big gold price increase (to a “modest” $5000 - $7000) is inevitable and likely to come soon.  I break down Jim Willie’s 13 reasons into two major reasons (or groups of related reasons):

Banking system meltdown: a toxic combination of accounting irregularities (very bad), massive thefts (including allocated gold bars), interest rate derivatives gone bad (and now with interest rates rising…), fractional gold management and bank “Bail-Ins” (in which customers take a big loss of money in their accounts.

Geopolitical/ financial reasons: a combination of the BRICS setting up a new trading system to exclude the US dollar, the rejection of US treasury bonds (the BRICS buying gold and infrastructure with the Treasuries), other BRICS measures that will weaken the USA’s financial position and the weakness of or abandonment by traditional allies of the United States (Germany and Saudi Arabia).

OK, I am not nearly as well connected as Jim Willie is, nor am I close to a professional geopolitical analyst, but I would have to agree with him re the delicacy of our financial position.  I would disagree with his strong relative bullishness on the BRICS…  India, Brazil and South Africa are much weaker than he portrays (IMO), and while China and Russia are indeed powerful rivals, I contend that they are not natural allies in the longer-term and further that they have their own problems (serious demographic, environmental and social) that will bedevil them more than he claims.


Below are links to two more bloggers who also believe that a reset to much higher gold prices is likely.  Each has their own "take" on how gold will move up.  BOTH of the below use similar, but not identical, logic in their analyses.  Both write shorter pieces than FOFOA, and so might be more accessible for people who want a shorter version.  BOTH are highly recommended if gold is a part of your investments or savings:

^--- I need time to examine his take and how it may differ or complement FOFOA's.  He does take the gloves off, pow!

A snippet from his blog (gray background) describes almost identically (with different words) FOFOA's idea of the "Superorganism" not needing gold (and so perfect for using as a Store of Value) while silver is very much needed, and so hoarding of silver in an important sense somewhat damages the economy (by driving up cost of silver used in so many products):

From an investment standpoint, the key merits for Gold is that it’s completely dispensable, and the key merits against Silver is that it’s completely indispensable.

In this way you can now see that Silver is far more valuable than Gold, and therefore it must be protected and stabilised, otherwise we risk revolt. Gold, on the other hand, is completely free to bob up and down.

So Gold is precious in its ability and capacity to support limitless Debt/Liability within the global financial system, and Silver is precious in its ability to support Modern Standards of Living.

Even Jim Sinclair (aka "Santa", "Mr. Gold". "St. Clair", etc.) is now writing that gold will go to $50,000, although you will have to dig around on his site to find his logic, it is NOT quite the same as FOFOA's logic. This is a new position for Sinclair, that gold will rise so high.

Q:  Who is "most" correct of all of them?
A:  Who of us can predict the future...?


"All the Gold in California", live from 1979 in HD!  Mandatory listening if your knowledge of American music is deficient...  This is the kind of song that I will sing in the shower if no one is around...  From the days when people knew how to sing, use their voices!  *Click* on the link below if the image does not play the song.

Wednesday, August 21, 2013

Relative Value -- Part Two

In my last article I looked at the relative value of gold vs. the other precious metals.  In this article I would like to explore the concept of relative value in a larger variety of investment contexts.

As I have done on occasions before, I am performing a "Thought Experiment" (actually a few), many of these topics I have looked at in a somewhat cursory manner, but they do illustrate the points I am trying to make, that there is value in examining "relative value".

Before I get into specific examples, I would like to make some comments on relative value in general.  First, this term "relative value" can be a little slippery to define well, in each case here I will try to point out properties or circumstances that might be unique in what I am examining,

Second, much of this is subjective, hard for me to say "this is fact"...  I personally believe that this subjectivity pervades almost all of these comparisons, and comparing relative values is the bulk of what I will examine here now.

Third, because of the subjectivity, and also because of uncertainty in general (and of course the possibility that I may read some things wrongly), I continue to believe that diversification is the best and smartest thing that most investors can do, unless they are extremely talented or extremely connected.

While I think the above notions of definition, subjectivity and uncertainty (and I will refer back to them various times) need to be kept in mind as we explore these topics, I think there has been enough navel-gazing, so let's get going...!


I recently (three or so days ago) a nice comment on Greece vs. South Korea.  Alas, I do not remember where I saw the comment, but it was a great comment!  My words, also expanding on the comment:

"What does South Korea export?  Cars, electronic chips, cell phones, ships and quality bearings [OK, I added that last one].  What does Greece export?   ...   ...   ...  Ah!  Greek yogurt (although much "Greek" yogurt is US-made), cheap wine, and olive oil."

That (original) comment stuck with me over these days, and was the creative spark for this article.  But, as I did some research, I found that a South Korea vs. Greece comparison was not so good, very unfair to Greece.  South Korea has 50 million people, Greece but 11 million.  But I could not find a single European country that really was reasonably comparable to South Korea (population, GDP / capita, etc.).  Spain comes kind of close, but not close enough for me.

So, this being a Thought Experiment, I will make up a country!  (Please note that subjectivity and uncertainty mentioned above now come into play, these concepts matter, even in the context of a "Thought Experiment")  Actually this made-up country might very well be easy to visualize: Itaña!  Which is my little hybrid of Spain and Italy.  I know, I know, purists are going to hate and/or attack this methodology, but this is for illustration and thought...  Both countries are reasonably similar to each other, both share some characteristcs with Korea, let's define "Itaña" as the average population, GDP / capita and certain other characteristics of two countries (info from wikipedia):

Natural  Destroyed in GDP /
Country History Population Resources Recent Wars? Capita
South Korea impressive history 50,000,000 not much very much $33k
"Itaña" VERY impressive history 53,000,000 not much yes, but less so $30k

(South Korea DOES have an impressive history, they even invented their own alphabet in the 1400s, "Hangul" (한국어), and while alien-looking, the written language is phonetic, more so than English...)

So, in some ways these two "countries" are roughly equal by some objective measures.  South Korea and "Itaña" both have great food too, yum...  ("Itaña", however, IS more geared up for Western tourists, with more to see.)

Now let's do some comparisons (differences):

South Korea

-- Exports cars (flagship Hyundai, the ONLY car company Toyota worries about)
-- Exports lots bearings of high quality (I wish their capacity was higher!)
-- Exports cutting-edge electronics
-- Bearing factories extremely modern (inc. robots, see my May 2012 articles)
-- Capital city Seoul as free Wifi everywhere, including outside
-- Children bust their asses in school, consistently perform near the top worldwide
-- Many work 60 hours per week (that is what I saw, see my May 2012 articles)


-- Exports some cars, but...
-- Exports some bearings, but not nearly as many as Korea
-- No significant high-tech exports I know of...
-- Bearing factories are old & "Dickensian"
-- Capital cities do not have free Wifi in most places, most hotels & Starbucks do though
-- I don't know how well their children are educated, "probably" similar to ours...
-- They do not work 60 hours in Italy and Spain...

Which "country" adds the most value to the world's GDP (put aside cultural matters greatly favoring Italy and Spain)?  South Korea.

Conclusion: by this analysis South Korea has higher "Relative Value" to the world's GDP.  South Korea is probably even more "green than Italy & Spain as well, so there!  :-p


Stocks and bonds have been compared so often to each other that some discussion of these two asset classes is almost required in an article like this.

Long ago, stocks often had high dividends to support stock prices, because their earnings were so volatile that without the inducement of high dividend yields, investors often would not hold them.  Some fifty years ago, this tradition died out to a large degree.  Dividend yields went down as investors preferred to bet on the rise in stock prices ("appreciation", which typically was higher than bond yields) as well as allowing the companies to better invest those funds for the future (instead of handing over the cash to shareholders).  Gains in share prices were (and are) typically taxed at a lower Capital Gains tax rate, an additional reason for companies to keep dividends low.

Bonds in the meantime then went on to become better yield investments, with both a higher yield and somewhat better security of payment.  Bonds were more suitable for those in retirement, as retirees could count on a fairly certain income stream.  Inflation came in the 1970s and caused a lot of pain for bond owners (as interest rates went up, then-current bond holders lost out as the value of bonds went down), but for some, the interest rate declines int he 1980s made them a LOT of money (my cousin did very well loading up on Treasury Bonds when their rates were in the mid-teens).

How about now?  Mmm...  All I see is danger everywhere!  Maybe some opportunity too (the old saying is, after all, "Buy when blood is running in the streets!").  Entry back into recession is very possible (perhaps we never left the 2008 - 2009 Great Recession).  QE-to-Infinity is likely, but there is talk of a "taper", where the Fed may cut back on their $85 billion / month bond-buying program...  Would the taper destroy the stock market?  Would QE666 destroy bonds and the dollar?  We now enter the playground of subjectivity and uncertainty mentioned near the beginning of this article.

My guesses?  Bonds look to me to be extremely dangerous.  By historical standards bond rates are still very low.  Even though rates have moved up a fair percentage amount at the long end (and hence much money has been LOST, anyone reading THAT anywhere???), we are still well below historical norms on, say, the 10-Year Treasury (now at some 2.83% plus or minus).  But, stock prices in the coming near and medium term future are quite uncertain IMO..., lots of risk of BAD earnings if the chips fall badly for the economy...

My verdict of stocks vs. bonds?  Stocks NOW probably offer a bit more Relative Value than bonds.


We own an interesting pair of investments that can be compared to a degree as well.  And they both pay us about the same amount of income (for a few more years anyway).

Our company in Peru, Ameru Trading del Peru S.A., owes us money which they are paying down like they would pay a mortgage.  We receive 5%, which is perfectly OK with me (and our tax accountant is OK with the structure of this).  That 5% is secured by the whole company, of which my wife and I own the bulk.  So, we get 5% on the outstanding loan amount for several more years (that interest can go up if 10-Year yields go up, that is in our loan documentation).  But, once that loan has been paid off, well no more income (at least from the loan, maybe I will ask to be paid then!).  And we own (most of) a profitable debt-free Peruvian company.  This is a bit like a Private Capital investment.  But, the investment is in Peru...

We also own a small commercial rental property in a smallish Southern city (not here where I live).  The rent is pretty comparable to the amount we get from Peru each year.  We collect rent from two tenants, but the "quality" of the leases is not so high (a "high quality tenant" would be a solid large company like a CVS with a 30 year lease, etc., my tenants are not THAT good: shorter lease and a small company).  And of course we own the property (well it is in a trust for the family, but still...).  OK, so we own a property that throws off an income and could be sold.  Yet, this property is not as valuable as one that threw off the same rent (the "CVS" example) as a higher quality tenant is worth more -- more certainty!

Which of these investments has a higher "Relative Value", assuming things like the value of the assets (company in Peru vs. real estate in the southern USA) were also similar like the incomes are?  I do not know without having to do more work and make more subjective judgements...  In this case, we'll keep them both, diversification...


Diversification brings me to my last example of comparing Relative Value.  This one may put me on a "Hate List" or two as well (LOL...).  And that is "All Inn Gold" vs. "Broad Diversification".  I will use equations from probability to illustrate my idea of which is higher, even though subjectivity and uncertainty raise their ugly heads again...  I am going to use equations from probability of expectation, which is kind of averaging a guess based on return expectations vs. risks.  And, I will not know the results of what I am about to do until they are done!  Oh, how exciting (I LOVE probability, as long as I can understand it...), let's get started!  We will start with All Inn Gold, easier calculations first!

(Actually, I know of only ONE person who is All Inn Gold, but that doesn't matter for the purposes of this analysis, FWIW, this is important to understand, it takes guts (IMO) to do this)

All Inn Gold

Let's make some assumptions (subjectivity...), hey look, I am just "MSU" as I go along, this is a "Thought Experiment" here!:

-- probability of Freegold to $55,000 per oz: 25%
-- probability of Freegold to $25,000 per oz: 25%
-- probability of Freegold to $85,000 per oz 10%
-- probability of gold staying around, say, $1400: 20%
-- probability of gold falling to, say, $900: 20%

(all numbers, above and below, are inflation adjusted, "let's say" a five year time horizon)

The expected value of our gold (per oz) would be calculated using the following equation, where E is the expected value of X (gold) , x (the $ values just above) and p(x) (the probabilities of each value above):

E[X] = SUM xp(x)

x ($) p(x) xp(x)
$55,000 0.25 $13,750
$25,000 0.25 $6,250
$85,000 0.10 $8,500
$1,400 0.20 $280
$900 0.20 $180
Expected Gold Price: $28,960

That would work out to some 21 times current price (now about $1370) or 2100%!  FOFOA's best guess (admittedly his "best guess" because who can know?) is a 30 to 40 times current price rise.

Note that this assumes a pretty high probability of Freegold happening more-or-less as he foresees...  If we assume that a Freegold event is of lower probability, or set of probabilities, that lowers (perhaps dramatically) the expected value of gold.  Subjectivity and uncertainty...

Broad Diversification

These calculations could get way out of hand even in a simple Thought Experiment like this, so I will pretty radically simplify for illustration.  Let's say the below asset percentages, probabilities of performance, expected prices for each are "fairly realistic: and let's go from there (remember, five years):

Real estate in USA and company in Peru appreciation: x = 25%, p(x) = 40%
Real estate in USA and company in Peru appreciation: x = 10%, p(x) = 20%
Real estate in USA and company in Peru appreciation: x = 40%, p(x) = 20%
Real estate in USA and company in Peru appreciation: x =   0%, p(x) = 20%
Income stream from real estate and Peruvian company: x = 40%, p(x) = 100%

(Above are 50% of portfolio)

Gold appreciation, net expected value as calculated above: 2100%

(Gold is 10% of portfolio)

Diversified stocks, appreciation: x = 40%, p(x) = 50%
Diversified stocks, appreciation: x = 30%, p(x) = 25%
Diversified stocks, appreciation: x = 10%, p(x) = 25%
Income stream from stocks: x = 10%, p(x) = 100%

(Stocks are 40% of portfolio)


% portfolio
xp(x)(% po)
US R.E. and Peruvian Co.
US R.E. and Peruvian Co.
US R.E. and Peruvian Co.
US R.E. and Peruvian Co.
US R.E. and Peruvian Co. (income)
Stocks (income)
Expected Growth:

Expected growth of above portfolio would equal 2.558 * 100% = 255%.  Most of that would be from the 10% in gold...  Not very much from all the other investments (call it 45% over five years or about 8% per year -- a pretty normal mainstream number).


OK, if you are pretty sure that gold will have the big reset, you do not mind running this risks of miscalculation, and your wife will let you do it (!), the above numbers say (the math) that the All Inn Gold is the way to go!  But, here is how I would think this through:
  1. Gold, fishez!  Yes, according to the arithmetic above, the "Relative Value" at the All Inn Gold is higher.  Expected return is some 2100% over five years for "All Inn", that's great!  But, concentration of risk as well as the subjectivity and uncertainty risks are very high...  And this, dear readers, is too scary for me.
  2. If you are NOT SURE, then play it safe, hold 10% in gold, you would get some 255% over five years, which is not that bad, it works out to some 18% or so per year.  That's not enough to get rich, but it's not bad!  And lower risk...
  3. The numbers also show that gold really ought to be a part of everyone's portfolio!  Diversification into gold will not only protect you from a SHTF (to some degree anyway, call it "insurance"), but would allow a BIG gain at low risk if FOFOA and Freegolders are right!
Ahh, you may be wondering about p(FOFOA's numbers) -- the probability of FOFOA being mostly correct!  That is the big question...  One that I have no solid idea about...  Do I think it likely?  Yes, I do.  How likely?  Hmm.  Not enough to bet the ranch on it!  

Your comments are very welcome!

Please do not use this "Thought Experiment" to construct your own personal financial portfolio, this for your imagination and educational purposes only...