Ordinary investors and the wealthy for about 300 years
now have been able to invest or buy intangible assets (paper, in one form or
another) as well as tangible assets.
Intangible asset examples would include stocks and bonds (popular since
the Mississippi Bubble in the late 1600s / early 1700s), cash, trademarks and
software. Intangible assets have been
popular because they are easy to buy and require little or no storage or other
safekeeping. Access to intangible assets
have, without doubt, allowed great numbers of people to participate in the
growth of the world’s various economies since those early days.
Tangible assets on the other hand are those that are real things, whether precious metals,
farmland, guns & ammo or many other things that are desired. In this article I will only discuss tangible
assets that are worth at least some money even though there are many things that are rare and collectible but
not valuable (e.g. butterflies). I also
exclude tangible assets that are worth money, but not of interest to most
investors (capital goods like John Deere farm equipment). Below is a table that classifies tangible
assets, many of which, especially valuable ones, are discussed below:
Examples of Rare Tangible
Assets
|
Useful?
|
|
Not collectible, not valuable
|
||
Osmium
|
no
|
|
Collectible, not valuable
|
||
Beanie Babies
|
no
|
|
Rare butterflies
|
no
|
|
Not collectible, but valuable
|
||
High quality family farms and "Bug-Out" farms
|
yes
|
|
Collectible and valuable
|
||
Silver and platinum
|
yes
|
|
Gold
|
no
|
|
Diamonds and other gems
|
no
|
|
Art and certain antiques
|
no
|
|
Coins and stamps
|
no
|
|
Rare watches and other high end collectibles
|
no
|
|
Collectible guns
|
no
|
Some general comments from the above table:
An example of a tangible good that is not collectible nor
worth (much) is the metal osmium (Os, element number 76, see an interesting
article here: http://en.wikipedia.org/wiki/Osmium). Osmium is the densest element and the rarest
stable (non-radioactive) element.
Despite its unusual properties, osmium has very little use and is of
very little interest to collectors (except for those collectors who collect all
of the elements…). Osmium and the like
will not be examined further.
There are lots of collectible things that are of little
or no monetary value. A nearly perfect
example would be butterflies, I know two people who have extensive butterfly
collections, but they are worth little.
“Beanie Babies” are collectible doll-like toys that were a fad
in the 1990s, these were for a brief time a collectible that people would pay
for (at least for certain scarce ones).
I consider things like Beanie Babies to not be valuable because of that
characteristic that they were only valuable for a short time. Collectible items that have a history of being valuable are a better
bet.
Also noted are whether or not each item above is
“Useful”. Useful means that there is a fairly high percentage that is used in
industry or otherwise used in productive activity. The reason for this distinction will become clearer
below.
***
Certain pieces of real estate could be considered “rare”
and of potentially great value to a certain class of investors. Included would be small family farms of high
quality (good soil, good water and right location); similarly a high-quality
“Bug-Out” farm would have those same characteristics of good soil and good
water. A piece of rural property that
can produce enough food to feed a family is of potentially great value when the
chips are down…
These kinds of rural properties are rare as it turns
out. While there are a lot of properties
available for sale at any given time, there are very few very high quality
properties that make in onto the market.
Such small farms with good water and other desirable characteristics are
often snapped-up by locals, and so never become available for sale to
outsiders.
(Special thanks to “DCFusor” for insights into rural properties)
Excluded from this discussion are pieces of real estate
like beachfront homes and luxury penthouses in popular cities (cities like
London, New York and Miami). While
beachfront homes and luxury penthouses are desired by many wealthy people, they
are
not rare.
***
Our discussion now turns to collectible and valuable goods, which are defined as
those rare tangible assets that people want (they may want them for various
reasons) and that are worth
something. Most of these collectible
assets have little use outside of people just wanting to collect them. Two of the few exceptions to this are silver
and platinum.
Silver and Platinum
Silver is used in more industrial processes and to make
more products than anything else (other than crude oil). Silver has unique properties that make it
almost critical (nothing can substitute for silver) for a huge variety of
products – a famous example is the 50 lbs. of silver that goes into every
Tomahawk missile. Much silver that is
used by industry is used but once, not recycled. Platinum is the other precious metal with
extensive industrial use (catalysts).
Silver (and to a lesser degree platinum) has its
fans. Apparently there are no large
above-ground stockpiles of silver anymore, and its industrial usage is running
very close to the amount of silver coming into the markets now. Fans of silver claim that supply disruptions
and other events could cause the price of silver to go way up in the future due
to these characteristics of tenuous supplies and extensive industrial demand.
To a similar degree platinum shares those characteristics
of silver, especially the high use of platinum by industry. Other physical materials that are rare and useful in the recent past have been
considered for investment (owning and possessing the materials themselves) have
been rare earth metals and ruthenium (ruthenium is a platinum-group metal that
will be used in jet engine turbine blades).
The rest of the collectibles described below are not
particularly “useful” to industry.
Gold
Probably the most famous collectible tangible asset
(“hard asset”), however, is gold. About 10% of gold production is used by
industry, but the other 90% is used in jewelry and in investment forms (coins
and bullion). Because gold has
relatively little industrial use, it can be classified as being desirable just
because people (and central banks, central
banks hold only gold among the precious metals) want it. Gold is a hard asset that humanity has valued
for over 5000 years. Most all of the
gold ever mined is still with us (gold often is recycled, from old circuit-boards
for example).
Gold is probably the best Store of Value throughout humanity’s history. Much about gold is controversial, even among
fans of physical ownership and/or Gold Bugs.
The price does indeed move up and down relative to the dollar. Some consider gold to be money, some do not
(“money” is a little bit of a tricky concept to define, many people think of
“money” in different ways).
Gold has a number of properties that are desirable in
making it desired as a store of value or as money:
n
It is inert, resistant to almost all chemical
attacks
n
It is fungible and divisible, it can be re-melted
and divided almost without limit
n
It is shiny, people just like it and it
universally valued; it is liquid everywhere
n
It is rare, and its properties make it fairly
hard to counterfeit
n
Gold is produced in a variety of countries,
there is no monopoly on gold supply
n
Gold has a high “value density”, a little bit of
gold is worth a lot
Gold has been getting more attention recent years as we
have seen major problems in the world’s economies (excessive debt perhaps the
greatest problem of them all). The price
has about tripled since 2000. It has been
as high as $1900 and was briefly traded below $1200 in the April – June 2013
price declines.
Gold is also bought and held by those who want
“insurance” against government financial ineptitude or as a protection against
financial catastrophe. Few other
investments have the characteristics of gold as a protection against almost all
economic woes.
There are almost innumerable sources of information about
gold, including many blogs that examine gold in as much detail as almost any
investor could want.
(Special thanks to anonymous blogger “FOFOA”
for making the gold discussion better, read his blog: http://fofoa.blogspot.com)
Diamonds and Other Gems
Somewhat related to gold are diamonds and other rare
gems. These have been valued throughout
human history as well. Beautiful
diamonds and other gems (usually emeralds, rubies and sapphires) are often
extremely valuable.
Diamonds and the other “precious gems” usually exceed
gold in density value. In other words a
handful of high quality diamonds are worth a fortune…
There are a couple of issues re investing in diamonds and
gems. The first is that much time and
study must be put into studying diamonds and the diamond markets. Diamonds are not a game for amateurs, diamond
grading greatly influences the valuable of diamonds, and such grading can
really only be done by experts. The
second issue is liquidity, unless one is in the business, the price for selling
a diamond (in your city’s “Diamond District”, for example, or even a jewelry
store) is very low compared to the price you would have to pay for a similar
diamond. A high bid-ask spread.
Art and Certain Antiques
Art as well as certain antiques and historical relics
have always had high value among many wealthy people. These clearly have no industrial use, and
very well illustrate the idea that certain collectibles are have inherent (but
sometimes difficult to quantify) worth.
Art and antiques are examples of collectibles which are
collected for their own sake, that
is, the collectors enjoy possessing them in addition to hoping for financial
gains… The beauty of these kinds of
collectibles gives their owners a satisfaction beyond their financial worth.
There are lots of different kinds of art competing for
attention however. Paintings are the
most famous artworks out there. High-end
paintings have been a feature in the homes of the wealthy for centuries, and
this kind of art has maintained its value very well through time. Many paintings since Pablo Picasso have
tended to be in the class of “Abstract Expressionism” which makes them
dependent on opinion makers in the Art World to value…
Rare antiques and historical relics can be good items to
invest in as well.
As with diamonds and gems, a knowledge of the art in
question is important in getting a good value (unless you are so rich that you
do not care…).
Coins and Stamps
Coins and stamps are perhaps the two most famous types of
“collectibles”. Both have a long history
of being collected, lots of experts and a fairly liquid marketplace. There is a lot of information available on
both, especially coin collecting. Because
of the long history of collecting coins and stamps, there is a reasonable
expectation that collecting these will remain a worthwhile hobby that might
generate a good financial return.
Once again, knowledge of the asset is useful if any
financial gain is hope for (or even just to be a competent collector). Not all coins, not all stamps are good
candidates for collecting for value.
Historically, for example, “Morgan Dollars” and “Double Eagle” US coins
in excellent condition have done well.
(Special thanks to “Rocky Racoon” and “Matt in NC” for insights into
coin collecting)
Exotic Collectibles (Watches, Guns and other collectibles)
There are other less known collectible items that have an
active collector marketplace (buyers and sellers). These would include high-end watches (like
Patek Philippe and Rolex brands) as well as collectible guns. But, these more exotic assets are less liquid
than the ones described above. It would
be even more important for prospective collectors to educate themselves in the
field chosen.
Here is a final comment on collectibles. The time frame may be important in deciding
what is collectible (and for what price).
In good times and bad, it is typical for the “best of the best” of a
collectible to do well. In a bad economy
/ SHTF / TEOTWAWKI low-end Rolexes and somewhat high-end guns may do poorly if
desperate consumers must dump them to get cash.
In these cases, other hard assets (TP, .22 LR and .45 ACP ammo, etc.)
might do better, but these are not rare.
But, there will always be a market for the best of the best.
(Special thanks to “Polly Metallic” and “Matt in NC” for comments on hard
assets in hard times)
***
Buying rare, and
valuable, tangible assets has always been an option for the wealthy and
even ordinary investors who have extra money to spend beyond the necessities. There is a variety of assets available to
cover almost any interest.
This article described some of these kinds of
assets. Prospective buyers and/or
collectors have a lot of choice, and in many cases it is important that they
educate themselves in the assets they consider buying.
American Hard
Assets is a new magazine that covers a large variety of rare and high-end
hard assets. Here is a link to their
website:
