Gold, BTC and Cash
Are you better off with a freezer full of meat?
Note: this is not financial advice. You’re an adult, you decide for yourself.
A lot of people in the financial world are nothing more than Panic Peddlers, shilling Panic Porn and making money by creating as much anxiety in you as they can. Yes, at some point in the future we will have a market crash and/or a recession or even a full on depression. But when? That’s the magic question.
Depending on your Panic Peddler of choice, its next week. Never mind that they’ve been calling for a crash everyday since 2008. At some point, they will be right. Not due to their extensive knowledge of markets, but simply because if you say that it’s going to rain every single day, eventually you will be right.
So where does that leave you, the regular person that has to rely on Panic Peddlers and Obsolete Media for information? In episode 21 we go through some of the options, but here we will break them down further.
Gold
Gold is a shiny rock. It doesn’t rust, it doesn’t decay, it just sits there. Gold doesn’t go up or down in value, rather the dollar goes up and down in value. If the dollar inflates, the price of gold rises. If the dollar deflates, the price of gold drops.
This makes the purpose of owning gold a way of preserving purchasing power across time, regardless of inflation or deflation. Think of it this way, if in the year 2000 your mortgage payment had been $500, that would have bought you 1 ounce of gold. Today that same house would have a mortgage of at least $1500. 1 ounce of gold is currently $1900.
If you had set $500 in cash aside in 2001, today it could buy you 1/3 of what it could buy in 2001. Instead, if you had bought 1 ounce of gold in 2001, it could buy you the same value of items today that it could back then.
No, the math is not perfect, some items, like tech (cell phones) get cheaper and deflate over time. In a short span, like 2022, gold can depreciate.
The point is, that unlike cash, gold will mostly hold its value and preserve wealth. If you wanted to keep $50,000 in cash for decades, it would depreciate away. If you bought $50k in gold, decades from now it would have roughly the same purchasing power.
It is for this reason that most advise no more than 10% gold allocation into your portfolio. (Not financial advice, you make your own decisions.) The theory being that its purpose is not to make you money, but to preserve a portion of you portfolio if the other 90% fails. It’s a doomsday investment.
If you are considering buying physical gold consider a few drawbacks:
You have to store it somewhere safe from theft or fire.
To turn it back into cash or currency you need to find a dealer (or citizen) to purchase it from you.
The government has banned gold before, they could do it again.
It could attract dragons, who will burn down your home.
BTC
By this stage of the game you either know what Bitcoin is or you don’t care to know what it is. Likewise, you also love the idea or think its a joke. Regardless of your position, read on. I’m not about to blindly shill or condemn BTC.
Note: I’m not going into the details of blockchain tech, use cases for BTC or why its different then crypto. By now you either know or don’t care. Also not financial advice.
TLDR: Bitcoin is a bet against the U.S. dollar and a bet for the future. I personally believe that Bitcoin could have an amazing future, and change financial opportunities for the users. That potential has not yet been realized. Bitcoin has a lot of things working against it to stop it from ever reaching its potential.
Adoption-It needs wide spread adoption before it can have any real utility. If it stays in the dark corners of the internet it will never obtain lasting value.
Ease of use-before it can get adoption it needs to be user friendly. Every attempt to make it easier to use is failing. Crypto exchanges are collapsing, lightening network has had at least one significant attack. These things need to be solved.
Government-Big brother is not going to take an attack on the dollar lightly. Regulations are coming, and they won’t be kind.
Volatility-People do not trust an asset that is work $40k one day and $20k a week later. The price needs to stabilize before people will trust it.
In spite of these negatives I hope that over time Bitcoin will win out. But hoping is not a strategy. Personally, I do not allocate any money to Bitcoin that I might need in the next decade. You’re an adult, you decide if it’s worth it to you.
If you do decide to go this route, researching self custody is a good idea.
Cash
When SVB (Stupid Venture Bank) went bust in March 2023, I watched my Boomer relatives rush to their bank to withdrawal all their money into cash and then hide it under the bed. I could not convince them that their money was safe in a bank. These are regular hurdles one encounters when dealing with Boomers.
What is the right amount of cash, if any, to have on hand? Is there any reason? I would say yes, but not for the reasons people think.
TLDR: Keep enough cash to buy a few weeks worth of groceries and fill your car a few times with gas. And keep it in a locked, fire proof safe.
Despite the Panic Porn, the banks are safe, especially for your personal finances. Most of us aren’t keeping $250k in a checking or savings account. If your bank does become insolvent and fail, you won’t even notice.
Most people over 40 have at least once in their life gone to their bank only to see a new name on the door. Your old bank either went insolvent and was bought out, or was close to failure and merged to avoid failing. Either way, you were not affected.
The greatest threat to the average person in terms of banking is cyber attack. Not ID theft, that has mostly been made not an issue by most banks. The threat is that your bank, or a series of banks undergoes a cyber attack that shuts them down for days or weeks at a time.
Your money is still there, but you can’t access it to pay bills or make purchases. I’ll note here that to my knowledge this has not happened in the U.S. yet. Given the amount of cyber attacks on our infrastructure, I think it’s only a matter of time before it happens.
In the event that this happens it is highly likely that any missed payments will be forgiven or extended since it was beyond your fault. The Covid lockdowns made a precedent of this. This is why I personally keep enough cash for gas and groceries. Anything more is subject to deflate away. But as with Gold and BTC, you do you.
Why not just fill your freezer with meat?
Gold and BTC are, in a sense, luxury investments. If you are still struggling to be a hundredaire, or barely have a few thousand in savings, then you need to be focused on making more money in the short term, not whether to buy Gold or BTC.
In this case, buying a quarter cow share and filling your freezer with meat might be your best option. We’re watching food prices inflate in real time. We’re also seeing a bizarre amount of fires and accidents at food processing plants.
Having a freezer filled with meat might be a better and more comforting investment.
Note: If you buy a freezer of any size, its a good idea to buy a backup generator. They are relatively cheap, and a guarantee that your food doesn’t spoil in the event of extended power outages. Expect follow up articles on this.
Any ability you have to secure food from the farmer, and to safely store it long term is money well spent. Its cheaper and healthier.
It’s emergency prep, not panic
Ultimately what you do with Gold, BTC and Cash amounts to emergency preparations. Whether its a “rainy day’ fund or you go full doomsday prepper is up to you. Personally I stay way from the doomsday side, as it seems more obsession then anything else. You decide for yourself what’s appropriate for you.