Thus, the fight over gold and silver as media of exchange is about more than mere money, let alone making money. For it is a fight with only two possible outcomes: either control of their own lives by the people themselves, or control of the people and their lives by political and economic elitists. - Dr. Edwin Vieira
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Do you have an email address or phone number for Edwin Viera? I’d like to order a copy of Pieces of Eight, if I’m not too late, and I’d like to talk to him about a few legal questions, as he’s located in my area, I believe.
Regards,
Curt
Looking at the liquidity pyramid, I am sometimes puzzled by the position of the category “Miscellaneous Assets” towards the top of it. That position might be fine where liquidity is concerned, but it seems quite out of place where safety, or durability is concerned. The motto “The system does not collapse, but evaporate” seems to suggest that the higher your asset class is in that pyramid, the more prone it might be to evaporate, which does not seem right where, say, real property is concerned. From the point of view of safety, or durability, it seems to me that the asset class in question should sit right on top of the metals.
In some countries where inflation is an ongoing scourge, people use bricks as a store of value for their savings. Anyhow, I would like to see some comments on this. Thanks.
Hi Charles,
Here is the response from our email exchange which other readers may find useful.
Yes, the pyramid does blur safety and liquidity. So much information is packed into such a succinct format that something had to give.
RE is not very liquid, currently there are many CRE properties which have been on the market for over a year, and the safety profile is limited.
First, RE is limited to a specific geographic location which is a huge disadvantage in today’s environment of political risk; just look at South America or Africa as an example of what happens to real estate when property rights are eroded. With America acting like a Banana Republic and trampling the rule of law the prosperity enjoyed because of things like ‘property rights’, which are taken for granted, can be rapidly eroded.
Perhaps your view of RE’s value assumes a solid legal infrastructure. A few years ago I was talking with Justice Kennedy of the US Supreme Court about this; the effects of 30+ years of neglecting the national legal infrastructure which is now crumbling much like the roads and bridges.
Second, which is mainly derivative of the first is that RE is subject to all types of ‘real’ events like vandalism, disasters, warlords, etc. Will America have warlords like Africa? Probably not for a few years at least ;)
RE’s value is derivative of its earning capacity which is a function of the underlying business. RE in Nigeria is not worth much because the underlying business does not produce much and the business cannot produce much because of an unstable legal system.
That is not to say RE is not a good investment just that it has a different risk and liquidity profile. I intend to use my monetary metals to buy up lots of cash flowing real estate in the best jurisdictions when it gets cheap.
Thanks for the explanation on how real estate ranks on your diagram.
I think of farm land as being very real and solid, intrinsically worth more than a 3 bedroom house. And the prices have not fluctuated as wildly as other RE sectors in the US, in locations that havn’t been affected by residential land speculation. But there are the questions of where to buy (“which jurisdiction”), and when to buy.