Why gold, crypto and foreign investments should be on your radar
Sometimes the most unusual investments can give you the most surprising returns. On this episode, you’ll discover why investing in overseas businesses as well as cryptocurrencies are a terrific store of value — nearly as good as gold. You’ll also find out why one famous investor thinks that farm owners will be the ones driving Lamborghini’s in the near future.
Remember: All investing involves risk. The content of the podcast is for informational purposes only and is not investment advice. Please always use caution and diversify.
Hello and welcome to the 16th episode of Alternative Investing. I’m Trevor Kraus, Communications Manager at MyConstant. Before I start, I hope everyone had a wonderful July 4th weekend. For me, I relaxed at home, with a glass of wine in hand.
I don’t know about you but when someone asks me what object or possession that I see as having the most value or something that I view as being valuable all over the world, and never losing it’s value, the first thing that comes to my mind is Gold.
If ever there was an investment that even a 5 year old might know about, Gold would be it. Historians say that gold has been valuable since as far back as 30 BCE and was used as currency in what is now modern day Turkey by 550 BC.
Because of gold’s age, and it’s universal acceptance as holding intrinsic value, people world over view gold as a solid investment. But unlike investments that you may have in the stock market, gold is a store of value. What does that mean exactly?
Store of value is essentially a commodity or asset that can be saved or exchanged in the future without deteriorating in value. In other words, to be in this category, the item you have should, over time, either be worth the same or more.
Gold and other metals like silver and platinum are stores of value, as their shelf lives are essentially evergreen.
Store of value does, however, have some special considerations. In most advanced countries, currency is seen as a good store of value. Most people don’t think twice when holding a US dollar or Swiss Franc note. The same can’t be said, however, if you have a Venezuela Bolivar in your hand.
You could also say the same about real estate to — another store of value. Owning a home or apartment in a middle or higher income country is generally a more stable bet than owning a home in a country with little to no commerce.
As a side note, in case you’re curious, the United States currently has the most gold — nearly 8 tonnes of it. To put it in perspective a 27 pound (or 12 kilo) bar of gold is worth around $700,000. So you can understand why when the guys find these gold bars in the movies, their jaws drop and eyes twinkle.
But gold is not the only ‘gold standard’ for store of value, there are other assets and places that you can invest your money in that are nearly as durable as gold. Including some gold backed cryptocurrencies such as the ubiquitous — Tether.
Before I go further, I want to give a brief disclaimer. On this podcast I generally try to talk about investments that everyone can get involved in. Whether it be wine, crypto or collectables. I try to cast a broad net.
I feel like, sometimes though, it’s important to bring up the more niche or unusual investment opportunities that maybe not everyone has access to but are still good ideas. And you never know in the future, you might be presented with one of these options.
The next two topics focus on foreign investment. And I know many people are thinking — well, I’m in the US, it’s too difficult to invest in property or a business overseas, it’s risky and unknown, or that’s only for the super rich. But, I can tell you, having lived outside of the US for nearly 6 years now, you meet many people who hold dual citizenship, and are not super rich per se. And they have these opportunities to make these unusual investments and don’t take it because they just don’t know about it.
In some counties it is difficult for foreigners to have a stake in a business or buy land or a house but there are also numerous places all over the world where it’s quite easy and feasible to do this. So now that I got that out of the way, I’ll continue.
So when I was doing research for this podcast, I was listening to an interview with Jim Rogers. Mr. Rogers is not as famous as say Warren Buffet, but he’s still a fairly well known and highly successful American investor. And he got on the topic of store of value investments and one of the top investments he mentioned was farm land.
In the interview Jim claimed that farmers are going to be the ones driving Lamborghini’s in the future. If you look at the trends around the world, agricultural farmland is arguably the most undervalued store of value.
Land, in general, is becoming an increasingly scarce resource. When I was in middle school the world’s population was 6 billion. Now, fast forward 20 years and we’re pretty close to 8 billion and that’s only going to increase rapidly over time. We’ll continue to see less and less available land.
For emerging countries, the jobs that people in the western world complain about have been moved to places like Malaysia, Vietnam, and China. This has led to an increase in the size of their middle class. Latin America has an increasing middle class as well. These people are eating more and more meat. Rearing livestock requires more space, making land more scarce.
Beyond meat, one hopeful aspect of farming is that we’re seeing more of farming moving indoors and becoming successful by utilizing vertical stacking methods. There is more and more agricultural innovation, especially in the West.
There is still a lot of room for improvement in other regions though. Several years ago, when I was living in Delhi, India, I had my father come and visit me. While he was there, I took him to a fancy hotel for dinner one night and as we sat on the veranda looking out on the lawn at the property next door — it was someones private home, and there was a man cutting the grass with an old fashioned push mower and another man was cutting weeds with scissors.
I was accustomed to seeing this, but my father found it so peculiar that we were in this upscale section of what is a fairly modern city and people were not using lawnmowers or weed wackers.
Even in India — let alone some of the more developing countries — there’s just not the economics for the development of even simple agricultural practices. While they have much of that in the West, and it can be a great investment play there, agricultural lands in developing countries have a lot of need and therefore a lot of potential for improvement.
This also applies to land in emerging countries in general. Look to buy land in cities that are expanding very rapidly. Perhaps not in Asia where it’s harder to buy and own land, but in developing parts of Europe or South America you’ll find land that is buildable, areas to where people are moving and there’s high demand.
With land, you’ll at least keep pace with inflation while having an asset that is a safer part of your portfolio. It’s harder for a government to go and take land. Digits in a bank account are one thing, but land is harder. Land, especially agricultural land, is a great store of value for your money.
The second store of value is a little open-ended: uncorrelated foreign investments. Oftentimes, people only look for stores of value within the area they live. Most of our listeners are in the US, and most people (at least that I know) are not thinking outside of the US bubble.
When I visit the US many of my friends say they could never envision living outside of the States. Even if things are going sideways, that’s where they feel most comfortable. Maybe they’d consider living in the UK or Canada because that’s what they know, but that’s it.
Many people don’t realize that there are countries with low taxes, increasing freedoms, and are moving in the right direction. If you can find markets — specifically emerging markets — uncorrelated with the currency that you’re in or that are uncorrelated with the stock market or money printing and debt, those are great investments.
I’ll give you a quick story, it’s no secret that New Jersey has the highest taxes in America and is one of the most difficult places to open a business and or build new commercial structures. The legal hoops you have to jump through are manifold.
Anyway, when I was growing up there I had a neighbor who inherited some money from her parents and she wanted to build a house and convert it into apartments or commercial space — I don’t completely remember as this was 15 years ago.
Anyway, instead of jumping through the legal hoops and attorney fees and zoning etc. She (on her own) ended up going down to Panama and built a small strip mall there right outside Panama City. She used to vacation there, so it was a place that she had some familiarity with.
Panama is a good example of a country that is stable, has low or no taxes for businesses (you’d have to check me on that), nice weather, easy access to the US. My neighbor does not live in Panama, but her investment is completely untouched by things happening in the United States.
I also have a couple friends in Vietnam who have purchased apartment units in Portugal — another country that has low taxes and cost of living, but it is on the rise financially. Let me repeat, these friends are not over the top rich, in many ways they are middle income earners who really just want to diversify as much as they can with a store of value investments. And keep in mind, if you’re a US citizen for example, foreign real estate that you own in your name is not reportable.
I would say, much like owning land in a foreign country, if you consider an uncorrelated investment like real estate or investing in a business. You want to look at countries that are on the up and up. Places like Vietnam, Turkey, Portugal, Panama just to name a few.
This type of uncorrelated investing is not easy and isn’t for everyone, but if you have the opportunity to invest in a forign country, it’s definitely worth your time and added research. Let me repeat, research. Do your independent research.
Okay, the final store of value for this podcast is gold backed crypto. I spoke about gold in the beginning and now we’re coming full circle.
There are countless people out there who give crypto the side eye because they say, well, what is backing it? I could hold up a leaf from a tree and tell you it’s valuable. And you’d come and say, well why is it valuable? What’s behind the leaf?
Stablecoins like Tether are pegged 1 to 1 with the US dollar and that gives people some peace of mind. But there are crypto’s that are bolstered by gold. Having a store of value like gold behind your crypto is great for people who are concerned about the general volatility with cryptocurrency.
Take Asia Broadband for example (AABB). The company is touting its new cryptocurrency as having the stability quality of a stablecoin with the token price supported by a minimum of 0.1 grams price worth of gold with a current value of $6.09 USD. AABB is on the Ethereum network and being backed by gold ensures pricing stability and at the very least, low volatility with the value based on market demand and gold assets.
I mentioned Tether as a Stablecoin just a minute ago, but in 2020, Tether Gold was introduced and already boasts a market cap of over $160 million. Tether Gold has its gold reserves in Swiss vaults, and token holders can exchange their crypto for physical gold or redeem it for cash. If you own Tether Gold, you can identify exactly which bar of gold is theirs by entering the wallet address which holds their AUXt. And one token of Tether Gold equates to one troy ounce of gold on one London Good Delivery bar.
Now, while gold is indisputably a store of value, it’s still early to brand all cryptocurrencies as having a “store of value.” If I had to pick one that could have a store of value, without being gold or currency backed — it would be bitcoin — simply for it’s finite amount and its scarcity.
As time goes on, and more bitcoin is mined the reward diminishes due to events known as halvings. If you guessed that this halves the reward, you’d be absolutely right. In the early days of Bitcoin, the system rewarded 50 BTC to any miner that produced a valid block. During the first halving, this number was reduced to 25 BTC. The subsequent halving cut it in half to 12.5 BTC, and the next one will slash miners’ reward to 6.25 bitcoins per block. This process will continue on for another 100 + years until the final fraction of a coin has entered into circulation.
As cryptocurrencies become accepted by more and more institutions, their store of value will undoubtedly rise. Remember, MyConstant uses cryptocurrency for collateral in all of our loans. We like crypto because it’s liquid and can easily be sold on a moment’s notice.
While I bring up cryptocurrency, I think there will be many people out there wondering — what about government currency? Currencies such as the US dollar used to be highly reliable stores of value when they were on the gold standard (meaning each US dollar was backed by an amount of physical gold). However, this situation changed when currencies started moving away from this standard and thus became known as “fiat” currencies.
This means that there is no actual physical commodity backing each US dollar, and it really only has value because everyone agrees about it. It also means that central banks around the world have the freedom to create additional supply of currency at will, without needing to prove its underlying substance, thus deviating from the requirement of good stores of value to have a limited supply.
This, often reckless, creation of money by central banks inevitably leads to high inflation and thus the erosion in value of currencies over time. This high inflation and simultaneous depreciation in value is of course more prevalent with some currencies than others. Certain currencies, such as the British Pound, the Swiss Franc, the Japanese Yen, and the US dollar, are relatively stable and can therefore act as better stores of value than others.
This indicates that fiat currency could indeed be a good store of value if used intelligently, and especially if one diversifies with the use of multiple foreign currencies. However, these days, many are becoming increasingly worried about the reliability of fiat currency in the long run and are looking for alternative ways to preserve their wealth.
As a side note, the Kuwaiti Dinar is considered the most valuable currency in the word. This is because currency in Kuwait is backed entirely by oil reserves. Something that the US and most of Europe is not able to do.
So just to wrap up this conversation on store of value, in order for an investment to be deemed a store of value it must maintain its value or grow in value over time.
If you’re looking for a store of value, think of real estate, land, precious metals and currency. And try thinking outside the box. On this podcast we mention the word “diversify” too many times to possibly count. If you have opportunities to invest outside of your country, do your research and try it out. Maybe your spouse or close friend is from another country. Feel ’em out and see what you can invest in together. As I mentioned in the disclaimer, these are ideas to mull over and think about — I don’t expect all of our listeners to get on board, but if you walk away from this podcast today, hopefully you’re thinking of something new.
If you have any podcast topics you want discussed, send me an email at [email protected] or message us in our new live chat feature. That’s all for today guys, you’ll hear from me again in two weeks!
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