Ask Lee Now: Answering Readers Questions

We love to hear from readers! Please email your question or comment to Independent Living editor Lee Bellinger ([email protected]). Please include your name and home state. You may also reach us via postal mail (P.O. Box 1240; Clover, SC 29710-4240).

Diversify Where You Place Physical Bullion

Ronald S. writes: If a major economic collapse or some other major calamity occurs, how safe will bullion for an IRA stored in a vault be? If the guards don’t get paid, who will protect it from raids? Is it time to take personal possession of it? This is a worst case scenario, but it does not seem farfetched any more.

A scenario in which assets at bullion vaults are raided may be unlikely to play out, but it is not farfetched. Safety is always relative, and risks always exist no matter how you decide to hold your wealth. Taking personal possession of bullion eliminates some risks but presents others. How will you prevent burglaries?

I would suggest that you should neither have all your bullion on deposit at a third-party vault nor have it all in your home. If the bullion you currently have stored on your behalf through an IRA represents all the bullion you have to your name, then perhaps you should take personal possession of some of it. Or acquire some additional bullion that you’ll hold outside the IRA.

Are Mutual Fund Returns Hampered by Market Timers?

Chris B. writes: I think you should be very cautious about recommending the Permanent Portfolio. There are many market timers in the fund who use it just before crises and then flee to an all-equity Russell 2000 or S&P 500 fund right after things collapse. This results in billions of dollars in investments prior to the collapse and billions of dollars of redemptions right after the collapse and huge pressures on the fund to liquidate assets, usually at very unattractive prices. In the trade, this is called a poor “tracking error.” It is going to surprise and disappoint many investors.

Don’t get me wrong. I think Browne’s original concept was very good. But if you want to track “the concept,” you need to do as I did which is to create your own Permanent Fund inside your brokerage account. This is not difficult to do.

Seth Van Brocklin responds: I frankly don’t see how the Permanent Portfolio Fund (PRPFX) would be an attractive instrument for market timers who seek temporary refuge from a stock market decline. After all, the fund holds a 15% weighting in aggressive growth stocks. And because of its broad diversification into bonds, precious metals, and currencies, timing the fund’s actual up cycles and down cycles is virtually impossible.

The fund is geared toward buy-and-hold investors and has a fairly low portfolio turnover ratio of 23.7%. Yes, it is true that mutual fund performance (and tax efficiency) can be hurt by redemptions and active trading. And while I wouldn’t argue that PRPFX is completely immune from these problems, I would suggest that its ample size ($11.1 billion in assets) and its all-weather investing approach make volatility in asset flows less of a concern than with most actively managed funds.

I do agree that those with ample assets in their brokerage accounts can construct their own permanent portfolios more efficiently by using various index exchange-traded funds. But for those who want to invest small amounts or desire the ease and convenience of an all-in-one fund, the Permanent Portfolio Fund still fits the bill pretty well, in my opinion.

Obamacare Designed to Take Down All Private Insurance Options

Barry B. writes: Can you give me some insight into Obamacare? Medicare and Medicaid have a complete outline of coverage – and costs. Obamacare just has penalties for noncompliance. May I suggest an article in your monthly newsletter?

Thanks for the suggestion. Nearly two years ago Independent Living made our case that Obamacare was designed to wreck the market for private insurance. And sadly that prediction is coming to pass. Healthcare concerns are a top priority for many of our subscribers, especially as Obamacare changes the dynamics of how many of us will pay for and receive care. In last month’s issue (“Escape from Obamacare”) we covered ways in which some individuals may be able to opt out of the individual mandate, the lynchpin of the legislation. In the months ahead, we will continue to try to help you navigate your way to quality healthcare options even as government-controlled medicine rears its ugly head.

The media focused a great deal on the bungled rollout of the “” web site. But that’s a just normal government incompetence writ large – a technical and logistical failure that’s ultimately fixable. What isn’t fixable is the program itself. Obama and his sycophants lied to the public about what Obamacare would and wouldn’t entail in order to push it through. Now millions of Americans face losing their coverage, losing their doctor, and being forced to buy Obamacare policies that are way more expensive than originally advertised.

Medicare patients will also be affected: the (Un)Affordable Care Act mandates $716 billion in Medicare payment reductions through 2022, while access to quality care at overcrowded and understaffed hospitals will become more difficult.

If young and healthy people (who least need coverage and are experiencing the biggest cost increases under the new regime) opt out of the system in large numbers, which they appear to be doing, the whole thing collapses. It won’t be pretty, but a collapse is what’s needed to force a start over.

If the program doesn’t collapse, then the economy will somehow have to cope with a huge new and permanent Obamacare tax. What’s so far been a windfall to pharmaceutical and medical-related stocks could suck the life out of consumer discretionary spending going forward. Investors take note!

Growing Chances of Homegrown Terrorism

Ed M. writes: When are you going to do an update report on the infiltration of Muslim Brotherhood members now working for the OBAMA Administration and perhaps deep within the Justice Department, NSA, as well as Federal positions within the states of Minnesota and Michigan? Perhaps this could link to something about homegrown US Muslims now fighting with Al Quiada [sic] in Afghanistan and elsewhere.

Many observers believe that our president has a strange affinity for the Muslim Brotherhood and Muslims in general, and question who the Administration has been backing in Egypt and Syria. The Obama Administration is pushing to increase the number of “refugees” the U.S. accepts into our cities from volatile places like Iraq, Syria, and Somalia.

A lot of these resettled Somali Bantu “refugees” end up organizing in Minnesota and other places where the State Department has set up communities for them. Some complete training to go back to Somalia to fight with Al-Qaeda affiliate Al-Shabaab. Often, when we send foreign food aid to the Somalis, it ends up in the pockets of Al-Shabaab.

The good news is that we haven’t had a 9-11 scale terrorist attack on our shores under Mr. Obama’s watch. The bad news is that his policies are putting Americans in greater danger even as the government uses antiterrorism as an excuse to spy on millions of us. I don’t think we will be so fortunate as to never suffer another terrorist attack. It’s something we all need to prepare for, including the potential for social unrest and ratcheted- up political tyranny in the aftermath.

Counting Family Silver

Sue H. writes: I have learned from you the value of buying silver coins, but I am wondering if there is any silver value in my silver flatware that belonged to my grandmother? Or how about the silver in the trophies my husband has won over the years in horse racing? Will this stuff increase in value at all, as silver will? And what should I do with it? I can’t melt it down. Could I barter with it? I really get a lot out of reading your IL newsletter each month.

I’m happy to have you as a subscriber! As for your silver flatware and memorabilia, yes, it definitely will go up in value to the extent that silver itself does. Your items may carry additional aesthetic or collectible value, but at minimum they are worth their weight in silver.

When you reach a point where you want to sell your silver items, you have a few options. You could try a pawn shop, but they tend to lowball people who bring in precious metals. A better option might be a local coin dealer. Often they’ll take flatware, etc. as scrap silver (paying you close to spot price). Or, if necessary, take it to a metals refiner who will buy scrap metal to be melted down.

If you think your items have more functional/aesthetic/collectible value than their silver content alone, you might try selling them yourself via local flea markets, consignment stores, or classified ads – or online via Craigslist or eBay.

Don’t Travel Abroad with Pepper Spray or Any Other Weapons

Dan O. writes: An article in your last letter has a major problem. The article was, ‘how to guard your gadgets at the border.’ Toward the end of your advice you told people who planned to visit Canada that Mace and pepper spray would help us Americans ward off an attacker.

Well, as I found out the hard way, mace and pepper spray are illegal in Canada. I crossed the bridge into Canada at Windsor and had to stop at the border to pay a $5.00 toll, the man in the glass shack told me to pull into the inspection station and when I did, three Canadian border goons ordered me out of my truck. They started to search my truck and one of the goons found a six oz. container of pepper spray, he held it up and shouted, ‘’He’s got mace!’’ At this time another goon grabbed me and announced, ‘’You are under arrest for bringing mace into Canada.’’

Then I was handcuffed for the first time in all of my 76 years. I protested that I was not bringing any mace into Canada and that all I had was pepper spray. They told me to shut-up and that pepper spray was illegal in Canada.

I appreciate your be willing to share the details of your unpleasant ordeal. Pepper spray is indeed illegal in Canada for regular blokes, and evidently their border agents enforce the law aggressively. As for the article in question, it didn’t state that mace or pepper spray should be carried with you when crossing the border. If it inadvertently implied adopting that as a strategy, I sincerely apologize.

The section on pepper spray as a tool in your self-defense arsenal was intended to be applicable within the United States. (Some states have restrictions on where pepper spray can be bought and how large a container you can carry, but I don’t believe any states ban it outright.) The section was originally supposed to be entirely separated in the newsletter from the material on safeguarding your privacy at the border. Unfortunately, during layout our designer merged it with the border privacy article.

Again, after re-reading the material in question, I find that the information itself was sound. It just appeared in the wrong place in the newsletter. I’ll definitely give layout decisions closer scrutiny in the future.

Key Information About 401(k) and IRA Options

Mike H. writes: I have a Fidelity 401K through my company, they provide a list of funds I can choose from but I don’t want to invest in any of them (except maybe their emerging markets fund to stay clear of the USD). As a result, all of my 401K is sitting in their Fidelity Money Market. I want to invest a portion of it in a precious metal IRA. I can’t “roll” my 401K money outside the Fidelity plan while I am working for my company.

QUESTION: If my company will allow me to cash it in (or a portion of it), would it be prudent to do so? I am 50 years old and even with the penalty for early withdrawal, I feel I may end up better off in the long run having some of that 401K money in a Metals IRA I can control.

You might first inquire about converting your Fidelity 401(k) to a self-directed 401(k) that frees you to invest anywhere. That way you wouldn’t have to cash out of it. But it sounds like breaking free of Fidelity is not an option with your employer. In that case, is the Fidelity Select Gold sector fund available to you? It holds gold mining shares – higher-risk than bullion, and they’ve performed dreadfully over the past couple of years, but they may prove to be a fantastic buying opportunity at these levels.

If the gold fund isn’t available, you might prudently consider leaving half your 401(k) in the Fidelity emerging markets fund and pay the penalty to transfer the other half into a physical gold IRA, if that’s the only way you can fund one.

Even the Most Clever Market Timing Tactics Usually Don’t Work

Jim T. writes: Every time there are even whispers regarding a reduction in the ‘tapering’ effort, gold and silver nosedive. With rumors of an end-of-year ‘tapering’ start or ‘easing,’ seems to me we should be exiting the gold and silver arena and park the funds until the dust settles. Then, when we see the metals recovering, reinvest our money into the metals. How do you see this situation?

The metals have been jerked around this year by comments from Fed officials and unending speculation about future Fed actions. My take is that now is not the time to be too clever by half. It’s prudent to maintain some exposure to gold and silver at all times. No one knows precisely when prices will start reversing to the upside or what the trigger will be. That said – it’s not a bad idea to gradually build a larger position over time – keeping a core holding, then adding to it as your confidence grows that precious metals prices are recovering.

The High Value of a Good Water Distiller

Victor P. writes: I live in a small town in the desert that is served by a municipal water system. In the event of an extended power outage or currency collapse, we will probably be unable to get water from that system. There is a river that flows near town, that I suspect is contaminated by municipal and agricultural petrochemicals such as gasoline, diesel fuel and fertilizer and by animal waste. Is there any way to remove those chemicals to make the water drinkable? Maybe something designed for the military?

While it’s never advisable to consume contaminated water, it is possible to make it relatively safer for drinking during an emergency. You’ll need to a use water filtration system designed specifically to remove heavy metals and chemical contaminants. A solar water distiller that produces clean, evaporated water may also be a good option out in the desert.

Germ Warfare Defenses Are Easy and Inexpensive to Mount, Here’s How

Chuck R. writes: In your germ warfare booklet, you mention having DMG on hand. I am having difficulty finding a source of the substance. Can you ID some sources? Enjoyed reading your booklet.

DMG (dimethylglycine), a natural protein compound that stimulates the immune system, can potentially help you survive a biological terrorist attack. DMG is also used by some athletes for energy, endurance, and muscle development. It’s available in tablet form from nutritional retailers including Vitamin Shoppe (866-293-3367).

“Ask Lee Now” is presented for general educational purposes only. Because we don’t know enough about readers’ personal situations, the opinions expressed here should not be construed as a recommendation to buy or sell any financial instrument at any time. We will not be responsible for financial decisions that readers make, and they should be made in consultation with their own advisers.