Ask Lee Now: Answering Reader’s Questions June 2014

Answering Readers’ Questions June 2014

Orvel E. J. writes: I have quite a bit of silver – coins and bullion. Storage is a problem. How can I handle any more at home? I am afraid of storing off premises. Are Brinks vulnerable to possible government seizure of assets stored with them?

I recommend holding a sizeable barter/emergency silver stash at home for sure and quick access during a crisis or when an immediate need arises. Howev er, I don’t suggest trying to store everything you own at home – especially if you possess large quantities of metal.

It really does make sense to diversify your holding methods. P recious metals that you hold in a secure storage facility are less likely to be lost or burglarized than those you hold in a home safe. Brinks is a reputable company in the ind ustry, but there is still so me counterparty risk. And, yes, government asset seizure risk.

To reduce counterparty risk, avoid storing metal via a “pooled” or co-mingled account. Such accounts give you a claim on a quantity of gold (or silver ) supposedly divided up among other account holders. But there may be more claims on t he gold than there is gold to make good on those claims. And if the firm goes bankrupt or runs into legal trouble, the gold may be considered to be the firm’ s asset, not yours! You can pay a little extra to get fully allocated and segregated storage. That means your coins and bullion are held in a specific place on your behalf and are never co-mingled with other precious metals products held at the facility.

If you are concerned about the potential for court-ordered asse t seizures or wholesale government confiscation, then you might consider placing some of your precious metals in a foreign safe or depository. It’s easier to accomplish this with gold than with a lar ge quantity of silver.

Yes, You Can Select More Private Software Systems for Your Computer

Dan writes: I am one of the 30% of people and businesses that still use Windows XP. I need to upgrade, and I am not that computer literate. Is there an operating system that is modern and not vulnerable to NSA – i.e., it doesn’t have a backdoor built in? Is there a system that is preferable?

I have read much about the gleaning of information from places like Facebook. Have you learned anything about anyone using backdoors to pilfer through information on private websites such as eHarmony and other dating websites?

Thanks, Lee, for all the help you are. You and your staff are greatly appreciated.

Thanks for your note! Unfortunately, there can be no absolute assurance that any operatingsystem or web site will keep your data secure from hackers or the government. A lot of people operate under the dangerous assumption that encryption, firewalls, and other security features protect their data, and so they let their guard down. That’s a big mistake.

The best privacy advice I can of fer is to keep personally identifying information you post online or store in your hard drive to a minimum. The open-source Linux operating system is purportedly more secure than Windows, but it may be difficult to adapt to if you’re more familiar with Windows. At the very least, you should upgrade to a newer version of Windows (either Windows 7 or Windows 8) right away. Microsoft has ended technical support for XP as of April this year, which means no new updates or security patches will be released.

Respect for Police and the Job They Do

Kyle G. writes: The “militarization” of police is a result of an arms race between criminals and cops NOT any desire to kill civilians and to even insinuate as much is inflammator y and insulting. And please remember the “us against them” mentality too many cops have, has every bit as much to do with what we do and say and think as it does with what they do and say and think. Please keep that in mind.

I have great respect for the vast majority of police officers. I am even personal friends with an elected Sheriff and other officers. They are performing one of the most difficult, dangerous, and important jobs out there. But at the same time, it is important that we – the people they are supposed to serve and protect – hold them accountable.

There are bad players in any community. And there is much higher potential for abuses of power given all the federal resources being given to local police departments. It is steadily militarizing law enforcement. Left unchecked, some pro portion of cops will succumb to corruption or abuse their power in odious ways. In my view, federal programs that help put surveillance tools and military-grade weapons int o the hands of police create perverse incentives.

The majority of violent crime is caused by bad people using pri mitive tools such as fists and knives. Most gun-related crime is attributable to ordinary, street-legal firearms (so-called “assault weapons” work in the same manner as ordinary handguns and are a far cry from military-grade fully automatic machine guns). Consider also that at the most heavily armed private facilities in this country (i.e., gun shops), violent crime is virtually non-existent! We don’t need the police trying to win an arms race; they should be fo cused on winning the smarts race against criminals through profiling and strategically deploying limited police resources for the most serious threats.

That’s what New York City began doing in the 1990s, and crime rates have since plummeted. Here I’ll quote Heather Mac Donald of the Manhattan Institute:

In 1994 the New York Police Department, led then by Commissioner William Bratton, embraced the revolutionary concept that the police could actually prevent crime, not just respond to it after the fact.

The department began analyzing victim reports daily to target resources to where crime patterns were emerging. Top brass held commanders accountable for the safety of their precincts. And officers were expected to intervene when they observed someone acting suspiciously, maybe asking the person a few questions, perhaps frisking him if legally justified…

Such proactive stops (or “stop-and-frisks”) have averted countless crimes. But a chorus of critics, led by the New York Times, charges that the NYPD’s policy is racist because the majority of those stopped are black and Hispanic.

Of course, if police weren’t focusing most of their efforts on the people who commit the most crimes (according to official NYPD statistics for 2013, nearly 75% of shootings in New York City were committed by black perpetrators. An equal 75% of New York City’s shooting victims were black), they wouldn’t be doing their jobs.

Wallet-Sized Gold

Steve writes: Karatbars are now offering Karatbars. They are gold bars the size of a credit card. They can be used to barter for stuff easier than a bar of gold .

These 1 gram pure gold “cards” can be handy when you’re travell ing or bartering or want to give a small gift of gold. However, these products aren’t a very cost-effective way to accumulate small denominations of gold. The Valcambi Combibar is a more efficient and versatile gold “card” t hat carries a relatively low premium over gold spot prices. The Combibar contains fully 50 grams of pure gold and can be broken apart into up to 50 individual 1-gram pieces. It is produced by Swiss-based
Valcambi SA, a major LBMA-certified mint for bullion products. You can obtain it through reputable bullion dealers. I’d definitely suggest adding at least a couple 50g gold Valcambi Combibars to your emergency barter stash.

Weightings Against Dollar Denominated Assets Explained

Mike V. writes: Seth’s Model Asset Allocation in May newsletter still leaves 60 to 75% (everything except physical metals) denominated in U.S. dollars and subject to counterparty risk. Comments?

Seth Van Brocklin responds: Actually, even our Model Safe Harbor Portfolio is proportionally more weighted to non-dollar investments (hard assets and foreign assets) than to dollar-denominated investments. The core stock position, Vanguard Total World Stock Index (VT), contains 50.8% non-U.S. stocks. The Model Portfolio also includes foreign bonds, foreign real estate investment trusts, and of course precious metals.

True, the foreign investments are contained within U.S.-based funds, which will presumably be held in a U.S. brokerage account. So there is counterparty risk.

Sophisticated investors can diversify away from U.S.-based counterparties by owning foreign stocks directly in foreign countries or through offshore trusts. But anything offshore is getting riskier due to new and impending U.S. regulations th at most foreign governments and foreign financial institutions will dutifully comply with.

An alternative way to reduce your risk exposure to the banking system and the stock exchanges is through owning more and different types of hard assets – diamonds, gemstones, art, collectible memorabilia, etc. You’ll have to weigh the advantages of avoiding financial assets against the disadvantages of being under-exposed to great dividend-paying stocks from around the world.

Natural Gas Alternatives to Home Security Issues

Andrew H. writes: Natural gas generators are being promoted as a solution for home owners to maintain a normal life style if there is ever a general failure of the electric power grid.

If the entire power grid were to fail, do the natural gas companies have their own independent systems to maintain the pressure of natural gas in their service lines, or do they rely on commercial electric power systems to operate their pressurization pumps? If they do not have their own pressurization systems, how long would gas service be maintained for natural gas customers?

These are good questions to pose to your local natural gas prov iders. In order to maximize your flexibility and reduce your dependence on any one source of natural gas, consider a portable generator that runs on propane. Propane is widely ava ilable from various sources in most towns, and you can store it at home in tanks of the sort u sed for gas grills.


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