Category: Business

Only Gold Lowers Risk, Compared To All Other Financial Assets

risk concept in clamp

Gold clamps credit and counterparty risk down to zero!

When reviewing the benefits of owning gold, one of the factors consistently at the forefront is the fact that gold has no counterparty risk. Counterparty risk is the risk incurred by having one or more other entities (counterparties) involved in a party’s transaction, such that they may be unable to fulfil their financial obligations to the party.

In fact, gold is risk-free in terms of credit and counterparty risk. It’s a concept that is thrown around a lot in the gold community, but few actually know what it means. Although it seems obvious once you understand it, the implications are very serious. Let’s first look at counterparty risk as it relates to gold because this is the most simple example, and then we will compare this to other asset classes or forms of financial wealth.

Gold is… well, Gold!

Gold bars

Gold is the only financial asset with no counterparty or credit risk

Gold is a very dense precious metal that has a physical composition that makes it ‘gold’. If you own an ounce of gold, it is yours, just like you own a pencil. Once you own a piece of gold, nobody else has a claim on it. You probably traded something for it, or bought it with cash. But once you own it, that person with whom you traded no longer owns the gold, has control over it, and will likely forget about it.

This of course may seem all too obvious, but the power of this simple observation will become clear as we compare gold to other financial assets.

EVERY Other Financial Asset Class Has A Counterparty

For example, consider corporate bonds. If you purchase a bond from a company, you own that bond and have rights to it. However, that bond is not just recorded on your personal balance sheet as an asset, it is also concurrently on the balance sheet of the company that issued it, and it is recorded as a liability on their books.

A holder of a bond is not just an owner of the bond, but has entered into a contractual agreement with the bond issuer. Counterparty risk is the risk that the entity on the other side of the contract will not fulfill their obligations; in this case, the risk that they will not repay the bond when it is due or make the required interest payments to you, the holder.

What about government bonds, which are considered risk-free? Government bonds are usually considered risk-free because governments have the power to tax their citizens to make their bond payment obligations. Unfortunately, there are limits to this, just ask Puerto Rico.

Governments that control their own money supply are considered to be even safer, because they can just print money to cover any bond repayment shortfalls. Yet this does not remove the counterparty risk. Holders of bonds will be repaid, but Out Of Stockwith devalued currency.

What about money in banks, such as simple checking and savings accounts? Surely there is no counterparty risk here, as the money is there to be withdrawn at any time, right?

Money deposited in a bank is an asset on your personal balance sheet. But for the bank, it is recorded as a liability, because the bank must be ready to redeem any request for that money, at any time you want to withdraw it.

When a large number of customers want to withdraw their money simultaneously – known as a bank run and usually the result of panic – the bank’s reserves may not be able to cover the withdrawal amounts and the depositors’ money is at risk. Yes, there is FDIC insurance, but this is just another counterparty, and the FDIC in turn receives its money from the U.S. Treasury: another counterparty to add to the list. Furthermore, ask anyone in Cyprus who experienced a ‘bail-in’ if they still believe their deposits are completely safe in a bank!

Finally, what about cold hard cash, withdrawn and stuffed under a mattress? Isn’t this exactly the same as storing an ounce of gold? No. The Federal Reserve issues those notes, hence the words Federal Reserve Note at the top of each the bill. Therefore, the Federal Reserve Notes that are outstanding and in circulation are a line item recorded on the Federal Reserve’s balance sheet as a liability.

Since you cannot redeem a dollar for anything but another dollar, the counterparty risk is that the currency may fail completely or at least be devalued, something we have certainly witnessed consistently over the past hundred years.

Many people believe gold is a very risky financial asset when compared to traditional vehicles like stocks, bonds, savings accounts and even physical cash. Yet all of these possess counterparty risk, while outright ownership of gold has absolutely no counterparty risk. If protection against turbulent financial conditions is one of your goals, gold is the only financial asset in your portfolio that will not carry this very real and significant risk. 

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Cheers for Yuengling

yuenglingIf you’ve been keeping up with my posts, you may have read the ode to craft beer that I wrote several months ago. Although I’m always partial to a craft brew, sometimes I just need something cheap because drinking exclusively ‘craft’ can become quite expensive. I have nothing against a cheaper beer when I’m really just craving a cold one. Like any good Pennsylvanian, my go-to-budget-beer has been Yuengling traditional lager.

This beer is considered by many beer lovers to be one of the tastier budget beers. As a native of the state, I didn’t realize that Yuengling had the limited distribution that it does until I really started getting into beer. I was surprised to find that people in other states would trek across state lines to get a case. The amber lager is decidedly ubiquitous in Pennsylvania, however. If there’s anything you can count on to be on tap in any PA bar, it’s Yuengling lager. In fact, at many establishments, simply ordering ‘lager’ gets you a Yuengling.

My Three Millionaire Friends All Have This in Common

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There is an old saying that those of average means ought to take their rich friends to lunch. Having long heeded this wisdom, I’ve been privy to a great deal of sage advice from these wealth masters.

Admittedly, I was quite surprised to discover one thing in common between them – a factor they all indicated was pivotal in their quest for financial freedom.

That factor? They have all chosen to forgo the use of electronic calendars on their computers or mobile devices, in favor of paper calendars. Yes, you heard right. Harking back to the post-Internet days when desk calendar blotters and pocket planners were in vogue, these three digital Luddites have elected to turn back the clock, at least in terms of planning their daily schedules.

Now for some breaking news. I have made the decision to join them. Yep, I’m ordering my PassionPlanner today.

Back in the 90’s when I was a freshly minted entrepreneur in my Armani suits, hustling for business in Chicago, I carried around the infamous Franklin Planner, a creation of that iconic time management expert Stephen Covey. Back then, Franklin had these huge Apple-ish retail stores where enthusiasts could pick up everything from calendar filler pages to pricey leather-bound briefcases in which to house their scheduling systems. They offered seminars on how to effectively manage your personal and professional activities, replete with a simple yet effective system for assessing your A-B-C priority list.  For me, The Franklin – as it was affectionately known – was my go-to source for everything I needed to maximize my day-to-day productivity.

Fast forward to 2007 when smartphones first appeared on the scene en masse. It was at this point that all reasonably minded people began to question whether it made sense to migrate the calendar function over to our electronic devices. Given my proclivity for being an early adopter, I was among the first to make the jump. And frankly, I’ve regretted it ever since.

The Future of Robotics

Robotics

Robotics

Artificial intelligence and robotics are advancing at breakneck speed, but do they make for a viable business? Google seems to think maybe not. Google’s new parent company Alphabet is planning to sell Boston Dynamics, a robotics company that it acquired a few years ago. Despite the marketability and relative success of simple, consumer-oriented robots like the Roomba, more advanced humanoid robots like those developed by Boston Dynamics probably have a long way to go before they will become feasible products. It has also been speculated that one deterrent factor is negative public response to humanoid robots that could threaten to take away jobs from humans.

Boston Dynamics have received funding from DARPA and the U.S. Marine Corps in the past, because many of their robots have been geared toward military or similar use. Historically, many of humankind’s greatest technological advancements have been made in the name of war. That makes it kind of disappointing that a consumer-focused company such as Google hasn’t found a way to make a sustainable business out of some of the most advanced robotics technology around. It would be great to see these kind of advancements supported by businesses and private investments, rather than military and government spending.

#BeResponsible: Networking Challenge

Waiter Serving Food To Customers At Table In CafeThere are SO many ways to network in your city or town. Websites are all over the place helping individuals, companies, and groups find like-minded friends and colleagues to expand their network and overall spice for life!

I’ve made a list of a few options when looking for a meet-up of like-minded folks in your area.

Try out:

  • Meetup.com: This is the number one place to find all the topics/interests you can dream of! Have a passion for small, white, fluffy dogs? There’s a meet-up for that! Love underground techno music, yep other people do too, and want to meet you! Want to talk to other entrepreneurs to learn about the struggles of starting a small business? They are probably your neighbors! Sign up. You won’t regret it.
  • Reddit.com: Either you Reddit or you don’t, but I promise, once you start you can’t stop. Most towns have their own ‘sub-Reddit’. A place where you can bitch about parking violations, how people drive, and the dogs who poop in your yard. It’s also a place to find like-minded people and start a conversation!
  • Eventbrite.com: This gives you a chance to browse the latest posted events in your area and get tickets! You can also use this site if you want to start your own networking event! (pro tip: offer free food to get your first round of new comers!)
  • Facebook.com: This goes without saying. Type whatever interest, hobby, or profession that interests you in the top search bar along with your city/town and surely you’ll come up with some active groups in your area. If you don’t, maybe it’s time to build an online community to find more like-minded people!

Perhaps you use another tool? Please share your expertise in the comments section and we’ll add it to the list!

Now onto the challenge:

From now until the last day of February (29 days this year! #leapyear), try and attend ONE meetup. Check one out, expand your network. While you’re there, take a picture and post it to your Instagram. Seriously…so much reward for rewarding yourself. #BeResponsible means to grow in success in 2016. Use this challenge to take a step in the right direction.

Questions about how to find the right meet up? Ideas or tips for other networkers? Let us know: support@anthemvault.com. Best of luck and don’t forget to submit your photo to the challenge!

Windows 10 – What’s the Deal?

Microsoft_Windows_logo_(Pre-XP).svgMicrosoft made ripples when it announced that Windows 7 users who migrated to 8.1 would have the chance to upgrade to its latest OS, Windows 10, for free. Microsoft has a reputation for being stingy with its software updates, so this marked the first time in the company’s history that they have tried something more wallet-friendly. In conjunction with the release of the Surface and Surface Book computers, it all seemed like a calculated raid on Apple’s territory. But what about the upgrade offer’s fine print?

Supposedly, the offer will end this coming July, just a year from the date the free upgrade was launched. There is speculation that the deadline was put in place to try to avoid the kind of negative issues that Microsoft suffered when they dropped support for Windows XP. The problem with this kind of deadline is that, in all probability, users who decline a free upgrade for an entire year most likely don’t want the upgrade at all. If Microsoft is trying to transition its customers to a new operating system as efficiently as possible, they’re going to have a hard time convincing people – who didn’t want Windows 10 when it was free – to pay for it in the future. Hopefully, Microsoft has something else in mind with this deadline, because selling upgrades has never been the most lucrative part of their business model anyway.

Microsoft’s plan might include extending the offer, making a new offer once the next upgrade of Windows 10 hits, or taking the risky gambit of completely dropping the free upgrade. Right now, it’s all speculation and anybody’s guess. I hate to resurrect the age-old debate, but the whole situation just begs a comparison to Apple.

Having been a lifelong Windows user, I just recently made the switch to an Apple computer. I could go into a lengthy discourse on why I made that decision, but suffice to say that I have no particular allegiance to either company. I advocate the use of whatever tools help get the job done, whether or not they have a shiny white fruit on the outside. That’s why I keep a virtual Windows machine on my Mac for running Windows-specific applications that I still need. That being said, I have for the most part been happy with my switch to Apple. One thing that longtime Mac users might take for granted – but that I can appreciate as a virtual migrant – is how nice it is to not have to worry about software upgrades.

Frankly, I wouldn’t see any shame in Microsoft copying this feature. Microsoft seems to be trying to do a better job of integrating its hardware and software, and has even begun to produce its own high-end hardware with the aforementioned range of Surface devices. But part of the reason this model works so well for Apple is that they have made software integration seamless across all devices, while Microsoft still has people using old unsupported software that came out years ago.

If Microsoft is trying to hide the fact that they are competing with Apple, they’re not doing a good job of it. That’s not to say that either company’s products are inherently better or worse, but if Microsoft want to avoid the comparison, they’re going to have to figure out a system that works. The free Windows 10 upgrade offer seemed like a good step, but the jury is out until we see what they have in store for this July…. when the offer ends.