Author Topic: Geographic Diversification — Q and A Thread (Read 4496 times)

on: November 05, 2011, 03:30:48 PM

I think geographic diversification is the black sheep topic of the Permanent Portfolio. Many people think it is crazy, but secretly they all want to know how to do it.

In order of geographic diversification for gold we have these levels:

1) None — ETF that holds the assets in a commodity warehouse. Risk is that the asset is not available or easily seized during an emergency.

2) Physical gold and maybe an ETF for ease of rebalancing. Plus is you hold some physical asset outside the banking system. Minus is you need to protect against theft.

3) Physical gold and a financial product that stores the asset outside the country. This could be physical with a fund like CEF that stores assets in Canada. Or maybe an ETF like SGOL that stores it in Switzerland. Plus is you have some diversification against natural or manmade disasters in the US. Minus is a government emergency could still force repatriation of assets against your wishes.

4) Physical gold and a gold storage service like Perth Mint, Gold Money, Bullion Vault that (claims) to store physical gold on your behalf overseas in segregated or pooled storage. Plus is geographic diversification is much stronger. Minus is you basically have a service standing between you and the asset and there are risks it wont be there due to shenanigans on the backend (although Perth Mint is guaranteed by the Western Govt. of Australia and others may be insured as well).

5) Physical gold and segregated gold storage at a Swiss Bank. Plus is that this is the, pardon the pun, gold standard. Swiss banks, despite the bad publicity of late, are still not willing participants in breach of financial privacy. They are unlikely to comply with blanket orders to repatriate or freeze assets (but will do so on individual basis for criminal offenses). Minus is that many of these banks no longer want to deal with Americans on any level due to IRS encroachment.

In the past it was relatively simple to get to the Level 5 side of things. The Zurich Kantonal Bank in fact use to offer gold storage services for an outstandingly low fee of 0.55% a year. This is only about 0.1% more than a gold ETF and youd have authentic gold storage in Zurich by a bank insured by the Canton of Zurich. Alas, they no longer want Americans there as of a couple years ago and this great option went away.

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Lets discuss:

What topics around geographic diversification interest you the most?

What strategies have you looked into and/or implemented to get it?

What concerns you about the idea of geographic diversification that are maybe holding you back?

What would you do differently for those of you that did implement geographic diversification?

What questions would you like answers to about the topic in general?

Inquiring minds want to know. Post your thoughts and lets trade ideas.