Gold, Silver and Platinum: Three Precious Metals in One Safe Investment
by: Louis Basenese: Small Cap & Special Situations Expert
Monday, June 4, 2010: Issue #1275
If it weren’t for Harry Markowitz’s Nobel Prize-winning research, which proved that diversification can account for more than 90% of portfolio returns, I wouldn’t own a single ounce of gold.
Why?
Because to me, gold epitomizes a “greater fool” investment. Its price is less a function of improving fundamentals and more a function of finding someone else (the greater fool) to pay you more for it.
Or as hedge fund manager, Julian Robertson, recently said: “It’s less a supply/demand situation and more a psychological one – better a psychiatrist to invest in gold than me.”
Gold investments come with baggage that others don’t carry…
The widely varying premiums that dealers charge for coins and small bars.
The hassle and cost of storage.
The lack of liquidity. (Next time you order a Big Mac, try getting change for a Krugerrand.)
So having listed these drawbacks, why am I writing a pro-gold column? I’ll tell you…
Momentum is Rampant… And the “Smart Money” Could Propel it Higher
We absolutely need gold (and other precious metals) in our portfolios to maximize our returns and minimize our risk. Especially now.
Over the past month, as fears of a Greek debt contagion spread and the Dow cratered by 1,000 points in a single day, we’ve seen a gold rush. The price zoomed to an all-time high above $1,230 an ounce.
Now I don’t have a crystal ball, but I can recognize momentum when I see it. And it rests squarely in gold’s favor.
In addition, the “smart money” group – hedge funds, insurance companies, high-net-worth individuals – is placing massive wagers that gold will head higher still.
We’re talking about guys like outspoken billionaire Jim Rogers and hedge fund guru David Einhorn of Greenlight Capital. Einhorn isn’t simply speculating, either. Gold represents the second-largest position in his $6 billion fund. Much of it is physical bullion, stored in a secret location near Times Square.
And then there’s John Paulson of Paulson & Co. The latest SEC filings reveal that Paulson alone holds $6 billion in gold-related assets. That’s more than 20% of his total portfolio. He owns more gold assets than Australia, Brazil and Romania.
As a rule of thumb, it’s often best to follow these leaders. In fact, their long-term track records suggest it’s stupid to do otherwise, given that they’re placing such big wagers…
Paulson, Einhorn and Rogers: A Trio of Big Bugs (Gold, That Is)
Let’s take a look at their stellar track records…
- Paulson: Successfully predicted the subprime market collapse – and pocketed $15 billion in a single year, as these toxic assets imploded.
- Einhorn: The guy was roundly lambasted for selling short Lehman Brothers before it was cool. But he made a mint when the Wall Street icon crumbled. It wasn’t a lucky call, either. Einhorn’s hedge fund has returned an average of 22% per year since 1996… after fees and expenses.
- Rogers: Most people know about The Quantum Fund that Rogers co-founded. It gained 4,200% in 10 years, while the S&P 500 Index only mustered up a 47% rise.
Bottom Line: Right now, some of the world’s smartest investors are practically betting the house that gold will rise higher.
Gold bug or not, it would be unwise to miss out on the action. And it’s not just these guys piling into the gold market either. Based on data from the World Gold Council, investment demand for gold has nearly quadrupled since 2007.
So what’s the best, safest way for you to join the party?
All Gain, No Pain
The good news is that you can position your portfolio to profit from gold – and silver and platinum, too – without putting a single penny at risk.
(Yeah, go ahead and read that again. It’s not too good to be true.)
Our friends at EverBank recently unveiled their latest innovative investment product. And when I say “innovative,” I don’t mean some kind of exotic product or complicated derivative.
The Jacksonville-based bank doesn’t offer that kind of landmine investment.
I’m talking about the MarketSafe Diversified Metals CD (Certificate of Deposit.) Here are the benefits…
- It allows you to participate in the appreciation of the spot price of gold, silver and platinum and is weighted equally, with 33% exposure to each.
- It has a low entry price. For a minimum investment of just $1,500, you can gain no-hassle exposure to precious metals.
- There are no management fees.
- Since this product is structured as a CD, it qualifies for FDIC insurance.
- It’s principal-protected. So if the precious metals rally wanes, we won’t lose a single penny.
Now you might recall that other “principal-protected” products became worthless when the issuer went belly-up. That’s not a concern here, though.
EverBank is well-capitalized. While the financial statements of most banks imploded in 2008, EverBank reported record net income and asset growth. In fact, if only all our financial firms followed the same diversified, conservative approach as EverBank, we wouldn’t have endured such a mess.
The only real cost is the opportunity cost of tying up your funds here instead of placing them into a traditional CD. And while it’s true that your money will be tied up for five years and gains will be capped at 50%, consider that the average five-year CD is currently paying 2.1%, according to Bankrate.com.
Personally, I’d be willing to give up that pittance for a potential 50% gain. And remember, your downside is completely protected. In my opinion, that’s more than a fair reward for taking no risk.
In the interests of full disclosure, Investment U does have an advertising relationship with EverBank. But even without it, I’d be recommending this product. It’s one of a kind. And in this case it provides the safest way to profit from the potential upside in precious metals.
So if you’re a gold skeptic like me – or a gold bug looking for another alternative entry into the market – I encourage you to check out more details on EverBank’s MarketSafe Diversified Metals CD. You can also call them directly at: 877.259.9014. Just be sure to reference code 11645 to identify yourself as an Investment U reader.
And don’t delay. The next funding deadline for this CD is Thursday, June 24.
Good (and smart) investing,
Louis Basenese
- Why It’s Time to Invest in Silver: This Precious Metal’s Rally is Just Getting Started
- Take Profits on Gold: The Media’s Dead Wrong About This Market
- Gold’s Two-Faced Disappointment
5 Responses to “Gold, Silver and Platinum: Three Precious Metals in One Safe Investment”
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In addition to being the foremast expert on small-cap stocks, Louis is also well versed in special situations including IPOs, mergers and acquisitions, spinoffs and contrarian investments. His commentary has been featured in several media outlets, including MarketWatch. And he's also a top-rated speaker at financial conferences throughout the country. 
June 7th, 2010 at 12:56 pm
Dear Louis,
I am a longterm gold bug so I don’t share your concerns about the precious metals since I think they may well be the best (or at least among the best) performing commodities over the next 10 years or so. Also the big problem I see with this CD is that “your money will be tied up for five years and gains will be capped at 50%.”
In five years time these metals will quite possibly show gains of much more than %50 especially given that the Euro currency weakness we are seeing now may spread to the US dollar (and possibly other major currencies as well). From what I understand over the past few years or longer gold has been rising in terms of the major currencies. Governments are racking up too much debt for them to maintain stable and strong currencies. Therefore I think that the precious metals will significantly increase in value vis a vis most currencies (if not at all).
I have met Chuck Butler who is or at least was a VP at Everbank and from what I heard him say not too long ago he is a “goldbug.” The folks at EverBank are smart and savvy investors and probably realize that they stand to make a good profit and are counting on the precious metals increasing far in excess of 50% over the next five years.
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June 7th, 2010 at 1:46 pm
Sounds good if you have a small amount of money to invest. I’m currently invested in gold ETFs and gold miner ETF and some individual gold miners. I have stops or trailing stops on all gold investments. I get all the upside with out a cap of 50% and very little downside. My money is not tied up for 5 years. I think that is a better deal. I am getting double and triple returns so far.
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June 7th, 2010 at 11:47 pm
I think the key word here is “qualified”. What does that mean? Is it FDIC insured or is it not? Can you qualifiy this for me?
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June 10th, 2010 at 9:32 am
Well, i won’t deceive you. If someone have the zeal and required capital to invest in precious metals such as gold, platinum,etc; wisely, it is quite profitable.
i cannot dispute the fact that a lot of precious jewellers that own large jewelries companies in countries like Saudi Arabia and the far east.
Anyone who invest in such deal is a hot cake. I know a lot of them in my country Nigeria that have such investments.
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June 15th, 2010 at 9:42 pm
Interesting CD, I’ll check it out as I have never heard of this one before.
Some may also just want to invest a portion of their savings in GLD and SLV if they do believe that both Gold and Silver will head higher in the future.
I do believe that they will both head higher in the coming years due to economic uncertainty and the printing of fiat currency.
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