For the past 7 or 8 years I have been a big proponent of gold and silver investing. I am a big opponent of paper money and our fiat currency. Plus, the ever increasing national and global debts doesn’t make me optimistic about where things are headed and does not comfort me at night.
Regardless, I’ve been doing a lot of thinking about my collection. It really isn’t a collection, but an investment. However, it doesn’t do anything. It just sits there. I can pet it and coo to it all I want but it doesn’t produce anything. Point blank, it isn’t a “productive” asset. It doesn’t produce anything each week, quarter, or year. It just gathers dust in my safety deposit box.
Now shift gears and consider land. Land in 1900 was about $45/acre and now it is worth about $9,000/acre. At the same time gold was about $20/ounce and now it is $1052/ounce. However, here is the big kicker. Land over the same period has produced a 115 years of crops (aka a productive asset) that generates income for a farmer or corporation. Gold or silver hasn’t produced anything. It just sat there.
- A productive asset will always outperforms an unproductive asset (over the long term) – What is a productive asset? It is an asset the produces a regular income or subset of assets. Take for instances the stock market. It continues to produce dividends year over year despite all the fluctuations. Gold and silver on the other hand aren’t a productive asset. They just sit there and gather dust. You can pet your gold and rock it to bed at night, but it won’t do anything for you. It doesn’t give you anything year over year for owning it. It is merely a “hedge” against inflation and fiat currencies.
- Land will adjust with inflation – Land, just like gold and silver, is a great hedge against inflation. As the rate of inflation grows, then so will the goods and services that are produced from the land. Just like metals, land will help you, as an investor, fend off the affects of inflation.
- Land prices are hard to manipulate vs gold/silver – Land prices are affected by a number of factors. They include,
prices of goods that can be produced from it, quantity of goods produced from it, domestic and foreign trade (tariffs), dollar value, supply and demand, and what bidders are willing to pay for it (basic supply & demand). Land isn’t a type of investment that can be manipulated like a currency or ETF fund. It has a number of different impacting factors that I mentioned above and some of which aren’t able to be easily modified. This fact makes land even more attractive than most of your traditional investments.
- Gold has very few uses compared to land – Gold is one of the best metal conductors of electricity and for use in jewelry. At the same time it is an extremely expensive product to use in electrical wiring and jewelry. Land, on the other hand, has a lot of capabilities. To name a few: producing crops (corn, beans, wheat, etc), raising livestock on, subdividing into smaller suburban lots, building a factory on, building a windmill on to produce electricity, or even leasing out land to a cell phone company to build a cell tower on. Vacant land can be used for any number of uses, which opens up a lot of possibilities in increased return on investment and/or passive income streams.
Previously I’ve written about how gold and silver were such a good investment, and I’ve slowly changed my tune. I’ve realized how gold and silver are so unproductive. They aren’t working for me. I want my investments to work for me month over month. However, this doesn’t go without saying that I still believe that gold and silver do have a small part in a persons portfolio. Ideally, most investment advisers recommend 5-10% of your portfolio, and especially if we want to hedge against all the fiat currencies.
I’d love to hear from some of our readers on your thoughts on what investments you make that are a “productive asset”? What are your thoughts on gold? What are your thoughts on land?