Before I (Chris Lowe) took the helm at The Daily Cut, I worked on an unusual project.
It was an advisory Legacy Research cofounder Bill Bonner headed up. It focused on helping wealthy families hold on to their wealth.
I don’t mean for just their lifetimes… These folks were looking to hold on to wealth for generations.
When I asked them how they preserved wealth over the long haul, the answer was often “a third, a third, a third.”
That refers to the tradition of dividing a long-term family portfolio three ways among gold, fine art, and land.
This “old money” secret won’t bring you overnight riches. Then again, it’s not supposed to…
It’s supposed to keep wealth intact not just during recessions and crashes… but also during wars, revolutions, and currency devaluations.
And as you’ll see today, you don’t have to be the descendant of a millionaire or billionaire to build your own “old money” portfolio… and inflation-proof your wealth.
Regular readers will know what I mean. But if you’re just joining, a hard asset is something that’s hard to produce more of relative to its existing supply.
This makes it inflation-proof.
Gold is expensive to dig out of the ground. And unless we figure out alchemy, there’s only so much of it on Earth.
Fine art is scarcer than gold… and harder to produce more of.
Artists die. This ensures they can’t create new artwork to boost existing supply.
Land is scarce, too. As Mark Twain put it, “Buy land. They’re not making any more of it.”
Each one of these is a good inflation shield. Together, they’re a great way to make sure you avoid a steep loss of buying power.
Let’s dig deeper into each…
We’ve been urging you to own some gold since right after we created the Cut for paid-up Legacy Research subscribers in the summer of 2018.
Back then, an ounce of gold set you back $1,215. Today, the same ounce costs $1,830.
That’s a 51% gain.
That’s just the start of the good news for gold investors. Bill…
Gold always has been – at least for 5,000 years – a bulwark and protection against all the funny things that happen in markets… including inflation. But I wouldn’t be a bit surprised if Americans don’t own much gold. I suspect they’re going to learn the hard way.
The most hassle-free way to buy gold is to pick up shares in a gold-backed exchange-traded fund (ETF).
The most popular is the SPDR Gold Trust (GLD). It’s the largest gold-backed ETF in the world. But it doesn’t store allocated gold in your name. That means the ETF provider or the custodian – somebody other than you – is the legal owner of the gold.
A better option is the Sprott Physical Gold Trust (PHYS). This ETF stores gold bars allocated in your name in vaults at the Royal Canadian Mint. That makes you the legal owner of those bars.
Bullion – or “common” – coins are a good starting place.
You can typically pick up these coins from a dealer for $50 to $100 an ounce over the quoted gold price.
These are different from collectible – or “numismatic” – coins, which carry higher premiums over the quoted gold price.
If you’re just starting out with bullion coins, stick with 1-ounce South African Krugerrands, Canadian Maple Leafs, or American Eagles.
Each is instantly recognizable anywhere in the world. Pull a 1-ounce American Eagle out of your pocket in any major city, and you can turn it into local cash in minutes.
Gold bars are more suitable for large amounts of gold.
Bars made by respected refiners are the safest to buy. So stick with bars made by PAMP, Johnson Matthey, Engelhard, Credit Suisse, and Heraeus.
For centuries, the ultra-wealthy have used art to grow their fortunes and increase their status.
And it continues to keep them ahead.
Since 1995, for instance, famous painters’ art has appreciated in value at a rate of 14% a year. That compares with an average annual gain, including dividends, of 9.5% for the S&P 500.
Better still, art can go up in price even when the stock market is crashing. That makes it a great way to diversify your wealth outside of stocks.
Of course, it’s not easy to know your way around the fine art world. I certainly don’t…
That’s why a recommendation Teeka Tiwari and his team made at our Palm Beach Letter advisory caught my eye.
It’s called Masterworks. It allows you to buy shares in iconic, multimillion-dollar paintings. And it’s an easy way to get exposure to artwork in your portfolio.
(Masterworks doesn’t let most folks sign up immediately. It puts potential new clients on a waitlist. But if you’re a paid-up Palm Beach Letter subscriber, Teeka has secured you a special “skip the line” pass. You can catch up on how to use that in your Da Vinci Factor special report here.)
Like fine art, this can be tricky for most investors to get a hold of.
Land is expensive. And it typically requires a lot of management.
That’s why I recently shone the spotlight on Gladstone Land Corporation (LAND).
Our natural resource investing expert here at Legacy, Dave Forest, has been recommending it to his readers as a way to get exposure to farmland.
Farmland is among the best types of land to own because it’s productive and throws off a yield.
But running a farm is hard work. Most folks don’t want to do that.
That’s why Dave has zeroed in on Gladstone.
It’s a real estate investment trust, or REIT. That’s a type of company that trades on public stock exchanges like a regular stock. Gladstone owns and operates income-producing farmland.
That’s not how most “old money” families do it. They tend to own land directly. They can afford it.
But owning shares in Gladstone is a better deal in three important ways…
You don’t have any of the hassle of farming the land yourself. You can buy and sell REITs anytime you want. And they offer more diversification than a single farm.
Gladstone owns 141 farms, spanning 104,000 total acres across 13 U.S. states. Its land is valued at over $1.2 billion and is 100% leased.
It even pays a dividend yield of 2.2%.
As a Legacy Research reader, you’ll likely also have a chunk of your wealth in the tech stocks Jeff Brown recommends.
You’ll also have made speculations on cryptos and pre-IPO (initial public offering) deals Teeka recommends.
And if you follow Dave or Nick Giambruno over at Casey Research, you’ll likely be speculating using warrants and blockchain stocks.
That makes sense. Earning big money with these bets is a way to really move the needle on your wealth.
But you want to play defense as well as offense… Especially now that inflation is on the rise.
So take a leaf out of wealthy families’ playbook and add gold, fine art, and land to your portfolio.
They’re time-tested ways to protect your wealth over the long term – long enough even for your kids and grandkids to enjoy it.
So I’d love to hear your thoughts on the “old money” secret I just shared with you.
Is it something you’ll be acting on? What other strategies are you using to beat inflation?
Write me and the rest of the team at feedback@legacyresearch.com.
Regards,
Chris Lowe
July 29, 2021
Barcelona, Spain