May 28, 2022

The Sale of Safes is Booming

Safe

In an interesting sign of the times, the sale of safes has been booming. This story has apparently been making the rounds on some local news programs and last week was the topic of an article in the LA Times.

Safe companies mentioned in the article are reporting sales increases of as much as 50% in the last few weeks. One chiropractor interviewed for the article mentioned that he has recently purchased a fourth safe, which he intends to fill with cash.

Some of the unspoken implications of this recent phenomenon:

  • People are investing in tangible assets like gold and silver instead of intangible assets like stocks and mutual funds. They are also opting for the physical version of the investment rather than certificates, ETFs, or derivatives. The boom in safes is a result of the need to store all of these new assets.
  • People have less trust in banks. They are willing to forgo the nominal rate of interest offered by the bank and keep their cash at home in a safe.
  • People have abandoned belief in safe deposit boxes. In the past, people may have kept tangible assets in a safe deposit box at their bank. Are people growing fearful of bank closures, bank holidays, or a gold seizure?

Here are some semi-hilarious quotes from the LA Times article.

“What people are putting in them I have no idea.”

This comes from a spokeswoman for the company Lowe’s. Not sure why they interviewed Lowe’s to determine what people put in safes, rather than asking the people buying them.

“It’s just stupid.”

This well considered and comprehensive opinion comes from a CPA and Financial Planner. Perhaps some of his clients think his investment advice is stupid. I’ll wait for that interview.

Reaction to: Gold May Pay Only in Case of Maximum Despair

With the price of gold on the decline, flimsy commentaries have started to appear which characterize gold as a fringe bet of foolish people.  I am admittedly biased in the opposite direction writing gold and silver blog, but if I wrote a commentary, I would at least make some substantive arguments that go beyond cursory and reckless statements.

I found this recent commentary written by Jane Bryant Quinn for Bloomberg particularly egregious, so I would like to examine some of her specific points.

“Gold is for rich guys…  you need a lot of it, stored around the world.”

I’m not even sure what she is trying to say here. Why do you need to be rich to buy gold? It can be purchased in sizes as small as 1/10 ounce, which would have cost about $40 in 2001. There is nothing to prevent “poor guys” from owning gold.

Why do you have to store it around the world? A 400 ounce gold bar worth about $288,000 is  7 x 3 5/8 x 1 3/4 inches. This would fit in an average sized safety deposit box. For the “poor guy,” 1/10 ounce of gold is about the size of a dime. You could store it in your pocket if you want.

“Gold isn’t even a reliable hedge against inflation.”

To prove this argument she quotes the price of gold in January 1980 and states that gold has not yet reattained this peak adjusted for inflation. By that same logic, one could state that stocks never have positive returns by quoting the price of the Nasdaq in January of 2000.

“For the average investor, gold boils down to a speculation on higher prices.”

She seems to mention this with a certain distaste. What investment is not based on speculation of higher prices, whether informed, rational, or otherwise? Would you make an investment if you thought prices were going lower?

“Toward the end of each year, [various world mints] let their inventories run down while gearing up for next year’s run. The surge of buyers left them short of high- quality blanks.”

The US Mint has been experiencing problems fulfilling demand for American Silver Eagles since March and problems fulfilling demand for Gold Eagles since August. The problems have been nearly continuous thoughout the year. The reason seems to be that the US Mint cannot obtain sufficient gold and silver on the open market to meet the physical demand.

“On EBay and the Home Shopping Network, coins sell at fantasy prices. A set of Eagles in four different weights was offered on HSN at $4,999.99.”

She lumps eBay into the same category as the Home Shopping Network. The Home Shopping Network is known for overpricing and overpromoting collectible products. EBay is a relatively well informed community of buyers and sellers whose transactions take place in a liquid market.  In general, transactions will occur at whatever price the forces of supply and demand will bear. When you’re favorite bullion dealer runs out of gold, why not purchase it on eBay?

“Gold, by the way, is taxed as a collectible… Your tax rate on long-term capital gains would be 28 percent, compared with 15 percent on other assets. Only a significant price gain redeems your bet. “

The 15 percent tax rate she mentions applies to long term capital gains. If you sold stock which was held for less than one year, it would be taxed at your marginal rate which could be as high as 35 percent. And perhaps more relevant, not too many people have long term capital gains nowadays. If you’ve been investing in stocks or real estate, I think you would welcome a gain taxed at 28% rather than a big pile of losses.