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Stacking Silver, Semi-Numismatic Coins and Gresham’s Law

One of the great trends in tangible asset investing today is stacking silver. Stacking silver is simply the process of regularly buying physical silver in order to hedge your investment portfolio against inflation, financial panic or other economic dislocations. However, there is a something of a controversy in the silver stacking community. Which is better to buy: low premium, bullion-oriented silver or higher premium silver that has some numismatic or collector’s appeal?

This might seem like a contradiction at first. After all, if one is “stacking silver”, isn’t the entire purpose to get as much silver as possible for the lowest possible cost? Well, yes and no. Pursuing a weight only approach to silver buying is certainly a legitimate strategy. And the simplicity of such an approach is quite appealing. But it isn’t the only way to stack silver, or necessarily even the best way.

Like many things in life, there is no clear delineation between silver bullion and silver numismatic coins. Instead, there is a continuum, or range between the two extremes. On the purely bullion side reside most modern struck and extruded silver bars that perhaps trade for only a few percent over the spot price. Generic silver rounds, struck in a variety of different sizes and styles by private mints, also fit into this category.

On the coin collector’s end of the spectrum are old U.S. and foreign silver coins, some of which trade for premiums of many hundreds or even thousands of percent over spot. Of course most silver stackers don’t bother with these pieces because they have far too much numismatic value in relation to the silver they contain. But there are a plethora of semi-numismatic silver coins (and even bars) that derive their value primarily from their bullion value while still retaining some collector’s premium.

90% U.S. silver coins are the poster child for semi-numismatic silver. Struck from the 19th century until 1964, 90% U.S. silver consists of dimes, quarters, half dollars and silver dollars. Silver dollars always command relatively high premiums while half dollars have more modest premiums. Silver dimes and quarters have the lowest premiums of all, although they are usually still significantly higher than no-frills silver bullion. 90% U.S. silver coins are readily available in $100, $500 and $1,000 face value bags.

Another popular category of semi-numismatic silver coins is modern bullion coins struck by government mints. These include well-known coins like American Silver Eagles, Canadian Silver Maple Leafs, Austrian Silver Philharmonics, Chinese Silver Pandas and British Silver Britannias. Although these coins were all originally intended as bullion pieces, a vibrant collecting community has grown up around them over time. Third-party certified, or slabbed, specimens in very high grades (MS69 or MS70 – essentially flawless coins) are particularly coveted in the marketplace.

Even silver bullion bars can, counterintuitively, sometimes garner high premiums. Vintage poured silver bars, in particular, are great examples of this phenomenon. Although initially treated as pure bullion pieces, vintage poured silver bars have evolved into a very hot corner of the market, with premiums sometimes reaching as high as 100% for especially desirable specimens.

All of this interest in poured silver bars has created a renaissance in its production. After having been largely discontinued due to the labor intensive nature of casting compared to struck and extruded bars, poured silver bars have made a comeback as a specialty, “luxury” bullion product. Smaller companies, like Yeager’s Poured Silver, have spearheaded the revival of this exciting form of semi-numismatic silver bullion.

But the real question most people have is “What is a better investment?” – pure bullion pieces or semi-numismatic silver? In one sense, I don’t believe there is any “wrong” way to pursue stacking silver. If you like it, buy it. Any type of silver that you purchase will help you diversify out of overvalued paper assets and give your investment portfolio some much needed tangible asset exposure.

However, I have always been partial to incorporating an element of numismatic value, no matter how small, in my own silver stacking. This is because semi-numismatic pieces grant otherwise ordinary silver the added benefit of optionality. Optionality is any aspect of an investment that you don’t pay much money for, but has the potential to generate outsized returns. Semi-numismatic silver might cost an extra 10% or 20% in premiums over purely non-numismatic silver bullion, but it also has the possibility of eventually selling for premiums of 50% to 100% over spot. That optionality could be very powerful indeed, granting a “multiplier effect” to your silver holdings.

Generally speaking, I like incorporating additional ways of making money on my investments versus fewer ways. In the case of stacking silver, exposure to the spot price of silver is one way of making money. I like that. But the optionality of semi-numismatic premiums is a second, completely distinct way of generating returns. And, provided I don’t pay too much more for the opportunity, I like two ways of making money on an investment better than just one way.

One of the negative aspects of semi-numismatic silver is that it is usually less liquid than straight bullion, meaning it is harder to sell on short notice for its full value. Many silver stackers who pursue a weight-only, non-numismatic approach do so because they believe it will be difficult, if not impossible to realize high premiums on semi-numismatic silver bullion in turbulent conditions. This period of expected future economic crisis is often referred to in the silver stacking community as the “sh*t hits the fan” moment.

However, in my opinion, if you’ve constructed your portfolio properly, you won’t be selling your silver in these circumstances. There is an economic concept known as Gresham’s Law, which famously states that “bad money drives out good”. This dictum is usually applied to circulating coinage when debasement occurs. If there are two different coins with the same face value, and one contains precious metal while the other doesn’t, the baser coin without any precious metal content will circulate while its more intrinsically valuable counterpart will be hoarded.

This exact situation was experienced in the U.S. after it ceased using silver in its circulating coinage in 1964. Within a few years, it was almost impossible to find silver coins in circulation; their copper-nickel replacements freely circulated while the good silver coins were hoarded.

I believe that if there is ever a major financial panic in the future, Gresham’s law will kick in with a vengeance. If you have been stacking silver before such an event occurs, then congratulations. Your stash of silver will be worth much more than it was before. But you probably won’t have to worry about panic liquidating your semi-numismatic silver pieces at low premiums.

Instead, you’re much more likely to use your credit card to spend virtual, rapidly-depreciating fiat dollars (or some other national fiat currency) for necessary goods and services. After all, fiat currencies will be the “bad” money according to Gresham’s Law, while your silver stash will be the “good” money. And the good, silver money will be the very last thing you’ll want to sell in such a situation. Even if the banks are closed because of the panic and credit and debit cards don’t work, you’ll still part with any physical cash you have before you’d consider bargaining away your precious silver.

In the end, I think investing in silver via semi-numismatic coins and poured bars is just as good a way of stacking silver as buying non-numismatic bullion bars, rounds or coins. Even if there is a future financial panic, Gresham’s Law dictates that your silver hoard is one of the very last investments you’ll liquidate. There is a high probability that you will only willingly part with your silver once any financial panic has subsided and premiums for semi-numismatic coins have normalized. But, as always, there is no wrong way of stacking silver. In my opinion, any silver is good silver.

Bondholders, Capital Structure and the Coming Stock Market Crisis

While I don’t normally write exclusively about paper assets, I see a coming disaster involving shareholders and bondholders that I feel compelled to talk about. In my opinion, there is a dangerous situation evolving in the U.S. and global capital markets that is obvious once it is pointed out. And yet, I have not seen a single article in the mainstream financial press discuss this topic. I hope to do my part to address this deficiency.

But before I can describe my worries, we need to have an intimate understanding of corporate capital structures. Many average people who invest in the stock market in their retirement accounts do not understand the importance of a company’s capital structure. The capital structure is the way that a company finances itself. More specifically, it is the breakdown between the different tiers of financing that a corporation uses to fund its operations.

The most secured part of a company’s capital structure is composed of senior secured bonds. Senior secured bonds are corporate debt that has specific property pledged as collateral. This collateral can be anything from office buildings to factories to oil pipelines – any tangible property with a market value will work. Senior secured bondholders face little risk of loss in a bankruptcy due to the pledged collateral.

Next in a corporation’s capital structure are senior unsecured bonds. These debt instruments are very similar to senior secured bonds, except that they have no specific collateral pledged against them. This means that in a bankruptcy senior secured bondholders take their collateral first, leaving senior unsecured bondholders with whatever corporate assets are leftover. In the event of bankruptcy, senior unsecured bondholders generally sustain losses that range from modest to significant.

Moving further down the capital structure we come to convertible and subordinated debt. These fixed income instruments are similar to unsecured debt, except that they sometimes contain provisions that allow a company to suspend interest payments if they have cashflow problems. Even so, convertible and subordinated bonds are contractual obligations of the issuing company. In bankruptcy proceedings though, convertible and subordinated debts are junior to senior unsecured debts. Bondholders holding this slice of a company’s capital structure usually face large losses in bankruptcy restructurings.

Going one rung further down the capital structure we come to preferred stock. Preferred stock is considered a “hybrid” security. This means it has both debt and equity characteristics simultaneously. Preferred stock usually has fixed, periodic dividend payments. But it is also counted as equity for the purposes of measuring corporate leverage. Preferred stock payments can generally be indefinitely suspended if a company runs into financial trouble.

Some preferred stock is “cumulative”, meaning any missed interest payments must be made to the preferred stockholders before dividends can be paid on common stock. However, most preferred stock is non-cumulative in nature. Preferred stockholders are usually wiped out in bankruptcy.

Common shareholders are at the very bottom of the corporate capital structure. Common shares, also called stocks or equity, pay a variable dividend that is completely at the discretion of a company’s board of directors. When business is good, a company might pay very enticing dividends that increase over time. However, when business goes bad, dividends can be quickly cut or even eliminated altogether. In a corporate bankruptcy, common shareholders inevitably lose everything.

As you can see, a company’s capital structure is a lot like a ladder. The higher up you are on the ladder, the more secure your investment is and the lower your chances for loss in the event of bankruptcy. The flipside of this is that only the bottom rung – common stock – has a claim on the excess cashflow generated by a successful company.

And here’s where the problem lies. For the last decade the stock market has done wonderfully. Shareholders have enjoyed strong returns with modest volatility. Much of this has been driven, either directly or indirectly, by the world’s central banks, which have acted in concert to suppress global interest rates.

Although many investors don’t realize it, companies have benefited dramatically from lower interest rates as well. First, many companies have been able to refinance their high interest bonds into low interest bonds. This has been bad for bondholders, but great for shareholders.

However, corporate executives and directors couldn’t keep their hands out of the honey pot. Instead of simply refinancing their existing debt, many corporations have used cheap and plentiful debt to lever up their balance sheets. They largely used this onetime financial windfall to A) buy back common shares on the open market; B) pay out dividends to common shareholders; or C) buy rival companies in an attempt to gain market dominance.

All of these debt financed corporate activities have been beneficial to shareholders in the short term. But, they risk the solvency of many of these companies in the long term. The numbers are sobering.

According to the U.S. Federal Reserve’s Z.1 report, total non-financial corporate bond and loan liabilities outstanding as of March 31st, 2017 were over $8.6 trillion. This number has increased by a staggering 2.8 trillion dollars – almost 50% – over the course of the last 10 years. This is particularly telling because many financial pundits have claimed that U.S. balance sheets deleveraged substantially since the Great Recession.

But the numbers don’t lie. U.S. Corporate leverage is higher than it has ever been before. And overseas companies have largely engaged in the same destructive financial behavior as their U.S. counterparts.

Some people may point to healthy corporate cash balances as a mitigating factor in this situation. On the surface, this argument seems to have some merit. According to the U.S. Fed’s Z.1 report again, non-financial corporate cash is a robust 2.1 trillion dollars at March 31, 2017. In an attempt to be as lenient as possible about the definition of cash, I not only included traditional cash instruments in this amount – bank deposits, CDs, money market funds, repurchase agreements and commercial paper – but also longer dated “savings” vehicles companies sometimes use, like corporate bonds, municipal debt, agency bonds and treasury securities.

Over two trillion dollars of cash on corporate balance sheets sounds great, until you realize that those cash levels have only increased by $0.6 trillion over the last decade. This cash addition was completely swamped by the $2.8 trillion in debt these same companies have built up over the same period.

A Forbes article from 2016 makes those numbers look even more ominous. Most of that cash is held by only a handful of the largest and most successful U.S. multi-national corporations. According to the Forbes article, the 50 biggest cash hoarding U.S. non-financial companies held $1.14 trillion at December 31, 2015. This means that actual cash balances for the 4,000 odd remaining U.S. listed companies are collectively less than one trillion dollars. There goes the myth of cash-laden, rock-solid corporate balance sheets.

The consequences of this excessive corporate leverage have been repeatedly delayed. And, as long as the capital markets are happy to throw fistfuls of money at junk rated companies or anything that pays a dividend, not much will change. But everything in finance is cyclical, and all debt-fueled, corporate borrowing binges must eventually come to an end.

When that day finally comes, the place your investments hold in the corporate capital structure will matter a great deal. As cashflows shrink, companies naturally retrench. They spend less on advertising, R&D, mergers and employee wages and benefits. They also cut back, oftentimes dramatically, on the two things that tend to support share prices – stock buybacks and dividends.

If you hold common shares, which are the lowest rung of the capital structure, you will be disproportionately affected by these developments. Unlike interest payments to bondholders, corporations have no legal obligation to pay dividends to common shareholders and only very limited legal obligation to make payments to preferred shareholders.

As I like to put it, common stockholders hold the “business end” of the stick when it comes to the capital structure. What I mean by this statement is that while owners of common stock can potentially reap the greatest rewards if a company succeeds, they also simultaneously occupy the riskiest part of the corporate capital structure if anything goes wrong.

If the coming liquidity crisis is severe enough, there is a non-trivial chance for widespread bankruptcies in our over-levered corporate sector. Common and preferred shareholders would bear the brunt of the losses in this situation. In fact, it is normal for stockholders to have their shares cancelled outright in bankruptcy without any compensation.

Under these circumstances, a company’s bondholders are usually equitized, meaning all or part of their bonds are exchanged for new common stock in order to recapitalize the company, effectively making them the new owners of that company. The “haircut”, or loss, that bondholders take is proportional to the amount of assets the corporation has, its level of leverage and where the bonds stood in the old capital structure. The higher your bond in the capital structure of a company facing bankruptcy, the better. Shareholders almost always get nothing.

Even if an over-levered company isn’t forced to declare bankruptcy, it doesn’t mean that its common shareholders are free and clear. Many times, highly leveraged companies become zombie companies. This term was first popularized in Japan in the 1990s in the wake of its collapsed stock market bubble.

A zombie company is one that is kept on life-support by its lenders or bondholders. These lenders continue renewing loans to zombie companies to keep them out of bankruptcy when there is otherwise little hope of them paying down their debts. In return, a zombie company becomes the de facto property of the lenders. The lenders appoint representatives to the company’s board of directors and essentially have veto power over any major corporate decisions.

In addition, and perhaps most importantly for shareholders, effectively all future cashflows of a zombie company are redirected to the bondholders. The shareholders are owners of the company in name only, with few rights and no realistic hope for future financial gains. Dividends are almost always suspended in this situation, as well.

I suspect that when our current economic cycle finally turns, there will be widespread corporate bankruptcies. Many, many companies that do not declare bankruptcy will instead become zombie companies. Common and preferred shareholders will be all but wiped out by these developments. Instead, bondholders will usurp their privileges wholesale and effectively take ownership of a huge swath of corporate America. In the end, only bondholders will inherit the stock market.

A Detailed History of the Platinum Gold Ratio

Out of all the precious metals, none have been as exalted in the modern age as platinum. For more than a century this most desirable of precious metals has been coveted by people as diverse as Hollywood movie starlets and titans of industry. Incredibly rare, this dense, chemically-stable, gray-white metal has an occurrence of only 0.003 parts per million in the earth’s crust. Platinum is so rare, in fact, that its annual mine production is less than 1/15th that of gold.

Platinum has been used in fine jewelry, luxury watches and high-end objects d’art for well over a century. And yet, shockingly, platinum used to be considered a junk metal. This, along with many other interesting tidbits, is reflected in the historical record of the platinum gold ratio. The platinum gold ratio expresses the value of a single troy ounce of platinum in terms of gold and is often used by precious metal investors to gauge relative value between the precious metals. A high ratio means that platinum is expensive compared to gold, while a low ratio means that platinum is cheap in relation to gold.

The chart above shows the platinum gold ratio from 1880 through 2016. By closely examining the graph, there are a few important observations we can make. For example, the platinum gold ratio has been extremely volatile. Over the past 135 years it has been as low as 0.05 in 1885 and as high as 6.63 in 1968. However, within the last 40 years, the ratio has traded in a far more constrained range, generally hovering between 0.8 and 2.0.

Although it may seem odd to us today, the platinum gold ratio was extremely low in the late 19th century. This was because the relationship between platinum and gold was fundamentally different before the 20th century. Before 1900, platinum was something of a scientific oddity while gold was universally considered money.

In pre-modern times, platinum had been used by various pre-Columbian South American civilizations. Later, Spanish explorers panning for gold in South American alluvial deposits were perplexed by the strange white metal and, believing it to be immature gold, often threw it back into the streambeds so that it could “ripen”. Although platinum was first officially noted by the Italian scholar Julius Caesar Scaliger in 1557, it languished unappreciated for centuries due to its extremely high melting point (1,768.3° C or 3,214.9° F) which made it very difficult to fabricate.

But people did try to find uses for the enigmatic metal. Foremost among these was employing platinum to counterfeit gold coins! Because many nations were on the gold standard in the 19th century, gold coins circulated freely. At this time platinum traded for just a fraction of the value of gold, as evidenced by the extremely low 19th century platinum gold ratio. However, platinum (21.45 gm/cm³) happens to possess a similar density to gold (19.3 gm/cm³). This made platinum the perfect metal to counterfeit gold coins during the 19th century. Today, these contemporary platinum counterfeits are quite rare, and usually command higher prices than genuine gold coins of the time!

Platinum Bullion Coins for Sale on eBay

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The 19th century Russian Czars took this trend one step further and actually introduced platinum coinage for general circulation. In the early to mid 1800s, large quantities of platinum-alloy nuggets were recovered from alluvial deposits in the Ural Mountains. The Russian Czars hoped to take advantage of this by turning the unusual metal into coins.

Between 1828 and 1845, Russia struck a series of circulating platinum-alloy coins in 3, 6 and 12 ruble denominations. Unfortunately, the Russian people, having no familiarity with platinum, rejected the unusual platinum coins wholesale. Relatively few coins were struck and specimens command exorbitantly high prices today when they come up for sale.

It was only around 1900 that the technology to easily work platinum was first developed. It arrived in the form of the super-hot, oxy-hydrogen melting torch. Only an oxygen-enriched hydrogen stream burned at a hot enough temperature to melt the recalcitrant metal. This invention finally democratized platinum, allowing the gray-white precious metal to be worked by jewelers and other craftsmen.

As a direct consequence of this development, demand for platinum in high end jewelry skyrocketed. Platinum was perfect for the application. The metal was chemically inert; it neither tarnished nor corroded. In addition, platinum is harder than gold, giving it better wear characteristics.

The gray-white precious metal is also extremely strong, which was a boon to early 20th century Edwardian and Art Deco jewelry designers. Jewelers used platinum to create fabulously complex pieces using platinum wire, sheet and gauze that would have been impossible with traditional gold or silver-topped gold alloys. The fashion for “white look” jewelry reached its apogee during the Art Deco period of the 1920s, when platinum was de rigueur.

At the same time that jewelry demand for platinum was taking off, the industrial applications of the metal were becoming apparent as well. Platinum is an excellent chemical catalyst and was instrumental in the growth of the fledgling oil and chemical industries. The scientific community also adopted platinum for crucibles, electrodes and thermocouples due to its durability, resistance to corrosion and high melting point.

These fresh sources of demand drove the platinum gold ratio to elevated levels above 2.0 from the 1910s through the 1920s. However, with the advent of the Great Depression both industrial and jewelry demand for platinum collapsed. As a result, the platinum gold ratio declined until it hovered close to parity from the 1930s until the end of World War II.

Platinum Bars for Sale on eBay

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In the aftermath of World War II, global economic growth accelerated again, underpinning demand for platinum. During this time it was also discovered that platinum could be used in catalytic converters to reduce pollution from automobile exhaust. Robust demand for the unique industrial metal sustained the platinum gold ratio between 2.0 and 3.0 from the late 1940s until the early 1970s.

The highest annual value recorded for the platinum gold ratio was a spike to 6.63 in 1968. This was undoubtedly the result of attempts by the U.S. and Western European central banks to suppress the gold price in the 1960s via the London Gold Pool, while the platinum price was free to rise in the highly inflationary environment of the time.

The platinum gold ratio then flat-lined around parity from the mid 1970s until the late 1990s, as both precious metals endured brutal bear markets after 1980. Starting in 2000, rising industrial demand for platinum, coupled with stagnate gold demand, combined to elevate the platinum gold ratio until the Great Recession hit the global economy in 2008.

Since that time the platinum gold ratio has collapsed below 1.0, reflecting sluggish demand for the industrially-oriented white metal. In contrast, gold has enjoyed a safe haven bid as a monetary metal in recent years, propelling it to a higher value than platinum for the first time on a sustained basis since the mid 1980s.

Today, during the fall of 2017, the platinum gold ratio is lingering around 0.72. This is an exceptionally low value, historically speaking. In fact, ratios this persistently low were last seen in the late 19th century, before platinum’s unique usefulness was fully realized! Although no one can predict the future, I suspect that platinum bullion is a better long-term buy right now than gold bullion, where you have to mind the stairs.

Exter’s Pyramid in the 21st Century

John Exter was a famous 20th century American economist. His illustrious career included stints at MIT, the board of the U.S. Federal Reserve, and First National City Bank (which later became Citibank) as a senior VP. He was even the first governor of the Sri Lankan Central Bank in the early 1950s. To say John Exter had an impressive resume would be an understatement.

However, he is best remembered for creating Exter’s Pyramid, an inverted pyramid that roughly organized asset classes according to increasing risk and market size. His pyramid is inverted because in a normal, healthy economy a relatively small number of extremely safe assets (located at the narrow base of Exter’s pyramid) support a large number of risky ones (towards the wide top of the inverted pyramid). Exter chose to use gold as the foundation of his inverted Pyramid – a sensible choice given that the gold-based Bretton Woods monetary system was still intact during his tenure.

But John Exter didn’t just choose gold as the base of his pyramid because it was in vogue at the time. He was also an avowed hard money advocate. He was old enough to remember the days when the United States still had a circulating gold coinage. He was also old enough to have the wisdom to know that a “flexible” money supply – a flawed ideal pursued by global central bankers for most of the 20th century – would inevitably lead to heartache and economic ruin. Fortunately for John Exter, he died in 2006. So he was never forced to witness the hideous financial denouement wrought by the world’s incompetent central banks during the Great Financial Crisis of 2008-2009.

Today, almost 10 years after that terrible crisis, the investment and economics professions have lost whatever tenuous attachment to reality they might have once possessed. One of the top Google results for the term “Exter’s Pyramid” is an article from 2014 by an investment firm that is boldly titled “Exter’s Defunct Pyramid“. You can probably guess the content of the article from the title alone; it is not flattering. In any case, it accuses John Exter of being an ancient fuddy-duddy whose old-fashioned ideas about gold don’t apply to our streamlined, ultra-modern, super-perfect fiat currency system.

This way madness lies.

And I think our collective insanity is obvious to any truly impartial observer of our current capital markets. As far as I can tell, the United States specializes in manufacturing lottery tickets in the form of highly dubious companies listed on public exchanges that purport to do something vaguely technological. To paraphrase a common saying: financial stupidity – there’s an app for that!

Seriously, we have companies like Snap Inc. This firm specializes in making software for live vlogging, which is like blogging except with videos taken in real time so you can’t edit out mistakes. Snap hopes to make money by selling advertising that it must cannibalize from powerful internet giants like Google, Facebook and Amazon – either that or tear the last few advertising dollars from the rapidly dying print media industry. Oh, did I mention that Snap currently sports a market cap of $17 billion and has yet to earn a single penny? And with a business plan like that, I suspect it never will.

Unfortunately, I think that today’s stock market is a confidence game in the classic sense of the word. There are only con artists and marks. If you don’t know which one you are, it is probably the latter.

With these thoughts propelling me, I decided to update Exter’s Pyramid to reflect the realities of a very uncertain 21st century. Below, I have listed my interpretation of John Exter’s asset classes from least risky to most risky:

Precious Metals
Fine Art, Antiques & Gemstones
Paper Money & Bank Deposits
Government Debt
Municipal Debt
Corporate Debt
Commercial Real Estate
Stocks
Derivatives & Securitized Debt

As you can see, I’ve replaced gold with the more general category “precious metals”. Precious metals, including gold, remain the most liquid of the safe assets available without a doubt. I’ve also inserted a new asset class in the number two position: fine art, antiques and gemstones. These undervalued tangible assets are all too often overlooked by an investment community that doesn’t understand them or have the specialized knowledge needed to evaluate them. The investment potential of fine art and antiques is, incidentally, what the Antique Sage website is all about.

Next I’ve placed the asset classes we traditionally think of as being safe. This includes physical cash, savings accounts and government bonds. These assets all have great liquidity, but could potentially suffer from currency devaluations driven by future financial crises.

After these come municipal and corporate debt on the risk scale. These asset classes can either be fairly safe or extremely risky, depending on a host of factors that most armchair investors are ill-equipped to judge. They have some elements of safety, but also many potential risks in the current environment.

The final asset classes in my interpretation of Exter’s Pyramid are commercial real estate, equities, derivatives and pretty much anything that has been securitized. These assets are all ticking time bombs. When they finally implode, the financial carnage will be devastating. Stay far away from these wealth destroyers.

To many financial professionals, Exter’s Pyramid is a historical footnote – a reflection of an obsolete monetary system that has no bearing on the present. But I believe differently. I think that Exter’s Pyramid is actually a window into our future – an economic warning of things yet to come. We would do well to heed the words of wise men who have come before us – men like John Exter.

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