Diversify your hedges against government good faith and credit

J.D. writes in: "I have been buying up antique guns with my cash.

"I see my gun collection as assets. When I lose my job, and am dirt poor, I will be able to sell off guns, one at a time to pay for things. I will always be able to trade 4 bullets for a happy meal. Bullets make great money. They are portable, easily authenticated, durable, etc. ...

"If a man tried to trade me a gold coin for a months rent, I don't know how I would be able to tell it was real gold. But if he trades me a .38, I can tell it is real.

"I believe the bankers are behind the anti-gun agenda, as any asset that a normal person can buy and hold, which keeps its value, is competition for their funds, bonds, interest bearing accounts, etc. ... We all know that antiques, paintings, etc. return the highest gains.

"The more people trade their stocks and funds and cash for assets, the more the assets are worth! You can't manufacture antiques. Can you name three "things" you can buy (assets) that hold their value and are as easy to store as guns?

I replied:

Hi, J.D. --

Sounds like you're on the right track.

Beware the "collector premium," though. This is why I advise folks to buy some "common date" gold and silver coins for their "bullion value," not just "rare collectibles."

In an emergency, the night clerk at the pawn shop may well have been advised to pay $12 apiece (or $35 apiece, or $150 apiece, who knows what the future may bring?) for silver dollars, based on their weight in silver. You go, "No, this is a rare-date Carson City in Mint State 67 — it's worth 70 times that much!" The clerk goes, "Could be, but I'm no expert. I just know it contains .77 ounces of silver, and I'm instructed to pay the same for this one as a 1923 Liberty that fell in the garbage Disposal."

The rarities in superfine condition are great if you presume you're going to have the time to get them into the hands of a knowledgeable auction house — and if your widow or grandkids are left instruction for how to do so, instead of accepting the offer of the first person who shows up at the yard sale.

Gold does show less of a tendency to rust than guns, as well as taking up minimal storage space, so it's first on my list, followed by silver and firearms. (I SUPPOSE folks will eventually try to pass gold-plated counterfeits made of lead — they'll try to counterfeit anything — but I buy from dealers I know and don't consider it a major risk. "Antique guns" can also turn out to be cobbled together out of mismatched parts, unless you educate yourself about what to look for.)

Presuming occasional maintenance, an M-1 Grand or a Springfield Armory M-1A or even a German G-43 or 1940 Tokharev combine reasonably high value per weight with immediate usefulness AS GUNS ... which may not be true for a 16th century matchlock or a mint 1851 Colt pistol that's going to lose collector value if it's ever fired in anger (assuming it doesn't just plain blow apart) ... and which might not be my choice to discourage a pair of thugs breaking in my door, even if they weren't cased and locked in the safe.

Actually, we've found at thrift shops first edition books for a buck that turned out to be worth $500 — and plenty worth $75 — a multiple you're not likely to get with guns. But I wouldn't put ALL my assets there — remember the guys who were told "the value of a quality stamp collection can never go down" ... not to mention a lot of "sports collectibles."

Specialized knowledge can help. But the value of everything but food and water depends on guesses about the future. And you can't very well sink your entire fortune into lima beans.

So diversify a little, into things that interest you. But you've got the main idea (in my thoroughly amateur opinion.) Dump dollar-denominated paper. Buy real stuff.