This guy is a bit of an extremist on his love for Silver right now, but he also has some very good points about silver. One interesting one I found that he likes is that when the market bottoms out and people move out of gold and silver that those who hold these commodities shouldn’t sell them, but instead use them as collateral for buying things. Things like cars and houses. That way you get to keep the commodity and you get to keep the house. If you sold your commodities and then bought a house and paid off the house you’d only have the house and not the commodity. There are a couple more things to consider for selling all of your commodities.
After the last bubble in the late 70’s early 80’s in precious metals, it took decades for its price to come back up although they did hold their purchasing power the entire time due to inflation of the US dollar. Another reason to sell the commodities would be to purchase more assets then perhaps you would otherwise be able to. This is just conjecture on my part as it very well may be possible to buy just as many assets using the commodities as collateral as with just purchasing them outright with the cash received for selling your commodities, but I don’t know and so I can’t say for sure.
People may also want to get out of commodities since they provide dividend yields like certain stocks and bonds do. They may want to do this since we might be back on a gold standard and inflation will be kept under control for the foreseeable future and so the price of precious metals may flat line for years to come.
Overall though this concept is smart as it is similar to Robert Kiyosaki’s infinite return principle in that he purchases an asset, cashes out of the original investment via a refinance, and rolls the proceeds into another investments. All the while maintaining ownership and cash flow of the first investment.
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