Safe deposit boxes, kept in bank vaults behind thick layers of steel, are widely believed to be one of the most secure ways to store valuables. However, people should make certain considerations and be aware of certain misconceptions before placing their valuables in a safe deposit box.

One major misconception is that valuables placed in a safe deposit box are covered by FDIC insurance. The FDIC only insures bank deposits in FDIC-insured banks, but safe deposit boxes are not considered to be bank deposits and are not covered. In addition, only banks found to be negligent are legally required to cover losses in the event of damage or theft of a safe deposit box’s contents. Some homeowner insurance policies will cover losses, so check with your insurance provider. Bank robberies and major natural disasters happen more in the movies than they do in real life, so these aren’t huge concerns, but safe deposit box holders should understand the limits of their protection.

An interesting story was published in the BBC today that should be of interest to people who keep their valuables in safe deposit boxes. The story is about a man in India who kept his life’s savings inside a safe deposit box in a bank that developed a termite problem. The bank posted a notice warning customers, but the man did not visit the bank on a regular basis and never saw it. On his next visit to the bank, all he found in his safe deposit box was a pile of termite dust where once there had been money and investment papers. Because the bank posted a notice, and because the safe deposit box itself was not damaged, the bank was not found liable.

The lessons of this story are 1) Make sure you understand exactly what is and is not covered by the bank when you open the safe deposit box, and 2) Make sure you have insurance to protect whatever is not covered by the bank. If you put your entire life savings in one spot, make sure it is 100 percent safe and secure.

Safe deposit boxes have their place. Your valuables are certainly much safer in a safe deposit box than they would be in your home, and many insurance companies will charge lower premiums for coverage of certain valuables if they are held in a safe deposit box. If you are storing investments such as gold or other precious metals, a safe deposit box will probably be your best bet. However, it is important that people understand exactly what they are getting with a safe deposit box, so they do not enter the arrangement with any preconceived notions. If you want to make sure your valuables are protected, ask questions and then get additional insurance if necessary.

Labels: Banks, Gold, investments

Global warming is on the minds of many people after yesterday’s news that a 160 square mile piece of Antarctic iceberg collapsed. According to an AP article, that ice formation had been estimated to be approximately 1,500 years old.

Most of us have heard evidence for and against the theory that human activity is the cause of global warming. I’m not a scientist, and I won’t debate whether global warming is a natural phase of the earth’s climate or the product of human industry. However, I will discuss how real estate values could potentially be affected if the polar ice caps melt, as some believe is already happening at an unnatural rate.

In an article in USA Today, scientists at the U.S. Geological Survey estimate that the maximum rise in sea levels would be approximately 215 feet, or 65 meters. This estimate assumes that all of the ice sitting on land in Greenland and Antarctica were to melt. That is the worst-case scenario that they predicted, and they said it would probably take a few thousand years to reach that point. For more details, read the USA Today article.

I found an interactive map that helps identify the areas that would be impacted. By changing the estimated sea level rise, you can see how the different areas are affected. As most people know, the biggest threat is probably to Manhattan. The area is home to millions of people and it is barely above sea level. It is also the financial center of the country, if not the world.

In a worst-case scenario, if Manhattan were to go under, millions of people and businesses would need to relocate, and there would be billions--if not trillions--of dollars in losses.

Here are just a few questions to consider: Would property insurance cover some or all of the losses? If they did cover such losses, how many insurance companies would go under as a result? Would the government come to the rescue, and if so, how much would it cost taxpayers?

I don’t believe that the worst-case scenario will happen. Many cities across the world would be lost--not just Manhattan--and the world wouldn't just sit back and let that happen. Scientists are already working on ways to combat the effects of global warming.

But if no action is taken and the sea levels rise, I believe that there will be widespread panic and people will head for high ground. If I were investing with the long term potential effects of the global warming in mind, I would stick to markets and areas that are at least 215 feet above sea level. Even if it will take thousands of years for sea levels to rise that much, people will become extra cautious much earlier on. Real estate values could increase dramatically in these areas as many millions of people are displaced and have to look for new homes.

I don’t think we will probably have to worry about this sort of chaos (at least stemming from the current global warming threat, but who knows what will happen when we start implementing the counter measures I mentioned earlier) but were it to happen, severe global warming would shatter the markets and send the world into financial turmoil such as never before witnessed. Even though desire for real estate in certain areas will increase, there may not be people who enough people who can afford higher prices, and actual demand probably wouldn’t equal investor expectations. Investors who think the effects of global warming will be felt in their lifetime might want to purchase gold. In times of panic, investors have always been able to count on gold.

Labels: Gold, investments, real estate

It long appeared inevitable, but it has now officially happened: today the price of gold hit the $1,000 mark. Wondering what’s so important about the $1,000 gold price? Well, let's see what Congressman Ron Paul has to say.

The following excerpts were pulled from an article posted on Lewrockwell.com by Paul (all emphasis mine):

“Buying gold and holding it is somewhat analogous to converting one’s savings into one hundred dollar bills and hiding them under the mattress–yet not exactly the same. Both gold and dollars are considered money, and holding money does not qualify as an investment. There’s a big difference between the two however, since by holding paper money one loses purchasing power. The purchasing power of commodity money, e.g., gold, however, goes up if the government devalues the circulating fiat currency.”

“Holding gold is protection or insurance against government’s proclivity to debase its currency. The purchasing power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency goes down in value. In our current situation, that means the dollar.”

“A soaring gold price is a vote of ‘no confidence’ in the central bank and the dollar. This certainly was the case in 1979 and 1980. Today, gold prices reflect a growing restlessness with the increasing money supply, our budgetary and trade deficits, our unfunded liabilities, and the inability of Congress and the administration to reign in runaway spending.” (This was written back in 2006, so you can probably add the uneasiness being felt from the credit crisis.)

“Likewise, a fiat monetary system encourages speculation and unsound borrowing. As problems develop, scapegoats are sought and frequently found in foreign nations (hello China). This prompts many to demand altering exchange rates and protectionist measures. The sentiment for this type of solution is growing each day.”

Congressman Paul then gets in-depth about how the fiat system will inevitably fail, as it has throughout history (which is an interesting truth). If you are interested in knowing the details, read the complete article. It is fairly lengthy, but well worth the time to read, whether or not you agree with his ideas—it will get your mind spinning a bit if nothing else.

I don’t envision the U.S. moving to a gold standard as Paul suggests, and I’m not sure exactly how I feel about that idea one way or the other. Paul makes an interesting—and extreme—point at the end of the article that I do want to bring up:

“Economic law dictates reform at some point. But should we wait until the dollar is 1/1,000 (which arrived today) of an ounce of gold or 1/2,000 of an ounce of gold? The longer we wait, the more people suffer and the more difficult reforms become. Runaway inflation inevitably leads to political chaos, something numerous countries have suffered throughout the 20th century. The worst example of course was the German inflation of the 1920s that led to the rise of Hitler. Even the communist takeover of China was associated with runaway inflation brought on by Chinese Nationalists. The time for action is now, and it is up to the American people and the U.S. Congress to demand it.”

Labels: Gold, investments, Ron Paul

With the price of gold sky high right now, how valuable are those Oscars that got passed out yesterday?

According to The Seattle Times, each Oscar Statuette cost $500 this year, up from $400 last year. In only one year the price jumped $100, or 25 percent! That is pretty amazing, and it goes to show how bad inflation is getting, especially for materials. Each Oscar, according to The Seattle Times, is made from pewter that is plated in successive layers of copper, nickel, silver and gold, and then lacquered and buffed. The price of gold itself has jumped around 40 percent in the last year.

Those who think that $500 isn’t much to pay for an Oscar might be disappointed to know that they can’t be bought. There are strict rules forbidding their sales, and Oscar winners sign contracts guaranteeing that they won’t sell their own award. If they were to break that contract, they would probably fetch more than $500 on the black market, but instead of investing in Oscars, one might want to consider the materials that make up an Oscar.

Even though it seems that silver and gold are at ridiculous highs right now, I think there is more room to grow. Considering the rate at which the Fed is inflating the monetary supply, gold and silver are practically a must for investors right now.

Labels: Gold, inflation, investments, silver