Seth: Hey everybody, how's it going? Welcome to the REtipster podcast.

You're listening to episode 179. Today I'm talking with Ben Nadelstein from Monetary Metals. So Monetary Metals is a company that operates the gold yield marketplace. They offer investors a yield on gold, paid in gold.

The company's mission is to unlock the productivity of gold by providing new incentives for the world to rediscover the use of gold as money. And this company offers a unique approach to gold investment, allowing investors to earn interest on their gold and silver hold.

And you might be wondering, what are we doing, Seth? Why are we talking about gold and silver now? I thought this was a real estate investing podcast.

And I'll admit, when I first heard the idea, I kind of thought the same thing. Like, does it fit? Like, does the REtipster audience want to hear about this? I don't know.

But then Ben, our guest, was explaining to me how there are some key similarities between the two, precious metals and real estate, and some benefits of earning income from precious metals that real estate can't deliver.

So it's almost kind of like an alternative that's definitely worth being aware of. And I think you'll agree as we get into this. I also had never even heard of this kind of thing, earning lease revenue on gold. It took me a second to wrap my head around it, but as real estate investors, one of our primary concerns is investing in tangible assets that produce a return.

And if we can do the exact same thing in some ways that are even easier with different asset classes, we probably ought to know about that, right?

So today, Ben is going to explain how Monetary Metals works, and I'm going to grill him with all kinds of questions. We're going to get a really deep understanding of this. And once we get to the bottom of it, we'll show you how you can get involved with this if you're interested.

So, Ben, welcome to the show. How's it going?

Ben: Seth, thanks so much for having me. I'm a longtime listener and I'm super excited to get grilled by the one and only Seth Williams on the REtipster podcast.

Seth: I'll just say I met Ben at FinCon and I was kind of blown away at like how good he is at explaining this stuff. I'm sure you'll agree as we get into this.

So my first question, why does everyone around the world, for thousands of years, why have we assigned a universal value to gold and silver? Why did people collectively decide that this should be used as their money? Why not copper or bronze or any other metal out there? What's so special about gold and silver?

Ben: Well, actually, it's a really interesting question because the answer is it hasn't always been gold and silver, but for a pretty long time, it's been gold and silver. And the real way to think about this is let's start way back when we were in in a barter economy.

So people add stuff, they brought it to some marketplace or some bazaar, you add cattle, I had fish, someone else had butter, someone else had beer, someone had bread, and we all kind of just traded with each other, right? I'll give you some bread, you'll maybe give me some eggs, and you'll pretty much notice right away that there's some issues.

Some commodities are just better for trading than others, right? Fish goes bad pretty quickly. And so, you know, maybe trading that for salt, which doesn't go bad really quickly, is kind of an unfair trade. You might need more fish to get some less salt.

And so over time, you can imagine this kind of barter economy where people realize, wait a minute, certain commodities just trade way better. The bid-ask spread between those commodities is much tighter than other commodities.

And so over time, the more you come do this trading, you get a sense of, wow, this commodity not only has value as whatever it is, let's say salt, but also as a trading good, right? It has a tight bid-ask spread. And once more people recognize that, a network effect happens where where some people know that salt's good to trade, so they trade for salt.

You may not even personally want salt, but you realize, wait a minute, if I have a cow and I can't sell that to the guy who wants shoes, I can sell the cow to the guy who has salt, and then I'll use that salt to buy shoes. And over time, people just kind of started finding certain commodities that had a money aspect to them, right? A tight bid-ask spread.

So some of the first monies recorded in history were things like cattle, right, as well, salt in the example. Now, what's interesting about the two different things, you'll notice that problem. So over time, people didn't want goods that went bad. So food is not really a great money. You didn't want things that rusted. So that could be metals might not be a great money. You also didn't want things that were not easily divisible. So think of something like a pearl, really cool, not easily divisible.

What's another problem with something like salt? Well, salt's great. It doesn't go bad, easily divisible, right? You can make more or less salt. You can weigh it. So that's really great. And one piece of salt is just like every other piece of salt. Problem with with salt is if I want to pay you for a house, that's a lot of salt, right?

And so people realized we need to have commodities for the big and commodities for trading in the small. So the first monies were actually cattle, which could be walked, right? Really heavy, lots of value, and low weight because it can walk itself. And then for smaller transactions, things like salt.

Now, over time, the more trading happened, the more commodities like gold and silver became the monies, mainly because they had all of those attributes that salt and cattle did, but they were easier to trade. Gold doesn't ever go bad. It doesn't rust. A small amount of gold has a lot of value, so you could trade maybe one gold coin for a house or dowry or something like that. And salt then became silk, which had an easier way to trade in the marketplace.

Let's say you want to buy a sandwich or a loaf of bread. You're probably not going to shave off a little little bit of gold, we're going to use silver. So over time, gold and silver became the commodities with the tightest bid ask spread. And over time, they became the monetary metals, the metals that were money, unlike steel, copper, or bronze.

And on that, on that whole thing, this is probably a whole other discussion, but like the value of gold compared to like the value of the U.S. dollar is always fluctuating and going up and down. And, you know, similar thing for all other currencies, I'm sure.

Seth: What makes that happen? Like if you have an ounce of gold, I don't know what that is worth today, but like, where does that number come from? How do we decide this number of dollars is worth this much gold and vice versa?

Ben: Great question. So like most commodities, there's supply and demand, right? There's people who are beating on the price of gold and then people asking for a certain price to sell it. And that's like all commodities.

Gold is no different. Gold does have some monetary aspects that other commodities don't. So for example, most people aren't storing something like oil as money, right? First of all, it's toxic, it's flammable, it's smelly. It doesn't have a great weight or volume to actual currency ratio. So you could have a whole pools full of oil and that same amount of value is maybe a small gold. coin or bar.

The reason that gold is valued the way it is, is in part for its jewelry uses, right? So let's say you're a jeweler, you need gold to make rings or, you know, necklaces, and also other industries like solar panels or, you know, wiring and computers or phones. They use some gold, as well as dentists. My dad's a dentist, he used gold in filling.

So gold has some uses not just as money. People aren't hoarding this as a wealth-saving device. But the rest of that premium, the price of gold, is from people who are holding or hoarding gold in terms of wealth saving or wealth management tools. Right?

I have a currency, let's say the U.S. dollar, which is actually the strongest of all the currencies, but I want to kind of hedge against either something like inflation or a debasement of currency, something to hold actual physical gold. And so part of that value is decided by people who say, “You know what, I want to check out of the system. I don't want to be a creditor to a U.S. dollar or a creditor to the Argentinian peso or a creditor to the real in Brazil.”

And that's pretty much where a lot of the price comes from. People saying, I want a flight to safety, and I want something that has no counterparty risk. When you think of something like gold, it has no counterparty risk. Gold is gold, right? You don't have a slip of paper saying, trust me, we will honor this slip of paper, whatever it says, whether that be a dollar or a ruble.

Versus something like a currency or a pension fund or a other type of promise on paper. It's a paper promise that can either be devalued over time, something like inflation or currency debasement. Or it can simply just be reneged on entirely. “Hey, Seth, I know we said we owe you a pension, but unfortunately, we just don't have it anymore.”

That is really not the case with gold. So that's why people buy it. Just like real estate, it's a hard asset. It's a commodity that you know is not a promise or a liability of someone else. It's just an asset.

Seth: So if there was like an apocalypse, I've heard people say like, what's really going to be worth a lot in that situation is like guns, alcohol, tobacco, these things like that. Do you think gold would be useful in that case?

I was going to think of maybe the reason gold is useful is because it is a very useful metal that can go into a lot of different things. And it's soft, it's easily moldable, it doesn't rust, that kind of thing. I'm sure that plays a role as well, right?

Ben: So a couple of answers to that. In a really, really bad apocalypse scenario, Ppople probably aren't going to be worried about things like gold. If anything, they might even want silver just because the way we're going to be trading for stuff, you're probably not going to be buying huge capital assets in the $100 million range.

In an apocalypse, the whole point is that, you know, the capital structure has broken down. There probably won't be a stock market where you can buy $10 million worth of stock. It'll be more like, hey, you know, I want some bread or food.

And so in that scenario, yeah, honestly, probably silver would be probably a better monetary metal. But you're right. I mean, it could be something like information, weapons, food, you know, guns. My brother always says you can download all of Wikipedia into a USB drive. So it would be, you know, sharing information.

But in such a bad scenario, I think which of the monetary metals will have more value is kind of a more theoretical question. I think right now that people are jumping into monetary metals like gold and silver is mainly because of currency risk.

So if you live in Argentina, it's not an apocalypse has happened there, it's not like there are no capital markets anymore or that the rule of law has broken down. It's simply that the government has stolen your wealth through things like inflation and currency debasement, where they just don't trust the currency to hold value and for good reason.

So in that case, I think it's somewhere in between, right? It's not, hey, everything's perfect and the government's great at managing the economy. And it's also not, hey, we're in an apocalypse, can I barter for your weapons?

That goes back to that original thing we were talking about, which is the reason barter economies weren't good is because they were really inefficient, right? There's huge spreads, and huge spreads are a sign of discoordination, where things are hugely inefficient.

What's incredible about our current system and our current economy is you have really tight spreads and huge liquid capital markets, where you can truly trade hundreds of millions, trillions of dollars in value across borders pretty much instantly.

Seth: I've actually heard a very similar thing about real estate in terms of what makes a good real estate market or what makes this real estate investment good in this country. And a lot of it actually does have to do with the country and how well they respect real estate laws and property ownership and that kind of thing.

I mean, there are countries in the world where you can buy land and who knows, maybe the country is going to get overthrown tomorrow and you're going to lose your property or if the government will just seize it from you. Whereas in the U.S., I mean, we take property rights really seriously, and there's a pretty reliable way to figure out who owns what.

So I don't know, it just kind of reminds me of that when I heard you talking about that. The government does play a pretty big role in that.

Ben: Yeah. Thomas Sowell is one of my favorite economists and his book, Basic Economics, if you haven't read it, you have to read it. You can even pause this podcast and stop listing me, just go read Basic Economics by Thomas Sowell. Everything he's ever written, I love, but that book is just a great primer on all things economics.

And I really don't have anything original to say. I just kind of learned from people who are smart, Thomas Sowell being one of them. And one of the interesting things he was saying, and particularly for a real estate investor, this is important to think about.

So if the government says, hey, just letting you know, you live in New York City, you are no longer allowed to rent out your real estate as an Airbnb. Well, pretty much what the government has done is confiscated some of your wealth through other means. They didn't send a guy with a gun. They didn't actually use a bulldozer and to destroy your real estate. But what they did is they took the value of that.

Let's say you were planning on renting it out as an Airbnb, and that's the only reason you bought it. Well, now your asset is suddenly worth much less. Even though the government hasn't physically done anything to the asset, they've now made laws, restrictions, other kinds of regulations that have now made your asset worth less money. So it truly is something to think about in terms of wealth and value creation.

How can I make sure that the assets that I own really aren't subject to government edict or government law? For example, I know you've had some guests talk about solar panels and subsidies for the solar and EV industry. Well, if tomorrow the government says no longer do we care about solar or wind and actually they're bad for the environment because we're polluting with the solar panel waste, now we're going to charge you to have solar panels in some ridiculous scenario.

Well, you can see how quickly those subsidies which worked in your favor now can be working against you. So very important point to think about your assets and how much of that value is tied up with some external liability that you have no control over, which goes back to gold, right?

Gold doesn't have that counterparty risk. It's not waiting on someone to say, hey, you know, we've decided that you can do X, Y, and Z with gold. It's a global asset, something to think about.

Sth: Now, speaking of government stuff, so I know it was back in 1971 when Nixon took us off the gold standard. So prior to that, you know, every US.. dollar was literally backed by gold. And all of a sudden that went away.

So why did he do that? Like, what was the rationale behind that? And was that a good or a bad move? Like, what are the implications for that decision?

Ben: Yeah, great question. I think it's a complicated history in terms of what the gold standard was, right? It had different kind of modifications and slow regulations on top of it. So by the time we got to 1971, a true gold standard was already kind of gone. We were still on a gold standard of some sort, but it wasn't like the past.

Now, what Nixon did specifically for good or for bad, was because he realized that essentially the government had more liabilities than it had gold to back up and other countries were draining our gold reserves.

So here's kind of an interesting part. So in the US.. for long periods of time, actually owning gold as money was illegal. You could own it as a dentist or you could own it as some like numismatic coin if it was some collectible, but you couldn't own gold just the way that people had owned gold for thousands of years as money. The government made that illegal. They made people actually hand in their gold and give it up to the government in exchange for paper dollars.

Now, the interesting part, so foreign central banks could actually still redeem their gold for dollars. So only inside of the United States could citizens not redeem their dollars for gold. So before that time, a U.S. citizen could go to a bank, they would slide their dollar across the teller window, and then that teller would then be able to redeem their dollar for a physical amount of gold. And a dollar was just a description of a certain amount or weight of gold.

But when the gold window was closed for U.S. citizens, that was no longer the case. So they could only use U.S. dollars, even though they still had some gold backing. The only people who could redeem that gold through a window would be foreign central banks.

So for example, after the war, we had lots of debts, right? And debts owed from one country to another, France to the U.S. The French decided they wanted to redeem paper dollars that they had for physical gold, which was their right.

Long story short, we had lots of devaluations of the currency. So we said, hey, a dollar is worth this much gold. And since the U.S. decided, because the dollar was pegged to the U.S. gold reserves, you could simply say, hey, we're only redeeming a dollar for a certain amount of gold, which is essentially theft. It's devaluation. It's like saying, hey, Seth, I owe you 50 bucks, but I'm just going to decide it's going to be 25 bucks now.

Well, that's that, right? You took 25 bucks from me. So the French decided they wanted to redeem their paper dollars, their promises for physical gold.

And Nixon realized that the US would be in big trouble if other countries continued to redeem their dollar currencies for gold at the pace that they were doing. And so actually through Milton Friedman, who's a big free market guy, was persuaded to stop that. And what most people thought would happen was that Nixon would devalue the dollar.

What does that mean? It would mean that he would say the dollar is just now worth less gold than before. We were going to redeem it for, let's say, 35 ounces. Sorry, we're just going to redeem it for 25 ounces. That's just a devaluation of dollars.

But actually what Nixon did is he closed the gold window entirely, which means that it was now impossible for central banks of other countries to take their paper dollars and redeem them physically for gold.

Now, this was a temporary measure, and you can actually go on YouTube and listen to Nixon say, “Hey, listen, I've directed Secretary Connolly to temporarily close the gold window, but it's been closed ever since, which means that we now are on an irredeemable currency system.”

So what does that mean? Your dollars are no longer redeemable for anything. So if you go to a bank and you slide over an $100 bill, the teller will say checking or savings, right? He won't say, you know, here's your $100 worth of ounces of gold.

Now you asked, is that a good thing or a bad thing? But I would say a bad thing, and I'll just point to two kind of big problems. So when a currency is redeemable, that gives people the ability to check and redeem their money from an institution that they no longer want to hold their money, right?

So if I give you my car, I can say, hey, Seth, you know, I need my car back, right? I can physically redeem that asset versus something like a promise. It's much harder to redeem a promise. You can't really do that as easily.

And so when the currency became irredeemable, that caused two big problems.

Problem one is that the government could print or borrow more currency, more dollars, than they otherwise could because there was no one to stop them and say, “Hey you guys have been borrowing lots of money and i don't think you're ever going to pay it back, so I'll take my gold back.” There's no way to do that anymore with paper dollars.

The other problem is that interest rates are now completely unhinged. So in the old system interest rates are actually stopped on top and by bottom by the marginal borrower and the marginal saver. What do i mean by that so let's say you're business, right?

And you realize in my land business, I can make 7% a year return. Okay. What amount of money would you stop saying, you know, I'll borrow at that rate? Probably 7%, right? Maybe even a little bit less at 6.9999%. There's risks, right? I might not make that seven every single year. So I'm only going to borrow at something like 5%, right?

And so when the interest rate rose too high, businesses said, hey, you know, that's too much. They walked away. So that set an an actual ceiling on the interest rate.

And on the bottom was the floor of the interest rate because I'm a saver.

And if someone said, hey, Ben, I'd like to offer you 0.0001% on your savings account, which might be what it's like today for you. Well, you would realize that's really not worth the risk of you holding my asset, right? If you said, hey, Ben, I want to borrow your car and I'll give you $1 to the year for it.

That's not really going to do it for me. So I would say, you know what? I'm just going to take my car back. I'm going to redeem it.

Well, in an irredeemable currency system, there is no floor. And that's why you can see savings rate or federal funds interest rates being literally 0% or 0.0001%, which just never happened during a gold standard because people could take their marbles home.

And so in terms of things that have gone awry, your two major problems are exploding debt— exponentially exploding debt, not linear, but actually exponentially exploding debt since 1971.

Seth: You're talking about U.S. debt?

Ben: Well, really, all debt outstanding. It gets a little bit complicated to see total debt in terms of public, private, corporate, household, and then of course foreign debt, but if you look at specifically U.S. debt you will see an exponentially rising trend starting in 1971. And the reason is that the government could borrow with kind of no one watching.

And so the two main issues and especially for real estate investors to think about is one is that debt will exponentially increase, it has to, with the way the system works. That's one thing to think about. Debt will increase exponentially.

The second thing to think about as a real estate investor is that interest rates are unhinged, meaning that there is no stable interest rate. They can shoot the moon like they did in 1971, and they can fall toward zero since 1980s. And we've seen pretty much zero interest rates until this most recent attempt at a hike.

But the incentives to bring us back from a zero bound just aren't there because, again, there is no kind of economic anchor through gold holding interest rates stable.

Seth: Wow, man. That was a great explanation. I never really grasped all that, but appreciate you putting together those pieces for us.

So when I think about this as a real estate investor, where we are today, like why not just buy more real estate? Like why own gold? Because real estate can pay me gold, at least up until this point, as far as I knew, gold just kind of would sit in my safe or would sit with somebody else. And it was kind of maybe like a hedge against inflation and that kind of thing.

But with what Monetary Metals does, is there some reason to intentionally take some of my funds and divert them to buying precious metals instead of real estate? What's the upside there?

Ben: So here's the upside. Just before we even talk about what Monetary Metals does with gold, pretty much everyone on the planet, and again, I'm not a financial advisor, but everyone on the planet should own own some amount of gold. That's just insurance on the currency, right? And if you have no insurance, you're just kind of asking for issues.

And the greatest thing about insurance is that you never use it. Everyone wants to have fire insurance, but never use it, or life insurance, and somehow never use it. And gold is just insurance on your government, and not on the money. The people in Venezuela, Turkey, Argentina, they really could have used that monetary insurance.

So that's the first thing, is everyone should own gold regardless if you're a a real estate investor, stock investor, just not even an investor at all, you should own some amount of gold, kind of regardless of it.

As in terms of a real estate investor, why real estate investors should own gold, is mainly because of diversification and non-correlation.

So a lot of people say, well, I'm a real estate investor, but if I need to diversify, I should buy something like stocks, right? They pay a dividend. Well, the problem with buying something like a stock or a bond, something to kind of diversify your portfolio, is that they need to be uncorrelated assets. So buying correlated assets doesn't really helpfully diversify you in any way.

So for example, let's say you buy a piece of land and you put all of your wealth in that piece of land. A lot of people would say, that's probably a risky move. I mean, if that doesn't work out, you're in big trouble. So why did you diversify?

Well, what if you bought just the adjacent piece of land? Yeah, it's technically different, but it's still land in the same zip code in the same area, right? If something bad is to happen, like a flood or a fire or just, you know, economic malaise, your investment could really tick.

So that's why you shouldn't put all of your money in Tesla stock or all of your money in one piece of land. You should diversify.

But you need to diversify something that's uncorrelated. If you buy assets that are completely correlated with each other, like, Bitcoin and Ethereum, well, if they move in tandem, they haven't really correlated that much, If crypto falls, in general, you're in trouble.

The reason people should own gold is that gold is the most uncorrelated asset. Gold is the most uncorrelated asset to stocks, bonds, and real estate.

So if you own real estate, you want something that goes up when real estate goes down. That's a counterweight, right? But if you own stocks, bonds, and real estate, oh, great, I'm diversified. You're actually not, because they all move together in tandem.

One of those big drivers is interest rates. The other big driver is the stock market and in the general economy. So if the general economy is doing really badly, what are the chances that your real estate is doing really, really well? It's possible, but kind of unlikely. They tend to be pretty correlated.

So owning gold, period, is a good idea because it's uncorrelated to the rest of your assets. When gold goes up, usually the rest of your assets aren't moving so high. And when the rest of your assets, stocks, bonds, and real estate are just killing it through the roof, gold is going to hang in there and say, hey, whoa, whoa, whoa, I'll be that little counterbalance.

So if you are into investing, you'll know about the Sharpe ratio, which is just kind of about volatility and smoothing out the returns. Gold is an awesome asset to smooth out returns over time because you don't want a big drawdown.

A lot of people say, well, the stock market increases at 7% a year. That's great, but that's on average. There are some years when it's down a bunch. And if you were planning on retiring that year or having a wedding that year or just needed a lot of capital in that specific year when there's a drawdown, we're kind of in big trouble.

So gold is that asset that smooths our returns, limits those drawdowns, and it's incredibly, incredibly liquid.

Another reason to own gold as a real estate investor is the liquidity. So let's say you have a land or an asset that you're planning on selling. It's possible that literally the next day someone said, hey, Ben, I want to buy that piece of land from you. But I mean, sometimes it can be six months, a year, or potentially never that that asset gets sold.

Gold is a global market, which means that people all over the planet are bidding on gold, which means it has incredible liquidity. You will always be able to sell gold in a bear market or a bull market, which is important for real estate investors because oftentimes it's very easy to sell in a bull market, right? Prices are growing up, easy to sell, lots of buyers, maybe even cash above asking price.

But in a falling market where you just can't find a bid on that land or on that real estate really difficult. And that just will never happen with gold because it's such a liquid asset.

Now, lots of people and famous investors like Warren Buffett have said, “What's the point of owning gold? I want an asset that produces something that actually has a cash flow. It gives me income.”

Gold doesn't have an income. It actually gets dug out of the ground. We pay people to watch it, to store it in a professional vault somewhere, and then it just does nothing. I can open a drawer and 60 years later, ta-da, there's my gold. If I have real estate, I can get rental income. If I have stocks, I can get dividends. I mean, that's actually a company that has cash flow and grows over time.

The company is called Monetary Metals. And what we've done is we've made gold produce an income paid in ounces of gold. So I'll jump into that real quick to explain kind of in a real estate terms, how that works.

So just like any asset, without any risk, there's no return. So if you have real estate and you don't rent it out, which is, of course, a risk, then there's no return. It just sits there. You can live in it. It'll go up and down in price. But that's not a return. That's just a speculation on the price of the asset going up and down.

But if you rent it out, you'll have renters, sometimes tenants or business, whoever that may be. And they'll pay you that dollar income to rent that asset from you. You still own the asset, the title of the house, for example, or the title of the building or the land is still in your name, but someone gets to use the asset, maybe for farming or solar panels or just living in, and then they pay you an income every single month. And it's denominated in your local currency, usually dollars.

We've done the same thing with gold in something called a gold lease. So everyone's familiar with how a lease works. How does that work with gold? You would want to rent gold. So here's how it works.

Gold is your asset. Something that doesn't do anything unless you rent it out or lease it out and have some risk to get some return. So you lease that gold out to a company that wants to rent gold.

Now, what company would want to rent gold? That can be businesses in the gold industry like jewelers, refiners, mints, manufacturers, bullion dealers. These businesses have gold work in progress or gold inventory, which means they buy gold raw. Usually they slowly turn it into something, let's say like jewelry. Then that jewelry sits in their inventory from let's say six months a year. And then someone comes in and says, Hey, I'd like to buy, you know, a gold ring. And then they sell that ring.

So what they're doing is trying to kind of arbitrage their gold price and the value add and buying it for less, selling it for more. But you'll notice there's a very big problem with this business. Is that they buy gold, and then lots of time goes by, and then they sell gold.

Gold can go up and down in price. So if gold drops 5%, by the time you go to sell your gold six months later, you're just going to have to take a 5% hit unless you're doing something complicated like buying futures contracts, which bet against the price of gold.

Well, I mean, a jewelry company is now doing futures contracts and rolling futures on gold prices. It gets complicated, but that's not even the only issue.

The other issue is that precious metals are very expensive. So remember, we were talking about copper and bronze, hundreds and hundreds of of tons of copper really aren't that expensive. You can actually buy that pretty cheaply versus hundreds and hundreds of tons of gold. It's going to be quite expensive. It's a precious metal.

And so that means that business is going to tie up working capital on precious metals. So that can be tens, twenties, hundreds of millions of dollars just owning that asset class while they slowly turn it into something like jewelry or literally just sits in inventory, which means they have to write a check every year that just sits in inventory.

So what we do at Monetary Metals is we take that entire supply chain and we lease it to the company. So that means the title, the actual gold is owned by the client of Monetary Metals, but the use of it, the location is at a jeweler, a refiner, a mint, a bullion dealer as their inventory or as their work in progress.

Now everyone's first question is now, wait a minute, Ben, I remember you saying that the jeweler sells a gold ring at the end of this process. So aren't they selling my rented asset? How can that be?

And the answer is, although their business needs to sell gold and silver, they don't need to actually sell that rented amount. So let's say someone's renting as a jewelry business, a thousand ounces of gold and a wife walks in and says, oh, I love that ring. I want to buy it. And it's a one-ounce ring. It's pretty heavy.

So instead of the business selling one ounce and now only having 999 ounces, what they do is they go into the market, they quickly buy an ounce and sell it. So that they always keep that 1,000 ounces as the rental amount, but you can buy and sell as much gold as they need.

So if someone walks in and says, I want 1,000 ounces of gold, great, they buy 1,000 and quickly sell 1,000. So they're not exposed to the price, but they can still fill that need while having that full work in progress and inventory in the spot where they need it.

So pretty much what a gold owner is doing is saying, hey, take my asset, rent it out in a a lease to a company that needs work in progress or inventory financing, and in return, I want to be paid an income.

Now, the specifics in Monetary Metals is that that income is paid back in ounces of gold. So if you had 100 ounces, you rent it out at a 5% interest rate, you could end the year with 105 ounces of gold.

That's regardless of whether the gold price goes up or the gold price goes down or just stays sideways. So the gold price can go from $2,000 to $1,900, or you go from $2,000 to $21, you still get the ounces no matter what.

For a gold owner, this is really beneficial because not only do you pay zero storage fees because our gold's not being stored. You pay zero storage fees, you have insurance on the gold because now someone's watching it, there's actual controls to make sure, hey, wait a minute, this jeweler isn't selling the gold or running away with it.

And you get an income statement every single month denominated in ounces, which means if the gold price falls, you actually get a little bit of a cushion because you've earned a couple ounces that month. If the gold price rises, that's just extra gravy for you because you got a couple of ounces that month as well.

So it's a way to have a long gold position to own gold, still have that physical aspect, right? It's physical gold and you're getting paid in physical ounces, but you get income every single month denominated in ounces of gold.

Now, of course, if you want to sell some gold and make dollars, great, you can always do that. Or if you just want to keep those ounces, let them grow and compound, you can do that as well.

So what Monetary Metals has done is just said, hey, everything that you understand about rental income from leasing, let's do the exact same thing, but for precious metals, gold and silver.

Seth: Yeah, so a bunch of questions came up as you were talking, and you may have told me the answer, but I just didn't catch it or I didn't understand it, but I just wanted to verify some things.

So let's say I've got a precious golden ring from my great-great-grandfather. It's a one-of-a-kind item, but I want you guys to take it and make me some lease revenue from that. So where am I sending this thing? Like, where is it stored? Or who, like, does that actual ring get consumed by some jeweler and made into something else and I lose it forever? Or does it just sit somewhere and somehow it's like used as collateral for this? I'm not sure if I totally followed that.

Ben: That's a great question. And we get it a lot, right? Someone will say, hey, I have this coin from 1902 or my grandfather gave me this beautiful ring or this, you know, necklace made out of silver. Can I use that as collateral?

That's a little bit of a different product. We're not doing collateralized loans based on some asset. People do that all the time with boats and houses. This is actually the physical rental of a physical asset, in this case gold, in an actual physical location…

So if you're turning your gold into something called pool gold. So what does that mean? So if you have a ring, a nugget, or a bar or a coin, that's actually some sort of product. It's a bullion product.

What we do is we melt that down and then it becomes pool gold, which is just the most liquid form of gold possible. So it's not a ring, it's not a coin, it’s called pool gold. And that's the most easily transferable and manageable for companies like mints, refiners, and jewelers because they need it for different purposes.

Now, when you want to actually redeem or sell your gold, then it becomes a product just like anything else. If you said, I want Krugerrands, I want Eagles, I want a bar, totally fine. We'll redeem it into some physical product and we can ship it to you. Or if you just want to sell it as gold, you can sell it as gold.

What I always tell people is similar to if you ever got out your first dollar from working and you hang it up on a shelf somewhere, you have it framed, you would absolutely never take that dollar out of the case, put it in an ATM, and then come back a week later and say, oh, thank God I got my dollar back. That's definitely not the same dollar because dollars are fungible. One dollar is the same as any other dollar, right?

Gold is the exact same way. Gold is fungible. So if you had a product with some sentimental value or it was like something like a ring or a coin that you really cared about, probably not a good idea to send that in simply because it's going to be turned into pool gold.

And if it can't be turned into pool gold, it's not going to be usable for a lease. So the answer is absolutely send in bars, coins, just regular products that you own, but understand that they're going to become pool gold. You can get them back as products. They're just not going to be the same one.

So if you had one from 1902, probably best to keep that one on you.

Seth: So you do officially lose whatever that unique physical item might be. And say if I got five bars of gold worth hundreds of thousands of dollars. Do I just drop it in the mail? Is there some secure way to make sure it's safe in transit?

Ben: Yeah, absolutely. So if you live in the United States, we cover the shipping and the insurance.

And of course, we want to be working with companies that are keeping an eye on the gold, right? We don't just say, hey, you know, walk it over to us. It'll be assessed, of course. And then depending on what type of product you're shipping in, if it has some value over par over the stock price, you'll actually get more in ounces in pool gold than you would as just the actual amount.

So let's say you had a one-ounce Krugerrand, there could be a chance that depending on the product, you'll actually get more than one ounce of gold in the program because you're getting a little bit of premium there that's being liquid.

So the answer is that, yes, it's shipped, it's insured. And of course, it's got to be shipped in a certain way. We'll help you with the shipping and handling and all that stuff. And of course, we'll pay for it. But yes, absolutely. It's not something that you just kind of say, oh, I'll walk it over. We make sure that it's secured and also insured as well.

Seth: So I guess I'm mailing it to your office or something or a location that you tell me to send it to, and then you or somebody melts it down, and that gold gets sent to whoever that lessee is as they need it. They say, hey, we need this much gold this month, send it to us. And what they're getting is part of the gold that I send in. And then they use it and pay you cash or something?

Ben: Yeah, it's a great question. So you'll probably ship your gold to a vault partner. It's not going to go to the office. We're in Scottsdale, Arizona; we definitely don't have any gold at the office.

But in terms of how the lease works, great question. So each lease is usually a one-year term.

So the same way that you rent a car for a year, the lease is usually for one year, which means your gold is being rented in a specific lease for one year. And they're fixed income products, which means that the rate of the year is fixed. You get a certain interest rate, anywhere from 2% to 5% interest on gold and silver in leases, and every month you will get those ounces deposited into your account.

So you will look at your account statement and it'll say you earned 0.04 ounces this month. And again, with bull gold, it's super easy to do small fractional amounts of ounces, which you'll be earning every month.

And then, over the annual period, let's say January 1st to January 1st of the next year, you will have earned those ounces at that specific fixed interest rate. So if you have 100 ounces at 5%, that's 105 ounces at the end of the year that you'll see in your account.

Now, if you wanted to liquidate all of your ounces for dollars, totally doable. You can say, “Sell my gold, wire me the dollars.” Or you could say, “Sell just some of the gold. I want you to sell only the interest payments. I want you to sell half of it because I need some dollar liquidity.” Totally fine. And the income is always paid in ounces. So you get the upside or the downside of the gold price.

So the gold price increases, the dollar price of the gold that you own, plus the interest income also increases as well. It's for a one-year period. So you're kind of locked into the lease for a year.

And then every year, there's an option usually to roll that lease, which means the person leasing the gold says, hey, can we have that gold for another year? Because we really like this financing option.

And you get to say, opting in or opting out, whether you want to keep your gold or silver in that specific lease. Each lease comes up about once a year. You decide, is the interest rate good for me? Is the risk good for me? Is the company good for me? Or do I need some liquidity? I'm going to step out of this lease.

We're not a bank, so all of the options to opt in or opt out are totally up to you. Versus in a bank, you give them your dollars, they’re like, “See ya. We're going to give you the interest rate. If you don't like it, sorry, we're going to fund mortgage-backed securities. We're going to fund ESG. We're going to fund whatever, and you just get the rate that you get. You're upset? Take your business somewhere else for an even lower interest rate.”

So in Monetary Metals, going back to the interest rate discussion, there's a floor and a ceiling on the interest rates. Because if we said, “Hey, Seth, send us your gold and we'll pay you 0.00001% interest on it,” probably not worth the small risk, right? There's always risk, but it's probably just not worth it for such a small return.

Now, on the other hand, if we said, “Hey, Seth, we're going to pay you 10,000% interest on your gold.” You would be knocking over your grandma to try to pull out her gold teeth to get us the gold, right?

But obviously, no business has a business case to lease gold at a 10,000% interest rate. For them, they're like, well, we might as well do futures contracts and just take the risk of hedging and tying up that capital.

So there's actually a beautiful economic reason for a ceiling and a floor on the interest rate of Monetary Metals, and it's stable. It's not going to be that the one-year interest rates are 50%, the next year they're back to 0%. Which is very interesting; you're seeing a monetary experiment in real time. Dollars have interest rates that can swing violently and stay at zero for a while. Versus at Monetary Metals, it wouldn't even make logical sense to have a zero interest rate because there's risk, but no return.

And of course, on the ceiling, businesses don't want to rent at exorbitant rates. So there's kind of that beautiful band that's very stable and kind of remaking this gold interest rate system through a private business.

Seth: I mean, right now you can put money into a money market account. You probably probably hear this all the time and make like five-ish percent, which is pretty high. So I see that option.

And then I see gold where I could make at the most 5%, probably less than that. There's also the upside or downside if the value of gold goes up or down. So there's that little question mark. We don't really know what that's going to do.

So is the main reason to consider doing gold anyway, even though we'll make less right now than a money market account might make, would the reason be just for the sake of diversification and the possible upside if value goes up?

Ben: Well, I think there's actually lots of reasons. And one thing I'll mention that we can get to right afterwards is there are two different products we have at Monetary Metals.

One is called the gold lease, and that's what we discussed, rental income from gold.

There's also something called a gold bond, which pays much higher interest rates. The last gold bond paid 19% interest on gold. I'll explain how a gold bond works.

So let me quickly go into a gold bond, and then I'll answer that kind of interest rate question, dollars versus gold. So how does a gold bond work?

Remember the gold lease, you had physical gold, it was rented out, we pretty much changed the location, the title, the ownership remained with you, it was always physical gold, and it got paid every single month to rent it. Pretty basic understanding once you get how the mechanics work.

A gold bond is actually a different product. It's for accredited investors only, which means you have to actually meet a certain threshold to even invest in the product. And it's different than a lease.

In a gold bond, gold bonds usually finance mining operations. So what does a mining operation need? Gold bond financing.

Let's walk out you through how mining operation usually works, and then we'll explain why gold bonds work.

So a gold miner has a super basic, easy business model. Get gold out of the ground for less than it costs you to do it. Sell for profit. Pretty simple. One big problem. Gold miners often need lots of financing, right? They don't have $10 billion to just create a new mine or pay for labor. They got to get a loan.

And that loan is a dollar loan. You'll notice there's a mismatch. They have a gold income, a gold asset, but a dollar liability, a dollar loan. Well, you'll notice, like we said, if the gold price moves up and down, they're kind of just speculating on the gold price. They're taking out a million-dollar loan, hoping that the gold they get out of the ground is worth more than a million dollars by the time they have to pay back that loan, which is kind of scary bets to them. They have to take on the gold price risk.

Now everyone says, why don't they just hedge? I never put the word just in front of any financial move, but definitely not the words “just” and “hedge.” Hedging is incredibly complicated. It's very expensive, and it's also very risky. The gold price can move and you can be underwater just on your hedging program.

Again, these are gold miners. Their core competency is not hedging the gold price. They're not a hedge fund, right? The reason they went into the gold mining business is because they understand everything about gold mining, not everything about hedging the gold price.

So that means usually an outside expert, a business that they're just sending money to to try to hedge the gold price, which means more money, more complexity, and just something outside of their main business.

So what Monetary Metals does is we offer them a gold bond. This is gold financing. So it matches their gold asset to a gold liability.

Here's how it works. We give them, let's say they need $1 million worth of financing. We would give them $1 million worth of ounces. They would take those ounces, sell them for dollars. Now they have $1 million, but they have a gold ounce liability, right?

They owe us those ounces. They take that $1 million dollars. They use it for labor, equipment, machines, whatever they need to get that gold out of the ground.

And once they do get the gold out of the ground, instead of looking at the gold price and selling that gold for dollars, they simply take that ounce amount, let's say it was 100 ounces, they pay back the 100 ounces plus whatever that interest rate is. So at 10%, it'd be 10 ounces; 20%, 20 ounces. And it matches their asset to their liability.

Gold in, gold out. You'll notice it doesn't matter what the price of gold is. The gold price could go up 10%, down percent, 10%, not moved at all. It doesn't matter. They owe gold and they give back gold from their gold profit.

The same way that if you have a business that makes U.S. dollars, but you have an employee who's in the Philippines, I got to pay him something in local Philippine currency. I don't even know what the currency is. It would be much easier if he said, oh, I'll accept dollars. Then you don't have to worry about the price, right?

So a gold bond simply matches the financing for what a gold miner has, which is a gold income.

Now, you'll notice that it's very different than a gold lease, because in a gold lease, the client of the gold, it's always physically present, right? We can do checks on it and do inventory reporting. It's always physically there. There's insurance for theft, loss, all those things. In a gold bond, your gold is sold for dollars.

And now you take the risk that that mining company doesn't actually get the gold or silver out of the ground. Now, of course, we're only going to finance companies that are either currently getting gold out of the ground or just one capital infusion away from getting gold out of the ground, because we want to make sure that there's actually a chance your gold will very likely be paid back the capital plus those interest payments. But because that risk is different from a gold lease, the interest rates are much higher.

One other thing to think about in a gold bond versus a gold lease, which real estate investors will know very well, is that jurisdiction matters. For example, having a high-rise condo in New York City, whoa, that's crazy. Having a high-rise condo in maybe Oklahoma, okay, maybe not so crazy.

Same thing with a gold bond. A mining operation in Chechnya has much different risks and returns than a mining operation in Colorado. Not to say that one is better or worse. They have different risks. But then you'll just notice that the interest rate is going to have to change.

So our first gold bond paid a 13% interest on gold. So that was with an Australian company called Shine Resources. They're an Australian mining company. They bought a gold bond that financed their operation. And when they got the gold out of the ground, they paid interest rates in around the 12% area. The latest gold bond is paying 19% interest.

And we said, whoa, that's a real big number. Well, the reason is because the actual jurisdiction, although the company operating the mine is called Acobo Minerals, they're a Norwegian company, they're on the stock exchange, the actual mine itself is in Ethiopia. Well, Ethiopia has many more risks than a place like Australia does. There's jurisdictional risk. There's all these risks to the continent that just aren't present in Australia. And to pay investors, you have to to pay them for that risk.

Some investors say, I don't want to face that risk. It's not worth the return. Others say, great, 19%. I love the bond. So that's where you can see different rates on gold.

So for investors who are very conservative, they can do something like a gold lease, always physically present. There's insurance, inventory reporting, tracking the physical gold.

Or for investors who want higher returns, they can look for options that have higher returns through other financing vehicles, which just have different risks to them. All of those options are present it to the investor, and then they get to decide just like in a free market.

Seth: Is there a minimum investment amount if you wanted to invest in a gold bond?

Ben: It's 10 ounces of gold or 1,000 ounces of silver, which at the time we're talking is about $2,000 an ounce, so about $20,000.

But the gold bonds, it kind of depends on each bond. So sometimes there will be a minimum, other times there won't be a minimum. But usually, about 10 ounces for a bond is about right.

But yeah, it just depends on each bond. The leases you can obviously, what we do at Monetary Metals, is we put your ounces into all of our different leases. So not all of your ounces are on a jewelry lease in Ohio. There'll be in a jewelry lease and a mint lease, a bullion lease, a refining lease, just so that your ounces are not only spread to get the best rate of risk, but also the best rate of return, so you get diversification across the leases.

Bonds are different since they come one at a time, they're securities, and then investors just decide whether or not they want to join.

Seth: And did you say what the general duration is of that? Like, is this all happening within a year or two years or five years or how does that work?

Ben: So bonds range in duration. They can be anywhere from two to five years. Bonds just have different durations simply because mining operations have different kind of times to them, right? Interest payments come a bit differently depending on the bond versus a lease.

And that's just simply because of the nature of a business, which is another reason why financing through Monetary Metals is much better than financing through a bank for these businesses, because we understand the gold business. We understand, hey, you didn't get gold out of the ground this month because you're doing some sort of survey or different mining process. We understand that. And maybe we can, let's say, push the payments, frontload them or backload them.

Or in a lease, we can say, let's make sure that before we do this lease, you have certain risk parameters or insurance to make sure that no one steals the gold by accident, or it gets damaged or lost.

And we present all of that to the investor in the slide deck, and then they get to choose.

So depending on the duration, there's also risk as well, because you have illiquidity. You might say, hey, I like this idea, but in a year from now, I'm having a big capital raise, or I might need capital to buy a new property. I'd rather do a lease, even though there's lower returns, but I know I'll have that liquidity.

So it just depends on the preference of the investor.

Seth: So like this Ethiopian gold mine, for example, let's say it takes three years for this all to happen and everything goes according to plan. Do investors earn that 19% back like one time at the end of those three years? Or is it like once a year, it's like, “Here's your 19% payment. Let's keep going.” How does that work?

Ben: The leases are paid monthly. So every month you'll see in your statement balance, hey, you got paid this much ounces from all these different leases.

Bonds, it really just depends. So sometimes the payments aren't every single month, but they're much more closer to monthly than they are to one big year. And again, that just depends on the bond and the way that the mine operation works. But that's disclosed up front. And for some people, they're like, hey, if it's not monthly, that's not going to work for me. You're probably going to want to do leases.

If you're saying, hey, I like that 19% return and maybe a little bit different of the payout structure or how often that fixed income is paid to me is totally fine, then a bond is for you. But yes, the answer is generally monthly. It's just on certain operations that does need to be tweaked, but you'll know that as an investor going forward.

Seth: I always wondered, how do miners know where the gold is? How can they accurately predict this? Is there some kind of technology that can go underground and figure that out? Or is it like, well, we see a vein here, maybe there's something, let's blast it open and see what happens. Maybe we'll get lucky.

I have no idea how they know that and how risky is it that you'll invest this money and like, oh, sorry, we couldn't find anything. Thanks anyway.

Ben: Yeah. So that's a great question. And a lot of people say, wait a minute, how do I know that they're going to find gold?

And we do a really good job of doing due diligence on these companies to make sure that they're either already producing gold or that they're just one shot away from producing gold, which means that they have gold in the ground, that they can see it's right there. They just need $5 million to get it, right?

What you're talking about is something very different. That's gold mining. What you're discussing is gold exploration or gold assaying, where people go, wait a minute, we see a gold vein here. I wonder if there's more gold beneath the ground or if it's just this one small vein. Or, this land is huge; I wonder if there's any gold here at all.

And so there's different levels kind of on a spectrum from all the way to mining to just exploring. And so if you want to think about a risk-return spectrum, people who are producing gold are much less risky. It's just like a business operation like anything else. They have pretty regular flows versus something like an exploration company. I mean, they might never find gold. Now, as an investor, you take the risk of them never finding gold through the potential of a huge payout.

So let's say you invested a dollar in an exploration company. And they hit big, oh my gosh, your dollar might be worth $20, right? Because they found gold and this could become a real mining project. Versus just buying that same miner 50 years later, it's probably not going to be a huge return.

The issue is that there's a huge amount of risk because most gold mines either don't come operational, never find gold, or just aren't profitable. So that just opens up the risk-return spectrum for gold owners.

Again, it's just a little bit of a different asset because you're buying a business. You're not buying an asset. If you buy physical gold, you're buying a commodity, right?

You can still go up and down in price, but you have the actual physical asset versus buying a company, you're buying managers, people, and just outside risks that really aren't there with something like a commodity.

Seth: In terms of the risk, how often do people lose money on gold bonds or at least get less than the projected return was going to be? I have to imagine that happens. So how frequent is that or what would be more likely to cause that?

For example, this Ethiopian thing for 19% sounds like that would be one where there's a higher risk of it not panning out to 19%. But just trying to figure out like, does this ever just completely go sideways? Like, people invest the money and they get nothing back. They lose it all.

Ben: Yeah, it's a great question. The first thing I'd always say is that there's no such thing as a return without risk. If you hear anyone say that, run as fast as you can, either lying to you, scamming you, trying to steal your money, or just a total moron. So we don't say that and we don't believe that. There is always risk if there's some sort of return. The spectrum differs, right?

So in a lease, that gold is physically present. We can do inventory reporting. We can do insurance. We can actually see in weight where that physical gold is the entire time. Is it in a safe? Is it in a vault? Is it on the jewelry floor? Is it in inventory? We can actually track it.

And if some reason they were to say, hey, we only have 90 ounces, we could pull that lease. We could physically go to the property and literally scrape up all the gold and take that lease back. If something were to happen, you as the client, are named as the lost payee, right?

So there's all these different before and after restrictions that we put on the person leasing your gold to make sure as best we can that nothing actually happens, that they don't just take your gold and take it all to a non-extradition country. I'm not saying it's physically impossible. It's just we do our best in terms of due diligence beforehand and procedures afterwards to make sure nothing will ever happen.

And so far, between leases and bonds, nothing has ever happened. Everyone has gotten paid exactly the ounces that they were expecting in their fixed income products, and there's never been any pressure either way.

Now, bonds are, again, different, right? There's that jurisdictional risk, there's that mining risk, and there's just the risk that the management, you know, messes something up. We, of course, have different collateral and different financial tools to make sure that we're as protected as possible for the investor, but it does just kind of depend on the bond.

Not all bonds look alike, and not all collateral looks the same, versus leases look much more streamlined. There's that similar insurance, the title remains with the owner So leases look a bit more similar. Bonds, again, they have different returns and different risks. You just need to read as an investor to say, does this collateral really make me feel good and sleep at night?

The one thing I always say is, if you can't fall asleep at night because of your investment, you probably invested too much, whether that's gold, stock market, or real estate. And not to to say that you should never take any risks. I think that's probably not advisable either. But you want to do something in your preference range.

And what I like while we're doing that at Monastery Metals is we're just really expanding that range. Because before our company, if you owned gold, you pretty much had two cruddy options.

Cruddy option number one, store your gold professionally, which means you got to pay every single year to store your gold in some far-off place with some far-off company that hopefully is trustworthy. And it calls basis points every year. It's kind of eating away at your gold, and it's not even doing it, right?

Another option would be an ETF. This is an exchange-traded fund that holds gold or has kind of some connection to the price of gold, but it's not physical gold that you own. You can't really redeem it. It's not like you can say, hey, you know what? Can you ship that gold that I have to my house?

And again, it's just a different type of asset that still has fees. You have to pay ETF fees to own that asset, so it still has fees. And then the option with kind of no fees would be to store it physically at home.

And for land investors, I really did do some digging into this because I thought this would be interesting for you guys because a lot of people say, hey, Ben, if you don't hold that gold, you don't own it. I don't want to take any risk with my gold whatsoever.

I totally understand. If there's no risk you want to take with your asset, that's totally fine. No one's forcing you to become a client of Monetary Metals. You don't need to do anything with your gold. And a lot of people hold gold as insurance, right? It's that emergency stash. They're like, wait a minute, if I'm leasing it and the apocalypse happens or a nuclear bomb goes off, where's my gold? I totally understand.

I always recommend that some people have some gold that they own at home, an emergency gold that they tell nobody about, that they bury even, and then some gold that they have in return, the same way that you have some cash under the bed in a safe and other caches in a bank or in stocks or in a real estate deal, just kind of getting that full range.

So if you are a land investor or real estate investor and you own gold, you say, I want to do some gold with Monetary Metals. I want to get that return. I want to get some income, but I do want to have some gold at home on my property.

I would just have a couple of recommendations.

First of all, if you're going to have it in your actual physical house, a professional safe would would be a good idea. You want to store it so that it doesn't get damaged or lost. You want to make sure that you know the code to your safe, and you want to make sure that no one else knows it, right? Maybe your kids, you can write it down somewhere, maybe in your will.

But you want to make sure that you're not just throwing gold coins around under the sofa or just in the basement somewhere where they can get damaged or lost, and God forbid someone steals from you. You don't want it just being out and about. So that'd be my first recommendation.

My second recommendation would be for the people who want even more protection and more security, which is saying, hey, I think at some point they're going to come, you know, confiscate gold like they used to or, you know, demand that people redeem or hand in their gold.

Some people have done something back in the day called midnight gardening, which is where at midnight they went and did some gardening where they dig maybe six feet down and made some seed plant that they put there that looked very similar to a shiny gold coin.

My recommendation is if you're going to do that again, make sure you know exactly where you've planted it. You don't want to be digging up your entire acreage trying to remember, where did I put that gold again?

And then for the people who are really looking for that extra security, I call it maybe like the 80-20 rule, which is like put 20% of your gold coins six feet deep and the 80% like 15 feet deep so that if someone started digging, realized you had some gold, they maybe dig, say, oh my God, here's a stash and then head out. And so the rest, the 80% will be 15 feet deeper, maybe even at a different location.

And then the final thing, which is just for that extra security, have some metal or something that'll beep off a metal detector just around your land so that it's not super easy to just go over and say, boop, there's the gold, and dig it up.

But again, this is just for all the different levels of risk to return. There are people who want the most security. They don't want it lent out. They don't want it loaned out. They just want it on their physical body, duct taped to them, or 60 feet down. Totally great.

And then on the other spectrum are people like you mentioned, who are kind of speculating on gold miners or gold exploration companies that don't have physical gold. They just are taking a big bet on a gold company all the way now in the middle, which is what I call in Monetary Metals, risk-return spectrum, in gold.

For the more conservative investor who wants to just do a lease where it's physically present, they have insurance and other kinds of security procedures on their gold, but they still get a return every month all the way to a gold bond, like you said, in Ethiopia, which has higher returns and higher risks.

Seth: In this conversation, you said that we should all own some amount of gold. How much is “some?” Is there like some ratio we're supposed to aim for? Like if you are worth, you know, $500,000, then have this amount in gold somewhere. Do you have any thoughts on that?

Ben: Yeah, that's a really good question. I mean, it kind of depends on your subjective goal, right? Like or your preference.

So if you're just trying to diversify a portfolio, if you're trying to find some insurance on, you know, the monetary system or inflation, if you're looking for returns, if you're like, wow, gold has increased 7% on average a year, adding anywhere from 2% to 19% interest on the gold, that really just adds to my return, maybe you want to do that. Then it kind of just goes on to a subjective thing.

The one thing I'd say is you should own some gold. Zero is not really a great option, in my opinion. But also owning 100% gold, probably not a great idea either, simply because you're not diversified that way either. I mean, just owning 100% gold, if the gold price falls and you need to send or get your kid to college, well, that's not so great.

But one thing I'd say is that anywhere between 5% all the way to 20% is totally fine. Nothing bad is going to happen. We've actually written a white paper, which you can have in the show notes, called The Case for Gold Yield in Investment Portfolios. So it's specifically kind of as an investment tool.

The question has always been, how much gold, right? The Seth Williams question, how much gold should I have? And the answer is just really dependent on the Sharpe ratio. How kind of smoothed out can you get those returns without sacrificing returns because you're all in on gold?

And so we did an interesting paper because most people outside of Monetary Metals say you should absolutely own gold, let's say 5%. But they're not exactly being honest because they're forgetting gold has fees. If they own gold as an ETF as part of their portfolio, that has fees every year. And most of the time they forget to add those fees. Just funnily enough, they forgot to subtract those fees every year. Same with professional vaulting.

And of course, if you have it at your home, there's probably no fees, but there's probably some cost, right? You have to buy a safe or whatever it may be.

What we did on Monetary Metals is we said, let's actually factor in those costs and then put that up against gold with, let's say, a 3% yield every single year. A conservative amount. But how does that actually affect the Sharpe ratio and your returns?

And I won't ruin it for anyone that wants to read it, but it really makes your returns smooth down and increases returns as well.

So in terms of how much gold someone should have in a portfolio, and I'm trying to never say should, but I do kind of warn people on the dangers of anywhere from zero to a hundred. Zero is too little. A hundred is probably too much. You can always call me and ask me and say, hey Ben, you know, here's my kind of specific situation. Here's what I'm looking for. And I'll give you my opinion.

But at the end of the day, um, you should have some, but you shouldn't have all.

Seth: When you were talking about the fees or the ETFs and that kind of thing. So if I ever want to withdraw my gold from Monetary Metals, I'm assuming there's some kind of fees involved with that, right? What does that look like?

Ben: Yeah. So there's not going to be fees exactly. There are no storage fees. There are no vaulting fees and there are no ETF fees because we're none of those things.

The only thing to just be aware of is let's say you have a hundred ounces and you want to, let's say, Hey, I want some bars. I want you to send me some coins. It's going to go from pool gold back into a coin or into a bar, right?

And those products have higher premiums. So it's not going to be the spot price of gold. It won't be, let's say $2,000, it'll be, let's say $2,050.

So you will actually see probably a coin with, the same amount, but what you add in pool gold would be much higher or potentially a bit higher than when you actually liquidate it into a physical product of some sort.

So it's not exactly a fee. We're not charging you to do that, but to actually turn pool gold into a product, there is some premium involved. So that's the only thing to think about in terms of fees.

I'll quickly explain how Monetary Metals makes money because I think a lot of people are going, wait a minute, no storage fees, no vaulting fees, no ETF fees.You're barely even charging me when I'm converting from product to pool because you get a bonus on the way in and, of course, back on the way out.

So how the heck are you guys making money?

Which is always a good question to ask. Always, no matter what you're investing in, you should ask how they're making money and how you can get screwed.

And so the way that we make money is by charging a spread in the interest rate. So let's say, Seth, you want to do a lease with a jewelry company and that lease pays 5% interest. We would be charging that jewelry company 7% interest and taking, let's say, a 2% interest fee for ourselves. So for you, net, you're still getting no storage fees and a 5% interest, and we're making that 2% spread, and they're charged 7%. So as the investor, as the client, you're not actually being charged. We don't make money from you. We make money from the spread. So always a good idea.

I think I would just kind of end this section by keeping an eye eye on how businesses make money and their incentives. I'm pretty young and I've already know that the gold business kind of has the scammy or kind of screwy air to it, which people feel like they're getting screwed over, or this is a bad investment, or the dollar's going to zero, you got to buy gold.

And the way I would think about this is like, how is the person on the other end of the phone making money from this? So if you get on the phone with a bullion dealer and they're saying, hey, grandma, the dollar's going to zero, you got to buy this coin from 1802, they keep confiscated and it's going to increase in value.

How are they making their money? Well, the way they're making their money is usually on the premium of that coin, right? They're trying to sell you the most expensive coin possible with the highest premium so they can get a really large cut. And then there's lots of fees associated with it. And then they ship it to you, delete your number, and never hear from you ever again.

It's not really a great relationship, right? Because the only way they make money is if you spend more.

At Monetary Metals, the incentives are completely different. We want you to get in at 10 ounces of gold, which means the cheapest gold that you can possibly get, which is full gold, charging the least amount over spot. And we also want to make money by making you money, right? When you earn interest, that means you were in a lease and we made money through a lease fee.

Versus other gold companies like a storage company or a bullion dealer, you just got to be aware of how they're making money. Not to say that there's never a reason to professionally store your gold or never a reason to buy a bullion product. Just something to be aware of when you're doing it.

Seth: As I keep hearing you talk about gold, I think about the land business. And part of what makes it so beautiful is that there's a repeatable, systematizable way to go out and buy lots of land at a pretty steep discount, like just notably less than what it's actually worth. And you basically just get a bunch of free real estate equity when you close on these things. And it's not that hard to make money on them, assuming you buy them, right?

And it just makes me wonder about gold. Have you ever heard of a systematizable, repeatable way to buy gold at a steep discount in a way that's not super risky? Any ideas come to mind when you hear that question?

Ben: Yeah, well, I think the first idea that comes to mind is simply just buying the cheapest form of gold possible. And land investing is a great kind of analogy. You can buy raw land and try to get a discount on the raw land because it's raw land. And there's nothing on it, right? It's much harder to value because there's nothing attached to it.

Gold is very similar. Buying cheap, raw pool gold is going to be your cheaper option as opposed to a numismatic coin from 1875.

Well, does that have value on it? Well, you know, that's much more speculative because people are buying. All these kind of things are just on top of the value of gold, which is just a bunch of atoms, right?

And so kind of the same way with land. Land is just land. It's that land mass that you're buying, which has potential on top of it. But the way to get a discount is going kind of bare bones and starting there and then realizing that potential and other opportunities.

I think of gold the same way. I want to buy gold as cheap as possible. I'm not trying to buy some numismatic coin or some product that I don't need. And then I want to leverage that gold in some sort of income-generating opportunity, whether that be a lease, whether that be a bond.

And of course, I think people do use gold in other kind of ways that are just less official. Like say, hey, I want collateral, right? Well, I got 100 gold bars here for you. That's some pretty good collateral, right? Or for example, you want to move and you need lots of wealth. I think gold is really useful there to say, hey, listen, let's melt this down and turn this into jewelry, and let's ship this to grandma in Argentina.

I think gold has lots of opportunities. I think there's going to be gold in the blockchain. There's going to be crypto gold. But I think the easiest way to get that discount or just get started is trying to buy the cheapest gold possible.

One other thing I'd mention, if you're going to buy a bullion product, call around. Don't get on the phone with someone and immediately buy something. Call them, hear their price, go online, check other prices, talk with this person. They want you to quickly make a decision and pay them and then never hear from you ever again.

That's a really bad way to buy something. The same way that if you went onto a property and someone said, come on, man, you got to buy this. This property is going five seconds from now. That's really not a great way to make a decision. You're emotional. Things are moving rapidly. It's hard to kind of take steps and processes to say, am I really doing the right thing?

So if you're going to buy a bullion product and not spot gold or the cheapest form of gold possible, or look at a lease, or look at a bond presentation, or have someone walk you through it, at least look around, right? At least see other options.

Because again, gold is fungible. That land, that real estate, that opportunity isn't probably very fungible. That one condo in Minnesota, that's not the same as a condo in Miami. But gold is the same as gold.

So just be careful when you're doing that and really try to make sure that you're getting the best deal for yourself. So if you are going to buy a bullion product and you are going to get gold, make sure that you're looking around to make sure you're getting the best deal.

Seth: So, I mean, given that you guys don't really care what form the gold is in, you don't care if it's a coin or just a rock or scrap gold or whatever. Is it safe to say it's not smart to take all of your gold bullion and send that to you instead? Instead, finding just the cheapest form of gold you can and send that. Is that an accurate thing to say?

Ben: Partially. So we do somewhat care what the form of gold is. You would need to be able to send in some recognizable bullion product, whether that be a bar or a coin. You probably can't just send in a piece of jewelry. We'll definitely not accept a necklace that has some gold in it.

And so it does need to be somewhat of an official bullion product, but it can be a Maple Leaf. It can be a Krugerrand. And it can be, you know, pretty much any recognizable form of bullion product.

I just wouldn't recommend trying to ship in jewelry because that won't be easily turned into pool gold. There are ways to do cash for gold or liquidate that to actually get the physical gold out of it or get the cash for that gold. But yeah, I usually wouldn't recommend sending in something like jewelry. I just usually stick to something like an easily recognizable bullion product.

And I also recommend that for buying as well. Well, usually speculating on the gold inside of some other asset is much more difficult than just buying an easily recognizable product.

Seth: And when you say easily recognizable bullion product, does that include like a bar of gold?

Ben: Absolutely. So coins, bars, they'll usually have a stamp on them. And you'll see that in the movies. There's always that stamp.

What does that stamp say? It'll usually say something like “Perth Mint.” It'll come from an official mint. It'll come from the U.S. government. It'll be a Krugerrand. It'll have some kind of marking on it. It's some official product, usually from a government, that'll say, you know, this has X amount of ounces in it. It is this type of product.

One thing that’s interesting, you know, some gold has other kind of metals in it just to keep that durability. So sometimes you'll measure it and it'll be, whoa, the weight on this is different than what it says on the coin. Understand that that's probably just dependent on the coin, but you should always check and make sure.

But yeah, absolutely. Anything like a bar or a coin can be an official bullion product. And you'll just check and see, hey, does it say Perth Mint?

Again try to stay away from things that are really weird. Like, Wombat Coin from Uganda. That's really not a highly liquid gold coin or gold bar. Mostt people are going to be like, I don't know what the heck this is, I gotta check to make sure this is real. You don't want someone to do that. You want to be saying, “Hey, I got a silver coin or a Maple Leaf,” that everyone knows, everyone recognizes easily, sellable, easily liquid, and that you're not going to be worried, wait a minute, is this going to be worth something in 20 years from now?

Seth: So I can't send in my kids’ chocolate coins and hope that you don't figure that out, right? You wouldn't accept that kind of thing?

Ben: Well, actually, it's interesting. So Hanukkah has just happened and you'll notice there's something called Hanukkah gelt which is those little gold coins with chocolate in them. And theIsraelii currency is called the shekel, and what's kind of interesting, just a fun fact for nerds out there, is that “gelt” is the old word for gold and “shekel” is the old word for silver.

So you can see that gold and silver have been money for pretty much forever as long as we've been people in a civilization.

So Hanukkah gelt is gold, right? That's why they're gold coins. And so you can just see why, over time, people have just been fascinated by these monetary metals, not only in terms of they're beautiful and they're shiny and they're cool and they're fun to collect, but also they have this real economic reason as to why we chose them instead of something like copper.

And it's kind of interesting to see like, wow, for thousands and thousands of years, people have found gold and silver, not only interesting, but monetarily interesting.

And I find that Monetary Metals is that kind of interesting monetary science experiment in the current day where you can say, whoa, it's cool. I find gold and silver interesting, not just as collectibles, but as money, and money finances things. Money pays interest, right? It should.

And so it's kind of interesting to see that gold standard plumbing start to reemerge as a private business has realized, wait a minute, we can incentivize gold to flow.

I think one thing that I found very interesting studying economics was most people thought incorrectly that the regulator of flow was price. So people said, wait a minute, the gold price is being manipulated by the governments. They're trying to hold it down because then people will realize when the gold price rises that the dollar is worthless.

And that's just obviously, empirically, not true because the gold price has risen quite a bit. And people are no closer to using gold and silver as money than they were 20 years ago. And what's the reason for that? Well, the reason for that is because price is not the thing that is arbitrating whether gold flows or not.

It's interest. It's income. Because when people can earn income, then they're likely to actually take their gold hoards and stop hoarding it and use it to produce and use it for finance and then earn an income.

And when you use it for finance, earn an income, then you're more likely to spend it. And then businesses, economies, and plumbing happens all around that interest. But it's unlocking of interest, that's why it's unlocking the productivity of gold and monetary metals, that is actually the regulator of flow.

An easy example of this, if dollars all of a sudden had zero interest rates. What would be the point of putting your dollars in a bank? You might as well keep them at home, right? You might as well have them in a safe somewhere or have them physically on you, because what's the point of risking them in a bank somewhere if you're not getting any return?

And actually, there's empirical evidence in places like Switzerland and Japan where interest rates were technically negative, where it would actually cost you money to store your dollars in a large enough amount in a bank.

Then what did businesses do? They weren't stupid. They didn't say, yeah, whatever, I guess we'll just lose 50 basis points this year. No, they said, it actually will cost us less money to buy a huge storage facility, a huge vaulting facility, and just physically plant our cash there because $50 in vaulting fees is way less than 50 basis points every single year.

And so people respond to incentives. And it's very interesting to see that the real incentive in our economy is interest. That's why it's so detrimental that the Federal Reserve took over interest rates and centrally plans them instead of doing what we do on Monetary Metals, which is have a marketplace where interest rates naturally rise.

Seth: Now, before we wrap this up, so you guys deal with like silver and platinum and other kinds of metals too?

Ben: We absolutely deal with silver. So we've had gold leases and silver leases. We've only done gold bonds. We haven't done a silver bond yet, but absolutely be on the lookout out for that.

And we have done a platinum lease. So one of the bullion dealers also sells platinum, and so they wanted to lease platinum products for us. So we did do a platinum lease, but generally just the monetary metals, which are gold and silver.

So if you own gold and you own silver, or if you're interested in owning gold and silver, those are going to be your two main income products. It's potential that there could be another platinum lease in the future, but generally gold and silver are the two main products.

Seth: Yeah, it sounds like if you're someone who likes to have gold or silver and keep it at home, there's not much of a reason not to send it to you guys. But I guess maybe the question is like, what is the minimum account size? And how can I fund my account? Like, what if I just have like a bunch of cash and I want to get started with this? Can I send you cash or does it have to be metal?

Ben: So if you have physical metal and you meet that 10 ounce minimum, you can totally send it in. You can ship it in. We'll help you do that.

Or if you're like, I don't have any metal on me, but this sounds awesome and I want to do it. Great. You can wire us $20,000 and we'll buy the gold for you. And then you'll have gold in your account, which you can be used at a lease or in a bond.

So we try to make it as easy as possible to fund your account and get started just at 10 ounce minimum. And you can meet that either with a thousand ounces of silver, 10 ounces of gold, or of course, wiring us the cash equivalent.

Seth: Okay. So if I'm going to do silver, you said it's got to be a thousand ounces of that?

Ben: Yep. A thousand ounces of silver, 10 ounces of gold, or again, the $20,000. And then you can split that in some silver, you can buy some gold, totally fine. People kind of like to do some silver deals, some gold deals.

And of course, the leases, you get to opt in and opt out of which ones you want to do, but we try to make it as easy as possible. So you're opted into all of our deals, unless you choose otherwise, you can opt out.

So you'll fund your account. Leases will come up. If it's in your lease yield account, it'll just go into all those open leases and you'll get a kind of amount placed in ounces into each of those deals. So we try to make it as easy as possible.

When leases come up, we'll show you the slide deck. You'll be presented with the risks, the returns, the way the business works, the flows, and then you'll decide, hey, this works for me. Kind of similar in a way to like a rental. So imagine you had a piece of property and a bunch of people said, hey, we'd like to rent your property for the year. We're willing to pay X dollars a month. And you could say, yeah, totally works for me, and just snooze it off.

Or you could be really active and say, no, I hate people who sneeze funny or anyone whose name is Jennifer, I have an ex named Jennifer, fine, whatever. So you can choose to opt in or out.

The difference with Monetary Metals to remember is that the income is paid in kind. So if you have a gold lease, you're getting paid in ounces of gold every month. If you have a silver lease, you’re paid in ounces of silver every month.

Unfortunately for land investors and real estate investors, you can’t get paid in more land. Not that I know of, at least, but it's kind of an interesting way to get paid, right? Like all of your income, this is one final thing to mention here, is that almost all of your passive income, if you're making passive income or income of any sort, is denominated in currency.

And that's a problem because that means that your currency is also, you know, in some ways, a risk to your government keeping that currency valuable. Because if you, let's say, lived in Argentina, like my relatives do, well, the government did a very bad job of keeping that currency valuable. They were tasked with it. Their central bank is tasked with keeping inflation low and all this stuff. And their currency is pretty much useless. It's a garbage currency.

And so if they had passive income from real estate and from stocks and from land and from a business and from a side hustle, that's awesome. You're really diversified across your assets that pay you passive income.

Problem is, is that your passive income is not diversified at all. It's all paid in a single currency, whether that be pesos, reals, rubles, dollars, you're kind of stuck into that one funnel of the currency. With gold passive income, you're getting paid not only in gold every month, which is great, but it's diversifying your income.

So if your ruble income all of a sudden becomes much worth much less, your gold income is probably going to to be worth much more. Because in a lot of ways, gold is just valuing the currency. It's not that the dollar is worth a certain amount of gold. It's gold is worth a certain amount of dollars.

And so kind of changing your understanding, I'll pitch this website. It's called pricedingold.com.

And what it does is it shows you over time, all of these different assets, US real estate, stocks, oil, other currencies, priced in ounces of gold. And so what that does is it actually shows you the true value of something. Wages, housing. You can see, wait a minute, was my house actually going up in value or was my currency devaluing?

Because if you live in Venezuela, oh my God, this is awesome. My house is worth a hundred times more. Oh, that's actually not the case. It's that your currency is worth a hundred times less.

So using gold as that constant, it's always there. It's that economic constant. You can can actually measure whether or not you've increased your wealth or decreased your wealth and not guessing whether it's the currency inflating, deflating, or devaluing over time.

Seth: Yeah. Awesome.

Well, Ben, I totally appreciate your time and helping me understand all this, helping the REtipster audience wrap their minds around it. Hopefully, if the listeners out there were able to make sense of it.

If anybody out there is interested in checking out Monetary Metals, REtipster does have a referral link to them. It's retipster.com/mm. And you can check that out. There's also a show notes for this, where I'm going to include links to a lot of stuff that Ben mentioned. Also a white paper they put together called, what was it? “The Case for Gold in Real Estate Investors or Investment Professionals?”

Ben: Yeah. So we've got tons of white papers actually specifically for your audience. We've got “The Case for Gold Yield in Investment Portfolios.” We've got the “Earn Passive Income in Gold” specifically for real estate investors, where we break down why earn passive income in gold, if I'm already a real estate investor, just like you asked. And then we've got tons of other white papers, like “How Not to Think About Gold.”

And we'll include all those in the show notes. And of course, if anyone ever has any questions, I'm always online and happy to chat because I'm in the REtipster forum, which you should absolutely join.

Seth: It's awesome to have you in there, Ben.

Again, show notes for this episode, retipster.com/179. That's where you can find all that. Appreciate everybody listening.

If you want to go ahead and text the word free, F-R-E-E to to the number 33777. You can stay up to date on everything else going on in the world of REtipster. I'll talk to you next time.