After spending an inordinate amount of time in the dark corners of the internet, I've come to a conclusion. The world is dominated by two kinds of investors: the "everything's alright" crowd and the "prepping for the zombie apocalypse" contingent. The approaches these two radically different groups take to investing couldn't be more different.
The unofficial motto of the "everything's alright" crowd is "buy stocks for the long run™"! They believe the world is gradually evolving into a post-industrial, information-driven society. Advances in technology, medicine and finance, coupled with the genius of our corporate and political leadership, will inevitably guide humanity into a permanent age of boundless plenty. For the "everything's alright" investor, stocks are the obvious investment vehicle to capture humanity's infinite future potential.
The "prepping for the zombie apocalypse" faction takes a diametrically opposed viewpoint of the future. They believe the world faces a comeuppance for its poor economic, political and social choices. Some think widespread raw material shortages or environmental disaster will usher in an unfamiliar age of universal scarcity. Others believe that the global economy has been terminally mismanaged and, staggering from crisis to crisis, is bound to eventually collapse with devastating financial consequences. A few even believe the very roots of Western Civilization are being systematically eroded by ill-advised social engineering, inevitably resulting in a disruptive fragmentation of society.
The "prepping for the zombie apocalypse" crowd generally considers "stacking" to be the best investment for the trying times ahead. "Stacking" is a term used to describe the orderly stockpiling of supplies for the future. These necessities can be as diverse as non-perishable foods, ammunition and guns, or gold and silver bullion. The idea behind this kind of investing is that basic food and materials will be much more difficult to obtain in a new, crisis driven world and whoever owns them will be well placed to prosper.
I want to focus on the investment assumptions underlying the "prepping for the zombie apocalypse" group in this article. First, I should state that I am sympathetic to some of their arguments about humanity's future direction. I do believe that the global economy has been terribly manipulated by the world's central banks and that we will one day pay a heavy price for that arrogance.
But the "prepping for the zombie apocalypse" crowd broadly shares many beliefs that I find highly improbable. For one thing, their basic underlying assumption is that society will more or less completely disintegrate under the stress of the challenges to come. This means they do not think there will be effective Federal or state government structures, although some form of local government may persist. They also implicitly believe that food, energy and goods distribution networks will either cease functioning altogether or become highly impaired.
If you accept these "zombie apocalypse" assumptions, then preppers' and survivalists' insistence on stacking basic supplies like food, ammunition and precious metals make a lot of sense. If the electrical grid permanently goes down and gasoline becomes unobtainable, then yes, a lot of people will starve and violence driven by desperation will be commonplace. Such an event would almost undoubtedly be the end of the world - or at least the end of civilization - as we know it.
This "zombie apocalypse" strategy is best exemplified by the way survivalists and preppers approach investing in precious metals. They typically like buying fractional gold and silver bullion coins, including old U.S. 90% junk silver, under the assumption that it will be easy to trade a real silver dime or quarter for a loaf of bread when the time comes. They usually eschew numismatic coins and antiques because they feel these assets will have no demand in a world where starving people are desperate for food and little else. Some preppers don't even bother with precious metals under the hypothesis that in a crisis no one will believe your gold and silver coins are actually gold and silver!
But I don't think a total collapse of society is a given. In fact, I don't even believe it is probable. A look at history is informative in this situation. The 20th and early 21st centuries have been packed full of some of the most disruptive periods in human history, yet only very rarely would a survivalist's full-blown "zombie apocalypse" preparations have made sense. In most instances, a less extreme approach was warranted.
Even the most extraordinary disasters are temporary in nature, rarely lasting more than a few years. For example, Weimar Germany's devastating hyperinflation of the early 1920s was only about four years long. Yes, it was a miserable four years, but when it ended, it ended for good.
Calamities are also often localized or regional in nature as well. The Yugoslavian civil war of the early 1990s is a classic case, with different hotspots flaring up at different times and locations in the fragmenting Balkan nation. Yet the surrounding European nations were practically untouched by this conflict, only experiencing a rise in refugees. World Wars are about the only exception to this rule, when entire continents became engulfed in conflict.
Finally, a number of catastrophes result not in bullets and chaos, but in slower, more manageable changes. Argentina's experience in its currency crisis of the early 2000s best exemplifies this. Capital controls were imposed, prices rose and crime increased, but otherwise life went on.
We can draw some conclusions from these situations. First, a protracted, slow decline is much more plausible than a total collapse, "zombie apocalypse" scenario. In fact, "zombie apocalypse" conditions - like Berlin or Tokyo in 1945 where food is all that matters - are vanishingly rare and almost always highly localized.
Second, a healthy investment allocation to hard assets - bullion, gemstones, art and antiques - is a prerequisite to protect yourself financially. However, there are a couple rules you must follow to maximize their benefit. It is imperative you have enough liquid cash, savings or bullion to see you through a temporary crisis. You don't want to be forced to panic sell illiquid, high value tangible assets in the depths of a crisis. A corollary to this rule is that stockpiling two or three weeks worth of food, bottled water and cash is always prudent.
Art and antiques are not investments meant to be liquidated in the midst of financial chaos. Instead, they are a play on the inevitable recovery that comes afterwards, once the dust and smoke clears. These precious tangible assets have been coveted and desired by the wealthy and sophisticated for many centuries. And, as long as humans walk the earth, that is unlikely to change.
