Another concern for long-term holders of precious metals (as opposed to the short-term trading which can, as I've pointed out, be very lucrative for those who know what they are doing despite the extreme wipeout risk) is that there is often a mistake belief that they provide doomsday protection. For those with any knowledge of financial history, it seems a bit absurd because the Government would simply do what it did in the 1930's - order that safe deposit boxes could not be opened outside the presence of a bank regulator or officer to ensure that no precious metals were inside.

Those that violated these rules were subject to harsh criminal penalties.

To put it bluntly, if the world really did go to hell, the only way to enjoy gold use would be to store it in a vault in Switzerland where no one knew it resided or be willing to risk dealing in a domestic black market that would inevitably develop if the dollar went to German reconstruction hyper-inflation levels. This can only be accomplished by refusing to report bullion holdings to the United States Government, committing a crime in the present for a potential future contingency. That always seemed idiotic to me in light of the better returns available in other asset classes.

I should point out that this section only applies to the bullion. Rare gold coins normally fall into asset category type #3. They have value for their own scarcity making them trade independent of the value of spot prices. It's an entirely different thing.

Asset Type #6: Consumer goods or other assets that depreciate rapidly with little or no resale value

Without a doubt, this is how most people spend their paycheck.

From video game consoles to cars that lose tens of thousands of dollars the moment you drive them off the lot, new clothes to some new must-have-gadget you'll forget about in two years, this is what you find in the homes of most Americans.

Perhaps the quickest way to guarantee poverty (or at least a paycheck-to-paycheck lifestyle) is to purchase Type #6 assets with debt that has:

1. An incredibly high interest cost on an after-tax basis (consider that a business loan at 10% for a company with a 35% income bracket costs less than a personal credit card balance at 7%).

2. A longer maturity / amortization time table than the salvage value of the underlying asset (e.g., borrowing $3,000 for 5 years to buy a high definition television that will be, for all intents and purposes, worthless by the time the debt is repaid).

This is the reason lottery winners go broke.  This is the reason NFL and NBA stars end up back in the poorhouse following eight and nine-figure career earnings.  This is the reason trust funds are exhausted.  Be very careful with the percentage of your cash flow you put to work in this category as it's a sunk cost.