first majestic silver

What is an Asset?

May 23, 2003

The dictionary states that an asset is, "Anything owned that has exchange value. A valuable or desirable thing. Accounting: The entries on a balance sheet showing all the resources of a person or business, as accounts or notes receivable, cash, property, etc." Interesting, huh? An asset then, can be hundreds and even thousands of things. Let's examine a few, and see what owning them can entail, their positives and negatives.

Property: Property can be real property, (real estate) or other types, such as equipment, clothing, autos, furnishings, collectibles, and even edibles. Real estate can be of various forms, such as a home in which to live, a farm, on which to grow things to earn income, rental property, investment property, or even raw land. All real estate has certain disadvantages, such as taxes, and liability. Some say you never actually own real estate, even if it is free and clear, and has no debts, because if the property taxes aren't paid, the real estate will be sold at auction by the local county clerk, if you don't pay. Liabilities of real estate are that if someone falls on your property, or dies in a fire, you or your insurance carrier may be liable for a huge judgement. Real estate also requires maintenance such as lawn mowing, weed liking, tilling, watering, replacement of roofs, and other things needed to keep it up and maintain its value. Real estate also can give one great joy and a certain sense of security as a place to live or earn income. Real estate is an asset, which can be taken from one if taxes are not paid, or its value crushed if it is not maintained. Real estate can also go down in value if the neighborhood goes bad, which has happened millions of times, especially in large cities.

Other assets, such as autos, tractors, trucks, tools, or mechanical things of various kinds, require maintenance, licensing, and housing, to be maintained, and hold their value. These types of assets, seem to go down in price, the older they become, regardless of how well they are maintained. By a strange quirk however, when both real estate and mechanical assets become really old, they take on a new value for collectors, due to their shortage, since most of their vintage have long ago been destroyed. Examples are old tools, cars, trucks, tractors, and yes, old houses as well. Normally, these types of assets, the mechanical types at least, are purchased for use in earning or transporting, and when they wear out, are scrapped or sold for pittances. These assets, are victims of age and usage, and while most consider them necessities, are very poor investments. They are at the mercy of use, exposure, rust, antiquity, and expensive maintenance.

Cash: Cash is an asset used to purchase things, but it can be easily stolen, since it is carried by everyone. It can be burned, and its value continually goes down in purchasing power, due to its numbers being constantly increased. I have often wondered if the word "cash" came from J.C. Penney's middle name, which was "Cash." At any rate, cash, while necessary, is a lousy asset, other than for immediate use. The purchasing power of cash is under direct control of the government issuing it. Governments are generally interested in their own welfare, not yours, so they regularly pay their bills with printing press "cash," while increasing the amount in circulation continually, thereby decreasing the value of yours.

Stocks: Stocks are a title to perhaps a billionth ownership of a large corporation. The corporation as an asset or business, is in the hands of a CEO, board of directors, and its employees, business practices, customers, and business atmosphere. The need for a product, can escalate or disappear quickly or slowly, be it buggy whips or Studebakers. CEO's, can screw up royally, and unions can demand huge wage increases, both of which will destroy a corporation, and the value of a stock asset. Further, government can tax corporations to death, or regulate them into the doors of hell. Stocks are an asset, that are totally dependent on things which the stockholder is totally helpless to control, guide, or influence.

Bonds are dependent on the solvency of the issuer, be it a municipality, government, or corporation. Money market funds are dependent on the same, for all practical purposes. Savings accounts and CD's are the same as cash. They are an asset, but dependent on the management, and integrity of their producers, which is an economic mixed grill.

Clothing must be cleaned, updated to be in style, and mended, but is a necessity. Computers grow outdated with alarming regularity, and furniture must be cared for. All are assets of course, but their value is dependent on regular upgrades and wear. Old clothes and computers have virtually no asset value at all.

Accounts receivable, and ledger entries, are dependent on the honesty of who owes, or the fiduciary ability of the accountant who entered the figures. Trees need to be trimmed, gardens weeded, fertilized, and watered, carpets need cleaning and wear out, machinery needs lubricating, cash should be spent before it goes down further, clothes wear out as do shoes, and many antiques suffer from questionable origin or value. Termites eat wood, rust consumes, moths destroy, computers get viruses, governments tax us to death, and after death as well, with inheritance taxes, and we all get old and dilapidated. What's there to do, as far as assets are concerned?

Maybe the best solution, is to become a troglodyte, ignore everything, and live from day to day, as would a homeless person. Maybe we should realize that all of the above are futile as permanent assets, because all of them are dependent on other 'things' to hold their value. 'Things,' such as governmental integrity, paint, market conditions, lubrication, maintenance, corporate responsibility, and even good weather. Sounds absolutely hopeless, as far as reliability and dependability are concerned, doesn't it?

There is a glimmer of hope, however. This not a pitch, because you can do this with other purveyors of it. I am just fronting for everyone who deals in this, as well as, because we all are interested in self preservation, as well as preserving our assets.

Which asset is not dependent on any other factor or faction, does not rust, needs no fertilizer, lubrication, polishing, painting, upgrades, or maintenance, has no debts, nor is dependent on any other thing for value? Which asset cares not a whit about the neighborhood, weather, or other actus reus? Which asset is compact, universally recognized, and has been a true asset for thousands of years? Obviously it is gold and silver. No, it can't be worn, and it won't grow corn. It can't be driven to the store, and doesn't show movies. One can't live in it, and it doesn't pay interest, but then does it need interest, since it is a hallmark of stability?

Everything that governments do, and for that matter always have done, makes gold and silver shine. They print money, go into deep debt, start wars, regulate, decimate, steal, tax, and interfere. Governments are the apotheosis of unreliability and untruthfulness. No matter what a government does, it always makes precious metals come out looking great. The more debt they create, the more currencies they print, and the more wars they start, always have and always will make gold and silver look very good. The more they tax, the more they regulate and seize, and the more they legislate, the better gold and silver will look, because they are absolutely not dependent on government, or anything else for value, stability, and desirability. Naturally, gold and silver gives government the heebie jeebies, and they don't like them one bit, but they don't know who has them, so they are powerless to collect them from the citizenry who has the sense to use them for self preservation. Food spoils, roofs leak, plants die, and tires go flat, but gold and silver have none of those ills. They just sit there, as proud stanchions of value. How nice! Protect yourself.

Don Stott

May 23, 2003

Don Stott has been a precious metals broker since 1977, has written five books, hundreds of columns, and his web site is

The naturally occurring gold-silver alloy is called electrum.
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