For Those Hard Investment Choices

The Hard Money Book, by Steven K. Beckner, New York: The Capitalist Reporter Press, 1979, 148 pp., $19 (paper).

If the 1950s and 1960s were decades of the glorification of the benefits of common stocks, certainly the 1970s will go down as the decade that sanctified hard money investments. Accelerating inflation and monetary crises destroyed investor confidence in stocks and bonds, shifting interest to commodities and especially to precious metals. Initially, investors had narrow choices of types of investments and sources of purchase. Gold and silver were offered by a few coin dealers, or through foreign banks, and both the investments and the sources were unfamiliar to Americans. With the devaluation and subsequent decline in the value of the American dollar, however, the demand swelled for any investments that could preserve or even increase purchasing power in the age of floating exchange rates and blistering inflation.

Coupled with the demand for new investment vehicles and strategies that could cope with the economic changes, came a new trend in investment books. Ushered in by Harry Browne's prophetic work, How to Profit from the Coming Devaluation, the past 10 years have seen the number of books on gold, silver, and other hard money hedges grow to a veritable deluge. Most of them are written by investment advisors and are heavily laced with the personalities and pet investment ideas of their authors. As such, they provide the opinions of their authors but frequently fail to offer an objective review of hard money investment opportunities as a whole. For those investors who are less interested in special points of view on this field, and more interested in an overview of hard money investments and strategies, Steven K. Beckner, a reporter, has recently written The Hard Money Book.

Beckner puts his talents as a reporter to work to survey and categorize the entire spectrum of hard money investments. He discusses the track record and outlook for gold, silver, diamonds, and foreign currencies in a dispassionate and objective style. The reader will find this a good summary of the supply and demand factors affecting these assets, as well as a reasonably thorough look at the ways to buy and hold these investments. Beckner has traveled widely and interviewed hundreds of producers, consumers, investors, and the most prominent hard money investment advisors. In journalistic style, he avoids injecting his own personality into the work and steers the reader to conclusions by adroit selection of quotes and opinions from other sources.

In most cases the opinions Beckner selects offer a positive view of the future of hard money assets, but in a couple of cases he has chosen to concentrate on the opinions of individuals whose self-interest might get in the way of an objective evaluation of the merits of the assets. His discussion of the prospects for silver, for example, lean heavily on conversations with Walter L. Frankland, Jr., executive vice-president of the Washington-based Silver Users Association.

Silver users—such as those companies in the photographic film industry, electronics, and the silver plating industry—are hurt by higher silver prices. Since silver prices are strongly affected by investor and speculator demand, bullish sentiments on future silver prices will tend to be self-fulfilling prophecies. It is not surprising, therefore, that Frankland levels a barrelful of pessimism against increasing silver prices. Unfortunately for Frankland, though, history has already demolished his arguments. When Beckner interviewed him in 1978, he asked Frankland to project silver prices for 1979. Frankland said he saw "no reason for it to be any higher, mainly because it is too high now." At the time of his statement, according to Beckner, spot silver was selling for $5.72 per ounce. Since that time the wildest forecasts of the silver bulls have been swept away.

Beckner offers some brief but interesting commentary on the various foreign currencies that are traded on the exchanges. He discusses the fundamental pressures that bear on the future values of each currency, as well as a variety of systems for taking advantage of price swings. Having spent several years as editor of Deaknews, the official newsletter of the Deak-Perera organization, Beckner is intimately familiar with foreign currencies. His concise but thorough discussion of the many ways they can be purchased and held is worth the price of the book. He also offers an understandable overview of bank notes, travelers checks, foreign bank accounts, foreign collections and payments, securities denominated in foreign currencies, as well as an explanation of the pros and cons of Swiss insurance, annuities, and endowments.

The final section of The Hard Money Book is devoted to a detailed discussion of the foreign currency futures market. This is a complicated subject, and while Beckner's treatment is clear and understandable, the section is biased toward the idea that, with the proper charting strategies, the solo investor has a reasonable chance of multiplying his stake. He discusses the conventional chart formations that technical analysts commonly use to predict price moves, such as downtrends, uptrends, congestion areas, tops, bottoms, double tops and double bottoms, wedges, head-and-shoulders formations, and ascending and descending triangles. Unfortunately, he fails to balance these discussions with the views of analysts who argue that charting cannot and does not work. The author's main source for the section comes from an interview with an individual whose self-interest conflicts with his objectivity: Dr. Wray A. Kunkle, vice-president at Paine, Webber, Jackson and Curtis in Washington, D.C. As an employee of an organization that depends on stock and commodity trading for its profits, it is not surprising that Kunkle suggests strategies and techniques that involve substantial trading and thus substantial commissions for the broker. As an observer who is extremely skeptical of technicians' claims that charting can beat the market, I am inclined to view Kunkle's arguments as a thinly veiled sales pitch designed to entice investors into trading in difficult if not treacherous markets.

In all, Beckner's book offers a broad look at the spectrum of hard money investment opportunities and presents a good cross-section of strategies for buying and trading in these assets. While it falls slightly short in areas where the author relies on opinions supplied by potentially biased experts, the majority of the book presents valuable material for any investor who is considering the fields of gold, silver, diamonds, and foreign currencies.

John Pugsley is the author of Common Sense Economics.