Step-nephew Sal has gotten the wealthy old man Nils keenly interested in precious metals. Look at the returns the last few years! OK; gold has come off its 2011 high, but the three-year return is way better than that of the Dow. And in one way of thinking isn't gold the only sure thing, the basic measure, what people will be grabbing for if our whole financial system goes kaput?
Nils has been a very good real estate investor over the years. He seems to think this carries over to other areas and Lars realizes this is potentially dangerous, but not unusual and not likely to get out of control. To give Nils some room to feel like he's still a crafty guy, Lars has agreed over the holidays to a bet or contest between them.
Nils and Lars have set up two new accounts with Sal. They as Co-Trustees put $500,000 of Nils's Living Trust into precious metals securities: 50% in gold, 20% in silver, and 15% each in palladium and platinum. This is Nils's baby in the bet.
Nils has given another $500,000 to a new irrevocable trust for relatives, with Lars as sole Trustee. Carrying out his fiduciary responsibilities, Lars will diversify this fund better than Nils has done with his: 20% each in funds in real estate, intermediate term bonds, international stocks, domestic stocks, and precious metals.
It's a one-year bet and a five-year bet. Both men realize that just one year won't prove much, although Nils is likely to brag if he's ahead at that point. Lars enjoys following the markets and keeping score, so he's looking forward to watching it play out. We'll follow it with them, for fun and to see what we can learn about the fiduciary's obligation to diversify.
