Stock Gumshoe

This is a little bit atypical for me, but a reader sent it in and it seemed interesting so I thought I’d share it with you. This is not a stock, and is even so boring that it’s FDIC-insured … but a newsletter editor saw fit to tease us with it and use it to scavenge subscriptions, so I’ll share the investment details with you.

The ad comes from Addison Wiggin, publisher of Kevin Kerr’s Outstanding Investments newsletter, and it’s a wellspring of enthusiastic boosterism for investing in gold. It mentions a special report that you can receive for trying the subscription service, called “Bullion and Beyond: Five Stunning Ways to Get Richer on the Epic Metals Boom Ahead”

But while a few companies are teased a little, the one investment he really focuses on is this “risk free” gold investment that’s guaranteed never to go down, even if the price of gold craters.

And the real urgency of the ad is that this investment has to be made by April 17th — and may never be available again if you miss that deadline.

I’ll cover the other four gold investments teased in this ad in the near future — or at least, I will if I can figure them out. But the government guaranteed gold investment is …

Everbank’s MarketSafe 5 Year Gold Bullion CD

And this is really guaranteed — it’s FDIC-insured against loss of principal, just like any other bank CD. The kicker is that the return after five years (and unlike standard CDs, you can’t pull your money out before five years absent death or other severe contingencies) is based on the spot price of gold as averaged across some pre-chosen set dates in the future.

And the open window for buying this CD really does close on April 17th, and I suppose it will be up to Everbank and their competitors whether this is offered again. I don’t expect there will be a secondary market for these CDs, but it’s always possible. As far as I can tell, the April date is arbitrary and — appearances to the contrary — has nothing to do with tax day.

The CD does not pay any interest, so you’re tying up your money for five years and are guaranteed to get that money back — and if the average price of gold during that period is higher than it is today, you’ll get the difference as your capital gain.

Everbank is pretty well known for unusual CD products — they offer many in different currencies for those who want direct exposure to other currencies and some yield, and they also offer something similar to this Gold investment that tracks the Japanese REIT index. That seems oddly esoteric to me, I have no idea why they focused on Japanese REITs as the only other index to track for these products.

I’m glad these kinds of things are offered, but I’m not particularly interested in this product. I don’t like the set dates or the five year lockup or the fine print, since to my mind it’s really a crapshoot where gold will be at any particular time even if you think it will generally go up over time. But that’s not to say it’s necessarily a bad investment.

And if you’re looking for guaranteed, keep in mind that this certainly offers no guarantee of keeping up with inflation, or with any other benchmarks (though appreciating Gold prices would presumably have some correlation with inflation).

And finally, five years is a pretty long time, and compound returns in other guaranteed investments can really add up. If you invest $10,000 in this, for example, you should compare the potential returns to a 5 year CD — you can get one now for about 5.25%. 5.25% compounded over five years will get you about $13,000 when you cash out in 2012. Will gold be 30% higher on average over the next five years? That’s your call, I have absolutely no idea.

I’ll follow up with some more of these gold company teasers I’ve been seeing as I’m able — happy investing, everyone.

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The author will always disclose any direct long or short equity, debt or option position in any stocks written about as of the day of publication, and will not trade in any stocks mentioned for three days (72 hours) after publication. Full disclaimer is at the bottom of the page.