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If you appreciate what I’m writing here and are considering joining Kinesis for a LAYERED PM portfolio, you can use my referral link here. Someday, it may buy me a newspaper 🙂 As a “Kinesis shill” (as I and others have been labeled), 31 people so far have signed up using my referral code and it got me a total of $10.31. So, if my detractors think my ethics are worth $10.31, they are sadly mistaken. One of you may be a whale and deposit a small fortune. In that case, my referral fee might be higher 🙂 I hope to paint a use case below as why someone like yourself would use Kinesis as part of your PM portfolio.

Overview

I have written extensively on Kinesis the last few weeks, more than I have in 2 years, but the FUD players are coming hard, and the best way to combat FUD is simply to provide facts and let people read for themselves. Most of what we are seeing is some poor research and investigation combined with fear of things like going concern, combined with some smart people who never took 20 minutes to understand how all of this works. This has been added to people doing personal attacks – including someone trying to go after my career for having KVT. It appears the user deleted it, but this person is a strong player in the SDG Reddit. I would really ask that personal attacks be left out of all of this. If you are resorting to try and go after my clearance because I own KVT, you are a lost, sad soul who cannot make a cogent argument. It’s despicable tactics at this point by despicable humans who lost the argument.

Use case

So, I’m going to lay out for you a scenario here, and how someone like me would use Kinesis for storing PMs. Your risk tolerances may vary, but I believe the USE CASE will be presented below. Additionally, I’ve gone an extra step and talk about market penetration and strategies I would use to get market share from those in the vaulting business. Currently, Kinesis has been slowly, but steadily becoming a force to be reckoned with – but I would now start looking at how to add to market share. You don’t want it all at once, because tomorrow if billions of dollars entered Kinesis, it might overwhelm existing support. The idea I like has been to grow organically, but it appears now that FUD is trying to take Kinesis out – and this is about presenting the USE CASE to many of you, and let you decide on your own.

Why Kinesis? I’m going to create a grid and post it below on different areas of how you might play the silver/gold move. I’m going to add pros, cons, and features. What you will find is that there are a LOT of different ways that you can play PMs.

The purists talk about “if you don’t hold it…”. To an extent, they are right. You have no counterparty risk with this. You probably also understand this is a great motto for the bullion dealers out there to sell you a lot of coins. I don’t have an issue with this, but many of you with this motto don’t have enough to make you feel uncomfortable holding it at home. The problem is, the more you hold, the more wealth you risk in the event of burglary or fire. Meaning, if you have some levels of wealth above a few dozen ounces, you need to understand how to layer your PM investments. Early in my stacking career in late 2019, I was like, “this is a BAD idea”. I then started adding funds to my trading account to invest in miners. More recently, I’m doing futures. I have done some vaulting in the past, but it costs you money to store. If you store at home, you then may spend thousands of dollars on a safe. There are costs with holding physical. Unless you use Kinesis. I’ll go into a more robust scenario below as a USE case, but this is a FEATURE of the product.

Meet Bob

Bob is like a lot of you reading this. He’s in his 40s, he has read a lot about the bad things coming to the financial system, and he, like you, decided precious metals were a really good investment. He has a sizable 401k in stocks, but he’s worried that if a market collapse happens, he may lose half of his 401k. What he WANTS to do is to HEDGE the value of his investments. In a scenario with a market crash, he sees a potential for PMs to go up. Likewise, if we run into any kind of super inflation or hyper inflation, Bob sees a possibility that his PMs may soar in value. Likewise, Bob has read Nate’s piece talking about the $20 bill and the oz of gold placed in a vault 100 years ago shows the gold is 95x more in value through the debauchment of the value of the currency over a duration of time. His intention with these PMs are:

1. Hedge value of current holdings. PMs may go down in the event his stocks go up. If his stocks go down, his PMs may go up.
2. Play a leveraged play on the metals. With a portion of his holdings, he wants to be able to make a profit on things like stocks and futures if metals go up. These have downside risks, so he has to be careful. This downside might be offset by his other investment holdings going up.
3. Be able to have immediate access to the value of a portion of his metals at home
4. Be able to have immediate access to spending a portion of his metals electronically.

Your use case may be different than Bob’s. Bob was sitting on $100,000 cash that he had previously had in a CD, but at 1% interest and inflation at 9%, he wanted to look into placing this cash into a variety of PM holdings for different reasons.

With this scenario, Bob decided that for him this was best for him and his family:

1. Start with physical (1.5%). He wanted 20 oz in the home for each him and the members of his family. He has about 60 oz at home. Value today on that is maybe $1,500. Bob lives in a nice neighborhood, but risk of theft or fire keeps him from really wanting to buy more. Additionally, he didn’t want to spend many thousands on a giant safe which is cost prohibitive.
2. (Traditional) Vaulting (10%). Bob has a reference to Steve who has been vaulting near his home town for 25 years. Bob pays a bit of a premium to buy to get in, and now has a monthly bill he has to pay to vault. It’s not a terribly high cost, but it’s much better than spending $4,000 on a safe for $10,000 in metals. Bob feels if the Zombie apocalypse happens, he can drive to Steve’s vault and pull out his metals. He hopes Steve is trustworthy and his metals are there, but he just doesn’t know and must rely on Steve’s reputation.
3. Stocks (50%). Bob has a bit of a background with investing and likes the upside to miners. He then deploys his resources across several miners in different phases. Bob is 45, and with this, he has another 20 years of earning. IF his miners dropped to zero, that would cost Bob $50,000. Bob decides he has a risk tolerance of 50% of his miners and with this, if his investments drop to $25,000 from $50,000, Bob will sell out of his miners. In this scenario, it is likely that his other non-PM holdings had gone up in value.
4. Non-PMs (10%). Bob might like things associated with metals and the overall story, like Battery Metals, uranium, oil, nat gas. He figured that this story might have inflation associated with it, so adding these other holdings may add value to his portfolio. Miners could have a bad day, but other items may have an up day.
5. Futures (10%) – perhaps you have some gold/silver/oil/NG micros.
6. Immediate electronic access to action on PMs (10%) – OneGold might be a place where if silver drops to $12 one day, you can load up on it with this. IF you later want to cash out with metals, you then sell your items and can buy metals via apmex at their best tier price.
7. Kinesis Vault holdings to get yield that you can spend (5%) – With Kinesis, instead of paying to vault, you can get a yield on what you hold in KAG and KAU. It’s possible down the road this might even pay the fees you have with your traditional vaulting solution. Kinesis has been around since 2018, and you know they aren’t profitable yet, but you know that you can easily access your metals, get them shipped to you, and in Canada/Europe you can spend your KAU/KAG at point of sale. Meaning, you can go buy your groceries with a Kinesis virtual debit card and at the POS it sells precisely the amount you need to make the sale go through. This allows you to hold financial energy in PMs to go UP as inflation goes up so you do not lose purchasing power holding fiat. This has the same risk as vault holdings above, with an added feature that in certain areas you can spend this financial energy real-time.
8. Speculative bet on KVT (3.5%) – perhaps you were able to buy 2 KVT for $3500. You know Kinesis has some promise, but at this point they are an early Amazon with a crazy awesome business model and promise. IF they capture a good portion of business in the near future, these may each produce significant returns. Early though, yields might be low until some of the major customers are on-boarded and the debit card usage picks up. Even at $17.50 yearly yield per KVT, that is a 1% return. The BET here is that in the next 5-10 years Kinesis will be a massive entity and each KVT might yield several thousand each for a 100% ROI yearly. IF a safe investment can get you 8% return, it might imply a KVT is worth $50k on $4k in yearly yields. I am willing to take this risk, with a SMALL PORTION of my entire portfolio on this upside bet.

Let’s talk about Bob

Bob has a $400,000 avg home that is mostly paid off, $300k in his 401k, a wife, kids, and in his 40s. His risk tolerance is higher than someone who is in their mid 60s – who might go for bonds. His risk tolerance is much lower than a 22 year old with $5,000 to their name just starting out and betting it all on risky Doge Coin in order to try and get a 100x and buy a house.

Most people who like PMs, have some flavor of the above. At issue here is that Bob is using a portion of his holdings in different layers. How he evaluated the risks in these layers, is his personal choice. Bob had recently read a lot about Kinesis, and wanted to lean in. He though the story was interesting and given he is a bit tech savvy, decided he wanted a PORTION of his total allocation into Kinesis vaults and KVTs. Bob also decided that each month, he will put cash into the KAG/KAU and then spend using his virtual debit card for all of his expenses like groceries, going out to dinner, clothing, gas, etc. He realizes that inflation is going up so fast, that if he just holds the cash in his account, he could be losing spending power even monthly. It is possible that this cash is going into metals at $21 and a few weeks later the metals are $22, boosting his spending power by a few percent to keep up with increased costs around him. At times when metals go down, he uses his bank debit card and buys more metals. As metals go up in price, he spends more directly from his Kinesis virtual debit card.

Let’s talk about Bob’s dad

Bob’s dad Charles also digs the PM story his son told him and he’s around retirement age. He has about $800,000 in his 401k, owns his $400k house outright, and has a few hundred thousand in cash in the bank after saving his whole life and inheriting some cash from his father a decade ago. Charles is worried mostly about the downside of the stock market and the purchasing power of his cash. He’s about to retire and is mostly concerned about PRESERVING what he has.

Charles looks mostly to GDX on the advice of his investment advisor and also vaults with Steve. He places most of his cash with Steve and a portion of the cash with GDX. He has some PMs at home, but like Bob, he worries about theft. Charles doesn’t know what the blockchain is, and it sounds pretty risky to him. He wants to be able to go and see and touch his metals.

Let’s talk about Bob’s son Nik

Nik is in his 20s, just got out of college. He’s making $45,000 per year at his first job out of college and living at home with Bob. Nik was was able to strike it big with Doge coin, getting in at $.03, and cashing out at $.80 and making about 27x his $2,000 he put into it. Nik is sitting on $54,000 and wants to save up for a house and get an engagement ring for his girlfriend. Nik is extremely comfortable with speculation, understands the blockchain, and hearing about everything his dad and grandfather have talked about with PMs, wants to take half of his crypto winnings and put this into Kinesis and KVT. He is able to buy 5 KVT as he is betting that 10 years down the road these could be worth a fortune, and he also likes the idea of putting cash into KAG to play the GSR ratio down the road. He puts in $20,000 into KAG at an 80:1 GSR and he is betting the GSR will be 10:1 at some day so he can then convert his silver to gold for a long term holding. He is betting on getting yields paid in gold, and if he is right, these yields can help him pay his mortgage in his 30s or even help him convert this to cash to buy stocks and investment houses. Nik has a LOT of risk tolerance, as he realizes he has 40+ years of earnings ahead, his salary will increase as he moves up the corporate ladder, and maybe someday he inherits some PMs from his family. Nik bought his girlfriend a ring, and he then put $10,000 into an index fund. He and his girlfriend plan to rent the next 2-3 years and save up for a wedding. In the apartment Nik is going to, maintenance people can come in and out, there’s not a ton of room, and he doesn’t feel comfortable with more than a few rolls of junk silver or a tube or two of eagles at his apartment. Kinesis provides him a way of stacking cheap ounces with every paycheck

What did we learn?

We know that all of the above in the family liked the PM story, but each had different risk tolerances, disposable income, savings, and earning potential in the next 20 years. We know that some were more tech savvy than the others, and storage at home may be a factor in how much you can store. When you have more than 140 or so ounces at home, you might want to consider vaulting options. Some may choose a traditional vaulting solution, some may like the idea of Kinesis where they don’t have to pay to vault, and some might split the two.

I believe if you love the PM story, that you need to work with your financial advisor and understand options available to you and to determine your risk appetite. Bob’s is different than yours, but closer to mine.

Bob may have sat down with his financial advisor one day and crafted the below matrix to address HIS risk appetite and his personal situation.

Conclusion

What I advocate for is a BALANCED and LAYERED approach to PMs. Bob likes the upside of miners and can take risks. He also like the upside of KVT and can afford for it to go to zero. Bob is also liked the feature with KAG/KAU that he can use this real time to spend, as he is located in Canada. It’s $5,000 or so immediately available to him with purchasing power. Each month as he spends, he can reload and dollar cost average in more. As he only needs to spend $1,000 a month or so on basic expenses, as he wants to put $1,500 in he will begin to accumulate more metal. At some point, his KAG/KAU allocation may grow, and he might draw down on his vaulted holdings as he now trusts Kinesis after years of business with them. Still, he wants to diversify, so he still keeps his vault holdings, but they are now 5% and KAG/KAU is 10%.

Anyone can design a portfolio like this. I feel it is important to note that nothing up there is risk-free. A vault owner may go out of business or defraud his customers. A miner could be nationalized. Kinesis exchange could go down and you would then need to follow the process to get paid your metals. KVTs could go to zero in years.

All of the above have risks, but you are engaging these risks because you are sold on the PM story. The simplest solution is to just buy some physical and be done with it, but for people who have the means to buy a LOT more than 140 ounces, you have to be extremely careful about being robbed or losing it in a fire.

Disclaimer – I have holdings in Kinesis. I am not paid by them and this is not a paid promotion. I’m stupidly bullish about the product and am trying to get more general PM users an understanding of WHY someone would use it, and perhaps how they might use it. I am in the process of now looking to add KAG monthly as part of my savings account.