In a time of geopolitical chaos and inflation, Simon Mikhailovich’s extreme wealth preservation strategies don’t seem so paranoid.
extreme wealth preservation strategies don’t seem so paranoid.The question is asked by Simon Mikhailovich, a Russian émigré and entrepreneur who is in the business of selling a certain kind of safety. His New York City–based Bullion Reserve has wealthy families as clients. On their behalf his firm buys gold bricks from refineries, has them picked up by Loomis armored trucks and delivers them to guarded warehouses located on two continents.
Aren’t most financial assets backstopped? Don’t we have a Federal Deposit Insurance Corporation for bank accounts and the Securities Investor Protection Corporation for brokerage accounts? Mikhailovich scoffs. Their reserves are adequate to cover one institution, if that institution is small enough to fail. They would be overwhelmed by a system-wide failure.
An atavistic urge lies behind this man’s affection for the yellow metal. A century ago his ancestors fled pogroms in Ukraine and settled in Leningrad , where they were able to buy food because they had brought gold coins with them. Just to ask for an exit visa was a risky business. Applicants had to begin the process by quitting their jobs; those whose visas were denied were left destitute. Mikhailovich, then a teenager, would wait in visa offices, watching some families emerge with papers, others in tears. Abuse from the officials was part of the process. They screamed at him.Traitor to what? Mikhailovich’s birth certificate said he wasn’t exactly a Russian. He was something different. A Jew.
The pair built the CDO work into a money manager with 19 employees overseeing $2 billion. It prospered in the financial crisis of 2008 with the help of some short sales. The money that Lehman owed them on a winning trade turned into a bankruptcy claim they sold for pennies on the dollar. Bullion Reserve’s selling proposition: Some of your assets should be off the grid. Grids, whether of the electrical variety or of the financial variety that relies on the electrical one, are unstable. A failure at any node can propagate across the whole network. That explains why New York went dark in 2003.
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