RISKY BUSINESS: POHOA Board Proposes Turning Reserves Into Coins & Bullion

At the upcoming December 14 “Annual Homeowners Meeting”, the POHOA Board slipped into the agenda an item that was not previously disclosed at the 11/8/22 meeting when the agenda was voted upon. According to the agenda, the Treasurer, Mr. Clay Jones, will make a presentation about taking 5-10% of our Reserves (currently valued at over $70k) and putting them into coins and bullion.

For context, homeowners need to consider that since June, shortly after being elected to the Board, Director Jones began opining about the imminent collapse of US and Global Financial Markets and Currencies. At the 6/15/22 meeting, he made a motion to move our money from First Internet Bank of Indiana to the Bank of Colorado so that he would be physically closer to the bank, and therefore be able to drive over to it to withdraw our money. In my comments, as a Board member, I suggested that if such a calamity were to occur, we might have bigger problems than physically getting the HOA’s money out of the bank.

The reason we had chosen First Internet Bank of Indiana was because we were earning an Interest Rate of about 1%, which was more than double what was available elsewhere. Now, that rate has risen to over 3%, while the bank we chose is returning just 1.5%. This equates to at least a loss of ROI of at least $1000 annually – and potentially more if the Fed raises the base interest rate further.

When the issue came up for a vote on 6/15/22, I asked to table the discussion for which Director Jones had provided zero information in advance of the meeting, and was told that the money HAD to be moved the NEXT MORNING (see above video link) because the imminent collapse of our financial system and currency was THAT urgent. More than 6 months have passed, and this doom and gloom forecast has still failed to materialize.

But, now, Director Jones is proposing an even more radical move with our collective money – he wants to take our money out of the bank and put it into coins and/or bullion. No details have been shared in advance about how this money would be stored or protected. And, importantly, how he is not crossing into Conflict of Interest territory as he works at a store that sells coins and bullion, or why we are not following the requirements of our Policy for Handling Conflicts of Interest for Directors in disclosures or voting. At the very least, this has a very poor appearance for due diligence and judgment.

But, presuming that homeowners would give Director Jones a pass on Conflicts of Interest (which they are allowed to do, if given the opportunity, which is uncertain), the question of risk, discretion, and judgement on the matter is worth serious consideration.

The citation of our Policy in the agenda refers to section (b) of a paragraph in our policies that is a longer list. As outlined in a prior article about our Reserve Policy, the phrase “US Coinage or US bullion according to Reserve Policy 5.2 Types of Investment (b) an obligation of the US government.” presumes that because the US Government has an obligation, our money is SAFE. But, given the scenario motivating putting our reserves into precious metals, Director Jones is saying that the US Government will FAIL at meeting their obligations, and even suggested at the 6/15/22 meeting that we would not get our money back because the obligations under FDIC would put us lowest in priority – and we’d lose the money.

If POHOA Homeowners examine the context of the Reserve Policy from which Director Jones pulls his quote that justifies putting our money into coins/bullion, they would note that all of the other options have some form of safety built in – mostly relying upon FDIC mechanisms. No such safety mechanism exists for coins/bullion. They are a commodity with wild swings in value over time. It’s not a conservative approach to protecting our financial assets, its a form of gambling with our assets. Sure, we might ride a big upswing and do way better than either First Internet Bank of Indiana OR Bank of Colorado’s interest rates. But, we might also lose significant amounts of money.

Let’s look at the price of Silver historically for perspective:

While the price in most recent weeks (when Director Jones first proposed this on 11/8/22 shows a dramatic rise, we are still below peaks during the Pandemic. And, we are above the plateau on prices from 2014 through 2019. There’s absolutely a future potential for the prices to drop back to that plateau – or even further. The question is where Director Jones is getting his information – and he’s not shown us charts, graphs, or cited sources. When he opines at meetings, he relies upon his expertise as a SALESMAN of the product he is pushing us to buy.

And, this, in turn, relies upon a doom and gloom forecast he promotes at nearly every meeting – that fuel prices are driving inflation. Inflation he believes is mis-reported by the government and media, and is really a much higher percentage. At the 11/8/22 meeting, he suggested that an increase in our budget was necessary due to his calculations of inflation, which he pegged at a “true” rate inflation of 16% – 20% (vs. the 8% increase cited by our landscaping contract, which he quibbles with), was based upon these “unknowable” predictions:

The price of gasoline, as anyone with a car knows, was driven up significantly in 2022. Everyone has their theories on what causes market movements, and most of the time, those theories are attached to their political beliefs. It most often results in those opposed to the current President to blame him personally, but then, if prices drop, to credit someone or something else. It is no secret that Director Jones is a Republican, as he and several others in our community have stated so openly at gatherings and meetings, but it is not fair to attach this to the political party. Those that advocate the doom and gloom scenarios are merely a cohort of the larger group – and the cohort that is seemingly engrossed in conspiracy theories of all sorts.

Yes, I am saying that Director Jones is being influenced by conspiracy theorists who WANT the economy and financial system (and therefore currency) to suffer for political advantage. Creating anger over the state of the economy has worked for centuries as a political tool, and those who practice true fiduciary duty must have the ability to discern true market indicators from the motives of those who are self-serving. The combination of someone under the influence of such purveyors of tainted information AND having a profit motive by actually selling the commodities he’s advocating we invest in is . . . risky business.

Yes, 2022 saw significant inflation due to a spike in fuel pricess. And, it is true we’ve only returned to the prices that many economists think are temporary as we recover from the effects of Pandemic Restrictions which were lifted at the beginning of 2022. But, these restrictions are no longer in place, and whether you believe oil/gas companies were gouging to help politicians they support win elections, or whether the market has corrected, the trend for 6 months is straight down, not up.

Therefore, financial decisions for POHOA going forward should not be made based upon the sole discretion and analysis of any one individual, their conspiracy theories, or political beliefs. We should make a sober and sane decision based upon the facts, as well as a reasonable analysis of risk. Putting our money into a volatile commodity on the advice of someone who may profit from the transaction (twice, if we have to sell it in a rush because the price of metals drops below what we bought them for), isn’t risk-averse. It’s taking risk that is unnecessary at this time.

Meanwhile, the risk of complete loss due to theft or misplacement of physical coins or bullion is absolutely a concern, particularly with sudden resignations of entire boards, leaving us without continuity and fights over the accounts and controls with a new Board, isn’t in line with normal fiduciary duty. Our money in an FDIC account earning the maximum interest is now no longer piddly amounts to be snuffed at. The move in June cost POHOA at least $500 in Interest Revenue in 2022. For no good reason, either – other than the fears of a Director who succumbs to fear-mongering politicos who want to unseat a President and opposing political party through whatever means possible (including harm to the economy and consumers).

I believe we should put our money back in the account (which is still open and operating) at First Internet Bank of Indiana, we should not approve a budget based upon fear-mongering conspiracy theories that our economy and currency are on the precipice of collapse, and that we should keep all of our money in FDIC accounts until concrete evidence exists that we would collectively benefit in any way from putting our money into coins or bullion.

It is uncertain because of ambiguous agenda wording whether Director Jones is merely making a presentation, whether the Board will make this decision, or whether this decision will be opened at the Annual Meeting for a vote by Homeowners. If past performance predicts the future, this decision has already been made, and President Ballweber plans to rubber-stamp it at the meeting.