The Golden Rule: She who has the gold makes the rules. The Wizard of Id (paraphrased to modify the gender)

Quite some years ago I had a remarkable client I’ll call Goldie. Goldie was then in her late sixties and looked exactly like a lady in her late sixties: gray hair pulled back in a bun, dress only a few decades out of fashion. She lived in a home only slightly larger than mine and she drove a twelve-year-old Oldsmobile.

But Goldie was worth $300 million.

Goldie’s grandfather, Jacob, had been an inveterate inventor of patent medicines, most of which proved to be useless. But one day he created a line of cosmetics that promised not only to make you beautiful, but also to make you look younger because it was good for your skin.

Jacob managed to build a sizeable business out of these cosmetics, and very late in life he sold his company to a then not very well-known firm called Merck. Merck, which was owned by a German parent, had recently been the subject of expropriation by the US government under the Trading with the Enemy Act of 1917.

When the grandfather died his only living heir was Goldie, then a young woman. In a letter he left for Goldie, the grandfather advised her never to sell Merck stock except to buy gold, and for years Goldie heeded that advice. Despite its rocky start in the US, Merck stock appreciated rapidly, making Goldie a very wealthy woman.

When Goldie became my client she continued to own nothing but Merck and gold, although the portion of Merck had long been in decline and the portion in gold had long been in the ascendancy.

I always met with Goldie in her home, located in a respectable middle-class neighborhood, and she always served tea. I don’t mean that she brought me a cup of hot water with a tea bag sticking out of it. For Goldie, making and serving tea was a kind of ceremony, from scalding the teapot to serving tea sandwiches and cakes on a little stand.

We always talked in Goldie’s sitting room, a sun-drenched place that usually had Vivaldi playing softly in the background. On this particular occasion Goldie said, “Do you know how I know I’m getting old?”

“You’re hardly old,” I said gallantly.

“I know because my world has shrunk down, not because I’m ill or lack energy, but because I prefer to be where I’m happiest. I love my house, my garden, my little neighborhood. When I’m anywhere else I’m less happy.”

“Nothing wrong with that,” I said, wishing the tea sandwiches were a lot bigger.

“Of course,” she continued, “I make an exception for Lugano.”

Goldie loved the small town of Lugano, Switzerland, where she kept an apartment. I also loved Lugano.

“I’m telling you this,” she said, “because I need your help.”

She told me, as I already knew, that she owned a lot of gold in the form of bullion – heavy gold bars or ingots – and that the gold was stored in underground vaults in Switzerland. The gold was insured and the insurance company, Lloyd’s of London, required that the bars be inventoried once a year in the presence of a Lloyd’s representative.

Goldie had always handled the inventories personally, and she always had with her either her Swiss accountant, Frank Bolding, or her Swiss attorney, Dr. Brenner. After completing the inventory, Goldie would travel to Lugano, where she would remain for several weeks.

“I’m happy in Lugano,” she told me, “but I’m not happy doing the damned inventory. So why not assign that dreary job to someone else – say, you?”

It didn’t sound dreary to me. Like Goldie, I would do the inventory, then head south for a few days in Lugano. She told me I could get all the details from Dr. Brenner, so I made an appointment to meet with him when I got to Zurich.

I arrived in Zurich on a Monday morning and met with Dr. Brenner that afternoon. I had Goldie’s power of attorney with me, but the Swiss were more comfortable if US powers were certified by a Swiss lawyer.

Dr. Brenner duly attached his certification, then picked up a stick of red wax and melted some of it onto the bottom left corner of the document. He removed a ring from his finger and applied his personal seal. It looked terrific and I vowed to do the same back in the US, even though it would be legally meaningless.

Our business completed, Dr. Brenner suggested we take coffee out on his terrace, where we could look out over the Zürichsee and, in good weather, see all the way to the Alps. I forgot to mention that Dr. Brenner’s law offices were impossibly quaint, looking like he and his partners were still litigating Jarndyce v. Jarndyce. On the other hand, he had that terrific terrace.

While we sipped our coffee Dr. Brenner asked how long I would be in Switzerland. “About a week,” I said. “I’ll see Frank Bolding tomorrow morning, conduct the inventory, and then on Wednesday I have meetings in Geneva. After that I’ll take the train to Lugano. Do you know how long the train ride is?”

When Dr. Brenner didn’t respond immediately I glanced over at him. He was staring at me in some confusion. “What’s wrong?” I asked.

“But Dr. Curtis,” he said – all lawyers are called doctors in the German cantons of Switzerland – “you can’t start the inventory on one day and go to Geneva the next! The inventory will take four or five days!”

Now it was my turn to stare at him. “What can you possibly mean?” I said. “How many bars of gold does the lady have?”

We continued to stare at each other for another moment, then Dr. Brenner said, “I think I see the problem. I’ll be right back.”

He disappeared into his office while I stared glumly out at the lake, watching my trip to Lugano go up in smoke.

Dr. Brenner returned with a map of Switzerland, sewn into a large-format leather folio. He paged back to the map showing the southern quadrant of Switzerland, then put his finger on a spot deep in the Alps.

“Her gold,” he said, “is here and here and here and here and here.”

Next up: Goldie, Part 2

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Please note that this post is intended to provide interested persons with an insight on the capital markets and other matters and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.

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