as told by Robert Strebel
This true story was told by Robert Strebel at a Financial Times World Gold Conference in Vienna, Austria in 1988. Strebel was a Member of the Executive Committee of the bank J. Vontobel & Co. Ltd. of Zurich, Switzerland. He ended his talk by telling “the story of a friend of mine, Charles Dupont.”
“Charles Dupont was born in Paris in 1900. At the age of 20, he inherited the handsome amount of one million French francs. On the advice of a very wise man, he exchanged his inheritance immediately for 50,000 gold Napoleons (coins), which were official legal tender at the time, worth 20 French francs each. In other words, Charles Dupont was the owner of 50,000 French gold pieces.
“From that day onward (January 2, 1920), he sold one gold Napoleon each day to finance his accommodation, food, clothing, and amusements. In 1980, Mr. Dupont dies at a grand age in a simple apartment not far from the heart of Paris. His nephew moves into the apartment and one day finds the notes and diaries of his dead uncle. In these diaries, Mr. Dupont had written how, over the past 60 years, he had been able to live simply, but well, on one “Napoleon” a day. He also describes the war, mentioning the black market and the fact that in those difficult times pieces of gold fetched very good prices. In addition, he tells how the price of the 20 franc gold pieces appreciated substantially after currency manipulations.
“In his diary Charles Dupont also relates his experiences with the tax authorities. He never paid any taxes because he did not have any officially recognizable income. He was summoned to appear before the tax inspector three times, in 1928, 1938, and 1948. The tax inspector visited his apartment three times, in 1958, 1968, and 1978. … Each time the inspector was forced to leave without finding anything. He found no incoming payment, no interest payments, no dividend payments, no wage payments. Charles Dupont appeared to have an invisible income.
“Some months ago (1988), his nephew was searching around in the attic in old chests, boxes and books that belonged to his uncle. He found two chests that were extraordinarily heavy and when he opened them he found they contained a treasure of 28,100 Napoleons which as a man of the times, he immediately converted to present-day currency. A few weeks ago, he exchanged the coins at his bank for the sum of 13.9 million French francs.
“For 60 years, Charles Dupont sold one Napoleon a day. He had used 21,900 Napoleons, and with the remainder, he made his nephew a rich man.
“This story has not failed to have an effect on people and firms who have been managing money for decades, or even centuries. That’s why I am convinced that if you are dealing with a reputable asset manager, you will still find traces of gold – both now and in the future – in your portfolio.”
[The Math Behind the Story and Editor’s Comments: This article was reprinted from GOLD NEWS, November – December 1988. The 20 franc French gold coin contained 6.4516 grams of gold, 90% pure, so 50,000 coins contained 290,300 grams of fine gold or 290.3 kilograms. A kilogram weighs 32.15 troy ounces, so the 50,000 coins amounted to 9333.15 ounces of pure gold. At the then price of $ 20.67 per ounce, this amounted to almost $ 193,000 US dollars. Dupont had spent 43.8% of his initial stash, leaving the remainder of 56.2% or 5245 ounces to his nephew. At $ 1500 per ounce (as of this writing in late 2019), the remainder would be worth over $ 7.8 million dollars. Apparently the French tax men did not think of applying a capital gains tax to the sale of Dupont’s gold, nor did Dupont live long enough to be subject to any kind of wealth tax, which is now being bandied about by American politicians. This story further illustrates what I call the Midas Clutch, somewhat similar to Gresham’s Law. If you have to sell assets, retain those which you judge to be the the most valuable in the long run, and dispose of those you expect to lose their exchange value in the short term. In other words, since gold has a long history of holding its purchasing power, ‘clutch’ on to it like Midas until you have disposed of your less valued property.]