Ask An Expert

Ask An Expert

Precious Metals And Rare Coins - Real Answers To Investment Questions

Welcome to one of the great places on the net to find an honest answer to questions about precious metals or rare coins. As you scroll down you can see my most recent observations and I add to them from time to time in an effort to answer the more frequent Email questions.

Ask an Expert about Precious Metals or Rare Coins is written to help you figure out the sometimes confusing world of physical precious metals and certified rare coins. Ask an Expert with Richard SchwaryAnd Ask an Expert about Precious Metals or Rare Coins will provide answers to questions like: “What is my stuff worth?” or “What should I pay for this coin?” or “What is best for me a coin or a bar?” or “I purchased gold and silver coins long ago and now wonder what they are worth”. 

This blog is also handy if you are looking for information about industry terminology: terms like matte proof, or high relief, questions about tokens or paper money, mint mark location, relative rarity, or grading definitions.

Ask an Expert will offer an opinion on everything coin and metal related from the best certification services to saving money at auction: and the price of admission is free. Any of your most important questions can be sent to me at Ask an Expert and you will receive a confidential reply within one business day.

There is no obligation, just learning – so ask away – you would be surprised at how many people already use this service. I am a member of The Professional Numismatists Guild (#365), a non-profit organization founded in 1955 and dedicated to knowledge, integrity and responsibility in the rare coin business.

So let me hear from you on any matter large or small. At the bottom of this page are 28 short articles I have written answering specific reader questions. Many of these have been published within the trade so you might find them helpful. Thanks for reading about Ask an Expert and your interest in rare coins and the precious metals is appreciated. You can also read my daily Gold Newsletter for an insider’s view of the precious metal markets without the usual nonsense.

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(1) Sept 8, 2014 -Modern Legal Tender Silver Bullion – The Big Three

The Big 3 when it comes to legal tender silver bullion are of course the American Silver Eagle 1 oz, the Canadian Silver Maple Leaf 1 oz, and the Austrian Silver Philharmonic 1 oz. From a weight standpoint they are the same and all three are struck in pure silver.

And from a consumer viewpoint all are very popular and all three are accepted and traded worldwide. But there are differences between the three which are not obvious and unfortunately not understanding these differences can create a hole in your investment plan.

So let’s study a bit more carefully before deciding which one is best. 

The distribution of the American Silver Eagle 1 oz is controlled through official distributors and production slowdowns by the US Mint can lead to wild premium changes throughout the year. In 2013 the premium on American Silver Eagle 1 oz coins increased dramatically when vendor production of raw coin blanks slowed. This low to high premium swing also happens at the end of each calendar year as the US Mint retools for the normal date change.

Most of the year the premium on the US Silver Eagle Monster Box is steady but if production hits a rough patch premiums could double. And when Mint production resumes premiums decrease so if you bought at the wrong time you may not be able to recover a very high premium when you sell.  

Such premium swings are not seen with the Canadian Silver Maple 1 oz and the Austrian Silver Philharmonic 1 oz.

But all of this is really minor compared to the real consumer abuse which regularly happens when the American Silver Eagle 1 oz, a common bullion coin is graded by both PCGS (Professional Coin Grading Service) and NGC (Numismatic Guarantee Corporation). Not that the grading services are at fault for what follows, but they certainly should not be held harmless as the coin telemarketing industry then sells these ticking time bombs to newcomers for ridiculous premiums.

The uninitiated bullion buyer is told by the telemarketing robbers that their certified American Silver Eagle 1 oz is rare and worth considerable more than a similar coin which is not certified – but this is fabrication.

And when the uneducated bullion buyer decides to sell his certified American Silver Eagle he can’t figure out why he paid so much for the coins going in and is now looking at a substantial loss coming out – even if the price of silver is basically the same.

This story has a darker side because the newbie now associates all silver bullion dealers with used car dealers or ambulance chasing attorneys. And it gets worse if you really want to do your homework. If the consumer placed these high priced certified examples in their IRA (Individual Retirement Account) the losses might be even worse. And this might bring in the Feds because selling certified silver bullion for ridiculous premiums is against the law.

Now I know some might take offense to this broad statement concerning the rights of free enterprise but none the less it is against the law. When the selling dealer holds himself out as an “expert” to a novice buyer and further suggests an investment he cannot materially alter the facts because the novice relies on his expertise to make a decision.

Calling any American Silver Eagle 1 oz bullion coin rare because of certification is not just retail puffing it is hiding the truth. The US Mint produces millions of these coins year in and year out and they are all basically the same so the term “rare” does not apply. And the fact that any particular coin is “certified” makes no difference.

So why aren’t the Canadian Silver Maple Leaf 1 oz and the Austrian Silver Philharmonic subject to the same telemarketing abuse? Because neither has the patriotic affiliation which comes with the American Silver Eagle 1 oz and the affiliation to the US Mint which always holds sway. This abuse makes the sale of certified American Silver Eagle 1 oz coins for high premiums particularly disgusting.

So should the American consumer avoid the beautiful American Silver Eagle 1 oz? Of course not – it’s one of the most popular of all silver bullion investments. But that same consumer would do well in calculating the premium over spot before writing the check.

A fair premium on the American Silver Eagle 1 oz will run between $2.00 and $3.00 over spot per coin. The premium on both the Canadian Silver Maple Leaf 1 oz and the Austrian Silver Philharmonic 1 oz is roughly a dollar less – coming in at around $2.00 over spot per coin.

So the silver bullion investment lesson here is to get a calculator and do the math. Most legitimate bullion dealers clearly post premiums before sale but most telemarketers stay up at night trying to hide the differences between certified bullion coins and what you thought you were buying – low premium bullion which moves directly with the market.

 

(2) August 2, 2014 – This comes from ZeroHedge.com a must read resource and Tyler Durden is one of my favorite commentators. What makes this entire commentary work is the “cowbell” – an old Saturday Night Live reference which is just hilarious.

Elliott’s Paul Singer On Gold, Inflation, And The Global Monetary Delusion

Submitted by Tyler Durden on 07/31/2014 22:57 -0400

Authored by Paul Singer, excerpted from Elliott Management’s latest letter to investors,

GLOBAL MONETARY DELUSION – MORE COWBELL

Central bankers think they are the masters of the universe because the world is looking to them (and only them) to deliver continuous stability and prosperity. There is no reason to suppose that they understand the modern financial system and economy to any greater extent than they did in 2007 (that is to say, not at all). Nevertheless, they plow ahead, expressing total confidence that what they are saying and doing is wise and not dangerous drivel. These master chefs have but one vat next to them on the policy table, and it is labeled “QE.”

They seem to think that all they need to do is dip into this vat, ladle on some QE, and asset prices will rise, the economy can be supported, jobs can be created and growth can be achieved. With no side effects, no indigestion, and no other factor would make them put the vat away and demand other ingredients. The new Chairwoman of the Fed, moreover, has made clear that as far as she is concerned, ZIRP is perfectly fine despite the stock market and high-end real estate booms, and that it will last, maybe not forever, but for a long period of time. The U.S. economy is growing, unemployment (at least the way they report it) is 6.1%, but the right interest rate for Chairwoman Yellen remains zero.

The central bankers of the developed world (with the possible exception of Germany’s) have failed to tell their political leaders that QE and ZIRP are creating great risks and uncertainties for the future. None of them has actually called a halt to monetary extremism in combination with demanding policies, or set out any policy recommendations that their governments should pursue in order to create real sustainable economic growth. Even the exquisitely named and effectuated “tapering” in the U.S. is months away from actually suspending the printing of money, and the Fed promises to preserve interest rates near zero for an extended period. In Europe, short-term interest rates are currently declining (to below zero in some cases) because of a new promise to keep interest rates lower for longer, and a new scheme for the central bank to purchase all kinds of securities.

All of the major central bankers profess a dread and imminent fear of deflation. In reality, the only places where such concerns are legitimate are in the lower-performing countries of the euro bloc that are prevented from devaluing their currency and are being forced to lower wages in order to correct imbalances. Everywhere else, the present and future prospects for deflation are virtually nonexistent, given the authorities’ misguided determination to boost inflation to levels higher than are currently purported to exist.

We can state with a great deal of confidence (although it is a minority view) that neither we nor the central bankers who are orchestrating these policies on the world have any idea how this situation is going to end, despite their assurances to the contrary. We believe that global monetary policy is currently extremely dangerous, that the financial system continues to be opaque and overleveraged, that major financial institutions are still essentially dependent on government guarantees to protect them if there is a renewed financial crisis, and that an abrupt shake-up could occur at any time.

Since confidence in paper money, central bankers and political leaders is unjustifiable and out of line with reality, the loss of such confidence could conceivably occur at any time, leading to the next “run” on the global financial system. We believe that those great sages who think that countries in the developed world have decades to get their financial systems and entitlement programs in order are delusional. In reality, only the markets can determine when time has expired – not the politicians or pundits and certainly not the central bankers.

Signals between QE, consumer prices, asset prices, bond prices, stock prices and growth are completely awry because governments are pulling the strings to a degree never before seen in free enterprise systems. It is unlikely that these unprecedented and experimental government policies of such gargantuan scope will actually create the desired result and allow themselves to be able to be unwound without great shock and disruption to the global financial system.

We recently perused the annual report of the BIS (Bank for International Settlements). We were impressed by its cool-headed assessment of the risks of current governmental policy in the developed world. In the introduction to the report, the BIS said:

To return to sustainable and balanced growth, policies need to go beyond their traditional focus on the business cycle and take a longer-term perspective – one in which the financial cycle takes centre stage…They need to address head-on the structural deficiencies and resource misallocations masked by strong financial booms and revealed only in the subsequent busts. The only source of lasting prosperity is a stronger supply side. It is essential to move away from debt as the main engine of growth.

The report noted that an intense quest for yield is driving down volatility and interest rates regardless of credit quality. The BIS said that the report is a “call to action,” and that governments should do more to improve the safety and performance of their economies, labor practices, and banks, which should raise more capital as a cushion against losses. The report also said that rising debt levels in many countries increase the potential for trouble, but the report said that the risk of deflation is less than many think. The overall message is that the world is hooked on easy money and has forgotten the lessons of the financial crisis. The report said that “[T]he temptation to postpone adjustment can prove irresistible, especially when times are good and financial booms sprinkle the fairy dust of illusory riches. The consequence is a growth model that relies too much on debt, both private and public, and which over time sows the seeds of its own demise.”

We have been saying as much for some time now, but here is a prestigious international institution that is “telling it like it is” in a compelling and persuasive way. Naturally, we became curious about this institution and its members. Who are these insightful people? We were astounded to learn that the board of the BIS is comprised of none other than… the heads of the major central banks of the developed world! Yes – Yellen, Draghi, et al! So, these central bankers are simultaneously failing to tell their respective governments that (1) monetary policy has done enough; (2) monetary policy is causing massive risks and distortions; and (3) political leaders must grab the reins and make structural changes, these same central bankers are authorizing BIS reports that will enable them to say, after the coming multifactor crisis, that they told us about the risks. We wonder who from the Fed authorized the report, and why they haven’t shared these harsh views of Fed policy in the FOMC meeting minutes or the endless public speeches by Fed officials. It is duplicitous for the Fed to authorize the views in the BIS report yet keep quiet about them elsewhere. But then, the Fed has never accepted much responsibility for the 2008 crisis, despite its decisions to keep interest rates artificially low for an extended period of time, to do a poor job of regulating the banking system and to abet Fannie and Freddie in their utter irresponsibility. History rhymes. The Fed has created the fuel for another crisis, seems to know it judging by the BIS report, and yet is covering itself with an “I told you so” report from the BIS rather than changing course.

“More cowbell” is a reference to a Saturday Night Live comedy skit in which a celebrity music producer (played by Chris Walken) keeps telling the cowbell player (Will Ferrell) in a secondrate band to play louder in the hopes of creating a better sound. It did not work, but it was funny. “More QE cowbell” as the cure-all to what troubles the global economy is also not going to work. And it is not really funny.

*  *  *

We continue watching with amazement the Fed’s magic act as it attempts to use quantitative easing and zero interest rate policy (QE and ZIRP) to create seemingly robust economic growth in the face of very poorly designed political, economic and fiscal policies, while keeping inflation within a narrow band. Substantial inflation is occurring in many asset classes and service sectors of the global economy, but is not presently recognized or captured by the traditional metrics upon which the Fed relies. This inflation is spreading in both scope and intensity. If and when it breaks out in an inescapably broad way, there will be a crowd of seriously confused policymakers making excuses and claiming that inflation does not in fact exist; it is not their fault; it was completely unpredictable; and/or it will actually be good for people.

We believe that if and when inflation goes from being something that affects only a particular list of assets (a growing list, presently a combination of things owned by the well-off plus a number of things that are basic necessities) to a widespread “in-your-face” phenomenon affecting the cost of living of almost the entire population, then the normal yardsticks of risk, return and profit may be thrown into the garbage can. These measures may be replaced by a scramble by citizens and investors to preserve value on a foundation of shifting sand, together with societal unrest that may make the current politically-useful “inequality” riffs, blaming the “1%” and attacking those “millionaires and billionaires” who refuse to “pay their fair share,” look like mere warm-ups for real class warfare.

(3) January 28, 2014 – The following was originally published in Coin World, all rights are reserved. Finding a good attorney in the coin business can be problem because most attorneys, even good ones don’t collect or understand rare coins. One of the best on the planet has been a good friend of mine for years. His name is Armen Vartian (www.vartianlaw.com) and besides being legal council for the Professional Numismatists Guild he also represents PCGS so his credentials are impeccable. Besides being a friend Armen also writes for Coin World and his commentary is some of the best in the business which brings me to his latest article published January 20, 2014. He not only makes a important point about describing the merits of a product being sold (sometimes called puffing) he draws an important distinction between selling the sizzle and the consumer’s own good sense. So read away and enjoy the story in the always changing world of precious metal and rare coin investing.

 The Art of “puffing” – Indiana High Court Upholds Rule by Armen Vartian

I often come across the issue of whether a dealer or auction house can be liable for fraud for bragging about its own goods – the legal term for which is “puffing”.  Think of a dealer saying that an ancient coin is “flawless”.  Obviously not literally true, but expressing a sort of opinion concerning the coin’s unusual state of preservation.  A famous New York judge named Learned Hand called such boasts the “kind[ ] of talk which no sensible man takes seriously,” and for the most part courts have been able to distinguish with common sense analyses whether or not statements by sellers are the sort that a buyer should reasonably rely upon when buying goods.

Recently, the Indiana Supreme Court recently reaffirmed this longstanding rule in a case involving the classic “puffing” opportunity – the used car. At issue was a dealer’s advertisement describing a car as a “Sporty Car at a Great Value Price.” After purchase, the buyer discovered that the car had extensive mechanical problems rendering it unusable. The buyer sued, alleging that the advertisement was actionable deception and fraud.

The trial court ruled in favor of the dealer, but the court of appeals reversed, concluding that calling the car a “Sporty Car at a Great Value Price” could implicitly represent that “it is a good car for the price and that, at a minimum, it is safe to operate”.  However, the Supreme Court restored the original ruling, holding that the statement was an opinion, “not a representation of fact, and thus cannot be the basis of deception or fraud claims.”  The Supreme Court also recognized that a contrary holding would significantly impede legitimate advertising and force sellers to list nothing but a product’s “name, rank, and serial number” in order avoid civil or criminal liability.

I sympathize with the Indiana Supreme Court, and with a federal judge’s decision earlier this year that a seller referring to its diet soda as “premium” did not have to prove that the soda contained “premium” ingredients because “The term ‘premium’ … has no concrete, discernable [sic] meaning in the diet soda context.”

However, there has to be a limit to puffing.  Moody’s, the credit rating company, was sued by investors in some highly-rated companies that turned out to have been insolvent at the time Moody’s rated them.  The plaintiffs showed the court that Moody’s had, over many years, touted itself as an independent company publishing accurate and impartial opinions, regardless of the fact that it often was paid by the very companies it was analyzing.  For example, its 2005 annual report stated “The market’s trust in and reliance upon Moody’s” are part of the “raw materials that support our business,” and that “Independence. Performance. Transparency … are the watchwords by which stakeholders judge Moody’s.” Moody’s also was fond of citing its code of professional conduct which “protect[s] the quality, integrity and independence of the rating process.”

Meaningless puffing?  That’s what Moody’s attorneys told the judge:  “Generalizations regarding integrity, independence and risk management amount to no more than puffery.”  The judge didn’t buy it.

One caveat:  when a term has an established meaning in an industry, a dealer using it must be careful.  I’m thinking of “finest known”, which probably constitutes puffery when referring to a Picasso, but not a coin.

Previous commentary you might find helpful. Your questions are welcomed and thanks for reading:

1. Reportable Bullion & Cash Transactions: Revision 3

2. Could Government Gold Seizure Become A Problem?

3. Learn To Sell Gold Scrap And Not Get Robbed In The Process

4. The Confiscation Myth And The Slime Gold Company

5. Sell Dad's Coin Collection And Guarantee You Get The Right Price

6. Avoid 'Hotel Buyers' When You Sell

7. Bait & Switch

8. The Value Of Error Coinage

9. Should I invest in gold and rare coins?

10. How much does gold have to move before I make money?

11. The Professional Numismatists Guild (PNG)

12. Should The Government Regulate Gold In Your IRA Account?

13.The Weather And Those Pesky Premiums

14. Are Shipwreck Coins A Good Investment?

15. How Much Gold Will Fit Into My Safe Deposit Box?

16. World Coins & Currency - Ancient Coins - A Secret Among Coin Dealers

17. Rare Coin Supplies And The Small Coin Store

18. Now is the time to consider early US gold & silver Commemorative Coins

19. What's In Your Wallet Or Can Your Dealer Actually Grade A Coin?

20. Rare Coin Prices And Being A Red Book Price Contributor

21. Is Cleaning A Coin Ever A Good Idea?

22. Observations: The Government Reporting Rules and Said Fiasco

23. The Token and Medal Society (TAMS)

24. Not affiliated with, licensed or endorsed by the US Mint

25. No Multiple Checks, Please

26. Coin Doctoring Presents a Moral Imperative to the Coin Industry

27. Protecting Valuables: Commercial Safe or Bank Safe Deposit Box?

28. Thinking of Trading Certified Rare Coins for Bullion?

29. How Does Changing Precious Metal Prices Move The Intrinsic Value Of Gold And Silver Coins?